Mortgage Professional Australia issue 16.07 by Key Media

MPAMAGAZINE.COM.AU ISSUE 16.7

UNSTOPPABLE Industry legend Wendy Higgins has retired, but Mortgage Choice Glenelg remains Australia’s No. 1 Franchise Brokerage JOHN FLAVELL On tackling housing affordability

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COMMERCIAL LENDING Lenders provide a 360° view

BUDGET 2016 What it means for brokers

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JULY 2016

CONNECT WITH US

CONTENTS

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

UPFRONT 04 Update

Insurance as part of a diversification strategy

FEATURES

COMMERCIAL LENDING

A 360° view from lenders on changes occurring in commercial lending and opportunities for brokers

STEFAN HICKS

16 Ensurance managing director on speeding up insurance

08 Statistics

What industry leaders think are the opportunities and threats for brokers in the coming year

10 Opinion

Mortgage Choice CEO John Flavell on the growing problem of housing affordability

12 News analysis

MORTGAGE INSIDERS

TOP 10 FRANCHISE BROKERAGES

THE BIG INTERVIEW

How fee-for-service broking works (or doesn’t)

Making the budget relevant for brokers

FEATURES

Australia’s best reveal their approaches to marketing, processing and management

06 Head to head

48 Stephanie Duncan

54 FEATURES

BOSS LIFE

A review of the frankest business book you’ll ever read

The rise and rise of Tiffen & Co’s new star broker and her route into broking

63 Darren Little

Smartmove’s general manager on going from banker to broker

64 Kim Cannon

FirstMac’s founder discusses his rock art collection

BUSINESS STRATEGY 52 iCommunication

Why managers can do better than performance reviews

58 FEATURES

ALTERNATIVE FINANCE

Why new lenders are leading a revolution in lending, not funding

MPAMAGAZINE.COM.AU NOW ONLINE: Highlights from our Non-major Banks Roundtable Top brokers and brokerages in Leading Mortgage Professionals Our free Business Education Webinar Series

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FEATURE / BROKER EDUCATION

EDITOR’S LETTER

AGEING GRACEFULLY

ere’s a controversial statement: brokers don’t pay enough attention to established businesses. Given we work in a business environment in which the word ‘disruption’ has acquired almost religious connotations, this is unsurprising: everyone (particularly MPA) chooses to focus on the new and shiny, assuming all established brokerages and business models will imminently be swept aside. The problem with that assumption is the numbers just don’t back it up. This issue of MPA presents our Top 10 Franchise Brokerages list for 2016, and the average brokerage in our Top 10 has been around for over 12 years; in broking terms, a lifetime. And while we’ve got a few new entrants in the Top 10 – most notably our runner-up – most brokerages are consistent performers. So how exactly is this useful to new brokers? Older brokerages have certain advantages simply by virtue of age: a larger loan book and, hopefully, a larger database of satisfied clients. However, there are also lessons new brokerages can take from their more established peers and apply to their businesses.

The average brokerage in our Top 10 has been around for over 12 years; in broking terms, a lifetime Perhaps the most obvious is setting up the structures for longevity and reducing staff turnover. Mortgage Choice Glenelg, which topped the rankings for the fourth year in a row, hadn’t hired a new broker for seven years prior to taking one on in January. So what is incentivising these staff to stick around? Our Top 10 utilise a number of strategies. Bringing new brokers up through administrative roles helps them understand the structure of a brokerage, while setting goals and improving back-office efficiencies can turn your existing brokers into high performers. Furthermore, despite being well established, many of these brokerages are not afraid to go out and knock on doors, revitalising their customer database. Longevity and stability might not be popular in business, but they are clearly appreciated by customers. Broking’s pioneers responded to the reduction of bank branches by making themselves the new local bank managers: trusted, reliable and always there. As broking increasingly comes under attack from new digital models, this desire for trust is essential to keep in mind. Sam Richardson, editor, MPA

www.mpamagazine.com.au JULY 2O16 EDITORIAL Editor Sam Richardson Journalist Maya Breen Production Editors Roslyn Meredith Hayley Barnett Contributor Georgia Murch

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

CORPORATE

ART & PRODUCTION

Chief Executive Officer Mike Shipley

Design Manager Daniel Williams

Chief Operating Officer George Walmsley

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

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

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

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UPFRONT

INSURANCE NEWS BRIEFS Brokerage and insurance provider seal white label partnership Top brokerage N1 Loans has recently entered into a commercial deal with insurance provider Ensurance. The partnership will supply the brokerage with white label insurance products to its home loan customers, according to an article in MPA’s sister title Australian Broker. N1 will be able to provide its clients with its own-label home and contents insurance and landlord insurance. N1 Loans managing director Ren Wong said the move aligned with N1’s strategy to become a “one-stop shop” for consumers. “We are very pleased to announce this agreement with Ensurance for the provision of their general insurance products to our customers,” Wong said. “This is another step for N1 to become a leading financial services company of choice, with an expanding range of products for our mortgage customers.” For Ensurance, it gives the firm the opportunity to extend its reach into the local Chinese community. “N1 adds new dimensions from their dynamic niche position in specialising with the Chinese-speaking community,” said Ensurance managing director Stefan Hicks.

Global insurer StarStone coming to Australian market Global specialty insurer StarStone, a subsidiary of the Enstar Group, has announced that it will begin underwriting operations in Australia, reports MPA’s sister title Insurance Business. Subject to regulatory approval, StarStone will launch in Sydney and operate alongside the existing Australian operation of Enstar. The venture will be led by Robin Barham, who brings close to 30 years of experience in the industry to the table, gained in both London and Australia. Through Lloyd’s syndicate 1301, StarStone will offer niche marine, property, casualty and specialty products

for SMEs and multinational businesses and will target specialty business from both Australia and New Zealand. StarStone International’s CEO Demian Smith said the decision to enter the Australian market was key to the global growth strategy of the business. “The ability to offer our products locally in the Asia-Pacific region is key to our growth strategy,” Smith said. “Our majority parent, Enstar, has had a presence in the Australasian market since 2008, and the opening of an underwriting operation signals our continued commitment to the region and to supporting Lloyd’s in pursuing its 2025 vision.”

Perth broker banned for misleading vulnerable clients ASIC has permanently banned a former Perth-based finance broker from engaging in credit activities and providing financial services. Grant Aaron Parker is the fifth broker the regulator has banned from Get Approved Finance in Victoria Park, WA. He was found to have engaged in misleading conduct when brokering motor vehicle financing for four clients in 2012. ASIC also found that Parker facilitated the issuing of financial products in his clients’ names and inflated loan amounts by selling and financing insurance and warranty products without his clients’ knowledge or consent. After Parker misled vulnerable clients with poor credit histories to believe they would be approved for vehicle finance if their loan applications were supported by guarantors, he then went on to dishonestly prepare loan applications solely in the names of the proposed guarantors without those persons’ knowledge or consent. “ASIC will not hesitate to permanently remove those who engage in misleading conduct from the industry,” said ASIC deputy chairman Peter Kell, stating that the banning reinforced a strong message to any broker considering engaging in misleading conduct.

A SMARTER CROSS-SELL How instant-response IT systems could make selling insurance worth brokers’ time

Insurance is a traditional cross-sell for brokers, but a recent panel discussion conducted by Deloitte explored how brokers could utilise technology to cross-sell products more effectively, like insurance, without risking their primary business. The panel of industry leaders was asked where the greatest opportunity lay for the broker channel to evolve in three years’ time, and Macquarie executive director Frank Ganis said: “It is about service and convenience. I strongly believe the market is evolving to multiproduct financial services intermediaries that will provide access to a broad range of financial services products to their customers.” However, Deloitte financial services partner James Hickey pointed out that traditional insurance cross-sell was less than 10% of a broker’s revenue. “When the mortgage market is hot it falls even lower. No one wants to risk their primary focus – the mortgage settlement. So, what does it take for brokers to broaden their value chain?” Malcolm Watkins, executive director AFG, explained how brokers could use technology to provide immediate quotes on life insurance. “To cross-sell more effectively using life insurance as an example, our brokers need to be more automated and immediate. Electronically they need to quote the cost to insure at the time of application, using a certain value with a number of built-in basic assumptions – like the value of the mortgage, etc. The quote and offer would be generated automatically and offered at the point of sale to the customer. “The customer can accept that quote and

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proceed or defer it until the loan is approved. That gives them the time to think about the levels of insurance they are most comfortable with. To make that work the system needs to be automated and supported by a customer service available to answer questions and make it more personal.” AMA finalist Cube Central in Brisbane is an example of a brokerage that has diversified into many areas, with health insurance being one of them. “We started with home loans in 2005,” Cube Central founder Scott Beattie told MPA in an interview earlier this year. “When the

“To cross-sell more effectively using life insurance as an example, our brokers need to be more automated and immediate” GFC hit we didn’t get paid for three months, and we realised that we had to diversify, and diversify quickly. We couldn’t be solely reliant on mortgages. “No brokerage that I’m aware of has really seemed to dabble in [health insurance] before, and we were pleasantly surprised; people were really interested in getting a quote,” Beattie said.

Q&A

LOAN PROTECTION Huy Truong CEO and co-owner ALI GROUP

Fast fact The proportion of family income required to meet loan repayments rose from 31.7% to 32.4% from the September quarter to the December quarter of 2015 (REIA/Adelaide Bank Housing Affordability Report)

Why should brokers consider offering loan protection? For a broker, moving from a monoline business to one that offers multiple products can offer many benefits, and many of our leading brokers have noted that offering loan protection has led to a more personal relationship with their clients, and this in turn leads to longer trail books and new client referrals. Financially, offering loan protection can help brokers generate valuable additional income. Our brokers are earning, on average, $500 per policy in commission and rewards points – and it only takes 10 minutes to offer. Why is offering loan protection a natural fit for brokers? The reality is unexpected life events could impact on a client’s ability to meet their loan repayments. Brokers are arranging loans that require servicing with cash flow, so it is important to protect that cash flow. Loan and loan protection therefore goes hand in hand, like buying a house and protecting it with home and contents insurance (which we also have available to brokers through QBE). What happens if a broker doesn’t have any financial planning qualifications? Can they still offer their clients loan protection? Yes! ALI Group provides a general advice product which means brokers can offer loan protection themselves after undergoing a simple three-step authorisation process.

“Unlike general insurance, life insurance is a very personal discussion” Our brokers convert between 20% and 40% depending on their clients’ demographics, and we even have some brokers converting at over 50%, but it’s fair to say they are the exception. The reality is that, unlike general insurance, life insurance is a very personal discussion and clients generally prefer to do so face-to-face within a very relevant context, such as how they would service their loan if an unexpected life event were to occur. What product offerings does ALI Group have for brokers to provide to their clients? Through ALI Group, brokers can offer their clients the Loan Protection Plan, which provides homebuyers with cover for critical illness (trauma), death and terminal illness, and involuntary unemployment. Critical illness cover is usually not available through superannuation and is becoming increasingly important, as advances in technology mean survival rates and treatment costs are on the rise. ALI Group’s critical illness cover pays a lump sum to the client that can be used in any way they wish, from helping with large debts (such as a mortgage) to unexpected medical bills. In addition, authorised brokers also have access to home and landlords insurance through QBE, which they can offer and put in place themselves. This ensures their clients are receiving a positive customer experience, end to end.

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UPFRONT

HEAD TO HEAD

How has fee-for-service worked for you?

Matt Lee

Ren Wong

Director of finance Infinity Group Australia Infinity Group has based its business on a fee-for-service model, with the structure established before the doors opened four years ago. We’ve never had a fear of charging a fee for service. We stand by our results, and so do our clients. By exceeding our clients’ expectations, we’re continually flooded with new referrals and repeat business. If you’re going to charge a fee for service, you must be able to demonstrate and deliver ongoing support, coaching and outstanding service to each client consistently to validate the cost. This requires tremendous company resources that can only be sustained by charging a fee for service, whilst ensuring the relationship is of a mutually beneficial nature, as a client will have an expectation on delivery when a fee for service is charged. By operating a fee-for-service model, clients can rest assured that a needs-based sale is the outcome of the transaction, as the product and/or service is not driven by the highest-paying commission, rather it is driven by the best solution for the client’s needs.

CEO n1 Holdings

Part of n1’s diversification strategy is to increase the scope of our service, while car loans, commercial and specialist lending are a natural fit into our business model as a mortgage brokerage firm. One of the main challenges we have had in commercial lending is in educating clients and setting realistic expectations while still converting leads. We initially had a lot of leads coming in for commercial, but over the first couple of months we realised the conversion was low and we wasted so much time responding to enquiries. Then we implemented fee-for-service, where we mandate a fee to look at deals and charge consultation fees. Subsequently, we saw an improvement not just on lead quality but a surprising surge in enquiries and conversions. I think it comes down to the reason people are trusting us more, because we ask for a fee for consultation, and clients tend to come to you when they really want to commit into a form of commercial lending, saving all of us a lot of time.

