www.brokernews.com.au issue 11.3
Young Guns 2011 The next generation of mortgage-broking talent
Reach for the stars In almost every walk of life, emerging talent is recognised and celebrated. Whether it be in sport, music and the arts, science or the myriad professional sectors of the working world, special attention is given to people whose performance belies their years of experience. Barely an awards ceremony or honours list goes past without categories mentioning newcomers or rookies and here at MPA, we’re no different. We too realise that the brokers who make up our Top 100 list won’t be around forever and that there needs to be a next generation to replace them if the healthy state of the third party market is to be maintained. That’s why we sent our talent scouts out into the market, canvassed the opinions of aggregators, broker franchises and lenders and scoured the phone book to source the freshest broking talent in Australia. We profile the 12 brokers to watch in 2011 in our ‘Young Guns’ feature and look forward to following their burgeoning careers. Congratulations to those featured. While we’re on the topic of striving for excellence and recognition, in this month’s issue we also take a look at some female brokers that are thriving in what was traditionally a male-dominated industry. We examine their success, what challenges they face and what the industry can do to assist them further.
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Elsewhere in the issue, we look at how you can help prepare first homebuyers for their first property purchase, identify the latest technological gizmos that could help your business and take a peek at some of the movers and shakers in the commercial sector. We also feature columns on debtor finance and the possible shift to a fee-for-advice model. Finally, we profile two new aggregator CEOs in the form of Choice’s Stephen Moore and Vow Financial’s Tim Brown and get to know what makes Wayne Macartney from Loanworks and Mortgage House’s Ken Sayer tick. Enjoy the magazine and all the best for a busy month.
Barney McCarthy Editor
MPA 2.0 Our multimedia edition features on-camera interviews with the industry’s biggest players. Visit Brokernews. com.au/MPA to hear their thoughts on the hottest issues facing mortgage brokers.
24 Commercial gains A round-up of some of the biggest players in the non-residential sector
40 2011 Young Guns
MPA’s annual review of the freshest mortgage-broking talent
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The big story Visit our website to watch our latest weekly investigation. The latest clip looks at: »» Financial planners eyeing mortgage commissions »» How licensing could alter the advice landscape »» The potential success of ‘one-stop shops’ Tim Brown
editor Barney McCarthy
NEWS ANALYSIS 12 Relief effort: How the industry reacted to the flooding in Queensland
COPY & FEATURES contributor Andrea Cornish production editors Jennifer Cross, Carolin Wun, Moira Daniels, Richard Garfield ART & PRODUCTION
FEATURES 30 The gender divide: The obstacles facing female brokers and what the industry can do to further support their businesses 36 Prime time: How to prepare potential homeowners for their first property purchase 52 Go-go gadgets: A review of the latest laptops, smartphones and apps that could make your life easier
designers Paul Mansfield, Lucila Lamas, Ivee Caburian, Doug Jeans SALES & MARKETING NATIONAL SALES MANager Rajan Khatak business development manager Lisa Tyras account MANager Simon Kerslake marketing executive Kerry Buckley marketing coordinator Anna Keane TRAFFIC MANAGER Jessica Jazic CORPORATE directors Claire Preen, Mike Shipley chief operating officer George Walmsley
COLUMNS 14 Are you being served? Paul Eldridge has his say on the fee for service debate 22 Cash converters: Tony Della Maddalena looks at the growing debtor finance market and how brokers can diversify into the sector to expand revenues
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18 Vow Financial’s Tim Brown claims the aggregator will be at the leading edge of the broker evolution 60 Stephen Moore of Choice talks about the tasks ahead
LIFESTYLE 10 A day in the life of…Wayne Macartney, Loanworks Technologies 64 My favourite things….Ken Sayer, Mortgage House
publishing director Justin Kennedy associate publisher Rajan Khatak chief information officer Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil
Editorial enquiries Barney McCarthy tel: +61 2 8437 4790 email@example.com Advertising enquiries Sales Manager Rajan Khatak tel: +61 2 8437 4772 firstname.lastname@example.org Account Manager Simon Kerslake tel: +61 2 8437 4786 email@example.com Subscriptions tel: +61 2 8437 4731 • fax: +61 2 9439 4599 firstname.lastname@example.org Key Media www.keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Singapore, Hong Kong, Toronto www.brokernews.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as MPA magazine can accept no responsibility for loss
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Savings trend could benefit brokers A trend of increased savings in 2011 could have an upside for brokers, it has been claimed. Loan Market chief operating officer Dean Rushton said that as households increasingly save due to wariness over the economy, pressure on interest rates could decrease. Rushton referred to a recent Loan Market survey which found 76% of respondents intend to increase their savings in 2011, while only 14% intend to refinance their home loan. “It indicates that the short-term environment will continue to be tough for lending but also that the RBA’s rate movements are having their desired effect, which should take the pressure off rates in 2011,” Rushton said. According to Rushton, a freeze on interest rates could bolster consumer confidence in the months ahead, and that an increased emphasis on savings will mean more borrowers are positioned to enter the property market. “A period of rate stability will bring more borrowers back into the market and the medium term upside is that at the other side of the cycle borrowers will have a stronger savings and equity position. First homebuyers in particular will return in 2011. “There are definitely opportunities with existing customers who are currently deleveraging to find out whether it changes their finance needs and what their next steps are. It’s also extremely important to stay in contact with prospects who may not have been in a position to act due to savings requirements, but are now assessing their options,” he concluded.
Oxygen predicts rise in refinance The year ahead will be marked by increased refinancing activity, which could lead to dilemmas for brokers, according to Oxygen Home Loans general manager James Green. “The problem brokers face is that they have an obligation to their lenders not to encourage a borrower to refinance their loan, causing churn,” Green said. Green added that regardless of whether such activity is encouraged or not, brokers can expect more refinancing inquiries for 2011. “Refinancing has already kicked up,” he observed. “AFG’s January Mortgage Index recently showed 41.5% of all new mortgage sales were for refinance.” While refinance inquiries may be rising, many borrowers are still hesitant to seek out refinancing options. A recent ING survey found that while 46% of respondents were unhappy in their home loan, only 31% were considering refinancing. Green believes this is due to the costs often associated with refinancing. “The main reason why people don’t refinance with us is due to either a change in their circumstance like their employment status, or due to fees such as LMI or break costs,” he said.
Percentage of market accounted for by refinancing in January, according to AFG
Rates to dictate home values: RP Data Australian dwelling values saw a slight rise for December, according to RP Data-Rismark. Its latest index showed a climb of 0.4% seasonally adjusted over the December quarter, with a 4.7% rise over the year. The index shows that the housing market in Australian capital cities peaked in May 2010. Over 2010, Melbourne and Sydney saw the most significant rises of 8.4% and 6.6% respectively. Perth saw values drop 2.4% while home values declined 1.0% in Brisbane. According to Rismark managing director Christopher Joye, aggressive interest rate moves over 2010 were responsible for the weak result. “The RBA’s four interest rate hikes in 2010, which were topped up by a fifth via the banks, conspired to snuffle out capital growth during the remainder of the year,” Joye said. “Indeed, the capital city housing market very clearly peaked in May 2010, and remains below this point today.”
ASIC pushes through last licences
Trail book buyers push prices up An influx of opportunistic trail-book buyers is starting to push prices up, as less sellers materialise than expected in the first month of the new year. During the transition to licensing under NCCP, many aggregators have been eager to snap up trail books as brokers exit the industry, or match their own member sellers with buyers. However, Vow Financial’s WA-based account executive Brad Driffill said there are now more buyers than sellers, which is placing upward pressure on trail-book prices. He added that opportunistic buyers are using this transition period to capitalise. “I think a lot of brokers who are set up well and have got the capacity to buy these books have for a while now been pre-empting that there will be a few books come on the market, and are now actively seeking to buy those books. We are starting to see a lot of those come out of the woodwork.”
HIA urges affordability action The Housing Industry Association (HIA) has called for swift and decisive action to address barriers constraining housing supply. It has released a report indicating that Australian house prices as a ratio of household income have been rapidly growing in both capital city and regional areas, which is making it increasingly difficult for first homebuyers to transition from the rental market into home ownership. “HIA research shows that … a major cause of falling affordability is that house price growth has outpaced growth in average wages over recent years,” said HIA’s Graham Wolfe. HIA argues that poor affordability levels have stemmed from large structural supply-side obstacles that could be alleviated by careful reformation by government.
77% Percentage of licensing applications approved by ASIC by 21 January
ASIC is expecting to clear all outstanding Australian Credit Licence applications by the end of March, well ahead of the final 30 June deadline the regulator was given under new laws. As of last week, 77% of applications received by the regulator were either approved or were at draft licence stage, and the remaining 23% were still in the assessment stage. The regulator aims to have between 90% and 95% through to draft licence stage by the end of February, though this will depend on how quickly brokers supply supplementary information. ASIC’s senior executive for the Real Economy team, Kathrine Morgan-Wicks, said the regulator had not formally refused a licence application, but some applications had been withdrawn after follow-up questions were asked. Morgan-Wicks said ASIC’s policy was that for any registered operation that has submitted a licence application, they may continue operating, but warned those who have not applied and who have not become credit representatives under another licence to cease operating or face strict penalties. “We are very keen to make sure that everyone out there is inside the tent; we want to make sure the market is captured, and we are now aware what the population is,” she said. The regulator will first issue warning letters to those operating without a licence, and will visit to confirm operations have ceased. ASIC will also be able to refer these cases through to its enforcement arm, after which they will face criminal penalties under NCCP law.
A day in the life of...
A day in the life of… Wayne Macartney, sales and marketing manager for Loanworks Technologies, talks software platforms, webinars and bagels
Alarm goes off; get up on autopilot to make the train to Sydney.
On the flyer from Newcastle where I continue to catch up on sleep. Grab a cappuccino and a muffin on the way into the office – that’s breakfast.
“ As a software company, we have a constant stream of development initiatives on the go ”
Catch up on overnight correspondence and follow up on any webinar requests that have come in via the website. Review statistics on website traffic for the previous day.
Meeting with Ben Binder, our managing director. We’re launching a new product called Loanworks Altra which provides intermediaries, broker companies and aggregators with a comprehensive software platform. We discuss industry feedback surrounding our proposition that – if you’re paying for a loan submission, you’re paying too much – and review our marketing plan.
Make any diarised follow-up calls to prospective clients. Given the constant changes to the industry over the last year or so, the business imperatives for our customers are often in a state of flux.
Lunch. Our offices are between St Leonards and Crows Nest on the North Shore in Sydney, so there’s a great selection of lunch venues. Today’s choice is Bagel Boys on Atchison Street – I can heartily recommend them for price, range, freshness and service.
Check and respond to emails and webinar requests, return phone calls, skim-read daily industry e-newsletters.
Meeting with Iain Pallot, our business services manager. Iain has any number of new customers that he’s bringing on board at any point in time. We pride ourselves on the level of hand-holding we provide our customers.
I conduct a webinar demonstration of Loanworks to a prospective customer. We find these one-on-one webinars ideal for giving a detailed walk-through of the software. The online format allows customers to schedule the webinar at a time that suits, without taking a big chunk out of their day.
I like to follow up immediately on a webinar by providing a proposal. The prospective client can then review the direct benefits to his/her business alongside the costs. Our pricing is a competitive ‘pay as you go’ model – over the last year or so we’ve worked to remove most of the upfront and switching costs (for instance there’s no charge for hosting), so that there’s an immediate, tangible value proposition.
Meeting with Andrew Duerden, our business development director. As a software company, we have a constant stream of development initiatives on the go, from minor tweaks, to significant customer requests, to strategic projects. Andrew and I review the status of our current projects, and prioritise some new feature requests.
The long commute home. I usually read and listen to music, or maintain energy levels with a nap.
Catch up with the day’s events on the home front.
2030h Dinner. 2100h
Household chores. We have a two-year old son, and my wife has a business to run, so we try to distribute the workload.
