Mortgage Professional Australia issue 15.06

MPAMAGAZINE.COM.AU ISSUE 15.6

CONSUMERS ON BROKERS WHY THEY USE YOU WHAT THEY WANT WHEN TO CONTACT THEM AND MORE!

INVESTOR CLIENTS HOW TO BECOME AN INVESTOR SPECIALIST

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CHARLTON NEVIS AUSWIDE BANK IS MAKING WAVES

LOW-DOC LENDING OUR BACK-TO-BASICS GUIDE TO THE SECTOR

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JUNE 2O15

CONNECT WITH US

CONTENTS 10

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

UPFRONT 04 News and tips

Intelligence and tips for the cutting-edge mortgage professional

62 Prospective homebuyers Updates from the recent QBE Barometer survey NEWS

BUSINESS STRATEGY

Are commissions all they’re cracked up to be?

54 Creativity

NEWS ANALYSIS

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58 Leadership

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CONSUMERS ON BROKERS

CHARLTON NEVIS

14 Auswide Bank’s national ambitions

MORTGAGE INSIDERS 36 George Samios 61 Day in the life

Thinktank’s Tony Zaccari is punching above his weight FEATURES

INVESTORS MORTGAGE INSIDERS

Five profiles of extraordinary leaders

On making MADD a winning brand

COVER STORY

The first-ever independent survey of what the Australian public thinks about you

Turning childhood creativity into business innovation

The ultimate – and most obvious – diversification play for brokers

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64 Favourite things

ALI Group CEO Huy Truong on the sounds of the MCG

MPAMAGAZINE.COM.AU NOW ONLINE: Sneak previews and selected magazine extracts in Business Strategy Top brokers and brokerages in Leading Mortgage Professionals

FEATURES

Bank roundtables and MFAA convention coverage on MPA TV

Top lenders talk you through doing it right

Results from our Brokers on Aggregators, Consumers on Brokers and forthcoming Brokers on Banks surveys

LOW-DOC LENDING

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FEATURE / BROKER EDUCATION

EDITOR’S LETTER

Contact the editor: sam.richardson@keymedia.com.au

Knowing me, knowing you

COPY & FEATURES

EDITOR Sam Richardson JOURNALIST Maya Breen PRODUCTION EDITORS Roslyn Meredith, Moira Daniels, Carolin Wun CONTRIBUTORS Iain Hopkins, Jim Kouzes, Barry Posner, Michael Bunting

ART & PRODUCTION

N

o man is an island – nor is this industry either. When it comes to knowledge of the world outside broking, we’re sure you know your clients well. But the third-party channel as a whole can often feel insulated from the Australian public; constantly on the defensive from what some see as ignorant comments from regulators and the mainstream media.

We felt it was time to bridge that gap. Knowing your clients is great, but you don’t know the clients you don’t have, which means you don’t know why you’re missing out.

Brokers could benefit from serious and independent consumer research, as is routine in other customer-facing industries. That’s why we’re launching a brand new MPA Special Report: Consumers on Brokers.

Surveying hundreds of potential homebuyers, Consumers on Brokers covers all the major areas: choosing a broker, marketing, diversification remuneration, and post-settlement check-ups.

MPA is fortunate to have two consumer-facing sister titles whose database is made up of potential homebuyers, the very sort of people who might be looking for your business.

It’s a modest start, but we hope that with your feedback this survey can keep brokers in touch with changing consumer attitudes. We think you’ll find these results surprising and confronting, particularly with regard to fee-for-service. So please read on to find out what consumers think about you.

Sam Richardson, editor, MPA

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GRAPHIC DESIGNERS Loiza Caguiat DESIGN MANAGER Daniel Williams

SALES & MARKETING

NATIONAL SALES MANAGER Rajan Khatak ACCOUNT MANAGER Simon Kerslake MARKETING & COMMUNICATIONS MANAGER Lisa Narroway TRAFFIC COORDINATOR Lou Gonzales

CORPORATE

CHIEF EXECUTIVE OFFICER Mike Shipley CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR Justin Kennedy ASSOCIATE PUBLISHER Rajan Khatak CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Sam Richardson +61 2 8437 4787 sam.richardson@keymedia.com.au Advertising enquiries Sales Manager Rajan Khatak tel: +61 2 8437 4772 rajan.khatak@keymedia.com.au Account Manager Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@keymedia.com.au Subscriptions tel: +61 2 8011 4992 • fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media keymedia.com.au Key Media Pty Ltd, regional head office, Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 • fax: +61 2 9439 4599 Offices in Sydney, Auckland, Denver, Toronto, Manila mpamagazine.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as MPA magazine can accept no responsibility for loss.

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ROUND-UP

NEWS AND TIPS FIRST HOME BUYERS

FAMILY GUARANTEES

6.7%

of first home buyers (FHBs) used family guarantees to get into the housing market in 2015

4.7% of FHBs used guarantees in 2010 14.3%

of FHBs in the Northern Territory used guarantees – the most in any state

3%

18–19 years old

73%

20–29 years old

21%

30–39 years old

12.1% of FHBs in Tasmania used guarantees – the 2nd most popular state for them

Source: NAB, ‘NAB helps first time buyers get a foot in the door’, April 2015

GROWTH SUBURBS

WHICH SUBURBS ARE EXPECTED TO HAVE ABOVEAVERAGE CAPITAL GROWTH?

QUEENSLAND Brisbane, Gold Coast, New Farm, Paddington, Sunshine Coast, Toowoomba, West End

NEW SOUTH WALES Blacktown, Campbelltown, Castle Hill, Eastwood, Kellyville, Marrickville, Parramatta, Penrith, Schofields, Surry Hills, Sydney, Ultimo

WESTERN AUSTRALIA Armadale, Baldivis, Bentley, Cockburn, Forrestfield, Perth, Scarborough

SOUTH AUSTRALIA Prospect

VICTORIA Box Hill, Brighton, Melbourne, Richmond, Thornbury, Ringwood, Toorak, Werribee

TASMANIA Sandy Bay Source: NAB Quarterly Australian Residential Property Survey Q1 2015

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ECONOMIES

STATE OF THE STATES CommSec’s quarterly State of the States report gives a long-term perspective on the performance of state economies, in particular the housing market.

VIC Housing finance percent change February 2015 (latest) on decade average

NSW ACT WA QLD TAS SA NT -25

-20

-15

-10

-5

0

5

10

15

Source: CommSec State of the States report, April 2015

MFAA CONVENTION

MFAA TO SPEND $1M ON CONSUMER AWARENESS At the 2015 MFAA Convention in Melbourne, CEO Siobhan Hayden announced that the association would spend $1m on a consumer awareness campaign. This runs contrary to the MFAA’s warnings in recent months that advertising would result in increasing membership fees.

Hayden told Australian Broker magazine: “Going around the country and talking to brokers, they were very clear about the importance of consumers being educated about the professionalism of brokers. Based on that feedback, I went through the budget and have gone to the board with the request of $1m for a consumer awareness campaign.” The money will be spent over 18 months.

The MFAA previously suggested that a TV advertising campaign would cost brokers $1,000 to $1,500 on top of their MFAA membership fees, but no changes to membership fees have been announced at the time of going to print.

RATE-CUTTING The RBA cut rates in May by 25 basis points to a record low of 2%, prompting a round of statements from the banks about their generosity to customers. However, not all the major banks have been as generous as others in their rate cuts:

ANZ

NAB

25bp

20bp

CBA

Westpac

20bp

22bp

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ROUND-UP

NEWS AND TIPS HIRING

DID YOU KNOW?

THE 5CS OF HIRING Speaking at the recent MFAA Convention, recruitment expert Kim Seeling-Smith of consultancy Ignite Global talked brokers through several practical tools to deal with the new generation of millennials entering the workplace. Among them was the 5Cs framework:

1 HIRE CORRECTLY

50–200%

Percentage of annual salary cost to replace one staff member

Be proactive in finding staff – don’t wait until someone leaves.

Hire for attitude and ability, as you can teach your staff skills.

Have a proper onboarding program with minimum form-filling.

2 CLASSIFY AND MANAGE APPROPRIATELY

1/3

Spend time with those employees who provide the greatest return on investment.

3 COMPENSATE FAIRLY What fair compensation means varies significantly from person to person. You need to gauge an employee’s expectations and match them.

Annual salary cost of disengaged staff member

4 CURRENCIES OF CHOICE FOR INCENTIVISING There are eight currencies of choice beyond compensation, covering areas like recognition, achievement, working for employers they like and trust, having a voice and a career path, and doing what they do best every day.

5 COMMUNICATE WITH FOCUS

Ideally, you should talk to individual employees once a week and focus your conversations around the above currencies of choice.

80%

of your staff are only mildly engaged to actively disengaged Source: Ignite Global/Kim Seeling-Smith

STAFF

HOW BUSINESSES DEVELOP NEW STAFF Bankwest’s Business Leadership Report recently surveyed 514 mid-sized businesses on how they developed new staff, providing a wealth of ideas for brokerages. Particularly interesting is who drove these initiatives.

“Employee growth and development processes or initiatives in mid-sized businesses are more likely to be led by employees in a bottom up approach,” the report said.

Here’s the breakdown of methods – note that multiple answers were permitted.

Mentoring programs

36%

Executive leadership programs

29.2%

Talent management programs

26.3%

Staff skills map

24.9%

Stretch assignments

19.8%

Psychometric/behaviour testing

18.3%

None Other

19.8% 0.6% Source: Future of Business – Bankwest Business Leadership Report, May 2015

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THE DATA

YOUR MORTGAGE TRENDS

BUYER TRENDS Key stats from borrowers making enquiries at Yourmortgage.com.au AVERAGE LOAN SIZE REQUIRED $424,000 Average loan amount $418,000 $412,000 $406,000 $400,000 APR 2014

MAY 2014

JUN 2014

JUL 2014

AUG 2014

SEP 2014

OCT 2014

NOV 2014

DEC 2014

JAN 2015

FEB 2015

MAR 2015

APR 2015

HOW SOON MORTGAGE IS REQUIRED Not immediately

60

In the next few months

Right now! Hurry!

50 40 30 20 10 0

APR 2014

MAY 2014

JUN 2014

JUL 2014

AUG 2014

SEP 2014

OCT 2014

NOV 2014

DEC 2014

JAN 2015

FEB 2015

MAR 2015

APR 2015

PURPOSE OF MORTGAGE First home buyer

Move home

56.9%

11.7%

Refinance to get a better deal

27%

To buy an investment property

3.7%

Give my home a makeover

0.6%

Other

0.1%

Visit www.mpamagazine.com.au/consumer-borrowing-data for all the latest borrower trends

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FEATURE / BROKER EDUCATION NEWS ANALYSIS

COMMISSION

COMMISSION UNDER FIRE The commission structure of the mortgage industry has been interrogated from all sides in recent months, triggered by certain comments from the RBA. Maya Breen looks at the good and bad sides of commission and the brokers who are taking a different approach

THE MORTGAGE industry has had to defend itself against a domino effect of scrutiny into its commission-based structure earlier this year, leading to the Mortgage and Finance Association of Australia (MFAA) and Finance Brokers Association of Australia (FBAA) rallying to the commission cause.

Shortly after the Reserve Bank of Australia inferred that the growing mortgage industry could fuel risks to the financial system, a review of the life insurance sector led to a call by some for commissions to be phased out and speculation that the same might happen within the mortgage broker sphere.

With all the discussion surrounding commissions, does it really remain the most effective model for brokers? What are its pros and cons, and who are those doing just fine without it?

MPA heard what the industry’s associations and franchise Mortgage Choice had to say on the subject and caught up with two brokerages that are thriving on a less traditional ‘hybrid’ model.

Commission-only pros and cons Commission-based pay has its benefits, with flexibility and uncapped earning potential at the top of the list. But this brings with it less

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security than that offered by a salaried position and takes time to get a sure footing when starting out.

Franchise giant Mortgage Choice is well aware of the draws associated with a commission-only model but that the cons must be considered too.

“Most notably, the property market is cyclical – sometimes it is hot and other times it is not,” says CEO Michael Russell. “And, at times when it is not hot, brokers operating on a commission-only model may find it hard to generate a good income.”

Russell says this is true especially for newcomers to the industry. “Because of the way

“If you’re going to drive a sales team, if you’re going to put a cap on their earning potential then they’re not going to perform that well” commissions are paid (once the loan settles) it can take quite a while for brokers (especially new entrants) to earn money,” he says.

Ren Wong, managing director of multiaward winning Sydney-based brokerage N1 Finance, also sees the toll that the first few months can take on new brokers. “The

downside is that commission-only models deter young brokers entering the industry as it can take up to six months to generate a decent level of income,” says Wong.

“As a result, mortgage firms risk losing new entrants, making it difficult to recruit and expand.” But the uncapped earning potential

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MPAMAGAZINE.COM.AU

WILL THE FUTURE SEE FEE-FOR-SERVICE IN BROKING? MPA’s latest Consumers on Brokers survey revealed:

97%

of respondents are aware their broker was paid commission YET

41%

would pay for a broker’s services

Read the full survey results on page 18

of commission-pay is a major benefit in being a finance broker and for brokerages, says FBAA CEO Peter White. “If you’re going to drive a sales team, and you put a cap on their earning potential, then they’re not going to perform that well or they’re going to get to a certain level and not perform any further.”

Similarly, Mortgage Choice’s Russell says that the commission factor is a huge motivator in the industry, keeping brokers looking for ways to bring business through the door. “It forces mortgage brokers to work hard and be constantly undertaking high-

net-worth activities. Furthermore, it forces them to take a savvy approach to business.”

And although he notes the downside of commission, Wong sees the plus-side of uncapped potential while benefiting a firm with lower fixed costs.

A hybrid model tried and tested With so many factors pulling commissions in opposite directions, some brokerages have taken the choicest aspects of salary and commission to create the most effective situation for their brokers.