THE PANEL AT MPA’S HIGH PERFORMANCE SUMMIT At MPA’s recent High Performance Business Summit in Sydney, one of the discussions touched on whether any of the broker panellists were or planned to implement fee-for-service into their business models. Choice Home Loans’ Peita Davies said it was currently a no-go, although she had considered it for SMSF because of the added work involved. “The model that I’m taking my business to and the future growth, it may be a case that if you want to deal with myself I’ll charge a fee – but I’ll have brokers there that will be on a no-fee service.” Although Astute Sydney City Central has fees for their commercial, SMSF and financial services, the residential side is different, said Moshe Moses. “If a client’s happy with your service and can also regenerate additional business, I don’t see the necessity for fee-for-service. It defeats the purpose of what we’re doing and it also gives the client the ability to go elsewhere and say, ‘well, can I get this done for free?’ ”

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STATISTICS

BROKING’S FUTURE

THE ROAD AHEAD

GREATEST OPPORTUNITIES IN

Deloitte brought together industry leaders to predict what the next three years could hold for the broker channel and wider housing market

THERE ARE several mortgage industry reports out there, but what makes Deloitte’s Australian Mortgage Report 2016 different is that it’s based on a panel of industry insiders. These include broking giants such as Malcolm Watkins of AFG and Michael Russell, formerly of Mortgage Choice, as well as leading figures at various banks and non-bank lenders. They asked them to pick from various suggestions of how broking and the mortgage industry might evolve, and the threats it could face. The headline result – that broadening the value chain capture was the next step for broking – is hugely interesting, in that it goes against the

PROPORTION OF MORTGAGES GOING THROUGH BROKERS Deloitte asked its panel what proportion of mortgage settlements would come through mortgage brokers by 2019. Encouragingly, three quarters of the panel predicted the proportion would stay the same or even increase, with a quarter of the panel predicting the proportion would top 60%. Brokers’ proportion of market share increased from 51.9% in March quarter 2015 to 53.7% in March quarter 2016. Furthermore, a recent report by JP Morgan picked out refinancing as the industry’s new driver (see MPA 16.6), noting that brokers make up 75% of the refinancing market. However, one quarter of Deloitte’s panel suggested that brokers’ market share would decrease to between 41% and 50%.

Broadening value chain capture* (8)

focus on digital in recent years (although this was still popular). It reflects the emphasis not only on diversification but on end-to-end service, from finding a loan to moving into a new house, which some brokerages are already offering (see our feature on diversification in MPA 16.5). Deloitte’s report also comes at an important point for broking. In May the MFAA announced that broker market share had reached 53.7% of residential lending. Deloitte’s panel suggests this could rise further, but there are threats, both from the economy and regulatory environments and from brokers being locked out of new fully digital mortgages.

Mergers and scale within the broker sector (1)

BIGGEST CONCERNS FOR THE MORTGAGE INDUSTRY When it came to risks for the industry, Deloitte’s panel was split between those picking economic, regulatory and reputation-based threats. Unemployment rising, placing pressure on serviceability 3 House price growth reducing or prices falling 3 Risk of inappropriate lending tainting the industry 3 Regulator focus on investor lending stifling growth 4 Prudential policy implications on capital pressuring prices 5 *Note: Two answers selected by each panellist

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THE BROKER SECTOR

Integrating digital into broker processes with customers (6) *Such as white label offerings, securitisation programs, wider selection of products

Investing in the business and management skill of brokers (1)

WHICH BORROWERS WILL BENEFIT MOST? A low-interest rate environment combined with increasing restrictions on investors will mean refinancers and existing owner-occupiers will benefit most, Deloitte’s panel said. First home buyers and non-prime borrowers will only gain modestly as the banks are not chasing their business. 8 7

2 1 Refinancers

Existing owner-occupiers

First home buyers

Non-prime borrowers

Vertical integration (0)

WHAT’S STOPPING INVESTORS? Deloitte has flagged the importance of ‘digital warriors’ – those consumers who are willing to do more of the mortgage application process themselves in the hope of getting a better deal. At face value, digital warriors threaten the broker proposition. However, Deloitte partner James Hickey believes brokers can engage with this channel. “It may be that the broker model evolves to be more of a supplementary model for those types of customers,” he said. These borrowers still seek reassurance that they’ve made the right choices, he explained, and brokers can provide that reassurance. All this depends, however, on banks working with aggregators to make digital work equally well through the broker channel as going direct, Hickey added. With digital-only channels still in development, whether brokers could be locked out is still far from clear. Source: Deloitte, Australian Mortgage Report 2016, April 2016

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UPFRONT

OPINION

LESS GRANDSTANDING AND MORE ACTION Mortgage Choice CEO John Flavell calls for the Government to take the growing problem of housing affordability seriously

ONE OF the biggest problems affecting thousands of Australians is housing affordability. Unfortunately, very little is being done to alleviate this problem. Data from the Australian Bureau of Statistics shows the average home loan has grown three times faster than the average Australian full-time wage in the past two years. According to the data, the average home loan grew by 13.8% in the two years to February 2016 – from $314,000 to $357,200. Meanwhile, the average Australian full-time wage grew just 4.0% from $77,838 to $80,958. As a result, the size of the average home loan in Australia is now 4.4 times larger than the average wage. In 2013, the average loan size was 3.9 times the average full-time Australian wage. These statistics make one thing very clear:

wage growth is not keeping pace with property price growth. If this trend continues, how can we expect our children or grandchildren to find and purchase affordable accommodation? Perhaps it is time for me to sit down with my three daughters and have the tough conversation about property ownership.

If this trend continues, how can we expect our children or grandchildren to find and purchase affordable accommodation? I will have to say: “I am sorry girls, but in the absence of sufficient leadership in this country, I have some bad news. As you know, I have some concerns in relation to your

THE WIDENING GAP

23.4%

Cumulative wage growth since 2008 Source: ABS, CoreLogic, REIA/Adelaide Bank

ability to afford to buy your own home in the future, and it seems those concerns are well founded. In the interests of political survival, it seems no one is prepared to make the changes to our tax system that are required for our collective future prosperity. As a result, you may not be able to afford to rent a house, let alone buy one. It looks like you will all be living with me for some time to come.” Clearly, this is not a conversation I want to have, nor is it something they would like to hear. But if both I and my fellow Australians want to avoid having this conversation, something needs to change. We need both sides of government to stop trying to solve the problem of housing affordability through meaningless inquiries into home ownership and start taking action. At Mortgage Choice, we believe the government should take a holistic view of the issues and create a program of reform. That reform could come from the introduction of new policies or systematic changes to our taxation system. The reality is our current tax system does very little to stimulate or drive economic growth. It does nothing to attract, retain and encourage global and local businesses to invest on our shores, and, it continues

51.7%

Cumulative house price growth since 2008

14.6%

The proportion of the owner-occupied made up of first home buyers, the lowest since 2004

to provide very little incentive for those in the workforce to grow and develop their skills. The time for political grandstanding has come to an end and it is now time to act. While we understand there is no ‘quick fix’ when it comes to the issue of housing affordability, nothing will be improved until the right action is taken. John Flavell has been CEO of Mortgage Choice since early 2015. Before then he lead NAB’s wealth advice arm and previously NAB’s third party channel. He has spoken and written about Australia’s housing affordability and homelessness challenges on several occasions.

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NEWS ANALYSIS

THE BUDGET

SMALL VICTORIES FOR SMALL BUSINESSES The 2016 Budget has ticked many boxes for small business and the housing market – but not everyone is satisfied. Maya Breen takes a closer look

WHEN THE 2016 Federal Budget was released on 3 May, as always there were some sure-fire winners and losers. But the response from the industry has been a positive one for the most part. The budget has shown strong support for SMEs, which will clearly benefit as businesses with a turnover of less than $10m will see their tax rate cut to 27.5% from 30%, from 1 July. And the company tax rate will fall to 25% for all businesses over the next decade and provide a boost for the residential construction sector. High-income earners won’t be so happy, as the government has cut a number of tax concessions for the wealthiest among us who are saving for retirement. Those earning more than $250,000 will pay 30% tax on their superannuation contributions instead of 15%. However, peer-to-peer lenders will be pleased with the budget’s decisions on superannuation, according to a global peerto-peer lender. “The clampdown on contributions and transfers to superannuation will mean lower returns for investors; however, peer-tobusiness lending is an alternative to

low-yielding shares and bank interest,” the CEO of ThinCats Australia, Sunil Aranha, commented. Aranha says the tax cut measure for businesses will also be a positive for those in the peer-to-peer space, and anticipates the number of lenders on its platform will grow substantially as a result. “I expect this measure will provide a boost to peer-to-business lending as [business] owners will be seeking to supplement the funds freed up by the tax cut with borrowings

Greg Charlwood says this year’s budget will enable SMEs throughout Australia to deliver broader economic growth.

“Even though the government has told us not to worry because they have an ‘economic plan’, I am still concerned about our increasing levels of indebtedness” John Flavell, Mortgage Choice to finance more staff and equipment.” According to Treasurer Scott Morrison, lowering the small business tax rate will benefit 870,000 small businesses employing 3.4 million Australians. Scottish Pacific’s head of debtor finance

“Having supported SMEs in working capital since 1988, we are pleased to see the benefits for companies with a turnover of $2m being extended to a sensible level of $10m turnover, where we see it will have a greater impact in terms of business

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THE BUDGET BY THE NUMBERS From 1st July 2016:

Companies with a turnover of less than $10m have a tax rate of 27.5%

$50bn national infrastructure plan

Instant asset write-off for small businesses with a turnover of less than $10m

Income tax threshold raised from $80,000 to $87,000

Cuts to company tax rate from 30% to 25% phased over 10 years Source: PwC 2016/17 Australian Federal Budget analysis

investment and boosting job growth and employment,” Charlwood said. “We support the reduction in the company tax rate for SMEs – dropping from 28.5% to 27.5% for small incorporated businesses with up to $10m turnover – as it should energise SMEs, encourage business investment and drive growth and innovation.” Charlwood said the tax rate reduction was a welcome initiative, particularly since Scottish Pacific’s latest SME Growth Index indicated a continuing downward trend of SMEs saying they were in positive growth mode (currently 58%). Peter Strong, CEO of the Council of Small Business Australia, said: “The economy is now in a better position to deal with and take advantage of change. “The big-ticket item is that the threshold

for determining what is considered a small business has been raised to $10m annual turnover. This creates a change immediately for government support actions around tax breaks, instant tax write-offs and other initiatives.” This higher threshold will give more businesses access to the $20,000 instant tax write-off announced in last year’s budget. There is also another tax decrease for these businesses, which means tax has decreased 2.5% in two years. “This is a good message to send to businesses who want to grow and employ, or start to export and take advantage of the global economy,” Strong said.

Good news for homebuyers An industry association has also praised the

budget, concluding it is a great win for mortgage holders and those wanting to enter the housing market. With the Reserve Bank cutting official interest rates to a record low 1.75%, the FBAA’s Peter White said the measures taken in the budget would ensure mortgages and loans remained well within the grasp of working Australians. “The tax cuts to small and medium-size businesses will go a long way to creating more jobs, while the overall tax package for individuals should help lift the burden on the household budget and relieve pressure on mortgage repayments.” Graham Wolfe, the Housing Industry Association’s chief executive for industry policy, also agreed that this year’s budget is good news for homebuyers, and the housing

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FEATURE / BROKER EDUCATION NEWS ANALYSIS

THE BUDGET industry too. “The budget measures reflect a measured path to budget recovery that should add to the confidence that the home-building industry and its customers need to make home-building and renovating decisions,” Wolfe said. “When combined with the decision taken today to lower the official cash rate, which has already started to flow through to housing interest rates, the budget will help maintain the residential building industry’s capacity to make a significant contribution to employment and economic activity. “The budget measures to support new approaches to funding the essential infra structure that our cities need to grow have the potential to unlock fresh opportunities for homebuyers and improve housing affordability.”

A ‘weak’ budget Not everyone is pleased with the government’s announcements, and the CEO of a major mortgage franchise has labelled the budget as “somewhat frightening”. Although Mortgage Choice CEO John Flavell appreciates the incentives offered to small businesses, he says ultimately it is weak in a time when the country needs a “structural overhaul”. “Small businesses play a very important role in our economy, and they are going to play an enormous role in the future. Whilst it is pleasing to see continued initiatives that encourage small businesses to invest and grow, it is frightening to see the enormous burden the Coalition is placing on the shoulders of these small businesses,” Flavell said. “That aside, [the] budget could really be considered a clever PR stunt by the Federal Government. No doubt they would consider their benign budget to be ‘electionwinning’. “We need leaders who are bold enough to acknowledge that slicing up the same old pie in different ways is simply not going to cut it anymore,” Flavell said. “At the end of the day, we need a structural overhaul of our taxation system to promote

corporate investment on our shores. We need an environment that encourages Australians to invest in themselves and their future worth in the workplace.” Flavell said he was also concerned about Australia’s levels of indebtedness that continue to rise, which the budget failed to address. “Since we fell into the red in 2009, the shortfall between what the government earns and spends has risen to an amazing 21.5%

changes to superannuation might make alternative saving strategies look more appealing, such as negatively geared properties. “If you haven’t got the money in superannuation [already], then you’re not going to get it in,” Gottliebsen said. “You’re going to have to adopt a different savings strategy.” Alice Kase, partner at PwC, agreed with Gottliebsen. “What the government is really

“The tax cuts to small and medium-size businesses will go a long way to creating more jobs, while the overall tax package for individuals should help lift the burden on the household budget and relieve pressure on mortgage repayments” Peter White, FBAA of gross domestic product. This is an inordinately large sum of money – something the government doesn’t seem to care too much about.”

Super changes and leaving negative gearing alone A great deal of discussion before the budget was released speculated on investors leaving property if negative gearing was touched, but now there might be a reversal after the government’s measures on superannuation arrangements and its decision to leave negative gearing alone. Commenting on the impact the budget might have on financial services providers, PwC financial services leader Julie Coates said: “The tightening of superannuation concessions and caps on contributions may make other asset classes like property more attractive. So there is a possibility that we could see some capital heading back towards the investor housing sector – but in all honesty it’s really too early to tell.” At NAB’s post-budget breakfast, economic commentator Robert Gottliebsen said the

telling us is that they’re reinforcing the message that super is not an estate planning tool, and it’s no longer a wealth accumulation tool,” Kase said at the NAB breakfast. “The big change is the $500,000 lifetime limit … I think we’ll see a redirection of savings mechanisms through the use of trusts and negative gearing.” Real Estate Institute of Australia president Neville Sanders said the government’s decision to leave negative gearing alone would go a long way towards helping Australia meet its housing supply needs. “We are pleased that the Treasurer in his budget speech reiterated that the government will not remove or limit negative gearing or change the capital gains tax as this would increase the tax burden on Australians trying to provide a future for their families. “The boost to infrastructure spending, the extension of small business concessions, modest tax cuts and the retention of the current arrangements for taxation of property investments will help ensure that the property sector remains an important driver of economic growth,” Sanders added.