Catch up on some TV we’ve pre-recorded on the Tivo. We’re generally two to three months behind.
And so to bed.
Relief effort After the devastating recent floods in Queensland, the clean-up operation is well underway. As well as volunteers on the ground, financial institutions are doing their bit to ease the burden, as Barney McCarthy finds out
he flood waters may have receded in Queensland and the television cameras moved onto the next big story, but for many people, the trauma, both emotional and financial, is still very real. Thousands of families were displaced by the natural disaster and for those who have been able to return to their homes, the bill to repair structural damage, replacement of appliances and furniture, and to renovate runs into thousands of dollars. Even some of those with insurance are finding that their particular policy did not cover flood damage. With such unplanned stresses on their finances, the last thing affected Queenslanders want to be worrying about is meeting their mortgage or personal loan repayments and many banks have stepped in to try and ease the burden. Individual banks announced assistance packages to help families and individuals,
business people and farmers in the communities adversely affected by flood waters and the Australian Bankers’ Association (ABA) was vocal in reminding the public that help is available (see box opposite for examples of support). Steve Munchenberg, chief executive of the ABA, said: “Many bank customers have been affected by the floods. The measures banks have put in place will provide practical help by giving immediate financial relief to those in most need of assistance and will help people and businesses get back on their feet.” Credit unions and building societies also offered hardship packages to members and waived ATM-direct charge fees for a fortnight in January. The initiatives included measures such as not enforcing late fees on mortgage repayments, waiving term deposit break costs and the refunding of transaction fees. Louise
Petschler, CEO of Abacus, the industry body for credit unions, mutuals and friendly societies, pledged continued support. “The devastation and tragedy in Queensland affects us all and our thoughts are with Queenslanders,” she said. “Individual credit unions and building societies will be standing beside their members now and in the difficult months ahead.” As well as giving affected homeowners breathing space with their repayments, many banking institutions have made significant donations to the Premier’s Disaster Relief Appeal. And it’s not just lenders helping out either, with training provider Intellitrain pledging $50 from every Certificate IV and Diploma enrolment until the end of February. The Brisbane-based company was temporarily displaced from its head office during the floods, but operated as usual as its IT systems are hosted externally and phone lines were diverted. Byron Gray, general manager of sales and marketing, said: “As a proud Australian and Brisbane-based company who is experiencing first-hand the devastating effects of the floods, we want to help as best we can. Our goal to raise $10,000 is ambitious but we believe it’s achievable.” Some companies even
sent manpower into the affected areas to help on the ground, with Mortgage Choice’s Queensland state manager helping co-ordinate teams of network members and staff to aid with the cleanup effort. The road to recovery is likely to be a long and painful one for affected homeowners, but the financial help at hand is at least providing some assistance. MPA
A helping hand Assistance provided to people will vary according to their individual circumstance, but according to the Australian Bankers’ Association, can include: • Deferring home loan repayments for up to three months • Restructuring business loans without incurring fees • Giving credit card holders an emergency credit limit increase • Refinancing personal loans at a discounted rate • Waiving interest rate penalties if term deposits are drawn early • Deferring monthly repayments on equipment finance facilities for three months
Fee for Service
Are you being served? The way brokers are remunerated could be changed forever if a fee for service model is widely adopted. Paul Eldridge has his say on the issue
ee for service remains a hotly contested debate. On the one hand, some brokers cite the concern that consumers can simply walk down the street to another broker or the bank who won’t charge them. On the other hand, there is the very real fact that broker incomes have dropped over the last few years thanks to lenders dropping commission rates and tougher lending criteria. Based on our conversations with brokers and aggregators, I believe most of us are actually on the same page, but the confusion seems to surround whether fee for service is intended to replace lender brokerage payments or exist alongside them. The ‘fee for service’ I am discussing in this article is a payment, charged when appropriate, to supplement the lender’s brokerage payment. This additional income compensates the broker for services they provide above and beyond what lenders provide and/or that lenders do not remunerate brokers for. Lender brokerage payments, as Steve Weston eloquently put it on BrokerNews TV, are a ‘fulfilment fee’. They remunerate the loan writer for completing and managing an application through to settlement. It is essentially the wage that a lender would otherwise pay its own staff to perform these functions, and the loan writer
is clearly entitled to payment for this service. Weston also clarified that he was advocating fee for advice as distinct from fee for service. The advice is the payment for those services brokers provide outside of facilitating the actual application. These are services that lenders generally do not offer their clients and do not remunerate brokers for. A clear example of this is the advice that many brokers provide their clients now around early repayment strategies, debt reduction and cash-flow management. We know that many brokers are providing this type of valuable service to their clients, but we also know that not many of them charge for this. Indeed, if you were to ask quality brokers how many of them have had clients ask how much the service they provide is going to cost them, it’s a safe bet that the majority would say it has cropped up – in other words clients often expect to pay. In a recent online forum discussing this very topic, a practising broker in Perth made some very pertinent observations. He believes (and I hope he doesn’t mind me paraphrasing here) that there is no ‘one-size-fits-all’ solution. His approach is to charge a fee where appropriate. An example cited is where he has a client with a complex credit profile or a complicated
Fee for Service
loan structure where he would charge a fee – something commercial brokers have done for years. However, as the intermediary says, where the client only wants an ‘execution’ service on a standard vanilla loan he wouldn’t charge a fee. While on the topic of advice, I would like to clarify a common misconception that mortgage brokers cannot provide advice. Of course they can; indeed under the NCCP they have to do this in recommending a product suitable for the client. What brokers cannot do is give advice on financial products which do not include credit (except for margin loans), budgeting or cash-flow management. This is where I see the opportunity for brokers. In my nine years in the industry, this is the most exciting thing I have seen thus far. Why? By way of example – in December, I attended a series of professional development days across the country where I asked brokers to put their hands up if they had been taught cashflow management and budgeting at school. Only one person amongst hundreds put up their hand. I then asked how many of their children were being taught this – no hands up. We have generations of Australians who have never been taught how to manage their money. One estimate states that over 70% of Australian households don’t have a household budget and don’t know if they are cash-flow positive or negative each month. The first rule in marketing
is to find a niche and exploit it. Financial planners aren’t exploiting this niche, and neither are accountants. No one is occupying this niche – ergo, it is a perfect spot for brokers. It would appear to be a win-win-win situation: • First and foremost the client wins as they are getting a valuable service which they are prepared to pay for • The broker wins as they gain additional revenue. We have one broker who has added 30% revenue to their business plus better client retention as they have a reason to contact their client on a regular basis. The lender gets relegated to a product provider with the broker in control – you become the finance coach and your client doesn’t make a move without you • The aggregators/franchises win as their brokers/franchisees have much stronger businesses meaning less people leaving the industry due to an unviable business model As I mentioned earlier, many brokers are already providing some of the services described here – and quite a few are even charging for it. Around three-quarters of your clients need this service and it seems many are willing to pay for it. When I was explaining the mortgage planning concept to our new PA, she said: “I need this! Where can I get this? Can you tell me a broker who does this?” There is your audience. And yes folks, she would pay for your (good) advice. MPA
Paul Eldridge is the co-founder and CEO of Intellitrain, a registered training organisation specialising in the finance and mortgagebroking industry. He has more than nine years of experience in this industry and has worked in training and development for in excess of 15 years.
Case study I want to provide another example of the point I am making. This is an extract from a letter sent in from Lorraine Lyford, a recent student of our mortgage planning course, which serves to highlight the very real value that brokers can and do provide above and beyond simply arranging a loan: “Soon after [I attended your planning course], a couple wanting to refinance their mortgage were referred to me by a colleague. When we sat down and discussed their financial position, it was clear they were financially stressed and their
debt level was out of control. ‘L’ had unfortunately suffered a major health battle approximately 18 months earlier, which saw her unable to work for 12 months. During this time, with only one income and the need for expensive medical treatments, they had resorted to using their credit cards to keep up with living expenses and medical costs. When I met with them, they had $50,000 worth of credit card debt, and were both feeling overwhelmed with juggling and meeting their monthly financial commitments. “L had returned to work on a
part-time basis and ‘M’ was bringing in about $65,000. They have two grown sons, who still live at home, but work and pay a little board. The mortgage outstanding represented approximately 58% of the home value. M & L completed the detailed fact finder and budget details. We were then able to refinance the existing loan, pay out all credit card debt, and give them a buffer for emergencies. “Once the loan settled and they started using the budget software, they could see very clearly where they were heading and what they could now achieve
with the mortgage plan. M & L now have their finances under control. Three months on, they are excited that they are now planning to achieve their next financial goal, to buy an investment property.” In this example, Lorraine did much more than just execute a loan. Not only did she provide credit counselling and debt consolidation assistance, she also showed her clients how to manage their finances and cash flow in order to work towards achieving a financial goal. The clients were happy to pay for this service.
Business Profile vow financial
Promise of change According to Tim Brown, Vow Financial’s newly appointed CEO, change is the only constant. But the relatively new aggregator promises to be at the leading edge of the broker evolution
n a communication sent to Vow brokers in early 2011, chief executive officer Tim Brown says: “if there’s one thing I can guarantee over the next 12 months, it is that there will continue to be more changes.” Brown, who took over from former CEO Jeff Zulman in January, admits the group has some major obstacles to face in 2011. “The first challenge is to close disintegration,” he says. “Like any integration, it takes longer than expected, but we want to put that behind us and move forward.” It’s been just over a year since National Brokers Group, The Mortgage Professionals and The Brokerage officially merged in February 2010 to create Vow Financial. At the time of the merger, the combined business represented more than 900 brokers in Australia and had loans under management of $16bn, making Vow one of the five largest mortgage aggregation businesses in Australia. Macquarie Bank, which holds a minority interest of less than 20% in the Vow group, facilitated the merger. And although Brown has only been at the helm of Vow for a couple of months, he’s been involved since the beginning. As the former head of Macquarie Bank’s third party mortgage distribution operations, Brown took part in early discussions with the shareholders. “I was there for those early strategy sessions and I feel very comfortable in knowing what direction the shareholders want to go. Now it’s just about focusing on those strategies and implementing them properly.” According to Brown, two of those strategies included offering something new in aggregation
and helping brokers build their businesses. “I strongly believe that if their business is successful, then our business is successful, so all my time and effort will be on trying to develop their businesses and make them more profitable and more successful. That has the flow-on effect of Vow being a more successful business.” Part of that involves helping brokers with business planning, strategy, structure and implementation. “We want them to understand what their competition is doing, and use that to benchmark against and be better,” he says.
Technology Technology has been a major focus for the group since its inception – “IT excellence” was listed among the promises Vow hoped to bring to its brokers. The aggregator introduced its new ‘Alice’ IT platform in 2010 and according to Brown, the secret to a good IT system is simplicity. “Some aggregators have introduced really great systems, but they’ll be lucky if brokers use 20% of it,” he says. “It’s not that brokers are technically challenged, but they’re looking for simplicity and ease of use.” The aggregator did break fresh ground in late 2010 when it announced its arrangement with Dell offering brokers discounts on computer packages, ranging from 10–40%. At the time, Vow CIO Alan Gibbons said: “I suspect many brokers have been delaying upgrading their computer systems, waiting to see how business would pick up in the wake of the GFC. This could be just the incentive they need to modernise their systems.”