Canberra’s top brokerage, Tiffen & Co, second on MPA’s Top 10 Independent Brokerages of 2014 and operating in its 21st year, knows what works and what doesn’t. Managing director Gerard Tiffen runs his brokerage on a part-salary/partcommission model, offering brokers salary and commission, based on settlement hurdles. Tiffen says that from an owner’s perspective, the commission-only model is appealing as their income will reflect their performance. “However, I think a mix is the best model as it gives you a base to work from, yet still incentivises you to take the best care possible of every client and grow your network.”

N1 Finance has also steered away from commission-only pay, offering their brokers the stability that salary brings but with a bonus component for upside earning

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FEATURE / BROKER EDUCATION NEWS ANALYSIS

COMMISSION MEET THE SPECIALISTS “I think a mix is the best model as it gives you a base to work from, yet still incentivises you to take the best care possible of every client and grow your network.”

Gerard Tiffen, managing director, Tiffen & Co

“The downside is that commission-only models deter young brokers entering the industry as it can take up to six months to generate a decent level of income.”

Ren Wong, managing director, N1 Finance

“Moving forwards, we wouldn’t be surprised to see an increasing number of other aggregators and business owners paying their loan writer staff a salary as well as certain commission/bonus incentives.”

Michael Russell, CEO, Mortgage Choice

“We are already seeing this within our industry and with consolidation, businesses are better positioned to provide salaried models for recruitment.”

Siobhan Hayden, CEO, MFAA

“The reality is with most brokerages or aggregation firms, they’re running on the premise that you’re a commission-only broker.”

Peter White, CEO, FBAA

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potential. “Salary-based compensation also has its own drawbacks, as it can remove the reward for ambitious employees to go beyond their basic job description,” says Wong.

“This ‘hybrid’ model offers a base salary plus commission or bonus for high performance. So although the risk is less as a broker can rely on a guaranteed salary, the

But there have been a number of models in the industry for a long time, says FBAA’s White.“The reality is with most brokerages or aggregation firms, they’re running on the premise of you’re a commission-only broker. It depends how each aggregator has modelled themselves and none of them are right, and none of them are wrong. It’s all a commercial

“Because of the way commissions are paid it can take quite a while for brokers (especially new entrants) to earn money” rewards are also less than an un-capped commission-only model.”

Wong says this model has been a perfect fit for N1 Finance, attracting brokers committed to a long-term broking career. “It allows our employees to focus on training and completing tasks properly without worrying about writing loans to pay for day-to-day expenses.”

As a franchise, Mortgage Choice says only their franchisees work off a commission-only model, since their self-employed status allows them to choose how they wish to be paid. “All of our full-time loan writers (excluding franchisees) are entitled to be paid a salary,” says Russell. “Many of (our) loan writers work under a part-salary/part-commission or bonus incentive model, whereby their franchisee/business manager pays them a salary as well as a bonus or commission based on the level of business they write.”

“Loan writers are considered a level 4 under the Banking Finance and Insurance Award, and the minimum base for an adult level 4 is currently $43,035.” He says if it’s expected that staff will work back, their managers will need to pay them overtime, penalties and shift allowances.

And the MFAA notes that some brokerages offer salaried options for new recruits. “Aussie initially led the industry by offering a salaried model for new entrants,” says MFAA CEO Siobhan Hayden. “But brokerages around the country are now offering a salaried or retainer initially whilst the broker establishes their business.”

positioning that they choose to undertake that best suits them for whatever reason that is.”

Although White doesn’t believe there will be an increase in the hybrid model in the future, if there was hypothetically, “it would be less competitive, because people aren’t trying to clamber over every deal”.

A future where commissions take a step back?

If commissions weren’t centre stage, would it change the face of the industry?

“I think it would definitely change the landscape,” says Tiffen. “I think there would be a lot more consolidation between industries – accountants, financial planners and mortgage brokers, if this was the case.”

“In a mature environment, it is common for businesses within the industry to consolidate,” the MFAA’s Hayden says. “We are already seeing this within our industry and with consolidation, businesses are better positioned to provide salaried models for recruitment.”

Wong says the industry would probably morph into a likeness of the bank model, where brokers are paid a base salary and set a target to reach for potential bonuses.

Mortgage Choice’s Russell expects to see more combined models in the future as the benefits offered become more widespread.

“We wouldn’t be surprised to see an increasing number of other aggregators and business owners paying their loan writer staff a salary as well as certain commission/bonus incentives.”

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HEAD TO HEAD

CHARLTON NEVIS

“What I’ve felt is that Wide Bay Australia has been a well-kept secret”

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Charlton Nevis:

NEW IN TOWN Auswide Bank’s third-party chief tells MPA what Australia’s newest bank is doing to connect with brokers nationwide

MPA: Is the move to Auswide Bank more than a rebranding exercise?

CHARLTON NEVIS: Yes, absolutely it is.

The corporate that is Auswide Bank right now has a complexity and a sophistication that has grown, and we reached this point over the years. It has required us to evolve into this new banking corporate structure.

Wide Bay Australia has had 50 years of success, and through its heritage has been primarily a branch-banking story … but that’s evolved over recent years and today it’s a multichannel strategy.

Because the organisation has taken this strategic footprint, the Auswide Bank move really supports that and marks, I guess, a new dawn in the evolution, and marks a level of corporate sophistication that exists now and will, I believe, develop further and further over time. What I’ve felt is that Wide Bay Australia has been a well-kept secret, in that it has a wonderful banking platform that’s been tried and tested over 50 years.

It’s really important that my people, when they’re having conversations further away from Southeast Queensland, are not having to spend the first five minutes of every conversation covering the ‘what are you?’ question that comes from stakeholders, because Wide Bay Australia doesn’t give away much. So the [re]branding certainly allows us to move the conversation from ‘who are you?’ to a ‘why should I choose Auswide Bank?’

question, which is really where we need to be engaging with our stakeholders.

MPA: Plenty of lenders compete as ‘non-banks’. How will the move to Auswide Bank make it easier for brokers to recommend you?

CN: The bank piece is what the end customer relates to more and more. The broader community probably doesn’t understand what a building society stands for, as much as they did 20 years ago. And they probably don’t understand what a credit union stands for, or a non-bank lender. The bank piece enables the broker to position with confidence; everyone understands what a bank is and does. Our introduction as the tenth listed Australian bank means that we can position ourselves as an alternative with a fresh approach, and I like to think of it as a break from the expected.

Most of the brokers who partner with us, further away from Southeast Queensland, the first thing they have to cover is who we are and what we do, so having Auswide Bank there instead of Wide Bay Australia certainly does help that conversation.

MPA: Do you think the Financial System Inquiry made brokers and consumers more aware of what non-major banks can offer?

CN: In terms of what the consumers and the public may perceive from the FSI, I think it’s

FROM WIDE BAY TO AUSWIDE

Auswide was known as Wide Bay Building Society until 1 April 2015.

The board decided two years ago that changing the name and acquiring bank status from regulators was crucial to expanding beyond their traditional base of Queensland.

Beyond Queensland the bank will rely on the third-party channel to sell financial products but will offer ATM services through the Westpac network.

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SPECIAL HEAD TO REPORT HEAD

CHARLTON NEVIS CHARLTON NEVIS’S CAREER TIMELINE

1995 2001

Begins finance career at Westpac

Moves to Suncorp to work in product management

2004

Returns to Westpac as regional manager broker sales, based in Brisbane

2006

Spends three years at Bank of Queensland

2009

Appointed regional executive at St.George; eventually rises to head of commercial and business banking

2013

Joins Auswide (then Wide Bay) as general manager third party and business banking

Greatest achievement “I’ve brought a number of products to market during my time, and I think bringing products to market is a wonderful experience and can have some complexity to it because of every angle that needs to be explored and delivered properly”

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very early days there, and I don’t really believe there’s enough information and enough debate in the public arena. I think what the FSI has done has generated a lot of conversation among people in the industry itself. So for us it’s been hugely important, because we recognise and applaud the need for us in the financial services community to look further afield and plan for the next 20–30 years, and what a great platform to do it that represents.

The key for us is getting outcomes from these recommendations, moving from the recommendation stage to tangible outcomes.

I probably have a view that closing the gap in terms of capital responsibilities between the two groups that exist at the moment, the ADI’s internal risk ratings and the rest, would be a good thing … but until that actually happens we’re still competing, and I’m competing today in a playing field that’s not level.

Now that level of guidance to some extent has disappeared from the marketplace, because the third-party channel has become so big; 50% of mortgages in Australia are generated through that channel. It’s a volume game, and most lenders just played the volume approach; however, I’m looking to put a level of expertise behind this engagement.

I’ve got a number of levels that sit behind the BRM to make sure the loan flow goes well.

I’ve got assessors that manage that loan flow, and I’ve got in-house credit assessment. And that’s important because I’ve got a head of third-party credit who essentially sits right beside the assessment team, and they work out the credit complications very quickly and communicate well. And all of that plays out into a high-touch approach; that is my ultimate advantage, and there is quite a large segment of brokers out there who like and look for that personal touch.

MPA: Regional banks tend to pride themselves on the personal touch, but how will you realistically provide this outside Queensland?

CN: Expansion beyond Queensland is through our third-party distribution channel, and outside of Queensland is exclusively driven through third-party distribution. We have designed a model which emphasises the personal aspect of how we do business. So what we have is a broker support model that is very personal; I would almost call it a little bit old-fashioned because it is a high-touch model, because there are functions in the support model which touch the broker, which are a little different to how most lenders do it.

We have a broker relationship manager function, a relationship management function, and their role is to frequently engage with their brokers – as they have a set portfolio of brokers – and to be scenario experts for the brokers. In other words, very accessible to them, providing policy guidance, and providing a quick yes or a quick no, and, very importantly if it is a no, providing information on how you can restructure the no into a yes.

MPA: Low rates and extra commission offers have long been used by non-majors to gain market share. Will Auswide be following the same path?

CN: I’m really keen to use this personal broker support model as my key point of differentiation and surround it with product niches. What I do in the commission space is I’ll offer a very fair market level of remuneration structure. So that’s how I’ve been operating for two years, and I’m at a level now where we’re really competitive and good value. We do pay trail from day number one; that is good from a cash flow perspective for brokers, but my key focus here is on service and product.

In terms of rates we are, and will continue to be, offering very good value for our rates.

Presently we’ve got offers on the less than 80% LVR category, and a special offer for the category of loans that sit between 80% and 90% LVR, and there’s extra incentives as well.

So I think we’ve got that covered really well.

MPA: So no stunts on the horizon?

CN: No, I don’t like that because that’s shortterm stuff. I’m more about being consistent.

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Welcome to

We’ve driven good growth through our model over the last two years, and we’re looking to improve our execution and keep that growth trajectory. In fact, we want to increase our growth trajectory, and that’s what I think is going to happen.

a new era in Mortgage Broking.

An era where just getting your clients a mortgage is no longer enough. It’s time to protect your clients as well.

MPA: Which specific products differentiate you from other non-major banks?

CN: I like to talk about what we’re doing with our fixed rate products, because we club a 100% offset and a redraw with a fixed rate,

“What we have is a broker support model that is very personal; I would almost call it old-fashioned” and that is a very flexible loan. What it means is that clients, customers with good cash flow, can effectively drive down their interest rate by using the features of offset and redraw, and it gives really good control to them … This is an advantage of us being smaller; we can do this and make these decisions, whereas some of the bigger players don’t need to look this far out of the box.

MPA: Which states will be the focus of your expansion strategies?

CN: The regions that we’re currently working very hard in to increase volume and increase flows are Queensland, NSW and Victoria; those are our key targets. Over the near term we’ll put more effort into Western Australia and more effort into South Australia; that’s down the pipe a little.

MPA: How would you like brokers to view Auswide Bank a year from now?

CN: The key thing for me is for brokers to understand how their customers get serviced

by Auswide Bank, and for brokers to be really confident in that proposition – because I know when a broker places a customer and the customer has a great experience, then that is the key moment of truth.

Choosing the right integration partner is critical to your success.

At Wealth Today, we specialise in seamlessly integrating financial services into existing Mortgage Broking businesses. After seven years working directly with Mortgage Brokers, we know that Integration is the key.

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Australian Financial Services License No 340289

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SPECIAL REPORT

CONSUMERS ON BROKERS

OUR FIRST EVER…

CONSUMERS ON BROKERS SURVEY MPA regularly surveys brokers about the state of the industry. Now, in the first independent survey of its type, we’re talking to consumers – and they’re talking about you

WE’VE BECOME OBSESSED in this industry by just one statistic. It’s a percentage figure, currently standing at around 50.5%, according to the MFAA; it’s the proportion of residential loans originated by brokers.

Why do we place so much emphasis on this figure? All it tells us is that brokers are taking market share from the banks, therefore presumably implying Australian consumers prefer brokers to banks. Such broad, sweeping statements might have been encouraging in broking’s early days, but today’s industry needs more feedback than that. Why do people use brokers, and what for? Are they really interested in diversified products? And what

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do consumers expect after settlement?

That’s why, at MPA, we set out to survey consumers, to answer these questions and more. Undoubtedly, this is not the first survey along these lines: franchises and lenders routinely run consumer awareness surveys.

However, this is the first independent survey of consumers’ attitude to brokers, using our own, closely monitored database of around 60,000 potential homebuyers.

The survey was run through our sister titles, Your Mortgage, Australia’s only independent mortgage website, and Your Investment Property magazine.

Consumers on their databases – who range

from first homebuyers to seasoned investors – were invited to answer 21 questions. These questions covered what we believe are the key concerns of brokers in 2015.

We certainly hope that these are the questions you’d ask, and intend that the results over the next six pages will help you and your business. We’d welcome your feedback on this survey; how could we make it more relevant to the average brokerage, and are there any key questions we didn’t ask? Whether we repeat Consumers on Brokers depends on your opinion, so please get in contact with the editor, using the details on page 2.