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THE BIG INTERVIEW

STEFAN HICKS

STEFAN HICKS: INSTANT RESPONSE Ensurance’s CEO wants to get brokers engaged with insurance, through new technology and point-of-sale quotes from multiple insurers

MPA: What is Ensurance, and how is it relevant to mortgage brokers? STEFAN HICKS: Ensurance is a multifaceted product producer and servicer for general insurance products. What the company does is it allows our white label partners to have the infrastructure to sell general insurance at the point of sale.

MPA: What makes Ensurance different from other insurance companies brokers may have worked with? SH: We have multiple quotes. You’re not going to have Insurer A sell Insurer B’s products, and you’re not going to have Insurer C sell Insurer D’s products. So the people who are licensed to give multiple quotes from multiple insurers are insurance brokers. One division of ours is an insurance brokerage that has been going for over 25 years and that allows us, with our IT platforms, to give a cross-section of multiple quotes and multiple insurers at the same time.

MPA: What products does Ensurance offer? SH: Home and contents insurance is the one that we are [highlighting]. We have many products on our platforms, including commercial, SME, construction, trades, but the two that are most of interest to the mortgage broking industry are home and contents, and landlords insurance. We have other products that are

available. We have a double housing cost insurance – which is like bridging finance – which is a first in Australia. That will [mean that for] people who have bought a second home who haven’t yet sold their first home, if they haven’t sold in a period of time, the

MPA: Could you walk brokers through the process of getting home and contents insurance through your platform? SH: If they’ve already got the client’s information, they can get the quotes themselves. Or, if the client is sitting there,

“We give brokers upfront plus renewal commission, which allows them to build a book of business over a period of time” insurance will pay for the interest and the cost of that first home.

MPA: A lot of brokers deal with SME clients, and are trying to expand into that space. Would they be able to offer commercial insurance through this platform, or should they go through your insurance division? SH: It depends on the complexity of the risk, but we design our platforms to allow the acceptance of most of the insurances and the risks out there. If they want commercial business, it really depends on what it is, but they can use us, or they can use our platform – they’ve got an option there. The platform is designed so something like house and contents and landlords insurance is easy for us to do because it fits through the box. It’s a lot easier for the platform to manage.

they can do it at the point of sale and give the client the quotes at that time. If the client’s not ready, we email the quotes out, and then you can pick up the email and go back to the unique quote, or the client picks an insurer, follows through the steps, and pays for it by credit card. Then all the documentation and compliance documents are returned automatically through email, including the certificate of insurance, which is essential for a settlement.

MPA: Is it possible for brokers to ‘white label’ your products, or is it obvious that this is an Ensurance product coming from an Ensurance platform? SH: What actually happens is that, as far as the customer journey is concerned, we can change our websites, we can include their logos and their colours, we can do everything like that, so the customer knows that it

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â&#x20AC;&#x153;Our white label partners have the infrastructure to sell general insurance at the point of saleâ&#x20AC;?

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THE BIG INTERVIEW

STEFAN HICKS WHAT’S REQUIRED TO GET A QUOTE MPA used Ensurance’s test site to try and get a quote for home and contents insurance. Here’s what was required: Email address Address Whether client is retired DOB of client Number of claims client has made in past five years Whether a financial institution has to be notified about the policy Level of cover Building sum insured* Contents sum insured* Particular valuables to be insured Building details Ownership-occupation status of the home Type of building Year of building’s construction Exterior wall material Roof construction material More/less than two stories Whether there are underground parts of the house Whether building is on stilts Whether there is an inground swimming pool Whether building is connected to townswater Whether building has an alarm installed Type of security on doors Type of security on windows Whether plot of land is more than 20,000sq/m *Comprehensive calculators were provided to provide these numbers

belongs to that company and the customer journey originates from that company. By the end of it though, the documentation, which is small anyway, has to come from our office because of our compliance and our Australian Financial Services License.

MPA: How does Ensurance help make insurance a bigger part of brokers’ businesses? SH: What Ensurance does, and what most insurers don’t offer at the moment, is renewal commission. So Ensurance is offering the

“If you use a single insurer, you’re going to get a strike rate of x. If you use a multi-insurer, your strike rate is going to be a lot higher” MPA: Will this platform be accessible and easy to implement for very small broking operations, including one-man operations? SH: Absolutely, it’s just as simple. The platform doesn’t change, whether it’s an organisation with 1000 brokers or an individual one. It’s exactly the same.

MPA: Would you consider partnering with aggregators to give brokers access to your platform? SH: We’re open to dealing with anyone who wants to use our platforms and service. Whether it’s a mortgage broker or aggregator doesn’t really matter to us, because it comes through in exactly the same manner.

MPA: How far can brokers go when explaining the products offered by your platform, whilst staying within regulations? SH: Our platform is an advice-driven platform. On the actual quote, below the quote, we have a policy comparison. Not only is there a price, that the insurance policy costs, but below that is a policy comparison which tells the client what they’re covered for and what they’re not covered for and is across all the policies and all the quotes on the platform. What we try and do is put as much information in there as possible for the client or the agent to make a decision, because of the information we’ve put into it. For anything outside of that they can give us a quick call or use the online chat system. So it’s very fast and comes through instantly.

mortgage broking industry renewal commission as well. We give them upfront plus renewal commission, which allows them to build a book of business over a period of time. They can wake up on the 1st of July and they have x amount of dollars already without having to do anything because of their general insurance book. We’re able to support that because of the ease with which we can manage our clients through the platform. Secondly, if you use a single insurer, you’re going to get a strike rate of x. If you use a multi-insurer, your strike rate is going to be a lot higher because you’re offering more products. As for the ease of use, previously, if you wanted four quotes for home and contents insurance, you’d have to go to four different websites, which can take up to two hours, and we can get it out in 90 seconds. So there are a number of reasons why brokers should take this up, probably the most important being that will increase their income margin on each client that they bring in.

MPA: How would you like Ensurance’s relationship with brokers to develop over the next 12 months, and how would you like to be perceived a year from now? SH: We want to be perceived as the go-to company for general insurance. We’re making it as easy as possible for these guys to write general insurance and to widen their product offerings to their clients. With the ease and the success of it, we should be known as the company that delivered exactly what the industry was asking for.

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7/06/2016 3:39:50 PM

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7/06/2016 2:22:05 PM

SPECIAL REPORT

TOP 10 FRANCHISE BROKERAGES

2016

TOP 10 FRANCHISE BROKERAGES These brokerages combine stability and consistency with constant innovation and improvement

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SPONSORED BY

BROKING AS an industry is growing up, and the question is, what happens next? When the initial impact of the industry has faded, and the pioneers retired, how can brokerages continue to interest their local communities? We think these 10 brokerages have found the answer(s). While being a long-established group of brokerages – with an average age of over 12 years – our Top 10 this year also provide a unique insight into a new model of broking. Operating within a franchise system, they’ve been confined to select neighbourhoods for years, yet continue to reinvent themselves, year after year, introducing new products and staff and improving their processes. This report is about those brokerages, with a particular focus on their management and organisation, although lead generation, diversification and after-settlement service also feature heavily. We’ve also included a stand-out section on making the jump from broking to management. As brokerage founders start to retire (including founders of brokerages on this list), their protégés are increasingly finding that running a brokerage can be a daunting task. MPA’s Top 10 Franchise Brokerages are ranked by a combination of four metrics: total loan book size; settlements over a 12-month period; settlements over that 12-month period per loan writer; and conversion rate. Each brokerage is ranked in each category, and the rankings are combined for a final ranking, meaning that each metric is of equal importance. However, in the event of a tie we prioritise the brokerage with the best performance over the most recent 12 months, to favour brokerages that have continually improved their businesses. Our method has remained unchanged from last year, and is the same method used for our Top 10 Independent Brokerages report. What has changed is that this year’s Top 10 was open to applications from any franchise brokerage, submitted through our website (previously we only accepted nominations from franchise head offices). Correspondingly, we have seen a number of excellent and possibly overlooked brokerages join our Top 10 this year, including 2016’s runner-up. We’d therefore like to thank all brokerages that applied for this year’s Top 10, whether or not they appear in this list. Look out for our Top 10 Independent Brokerages report in the next issue of MPA.

A MESSAGE FROM OUR SPONSOR Suncorp Bank is proud to support the MPA special report on the Top 10 Franchise Brokerages in Australia. We congratulate the successful brokers and acknowledge their achievements and efforts. At Suncorp Bank, we see our service as an extension of our broker partners, with our aim being to deliver an exceptional experience to customers. We are committed to building strong and sustainable relationships with brokers by delivering transparency, consistency and dedicated local support. Our integrated approach to the mortgage value chain means that customers benefit from a seamless onboarding process. Likewise, our commitment to becoming easier to do business with extends from back-office to sales support, with resources dedicated to making a real difference to our brokers’ businesses. Our proposition is simple and clear – we stand with our broker partners to support and add value to the broker-customer relationship. This report identifies and rewards brokers who have excelled at developing this relationship through their hard work, commitment and innovation. Congratulations again to all who have been recognised in this year’s Top 10 Franchise Brokerages in Australia. It’s a significant accolade, one which you should all be proud of achieving. Steven Degetto Head of bank intermediaries, Suncorp Bank

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7/06/2016 2:25:23 PM

SPECIAL REPORT

TOP 10 FRANCHISE BROKERAGES

MORTGAGE CHOICE PERTH

After years of repeat business and referrals, Richard Crommelin’s brokers are again knocking on doors and chasing new business

Total loan book

$984,497,188

Total settlements 1 April 2015 to 31 March 2016

$154,872,730

Number of brokers/loan writers

Average annual volume per broker

$22,124,675.71

Conversion rate

91%

Relying almost exclusively on repeat and referral business has become a badge of pride for brokers in recent years; chasing new business has been seen as a waste of effort. Yet justifying this argument has become increasingly difficult in much of Australia, particularly for Mortgage Choice Perth. “The market has changed dramatically,” explains director Richard Crommelin. “It’s not a growing market so our business has to come from increasing market share.” Located in Perth’s CBD, 300m from the offices of Rio Tinto, Woodside Petroleum, BHP and the like, the brokerage has been affected more than most by the drop-off in mining. Simply having a great reputation (and continually featuring in MPA’s Top 10) was no longer enough, explains Crommelin. “We can have the best customer service and products in the industry, but if we don’t get a chance to tell our story, that’s a problem.” Their solution? “We stopped sitting back and waiting for business to come to us,” says Crommelin. “We’re going to go out and knock on doors, and that’s what we’ve done for the last six months.” They took on a business development specialist, who is already paying dividends. “She’s been fantastic in exposing us to additional referral points, because previously our business was 95% referral points and

5% alliances, and we’re trying to make that 70% to 30%.” They also market themselves through Facebook, LinkedIn, YouTube and database marketing, with eight to 10 campaigns running at any one time. Mortgage Choice Perth has long had a focus on diversification, and being a ‘trusted financial partner’ to their clients, so customers call them for all financerelated questions, according to Crommelin. “We want to cuddle all our existing customers and look after all their needs, rather than sending them out to other businesses to do that.” In order to achieve this, they’ve recently tried to assign specific brokers to specific areas, notes Crommelin. “If you don’t have somebody focused on something, it’s hard to get the maximum benefit from it, and that’s something we’ve really learnt in the last 12 months.” That includes a dedicated commercial division, a financial planner, and the brokerage’s above-mentioned business development specialist. Keeping an eye on diversification despite a tough market is critical, Crommelin believes. “We got onto the diversified income philosophy quite early. It is a battle; people come in for one thing and don’t expect to be talked to about other things, but it’s something as brokers that we have to work on … we believe the SME market is the next mortgage broking market.”

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SPONSORED BY

SMARTLINE CURRAMBINE

Dave Urquhart and his team keep a local focus as they respond to WA’s faltering housing market

Total loan book

$737,119,907 Getting back into the Top 10 despite a struggling local economy is no mean feat. But Smartline Currambine has gone a step further and is in fact expanding its operations and marketing. With CoreLogic-Moody’s Analytics predicting flat house prices in Perth for the next year, the brokerage is taking a “stronger focus on our existing client base”, says Dave Urquhart. “The market over here is extremely tough, with low valuations, etc, so we’re telling clients not to panic and we’re holding their hand, so to speak.” The brokerage’s clients are 80% local, and spread across the main client groups, although Urquhart finds the clients he personally deals with are mainly investors. During these tough times Smartline is making a point of fighting for its clients by continually reviewing their loans, explains Urquhart. “With ANZ, for example, came out that they would do 3.75% for three years, so we’ve proactively contacted all ANZ clients saying this is an opportunity for you to lock in half your mortgage at this rate. So that type of proactive response – clients love it, because they can see you’re acting in their best interests.” Now 11 years old, the brokerage has worked hard to establish a local presence and local loyalty, which they maintain in innovative ways. They recently launched a blog with articles of general community interest, such as new supermarkets opening in the area, which Urquhart believes could prove popular. “That’s got a good following of 820, just over the last month, and we’re looking at increasing the coverage

of that.” They also advertise on Facebook and are present on LinkedIn. The brokerage’s six brokers are supported by two administrative staff, who are “the backbone of everything we do”, says Urquhart. It is looking to take on extra staff – when a staff member recently went on holiday, he says “our top writers were taken away from

“That type of proactive response – clients love it, because they can see you’re acting in their best interests” what they were meant to be doing and were chasing progress payments and this type of stuff rather than seeing clients”. Refinancing has increased by 20% since last year, and a slight fall in settlements can be attributed to departing staff, says Urquhart. “If you compare apples with apples we’re probably on par with last year.” Defying “the doom and gloom in the market”, Smartline recently took on a specialist in commercial and equipment finance, sending the brokerage in a new direction: “already in the first few weeks he’s bringing in clients and scenarios we wouldn’t have dealt with before, and that’s opening up doors in the local community”.