Building the future Part of building a successful business is developing an exit strategy, Brown says, which is why Vow Financial has chosen to focus on succession planning in 2011. “We need to help brokers bring new people into their businesses, help them develop those brokers and eventually have them take over.” Vow is looking into ways to help brokers foster these kinds of relationships, perhaps through introducing a long-term incentive. According to Brown, succession planning is even more important, in light of legislation and the inevitable reduction of broker numbers. “There is no doubt we will see less brokers and as a result I believe we’ll see an even greater consolidation of brokers,” he predicts. Brown envisages consolidation will encourage brokers to ditch their home offices to share storefronts, which overall helps to improve professionalism of the industry. Current Vow membership sits at about 700 brokers, but Brown says they are more concerned about quality than quantity going forward. “Our long-term goal is to have brokers deal with us because of the good service that we offer as well as the breadth of service that we offer.” According to Brown, Vow brokers are representative of the intermediary spectrum. Going forward, the group is hoping to attract “the business broker” – someone that is able to develop a long-term proposition that they can actually sell. Late last year, the aggregator announced it was on the lookout to buy trail books from retiring
Personal fact file: ++ Tim Brown, CEO Vow Financial ++ Age: 48 ++ Education: Queensland University of Technology ++ Family: Three kids – two girls and a boy aged 25, 23 and 21 ++ Hobbies: Surfing, playing golf, reading ++ Home town: Canberra
“ Like any integration, it takes longer than expected, but we want to put that behind us and move forward ” brokernews.com.au
Business Profile vow financial
brokers within and outside its broker network. The strategy not only helps brokers looking to retire, but it also gives new brokers a leg up. Vow Financial Western Australia account executive Brad Driffill said then: “We’re looking to offer options to our existing guys. If they want to grow their business, a quick way to do it is to buy a trail book. But if they are looking to retire, if they are in their 60s and want to get out, rather than sitting on their trail book and watching it slowly diminish, let’s talk about finding another broker to purchase it.”
Conditions: 2011 In terms of what to expect in the wider industry in 2011, Brown predicts the economy will remain somewhat flat. “I think it will be similar to 2010 – not a boom or bust year.” While the flood situation will set the Australian economy back a bit, overall the outlook should remain stable.
As for the mortgage industry, he doesn’t predict there will be any major swings in commissions. “Different lenders at different times are going to always review commissions, but with competition coming back I think commission offerings will improve – at least it will keep the majors looking over their shoulder,” he says. However, the government could do more to improve competition, he adds. “I don’t think it has done enough to support the RMBS market,” Brown says. “I know $16bn sounds like a lot of money, but it’s less than 10% of the overall loan pool. We should be looking at adopting something similar to the Canadian scheme.” Despite a lack of leadership in this direction, he notes that non-banks are making a comeback. “A lot are offering good products at the moment and I think that flight to brand quality has weakened, and clients are starting to take a serious look at non-banks again.” MPA
Making the transition The best piece of advice Tim Brown ever received was “don’t complain about it, get yourself in a position where you can make some change”. It is advice Brown has taken to heart. Macquarie Bank’s former head of third party mortgage distribution operations stepped in to replace Jeff Zulman as CEO of Vow Financial at the end of 2010. Brown says Zulman, who returned to consultancy work, did some excellent work in consolidating the back offices, getting the three businesses on to one platform and helping them understand the strategy of the group in terms of cross-selling. Brown says: “What I bring that is different to Jeff is
that sales and marketing focus, which is one of my strengths in building distribution.” Macquarie’s central role in the formation of Vow Financial placed Brown close to the group at its inception. He was heavily involved in facilitating the merger to create Vow, bringing the groups together for negotiations and merging the businesses. “I felt passionately about Vow,” he says. “I was involved in early strategy sessions and I felt I was the right person to see those come to fruition.” Brown’s background combines a unique balance of banking and mortgage industry experience. He started his career at Aussie Home
Loans, then moved to Suncorp where he worked as general manager. Brown then branched out and started his own consultancy business, from which he assisted in setting up the financial services arm of real estate groups such as LJ Hooker, Elders and Century 21. In 2005, he made the transition to head of retail sales at Macquarie Bank. He says his professional experience helps him to see the industry “from both sides”. In his 30 years in this industry, Brown has witnessed huge changes. And he says the industry is about to evolve even further. “I see mortgage brokers moving towards wealth management with a
property focus.” Brown indicates that the group will focus on diversifying income streams by helping brokers adopt what it has coined a “wealth management strategy”. Vow is encouraging its brokers to stick to products related to core mortgage products, such as insurance that is related to the debt, eg, life and accident cover. “It’s our responsibility to ensure clients have that coverage – there’s an obligation to ensure they have it,” he says. Vow currently has alliance agreements with five financial planning businesses within its network, but is hoping to grow this number over time.
converters With business lending through traditional lines of funding remaining tight, many companies are seeking alternatives. Tony Della Maddalena looks at the growing debtor finance market and how brokers can diversify into the sector to expand revenues
he collapse of the financial markets in 2008 changed the landscape of the lending market, possibly forever. Nowhere has the effects of this been more acutely felt than in business lending, with the market remaining extremely constricted. Not only is it difficult to secure funding through traditional funding lines, as financial institutions tighten policies and lending criteria, but for those who are able to secure an overdraft, the terms on which money is lent are unfavourable when compared to the days prior to the financial crisis. However, these changes in market conditions have opened the door for other non-traditional lending facilities, as businesses seek viable alternatives. This is evidenced by the continued growth of the debtor finance sector, growing 6.3% over three months. Data from The Institute for Factors and Discounters of Australia and New Zealand’s (IFD) most recent quarterly index measuring total turnover, shows the debtor finance sector expanding. This is compared to a reduction of 1% in total business credit in the same period, according to Reserve Bank figures. Moreover, debtor finance issued to Australian businesses over the past 12 months totalled almost $60bn, which is rather impressive given that in 1999 the entire market was valued at $8bn. While we’re witnessing the ongoing acceptance of debtor finance as Australian businesses continue to experience a challenging cash-
flow environment, the local sector could still be considered in its infancy when compared to overseas markets, where debtor finance is far more commonplace. It’s estimated that in the UK and Europe, for example, approximately 20% of businesses use debtor finance in some form or another. In Australia, however, it’s more in the realm of 5%. The market here is far from mature and we expect to see debtor finance growing in popularity as small and medium enterprises (SMEs) seek to leverage their debtors’ book to enhance their cashflow position, the lifeblood of every business.
How does it work? One possible reason why the debtor finance market in Australia is lagging behind other parts of the developed world is because it’s often not well understood, and is considered by some as being opaque. Further complicating matters, debtor finance is known by many different names, including receivables finance, invoice financing, cash-flow finance, factoring and discounting, and the list goes on. Regardless of the name, in reality debtor finance is a simple and straightforward finance facility both in theory and in practice. Factoring and discounting are two options for businesses to improve their cash flow. Both of these financial arrangements are primarily secured against the unpaid invoices of a business.
Under both facilities the client sells the unpaid invoices for immediate access to cash, but under the factoring arrangement the provider additionally manages the client’s sales ledger and collection of accounts. Therefore, under a factoring arrangement the debtor makes payments directly to the provider. Under discounting, the debtor makes payments to the company, as per usual, but as the debt is owned by the provider, the company manages the collection process and then passes the revenue collected to the provider. One of the attractions of debtor finance is that it’s a self-liquidating facility, meaning that the company isn’t taking on additional debt per se, but rather taking an advance on money that is already owed to it. The goods or services have already been provided, and while the facility needs to be repaid, this should take care of itself as a matter of course as the company’s debtors settle their invoices. Debtor finance facilities, unlike overdrafts, do not generally require real estate security.
The role of debtor finance Two problems conspire to constrain the growth of today’s business. They are late-paying customers that can stretch the liquidity of a business to its limits and lead to the imposition of additional interest charges, and hard-to-secure overdrafts which often provide an inflexible form of finance which is unable to respond to fluctuations in business activity. Debtor finance provides a financial solution to address these problems and enables businesses to survive cash-flow crises and realise their growth potential. Many see debtor finance as a tool to overcome short-term cash-flow constraints which may impact a company’s survival. There are a growing number of companies engaging this tool more strategically, however, by utilising the enhanced cash-flow position to grow their business through employing more staff (paying wages) or for capital expenditure. While there are many advantages for companies using debtor finance, according to the IFD, businesses state the three key benefits to be:
Freeing up of cash within 48 hours (usually varying between 75–90% of the value of an invoice), allowing the business to accelerate growth The ability to utilise the cash flow to obtain early settlement discounts from suppliers/ creditors (up to 5%) Factoring reduces management time spent on chasing slow-payers, allowing managers of the business to concentrate on areas more appropriate to their responsibilities, such as driving new business
The role of brokers Brokers are increasingly becoming an intermediary introducing Australian businesses to the benefits of debtor finance. This is due in part to brokers seeking to diversify their service offering, pursuing new revenue streams. To the same extent, brokers are becoming more involved in the facilitation of debtor finance as the profession matures, and brokers take on more of a role as ‘trusted advisors’ to their clients. Brokers aren’t required to be authorities on debtor finance, with providers generally being comfortable for brokers to be as involved in the process as they desire – from a straight referral (and nothing more) to a more active role. Attractive commissions are offered, with most providers paying an upfront as well as a trail commission for the life of the facility. In addition, brokers also benefit through the development of stronger relationships, as they provide financial solutions to their clients which they may not have considered otherwise. For those brokers looking to explore how they can assist their clients joining the growing number of Australian businesses benefiting from this facility, a good place to start is by contacting an IFD member. All members are listed on the IFD website and will be able to assist you with the accreditation process. MPA Tony Della Maddalena is chairman of the Institute for Factors and Discounters of Australia and New Zealand (IFD) brokernews.com.au
You could be missing out if you aren’t considering commercial applications. Barney McCarthy finds out why from some of the sector’s key exponents
t is often said that if you stand still, you get left behind. In an arena as innovate and dynamic as the mortgage industry, this is certainly true. It is important that you consider all the options available to you, for the benefit of both your clients and your business. After all, if you aren’t offering something your competitors are, the chances are your customers will take their business elsewhere. Residential mortgage transactions can continue to be your core focus, but adding further strings to your bow helps you reduce your exposure to risk – and strengthen your overall brand. Commercial finance can be anything from mortgages on shops or blocks of units, to construction or business loans, right through to leasing or equipment finance.
You may think this is outside your sphere of expertise, but it’s really not that different to your day-to-day home loan transactions. If a small business owner comes to you for their residential mortgage, why let them walk out the door when you could be helping them to refinance their commercial premises too? We spoke to four companies to find out more about their propositions and the commercial market in general.
“ Adding further strings to your bow helps you reduce your exposure to risk ”
“ This year is quite different and activity has been strong, both with new enquiries and handling the overflow from the tail end of last year ” Acuity Funding
Acuity Funding is the commercial arm of the Acuity Group, a collection of businesses that operate across the financial services spectrum. Operational for more than six years, the business is anchored by managing director Ranjit Thambyrajah, an intermediary giant with some 25 years of experience and winner of MPA’s top commercial broker title in 2010. Located in Pennant Hills in NSW, Acuity Funding has four staff working in its commercial team, ably supported by a couple of accountants and colleagues in the home loan division. Thambyrajah says early 2010 was a lean period for the commercial sector, but notes that things are now on the up. “When we came back after the Christmas break last year, things were quiet for three months,” he remembers. “This year it’s quite the opposite and activity has been
IMB is one of Australia’s largest building societies and is currently celebrating its 130th anniversary. While it offers a whole suite of personal finance products direct to consumers through the third party channel, its sole focus is commercial and it has a dedicated team of a dozen staff handling applications. The Wollongong-based society predominantly operates in NSW, Victoria and the ACT with BDMs on the ground, but welcomes national enquiries – and has the resources to deal with interest from elsewhere. George Sotiros, senior manager of direct & third party channels at IMB, says brokers and customers alike are now looking towards the non-banks for a lending alternative. He says the building society has been able to capitalise on major banks exiting the commercial space. Sotiros admits the sector has been through a trough, but says the future looks brighter. “The last 12 months have been tough, but we are buoyed by the last quarter and the general pick-up over the past 3–6 months,” he says. “I’m quietly confident looking forward, even though things are still slightly patchy. Providing the
strong, both with new enquiries and handling the overflow from the tail end of last year.” To illustrate this point, Thambyrajah says the company handled around $30m–40m worth of leasing business last year, but received enquiries worth $13m alone in January 2011. He refuses to get carried away with this increase and says the ‘good times’ are not quite back, but observes that many companies will continue to require commercial finance while the economic cycle remains at a positive stage. Thambyrajah urges any brokers “serious about their business” to try their hand at commercial finance, but warns against trying to do it all by themselves. “There is money to be made in commercial finance if the transactions are presented properly,” he says. “But it is important to team up with the right partners and not promise what you can’t deliver.”
cash rate stays the same and the cost of funding doesn’t alter dramatically, we should see more SME confidence returning.” It is the SME arena that IMB concentrates on; Sotiros paints the picture of the typical customer as a motor mechanic who has rented his premises for five years and is presented with the opportunity to purchase it outright for $550,000. “Not many of our clients require an annual review in the same way that residential mortgage owners do,” he observes. “Once you’ve got one of our rates, that tends to be that.” Sotiros advises brokers considering writing some commercial business to get close to lenders operating in the space who will support them, and says “we often send a BDM out to spend time with brokers to walk them through the process. “Once brokers have one or two commercial cases under their belt, they soon realise it isn’t that onerous. It is vital for brokers to spread their income and diversify and not just rely on residential business.” Sotiros also stresses that commercial clients tend to present the opportunity for repeat business, both through their own needs and recommending your business on to others.