Sponsored by

A MESSAGE FROM OUR SPONSOR Simply put, understanding your customers’ decisions and the reasons behind them is imperative to good business. At ANZ, we believe the expertise we provide to our brokers is due to the extensive level of understanding we have for the industry, the challenges you face and the reasons behind your decisions to choose one lender over another.

We know it’s important you get the information and service you need at the outset, so you can confidently find the right lending solution for your customers. And we know at its core, it’s all about us helping you look good in front of your customers by delivering outcomes that exceed.

It’s no secret that customers are moving more and more towards brokers as a first preference. This is why we invest in our BDMs, ensuring that they are not only experts in their field but are also at the forefront of service delivery.

The question I encourage every broker to ask themself is whether you can identify the motives behind why your customers choose you over all of the options they have available?

Undeniably, understanding the root of your customers’ decisions and choices is imperative to engage in meaningful interactions that will resonate, build trust in you and your recommendations and ultimately build a great business.

ANZ is proud to partner with MPA to bring you the thoughts of customers in the Consumers on Brokers survey, the first independent survey of its kind.

I often say to my team that feedback is a gift – a gift you can choose to embrace or one that you can choose to ignore. And that the skill of listening is undervalued and yet provides the most powerful insights.

I encourage you to embrace this gift, listen to what customers are telling you, and use it to shape your future business decisions, taking advantage of the valuable information provided in this month’s report. The insights will help you understand how to direct your decisions and communications, building your business on a strong value proposition, centred on your customer.

Keiran Evans, Head of third party relationship channels, ANZ

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SPECIAL REPORT

CONSUMERS ON BROKERS

WHY CONSUMERS USE BROKERS As you’ve been saying for years, it’s NOT just about the cheapest rate, and consumers aren’t just looking for a mortgage

YOU CAN’T summarise the entire broker proposition in a few survey questions, nor summarise the entire development of an industry. However, we thought a good place to start would be to ask consumers to pick between the three most obvious reasons for using a broker, these being the cheapest interest rate, help with the application, and access to specialist lenders.

‘Help with the application’ was the most popular reason for using a mortgage broker, comprising 38% of responses. Access to specialist lenders came second, at 28%, followed by the cheapest interest rate, at 25%.

Bear in mind these options were not exclusive; respondents could pick more than one. The most popular combination was ‘help with the application and the cheapest rate’.

Some brokers, and perhaps specialist lenders, will no doubt feel an overpowering urge to say ‘I told you so’ in response to these results. But clearly, the cheapest rate still matters to a significant minority of respondents.

One explanation is that these respondents consider help with the application the main value-add of brokers; in the comments sections of the survey, many declared they could find a cheapest rate themselves.

These results imply brokers should push the service aspect of what they do, as mentors for first homebuyers and trusted advisors for investors. We also included an ‘other’ option for this question, where respondents could write responses; these included ‘personal touch’, ‘strategy’, ‘better service than the banks’ and ‘end-to-end process management’; all issues that fall within the service category.

Looking closer at the data, it appears the 18-35

20

78% of respondents who had used a broker would use one again, with 16% answering ‘maybe’. Evidently, those brokers who are providing excellent service are benefiting the entire industry.

age group are the most likely to prioritise the cheapest rate (28%) but also the most likely to prioritise help with the application (42%). As clients get older it seems they prioritise access to specialist lenders higher, possibly because many are seasoned investors involved in more complex transactions.

Service comes into the survey again, with the results to our alternate services question (see pie chart below). Whilst the results are fairly evenly spread between different options, the fact that 84% of respondents would consider getting a non-mortgage service from a mortgage broker should be a wake-up call for all brokers. Not only is there money to be made, but being a client’s gateway to these other services feeds into the service aspect which distinguishes brokers from other specialised professions.

Finally, it’s worth mentioning one seemingly obvious reason why consumers use a broker: because they’ve used one before.

OUR TYPICAL RESPONDENT Is aged between 35 and 55 Earns between $80,001 $180,000 a year Owns two properties 91% had used a broker before (we excluded the remaining 9% from the majority of questions)

DON’T JUST SELL THE MORTGAGE What other services would you consider obtaining from a mortgage broker?

None

Loans for business

19% 16% 19%

Financial planning

Vehicle loans

25% 20% Insurance

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Sponsored by

HOW CONSUMERS CHOOSE A BROKER Personal recommendations make the difference, particularly for younger and wealthier buyers

TOP BROKERS have been saying it for years; a referral network is the most powerful tool to get clients in the door. We asked consumers a simple question: ‘How did you choose your mortgage broker?’, and 60% of respondents answered ‘recommendations’; with 35% for personal recommendations and 25% for professional recommendations.

There were other options available; 19% acted on advertising, whilst 14% of respondents were encouraged by their broker being based locally, and 7% answered ‘other’.

Again, it should be noted that respondents could select more than one option, however, personal and professional recommendations still figured heavily.

Further analysis of responses revealed important age and wealth-based trends which you should factor into your marketing strategy.

Young people (the 18-35 age bracket) take personal recommendations more seriously than any other group, whilst the perceived importance of advertising and location rises with age, and falls with wealth. And if you’re going for the wealthiest clients – those earning $180,000+ p.a. – recommendations are more important than ever, comprising a majority 78% of responses.

Perhaps the reason recommendations are so important to consumers is because they don’t know how else to judge a broker’s ability. We also asked consumers three auxiliary questions: ‘Were you aware of your broker’s qualifications?’, ‘Did being part of a franchise encourage you to pick your broker?’ and ‘Were you aware your broker was part of an industry association?’; the answers to these questions provided sobering insights.

Firstly, consumers do care about your qualifications. Only 6% of respondents said they ‘don’t care’ about their broker’s qualifications, although 41% said they weren’t aware of those qualifications (the remaining 51% were aware).

Perhaps brokers need to be more vocal about their Cert IV, and perhaps those brokers with more easily-understandable university-level qualifications have the most to gain.

Despite a number of high-profile marketing campaigns, being a franchise doesn’t seem to sway our respondents. Only 30% were encouraged by their broker being part of a franchise – 40% opted for independent brokers and 24% didn’t care. Nor does being a member of the MFAA or FBAA seem to help that much; two out of three respondents didn’t care about industry association. It seems consumers are yet to be convinced by the industry’s various attempts to create a ‘badge of quality’, and instead resort to personal recommendations.

REFERRALS ROCK!

Personal recommendation

35%

Professional Recommendation

25%

Local to my area

14%

Saw advertising

19%

Other

7%

REFERRALS ROCK! The importance of personal recommendations falls with age…

But rises with wealth

50%

40%

40%

30%

30%

20%

20%

18-35

35-55 AGE BRACKET

55+

10%

UP TO $37,000 P.A.

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$80,001- $180,001+ P.A. $180,000 P.A.

ANNUAL INCOME BRACKET

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SPECIAL REPORT

CONSUMERS ON BROKERS

PAYING THE BILL Consumers are more open to fee-for-service than you think, depending on what you’re offering

WITHOUT DOUBT the most surprising result of this entire survey came from the simplest of questions: ‘Would you ever pay for a broker’s services?’, with just two possible responses; ‘yes’ or ‘no’. The surprising part?

41% of respondents answered ‘yes’.

In recent years, the fee-for-service debate has seemed dead and buried; brokers were making fortunes from commission, and banks weren’t about to kill the golden goose which brought them so much new business. But perhaps, given this result and the RBA’s recent warnings about commission levels, it’s time we reopened the casket.

We shouldn’t get carried away of course: 59% of respondents still wouldn’t consider paying a broker; possibly because they were part of the 97% of all respondents who were aware their broker was paid commission.

Interestingly, the proportion actually willing to pay a broker didn’t shift significantly depending on whether they used a broker to get the cheapest rate (see p.3). We can only presume that those who would pay a broker are either particularly generous or (more likely) expect extra services.

Therefore, we asked that 41% what they’d expect for their money. You can read the full results in the box; it’ll suffice to say here that ‘financial advice’ may be a lucrative direction for brokers to take. Indeed, it builds on the important role of brokers in helping with the application, and also the popularity of financial planning as an additional service (for both see p. 3). When we dissected that 41% by wealth bracket, we found willingness to pay rose with wealth – 52% of respondents earning $180,000+p.a. would pay for a broker.

This really shouldn’t come as a surprise for the

24

industry; accountants and investment experts have been charging for their services for ages, as have many commercial brokers in recent years. So why should residential brokers give it away for free? Perhaps brokers giving sophisticated investment advice should consider monetising their services, and everyone else should consider diversifying.

It’s also worth exploring responses to the ‘other’ option for why respondents would pay a broker. One respondent remarked that their broker was ‘a vital part of my team’, another highlighted ‘overall holistic approach’, and several others suggested paying for a broker helped allay their fears about brokers’ judgment being biased by commission.

COMMISSION & FEE-FOR-SERVICE

97%

14%

Yet would pay for a broker’s services

of respondents are aware their broker was paid commission

WHAT’S WORTH PAYING FOR We asked respondents who said they would pay for a broker why they would pay for a broker.

Here’s the breakdown: Other

11%

Cheapest rate

22%

24% Financial advice included

42%

Priority turnaround time

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Sponsored by

AFTER SETTLEMENT SERVICE Consumers do want to hear from you again, so it’s time to revisit your database

DATABASE-MARKETING – i.e. going back to existing customers for new business – is the current strategy in vogue at the moment, and our survey suggests that’s not without good reason. Only 13% of respondents would ‘never’ like to be contacted after settlement, and of those who do want to be contacted, only 4% don’t want any additional information post settlement from their broker.

However this shouldn’t be an excuse for poorly-constructed, mass-emailed monthly newsletters, which remain the sole follow-up strategy for some brokers. The majority of our respondents preferred annual (38%) or quarterly check-ups (33%). A much smaller number opted for monthly or biannual checkups, with just 6% expecting monthly contact.

With increasingly powerful database software available to brokers, follow-up contact can be more personalised and relevant than ever before, and this survey suggests it should be. Refinancing unsurprisingly is the most popular option, by some distance. With the introduction of the PEXA e-conveyancing system, which could make refinancing easier, it may be worth pushing refinancing options in your database marketing.

Disappointingly for many diversification advocates, our respondents seemed relatively uninterested in information about vehicle or commercial finance, with just 9% of responses.

Admittedly, our wording of the option (see box) may have been overly restrictive; respondents told us earlier in the survey that they were interested in brokers providing other services (see p.3). One explanation might be that whilst vehicle and commercial finance are niche

options, they still can be particularly powerful, when marketed to niche databases maintained by specialised brokerages.

Finally, investment advice performed strongly, a result consistent with the emphasis

on help and service throughout this survey’s results. This result also supports the strategy of ‘helpful marketing’, whereby useful updates, downloadable reports and free consultations attract and impress potential customers.

A DATE FOR YOUR DIARY Asked about frequency of check-ups, it appears annual check-ups are the most popular, although quarterly check-ups aren’t far behind. Monthly check-ups clearly aren’t popular.

Monthly 6% Quarterly 33% Annually 38% Biannually 10% Never 13%

WHAT CONSUMERS WANT TO HEAR ABOUT Cheaper rates for refinancing

52%

Information on vehicle or commercial finance

9%

Investment advice about your area None Other

34% 4% 2%

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SPECIAL REPORT

CONSUMERS ON BROKERS

WHAT CONSUMERS SAID ABOUT YOU Looking at the comments of our respondents reveals a whole host of opinions about brokers

THE FINAL question of our Consumers on Brokers survey asked respondents to answer the question ‘What would you say to a friend thinking about using a mortgage broker?’ We hoped this question would tell us more about those all-important personal recommendations and why people make them. However, we also wanted to explore respondents’ deeper feelings about their brokers.

Good news: of the 502 comments we received, the majority were overwhelmingly positive, reflecting the statistic that 78% of respondents would use a broker again. For many commenters, using a broker wasn’t just easy to justify, it was obvious, because they could save money for free. In fact, four comments were simply and identically worded ‘go for it’.

The longer and more profound comments tended to focus on particular brokers providing personalised solutions.

A reoccurring feature of these comments was

accessibility, talking about brokers who worked around respondent’s schedules and situations.

Not all replies were quite so positive, and a significant minority’s advice to friends included warnings of types of brokers to avoid. Inexperienced brokers were a cause of particular concern, and many respondents advised their friends to compare multiple brokers before choosing one. Some specified the exact questions they’d ask a new broker, a few of which we’ve featured on the opposite page.

The small number of unequivocally negative replies were split between those who had a bad personal experience, and those who felt they could the research better; ‘do your own homework’ was a reoccurring phrase. Ultimately, like the rest of this survey’s results, these negative comments show that consumers look to brokers for quality service, above all else.

OUR FAVOURITE COMMENT For consumers who answered our final question, a $250 gift card was on offer for the best comment.

We thought the following was an absolute gem:

“BROKER = B-est advice on R-ates O-n all loans plus K-nowledge of E-very product available and R-ealistic on what you can afford”

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WHY USE A BROKER?

“Highly recommend my mortgage broker. Wouldn’t do it any other way. It’s too large an investment to leave anything to chance”

“I was once like you and thought the big four banks were the only way. I am now more educated and would now go to a broker every time! The broker will go into bat for you and get the best deal, knows the products and represent you”

“Using a mortgage broker is like using a sherpa on a mountain hike. You could probably do the hike without them but it makes the whole process a lot easier”

“I would definitely advise in using a mortgage broker. The right person can give you sound advice, talk you through step-by-step the process and give you an idea of your loan capabilities. Takes a lot of the guesswork out as well as paperwork being compiled correctly by them!”