Total settlements 1 April 2015 to 31 March 2016

$188,373,901

Number of brokers/loan writers

Average annual volume per broker

$31,395,650.17

Conversion rate

74%

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7/06/2016 2:29:12 PM

SPECIAL REPORT

TOP 10 FRANCHISE BROKERAGES

AUSSIE CARNEGIE

Moving up a place in the rankings, Glenn English and his staff pride themselves on excellent after-settlement service

Total loan book

$428,000,000

Total settlements 1 April 2015 to 31 March 2016

$156,820,106

Number of brokers/loan writers

Average annual volume per broker

$39,205,026.45

Conversion rate

88%

Financial year 2015/16 has seen Aussie Carnegie engaged in steady but solid growth, and it’s begun paying dividends. The brokerage has moved one place higher in MPA’s Top 10, but also added $30m to its annual settlements figure, while taking on an additional two support staff. It has also made improvements in the back office, says principal Glenn English. “I think that we’ve become a little smarter with our processes. There is less double handling.” English has emerged as one of Aussie’s leading brokers, No. 28 in our most recent Top 100, through a focus on his database. “For myself, I am more focused on my existing client base and referrals,” English explains. “A lot of my clients are investors or second-time buyers, whereas the brokers in the office concentrate on new business: first home owners, refinancers.” More than 60% of the business comes from client referrals, says English. Nevertheless, a dedication to existing clients is something that is shared by the entire brokerage. “Once settlement has been completed, we don’t just say thanks for your business and walk away,” says English. “After settlement, we send our clients a ‘thank you’ gift for their support. We also proactively follow up with our clients to ensure that their home loan and lender expectations are being met.”

English believes that brokers are obliged by their trail commission to take after-settlement service seriously; it also encourages existing clients to go back to Aussie Carnegie for their next loan. In order to provide this level of customer service, the four brokers in the office are backed up by four support staff: an office manager, two loan packagers and a receptionist, although there is some room for flexibility, and they’re planning to hire another administrative staff member in the next 12 months. Building a team is what, for English, separates a good broker from a good brokerage manager. “It’s easy to be a good broker,” he says. “But it’s hard to find the right team who can deliver the same level of service that your clients are used to receiving.” Recent curbs on investment lending haven’t hurt Aussie Carnegie, says English. “These hurdles just add to the fun of being a broker. We’re problemsolvers, so it’s our job to find a solution to our client’s problem.” He is positive about the brokerage’s prospects. “I can honestly say that Aussie Carnegie is in the best shape that it’s ever been in from a lodgements and settlements perspective. This can be attributed to the perfect team that we currently have in place.”

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SPONSORED BY

AUSSIE LIVERPOOL

Setting strategies has helped Mark Burton’s experienced brokers evolve into top performers

Total loan book

$396,003,649

Total settlements 1 April 2015 to 31 March 2016 Aussie Liverpool owner Mark Burton can recall the moment the brokerage got into its stride: at a team meeting when they discussed how they’d get to the next level. For years the brokerage was “an average performer”, says Burton. It’s easy to forget that just a couple of years ago NSW’s housing market was not nearly so buoyant. Building the brokerage was a gradual process. “We put in strategies: marketing, customer retention, customer calls; we got better at asking for referrals, working our leads – not just one thing, many things,” Burton says. The brokerage changed, but the personnel did not. Burton, who opened the brokerage in 1999, points to brokers Shareek Mohammed and Evelyn Burton, who have both been with the brokerage for 10 years. Aided by the changes in the Aussie Liverpool’s organisation, both have stepped up in the past year, becoming high-performers, with Mohammed clinching the No. 52 spot in MPA’s 2015 Top 100 Brokers. Burton’s team still serves a broad range of clients, and he wants to keep it that way. “Because the cycle changes so often, we’ve decided not to dig in on any particular group.” Recent restrictions on investor lending by APRA and the banks have appeared to prove him right: while other brokerages have suffered, at Aussie Liverpool

“we haven’t noticed a drop-off in volume”, he says. The longevity and experience of Burton’s team is a great advantage. “We’re a great big brains trust with over 100 years’ experience, so there’s very few scenarios somebody doesn’t know how to fix.” Having a veteran team does present some challenges, however. The brokerage has benefited from Aussie’s opt-in digital marketing service, Burton explains. “We’re all dinosaurs when it comes to social media: we’re not good at it, and we’re not really interested in it to that degree, except as a business tool. We’ve got some twentysomethings at head office for whom it’s all bread-andbutter stuff, so we outsource.” Furthermore, the brokerage is still looking to expand, but Burton is finding that his veteran brokers have more than enough leads from existing sources. “The guys have been with me so long, they don’t go out knocking on doors; they don’t need to.” Therefore he’s currently in discussion about hiring new brokers with the appetite to go out and chase brand-new business. Whoever joins Aussie Liverpool will have some excellent role models. “I don’t think we do anything particularly special,” Burton concludes. “Shareek is a gun when it comes to asking for referrals, and following up his leads and calling his database; that’s why he’s a Top 100 Broker … he’s persistent and consistent.”

$208,242,619

Number of brokers/loan writers

Average annual volume per broker

$41,648,523.74

Conversion rate

82%

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SPECIAL REPORT

TOP 10 FRANCHISE BROKERAGES

MORTGAGE CHOICE INDOOROOPILLY

Russell Passfield and his team have found a unique way to make themselves visible to their community

Total loan book

$556,611,630

Total settlements 1 April 2015 to 31 March 2016

$156,182,784

Number of brokers/loan writers

Average annual volume per broker

$26,030,464.00

Conversion rate

96%

Everything at Mortgage Choice Indooroopilly reflects stability: it has over 16 years under its belt, and “virtually no turnover” of staff – many of whom are family members – says principal Russell Passfield. “We’ve not recruited any staff; everyone who works with me has actually put their hands up and said, ‘Can I work with you?’ ” The brokerage has consistently made Mortgage Choice’s Top 10 for almost a decade. Yet stability alone doesn’t explain why this year it has gone from outside MPA’s Top 10 to an impressive sixth place. Passfield himself isn’t quite sure. “The guys have just been more focused … they’re not really doing anything particularly different. We’re always conscious of engaging with clients in a way where we can very quickly find out their needs and we meet those needs.” Their clients are broad-based, with slightly more repeat business from investors, upgraders and refinance, explains Passfield. “First home buyers are in there; they seem to have returned to the market over the last 12 months or so.” Brisbane’s housing market “has been a bit more buoyant of late”, says Passfield; but more importantly – and locally – Indooroopilly’s shopping centre has undergone a $480m revamp, completed 18 months ago. This is important because the brokerage is based within the shopping centre, not in a shopfront, but in a kiosk.

Chasing walk-in clients has not been fashionable of late, Passfield admits. “It’s a bit unusual to have a kiosk; not many people have done that successfully … the rent is ridiculous.” Yet having a kiosk, conveniently located outside Target, has a particular advantage: “we don’t want people to feel they actually need to break a barrier – the doorway – and walk in like it’s a bank branch; we just want them to lean on the counter and have a chat. We probably get more leads, and maybe the conversion is not as high”. With a combination of the kiosk, limited marketing and a large database of satisfied clients, the brokerage is doing well. What marketing it does is focused on making the brokerage visible, including running a BBQ/pizza oven outside the shopping centre for several weeks. Passfield himself has stepped back from broking in recent years, and manages the brokerage. He sees Asian and foreign investor clients in Brisbane as a new opportunity. Day-to-day, however, they’re trying to maintain the stability, visibility and customer service that have earned the brokerage not only a Top 10 spot but an even greater accolade: Passfield notes that “two of the brokers we’ve had were actually existing clients; they loved the experience so much they wanted to come on board”.

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SPONSORED BY

WHAT AN ELITE FRANCHISE BROKERAGE LOOKS LIKE IN 2016 CONFIDENCE

GOING FROM BROKER TO MANAGER? “It’s probably been one of my biggest learning curves…being able to manage your time efficiently enough to be able to give back to your staff from a managerial perspective, as well as giving back to your clients from a relationship management perspective, is a very fine line to walk.” Matt Cunliffe Mortgage Choice Brisbane

8 out of 10 brokerages are planning to hire staff over the next 12 months

SUPPORT STAFF 10

Mortgage Choice Brisbane City

Aussie Parramatta

Number of support staff

Mortgage Choice Melbourne

“It’s hard to be everything to everyone. Over the next 12 months part of what I’m going to do is that transition to a leadership role: I’ve started having my trainees and assistants sit in on every appointment and phone call, and they can hear the way I talk and present to clients.” Ross Le Quesne Aussie Parramatta

Mortgage Choice Buderim

Mortgage Choice Perth CBD

Aussie Carnegie

Smartline Currambine

Mortgage Choice Glenelg

Mortgage Choice Indooroopilly

Aussie Liverpool

1 0

Number of brokers

“Change from a ‘me’ focus to a team focus…brokers are very competitive and protective, and it’s hard to switch off from being all about you to your success coming from managing a good team, and your excitement and success comes from seeing them achieve.” Richard Crommelin Mortgage Choice Perth

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SPECIAL REPORT

TOP 10 FRANCHISE BROKERAGES

MORTGAGE CHOICE BRISBANE CITY

Brisbane’s AMA-winning brokerage has undergone an ownership change but continues to challenge at the highest level

Total loan book

$223,789,023

Total settlements 1 April 2015 to 31 March 2016

$329,287,938

Number of brokers/loan writers

Average annual volume per broker

$36,587,548.67

Conversion rate

96%

Over the years Mortgage Choice Brisbane has emerged as one of the strongest performers in MPA’s Top 10, including narrowly coming second in 2015’s survey. It also walked away with the trophy for Brokerage of the Year – Franchise at the most recent Australian Mortgage Awards. Therefore, the brokerage’s relative drop in this year’s list – albeit to a very respectable fifth place – comes as surprise by comparison. Looking at the numbers, the brokerage leads the pack in terms of settlements over the past financial year ($329,287,938); what’s brought it down is a greatly diminished total loan book. And what’s brought the loan book down is a change of ownership within the brokerage: Matt Cunliffe, previously general manager and part owner, bought out the remaining client base but not the book. It’s been the main change for the brokerage this year, Cunliffe explains. “The ownership change has taken up most of the time; the leadership change has taken up most of our time. What we’re really focused on is keeping the business doing what it’s done in previous years … we didn’t want to reinvent the wheel this year.” Mortgage Choice Brisbane targets casual investors, and unlike many other brokers it sees 2015’s changes in the investor market as a major opportunity. “It’s probably aided in the growth,” says Cunliffe. “We’re a very young brokerage in the scheme of things; our

brokers are very adept at change, and when those sorts of things come into the market it validates our job even more so. We’re well aware, we’re well versed in the changes, and we put a lot of time into research into what’s going on in the market and then provide that extra credibility to our clients and referral partners, so those sorts of changes just enhance what we do.” In fact the brokerage is rapidly expanding, from three and a half to eight brokers over the past year, three of whom were hired in the last three months. “We typically don’t hire straight into the broking role,” explains Cunliffe. “We’ll bring them up through the admin support role, ground them firmly in the business and industry, and the ones that put their hands up we can bring up into the broking role.” The brokerage has nine support staff, divided into teams for loan input and taking files from submission to settlement. Going from a broker-manager role to the responsibilities of being full owner has been a challenge for Cunliffe. “It’s probably been one of my biggest learning curves … being able to manage your time efficiently enough to be able to give back to your staff from a managerial perspective, as well as giving back to your clients from a relationship management perspective, is a very fine line to walk. That’s done and dusted,” concludes Cunliffe, “so we’re moving on and upwards.”

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SPONSORED BY

AUSSIE PARRAMATTA

Aussie’s premier brokerage continues to roll forward with a dedicated focus on investor lending

Total loan book

$714,365,933

Total settlements 1 April 2015 to 31 March 2016 Aussie Parramatta is a near-permanent feature of this Top 10, but also a rather exceptional one. Whereas most brokerages serve a broad base of clients, the Le Quesne brothers – Ross and Scott – have targeted property investors, who make up 60% of their clients. “We’ve got a focus on property investment and are experts in the field,” says Ross Le Quesne. “Most of us are property investors ourselves, so we can provide authentic advice and loan structuring for those clients.” That focus has continued. What’s changed over the past year is an increased emphasis on the back office, Le Quesne explains. “We continue to refine our processes and the training of our processing staff, and that’s allowed us to increase the volume we’re able to do.” The objective is to ensure that “the handover is seamless from the broker to the broker’s assistant and from the loan manager to the settlements officer”. They’ve rigidly documented their processes and created templates and charts to aid communication within the brokerage. Dealing with investor clients means taking a different approach to repeat business: “we’re big on focusing on why they’re here; what they’re focusing on long term; the bigger picture of what they’re trying to achieve rather than a point of interest rates”. That said, small tweaks of interest rates are a good way to add “massive value” to clients, Le Quesne adds. A recent client saved

$30,000 on interest from a 0.5% rate reduction. Focusing on investors has exposed Aussie Parramatta to recent changes to investor lending by APRA and the banks. “We’ve had to say ‘no’ a lot more than we ever have, because serviceability changes have been quite great because they’ve assisted people with bigger portfolios,” notes Le Quesne. “For every million dollars of lending they’ll need to earn an extra $40,000 in gross income, and people just aren’t getting those pay rises.” Nevertheless, the brokerage’s settlements for 2015/16 – $296,146,652 – are nearly $50m higher than for 2014. In addition to four brokers, Aussie Parramatta has six support staff, who are assigned to specific brokers, and two trainee brokers, who also do administrative work. New brokers generally start in admin roles, Le Quesne explains. “Recently we’ve had a couple of brokers leave, so we’ve had guys on the bench, if you will, who are ready to step in and get their accreditation.” The brokerage is looking to hire additional brokers as it is presently purchasing an additional Aussie franchise. Expanding the business also means Le Quesne has to take a step back. “Over the next 12 months, part of what I’m going to do is that transition to a leadership role: I’ve started having my trainees and assistants sit in on every appointment and phone call, and they can hear the way I talk and present to clients.”