Sintex Founded in 2004 and launched into the market in 2006, Sydney-based Sintex was established with the intention of providing a viable alternative to the banks and private lenders, who had previously dominated the commercial finance market. As well as focusing on commercial, Sintex does consider property investment applications on residential properties. It employs 11 staff at its Ultimo, Sydney office, supported by a team of back-up service providers. General manager Cathy Dimarchos says the past 12 months has seen a tighter but steady market which has provided Sintex with a solid platform for the coming year. “With consumer awareness becoming more prominent and the non-bank sector becoming more involved in commercial lending, a steady and positive growth is anticipated,” she says. Dimarchos is also quick to allay fears brokers may have about commercial cases being complicated. “Commercial lending is not as difficult as many state it is,’ she says.
“You have to make a start somewhere, so looking at the smaller and simpler transactions will build confidence and give you an insight on the similarities and differences between residential and commercial lending.” You don’t have to venture into a new sector alone either. “If you are starting out, don’t try and do it all yourself, look for support,” she advises. “Mortgage managers will usually guide you and support you along the way. They tend to be service focused and will therefore ensure that your first steps into the space are positive.” Dimarchos adds that it is time that brokers who are used to referring commercial enquiries onto the banks start offering their clients more. “Clients want a ‘set and forget’ commercial loan, not just a three or five-year bill facility, so do them a service by offering them a long-term solution for a long-term asset.” Sintex offers mortgage managers a white label offering, allowing them to capitalise on the awareness and branding while providing service from the back end.
“ We had record settlements in December and this has been our busiest January to date, which is a time of year when we would ordinarily expect the market to be taking a seasonal breather ” Peter Kearns
Think Tank Commercial property finance specialist Think Tank launched in mid-2006 after three years of planning. The North Sydney-based outfit currently employs 10 staff, but has plans to significantly increase this in 2011. General manager Peter Kearns says it benefits from concentrating on one sector. “We are a specialist in commercial property finance and therefore we prefer to focus on this area, rather than seeking to diversify too soon. We presently see great opportunities to expand our share of the market in the commercial space,” he says. “We see some natural synergies that we will likely embark upon over the next 18 months in the areas of construction, equipment and cash-flow finance.” Kearns echoes the sentiments of other players in the commercial space – that volumes are returning after a tempestuous 2010. “The commercial market picked up noticeably in about March last year, dipped around the time of the election for 2–3 months and has since come back in a big way, from September through to now,” he explains. “We had record settlements in December and this has been our busiest January to date, which is a time of year when we would ordinarily expect the market to be taking a seasonal breather.” Kearns adds the succession of interest rates by the RBA prevented the market getting too ahead of itself.
Looking forwards, he expects similarly mixed fortunes in the year ahead. “There are many parts of the economy that are still soft and struggling despite the undeniable positivity of the employment numbers,” he explains. “Retail, light industry and the services sectors are all still vulnerable to further rate rises and this vulnerability is probably reflected in the recent quarterly CPI numbers which came in below consensus expectations.” “This suggests that we can expect further stabilisation and modest gains in the commercial property market across the year, as long as the RBA doesn’t get overly aggressive on monetary policy – which we don’t think it will.” Despite the uncertain climate, Kearns recommends that brokers thinking about entering the commercial sector should turn to their aggregator’s commercial lending team, or partner with an experienced commercial brokerage firm who can package the deal and place it with a reliable lender. “If you are looking to deal direct with the lender, try the non-banks who typically have less bureaucratic structures than the banks. Don’t set volume hurdles for ongoing business and offer flexible commission arrangements,” he suggests. “Try and get hold of a lender BDM that you can contact when you need to, will return your messages, keep you up to date and help you put the deal together.” MPA
The gender divide Women have made significant gains in a profession that is largely dominated by men. Andrea Cornish examines their success, what obstacles remain and what the industry can do to further support their businesses
ortgage broking, like many professions related to banking and finance, has long been a man’s world. Nicole Cannon, director of Pink Finance, has been in the industry for eight years. When asked if she finds mortgage broking to be a male-dominated industry, her answer is succinct: “Absolutely. But when I started back in May 2002 it was even worse!” Smartline Blackwood’s Cathy Anderson attributes the gender gap to the banking brain drain. “As many mortgage brokers in the early days of the industry were from a banking background, there’s no doubt that the majority of mortgage brokers at that time were men. “While the number of women in the industry has certainly grown over the past 10 years or so, the fact is that the number of men still far outweighs the number of women.” While women currently make up 30% of the MFAA membership, Cannon notes there are few females occupying positions of prominence at aggregators and banks. “Last year I was looking for female BDMs to invite them to the McGrath Foundation High Tea, and I couldn’t find any. I now have one female BDM, but males definitely dominate this work role,” she says. Redconcierge director Sarah Wells says the dearth of women in positions of prominence in the industry needs attention from industry associations. “Some very talented women self-select out of the industry for a number
of reasons,” she says. “I would like to see organisations working on why this happens and in turn we may see more women in positions of prominence generally.”
“ There are some exceptional young women in our industry that are passionate about making a worthwhile contribution ”
Alison Whittle, director of Tiffen & Co/The Mortgage Detective, has 15 years of experience as a mortgage broker and seven years as an MFAA representative. In 2009, she was elected president of MFAA’s NSW/ACT council. She agrees that there is definitely a lack of women in prominent positions in the industry, but says she sees this changing over the next few years. “There are some exceptional young women in our industry that are passionate about making a worthwhile contribution and are willing to help shape the future of our industry. It’s just a matter of time before they rise through the ranks. Watch this space,” she says. Whittle, along with council members Katrina Rowlands of Mortgage Success, Donna Beazley of Professional Finance Mortgage Brokers and Wells of redconcierge, has helped boost female representation up to 40% on the MFAA board. Whittle says that as an industry body, the MFAA “would like to see a normalisation of the imbalance but this takes time and active participation from the women already established in the industry. In saying this, I think greater visibility of women in our industry can only be
viewed as a positive to others looking to join our profession.” According to Whittle, the MFAA has always been a big supporter of women in the industry as was clearly demonstrated when it took over the management of the Women in Mortgage Business Network (WIMBN). WIMBN was launched in 2003 as an industrywide initiative to provide a positive environment for women within the mortgage broking and wider financial services industry, with an aim to grow their businesses and expand their social and professional networks. The association holds social and educational seminars in five cities each quarter, featuring inspirational speakers and workshops on a variety of topics. It also provides an online resource centre with articles and interviews designed to inspire businesswomen. The MFAA took over management of WIMBN in 2009, the same year Aussie announced it would come on board as the association’s principal sponsor. Major sponsors include CBA and NAB, while Master Property Group is listed as a supporter. “WIMBN events are always well attended and it is just a matter of continuing to provide opportunities for women to further network with like-minded people,” Whittle says. Professional Finance Mortgage Brokers’ lending manager Donna Beazley is entering her fourth year as a member of the NSW Council for MFAA. She says the support from the MFAA exists, but there needs to be greater participation on all levels. “I would like to see more or all of the lenders supporting WIMBN. And more importantly, women like myself that are working in broking have to make the time to come along to these events for women in order to support them.” Wells also argues that women can’t expect change if they’re not willing to participate in
“ Many female brokers downplay their strengths and doubt their ability ”
finding solutions. “It is very important to me, which is why I ran for the NSW state council in 2009 and was elected vice president in late 2010. I encourage my peers to consider similar opportunities. It is easy to comment from the sidelines but my experience has been to get involved and create the change we all crave which takes time, dedication and introspection,” she says.
“ If we do our job well, we all have the capacity to earn the same ”
Statistics from Rice Warner Actuaries and the Australian Council of Trade Unions reveal women earn an average of 17% less than men, however the commission-based model of mortgage broking gives women greater opportunity to close the gender wage gap. Evidence of this is the growing number of women entering the ranks of the best earners of the country. “Many of the top performers are women – if you look at the top 10 tables for most of the franchising or aggregator groups, a solid percentage of these are women,” says Anderson, who is a great example herself. Anderson beat 140 franchises to win Smartline’s Franchise Owner of the Year three years in a row (2008–2010). The award not only recognises business volume, but consideration is also given to leadership, as well as brand and systems alignment. Other top performers in the mortgage industry include Wendy Higgins and Katrina Rowlands – who are perennials in the top 10 of MPA’s top 100 list. “Mortgage broking is very much an ‘income leveller’ – you are rewarded for your own results and contribution, regardless of whether you are male or female,” Whittle says. Cannon agrees. “If we do our job well, we all have the capacity to earn the same,’ she states. “You have to take all the opportunities you get. However, in saying that, I do not have children
yet, so for me it is easy to see clients in the evenings at the last minute – I don’t have to think about the kids, babysitters, and childcare. This may then limit your capacity to earn the same, as you are limited in the times you are able to see your clients,” she added.
Motherhood Many women are attracted to mortgage broking because of the flexibility it offers. However, trying to juggle this profession with a young family can put you at a disadvantage, Beazley says. “When I become a broker in 2003, it was definitely a male-dominated industry, especially in regional areas and being a mother of two young children it was a challenge to fit in a busy work schedule and family life. As a mum, the running of the household and normal family life never stops, so the balance has to be carefully considered,” she says. “A lot of the time, male brokers I worked with had their spouse at home performing the mothering roles so they could be a broker and work the longer days Monday to Friday, and I was juggling the same amount of clients with different hours and weekends.” Beazley notes that an increasing number of brokers are teaming up. “More recently I have seen a lot of husband and wife teams in brokering businesses working together,” she observes. Going forward, this might be the type of solution working mums are looking for – especially in light of increasing calls to get rid of the ‘part-timers’. According to Whittle, anyone entering the industry on a part-time basis may struggle with the demands of establishing a new business. “To be a successful mortgage broker, male or female, initially requires long and unusual hours, which can be a difficult adjustment for many,” she
“ As a mum, the running of the household and normal family life never stops, so the balance has to be carefully considered ”
warns. “The support of family and partners is vital and without this you are not going to be able to give training, education, personal development and networking the attention it requires to establish yourself.” Working on a part-time basis may be easier for women that have already built a large database and have a recognised brand. “Established brokers that have already developed a strong network of clients and referrers now have greater flexibility and choices – I believe that many of these brokers will remain in the industry and continue to develop their businesses,��� Whittle adds. But it’s a tough go for mortgage brokers trying to be super mums, Anderson says. “There is an eternal struggle between wanting to be the best at our job and managing our businesses while running a household. Spending time with their children can be an impediment to some women who want to achieve all they would like to.”