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Sponsored by

GOING ABOVE AND BEYOND

“When you get a good mortgage broker like mine, you will feel like you have a friend who happened to be a professional as well”

“I was very happy with my broker’s service overall.…my broker was always happy to answer my question any time, she was even able to help me on [the] Saturday which we decided to purchase our property (I was a first homebuyer)”

“I would highly recommend using a broker. Being a first homebuyer, the assistance of the broker was outstanding. I would not know where to begin when it came to banks/loans/interest rates. My broker assisted me in choosing the right loan and bank. She came to my house two or three times to discuss the process, help complete paperwork etc. She even liaised with my conveyancer and kept me in the loop with everything. When my three-year fixed rate is up, I will ensure I contact my broker to see where I am at and ask if any amendments should be made”

“If you find and use the right broker it can be a superhelpful tool. My broker is diligent, affable, knowledgeable, patient, financially-savvy (you would hope so) and speaks to me in understandable terms. Use my broker and you cant go wrong!”

CHOOSING A BROKER

“Three questions to ask: How many properties do you own? How often do you communicate or reply to emails/phone calls? If the bank declines the deal, how will you handle the situation?”

“Brokers (should) understand the larger picture, the lending thresholds, costs, and the best or most likely avenue for your borrowing needs. It is hard to know whether the broker has an affiliation or preference based upon loan trails”

“I would strongly advise the friend to be direct in what they want from the broker (fixed/variable, years etc), and meet face-toface a number of times to demonstrate required loan structures and gain confidence in the broker’s ability to seal the deal”

“Shop around as not all of them have your best interests in mind. Also, if they make you wait months after your initial contact with them for communication, then you may wish to reconsider if they are the best broker for you”

“Review what they are looking for in a property and ultimately finance.

Research ‘top’ mortgage brokers online or in property magazines. Talk to friends who have used a broker for any referrals (if they believe it’s worth it).

Based on research, talk to two to three mortgage brokers including one in local area if practical. Base decision on facts but also trust your instincts”

ROOM FOR IMPROVEMENT

“Make sure you pick a broker with good experience and good communication skills. My broker was young and had limited experience. She also did not outline the steps required so I was left in the dark about many things”

“Get advice from at least two brokers plus a banker. I have had two brokers advise me with completely opposite information. I have gone straight to a bank myself now as I don’t feel confident with brokers. I am awaiting the bank’s reply…. Do your own homework and get a number of different quotes from different sources”

“Only use a broker who has been recommended. But, know that broker’s advice can be biased, since they receive commission by the lender. So, always do your own research, and proceed only if the broker’s advice benefits you”

“If you can get a deal direct through the banks and know what you’re looking for, don’t worry about a broker. If you go through a broker for specialised service make sure you ask them upfront about commission. (My broker sent me a commission disclosure with my loan documents asking me to sign off on paying them above $15,000 if I changed my loans in the next two years. No mention of their commission structure prior to this which is dodgy behaviour. With financial planners being subject to disclosure around commissions why aren’t mortgage brokers also subject to disclosure?)”

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FEATURES

INVESTORS

FROM BROKER TO INVESTMENT SPECIALIST 28

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Forget the mums and dads; property investors are still the engine of Australia’s housing market. MPA asked the top brokers in the space how they do business CONSIDERING THE importance of property investors to the housing market, it’s surprising how little brokers talk about them. We all know and celebrate the mum and dad broker, the niche medical specialist, and the one-stop shop for the local community, but the area that Australia’s top brokers are almost all heavily involved in is the investor market.

Moreover, the language surrounding investors has taken a negative turn in recent months. In December, APRA wrote to lenders warning them it’d be “paying particular attention” to high LVRs, interest-only loans, and affordability tests. Indeed, any investment lending portfolio growing at more than 10% annually would trigger further action from regulators.

Therefore lenders aren’t so keen to talk about or be associated with investor lending, compared to in previous years. But that doesn’t mean they’ve stopped lending, or that investor lending is an area brokers should be wary of.

Dealing with investor clients is quite different to how it’s portrayed in the mainstream media, and we hope this article will help you decide whether it’s right for your business.

MEET THE SPECIALISTS

Ben Kingsley, Property Investment Professionals of Australia

Jason Back, Australian Lending and Investment Centre

A natural diversification play Servicing investor clients is a natural diversification play, according to John Manciameli of Sydney brokerage Hunterwood Solutions. In fact, he believes it’s the most obvious diversification strategy of all.

“Property and finance go hand in hand … it makes me laugh when I hear everyone talking about diversifying their businesses, when the reality is there’s a tremendous opportunity for very little effort to be earning quite a sizeable

John Manciameli, Hunterwood Solutions

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FEATURES

INVESTORS REACTIONS TO PRESSURE FROM APRA Ben Kingsley, Property Investment Professionals of Australia: “I think it’s good; we only need to look to America to see what happens when relaxed lending standards occur…

APRA moving to being more upfront, putting their ideas out on what is responsible lending, is a good thing.”

Jason Back, Australian Lending and Investment Centre: “Like any intervention, I don’t believe the long-term ramifications have been significantly understood, yet there is a rush to legislate out the investor in the market.”

John Manciameli, Hunterwood Solutions: “For us brokers it’s no big deal; one lender will pull back their servicing, and the next month another lender will step up and say, ‘We’re flush with money; let’s lend more’.”

amount of income by simply referring qualified clients who are ready to go.”

Being an investor specialist, for Manciameli, is about taking the education of the client, a core part of the broker’s role, to a whole new level.

“What I’m trying to do is get clients to use the equity in a way that can better serve their needs down the track” “I’m stepping up beyond the average broker who says, ‘Yes, you can do better on your home loan’,” Manciameli says.

“That’s easy. What I’m trying to do is get clients to use the equity in a way that can better serve their needs down the track.”

Manciameli, like many investor specialists, started out as a personal investor, alongside his day job as a mortgage broker. Increasingly, he began to feel that his clients were buying in the wrong places, and while he could arrange them a suitable loan, he felt that wasn’t good enough. He brought together a team of specialists to create a brokerage, Hunterwood Solutions, that could provide almost all the services a brokerage needed – accounting, market research, financial planning – in-house. Now he’s setting up a training program for brokers, dubbed Slipstream, to help them specialise in investor clients.

Brokers and brokerages The Manciameli example is important because it shows that adapting for investor clients is about the brokerage, not the broker. While Manciameli’s personal interest in investment drove the creation of Hunterwood, personal experiences shouldn’t be relied on, cautions Property Investment Professionals of Australia (PIPA) chief Ben Kingsley.

“Where we have concerns with some brokers in the property investment industry,” says Kingsley, “is where they might have gone out and bought a couple of properties themselves and done alright, so all of a sudden

30

they’re a so-called expert and they’ve got one strategy which they advise to clients. The best advisers tailor a solution, as opposed to writing a script.”

Mortgage Choice chief Michael Russell voiced a somewhat more straightforward

opinion on the subject of specialisation, back in February: “You wouldn’t want your dentist to check your prostate,” he said.

Kingsley, himself a broker, is on a mission to professionalise and build trust in the property investment space by enforcing minimum standards for PIPA-accredited professionals. He says brokers should only provide advice in areas they are qualified in, namely cash flow and credit. “If they’re going to step out of those boundaries with regard to giving property investment advice, we’d like to see them formally qualified to do that. So undertake a course like the QPIA [Qualified Property Investment Adviser], or a university course.”

To ensure the brokerage is only giving advice that it is qualified to provide, Hunterwood Solutions has a number of specialists who refer to each other as required.

As well as ensuring high-quality advice, it also helps deal with conflict-of-interest problems, Manciameli explains. “What we don’t want to be seeing is someone who’s giving advice on how to buy and where to buy and so forth; at that point you’re stepping over the line, and it’s a conflict of interest … it is still in-house, but what you’re doing is you’re outsourcing the expertise.”

In the modern investor-focused brokerage, Manciameli claims, the broker’s role is as gatekeeper, similar to the GP’s role in healthcare: they have the initial contact with the client and refer to other specialists within and beyond the brokerage, depending on the client’s particular situation.

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Brokerages and networks First you need to get clients. To find out how, MPA spoke to the Australian Lending and Investment Centre (ALIC), the current AMA Brokerage of the Year and MPA’s No. 1 Independent Brokerage 2014. Based in Melbourne, ALIC focuses on investor clients, and this strategy has paid off handsomely.

While ALIC was only formed in 2009, it drew on previously established referral networks, managing director Jason Back explains. “Mark [Davis] was positioning his brand within the investment market for the previous 10 years. By working tirelessly with only the best buyers’ advocates, financial planners and accountants, they were able to position ALIC from day one as a specialist in the investor market.”

“The best advisers tailor a solution, as opposed to writing a script” Back also believes that having a focus from day one has helped ALIC avoid the hassle of rebranding and unnecessary expenses. “With the focus on meeting the demand of clients for education and advice in property investment and correct debt structuring, rather than chasing the supply of basic mortgages in the market, ALIC has been able to sustainably differentiate

INVESTOR LENDING SLOWDOWN? In February, lending to investors fell , while overall housing finance was flat, in stark contrast to a frenzied January.

Craig James, chief economist at CommSec, suggested the decline could be because investors were anticipating further RBA base rate cuts later in the year, rather than just responding to APRA’s warnings.

3.4%

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FEATURES

INVESTORS THE INVESTMENT CLOCK John Manciameli of Hunterwood Solutions uses the investment clock to help clients understand movements in the property market.

Sydney Darwin DA N

Perth

BOOM

GER

11

12

PAIN

1

10

Networks and lenders

Canberra

4 7

5 6

OPPORTUNITY

VALUE

8

3

CORRECTION

Melbourne

2

Where are the markets?

2015

9

Brisbane

Hobart

itself from the competition,” Back says.

ALIC is not a one-stop shop: it refers out for financial planning, risk analysis, accounting, legal and buyers’ advocates.

Having no referral fees, in Back’s opinion, “keeps all parties focused on the needs of the client”. Sitting at the point in the value chain closest to the decision point makes the broker an ideal gateway for a number of services, but also makes them responsible for the quality of services provided, Back notes. “We run a very strong governance protocol over our referral partners, and if they do not meet those standards we will remove them from our panel.”

Adelaide

Dealing with lenders is another aspect of being an investor specialist. Investor loan applications can present in a variety of different ways, and require lenders to be flexible. That doesn’t necessarily mean switching lenders, Back cautions. It’s about understanding each other. “Before we were able to ‘negotiate’ with some of our banking partners, it was first vital that they understood our business model and the market space in which we operate. But, just as important, we need to understand their appetite for the clients that we service.

Mortgage Management Software Powerful, Flexible, and Easy to Use Contributory Mortgages ASIC Custodial Requirements

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0011 1 800 833 3343

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“Once we have that mutual understanding,” Back adds, “then it is up to us to deliver the numbers that make significant enough difference to these banks that they would make changes to process and policy.”

It’s also important to work proactively with BDMs, and with those at the senior levels of the third-party channels, Back says, so they’re not stuck in ‘fire-fighting’ roles when things go wrong.

consumers, as well as offering the QPIA investment property qualification.

However, Manciameli believes PIPA can only be so effective. “It’d be nice if we had a body like the MFAA putting on a program for [investment advice;] it really does test you and you really do need to do courses and after your name have an acronym … an MFAA course on investment would help brokers understand negative gearing,

“We run a very strong governance protocol over our referral partners, and if they do not meet those standards we will remove them from our panel”

7 TRENDS TO KEEP AN EYE ON What your investors should keep in mind, as nominated by our sister title Your Investment Property: 1 If demand exceeds supply, buyers

will quickly snap up available property, so the amount of time a property spends on the market decreases, resulting in low days on market (DOM).

2 Sellers will drop prices to attract buyers if demand is weak. So a low discount means demand is actually strong.

3 A high auction clearance rate

means demand from buyers is strong.

Just as you expect lenders to change to suit your needs, Back explains, you need to change how you do business to suit them. “We focused on what we could do to increase straightthrough processing and reduce the waste; be a better business partner. We did not want to be ‘hard to deal with’.

“It’s not just about moving on to the next one,” Back concludes. “Our solutions are based on the needs of our clients, not just the preference of who we will or won’t work with.”

Regulation and professionalisation If the property investment sector wants its reputation to improve, those businesses that are doing property investment responsibly need to set out to reform the sector, our experts told MPA. Kingsley believes PIPA can take the lead.

“Currently, the government doesn’t have an appetite for further regulation in the property space, and that’s disappointing from our end,” he says. “Organisations like PIPA have set up to pretty much self-govern the industry, and those members that join us are voting with their feet.”

Brokers can become accredited with PIPA, and the organisation runs advertising campaigns to promote the accreditation to

Section 221D of the Tax Code, asset-holding structures like trusts … so you really can help the client.”

MPA took these concerns to MFAA CEO Siobhan Hayden. “I agree that the MFAA has a role to play in educating brokers to support their diversification interests,” she responded. “The MFAA is only in its infancy regarding training and development within this sector. We have successfully deployed SMSF training to assist with these product options, and are also soon to deliver the first of three phases of equipment, commercial and asset finance training, to better support traditionally residential brokers with investment lending skills.”

As brokers, you’re probably already servicing a number of investor clients, but being an investor specialist is a different thing entirely. It’s certainly not about being a jack of all trades, nor can the transformation be achieved overnight; it’s about building a diversified brokerage and surrounding that brokerage with a diversified network. With growing professionalisation and regulation by industry associations, the investor proposition is becoming an increasingly viable strategy for established brokers who want to rise to the top.

4 A low vacancy rate means

that there is a shortage of rental accommodation for the number of tenants in the market.

5 Owner-occupiers generally take better care of their properties than tenants and landlords. Renters are also often in a lower socio-economic demographic than owner-occupiers.

A lower number of renters in a market means there is less competition among landlords to find a tenant, so a low proportion of renters is a good thing.

This figure is effectively a reflection of the supply of rental accommodation.

6 A high yield is a precursor to capital growth. As the area becomes popular among renters, homeowners and investors will soon move in, pushing prices up.