$296,146,652

Number of brokers/loan writers

Average annual volume per broker

$98,715,550.65

Conversion rate

88%

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SPECIAL REPORT

TOP 10 FRANCHISE BROKERAGES

MORTGAGE CHOICE MELBOURNE

An office restructuring and a willingness to delegate have taken the brokerage even closer to the top

Total loan book

$832,760,175

Total settlements 1 April 2015 to 31 March 2016

$222,644,241

Number of brokers/loan writers

Average annual volume per broker

$37,107,373.50

Conversion rate

97%

Returning to our Top 10 this year, Mortgage Choice Melbourne is a bigger brokerage than it was last year, and consequently a better one, says co-owner Cameron Price. “We’ve actually beefed up our back end with our support staff; we call them customer service managers.” Price heads up the brokerage alongside Ashley Koenig and Stephen Zamykal. Taking on two extra support staff has had obvious advantages. “They do the hard work, that’s for sure, so we have more time to see clients,” Price says. However, the brokerage has also reorganised its structure, promoting a staff member to manage the customer service managers. The move is paying off in a big way, Price explains. “She’s now managing all our customer service staff so there’s a lot more communication there between the sales/broker team and the admin team, which has certainly streamlined our processes, kept clients informed, and they’re having a better experience because they’re being kept updated all the way: valuations, conditional approval, approval, settlement.” In fact Price says it’s “the best thing we ever did”. After-settlement service has only become more important with 2015’s investor lending changes, as Mortgage Choice Melbourne operates heavily in the investor and owner-occupier spaces, Price says. “It’s

making it more difficult with borrowing power and pricing being a lot different, and that affects clients, but the thing is it creates interest, which is not a bad thing and gives us a chance to review what clients are currently on, and if there’s anything for them.” Price sees several other opportunities for re-engaging with existing clients: rate changes, fixed rate and interest-only expiries, and valuations to assess equity. Contacting clients is something, notes Price, that “we’re a lot more hot on than we have been previously, now we have time to do that … we’re always on the phone with clients”. The brokerage also runs seminars, has a newsletter, and sends out “Friday facts”, which, being a mix of finance and humour, get a surprising amount of attention, according to Price. While the past year has mainly been one of consolidation, the brokerage is using all the staff in the office – not just brokers – to make the most out of repeat and referral business. “Having good staff is the key; that’s the number one key,” concludes Price. “It’s very hard, sometimes, to [delegate], but once you do you’ll find you have a lot more time to work on the business, and that’s certainly key for us … it’s allowed us to take a bit more of a step forward.”

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SPONSORED BY

MORTGAGE CHOICE BUDERIM

Linda and Matt Ireland are re-engaging with their clients, their referral partners and, crucially, their staff

Total loan book

$549,498,575

Total settlements 1 April 2015 to 31 March 2016 Our runner-up this year came as a surprise, albeit a very welcome one. Mortgage Choice Buderim is unlikely to be a name you’ll recognise; the Sunshine Coast seems a million miles from the investor hotspots of Sydney and Melbourne. Yet this hasn’t stopped owners Linda and Matt Ireland from building a formidable operation and competing at the top level. The past year has been a big one for the brokerage, with the departure of high-performing Top 100 Broker Colin Mason in January and the Irelands’ re-engaging with the business after a period working part-time. “We’d had the business for 12 years,” explains Linda Ireland, “so you get into a roll, but this year we really looked at doing things differently and injected new marketing into the business, and have had really positive results as a consequence.” They’ve been looking at their existing client database and at their key referral partners. “We’ve been reconnecting with all of our clients and relationships that we’ve had over the years, and, instead of generating new business, we’ve been looking at connecting with established clients.” The brokerage tends to get a lot of investor clients, Ireland says. “All of the brokers in our office are investors themselves: we find we have mum-and-dad investors with the intention of growing a portfolio over time.”

In Mortgage Choice Buderim’s case, the changes affecting investor lending in 2015 have actually increased demand from clients, as Ireland observes. “We’ve definitely had a lot more people looking for a better deal, actively wanting to renegotiate with their existing lenders, and if that doesn’t work then refinancing.” The brokerage also actively goes out to its database, with a staff member assigned to call the entire database every 12 months. Within the office, Mortgage Choice Buderim has four brokers, each with their own specialisms, including in construction and commercial finance. Ireland makes a point of keeping all brokers up to speed. “We actively cross-train our brokers; even though they each have their speciality, we believe in keeping our qualifications up to par across all areas.” Those brokers are supported by six support staff, and Ireland is planning to hire over the coming year. Management is immensely important to Ireland, and the “total opposite” to being a good broker. “They’re different skill sets; one is supporting your clients, the other supporting your team,” Ireland says. She prides herself on developing this team mentality and pushing the brokerage forward. “We really believe in putting our team first; we don’t see them as working for us, but us working with them towards our collective goal.”

$227,922,547

Number of brokers/loan writers

Average annual volume per broker

$45,584,509.40

Conversion rate

99%

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SPECIAL REPORT

TOP 10 FRANCHISE BROKERAGES

MORTGAGE CHOICE GLENELG

2016 sees a fourth successive win for the brokerage, despite the retirement of principal and industry legend Wendy Higgins

Total loan book

$1,222,933,732

Total settlements 1 April 2015 to 31 March 2016

$223,646,635

Number of brokers/loan writers

Average annual volume per broker

$44,729,327.00

Conversion rate

97%

This will be the fourth year in a row that Mortgage Choice Glenelg has been Australia’s No. 1 Franchise Brokerage. This year, however, one key person won’t be there to receive the trophy. After countless Top 100 and Australian Mortgage Awards, industry veteran Wendy Higgins is retiring from the business, after gradually pulling back in recent years. From July, ownership will transfer to Keith Caine, who MPA spoke to in order to learn more about a business model that continues to deliver. According to Caine, the brokerage’s success is relatively simple: “we do have a model that works, because ultimately it’s a team effort; we all know what areas we perform well in and we focus on that. Staff in the business working on what they’re best at – that’s really the recipe for success in this business”. The brokerage has staff working in almost all areas, Caine says, and a client base to match. While they’re restricted to advertising in certain areas, their longevity – Higgins purchased the franchise in 1998 – means they now have clients from all over. So far so good: many excellent brokerages have both a strong team and a wide range of expertise. However, Mortgage Choice Glenelg’s team spirit is the sort that can only be built over time, and with an unusual remuneration structure. “We never have turnover,” explains Caine. “The most recent staff member that we recruited was back in March, when Wendy retired; we brought someone in to fill in for Wendy. Prior to that, the most recent staff member was me, and that was several years ago. We’ve got Julie [Mahony], who’s been here for 16 years, Rea [Magill], who’s been here for eight, and myself, who’s been here for seven.” The stability of the brokerage has advantages in terms of leads and staff morale, Caine believes. “Repeat business is huge, but more so from a staff perspective they see this as their own business …they’re not

micromanaged; they run their own businesses, and they know what they need to do for this business to be successful, and I leave them to do that.” Furthermore, brokers at Mortgage Choice Glenelg are salaried, rather than being on commission. “I don’t believe the commission model works for this type of business, for the staff we have here,” says Caine. “With the longevity that we’ve got, they’re incentivised by the success of the business, not by the money in their pockets. We feel like we’re a family; it’s a team environment here, and we want this business to be successful, so the most important part for the business is the people we employ.” Additionally, as the brokers are on salaries, files can be transferred between them more easily, further building trust, Caine explains. Unsurprisingly, they are not planning to hire anyone this year. Looking ahead, Caine will be reviewing the brokerage’s very extensive range of sponsorships. With a huge number of referrals and repeat business, maintaining their current level of marketing may not be necessary, he suggests. “Our sponsorship program is up for review; it’s not been as successful as it has been in the past because our brand is so big in this area,” Caine says. However, he will be continuing relationships with certain local sports clubs: “we know and like the people who run the clubs, and we like helping the clubs, because they are a part of the community we’re in”. While the statistics of Adelaide’s housing market are relatively stagnant, Caine says with high auction rates and low time on the market it’s still a great time to be a broker. Caine’s main challenge will be managing morale, he admits. “It’s about making sure our staff are incentivised to succeed, everybody’s happy, and we maintain the level of customer service … that’s the main focus of the business and one of the reasons we’ve been so successful.”

“With the longevity that we’ve got, they’re incentivised by the success of the business, not by the money in their pockets”

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SPONSORED BY

Keith Caine, owner of Mortgage Choice Glenelg, is presented with the trophy by Renee Blethyn, Suncorp’s SA state leader

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FEATURES

COMMERCIAL LENDING

COMMERCIAL LENDING: A 360° VIEW We’ve brought majors, non-majors, non-banks and specialist lenders together to advise brokers on the changes affecting commercial lending in 2016

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A COMMON complaint about residential lending is that it’s ‘all the same’; that lenders – at least in the prime space – have similar products, rates and policies. And while the clients are different, they can still be broadly characterised into certain groups: first home buyers, upgraders, investors, etc. In comparison, commercial lending involves a kaleidoscope of clients, policies, products and solutions, many of which involve at least an element of custom tailoring for the client. With such a diversity of industries in Australia, lenders have developed specific appetites, taken on specialised staff and developed particular products. That’s why, in order to get a complete view, it was necessary to get a wide variety of lenders together to explain, in their own words, the changes affecting the commercial lending space. The most obvious change in the commercial space is that residential brokers are becoming more likely to consider it. Vow CEO Tim Brown picked out commercial lending as the new frontier for brokers. “I think commercial and leasing will the biggest opportunities for brokers [in 2016],” Brown told our sister title Australian Broker. “At least three or four out of every 10 clients the average broker will deal with will be self-employed.” Several aggregators have launched additional commercial training courses, while MPA’s recent Commercial Lending Guide was specifically designed for residential brokers. Meanwhile, lenders have had to deal with demands for accessible commercial accreditation and products. Furthermore, the SME space has been targeted by a new generation of alternative lenders, who see it as far more open to disruption than residential lending. Lenders, including Spotcap, RateSetter and OnDeck, use smart technology to make quicker lender decisions, and some already work with

brokers. Traditional lenders may be driven to push their own processing technology in a similar direction. This feature looks at the specialisms of our featured lenders – at their response to changes in the market and at how brokers can reach and service commercial clients. It then looks at popular misconceptions of the space, finishing with an analysis of what makes a top commercial broker. There are also sidebars featuring individual lenders who talk about their plans and offers for the coming year.

SMALL BUSINESSES AND THE BUDGET 2016’s Federal Budget included a number of provisions related to SMEs that have been welcomed by the Business Council of Australia and others. Among them were: Businesses with annual turnover of less than $10m will have a company tax rate of 27.5% from 1 July 2016 Concessions already available to businesses with a sub-$2m turnover will be extended to businesses with a sub-$10m turnover from 1 July 2016 An increase in the tax discount for unincorporated small businesses with an annual turnover of less than $5m from 5% to 16% over 10 years All these measures are designed to stimulate growth by increasing confidence – and potentially providing new customers for brokers. For more information on the budget, read our News Analysis in this issue of MPA.

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FEATURES

COMMERCIAL LENDING ENGAGING BROKERS IN 2016: JONATHAN STREET, CEO, THINKTANK We are continuing to build on the success of our national program of working with aggregators and brokers at all levels to keep bringing relevant, useful and timely tailored sessions and events to the industry. As a lender, our ongoing commitment is to give back as much as we can of our combined experience and knowledge to the industry, and over time offer ongoing education, mentoring, workshopping and skills development. In 2016/17 we are focused on identifying and assisting to address the changing concerns and needs of brokers through continual engagement at all levels. Our events calendar is pretty heavily mapped out for the next 12 months around prospecting, whole-of-commercial lending training, SMSF lending and other specifically requested group and webinar sessions, but one of our core propositions is responsiveness.

Do you specialise in a certain area of commercial lending? ANZ

NAB Broker

ANZ has a specialist focus on property, health, agribusiness, and on transacting with trading businesses. ANZ accredited brokers are not only supported by commercial broker managers but also have access to bankers from these specialist areas to help finalise financial solutions for their customers.

As Australia’s largest business bank, NAB has deep expertise across the broad commercial lending spectrum. At industry level, we have particular expertise in financing for the healthcare and agricultural sectors. We feel these are the two key growth areas that brokers should consider expanding into. Demand for financing for the health industry is being driven by our changing population demographics … There are also, currently, strong prospects in agricultural lending as the sector is buoyed by recent signings of regional free trade agreements and a lower Australian dollar making exporting more attractive.