Biggest challenge The biggest struggle women in broking face might not be the gender imbalance or even the demands of juggling family and work. Many argue women can be their own worst enemy when it comes to achieving success. “You need to be very driven to be a success in this industry – you need to have a very strong desire to achieve. You also need to believe in yourself and your abilities, and to be prepared to back yourself,” Anderson says. “I see many female brokers who downplay their strengths and doubt their ability to do well – men seem to be more confident that they can get the job done. I think that’s probably the main barrier to even more women doing well in this industry – that lack of self-belief.” MPA
Stricter lending criteria and rising house prices have made it increasingly difficult for first homebuyers to save an adequate deposit. MPA looks at what brokers can do to help potential clients reach their goals â€“ and in return gain customers for life
overnment incentive programs to encourage first homebuyers during the financial crisis had the desired effect, with around 30,000 Australians taking advantage of the offer. However, the number of first homebuyers has dropped dramatically since the government phased out the boost to the First Home Owners Grant, in December 2009. Figures presented by AFG indicate first homebuyers dropped to 11% in December 2010, down from 18% the previous year. While the rush to jump onto the property ladder has subsided, there is still a strong desire among potential first homebuyers to own their home. According to Mortgage Choice, overall application levels from first-time buyers remain low, but the number of enquiries appears to be growing. It reported that the number of visitors on the first homebuyer section of the Mortgage Choice website increased during the month of December into the first week of January. Although there is a desire to climb off the rental roundabout, many would-be borrowers lack the ability to demonstrate genuine savings. A survey conducted by Mortgage Choice in March 2010 found that, despite the disappearance of 100% loans, almost 8% of respondents intended to borrow the full purchase price. Fortunately, lenders have started to loosen loan approval criteria. While most required a 20% deposit during the GFC, several lenders reduced LVR requirements to 90% in early 2009, and many are now allowing up to 95% LVRs.
Making the connection Even though there has been a decrease in deposit requirements, mortgage brokers often find borrowers come to them before they are ready financially. Smartmove Professional Mortgage Advisors’ Haley North says many customers visit her first for information. “Often a client will simply want to understand the process fully as they are planning towards a purchase in coming months, so they can ensure they have taken all factors into account,” she explains. North adds that it can definitely be a positive for people to start their research early “so they fully understand the financial undertaking they are working towards, which can enable them to focus on their target purchase price”. She says a large percentage of potential buyers lack adequate savings – in part because they are unaware of other costs that can be involved such as stamp duty or lenders mortgage insurance. These claims are supported by figures collected by Mortgage Choice which show that the percentage of potential first homebuyers admitting to having no idea about the property purchase process has doubled – rising to 6% from 3% in 2009. Meanwhile, 51% felt they had “some idea” while only 12% considered themselves well informed. First homebuyers also make up a significant proportion of customers for David Thurmond of Mortgage Choice in Berwick. “We are in a growth corridor in Melbourne’s south-east suburbs, so first homebuyers made up a huge part of our
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business before the First Home Owner Grant was reduced.” According to Thurmond, about 70% of first homebuyers lack genuine savings. “People definitely start to think about buying a house long before seeking finance approval. The idea of buying a new home is a lot better and easier than the reality of it is.” Regardless of their financial situation, Port Group director Anthony McDonald says it is helpful for clients to make a broker their first pit-stop. “Like most things, some people are more organised than others when it comes to their finances,” he says. “Some come armed with a fully-fledged budget detailing every dollar they spend and are very motivated to enter the property market. Others have good cash flow but aren’t great savers and need direction on how to achieve their financial goals. It takes all sorts, but we like to see the client as soon as possible so we can work through their financial objectives in a timely manner without any stress. People actually like to plan and seem to do it better when they have someone in their corner helping along the way.”
“ Often first homebuyers are looking for genuine, proactive mortgage advisors that are upfront and informative ”
Money-Smart’s mortgage specialist Michelle Murchison finds there is a high rate of would-be first-time buyers without the financial wherewithal to get started. “I’d say approximately 60% may lack genuine savings at the initial enquiry. However, with our guidance and providing additional tools and support, we often find they’re ready to go within 3–12 months.” While Smartmove’s North finds only a small percentage of her clients lack any kind of deposit or genuine savings, at least half are not aware of how much deposit they need – particularly if they are to avoid mortgage insurance without having a guarantor involved. Regardless of their position, she talks her clients through the full loan process. “This is important so I can fully understand their needs and position – and so they understand the process
they will experience. I find that if this discussion takes place at the start of the relationship, I avoid missing any critical factors that a person may need to take into account.” By way of example, North describes the situation with a client who is in the process of saving a 5% deposit. In this instance, it would be a mistake for them to consider closing out their credit card with a lender that allows up to 95% LVR for customers who have held a credit card with that institution for more than six months. “Had I not taken the time to discuss the full process, their position and current available options, they may have inadvertently closed off one of the potential solutions available to them down the track,” she says. North provides clients that are looking to save with a budget calculator so they are able to see their position down to the dollar in fine detail. “This is also an important tool for people to identify their comfort level with repayments, taking into account future expenses as well as current ones,” she says. “Clients may also wish to explore different options in order to reduce existing liabilities, by either consolidating all their debt in order to achieve a cheaper interest rate, or look at arranging balance transfers for the same effect – so that more of their repayments can work towards debt reduction rather than simply paying exorbitant interest.” McDonald encourages his clients to set up a separate account from their everyday account, which attracts a higher interest rate. “The psychology of building up money in an account and receiving interest gives people a positive feeling and once they start they become motivated, then enjoy watching the savings build. We encourage first-home buyers to label their account ‘Home Deposit’ so they are reminded about their financial goal every time they go into their internet banking.” McDonald also stresses the importance of budgeting to his clients. “Some people are afraid of doing a budget, feeling that their way of life
will be burdened by having to stick to a plan,” he observes. “I say the opposite will happen – if you work hard, pay yourself first via your budget and then the rest of your bills are taken care of, then you don’t have to stress about not having any money. The money you have set aside you can spend any way you like.”
Follow up The benefits of making regular contact with customers afterwards are two-fold: customers are encouraged to follow their budget and the broker-client relationship is reinforced. Thurmond follows up on all leads one month after first contact and then 90 days thereafter with an email, to see how the client is progressing with their savings. He also sends out a monthly newsletter with updates on lender specials, suburb reports from RP Data and anything else that might benefit or interest them. McDonald employs a dedicated client services officer to keep in regular contact with first homebuyers. As a result of the effort he makes with these clients, his office has a very high conversion rate. “We find that putting in the time with people and genuinely showing interest in helping people achieve their financial goals converts into business at a later stage. The relationship is the key and as long as we stay in regular contact, we do have a high percentage of clients coming back to us from a previous meeting.”
Reaping the rewards Thurmond agrees it’s definitely worth the time to foster the relationship with first-time buyers. “First homebuyers are a great referral source. It’s their first major
financial decision, so if you can make a good impression from the start you’ll have their friends and family calling you soon after.” Murchison adds that making a strong connection with borrowers at the start of their home ownership journey sets the stage for future opportunities. “Often first homebuyers are looking for genuine, proactive mortgage advisors that are upfront and informative, preferably for a longer term advisory relationship,” she says. “Because we’re property investors ourselves, if they’re inclined towards longer-term property investment, they’re drawn to our skills and experience to build a correctly structured property portfolio over the long term. This complements our ‘lender for life’ philosophy, which generates quality repeat and referral business from satisfied buyers.” MPA
The flipside Not all brokers are interested in pursuing first homebuyers. Wealth Today’s Darren Hands says for the past seven years he has been “fortunate” to have processed less than one first homebuyer loan a year. “My general thoughts are they do not save before they go looking for a house and expect a brand new four-bedroom, two-bathroom home fully kitted out, with a new car in the driveway to boot.” The majority of Hands’ clients are property investors and 80% of his business comes from existing clients – so he doesn’t really operate in the first homebuyer market. “I had a few loan writers that I put on staff over the last few years and all they did was attract first homebuyers. They simply wasted so much time following them up for very few positive results and at the end of the day they were quite small loans. None of them work for me anymore.” brokernews.com.au
on the block
Embarking on a new career is never easy, but the intermediaries featured here have taken it in their stride. Barney McCarthy profiles the mortgage broking community’s hottest new talent
e can all remember the nerves we felt when starting our first job or, for the more adventurous among us, the trepidation experienced at the thought of the challenges that lay ahead. Countless hours are spent learning the ropes, getting used to the jargon and learning the intricacies of a new profession. Against this backdrop of the unknown, it can be difficult enough keeping one’s head above water – let alone bringing in significant amounts of business. The brokers highlighted in this year’s ‘Young Guns’ rundown had no such qualms: they have hit the ground running. Their impressive entrance into the market has been such that their franchisors, aggregators and peers have seen fit to nominate
them for inclusion in this prestigious hall of fame. As with any industry, it is important that those who depart are replaced with fresh blood. Hopefully the increased professionalism brought about by licensing will enhance the desirability of mortgage broking as a career. If these ‘Young Guns’ continue their stellar start, then the advisors featured here could well become stars of the mortgage broking industry – not to mention the MPA Top 100 Brokers list – for years to come. Our congratulations go to the rookies who made this year’s cut. But before we hear from them, we first have a short word from our exclusive ‘Young Guns’ supporters, Commonwealth Bank of Australia.
The sustainability of the mortgage broking industry will be impacted by the quality of its brokers and, in particular, the quality of those in the early days of building a mortgage broking career. The National Consumer Credit Protection Regulation has reinforced the need for vigilance in understanding customer needs and their financial position. MPA has been recognising the rising stars in our industry for the past few years. This year Commonwealth Bank is proud to be associated with the ‘Young Guns’ feature. To be recognised as a ‘Young Gun’ is to be acknowledged nationally as talent on the rise; a future leader or influencer. Each of our ‘Young Guns’ has a story to tell and advice to give, which may help many readers to be more successful in their own businesses. Commonwealth Bank is committed to
continuing the momentum of the mortgage broking industry and encourages brokers to be professional in every way. Professionalism is a commitment to ongoing education and ethical behaviour, leading the way in customer service and constantly raising the bar in the industry. Our ‘Young Guns’ exhibit such professionalism and we congratulate those who are featured in these pages. We hope these achievers inspire others in the industry to continue to strive to be the best in what they do. Kathy Cummings Executive general manager, third party and mobile banking
“ I actually receive more referrals now from existing clients, family and friends because I am seen as independent and not tied to one lender ”
Terry Azzopardi Company: Smartline Location: Caroline Springs, Vic Terry Azzopardi hasn’t yet clocked up two years as a mortgage broker, but is already landing awards left, right and centre. Having been named as Smartline’s ‘Rookie of the Year’ in 2010, he followed that up by scooping the ‘Quality Young Gun of the Year – Franchise’ award at the Australian Mortgage Awards. But while he may be new to broking, Azzopardi isn’t wet behind the ears, having notched up 22 years with NAB before making the switch. “I started with NAB straight from school and held almost every role there, from mail boy to regional manager,” he explains. “It was a good company to work for, but there comes a time in big organisations where you feel like you’re just a number. While I wanted to do something new, I knew that I loved lending and the opportunity it provides to put smiles on people’s faces. I saw becoming a mortgage broker as an opportunity to do that – with the added bonus of being able to do my own thing and move away from the distractions that come from working in a large corporation.” Azzopardi says mortgage broking has opened his eyes to the world after suffering tunnel vision during his final days at the bank. Having regularly put in 12 or 13-hour days at NAB, he has now adopted a more relaxed approach, which includes spending more time with his family. But this doesn’t mean he is taking his foot off the pedal, as his accolades prove. Azzopardi attributes his ability to hit the ground running to the large referral network he built up while at NAB. “I was lucky in that I had a good database, with some customers I had known for more than 20 years who were loyal to me personally, rather than the bank,” he explains. “I actually receive more referrals now from existing clients, family
and friends because I am seen as independent and not tied to one lender. I’m getting clients now that I couldn’t get before, because they didn’t necessarily want to bank with NAB.” Despite the knowledge he gathered while working for a lender, Azzopardi still encounters occasional difficulties when dealing with banks and says, if anything, it makes it worse because he knows what holds applications up. “In my previous role I just did everything myself, whereas now I am more reliant on other people,” he says. “Friction can be reduced by eliminating things prior to application and advising the client what to bring with them.” Being methodical is all in a day’s work for Azzopardi and he says being meticulous is the best advice he has received. “Be thorough with applications, especially with compliance,” he says. “The best chance an application has of going through is if it is done right initially.” Having written $25m in his first full financial year, he is targeting in excess of $30m in 2010–11 and has words of encouragement for those thinking of following his career path. “You might think there is a risk, but if you have the passion then take a punt. Everything in life has some risk, but once you make the decision, you won’t look back.”