7 Low stock on market (SOM) as a proportion of total properties in an area means properties are tightly held by owners and snapped up quickly by buyers when they do come on to the market.

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FEATURES

INVESTORS

AFFORDABLE SUBURBS WITH HIGH GROWTH POTENTIAL From our sister title Your Investment Property, some affordable growth suburbs for beginner investors to consider IF YOU think it’s getting harder to find

WA

VIC

SA

QLD

NSW

affordable properties in many cities around Australia, you’re not imagining it.

According to a recent analysis by CoreLogic RP Data, there are indeed fewer properties available for budget-conscious investors, especially those who are targeting the $400,000 price range.

“Twenty years ago, 95.4% of capital city house sales were below $400,000, and only 0.4% of all house sales were above $1 million,” it says.

“In 2014, only 35.3% of sales were below $400,000, and 16.2% were above $1 million.”

While there is a big divergence in price points between capital cities, the escalating

34

prices mean there are fewer options for buyers on a low budget.

But fear not. There are still many options for the smart investor on a tight budget.

With the help of research guru Jeremy Sheppard, we present in the table below a list of areas where you can still find properties priced below $600,000 that are likely to grow solidly over the near to medium term.

Affordability – Only suburbs with a median price below $600,000 were included.

Obviously there are many cheap suburbs around Australia, but they don’t necessarily have growth potential.

Demand and supply indicators – These include days on market, stock on market, as well as vacancy rates. The suburbs selected all show low days on market, low vacancy rates and falling stock on market.

How the suburbs were selected Demand and supply indicators as well as the property price points were taken into consideration, as well as the other fundamental growth triggers.

Desirability to owner-occupiers – This is represented by a low proportion of renters in the suburb. Homeowners are the ones who are going to push prices up, not investors.

LGA

Suburb

Type

Median Quarterly 12-month Average annual Weekly median Time on Gross rental Vacancy Stock on Average GPO price growth growth growth advertised rent market (days) yield rate (%) market (%) distance

Wollongong Wyong Wyong Blacktown Campbelltown Brisbane Brisbane Gold Coast Gold Coast Brisbane Mitcham Charles Sturt Charles Sturt Tea Tree Gully Cardinia Cardinia Moorabool Macedon Ranges Yarra Ranges Bayswater Wanneroo Wanneroo Bayswater

BERKELEY BERKELEY VALE BERKELEY VALE BIDWILL BRADBURY BRACKEN RIDGE BRACKEN RIDGE HIGHLAND PARK HIGHLAND PARK MANLY WEST GLENALTA KIDMAN PARK KIDMAN PARK SURREY DOWNS BEACONSFIELD UPPER COCKATOO GORDON MACEDON SASSAFRAS BAYSWATER LANDSDALE MARANGAROO NORANDA

House House Unit House House House Unit House Unit House House House Unit House House House House House House Unit House House Unit

$318,000 $385,000 $222,500 $350,000 $411,000 $415,000 $320,000 $415,000 $248,000 $510,000 $455,000 $500,000 $365,000 $329,000 $500,000 $363,500 $325,500 $452,765 $555,750 $329,000 $593,500 $470,000 $382,500

1% 3% -16% 4% 5% -1% n.a.

-3% 0% 4% 3% 1% -1% 1% 3% -2% n.a.

-6% -12% 3% 1% 1% 2%

6% 10% -6% 38% 17% 0% 2% -1% -10% 7% 8% 3% 4% 3% 6% 4% n.a.

-9% -15% 14% 5% 4% 6%

2.1% 1.6% -1.2% 4.2% 3.1% 3.3% 1.6% 2.9% 2.4% 3.9% 4.8% 3.7% 4.3% 4.5% 4.2% 5.6% n.a.

4.7% 6.5% 10.3% 7.6% 9.1% 9.3%

$360 $408 $285 $330 $390 $420 $365 $450 $340 $475 $380 $400 n.a. $345 n.a. $330 n.a. $390 n.a. $350 $550 $440 $370

48 40 54 40 26 45 55 56 62 57 57 94 n.a.

52 49 55 n.a.

53 97 77 67 46 50

6% 6% 7% 5% 5% 5% 6% 6% 7% 5% 4% 4% n.a.

5% n.a.

5% n.a.

4% n.a.

6% 5% 5% 5%

0.22 0.65 0.65 0.34 0.93 1.11 1.11 0.9 0.9 1.8 0.4 0.6 0.6 0.84 0 0 0 0.9 0 1.48 3.7 1.13 1.96

0.38 0.41 0.41 0.29 0.2 0.15 0.15 0 0 0.23 0 0 0 1.09 0 0 0 0 0 0.07 0.21 0 0.33

73 62 37 39 44 16 16 68 68 14 10 7 5 17 44 49 80 55 35 7 16 14 9

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9:45:31 PM AM 13/05/2015 2:20:46

PROFILE

GEORGE SAMIOS

George Samios: MADD ABOUT FINANCE With a highly distinctive vision, 26-year-old George Samios of My Address Finance is building a broking brand to rival the big players

MY

ADDRESS FINANCE (MADD Finance) has a website that positively screams ‘confidence’. On a lime-green background you’ll find professionally produced advertising videos, and a simple yet slick interface.

Websites like this don’t come cheap, and you’d be forgiven for thinking that MADD, based in Brisbane, was part of a major franchise or leading independent brokerage. But in fact, it’s the work of just one individual, George Samios, a young broker with a conviction that his business “will be the next Aussie”.

These are big words – words that we’ve become accustomed to taking with a pinch of salt, as they all too often come from inexperienced young brokers riding a booming market. And indeed Samios doesn’t have a great deal of experience, moving from being a real estate agent to a Bankwest Mobile Banking manager at the age of just 20, before starting MADD in January 2012.

However, Samios – a former MPA Young Gun back in 2013 – has genuinely made the leap from promise and potential to writing serious loan volumes. In last year’s MPA Top 100 Brokers, Samios came 50th, with a total loan value of just under $86m. So, what has

36

Samios got up his sleeve, besides youthful exuberance?

MARKETING DIFFERENTLY MADD Finance has a variety of unusual marketing tactics, including:

driving around Brisbane in a lime-green mini

A band of brothers A formidable referral network is crucial, Samios explains. “I catch up with my [real estate] agents every quarter; take them to lunch.”

Drawing on his real estate days, he’s amassed a group of Brisbane agents from across the brands. “It doesn’t matter. We’ve got a really good connection with each other; we give each other advice, and I brought them all together.”

For Samios, business is personal. “The wrong way to go about it is asking for referrals.

For years I opened every Saturday, helping them out, helping them build their business, giving them advice. They train with me; we go to the gym together, we bike together, we box together. Your friends should be your referrers.

You should become good friends with your referrers because you deal with them every single day.

“When I go down to the coffee shop I’m a nice guy to everyone, not just to my customers,” Samios exclaims. “You’ve got to change your way of thinking; you’ve got to be helpful to everyone, not just in your own business, all the

handing out free water

giving away tickets to local comedy clubs on social media

madd running a competition for followers to win a personalised number plate

making comedian Vince Sorrenti its ‘MADD ambassador’, and featuring him in a zombie-themed TV commercial

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“Your friends should be your referrers; you should become good friends with your referrers because you deal with them every single day�

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13/05/2015 2:22:29 PM

PROFILE

GEORGE SAMIOS immensely; whatever I put in, the business is going to get 10 times more, because I’m growing the business. I don’t mind spending money on advertising campaigns. TV commercials, radio advertising, home shows, print media – we do everything. And it’s not necessarily to [directly] get new business; it’s to show people we’re around … it shows people what our vision is.”

Leaving clients without questions

George Samios with comedian Vince Sorrenti, the company’s ‘MADD ambassador’

PROCESSING AT MADD PA has pre-assessment with client over the phone.

Credit assistant looks at all client docs and does calculations.

Samios finds suitable products and lenders.

Samios presents options at 45-minute meeting with the client.

Clients receive automated application progress updates until settlement.

Customer survey is sent out.

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time.” Samios likens his holistic approach to a complete lifestyle: “You need to become that guy.”

Branding and culture at MADD It’s ironic, therefore, that MADD Finance’s director seems uninterested in building ‘brand Samios’. MADD’s website promises a “MADD experience”; a “MADD loan”that will truly be a “MADD deal”. If somewhat clichéd, Samios’ website is a textbook example of constructing a brand identity, as done by far larger businesses. “There’s nothing wrong with having a small, personalised brand,” explains Samios. “That’s cool, but I wanted to create something bigger. I want everyone in Australia to have the same experience we’re having … we think so differently; it’s the next level the way we do things.”

MADD is still a very small company, with Samios being the primary broker. Yet Samios runs a marketing campaign typical of a much larger brokerage, with everything from TV commercials to branded cars. How does he justify the presumably considerable expense?

“I love marketing; I love having fun. So I’m not necessarily too concerned about the price,” Samios replies, adding that “you need to spend money to make money in business”.

Thinking big, believing MADD will become a major national player, justifies for Samios his marketing spend. “I see the value

Clearly Samios’ marketing is getting new business, and he maintains that it brings in all sorts of clients. MADD’s youthful approach unsurprisingly pulls in first home buyers, and Samios believes in such situations his age becomes an asset. “I’m only 26 now, so I can really help first home buyers go through the whole process. This is what you’re in for in this red-hot market; I’m going to train you to negotiate, to deal with real estate agents, give you reports, get you pre-approval.” However, he also caters for Brisbane’s medical professionals, a lucrative niche, but has a number of customers “who just want to save money”.

MADD’s light-hearted marketing brings customers in the door, but Samios has paired with it a highly organised processing operation (see boxout) in order to keep them there. The objective is to make clients’ interactions with Samios as high-quality as possible, by shifting more rudimentary tasks to earlier in the process.

“You don’t want to spend the first 20 minutes of your meeting asking ‘what’s your birthday?’ or ‘where have you been living for the last 20 years?’,” insists Samios. Instead, his personal assistant gets that information in a preliminary assessment on the phone, and requests client documents. His credit assistant goes through those documents, calculating serviceability and LVRs so Samios can begin the search for the right product and lender, all before he sets eyes on the client.

It all comes down to the meeting. “I have 45 minutes to talk with the customer about recommendations for loan set-up, loan proposal; how I want to structure the loan in order for them to pay it off as fast as possible … offset accounts, credit cards, paying off the loan faster; and educate them on what’s the

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difference between fixed and variable, interestonly, or P&I.” Samios ensures his meetings aren’t interrupted by calls on his mobile, and has a highly visual presentation style, using a whiteboard. He aims to finalise plans at his meeting, by leaving clients feeling confident to make decisions. “It does make our life easier, but it’s [primarily] to make sure the client has a good meeting, and they leave after 45 minutes without any questions.”

Following the loan application submissions, clients are kept updated at every step by automated texts and emails, a system Samios set up with help from his aggregator, Connective, but he admits that nevertheless it required “a lot of effort”. Finally, all customers are given film tickets on loan settlement, and asked to fill in a satisfaction survey.

Expanding MADD nationally It’s clear that Samios has built My Address

“I see the value [in marketing] immensely; whatever I put in, the business is going to get 10 times more, because I’m growing the business” Finance on more than bluster; he has developed a brand and approach that he believes can travel. By the end of the year he wants to set up an office in Sydney, to service MADD’s existing client base there, followed by another in Melbourne. But first, Samios notes, he needs to start hiring. “I want to have offices all over Australia, but I need to find other

people who believe in my brand and want to jump on board.”

Behind Samios’ ambition is a sincere belief that his approach works, and can be passed on to other brokers. “When we do expand in Australia, we’re not going to have 10 brokers per office like other franchises; I’m one broker, but can write more than one broker. How can I do that? Well, the MADD franchise … if you have one broker, with once PA and one CA, you will write $15m a month.

“I haven’t really changed since the start,” Samios concludes. “I’m the same guy as I was three years ago … the only thing that’s changed is that people say, ‘George Samios, he does the right thing’.”

Yet change is coming, and MADD’s expansion will answer a question for the entire broking community: Can you go beyond the nice-guy approach, when the nice guy isn’t around? It all depends, essentially, on Samios finding brokers as MADD as he is.

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13/05/2015 2:22:46 PM

FEATURES

LOW-DOC LENDING

LOW-DOC LENDING:

THE REAL NUTS AND BOLTS

Together with Australia’s top low-doc lenders, MPA has prepared a back-to-basics guide to this important but underutilised sector of the market

‘LOW-DOC’ is one of the most disputed terms in the industry – a term that for some emphasises convenience and flexibility and for others is a toxic label ensuring vilification in the mainstream press. Indeed, many lenders in this survey prefer the terms ‘alt-doc’, ‘lite-doc’, ‘flex’, and more.

Yet the problem actually lies in how low-doc is generally described: as a niche.

To describe Australia’s many self-employed borrowers as a niche would be like describing first home buyers as a niche; you’re ignoring

40

a huge number of potentially lifelong clients.

Of course that doesn’t mean low-doc lending is the same as prime lending, which is exactly why we’ve put this guide together, using the expertise of the top lenders in this space.

If you know how to write a prime loan, you’re well on your way to writing a low-doc loan. This guide is intended as a practical look at how to move your business in that direction – it certainly isn’t an alternative to reading NCCP requirements, and it’s always worth going to lenders directly for further advice.

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OUR GUIDES TO LOW-DOC LENDING

Allan Savins, chief commercial officer, RESIMAC

Cory Bannister, vice president and head of distribution, La Trobe Financial

Mario Rehayem, director of sales and distribution, Pepper

Murray Cowan, owner, Better Mortgage Management

Paul Grant, national sales manager, Australian First Mortgage

Royden D’Vaz, national manager sales, marketing and distribution, Bluestone Mortgages

Ray Hair, general manager sales, Homeloans

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13/05/2015 2:23:56 PM

FEATURES

LOW-DOC LENDING

INNOVATION AND EDUCATION AT BETTER MORTGAGE MANAGEMENT “Continue to offer new innovations in this space and support these products with education to the broker community regarding the suitability of low-doc lending for certain clients.