ING DIRECT We don’t see ourselves as specialists in particular funding; we have a simple product suite that can work across various segments. ING DIRECT targets less specialised security property types under our PCM proposition, such as retail, office, industrial, warehouse and general use commercial properties … in the last 12 months we’ve expanded to include business purpose lending for SMEs with more complex structures, and we’ve doubled our average transaction size.

La Trobe Financial Our commercial product range is very broad, which therefore makes us more of a ‘general practitioner’. We cater for a variety of commercial property finance … We can also lend to individuals, companies, trusts and SMSFs, residents and non-residents, and can do so on a full-doc, lite-doc and lease-doc basis. That said, the area we do ‘specialise’ in is making commercial loan products accessible to all finance brokers in an easy-to-use, familiar format, regardless of experience.

Liberty Financial While we have a strong heritage in the specialist custom space, and are at the forefront of SMSF lending in Australia, Liberty’s expansive range of lending solutions appeals to a much broader base of customers. This includes lending to self-employed workers, right through to custom vehicle, property and business lending, for example.

Suncorp We are committed to supporting the growth and success of small businesses, agribusinesses and commercial businesses. We offer highly competitive business lending solutions for a variety of purposes, including business expansion, buying a property to operate from, or purchasing plants and machinery. In addition to this, Suncorp Bank brokers are automatically accredited to write small business lending of up to $1m.

Thinktank Thinktank is a broad-based commercial lender spanning all standard security property types across retail, industrial, office, professional suites, childcare, etc, up to $3m in loan size. We lend across the country, do not mind whether the borrower is an owneroccupier or investor, and provide loan terms from six months to 30 years on a set-andforget basis. We have developed a marketleading position in SMSF commercial lending up to 75% LVR and 30 years which is based on our strengths in understanding and managing the many nuances of the legislation.

www.mpamagazine.com.au

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FEATURES

COMMERCIAL LENDING ENGAGING BROKERS IN 2016: ROBYNNE FROST, NATIONAL MANAGER SMALL BUSINESS AND COMMERCIAL, SUNCORP Continued education to equip brokers to diversify into small business lending with programs such as our SME Masterclasses is of top priority to Suncorp Bank. Helping brokers to understand financial statements, ratios and also what bank credit assessors are looking for will provide the best chance of fast assessment and less back-and-forth with customers, ultimately improving customer experience. We are committed to simplifying our processes and making it easier for brokers to do business with us, and have some exciting developments in the pipeline to improve service and turnaround and strengthen the relationship between brokers and their customers. This includes aligning home and small business lending processes, an example of which is the recent changes we made to our commission structure to streamline the process for brokers. Importantly, we will continue to provide on-the-ground, expert support to brokers seeking to diversify into small business lending through our national team of small business BDMs.

What’s changed in the commercial lending space over the last 12 months? NAB Broker Over the last 12 months there has been renewed appetite from the SME business community for commercial lending. The climate for commercial lending is favourable in Australia, with the April NAB Monthly Business Survey indicating conditions are well above average levels for the past year, at +9 index points. The commercial lending space has also been shaped by regulatory changes. We would encourage brokers to consider these changes as an opportunity to build stronger customer relationships.

Thinktank Across the board, commercial lenders have been a lot more accessible and flexible in the way they approach the market, engage with brokers and stimulate new business opportunities, which has been encouraging to see. There has also been a tremendous amount of profoundly good work being done by aggregators in supporting commercial business through programs advancing broker skills and knowledge development, while working closely with lenders to bring industry participants together more effectively. In the last six months there has been some selective adjustment to policy and pricing by a number of lenders as the wholesale cost of funds increases and concern for the broader property market is taking hold.

ING DIRECT The noise around diversifying into commercial lending has become louder. Brokers have seen residential investment lending soften, and they need to make up volume elsewhere. Aggregators continue to forecast strong growth in commercial lending, and at ING DIRECT our volumes increased by 38% last year.

La Trobe Financial For us, it has clearly been the increase in the overall size of the commercial lending

opportunity. It has grown significantly as demand for commercial property has lifted, both from SMEs looking to purchase the premises from which they operate their businesses (particularly in SMSF structures), to investors looking to take advantage of the higher yields commercial property offers… All of this has been compounded by the recent regulatory changes which have resulted in some lenders tightening their overall appetite for commercial and investment loans generally, which pleasingly for us has resulted in the origination of a high proportion of what are traditionally known as ‘bank deals’.

Suncorp The market is increasingly competitive, with SMEs becoming an area of increased growth and focus for many major and non-major banks moving forward. Banks will continue to offer strong, competitive offers in the SME lending space, which will open more opportunities for brokers who can offer the whole package.

Liberty Financial The finance industry has obviously gone through a lot of change in the last 12 months, particularly with banks restricting their investment lending. As a result, the demand for Liberty’s products, in both the commercial and residential investment space, has increased significantly. As SMSF lending gains popularity as well, we’re seeing more borrowers looking to buy commercial property through their SMSFs.

ANZ It has become considerably more competitive, which is providing customers with lots of options. At ANZ we have been focused on deepening customer relationships rather than just chasing single transactions.

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FEATURES

COMMERCIAL LENDING ENGAGING BROKERS IN 2016: CHRIS THOMAS, HEAD OF COMMERCIAL BROKER, NAB BROKER NAB Broker’s plan to engage brokers over the year ahead is twofold. Firstly, we will continue to grow our BDM capabilities and numbers, as it is very important for NAB to have strong personal relationships with our brokers and be able to support them via BDM guidance. Secondly, we are working hard to develop a digital lodgement facility for equipment finance and small business lending. This is a very exciting development as it will streamline processes, simplify any administrative burdens, and provide a quick, responsive platform for brokers to use. I look forward to sharing more on this in the coming months.

How can a residential broker reach commercial clients? Suncorp Australia is home to more than two million small businesses. This market accounts for 96% of the country’s business sector, creates 4.5 million jobs and contributes more than $330bn annually to Australia’s economic output … Approximately 30% of our home loans are for self-employed borrowers, which highlights the opportunity for our broker partner to cross-sell.

opportunity to refinance it for them, particularly where they have held the property for some time. We often see untapped equity sitting in a customer’s A&L statement tied to commercial property. For new clients, we suggest contacting your network of accountants, financial planners and real estate agents for leads in this space, or try your aggregator or other successful brokers for their ideas on how to get involved.

Liberty Financial

Thinktank

Residential brokers have a wealth of data to help them establish relationships with prospective commercial clients. The first port of call is to go through existing databases and identify self-employed workers. If the client rents their business premises, it is worth asking if they are considering buying commercial property, or if they need help with vehicle finance or accessing funds for business … Many brokers don’t realise their local community is also a great source for finding new clients, as is filtering LinkedIn connections by area.

Residential brokers with self-employed clients are already in the frame to start writing commercial business … All the aggregators we work with have continued to develop and refine their grassroots commercial support programs which are specifically geared to assist brokers to identify, attract, cultivate and convert commercial opportunities. As a lender, we provide dedicated training sessions and workshops throughout the year.

ANZ Residential brokers are already servicing a considerable number of self-employed clients. Our simple message for mortgage brokers is this: if you are not talking to your clients about their commercial needs, then someone else is. At ANZ we offer a number of commercial broker finance accreditations, starting from a simple spotter (name and number only) accreditation through to a full commercial broker accreditation.

La Trobe Financial In terms of lead generation, a finance broker’s existing database should be their first port of call. This involves mining their CRM to identify clients that already hold commercial property to see if there is an

ING DIRECT All brokers will have customers in their portfolios who are either business owners themselves or who know business owners. Every business customer will know an accountant, a financial planner, a solicitor, and other business customers in the supply chain.

NAB Broker If we consider that brokers are responsible for 53% of mortgages across Australia, it’s fair to assume that a large percentage of these customers own and run their own businesses. To tap into this market, residential brokers need to expand their conversations … Many brokers are business owners themselves, so there is a natural level of understanding and alignment … Residential brokers can also reach out to their BDMs for tailored advice on how to reach commercial clients.

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FEATURES

COMMERCIAL LENDING ENGAGING BROKERS IN 2016: JOHN MOHNACHEFF, NATIONAL SALES MANAGER, LIBERTY FINANCIAL Liberty has long understood the value of face-to-face meetings so brokers have the opportunity to ask about a wide variety of loan scenarios. Because Liberty provides such a broad range of lending solutions and thinks differently to traditional banks, brokers appreciate our ‘can do’ approach and the accessibility of our BDM network. In the year ahead, Liberty will continue to increase its commercial BDM network in response to the growing demand and interest from brokers in our products and services. Liberty is further investing in all of our aggregator partners, and specifically sponsoring their commercial ventures at PD days across the country. We’ve also sponsored the Commercial Better Business Summit and will be supporting the industry peak body events held by organisations like the MFAA.

What services would an average SME client typically require? Liberty Financial There are so many reasons small businesses seek additional funds that it’s hard to describe an average client. From a cleaning business looking to fund its next business expansion, to solving cash flow issues or helping self-employed workers purchase a new vehicle, the needs of a small business are varied. That’s why brokers value lenders like Liberty, because we can help them provide finance to a much broader client base.

Thinktank The self-employed and SME sector offers great variety and, in turn, great opportunity. Their needs can range from a simple residential or commercial property loan to a much wider array of lending products spanning cash flow, short-term, long-term, trade facilities, and acquisition or business expansion funding. The average client … will often tend to span multiple property loans, lines of flexible credit, personal finance, insurances and wealth management that now more often than not includes a selfmanaged superannuation fund.

ING DIRECT A broker is vital to customer experience as they will work to simplify the overall finance process by acting as the dedicated intermediary, putting more time back in the customer’s day and allowing the customer to focus on other issues and opportunities at hand in their business.

NAB Broker Generally speaking, SME customers require working capital facilities like overdrafts and invoice financing. They also typically require term lending and transactional services, including bank accounts, credit cards and online banking facilities. We would always

say, however, that servicing an SME client should really start with a conversation.

ANZ We find that SMEs have a wide range of financial needs, from the set-up required to run the day-to-day, such as trading accounts, commercial cards and merchant terminals, through to funding solutions to support both set-up and growth. These types of funding needs may be met with simpler lending products such as overdrafts, term loans and equipment finance, through to more complex solutions such as working capital and trade services … ANZ has pledged $2bn in lending to start-ups and is currently offering discounted banking packages along with a way to set up a business online in just one day.

La Trobe Financial SME clients will typically be looking to purchase premises from which to operate their businesses, or they may already own their business premises and may be looking to refinance in order to consolidate accumulated business debt. This may even include outstanding taxation obligations. In addition to this, SMEs often require equipment finance and leasing solutions, so there are plenty of cross-sell opportunities for finance brokers. This is why commercial lending can be such an attractive proposition.

Suncorp It’s about understanding their financials, business cycles and what is important to them. At Suncorp Bank we are aiming to bridge that gap and make it as streamlined as possible. SME customers are faced with unique challenges and opportunities, and it is important for a broker to understand their customers’ long-term goals and represent them appropriately throughout the loan application process.

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FEATURES

COMMERCIAL LENDING ENGAGING BROKERS IN 2016: CORY BANNISTER, VICE PRESIDENT, LA TROBE FINANCIAL We have enjoyed great success with our recent broker engagement strategy, and plan to continue along the same path in 2016, increasing our footprint further each year. We will continue to demonstrate to brokers personally, through tailored presentations conducted by our sales team, how we can add value to the finance broker’s business. This is done by providing them with access to a broader suite of loan products, many of which they may otherwise not have access to, which allows them to expand their business capabilities and in turn increases their bottom line. Giving brokers access to commercial loan products forms a key part of this strategy and is extremely important to us, as it goes to the very heart of our company’s mission. This mission is to assist underserved markets. Commercial lending is an area where many finance brokers feel they are underserved by lenders, often due to volume and accreditation barriers.

What’s the most common misconception about commercial lending? La Trobe Financial By far the most common misconception we hear regarding commercial lending is that it is incredibly complex, best left for specialist brokers, and certainly not for the faint-hearted. Our view is that it doesn’t need to be. One of the most crucial decisions a broker will make when lodging a transaction is which lender to use as this will often dictate the level of difficulty or complexity. Brokers should investigate a lender’s policy and process for the specific transaction prior to lodging, to avoid any unnecessary delays or surprises.

ING DIRECT That it’s all too hard. However, many brokers know their way around a profit and loss and regularly negotiate home loan approvals for self-employed borrowers. They can use this knowledge to move into commercial lending – start small, talk to your BDMs, research the industry/customer before you interview them, and you’ll be more confident.

NAB Broker The most common misconception is that commercial lending is only about the loan. Commercial lending is about understanding your customer’s needs beyond just the one transaction, and uncovering their business strategy to see how financing will fit into the customer’s short-, medium- and long-term goals. If brokers do this, they will build strong relationships with their customers and become trusted, lifelong advisers.

Thinktank As with many misconceptions, there are often elements of truth that lie behind them ... it is often the suggested difficulty of finding deals that work, then getting them set without an endless amount of hassle

from the client, the lender or both. It certainly can be, but doesn’t have to be that way these days, where the availability of training and support is so good from the majority of lenders and aggregators. Commercial loans below about $2m are generally similar in experience to a selfemployed home loan.

Suncorp Business lending is more complex, and therefore it’s important for brokers to invest the time to educate themselves about the sector and get comfortable with having these discussions with their client base. Suncorp Bank has developed a series of educational forums and workshops to support our broker partners to have a stronger understanding of how to leverage their existing customer base to attract new business and gain SME exposure.