‘‘ The fastfood industry was the best grounding for me and I picked up invaluable, transferable people skills ”
Kim Narayan Company: Mortgage Choice Location: Glendenning, NSW Customer service expertise is often mentioned as one of the most important attributes a broker can have. Mortgage Choice’s Kim Narayan spent years honing her interpersonal skills in a rather different industry. Having left school at 16, Narayan started working in the food trade, completing a retail management course and holding management positions at a number of familiar institutions, including KFC, Hungry Jacks and supermarket chain ALDI. Working on the front line, she was able to garner a significant insight into keeping customers happy in a fast-paced environment. “The fast-food industry was the best grounding for me and I picked up invaluable, transferable people skills,” she says. Having always had an interest in finance and a passion for property, Narayan admits the leap into broking “fell into her lap”. Having embarked on a career as an intermediary only a few years ago, she purchased her own franchise towards the end of 2009 and has gone from strength to strength. She handled $20m worth of mortgages in the final nine months of 2010 and is targeting $3m a month into 2011, as well as planning to work “on the business and not in the business”. Narayan is fond of mottos and catchphrases – perhaps a side-effect from her retail days – and is often found passing on nuggets of wisdom to her fellow franchisees. “Pretty much every broker offers products from the same range of banks. The way to
differentiate yourself is to offer great customer service,” she advises. Narayan says she has managed to achieve a satisfactory work-life balance since becoming an advisor, but says long hours are still sometimes inevitable to achieve your potential. However, the variety that comes with the job helps to keep Narayan fresh and focused. “As a broker, you deal with customers from all walks of life who all have different objectives,” she says. “Every customer is a new challenge.” Despite relishing her new career, Narayan is cautious in her recommendations to potential brokers. “It is important to have cash flow when starting a new business and initially you have to be prepared to work hard for minimal reward.”
“ Having a better understanding of all the stakeholders will help you stand out in the crowd ”
Cameron Wiles Company: Smartmove Home Loans Location: Neutral Bay, NSW Cameron Wiles has wasted no time in making an impression in the mortgage broking community since making his move two-and-a-half years ago, and the plaudits came thick and fast at the Australian Mortgage Awards. As well as being part of the office named ‘Large Brokerage of the Year’, he also received personal recognition in the form of scooping the independent ‘Young Gun of the Year’ award, alongside the ‘Quality Australian Rookie of the Year’ accolade. To top off this impressive set of achievements, Wiles debuted in the prestigious MPA Top 100 Brokers list at number 75 – no mean feat for a newcomer. Yet despite wanting to improve on this prolific year, during which he wrote just shy of $45m worth of mortgages, Wiles has a simple target for 2011, namely a clean bill of health. He fractured his skull in 2010 while playing soccer – and completing his recovery is his top priority. On graduating from university with a Bachelor of Business majoring in management, Wiles wasn’t too sure about what profession to pursue, apart from knowing he wanted to work in finance. “I worked for a major bank in their branch and while I hadn’t actually been involved in lending myself, I thought it was something I might be good at,” he says. “I spent some time with an advisor, spent some time studying financial planning, and a former colleague at the bank gave me the confidence to really follow that career path.” Wiles relishes the variety provided by broking and the opportunities it affords. “You see a little bit of everything and you develop an insight into other peoples’ professions, which is really interesting,” he adds.
Wiles cites the best advice he has ever received as a simple, selfless statement. “If you put your client’s wishes first, success will follow,” he says. “We rely on word-of-mouth referrals, so it’s important to always do the right thing.” He has a simple but effective message to pass onto would-be brokers. “Anyone can be a broker, but to be a good one you have to have a broad understanding of the whole property sphere, from accounting through to real estate and the legal side of things,” he says. “Having a better understanding of all the stakeholders will help you stand out in the crowd.”
Matthew Rose Company: Aussie Location: Adelaide, SA In his role as a mobile broker, Matthew Rose is used to making people’s home ownership dreams come true. While he has only been an intermediary since joining Aussie two-and-a-half years ago, he is not new to helping people fulfil their aspirations – his previous role was as a services manager at Mazzucchelli’s Jewellers. It was the success of an acquaintance that prompted his career change. “I was after a change in lifestyle and I had a friend who was a successful broker,” Rose explains. “Being a broker offers me great flexibility, particularly as I am a mobile broker. My only regret is that I didn’t make the switch sooner.”
Rose cites the ever-changing bank policies as one of the main frustrations in his role and says lender staff are often reluctant to take individual responsibility, claiming the big banks are often the most culpable. Despite this, he has made a storming start to his broking career, writing more than $44m of loans in 2010 and targeting in excess of $50m in 2011. The best advice Rose recalls receiving is that success comes directly from your attitude. It is a message similar to this that he wishes to pass on to prospective advisors. “Honesty and integrity are the two biggest parts of being a broker,” he says. “It is paramount to make customers feel special.”
“ My only regret is that I didn’t make the switch [to becoming a broker] sooner ”
Euan Brown Company: Loan Market Location: Toowong, Qld
“ As a broker, you have freedom and are in charge of your own destiny ”
Euan Brown is the latest in a long line of brokers to come from a banking background. Upon moving to Australia from the UK eight years ago, Brown initially intended to become a financial planner, but he eventually ended up heading down the mortgage route, after completing the MFAA requirements. He finally became a mortgage intermediary 18 months ago, claiming that “being a small cog in a big wheel wasn’t doing it for me”. “As a broker, you have freedom and are in charge of your own destiny,” he says. “You also have the autonomy of putting a deal together from a variety of lenders and not just from one product suite.” Brown admits he “bangs heads” with the banks, but balances this by admitting that
disappointment is less likely once brokers familiarise themselves with individual banks’ policies. He claims that much of his first six months as a broker was spent simply getting set up and learning the ropes. “I’m not sure I realised how much of a slog it would be or the blood, sweat and tears involved,” he concedes. Brown operates out of a real estate office and says he has developed a good relationship with the principal, being able to learn from how he carries himself, while admitting the benefit of having someone “banging your drum”. Having written $29m worth of business in his first full year, he is targeting $40m and $50m in his next two campaigns, but admits this may be tempered somewhat by the effect of the Queensland floods.
Damian Mansfield Company: LJ Hooker Financial Services Location: Hobart, Tas Another ex-banker in this year’s list, Tasmanian advisor Damian Mansfield jumped to the other side of the fence after becoming frustrated with a lack of direction from his former employers. Now he is free to map his own future, Mansfield is revelling in his new-found freedom. “Helping people realise their home ownership dreams and the flexibility are the things I enjoy most about mortgage broking,” he says. “I still work a lot, but things are more adaptable and I am able to fit in things like picking the kids up from school more easily.” Mansfield says that while the irregular nature of enquiries means he is sometimes free to deal with other priorities, it also means that at other, busier periods, it is difficult to leave the office at all. Another pet peeve of Mansfield’s is when loans that should be approved are refused for no discernible reason. Despite these challenges,
he says mortgage broking is a good industry for anyone willing to work and provides him with enough income to make a good living. Looking at the year ahead, Mansfield doesn’t set himself any specific volume targets, but instead plans to continue growing his business and intends to expand his team of three brokers and one administration employee. He is keen to attract new business, but won’t overlook what he describes as the most important part of being a broker – keeping existing clients happy. “Managing your portfolio is imperative,” he warns. “Fixing your follow-up and looking after your database is half the game.”
“ Fixing your follow-up and looking after your database is half the game ”
Warren Dworcan Company: Rate Detective Home Loans Location: Osborne Park, WA Warren Dworcan has only been a broker for two years but has already set up his own brokerage. Having started his career at House & Home Loans, Dworcan went on to set up Rate Detective Home Loans and has posted some impressive statistics already. The $45.2m he handled in 2009–10 made him Australia’s 71st best broker, according to our authoritative Top 100 Brokers list. He was also shortlisted for the ‘Independent Young Gun’ award at the Australian Mortgage Awards. Prior to becoming a broker, Dworcan studied law for four years, before deciding it wasn’t what he wanted to do with his life. A stint as a fund manager followed before becoming a first-home buyer himself, which gave him some inspiration. “When I bought my first property, I saw how it all worked and realised what a broker could do,” he says.
“Since then I have found it an enjoyable industry to be involved in and it is rewarding saving people money and helping facilitate their dreams. Some people don’t think home ownership is achievable, so it is nice to make a difference.” Dworcan echoes the words of our other featured brokers by claiming that in doing the best for the client, personal success will follow. He is also a firm believer in performing consistently. “It is important to work hard no matter what the economic climate is,” he says. With lofty ambitions to significantly improve on the level of business he wrote in the last financial year, Dworcan won’t be letting up any time soon.
“ It is important to work hard no matter what the economic climate is ”
Leah Busby Company: Blackfish Finance Location: Adelaide, SA Self-confessed ‘people person’ Leah Busby was AFG’s nomination for inclusion in our ‘Young Guns’ parade this year, and it’s not hard to see why. The new company she founded, Blackfish Finance, regularly tops the aggregator’s regional results tables – not bad going for an institution that has only been up and running for 18 months. “It seemed more advantageous to start our own business and I relished the challenge of it,” she says. Having settled $20m during her first year in business, Busby hopes to exceed $40m in 2011. She says she isn’t volume-focused and is more concerned with the business growing naturally, with plans to expand the team, maintain high customer service and increase Blackfish Finance branding via social media and frequent touch-points. She admits that mortgage broking can sometimes cause more stress than it should, but concedes she thrives in the fast-paced environment and says hard work brings its rewards. When it comes to words of wisdom, Busby’s mantra is straightforward but effective. “It’s important to be yourself and trust your instincts. It all boils down to treating others how you would like to be treated yourself.” She also emphasised the importance of keeping in touch with all parties on every transaction. “It is paramount to communicate with the client, lender agent and conveyancer so you all know what is going on,” she adds. “When it comes to doing your research for solutions, you can never do too much.”
“ It all boils down to treating others how you would like to be treated yourself ”
“ This job is all about people and it is important to keep meeting and connecting with them ”
Alex Nochar Company: Oxygen Home Loans Location: Neutral Bay, NSW Alex Nochar is another broker who hasn’t passed the two-year milestone but is already making waves. Having featured in our ‘Rising Stars’ issue last year, Nochar’s second-year performance again saw his name put forward for recognition by Oxygen Home Loans. He has been awfully quick out of the blocks too, writing more than $55m in 2010 and aiming to exceed $60m in 2011. Unlike his many contemporaries who started broking after serving apprenticeships at a bank, Nochar developed his skills by running finance departments in the motor trade. While some of this experience was relevant for his new occupation, his overall mindset has changed. “Selling cars is all about margins and making a profit,” he admits. “The mortgage arena is much more ethical and, if anything, is quite the
opposite to what I was doing – you want to help people save money.” A contact made through the sale of an Aston Martin soon developed into the opportunity to become an intermediary and Nochar hasn’t looked back. “This job is all about people and it is important to keep meeting and connecting with them,” he says. Yet he is still getting used to lenders continually adapting their policies. “You have to stay on top of all the changes as lenders have a tendency to move the goalposts,” he says. He is grateful for Oxygen’s handling of compliance issues and says licensing can only be a good thing for the industry. It is this support that Nochar says is vital for new brokers. “I would advise any rookie broker to join a group as it can be hard to start off with no referrals,” he says. “You need someone to give you those leads.”