This education will show brokers that low-doc loan products do not need to be harder assessment or more complex when they understand the process. Low-doc loans can be another source of business-income generation from either their referral partners (if accountants) or existing self-employed applicants. With 30 June 2015 fast approaching, we have solutions to help them now, rather than waiting to get their financials completed, which may not be due until March 2016.”

Murray Cowan, owner

FINDING LOW-DOC CLIENTS: AN A–Z A

Accountants

“There are also those borrowers who have less than two years trading in their business, a requirement for full-doc selfemployed borrowers. And who better to comment on the current trading performance of these businesses than the accountant, who in most cases is preparing the quarterly BAS returns and monthly management accounts?” (Allan Savins)

D

Database

“The best place for brokers to find low-doc clients is often their existing client database. Brokers should filter for selfemployed clients and consider if they may be: approaching the house limits of mainstream banks; behind on the preparation of their financial reports/taxation statements; tired of having to prepare annual review documents for the bank; looking to purchase additional property and require a higher LVR than the banks can offer, or wish to do so without incurring an LMI expense; looking to access equity in their property for personal, investment or business use; or looking to purchase commercial property.”

(Cory Bannister)

F

Financial planners

“Another option is for brokers to talk to their network of accountants or financial planners, identifying clients who are not up to date with their tax lodgements but are

42

self-employed and looking to borrow money prior to having their returns completed.”

(Cory Bannister)

Magazines

M “Brokers could source low-doc clients from accountant referrals, or by accessing trade or business associations and advertising in their publications.” (Murray Cowan)

L

Local businesses

R

Referrals

S

Self-employed

“To state the obvious, it starts with customers that are self-employed; from tradies to affluent small business owners, this product does not discriminate … Other great prospecting opportunities are local businesses and your own network (printers, IT specialists, courier drivers, hairdressers, mechanics, restaurant owners, and the list goes on).” (Mario Rehayem)

“Any broker that creates a strong referral source will come across selfemployed borrowers, and some of these will [need] to apply on a low-doc basis.”

(Murray Cowan)

“Customers are often self-employed borrowers who are yet to complete their most recent financial statements; borrowers who have only recently become selfemployed; and/or borrowers with complex financial structures involving multiple entities and parties.” (Ray Hair)

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FEATURES

LOW-DOC LENDING

BLUESTONE: THE FUTURE IS BRIGHT “More than half (55%) of loans written by us are in this space, and we see that continuing over the next 12 months.

We want to be known as a lender that services the self-employed market.

The self-employed sector is huge, and there’s no reason why these people shouldn’t have a lending solution available to them; likewise, borrowers who may have had a few hiccups in the past. Our current offering, coupled with what we have on our radar, will certainly attest to our appetite to help these borrowers.”

Royden D’Vaz, national manager sales, marketing and distribution

SELLING LOWDOC PRODUCTS TELLING YOUR clients that they need a low-doc loan is very different to introducing prime products. And that’s for one main reason, RESIMAC’s Allan Savins explains.

“Specialist loans are sold, not bought. No borrower will ever come in and say they want that loan through an unknown lender brand, with a higher interest rate,” he says.

Not all the lenders featured here characterise the initial broker-client conversation as selling, but they acknowledge the initial need to counter client ignorance.

For Ray Hair of Homeloans it’s about explaining to the client the realities of their financial situation.

“In educating the client on what is required to verify income and expenditure, the broker assists the client to acknowledge whether they can meet the verification requirements of a full-doc loan,” Hair says. “Acknowledging the need for alternative verification is not

an admission of poor credit risk.”

What brokers should be presenting is a solution, rather than simply a loan, our lenders insist. Part of that process is acknowledging to the client that this may be a solution for the short term, according to Better Mortgage Management’s Murray Cowan. He says “brokers need to make clear the parameters for full-doc loans and emphasise that low-doc loans are a solution for now, and their circumstances can be reviewed when circumstances change”.

Finally, and on a common-sense note, it should be pointed out that low-doc loans are subject to the same basic restraints as normal loans, as Mario Rehayem of Pepper explains. “Brokers should never engage in discussions where they are encouraging borrowers to apply for an alt-doc loan because their financials do not allow them to service the proposed debt.”

A TEMPLATE FOR THAT INITIAL CLIENT CONVERSATION

“Mr and Mrs Client, unfortunately the loan we were originally discussing is not available due to you not having up-to-date financial statements. The good news is that there are specialist lenders that will be able to help you with that [consolidation, cash out, property purchase]. We can always look to switch it over to a more mainstream loan once your financials are prepared.”

As suggested by Allan Savins of RESIMAC

O W e th

La

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1

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Your credit experts

Our expertise in delivering products is a ‘solutions delivery’ model that has stood the test of time.

We are the market leaders in innovation and never lose sight of the lending basics. It is our expertise, commitment and superior service that allows us to action, deliver and be ahead of the pack. So call the experts today for an instant answer on 13 80 10 or visit latrobefinancial.com La Trobe Financial Services Pty Limited - Australian Credit Licence: 392385 La Trobe Financial Asset Management Limited - Australian Credit Licence: 222213

13 80 10 • latrobefinancial.com 40-53_Low Doc_SUBBED.indd 45

Looking out for you™ 13/05/2015 2:24:41 PM

FEATURES

LOW-DOC LENDING

LA TROBE FINANCIAL: STEADY AS SHE GOES “We will continue to offer low-doc loans to Australia’s underserviced self-employed sector as we have done for over 25 years since pioneering the product back in 1990, and do not anticipate any significant changes to be made to this product during the next 12 months.

“We already make our Lite-Doc™ option available across our entire product range, and have been consistently writing solid volumes in this space and will continue to do so as the level of actively trading SMEs in Australia continues to increase, now totalling more than 2.1 million businesses and growing – a sizeable market.”

Cory Bannister, vice president and head of distribution

ASSESSING THE CLIENT

BY NATURE, low-doc lenders pride themselves on flexibility when it comes to client documents; in many cases they will accept just one of the three document types listed below.

However, as the broker, you should try to obtain all of these documents, in order to protect yourself if anything goes wrong further down the track, our lender panel strongly advises. You also need to take a specific approach to documents: the object is not to meet the minimum requirements but to have enough information to check what the client has told you about their situation, and document all the steps of the preliminary assessment process.

Be aware that lenders will do their own checks of all the documents you provide, potentially including talking to the client and the client’s accountant.

Accountant’s letters Many low-doc lenders will accept a letter from the client’s accountant setting out their financial position, in place of financial

statements. However, it’s vital that you check the accountant’s accreditation for yourself.

There are three main accountants associations in Australia: the Institute of Public Accountants, CPA Australia, and the Institute of Chartered Accountants of Australia.

Business Activity Statements These can be a good chance to check the client’s claims about the nature of their business, in terms of the type, frequency and consistency of revenue. Different low-doc lenders ask for different timespans for BAS statements, usually at least six months.

Income tax returns can fulfil a similar role.

Bank statements Like BAS statements, these are useful for assessing the performance of your clients’ businesses. Look for debts the clients may not have disclosed. Remember that not all mainstream lenders will pay attention to the client’s most recent financials – which could show business improvement – preferring to take a wider view across two to three years.

COSTING THE LOAN: DOES REQUIRING FEWER DOCUMENTS MEAN A HIGHER RATE? Flexibility comes at a price, and low-doc products tend to be more expensive than prime products.

However, within the low-doc space, the price doesn’t necessarily correlate with the level of documentation provided.

The question is how lenders assess risk, which for securitised lenders affects the cost of funds. When different documents have the

46

same risk profile (ie accountant’s letter or BAS statements), then some lenders may not price differently, depending on which documents you provide.

It’s worth remembering that the loan is given to the client, not the documents – loan purpose, credit position and backstory will often carry more weight in determining pricing.

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FEATURES

LOW-DOC LENDING

PEPPER’S STRATEGY FOR 2015–16 “Since 2011, Pepper has seen resurgence in the alt-doc segment, with very strong performance, including low levels of arrears that even outperform its full-doc counterpart.

Through specialist lending education campaigns we are starting to see more brokers understand and appreciate the important role that alternative documentation plays to serve the needs of the self-employed market.

“We will continue our focus on education as there are still a large number of brokers who are yet to realise the value of alternative-documentation lending. Over the next 12 months we will also look to identify and fill more gaps in the alt-doc market through product innovation so that we can cater to more of those unmet needs.”

Mario Rehayem, director of sales and distribution

AVOIDING DELAYS POST-APPLICATION Allan Savins, RESIMAC: “Brokers also need to take a common-sense approach and be mindful to check the supporting documentation. With mortgage loans being refinanced, have all monthly repayments been made? If not, why not, and does the reason given make sense and support the facts? If business bank statements are provided, do they support the income declared? Does the income declared make sense to the nature of business? Look for undisclosed debts.”

Paul Grant, Australian First Mortgage: “Generally, low-doc loans are simple to process. The only thing they and their customers need to be mindful of is that lenders do tend to call accountants and borrowers to verify the details of the declarations held.”

Cory Bannister, La Trobe Financial: “There shouldn’t be any hurdles late in the process that are specific to a loan being a low-doc loan. For us, the only difference between our Lite-Doc™ loans and our full-doc loans is the income verification method; once this has been established, which generally happens very early in the approval process, there is no difference in a file’s path to settlement, which is why there shouldn’t be any last-minute surprises.”

Murray Cowan, Better Mortgage Management: “If the broker understands the funder’s assessment process, there shouldn’t be any surprises. As part of our/funders’ compliance we will check that the accountant is a registered tax agent and contact the

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accountant to confirm information provided on the accountant’s declaration and/or confirmation of BAS statements, if used as the income verification. The broker should ensure the applicants and accountants are aware that they may receive a call from the funder to confirm details provided.”

Ray Hair, Homeloans: “Both the broker and the lender need to meet their responsible lending obligations (refer to ASIC Regulatory Guide, RG209) … A conditional low-doc approval from a lender will still require verification prior to a formal loan offer, and if the broker has not prepared and obtained such then broker and client are likely to be frustrated and disappointed.”

Mario Rehayem, Pepper: “The key takeaway for brokers is validation. If they are comfortable with the stated income of the borrower and can validate it with the documentation available, then there should not be any significant hurdles in the application process.”

Royden D’Vaz, Bluestone: “Not every application gets across the line, and deals do fall over for various reasons, the most common being ‘lower than expected valuations’ … real estate agents tend to be optimistic about price, yet values are, by their nature, conservative in order to protect the borrower and the lender over the long term. So, as you can imagine, sometimes the borrower’s expectations can’t be met. We suggest leaving a bit of ‘wiggle room’ in any serviceability and affordability calculations to accommodate this.”

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FEATURES

LOW-DOC LENDING

RESIMAC’S AMBITIONS FOR THE YEAR AHEAD “We have just completed a major overhaul of our specialist product range, particularly in the alt-doc area.

This has gone a long way to taking the complexity out of specialist lending and makes the process a lot more straightforward. The changes included a number of product and policy improvements, including an increase to the value of defaults that will be disregarded to $2,000 (up from $1,000) and introducing an interest-only option on all specialist products, including owner-occupiers.

“We have also added several new members to our sales team to ensure our new products are backed up with industry best service. This will form the overall basis of our 12-month plan to continue to strengthen relationships with our existing network and build new relationships with brokers who may not have used RESIMAC before.”

Allan Savins, chief commercial officer

CREATING A CLIENT FOR LIFE 1

Create a contact schedule Low-doc clients are a valuable part of your database and should receive the same marketing and check-up contacts as other clients. It is particularly useful to get in contact 12–18 months following the application, as this period of time gives the client a chance to complete their full financials and possibly transfer to a full-doc loan and/or different rate.

Plan their road to recovery The information you gathered about the client during your assessment isn’t just useful for the loan itself; you can plan the client’s road to financial normality and eligibility for prime products. This might just mean waiting for new financials to come through, or involve a fundamental restructuring of their debt. Either way it keeps you in the loop.

2

3

Auxiliary products Given that self-employed and small business clients make up much of the market for low-doc products, it makes sense to offer them commercial and equipment finance if appropriate.

Debt consolidation Even healthy small businesses often have a number of debts involved in running them, from loans to pay suppliers to more serious credit card debts. Combining and accounting for all these debts may be an important part of getting the clients back to full financial health.

4

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You can plan the client’s road to financial normality and eligibility for prime products

SMSF lending Self-employed clients may well also manage their own super funds, and so SMSF lending may be an option, particularly for small business clients looking to purchase commercial property.

5

Low-doc as an ongoing solution Not all lenders agreed with this approach (see point 2) but some did suggest that low-doc loans might be an ongoing solution for some clients. With good selfemployed clients, finding full documentation may be particularly difficult, making the cheaper low-doc products a potential timesaving tool.

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LOOKING TO THE FUTURE AT AUSTRALIAN FIRST MORTGAGE “Here we will continue to create innovative product offerings to meet the needs of low-doc clients.

This could be by sharpening interest rates, loan features, and ease of application, back to full-doc loans where applicable.”

Paul Grant, national sales manager

HOMELOANS’ STRATEGY FOR THE LOW-DOC SPACE “Homeloans has a diverse range of loan options (full-doc and low-doc), experienced BDMs and credit managers locally in the major capital cities.

Low-doc loans provide an important alternative finance option for brokers and borrowers, and we are committed to maintaining a competitive range of solutions. We will continue to invest in broker training and workshops to build broker confidence and capabilities in low-doc lending and in Homeloans as the business partner of choice.”