ANZ The main misconception is that commercial lending is too hard. Sure, being a full commercial broker through ANZ does require extensive training (which ANZ offers face-to-face); however, if this is not where brokers want to start, brokers can simply provide the name and number for their client and we will do the rest under our spotter accreditation. It can’t get any easier than that.

Liberty Financial We often hear brokers say that commercial lending is so much more complex than other lending. Although experience always helps, the fundamentals are the same, and it’s easier than many think. If you take the time to understand the customer’s needs and financial position, then all the broker has to do is work with various products and lenders to find the right solution.

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What characterises the best commercial brokers you deal with? Thinktank

La Trobe Financial

It is generally a combination of qualities … Chief among them are a good knowledge of finance and debt, an ability to identify transactions and bring them together, a strong affinity with their client and that client’s needs as they develop over time, having a core of two to three strong lender relationships they can turn to in different situations, and probably, above all, an ability to not only see things in advance but to quickly adapt when the circumstances in front of them might change. The most successful brokers never seem to get flustered; they keep it objective and focus on producing the best end result for all of their clients.

We see the most rapid growth for finance brokers, both residential and commercial, coming from those who are inquisitive and hungry to try new things … Specialist lending is a great conduit to achieving these outcomes as it allows brokers to cater for more events over a client’s journey, and that is not just limited to ‘credit events’ where they may hit a bump or two along the way. Through innovation, specialist lenders are able to provide products that cater specifically for particular market segments, such as our recently launched Aged Care loan … finance brokers can ensure their clients remain clients for life.

ENGAGING BROKERS IN 2016: COSI DE ANGELIS, GENERAL MANAGER COMMERCIAL ORIGINATION, ANZ We will continue to engage brokers as we have been ... With our existing commercial brokers we will focus on deepening this relationship whilst at the same time assisting mortgage brokers in making the move into commercial lending. We will invest in those markets where there is an opportunity to continue the growth we have been experiencing, with a particular focus on broker professional development, strengthening and streamlining our processes, and additional BDMs.

ING DIRECT Liberty Financial For a start, every residential mortgage broker selling commercial finance has been openminded enough to recognise the high value of diversifying their business and trying something new. There are two key things a broker needs to do to stay competitive: be

Knowing and ‘owning’ their customer. They can quickly identify the strengths and weaknesses of a proposal or a customer’s business. On the back of this they’re not scared to ask the hard questions. They know that if they don’t, the bank will. It’s all about open communication.

“Above all, an ability to not only see things in advance but to quickly adapt ...” innovative and relevant. Those brokers who are looking at ways to broaden their business, so they can sell more and have more reasons to connect with customers, are destined for greater success.

NAB Broker The best commercial brokers are those who have great customer conversations and thus build strong credibility. If a broker really gets to understand their customer’s business goals, as well as the ins and outs of their business, they are able to compile a very compelling loan proposal that does justice to the customer and their business.

Suncorp The best commercial brokers are ambitious and strong home loan brokers with selfemployed customers who have the desire to have deeper conversations to explore small business opportunities. Brokers need to be able to take a holistic view of their customer’s business to truly take on the role of a trusted adviser and achieve a long-term relationship.

ANZ The top commercial brokers are passionate about helping customers. At ANZ we share this philosophy and are right behind our accredited brokers to ensure they win with their customer.

ENGAGING BROKERS IN 2016: JOHN KOLYVAS, NATIONAL PARTNERSHIP MANAGER, COMMERCIAL, ING DIRECT For residential brokers, they will have comfort in dealing with their current ING DIRECT residential BDM across commercial loans. Our residential BDMs are fully supported by our Credit Assist team ... We will also continue with the roll-out of our successful commercial training program for residential brokers. For commercial brokers, we’re focused on tailoring our solution with dedicated commercial BDMs, bespoke commercial events/training programs, and by building closer relationships between our credit team and commercial brokers.

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PROFILE

STEPHANIE DUNCAN

“I’ve really tapped into the family law stuff, because unfortunately it is needed more and more these days”

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STEPHANIE DUNCAN: STANDING OUT Making one’s name in an already-established brokerage is far from easy, but that’s exactly what Top 100 Broker Stephanie Duncan is doing at Tiffen & Co

WHEN YOU think ‘mortgage broking powerhouse’, Canberra doesn’t usually come to mind. Yet Australia’s tiny capital doesn’t just punch above its weight in political terms – it’s long been the home of leading brokers and established brokerages. Stephanie Duncan (nee Brennan), of Tiffen & Co, is one of those Top 100 brokers making a name in her own right, entering our Top 100 on the back of $70,814,642 worth of residential loans over the past financial year. It all could have gone very differently, however. Working as a teller at ANZ in 2003, Duncan was looking for a change in direction, and financial planning was it. However, fate – or rather, romance – intervened. “I was dating a real estate agent at the time,” Duncan recalls. “He threw the option of becoming a mortgage broker at me. [The industry] was pretty unregulated at the time, back in 2003.” Duncan might have had a long-term interest in finance – her father was an accountant – but no lending experience as a broker, no lending experience in banking and no Cert IV. After a rejection from the first brokerage she approached, Duncan needed someone to give her a shot, and the Mortgage Detective (which merged with Tiffen & Co in 2008) was it. “I said I was interested. They pretty much interviewed me on the spot, and I started the next week,” she says. Today, industry entrants with Duncan’s experience would work in assistant roles, but Duncan joined Mortgage Detective as a fullyfledged broker, which even then was quite

unusual. That also meant starting on full commission, and luckily Duncan’s real estate ex-boyfriend gave her an advantage. “I spent a lot of time at real estate agencies and that was how I worked it and got my referrals and got going.” Thirteen years on, Duncan is still going, and has gone from a promising young broker to a leading figure in one of Australia’s most awarded independent brokerages. Duncan has prospered from targeting specific client groups, including marital separation cases. When it comes to divorcees, Duncan believes she’s benefited from being the only female broker at Tiffen & Co. “I do have some really good relationships with family lawyers and have a lot of that business coming through. I think because I am a female I’m maybe more empathetic to people like that.” Furthermore, as Duncan notes, it’s not just female clients looking for female brokers. “I would say I actually deal with more men going through the separation process than women to be honest.” Brokers as an industry are still overlooking what is a significant client group, Duncan believes. “I’ve really tapped into the family law stuff, because unfortunately it is needed more and more these days… I would always have multiple court cases going through my book regularly.”

Being a woman in the industry Being a woman in an industry perceived to be male-dominated has had wider advantages in

MR FLUFFY Despite the name, Canberra’s ‘Mr Fluffy’ asbestos scandal is anything but funny. It has, however, provided a great deal of work for Tiffen & Co’s brokers. Two companies, colloquially named ‘Mr Fluffy’, pumped dangerous asbestos into thousands of homes in the ACT and beyond in the 1960s and ’70s. In 2014 it emerged that the number of affected houses could be larger than originally thought, prompting the government to buy back 1,022 properties from owners in order to demolish them. This has put a corresponding number of buyers on the market, says Tiffen & Co managing director Gerard Tiffen. “From a terrible situation, the positive side is it has created a lot of work.”

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PROFILE

STEPHANIE DUNCAN MENTORS AND MENTORING

Unlike many brokers, and particularly those in established brokerages, Duncan does not identify any single individual as a mentor, instead identifying with several. “I’ve always kept some sort of mentor in my life, with different aspects of my life, not just work,” she says. Many of these mentors are not brokers, Duncan adds. “Success isn’t just driven by your career, it’s the person themselves that are successful, and you can place them in any industry... It’s more the mental aspect and it’s not necessarily related to mortgage broking.”

terms of networking, Duncan notes, but these are not unlimited. “There are a lot of women networking groups that I’ve been able to tap into, which I guess is a referral source that is not readily available to the guys here. But all in all, despite being a female in a male-dominated industry, I don’t really put myself forward to be anything different to the other guys in the industry.” Some clients simply prefer a female broker, Duncan argues. Duncan’s approach to networking has changed as she’s become an established broker. “I’ve been in the industry for a long

“I network with people I like and have a lot in common with and enjoy spending time with… I think that generates a better quality of referral” time now, so I’ve steered away from doing the organised referral groups around town, which is great for people starting out in the industry, but now I have my own connections I create my own referral groups.” These groups are quite different from the pressurised, work-driven environment of organised networking, Duncan explains. As well as once-a-month coffees, they also organise events, such as cooking classes, for a similarly-minded group of people. “We try to do something fun,” she says. “I tend to network with people that are of a similar age and experience to myself. I network with people I like and have a lot in common with and enjoy spending time with, rather than throwing myself into a big group of people I don’t know. We become better friends and I think that generates a better quality of referral.”

Driving Tiffen & Co’s overall strategy Duncan is not simply a leading broker but is now involved in steering a leading brokerage. In 2012, she became a shareholder of Tiffen & Co. The move “made a massive difference… understanding the guts of how it all works and how all of us can work together to achieve a common goal in the business.” Duncan is still a broker, but being involved

in management has changed her approach. “It gives you a completely different viewpoint on what you’re doing from day to day and what you’re trying to achieve,” she says. So, what is Tiffen & Co trying to achieve? According to Duncan, their main task is safeguarding a reputation for excellence while continuing to improve their processing. “We’re always striving to be one of the best in the industry. We are still independently owned, which we’re really proud of. We’ve generally got four of us in the Top 100. We’re in the Top 10 consistently.”

One recent change was hiring a specific staff member to deal with existing clients. “We saw a need for our clients to have someone specific looking after that, because there is a lot to be done, and we find our PAs can get a little bogged down in this rather than looking for new business,” Duncan says. Moreover, finance and broking are not Duncan’s only passions. In 2008, she completed the Kokoda Track, the gruelling 96km trek through Papua New Guinea’s jungles made famous by Australian troops in World War II. “I tend to go on little tangents where I try and challenge myself with things,” says Duncan. “That was one I came up with for some friends and signed up that night.” It helped that Duncan is a huge CrossFit enthusiast, attending the regional competitions four years in a row. Looking at the industry today, Duncan says it’s become harder to enter, and suggests that new brokers take a different route to her own. “Canberra’s one of those places that’s pretty cliquey, and if someone is starting out in the industry, it can be tough. If I was to come into the industry these days, I’d be hunting down the best broker in my area and wanting to come in as a PA. I’d be wanting to sink my teeth into it in terms of going to client appointments and getting in front of clients and getting that knowledge as fast as possible.”

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BUSINESS STRATEGY

COMMUNICATION

iCOMMUNICATION: THE WAY FORWARD FOR ORGANISATIONS Georgia Murch explains how, by ditching annual performance reviews, organisations can finally press their foot firmly on the accelerator – and achieve progress

DELOITTE’S RESEARCH and costing tells us that an annual appraisal for 65,000 staff took two million hours. Expedia says it mostly wanted to ‘rehumanise’ the relationship between employees and bosses. A recent PwC study conducted in Australia showed that 81% of companies had performance management systems which were only “somewhat effective” at achieving their goals. Adobe, a global software business, estimates that their annual performance reviews were costing them 80,000 hours of managers’ time each year, the equivalent of 40 full-time employees. And after all that effort, internal surveys revealed that employees felt less inspired and motivated, and staff turnover increased. Increasingly, the progressive companies are recognising this and ditching the performance reviews in place of feedback cultures and regular ‘check ins’. Adobe led the way, soon followed by Juniper, Accenture, Microsoft, Deloitte, Zappos, Expedia, Dell and GE. There are over 30 companies now ditching performance reviews in place of feedback and ‘check in’ cultures. It’s no surprise these are the ones that attract the best and brightest as they are receiving the feedback they need and deserve, and improving themselves and productivity as a result.

Why don’t we implement powerful feedback cultures? There are four main reasons that get in the way of leaders and organisations creating these cultures:

1 Organisations don’t muster the courage to invest in their people and culture. They are stuck in the 1940s and they just don’t get it. They fail to acknowledge that their biggest assets are not their products or services but their people. As a result, these are not highperforming companies.

2 People think the change will be too hard and too disruptive. Creating a cultural shift requires effort, but without the investment there will be no change. It’s like the frustrated lumberjack who continues to use a blunt saw to chop down the trees. He decides he doesn’t have time to stop and sharpen it. Yet all he is doing is making more work for himself. 3 We blame the organisation and its leaders for failures in feedback and get stuck in what I call ‘the blame trap’. Getting stuck in the blame trap means we blame others,

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organisations and leaders and do not take any responsibility ourselves. It’s not a healthy space, nor does it allow anyone to move forward.

4 We think that ‘robust’ six monthly or annual performance reviews will be enough. It won’t. In fact, the Corporate Leadership Council tells us that when informal feedback, that is outside the formal review process, is delivered well it can improve productivity by nearly 40%. Now, it’s pretty compelling that conversations outside the performance review work.

It’s time to move to the future The concept of ‘performance management’ was introduced about 60 years ago as a means to determine the wages of an employee based on their performance. It was used to drive behaviours to generate specific outcomes. When employees were solely driven by financial rewards this tended to work well. In the late 1980s, not all employees felt rewarded, nor motivated, by financial gain alone. Many were driven by learning and the development of their skills. From here, performance management started moving into more frequent monitoring and reviews

with a focus on ‘regular feedback’ outside the formal review process. As organisations put more regular conversations into the mix there was a notable improvement in productivity and employee engagement, when the conversations were handled well. This still meant that the onus was on the person giving the feedback rather than the person receiving. Organisations that are in touch with the now – the high-performing organisations – exist where all employees, not just the leaders, are being taught how to give great feedback and also how to receive feedback with equal candour and grace. Organisations that do this are in their ‘feedback flow’. But there are far less that are gaining this as their competitive edge. BRW cited that one of the important factors about creating these high performance workplaces is where ‘the bosses saw issues from the employee’s point of view, and gave meaningful feedback and information’. I know this to be true as I work with many of them and they are committed to improving the quality of their conversations. Then they improve collaboration with each other, and their customers, and drive better strategies and relationships. The great companies get it.