Yannick Ieko Company: Super Finance Location: Melbourne, Vic Yannick Ieko is chatty. “I talk to anyone and everyone,” he explains. “Whenever I get on a plane I talk to the person next to me and you usually find you share something useful.” Such loquaciousness stands Ieko in good stead given his chosen vocation and he says meeting people and helping them with their dreams is the thing he enjoys most about mortgage broking. Indeed it is this personable nature that lead to Ieko being named Rising Star Winner at Vow Financial’s national conference in October. The criteria for the award requires the winning candidate to have lots of energy and talent, be assertive and confident, knowing the industry or attempting to learn very quickly and on their way to becoming very successful – all of which Ieko has a handle on. Having completed a Bachelor of Business before working as a BDM for an accountant, Ieko describes his first forays into mortgage broking as a coincidence. After a tough beginning, he says his perseverance is now paying off nicely. “If you put clients first, the rest will happen naturally,” he says. “Networking is amazingly powerful and
soon helps you establish and grow your company.” Having written $15m last year, Ieko has since merged his Super Finance business with a friend’s company and hopes the joint organisation can write closer to $50m in 2011. Ieko has few bugbears, but a fledgling broker’s profile wouldn’t be complete without a grumble about the banks. “I sometimes feel like we aren’t on the same page,” he says. “We’re here to help the clients, but sometimes it seems as if the banks are only concerned with themselves.”
“ If you put clients first, the rest will happen naturally ”
Mike Wegener Company: Club Financial Services Location: Norwood, SA Mike Wegener didn’t have to look too far to find someone to act as his mentor as he began his broking career – his brother David owned the Club Financial Services franchise in Norwood. And it’s no ordinary franchise either, as it was named “Small Brokerage of the Year’ at the Australian Mortgage Awards in 2010. Having completed a Bachelor of Commerce and Business degree, Wegener had originally planned to become an accountant, but changed his mind after tagging along to a conference with his brother. “He took me to a property investment seminar and I was bowled over by it,” he remembers. “Now, I’ll handle any cases, but I mainly do property investment deals – and they offer great opportunities for repeat business as clients grow their portfolios.” After writing $15m in his first full year, Wegener is looking to almost double that by aiming for $25m next time around. He loves
the personal side of broking and building his relationships with customers. “It’s important to speak to your clients and I’m always on the phone to them, getting them fired up. It can be about anything … ” As with many of our Young Guns, Wegener cites “illogical” bank policies as his main source of frustration, but you get the impression it doesn’t keep the chirpy newcomer down for long.
“ It’s important to speak to your clients and I’m always on the phone to them getting them fired up ”
“ He advised me to switch off from bank mode and to start over again, thinking as a broker would ”
Peter McFall Company: Kalgoorlie-Boulder Finance Brokers Location: Kalgoorlie, WA Peter McFall completes our roundup of hotshot rookies and was nominated by his aggregator, PLAN. After working for a bank for two decades McFall struck out on his own two-and-a-half years ago, acquiring a brokerage in a country town in Western Australia. The previous owner of Kalgoorlie-Boulder Finance Brokers had some sage advice for him. “He explained how working in a bank and being a broker are completely different things,” McFall recounts. “He advised me to switch off from bank mode and to start over again, thinking as a broker would.” McFall’s transition to broking was motivated by a number of factors. “Due to my location, I had reached a glass ceiling in terms of how far I was going to progress with the bank,” he says. “I was also frustrated I couldn’t offer customers better service by being able to choose from a variety of lenders.” Having kicked down these doors, McFall says he revels in helping people achieve their dreams, particularly first homebuyers. Despite his new-found freedom, he still admits to a certain frustration that brokers don’t have the final say in transactions, and concedes their hands are tied in certain situations.
McFall and his team wrote $50m of mortgages last year and having lost one loan writer, he says the target will be around the same level this year. He also has some sensible advice for potential brokers, something that appears obvious but is often overlooked. “Finding the right location for business is imperative, and there may already be enough brokers in town,” he says. “You must do your marketing and research.”
Go, go gadgets Looking for the latest gadgets to improve your business? MPA looks at what’s new, what’s improved and what you can’t live without
onsumers are expecting a lot more from technology. Smaller, faster, more functionality, better connectivity, higher resolution, enhanced communication capabilities, larger capacity – in short, gadgets that do it all. The good news is that manufacturers are delivering. The number of gadgets designed to maximise business owners’ productivity continues to soar. Here’s a quick and tempting guide to what will be on offer in 2011:
Tablets Stuck somewhere between phones and laptops are tablets – devices with mid-sized screens that allow users to write with a pen or have touchscreen capabilities. Many large manufacturers are hoping to emulate the success of Apple’s iPad, which was released in Australia in April 2010. More than 80 new tablets were showcased at the 2011 International Consumer Electronics Show held in January in Las Vegas, US. Manufacturers such as Toshiba, Sony, Motorola, BlackBerry, Samsung and Panasonic have all thrown their hat in the ring. These are the products getting the most buzz:
Motorola Xoom: Industry experts are touting the Motorola Xoom as one of the best new products in the tablet category in 2011. It’s the first tablet with a dual-core 1GHz processor and Android 3.0 (Honeycomb) – a Google platform specifically designed for tablets. It also features front and rear-facing cameras, a camcorder and Adobe Flash Player – all on a 10.1inch widescreen HD display. It will be available by the end of March as a 3G/ Wi-Fi device, but a 4G LTE/Wi-Fi version is scheduled to be released in Australia in the second quarter. Apparently this device can even predict the weather. It includes a barometer that is used to measure atmospheric pressure. It not only tells users their altitude but also determines the likelihood of rain.
BlackBerry PlayBook: Design-wise, the 7-inch BlackBerry PlayBook is very sleek with a glossy black finish and stainless steel trim – everything you’d expect from BlackBerry’s makers Research in Motion (RIM). The PlayBook boasts a 1GHz dual-core processor, 1GB of RAM and the new BlackBerry Tablet OS, as well as a front and rear-facing camera both with HD. One of the key features for business users is that it will connect with BlackBerry enterprise servers out of the box. But it’s not all business – experts are talking up its gaming abilities as well. The BlackBerry PlayBook is set to be released in the US in early 2011 with roll-outs internationally beginning in Q2.
Samsung Sliding PC 7 Series: Is it a tablet? Is it a laptop? The Samsung Sliding PC 7 Series combines both. It features a slide-out qwerty keyboard that transforms it from a tablet to a laptop instantly. It features a 10.1-inch multitouch 1366x768 screen, 32GB and Windows 7. As you’d expect from a tablet it comes with apps, but it is also loaded with Office 2010 Starter edition. It is set to launch in the US in March, but there is no word on an exact Australian release date at the time of writing.
Apple iPad 2: Apple’s iPad was the big story of 2010 and the rumours surrounding the possible release of an ‘iPad 2’ have been circling for months. Whether the next generation will have a camera or a mini USB connection remains unknown, as does its official release date, although there are whispers of April. Are tablets a must-have for business operators? Deloitte recently forecast that businesses would be purchasing up to 25% of tablet computers sold in 2011. For those hopping from meetings to conferences and back to the office then the tablet could be a preferable device to the laptop. It’s lighter and more portable and the screen size makes it easier to read… well, just about anything. But if you spend most of your hours in the office and commute by car, then the tablet might not deliver the best bang for your buck.
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Smartphones Smartphones – mobile phones that offer advanced capabilities such as email, fax and internet access – have forever altered pub quiz nights. They have also become an indispensable tool for business operators. While Apple has been a forerunner in this category, several other players have released new products to rival the iPhone.
Motorola Atrix 4G: This innovative mobile phone is the world’s first dual-core processor smartphone, which means users can run two applications at the same time. It also packs 1GHz of processing power, making it incredibly fast. The other revolutionary aspect of this phone is the webtop application, which allows users to interact with their phone and a full web application environment – basically it’s a special dock that turns the smartphone into a mini laptop. Motorola has dubbed it a “full computer in a smartphone”. It can also be linked to high definition TVs to stream films and music over the internet. A specific release date in Australia is yet to be announced.
Best business apps It’s not all fun and games. The continual evolution of smartphone apps has resulted in some pretty amazing tools for business operators. Here’s a quick look at some of the best ones available: MetroView Australia (iPad): The iPad is compatible with many of the navigation applications available for the iPhone, but this is the first navigation app fully-optimised for the larger iPad screen. In addition to speed alerts, lane guidance and locally-stored maps, it offers spoken street names in an Australian accent. Price: $24.99 Call Log Calendar (Android): While your mobile already records calls received, missed and outgoing – it only saves numbers for a short period of
time. This app allows users to access a record of calls made or received weeks ago by automatically saving calls to their mobile device’s calendar. Users can opt which calls to save, whether to save location and the calendar to save the calls in. Price: Free SmartBeBattery (BlackBerry): This simple application is very useful – particularly when you’ve left the charger at home. It gives users a visual reminder of their remaining battery life by displaying a percentage on the apps menu icon. Just put the icon on your home screen and you’ll always know how much life is left in your phone. Price: Free ScanBizCards Business Card Reader (iPhone): This card reader scans and adds contacts
to your address book but it includes 16 additional features, such as: double-sided card support, the ability to add notes and calendar integration to add reminder to follow-up with new contact. All the user has to do is take a photo of the card and it is permanently added to your iPhone contacts and MS Outlook contacts. Price: $8.99 DriveSafe.ly (Blackberry): Avoid the temptation to scan your emails while driving by installing this app, which reads the name of the sender and the message out aloud. Price: Free TaskPRO (To-do & Projects) (iPhone): Create the ultimate to-do lists with this smart app. Unlike other applications, TaskPRO allows users to create sub-tasks. It also allows users to
view tasks by category: Due today/week, Overdue, Priority, Tagged or Starred. You can also search tasks by keyword. Price: $2.49 Mobile Superhero (Android, Windows Mobile, Symbian, BlackBerry): This app promises to help you find your phone and make it easier for someone to return your phone to you. It also keeps data secure by locking the device remotely and if you lose it completely, it allows you to retrieve all your personal contacts. Price: Free 7-day trial Australian BrokerNews (iPhone, iPad): The latest industry news at your fingertips. In addition, Australian BrokerNews offers property market updates, economic updates and multimedia content. Price: Free
LG Optimus 2x: The LG Optimus 2x shares the honour of being the world’s first smartphone to carry a dual core processor. And like the Motorola Atrix, it boasts 1GHz of processing power, making it equally fast. Other highlights of this smartphone include its ability to record and play back video in 1080p quality HD via HDMI, and its gaming abilities. LG stated that it concentrated on two things with its new smartphones: reducing lag and extending battery life. Also making waves in 2011 is the LG Optimus Black phone, which uses 40% less battery and is one of the slimmest phones out there at 9.2mm. No confirmed Australian release date.
Sony Xperia Arc: Now this is the slimmest smartphone to date – at 8.7mm thick it beats LG’s offering by 5mm. The overall size of this phone is 4.9in and screen size is 4.2in. Video is available in HD 1080p and it features face detection, smile detection, noise suppression and geo tagging. The Sony Xperia Arc should be available in Australia in Q1, 2011. Should you upgrade? If you’re into superlatives and looking for the slimmest, fastest, brightest or lightest device that’s on the market, then there will be plenty of options to impress your friends and colleagues with in 2011. MPA
mpa lender news
contents 58 news: a review of the world of non-bank lending and mortgage management 60 In profile: choice
Lenders raise LVRs as crisis eases ING Direct has announced it will increase the maximum LVR available to borrowers to 95% for new purchases and 90% plus capitalised LMI premiums for refinance. “The market seems more comfortable with what are viewed as higher LVR settings as compared to the past couple of years,” ING head of mortgage products Ray Esho said. In a sign the market is indeed more comfortable with higher LVRs, National Finance Club (NFC) is also raising the LVR of its finance for first homebuyers from 90% to 95% in a bid to draw them into the market. NFC general manager Andrew Clouston has commented that the increase in LVR will enable prospective first homebuyers to enter the market sooner. “These are competitive offers designed to help first homebuyers take that leap into home ownership sooner by requiring a smaller deposit,” he said. “It will be a welcome move around the country as rising interest rates have had a significant impact on this section of the market.” NFC will also raise the LVR on refinance loans for existing borrowers from 85% to 90%, plus capitalised LMI. “The reduced LVR for refinanced loans also provides a great opportunity for homeowners wishing to unlock a greater portion of equity in their homes to capitalise on investment opportunities or to renovate their current homes,” Clouston added.