Ray Hair,, general manager

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FEATURES

LOW-DOC LENDING

FEATURED PRODUCTS PEPPER Product name

Initial rate

Comparison rate

Term

Variable/fixed

Max LVR

Pepper Essential

4.99%

5.18%

10–30 years

Variable

80%

Pepper Easy

5.75%

6.10%

10–40 years

Variable

85% (for purchase)

Pepper Advantage

6.24%

6.61%

10–40 years

Variable

85% (for purchase)

Initial rate

Comparison rate

Term

Variable/fixed

Max LVR

Residential Lite-Doc

6.25%

6.58%

30 years (5 years IO)

Variable

80%

Commercial Lite-Doc

6.99%

n.a.

25 years (5 years IO)

Variable

70%

Non-resident loan

6.25%

6.58%

30 years (5 years IO)

Variable

80%

Residential construction

6.99%

7.64%

30 years (5 years IO)

Variable

75% (on completion)

Development finance

8.99%

n.a.

2 years IO

Fixed

70% (on completion)

Rural finance

8.95%

n.a.

25 years (5 years IO)

Variable

55%

LA TROBE FINANCIAL Product name

Survey opens 1 June MPA BONB third ad.indd 1

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Proudly sponsored by

11/05/2015 10:03:30 AM

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HOMELOANS Product name

Initial rate

Comparison rate

Term

Variable/fixed

Max LVR

Accelerate Prime Lo Doc

From 4.99%

5.17%

30 years

Variable

80%

Ultra Lo Doc

From 5.24%

5.56%

30 years

Variable

80%

Ultra Plus Lo Doc

From 5.04%

5.81%

30 years

Fixed

80%

MoniPower Lo Doc

From 5.93%

6.49%

30 years

Variable (fixed available)

80%

FlexiChoice Lo Doc

From 6.64%

6.69%

30 years

Variable

90%

BETTER MORTGAGE MANAGEMENT Product name Flexi Ultimate Alt Doc

Initial rate

Comparison rate

Term

Variable/fixed

Max LVR

4.99%

5.22%

10–30 years

Variable

55%

Initial rate

Comparison rate

Term

Variable/fixed

Max LVR

6.29%

6.48%

25 years

Variable

85%

BLUESTONE Product name Lite Blue

Please note rates are correct as of 27 April 2015 – always contact the lender for latest rates.

“

I’m sold on specialist lending because it lets me achieve my clients’ dreams MELISSA GIELNIK – SMART LENDING

Discover Pepper’s range of specialist home loan solutions.

”

1800 737 737 pepperonline.com.au/specialist

Terms, conditions, fees and charges apply. Applications are subject to Pepper’s normal credit assessment and loan suitability criteria. Pepper Homeloans Pty Ltd ACN 092 110 079 is Credit Representative 395012 of Pepper Australia Pty Ltd ACN 094 317 665, Australian Credit Licence 286655.

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BUSINESS STRATEGY

INNOVATION

THINKING OUTSIDE THE SQUARE How can creativity be funnelled into innovative outcomes for business? Iain Hopkins asks where our childhood creativity goes and how we can bring it back

INNOVATION CAN come from anyone, anywhere – that’s because all human beings are creative. We lose sight of that fact as we progress from childhood through to adulthood and it gets buried, especially when we hit the workforce. Yet there are countless examples of everyday workers using creative thinking to resolve business issues.

The three biggest innovations at McDonald’s came from people who were flipping burgers. The Big Mac, the Egg McMuffin and the Filet-o-Fish all came from the front line, not the head office. The worker who invented the Filet-o-Fish realised that Catholics would not eat hamburgers on Fridays. He suggested an alternative might be a burger containing fish. The idea went up the chain, and a new product line was born.

“Ideas come from where problems exist,” suggests Jason Clarke, founder and lead ‘mind worker’ at Minds at Work. “Go where the problems are. You need to empower people where the problem is and say to them, ‘What would you like to do about this?’ ”

innovation. Clarke suggests the relationship is similar to the one between bread and toast; in other words, the two are one and the same.

“Creativity is one of the fundamental mindsets you need – you cannot have innovation without creativity. Innovation is simply when you say, ‘Let’s take those ideas and turn them into things which will deliver outcomes or progress or whatever else’.

Innovation is the application of creativity.”

Clarke confirms that everyone is born creative, but this particular trait “goes into hiding” as we get older. “If you think about people who are anxious, they are actually expressing creativity; they are imagining something that might not be a problem.

People who dream – dreams are creativity while you’re asleep. It’s there. Our ability to invent and create is hardwired into us – you can’t stop it.”

Even empathy, he notes, is a form of creativity. Whenever we’ve felt for someone or wondered how it would be to be someone else, we have been using our imagination and creativity.

Creativity and innovation First, it’s important to recognise the close, interconnected realms of creativity and

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So, what happens to that creativity?

THIS IS YOU

“I think part of the problem is people aren’t

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THIS IS WHERE YOU SHOULD BE

TOP TIPS Define what innovation means to your organisation.

Ensure members of your executive team understand and are aligned in terms of what good innovation looks like for your business.

Engage your broader leadership group to think-tank innovative concepts regularly, and build a bottom-up culture of idea generation.

Leverage your strategy teams and business experts to work with your high-potential leaders to turn concepts into strong business cases.

Prioritise practical, ROI-focused ideas and gain executive agreement on value-based investing.

Create a culture that supports the continual flow of new ideas and strong feedback loops. given the confidence to be creative,” Clarke says. “A lot of that happens in early childhood.

It’s a bit like sport. When kids are encouraged to be sporty when they are little, they become comfortable with that as part of their personality. But if you’re one of those kids who was never picked at sport, you tune that part of you out.”

What goes wrong?

Most businesses, consciously or not, then proceed to squash that creativity even further.

But it must be remembered that, like McDonald’s, creativity can actually be used to enhance and improve business outcomes. It’s just a matter of drawing it out of people.

“Organisations will ask, ‘Have you got any ideas?’ People will generate ideas and the organisation will say, ‘That doesn’t address any of the problems we’re dealing with. I was hoping someone would come up with an idea to solve problem F, not A, B, C’,” Clarke says.

The first step is to identify whatever the organisation is not happy with, something that isn’t working as best it could. It could be

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BUSINESS STRATEGY

INNOVATION a loss of market share, or bad customer experiences, or too much time being wasted in meetings. Once the problem is established, it’s time to tap into the minds of employees.

“This is where creativity becomes innovation – it becomes targeted. Very often the creativity doesn’t have a target,” Clarke says.

The concept of the ‘lightning rod’ is handy to keep in mind. The problem with the traditional ‘ideas box’ is that people will submit ideas but very few can actually be used. A lightning rod, on the other hand, is staked to the ground to bring sparks to where you want them.

“Organisations should say, ‘Let’s have a dozen suggestion boxes. Suggestion box one is how do we improve the customer experience? Box two is how do we cut our operating costs? Box three is how can we boost staff morale? So the ideas are going into something useful,” says Clarke.

To cite just one example, on 25 May 1961 President John F. Kennedy announced before a special joint session of Congress the ambitious goal of sending an American safely to the moon before the end of the decade. He didn’t specify how it should be done, but he planted the seed.

The announcement kick-started a period of incredible invention and innovation – people had a clear goal to work towards, and it would take their own creative ingenuity to make it happen.

Funnelling the ideas A second key tip is to create some form of creativity process so the wonderful ideas have a direction and pathway to eventually end up as an innovative product, service or ‘thing’.

“The trick is making it simple and straight enough so that ideas can actually get up,” says Clarke. “You can get people fired up about creativity and innovation – that’s very easy.

People are waiting for someone to invite them to have this discussion. So it’s about getting on a train, filling it up with coal, and getting people really excited. But if there’s no track for the train, it will just plough into the dirt. No one knows what happens next.”

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The alternative is that there are tracks, but they run like the roller coaster at Disneyland: complicated, twisty, double-backing.

Clarke cites a recent client that had an innovation process in place, but it was so long, with many layers and steps, because it had been put together by the legal department and the finance department and the rest, to ensure nothing dangerous or risky happened.

“All they succeeded in guaranteeing is that nothing ever happens,” he comments.

“Waiting years for approval is just going to kill everyone’s enthusiasm.”

THE INNOVATION PROCESS The innovation process goes through several stages or progressions. Each stage is vital to an idea moving through to an executed reality. Here’s a basic four-step plan: At the first stage, you want open, free and unbounded ideas. Fill the bucket with ideas. Be playful, imaginative, creative.

“This thinking will get you started, but it won’t get you to the end,” says Clarke.

The second stage is about designing, planning and engineering. This is where you say, let’s think creatively but within the constraints of the thing we’re trying to fix. “Putting some KPIs around things might inhibit the creative people, but it will inspire the more practically minded people,” says Clarke.

The third stage is when you start to get more critically minded. “Let’s test it in terms of its politics, its legality, the finances and the rest. A lot of organisations apply this third phase at the beginning. It’s what we call premature evaluation, where we kill the idea before it has a chance to grow,” says Clarke.

The fourth is the pragmatic stage. “If you make a decision, what are the next steps, how do we break it down, what’s the budget, what are the KPIs that will track success?”

Each of those stages requires different thinking. You start off naive, then you become more practical, then critical, then pragmatic.

You may need different people at different stages. “This means that, if I say to John, ‘You’ve got this great idea; you’re now in charge of making the whole thing work’, it will probably fail – we don’t have the mindset that can do all of those things. I don’t think anyone does. We say to clients: great minds don’t think alike – you need a diverse set of characters, skills and egos to do it all,” Clarke says.

Importantly, innovation needs cynicism as much as it needs optimism. It isn’t just about believing in things and hoping for the best; you need someone to say, “Is this really going to work?”

“However, if you get the sequence wrong, if you are negative too early, or optimistic too late, it won’t happen,” Clarke warns.

Further tips There are two further critical pieces to consider: organisational culture, and the role of leaders. Clarke notes that clients often approach him and talk about their fear of failure, yet this is not a human condition.

When a child walks for the first time, they are not afraid to fall.

“What we’re afraid of is blame and ridicule,” Clarke says. “We’re afraid of being accused of screwing up. It’s not the failure that we have a problem with; it’s the way people respond to us having tried to do something new and it didn’t go exactly the way we thought it would.”

Clarke’s recommendation to organisations is to get past the narrow definition of ‘failure’.

“We use the word failure to describe a range of things. Let’s imagine I’m a pilot and I didn’t put the wheels down when I landed the plane because I was too busy texting.

That’s a failure, a potentially very serious failure. We shouldn’t be using the same words when describing, ‘Well, John wanted to try something new and it didn’t work quite the way we thought it would work’. I don’t think John should be punished for trying something new, because he could potentially figure out the way forward for the rest of us.”

The most important contribution leaders

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Why are we so busy in the first place?

Why are we working so hard?

The answer is simple: the old ideas don’t work anymore can make is their influence on culture, one that fosters innovation. A leader’s job is not necessarily to be the innovator – you don’t have to be the genius; you have to find the genius. Richard Branson is the prime example of this. Virgin consists of around 250 companies. Branson didn’t come up with every single idea within those companies. But he’ll be the guy who had the idea, or the guy who supports the guy who had the idea, or the guy who turns up at the launch and makes a big fuss about the guy who had the great idea.

He’s quite happy to put his ego aside and step back and let other people step forward.

“That’s the hardest challenge for leaders – they get excited about being a leader and their egos get too big. If you’re a boss with 1,600 brains working for you, you’re just another one. Get out of the way and encourage people to put their ideas forward,” Clarke says.

No time? No excuse Not surprisingly, Clarke scoffs at the suggestion that there is no time to be

innovative today, to take the time to think outside the accepted square. He flips this concept on its head: Why are we so busy in the first place? Why are we working so hard? The answer is simple: the old ideas don’t work anymore.

Yet the whole idea of innovation is not to invent new work. It’s to simplify and make better use of our resources.

“We invented the wheel not to make ourselves busy but because we couldn’t be bothered walking,” says Clarke. “The commute time in Sydney is, on average, 15 hours per week. At what point do we say, ‘OK, this is ridiculous. We need to find a better way. Could we work from home? Could we use flexi-days or alternate start/finish work times?’ I don’t buy the idea we don’t have time – the time we have is going into old ideas that don’t work anymore.”

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BUSINESS STRATEGY

LEADERSHIP

EXTRAORDINARY LEADERSHIP IN ACTION Jim Kouzes, Barry Posner and Michael Bunting provide five mini profiles of leaders who are excelling in Australia

AUSTRALIANS ARE fiercely egalitarian.

They don’t tolerate hypocrisy, and they certainly won’t follow leaders just because they have a ‘leadership’ title or position. That is why people who can truly lead in this country, who can gain the voluntary engagement of their people, are worth learning from. These are leaders who display the five practices of exemplary leadership – an evidence-based and proven framework.

These five practices have proven to be successful foundational principles that, when put into practice, can overcome the special challenges found in Australia and New Zealand, and they are described in our new book, Extraordinary Leadership in Australia and New Zealand: The Five Practices that Create Great Workplaces. Consider the lessons learned from leaders we profile who achieve extraordinary results by applying ‘The Five Practices’.

INSPIRING A SHARED VISION: Jan Pacas Jan Pacas is managing director at Hilti Australia, a premium brand that makes electrical power tools and

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fastening technology. He had worked for the company in other parts of the world and was surprised to find that the Australian division was a “very average company”. He believed that they needed a new vision – “something to give us the motivation to work together in one direction … constantly striving for something bigger and better”. Pacas knew that simply having strategic objectives wasn’t enough, and that they needed to translate their

Hodson understood the need to empower everyone on her team to act like leaders. She enabled them to “proceed until apprehended”, meaning that they were free to “have a go and keep going” comprehensive strategy into something that every person could easily see and describe; that is, a shared vision. ‘We’re Painting Australia Red’ is what they came up with.

Pacas explains: “We painted the picture that we wanted to see a much bigger share of Hilti’s signature red colour on every job site.”

That vision quickly caught on, and ‘Painting Australia Red’ provided a rallying point that got everyone excited about playing a role in the company’s success. Pacas realised that by envisioning exciting future possibilities leaders get people to feel that they’re a part of something special. People get energised when

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they can envision where the company is heading in the future. Revenues have since grown in double digits every year, and in 2011 Hilti in its first year of entry received the top honour of ‘Best of the Best’ in Aon Hewitt’s Best Employer in Australia and New Zealand citations.

CHALLENGING THE PROCESS: John Studdert John Studdert is an Australian leader who never says never. He built a successful consulting business, sold it to the Ogilvy Public Relations organisation, and then served as their CEO and executive

chairman in Australia. While in that role, Studdert was persistently searching for opportunities beyond the visible horizons.

Studdert’s direct reports describe him as a restless explorer, constantly pushing the envelope, constantly thinking, “Are we doing it right? Could we do it differently? Have we thought hard enough? Let’s start a little something and see if we can grow it”. This is what challenging the process is about. It is expanding the boundaries and looking beyond the current reality to future possibility. It does not require the leader to do all the innovating but rather to create a culture that welcomes and rewards innovation from every team member. Under his leadership, both the revenue and reputation of the firm has grown.

ENABLING OTHERS TO ACT: Celia Hodson Celia Hodson is the CEO of the School of Social Entrepreneurs Australia, an organisation that helps local leaders to set up, manage, fund, and lead successful social ventures. Shortly after settling into her new role, Hodson discovered that the school had run out of money. Knowing that this was a challenge beyond the capacity of any single individual, Hodson understood the need to empower everyone on her team to act like leaders.

She enabled them to “proceed until apprehended”, meaning that they were free to “have a go and keep going”. Once team

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BUSINESS STRATEGY

LEADERSHIP The leadership-follower relationship, particularly in Australia, is predicated on building trust members felt motivated, and empowered, Hodson encouraged them to be leaders of those initiatives. They took ownership and responsibility for the organisation’s success.

Leaders enable people to see that they can develop their skills and actually do more than they thought possible. Hodson’s action of enabling her team to act increased their selfdetermination, and produced a complete turnaround of the school. Making each team member the CEO of their own area helped lead the business from the edge of bankruptcy and closure to a thriving and inspirational organisation.

MODELLING THE WAY: Tyrone O’Neill The leadership-follower relationship, particularly in Australia, is predicated on building trust. Tyrone O’Neill, responsible for customer marketing at Optus, one of Australia’s major providers of internet and mobile phone services, well understands this. Trust begins with people knowing who you are and witnessing that your behaviour is consistent with your values.

“It’s only through your actions that you prove your trustworthiness,” explains O’Neill.

Leaders must walk the talk and hold themselves, as well as others around them, accountable for putting values into action.

O’Neill and his team, challenged to improve customer retention, realised this would require a fundamental change in the operational habits at Optus. In order for people to really embrace a customer-centred focus, there would have to be a change in behaviours, and he began with his own.

O’Neill assigned everyone on the team who was not in a customer-facing role a list of customers, and expected them to call customers directly and go through customer

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satisfaction surveys with them. Although everyone hated the calls at first, when they saw O’Neill performing the same tasks, their attitudes changed.

Everyone witnessed O’Neill calling and surveying customers personally, even after work hours. He would also visit the call centre and listen in on survey calls and discuss survey results with the call agents. By ‘modelling the way’, O’Neill set a path for his team to follow.

The effect was that everyone wanted to get involved and mimic his behaviour. In less than two years, they achieved the best customer retention rates in the company’s history.

ENCOURAGING THE HEART: Deven Billimoria Few things give people greater courage and confidence than feeling they are a part of a team that shares their values and watches out for their best interests, which is how leaders ‘encourage the heart’.

Deven Billimoria is CEO of Sydney-based Smartgroup Corporation, a medium-sized holding company that presides over a group of companies, including Smartsalary. The company works with HR and finance departments to help employees properly structure their salaries and benefits. He’s described as having a “real loyalty and commitment to the people around him. Once he’s made an emotional connection with you, you’ve got his support for life”.

Billimoria believes that you cannot really lead people, particularly in Australia, until you build a relationship, and you cannot begin building a meaningful relationship without first knowing people’s names. He makes it a point to know every one of his 340 team members by their first name, and demonstrates by this action that he values each team

member with a deep care and concern.

Not so long ago, the Federal Government explored elimination of the principal fringebenefits tax concession which was the foundation of the company’s business model.

While some of his competitors reacted by drastically reducing staff, Smartsalary decided not to immediately retrench anyone or manage leave liabilities. They were taking a bold stance, sending a strong signal that they would either find a way out together, or fail together, as a team.

Smartgroup used this opportunity to strengthen their collaborative culture.

Everyone was encouraged to work together to find solutions. “We came together as an entire organisation,” Billimoria explains. He told his team: “This is a problem for us. Let’s figure it out.” Leading the business through a major legislation crisis and ultimately managing to keep his staff engaged and efficient contributed to Billimoria and Smartsalary winning multiple accolades, including an Aon Hewitt Best Employer accreditation for the past two years.

You can be next These five examples are just a sampling of the difference that implementing ‘The Five Practices of Exemplary Leadership’ can mean in Australia. We share scores of additional examples in our book about Australians and New Zealanders who have applied these leadership principles within a variety of industries. While the contexts vary, organisational success is not so much about any unique characteristic of the individual leaders but about the common application of these leadership practices. Great leadership creates great workplaces that produce extraordinary results. Put these leadership practices into your organisation.

Jim Kouzes and Barry Posner are co-authors of The Leadership Challenge. Michael Bunting is a co-author of Extraordinary Leadership in Australia and New Zealand: The Five Practices That Create Great Workplaces, from which portions of this article are excerpted. Michael is also the founder of leadership development consultancy WorkSmart Australia (worksmart.net.au).

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FEATURE / BROKER EDUCATION

LIFESTYLE

DAY IN THE LIFE OF…

Tony Zaccari, senior relationship manager, Thinktank

5.30am: I have a set fitness activity each morning which means either a run, a walk, gym work or boxing. This morning I am off to the gym to do a Box-Fit class with my wife who is a personal trainer. Boxing with Luisa is something I look forward to and believe me, there is no slacking off ! I find the sessions really prepare and energise me for the day ahead.

7.15am: Arrive back home for breakfast.

My three boys have been preparing themselves for school, a quick hello to them all but there is little time to chat. I finish

commercial finance as they were in business banking for many years and I know them well from my previous role. The welcome is warm and they are keen to hear about our offering. We move downstairs to a coffee shop and I go through our range and options. Their minds are ticking over and I can see they are thinking about current and pending opportunities they can send our way. Plenty to progress and follow up post the meeting.

5.30pm: Arrive home and, like most 12.30pm: Sit down to have a quick bite, sushi of course – just love it. Today I am able

Boxing with Luisa is something I look forward to and believe me, there is no slacking off! breakfast, coffee and get ready for the day which, like most days, is packed with preplanned broker appointments.

9.00am: Appointment with a new broker to myself and Thinktank. The broker writes mainly residential business, it is her first commercial deal and I sit with her and guide her through the process. This is just a standard service that we provide to brokers who might require it. Time has flown, the appointment runs a little over but is well worth it as the broker is appreciative of the help and we have the deal under way.

11.00am: Appointment with another broker. This broker group is experienced in

opportunities. I am offered a coffee and decline which he can’t believe but I’ve definitely hit my limit for the day. His opportunities are all early stage and I assist with some input. Time will tell which ones convert into new business, I make a diary note to follow him up next week.

to actually sit down and eat, most days there is no time with so much on the go…With the new Melbourne office now open it seems like everyone wants us!

It’s great to be in demand.

1.30pm: Another broker visit and more coffee. This broker I know from my previous role, is well experienced in commercial finance but hasn’t dealt with us before. A perfect opportunity for me to discuss the Thinktank business and our commercial range.

4.30pm: Stop by an existing broker relationship and discuss a number of

weeknights, we have kid’s sports activities on the go. Tonight is my youngest son Francesco’s tennis training and I’m on the court helping out which I really enjoy. Other nights it is basketball for my eldest son Julian and soccer for my middle son Adrian.

It is great fun watching them and relaxes me after a full day out and about.

7.00pm:

Arrive home for dinner and I am starving. Sit down with the family and we all chat together about the day. It is often a good debating time, with three boys it can become pretty entertaining!

Everyone pitches in as we clear the table and prepare for a movie or TV; Big Bang Theory is the family favourite.

9.30pm: I have missed most of the movie by dozing off. It’s good night to everyone and then off to bed to get some rest ahead of another busy day and probably more coffee tomorrow.

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THE DATA

DEMAND FOR PROPERTY

HOUSING ON THE BRAIN The recent QBE Barometer report casts light on what Australian prospective homebuyers really think about the housing market

GOOD NEWS FIRST: Australians are still interested in property. The appeal of residential property has increased since the February rate cut, and is similar to mid-2014, and higher than 2013. Despite all the concerns around house prices – or perhaps because of – the proportion believing ‘now is the time to buy’ has actually increased.

The bad news: Australians also think that property is overvalued and is increasingly unaffordable. So how is this affecting their

IS THE NEXT 12 MONTHS THE TIME TO BUY?

decision to buy? The proportion believing they’re better off renting remains steady at just 19%; even the struggling first homebuyer segment still wants to buy property.

A couple of trends emerge from the report.

First homebuyers are more likely to be flexible in the type of properties they’re looking for, driven by an increased interest in new properties. They’re slightly more likely to consider an interest-only loan to get what they want, although the average LVR remains

WHAT WILL HAPPEN TO AFFORDABILITY IN THE NEXT 12 MONTHS?

8%

YES

don’t know

13%

39% 61%

NO That’s a slight increase on June 2014 (36%).

The Westpac-Melbourne Institute of Consumer Sentiment ‘Time to buy dwelling index’ also reported an increase on last year, from 121.2 to 125.8

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similar to 2014 at 70% for those intending to buy over the next five years. Finally, younger people are more likely to go through a broker, and they aren’t doing it for the cheapest rate.

The Barometer, run by mortgage insurer QBE, is an annual survey of consumer attitudes to housing and mortgage insurance; this year 1,014 participants took part, who either owned properties or were imminently intending to buy. Read on to see what your current and prospective clients are really thinking.

property will become more affordable

47%

property will become increasingly unaffordable

32%

there won’t be much change in property affordability

“Future generations will find it harder to purchase their first home” (UP, now 85%) “I’m worried that foreign investment will make property unaffordable for the average Australian” (UP, now 70%) “I would consider an interestonly loan in order to purchase a more expensive property” (UP, now 33%) “I think it’s more important to get into the property market now than to wait and save a bigger deposit” (UP, now 41%)

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THE BAROMETER ON... BANKS AND BROKERS

39%

QBE asked intending or current mortgage-holders whether they would go/ had gone direct to a lender or through a broker, and why: Direct with a lender Going with my bank because it’s easier More convenient Think I will get a better deal

31%

Through a mortgage broker Helps understand the different mortgage options More convenient Do the research for me

Encouragingly, those aged under 45 were more likely to use a broker (39%) than those aged over 45 (31%)

WHAT WILL HAPPEN TO PRICES OVER THE NEXT 12 MONTHS? Respondents in NSW/ACT were the most likely to forecast an increase (63%); those in WA were the least likely (41%).

TOTAL

1ST HOMEBUYER

46%

53%

56%

HIGHER

47%

56%

53%

24%

24%

23%

LOWER

27%

26%

30%

MAY ‘13

JUN ‘14

FEB ‘15

MAY ‘13

JUN ‘14

FEB ‘15

52%

59%

63%

48%

56%

57%

32%

46%

52%

33%

43%

41%

61%

49%

60% HIGHER

18%

21%

19%

26%

25%

21%

30%

23%

23%

33%

30%

38%

18%

22%

21% LOWER

MAY ‘13 JUN ‘14 FEB ‘15

MAY ‘13 JUN ‘14 FEB ‘15

MAY ‘13 JUN ‘14 FEB ‘15

MAY ‘13 JUN ‘14 FEB ‘15

MAY ‘13 JUN ‘14 FEB ‘15

NSW/ACT

VIC/TAS

QLD

WA

SA/NT

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LIFESTYLE

FAVOURITES

FAVOURITE THINGS Huy Truong, CEO, ALI Group

People: Those that have the imagination and courage to make a difference, to make the world a better place – Martin Luther King Jr, Obama, Keating, Steve Jobs, Elon Musk.

Food: Beef pho in Vietnam, spicy curry in Malaysia, pasta in Italy – food is as much about taste as it is about life and culture.

Photo of Martin Luther King Jr by Dick DeMarsico, World Telegram staff photographer – Library of Congress, New York World-Telegram & Sun Collection.

Sounds: Laughter of my wife and children; the noise at the MCG; silence of a national park.

Sensation: Working with great people to deliver on inspired ideas.

Detox: Running a hard 10k. It needs to hurt.

Place: Australia – “big of heart and opportunity” – accepted my family as refugees, educated us, embraced us, encouraged us to contribute back.

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Event P Music: Cold Chisel, U2, Lorde, Ed Sheeran.

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MPA 15

Photo of Martin Luther King Jr by Dick DeMarsico, World Telegram staff photographer – Library of Congress, New York World-Telegram & Sun Collection.

“Winning Broker of the Year - Productivity was a fantastic acknowledgment from the industry.

This award recognises the seamless, efficient and personalised approach I take towards new and existing clients. Being able to market myself further with the AMA award has seen a real increase in new business coming in the door.”

Mardee Thomas, 1st Street Home Loans, Broker of the Year – Productivity 2014

NOMINATIONS NOW OPEN Friday 30th October 2015 The Star Sydney Event Partner

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Award Sponsors

Official Publications

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13/05/2015 2:32:12 PM