Banks well prepared for crisis: Fitch Australian banks would be capable of withstanding a severe downturn in the domestic mortgage market, according to Fitch Ratings. The results of stress tests conducted by the research house indicate that gross losses incurred by the four big banks in the event of a major crisis in the mortgage market would be “manageable”. However, Fitch Ratings senior director John Miles said of more concern in such a situation would be the broader state of the economy, due to the impact this would have on the banks’ commercial loans. In a statement, Fitch argued that Australia’s relatively high household debt to income burden and the banking sector’s reliance on wholesale borrowings are vulnerabilities. The severe scenario tested by Fitch described an 8% rate of base defaults, along with a 40% decline in house prices. “Even under severe mortgage market downturn assumptions, Australia’s four major banks exhibit substantial capacity to absorb mortgage losses, largely reflecting relatively conservative LVRs and protection afforded by LMI,” Fitch said. “However, should Australia experience a mortgage downturn of these magnitudes, stress in the corporate and SME sectors would most likely be a contributing factor and deterioration in major bank asset quality would be broader than just the mortgage portfolios,” it said.
Westpac index shows waning growth The Westpac-Melbourne Institute Leading Index, indicating the likely pace of economic activity three to nine months ahead, was tracked at 3.5% in November. The result is slightly above the index’s long-term trend of 3.2%. Westpac chief economist Bill Evans has commented that this result suggests rates may be left on hold through the first half of the year, “although the stronger likely growth profile in the second half due to the rebuilding program points to upside rate risks in the second half”. The index’s quarterly measures showed a decline in overtime worked, productivity and corporate profits. “There are many reasons why rates should be kept on hold,” Evans said. “Firstly, with rates now above neutral, more time should be taken between rate moves to assess the impact. Secondly, the floods will have a severe impact on economic activity in the first quarter. Finally, the December quarter CPI printed a much lower number than expected.”
The maximum LVR now available for new purchases from ING Direct
LEADERSHIP The process of influence in whi ch a leader successfully enlists the su pport of others to accomplish a goal Greg Wells, Wells Partners AMA winner 2010
Celebrating 10 Years
Nominations for the 10th Annual Australian Mortgage Awards open soon Official event partner
Head to Head Stephen Moore
After Brendan O’Donnell’s departure, former general manager of Advantedge Financial Solutions Stephen Moore was named as the new CEO of Choice. Here Moore gives his first in-depth interview in the role to Barney McCarthy
Q: Talk me through your career to date. A: My background is in wealth management. I’ve worked across a range of roles in products, operations, strategy and distribution, across companies such as ING and MLC, who I had a number of roles with. I then moved over to the banking side with a great opportunity to set up a new bank, a once-in-a-lifetime opportunity, which was UBank. Working there was a fantastic experience and it is now very successful in the direct banking space. Then came the reality check that what I really liked was working with people, and small businesses in particular, and when the opportunity came up to work in the broker space I jumped at it. Q: When did you first join Advantedge? A: I actually worked on the acquisition of Advantedge back in June 2009. During the due diligence process you get to know a business pretty well and I liked it so much I was keen to be a part of it, and hence we set up the new financial solutions business. Q: So you were part of NAB before that? A: I came from MLC and I had done a little bit of strategy work at NAB, but was mainly focused on setting up UBank, which is backed by NAB, but very much a separate bank. Q: So it should be a pretty smooth transition for you, taking over Choice having worked within the same organisation for a number of years? A: I’ve had a pretty good insight. I’ve worked closely with Brendan [O’Donnell] and the other CEOs over the past 12 months and I’ve been quite lucky that there’s been a very smooth handover. While I’ve only formally been in the role for a short period of time, I spent a month or
so on transition, travelling around the country meeting the key groups. Q: You held a series of road shows didn’t you? A: We had a road show over a week or so which was great and very well received by our members, and I’m looking forward to working with them over the next period. Q: Brendan O’Donnell said on his departure the future lies with branded brokers. What do you think about that? Will groups such as Aussie and Mortgage Choice offer more competition going forward? A: It’s a big marketplace, there are a lot of brokers in our industry and there are different successful models across the industry: from a loan writer who can run a very successful business, to larger groups, some of whom are branded. I don’t think there is a magical model that is the key to success, but what is important is who you partner up with – who can support you and help you grow your business. Q: In terms of differences brokers might have noticed since NAB took over Advantedge, have you had much feedback on that? Have they noticed much change? A: I think there were expectations there would be fundamental changes, which hasn’t been the case at all. The feedback has been very positive and, from my point of view, NAB’s ownership has allowed Advantedge and the aggregator brands to offer more to their members. The Advantedge business simply wouldn’t have been able to invest in technology to the extent we have, in licensing to the extent we have and even in the financial solutions arm. We simply wouldn’t have been able to invest in that without the support of NAB.
Head to Head Stephen Moore
Head to Head Stephen Moore
“ Now more than ever, aggregators have an increasing role to play in truly supporting brokers in becoming successful ”
Q: Do you think there was a worry for brokers that there would be consolidation of the aggregator brands given that they had chosen their partner for specific reasons? A: Sure, and if I had a dollar for every time I’ve been asked I would be rich! I’ve had the opportunity to spend time in PLAN, Choice and FAST right around the country and they each have quite different cultures, and brokers are clearly attracted to them for different reasons. It would be a bad business move to bang those businesses together and we have no plans whatsoever to do so. We have every intention to continue to grow out the natural strengths of each of the three brands. Q: Moving on to licensing, what will the role of aggregators be going forward? Will it change much? Quite a few brokers are becoming credit representatives, so do you see compliance occupying a much larger part of your operations? A: Now more than ever, aggregators have an increasing role to play in truly supporting brokers in becoming successful. I think traditionally some aggregators have had a relatively small role to play, almost as a software provider only. But successful aggregators will provide far more for brokers on an ongoing basis, which includes licensing support in some cases, complying with a best business practice, ways to grow their business and diversify their income stream, and a whole raft of other things we’re committed to helping our members with. Q: What sort of split have you seen between brokers seeking their own licences or becoming credit reps? A: It varies across the groups. It’s around the 50/50 mark, but from our point of view we’re pretty agnostic on what brokers choose. It’s whatever is right for their business, whether that be coming under someone else’s licence or getting their own. We’re very happy to provide
that service, but we support broker businesses irrespective of the licensing outcome. Q: How do you expect the first year of licensing to pan out in general? Do you think the regulator will take a softly-softly approach or do you think it will be forceful right from the start? A: It will be interesting to see how it pans out, but I can’t really talk for the regulator. I would probably draw an analogy with what happened on the financial planning side where we saw about 20% choosing not to continue. After the transition period the market returned to where it was and then increased, so the net result is a productivity increase and a key trigger for increased professionalism in the marketplace. Q: Sometimes a natural streamlining isn’t such a bad thing and it means those left are fully committed to the market. As you say, it also means more business for those who are left. A: It’s a natural part of the evolution of broking to be seen as a true profession, which is something we’re very committed to helping. It’s the usual story of a very small number of bad eggs can often give a bad reputation to the whole industry. From my experience there are very good businesses and some great brokers in our industry but I think they’re looking for us and other groups to provide support to take them to the next level. Q: It’s interesting what you say about the evolution of broking as there is a lot of talk about how brokers will become more like financial planners – a one-stop shop for consumers – so it must be quite useful for you having that financial planning experience? A: It does, but we need to be careful not to assume that what worked in financial planning can instantly work in broking. We are working from the ground up, based on broker needs. That said, there are a lot of good lessons and appropriate knowledge I can bring to the table. We don’t think all brokers will become financial
Head to Head Stephen Moore
planners, but we do think there is real value in customers being provided with advice, which may be as simple as putting plans in place to accelerate the repayments on your loan, making sure the loan is structured up right, extending into insurance and beyond. It’s good for business and it’s a good outcome for customers. Q: Many brokers started diversifying out of necessity, but there is now wider talk about a shift towards a fee-for-advice model. A: That debate is in the early stages, but my starting point is that setting up a loan and executing that transaction on behalf of the consumer has value, and commission is a good remuneration for that. However, I would also argue that there is strong value in the advice that we provide customers and there are a number of brokers now charging an additional fee for that advice, and that’s something we’re keen to start a debate on. A number of brokers are successfully doing it already. Q: In terms of your old role at Advantedge Financial Solutions, who is taking that over? A: We’re in the middle of recruiting for it now, but I will keep that hat on for the interim. It’s a critical role for the future of our business and the industry and I will keep responsibility of that for the time being. We’ve just launched a protection offering, we’ve just launched the buy-sell facility and we’ve got a great team working on it. It’s a pivotal time for Advantedge Financial Solutions. Q: Looking ahead now, what do you think will be the biggest issue facing the industry in 2011? A: One of the key factors will be lending volumes and we’re seeing a slowdown right now. It’s a cyclical market and we know that, but in markets that are cyclical in nature it is crucial to look for other sources of revenue. This means looking at servicing, looking at the needs of existing customers and looking for opportunities to diversify revenue, which is why we’re so keen on
Choice Protect, which is a very simple solution for brokers to look after customer needs. Q: That’s what you think will happen. What would you like to happen if you had one wish? A: That mortgage broking be recognised as a true profession. This will attract more customers, which will make the industry more successful and mean that Choice can invest more back into the industry – it’s a virtuous circle. Q: Are there any particular sectors you expect to thrive or decline in 2011? A: It’s a big market. What will differentiate successful businesses is those that are professional, those that continue to embrace and drive change and continue to provide high support to brokers. Q: Any particular demographics/groups? First homebuyers, property investors, refinancers? A: The first homebuyer market has been doing it pretty tough based on loan affordability. We’re not expecting that to change dramatically. Brokers focus on different areas, but they can work successfully across all the different segments. Q: Where will the RBA cash rate be at the end of next year? A: We know the mortgage market is slowing down and we know that loan affordability is an issue, particularly for first homebuyers. Personally I would like to see rates stay stable, but I’m not predicting that. It would be the right result for consumers if we don’t see significant hikes. Q: Finally, what do you like doing outside the office? A: I’m married with three boys aged nine, seven and four, so things are pretty busy. We’re keen snow skiers, not the ideal sport to be into given the limited season! I do a lot with kids’ sport – the older two play footy – and I just enjoy spending a lot of time with friends and family. MPA
Vacation spot Any excuse and I’ll board a plane and head to New York. Nothing beats the nightlife – great theatre, fabulous restaurants and some of the hottest jazz clubs in the world (I’m always hoping I’ll bump into Woody Allen) – in ‘the city that never sleeps’
Place to be The Waldorf Astoria, New York in the dead of winter. Magical!
Ken Sayer + Managing director + Mortgage House
Hobby Travel – anywhere and everywhere. I never tire of it
Book I don’t get much time to read. Ask for my favourite free-to-air or cable news coverage or business segment or Bloomberg.com article and I’ll gladly tell you!
Food Japanese. Tetsuya’s in Kent Street, Sydney continues to delight my palate
Celebrity 60 Minutes presenter Liz Hayes. She lives in my building Movie Star Wars, in particular The Empire Strikes Back
Music Anything by Phil Collins
Sport NRL. Mortgage House has put up a $10m sponsorship to underwrite the Central Coast Bears’ bid to return to the competition in 2013. Go the Bears!