FEEDBACK FLOW MODEL

High profit

Productivity

Feedback flow

Low profit

Regular feedback

Performance management Low performance organisation

Time

High performance organisation

No wonder they are becoming the places that employees flock to and stay with. So, if we want to remain not only competitive, but ahead of the game, we need to move into the future and have feedback become part of our everyday tasks. Part of how we flow. Creating a feedback flow is how progressive and competitive organisations get things done and create happy, fully engaged employees and customers. It is where we reverse the push of giving feedback and add to it the pull of receiving it, and alter systems to create an even flow.

Fixing feedback We need to make the changes to not only get ahead but to stay there. Fixing feedback is about creating a cultural cadence. It’s more than feedback training. It’s about creating a self-sustaining flow that feeds itself and becomes effortless. It’s about moving to the future. The onus is on both parties: one to deliver the feedback in real time, and the other to receive it well in the moment. The outcomes of this: eliminates dependence on performance management systems significantly improves productivity creates a culture of accountability and commitment evolves authentic transparency and openness allows individuals to own their own development. When we create a frequency of accountability that feeds itself, giving and receiving becomes an inevitable part of the way you do business. You and the organisation are in your flow. You and your people become remarkable and no one can stop talking about it.

Georgia Murch is an expert in teaching individuals how to have the tough conversations and create feedback cultures in organisations. She is the author of Fixing Feedback and a highly engaging speaker. Visit georgiamurch.com or email georgia@georgiamurch.com

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FEATURES

SMALL BUSINESS

SURVIVING THE BOSS LIFE Books about the day-to-day reality of small businesses are few and far between, but Paul Downsâ&#x20AC;&#x2122; Boss Life is a refreshingly honest look at the subject, writes Sam Richardson

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“IF THIS were a standard business book,” begins Paul Downs’ Boss Life, “I would tell you all the smart things I did to achieve financial success, and maybe trot out a few mistakes to show some humility. Unfortunately, I’m not a business genius and I’m not rich. My story has neither tidy conclusions nor a triumphant ending.” Boss Life, written by Paul Downs and published in August 2015, is one of those books in which you get the uncanny sense that the author is writing just for you and nobody else. It’s also one of those books that struggles to be categorised. Forbes magazine named the book among its 2015 best business books of the year, yet by the author’s own admission it’s no such thing. Instead, it’s a book about business, although it’s one that you’ve never seen before. But first, who is Paul Downs and what makes him qualified to write about business? In his day job, Downs is the owner and manager of Paul Downs Cabinetmakers, a manufacturer of custom conference tables, based in the US state of Pennsylvania. With fewer than 50 employees, the company is not particularly large, nor has it invented anything, and whilst its conference tables are certainly impressive, the company is not likely to be on anyone’s ‘one to watch’ list any time soon. It’s very much a regular small business, with all the challenges that entails – and that’s the point. The book is more memoir than guide. Coming off the back of a blog Downs wrote for the New York Times, it goes month by month through the year of 2012. At the start of every month, Downs lists his bank balance, net cash and new contract value year-to-date numbers, then describes what happens. At some points, he’ll take you into the room with him; at others, he will talk about the highlights of his week. It’s a diary, but in the present tense. There are no bullet points, mind maps or flowcharts, although there are pictures of tables and screenshots. All of which makes it far, far easier to read than your average business book.

IN NEED OF INSPIRATION? Although there’s no direct equivalent to Boss Life for the mortgage industry, the industry’s leading brokers speak often and eloquently about the challenges of the profession. Take these five quotes from leading Top 100 Brokers. “If you’re doing something well, remain focused, remain consistent, and the results – at whatever level anyone wants to achieve – will get there” Jeremy Fisher, 1st Street Home Loans “Take it two months at a time. Once you’re six months in, every month thereafter you realise how much you’ve learnt” Deanna Ezzy, Trilogy Funding “Don’t do it for the volume or the money – you need to enjoy helping people grow their portfolio and wealth” Jack Wei, Financial Genius “It gets back to not being an order-taker, but giving all-round advice – not just doing what they ask you to do, because that isn’t necessarily what’s best for them” Wendy Higgins, Mortgage Choice Glenelg “To do these numbers, you have to live and breathe it. You have to be very committed… be at the coalface every day, and be committed” Mark Davis, The Australian Lending and Investment Centre

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FEATURES

SMALL BUSINESS WHERE TO FIND SUPPORT AS A SMALL BUSINESS OWNER MFAA WIMBN Although WIMBN was originally focused on the challenges facing female brokers, a recent rebrand has expanded its scope to include broker lifestyle (for both genders) and the impact work can have on your physical and mental health. Earlier this year, the MFAA ran a WINBN: SOLD roadshow and you can find more information on their website. wimbn.mfaa.com.au Heads Up A joint initiative by governmentsupported Mentally Healthy Workplace and BeyondBlue, Heads Up has information, tools and support for business owners dealing with mental health issues, whether their own or those of staff. Joining is free, and you can create an action plan for your business and order training packages. headsup.org.au Flying Solo A community for small and micro businesses, with a variety of articles covering marketing, technology, funding, wellbeing and productivity. They also have a podcast and organise meet ups. flyingsolo.com.au

The plot Boss Life is not a story about woodworking, although you’ll learn a surprising amount about this craft as you read the book. The plot is far simpler – the survival of a small business as their sales fall through the floor. Downs walks a precarious tightrope between incoming orders and outgoing costs, with the in-balance gradually depleting his cash reserves to the verge of disaster, at one point remarking that “at our current rate of spending, that’s enough to operate the shop for 15 working days.” At the start of the year, the company’s problems are not immediately apparent. In a situation familiar to many small business owners, Downs is perennially distracted by multiple and competing responsibilities, including “managing employees, keeping track of money, dealing with bureaucrats, negotiating with the landlord… These tasks land in the boss’ lap. No matter that the boss may have little or no training, and no desire to spend time on them.” In addition, he’s trying to find new clients abroad, flying to Germany and Dubai on exhausting, but largely fruitless, endeavours. Boss Life chronicles his realisation of the company’s problems and struggle to bring it back to health, whilst himself trying to stay financially and physically healthy. Small business’ struggles are age-old and Boss Life could have been written 50 years ago, if not for an intriguing sub-plot. Downs’ company is heavily dependent on Google AdWords, the service where you can pay for your website to be listed above all other results when readers search for certain terms. Downs finds that despite raising his ad spend, the number and quality of enquiries are declining and, without any SEO expertise, he sets out to discover why.

The challenges The AdWords saga is just one of many stories woven into the book, which conveniently and comprehensively covers the typical challenges of small business owners. This starts with clients. As products, custom conference tables and financial products could not seem more different. Yet both suffer from similar

troublesome clients, such as the client who, despite several (free) consultations, can’t commit. Then there’s the client who doesn’t read the brief and complains about the product, not to mention the clients who play off Downs against his competitors, don’t pay bills, and generally make life miserable. Downs discusses how his sales team deals with such people, and how their methods of dealing improve as the year progresses. Then there are staff. Being a good employer is clearly a major driver for Downs, as he writes in his introduction: “Consistently meeting a payroll is a real accomplishment. A business can provide for the security and growth of both boss and employees.” Yet he also sensitively describes the emotional challenge of firing a staff member who faked their time sheets, and his struggle with his talented but uncommunicative foreman Steve Maturin, who is vital to Downs’ operation but is holding it back from real innovation. On top of all of this, Downs writes sensitively about family problems. A man writing about family in a business book is still surprisingly rare, but clearly should be more common. Downs talks frankly about his disabled teenage son, Henry, and how it adds to the stress of a struggling business. Downs suggests the solution is to be open about both challenges. “Keeping a barrier between my work and home lives was a mistake. When my wife had a clear picture of the situation, she became an ally instead of an adversary.”

Fighting back There are certainly lessons to be learnt from Downs’ book, and they don’t require much digging below the surface. As in his NYT blog, Downs runs through the various strategies he implements, describing their successes and failures, answering many of the questions small business people are desperate to ask, but don’t know how. Take the current vogue for referral partners. Downs works with other companies, some looking for a presence in the US, others wanting to leverage his expertise, but Downs’ success with such clients is often mixed. One European manufacturer, who Downs dubs ‘Eurofurn’, are particularly tricky.

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Downs leaves one meeting in a ‘mixed mood’ – “I feel his projection of sales volume is nonsense, and I know that without significant outside investment I won’t be able to handle their million dollars in orders… but now isn’t the moment to put the brakes on.” He continues being strung along throughout the year, as Eurofurn demands he invest without guaranteeing they’ll provide the sales he requires. More encouragingly, Downs finds support and advice in a group for local business people called Vistage. There, he meets staircase manufacturer Sam Saxton and

and drive innovation by promoting that employee to foreman. As Downs jokes, the situation was typical of “the Zen of a very small business: When the Boss is Ready, the Solution Will Appear (Sometimes).”

The year of living dangerously The story ends at Christmas and, as Downs originally promised, without triumph. Despite the company limping back to health, Downs is forced to cut the Christmas bonuses. It’s an ending that suits the book itself, with its focus on the day-to-day realities rather than the glittering possibilities of success.

“Consistently meeting a payroll is a real accomplishment. A business can provide for the security... of both boss and employees” visits his factory, looking for inspiration. He finds that Saxton’s business has a number of fundamental differences, particularly when it comes to selling. “The approach is very different from ours – the design itself isn’t highlighted as much as the numbers. It doesn’t sell itself.” Downs realises Saxton’s salespeople are more persuasive than his own, which drives Downs to engage the services of a sales consultant. Using a consultant is something many business owners consider, but are reluctant to spend money experimenting with. This is what makes following Downs’ experiences with his sales consultant, Bob Waks, particularly interesting. Whilst the overall result is positive, Downs eloquently expresses his doubts at the beginning of the process, and describes the practical steps recommended by his consultant. Downs openly discusses what Waks reveals about his own limitations, such as their lack of a customer relationship management system. Indeed, Downs often appears more comfortable discussing his own limitations than his strengths, despite asserting that he’s an optimist. Yet, there are moments of inspiration for readers. Confronted by a talented but young employee looking for a pay rise, he finds a way to keep the employee

Evidently, 2012 was not a successful year for Paul Downs Cabinetmakers, as Downs himself reflects. “Whatever way you measure it, either on a cash flow or accrual basis, I’ve lost money.” Yet, in the case of Boss Life, readers benefit far more from the journey than the destination – Downs’ efforts to work out his company’s problems and find a solution. The lessons to be learnt are not restricted to manufacturing, as Downs’ key focus is on sales, marketing, and the challenges of the SME boss. The book is filled with practical business tips, but unlike other business books they won’t be highlighted and framed for your convenience. Instead, they emerge from the day-to-day experiences, much like they would in reality. What makes this book stand out above all, however, is its honesty. As Downs dryly observes, business journalism is focused on success and aspiration, and lacks the depth to reflect on the complexity of business problems. And whilst business books refer to honesty, they rarely lay bare the brutal, and occasionally overwhelming, truths that Downs conveys on the realities of running a business. His book can, therefore, be considered a must read for anyone currently living the ‘Boss Life’, or looking for a depiction of what it’s actually like.

TAKING ACTION IN YOUR BROKERAGE In addition to Boss Life, Downs’ has written extensively about business challenges on his blog You’re the Boss, which you can read on the New York Times’ website Downs benefitted from joining a local business group. You too can find industry and local business associations using the government’s searchable directory: business.gov.au/ advice-and-support/directory/Pages/ default.aspx If, like Downs, you’re struggling with Google AdWords, you may wish to use an SEO consultant. Ask colleagues and your aggregator BDM to recommend someone you can trust.

Boss Life, written by Paul Downs and published by Blue Rider press, is available in bookstores and online as an e-book at bosslifebook.com

www.mpamagazine.com.au

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FEATURES

ALTERNATIVE FINANCE

ALTERNATIVE FINANCE: A DIFFERENT SORT OF DISRUPTION It’s not funding that makes alternative lenders important to brokers, but their approach to lending – online, flexible and, above all, quick, writes MPA editor Sam Richardson

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BROKERS, AS a group, still think they’re the big disruptors. The stories of Symonds, Bouris and co. bursting onto the lending scene in the early ’90s to challenge the banks continues to define the industry, both in the minds of brokers themselves and for the general public. That’s all true; what’s no longer true is that brokers are the only disruptors in town. Australia’s banks, warned Morgan Stanley equity analyst Richard Wiles, “are more vulnerable to disruption than at any time in the past 25 years”. The catch? Wiles was speaking not at a broker conference but at Australia’s inaugural Alternative Finance Summit, held earlier this year in Sydney. Alternative finance has, for a number of years, been considered just another one of the many post-GFC developments that were meant to bring banks down but failed to do so. Yet bankers, academics and regulators increasingly see alternative finance as different. Robert Wardrop, executive director at Cambridge University’s Centre for Alternative Finance (CCAF) in the UK, began studying the sector several years ago. “We realised that what was going on was not a cyclical change; it was not something going on because people didn’t trust banks anymore,” he says. “It really was a technology-driven phenomenon and a behaviour change-driven phenomenon.” A quick glance at the CCAF’s numbers confirms that alternative finance has come a long way since then. The market in Australia is now worth $457m, the CCAF reported in March, and is the third largest in the Asia-Pacific region. It’s worth $4.2bn in the UK, a country with less than three times the population of Australia, and Wardrop sees Australia following a similar path. “When you see disruptions in other markets it doesn’t take a rocket scientist to see the trajectory in your market,” he says. Morgan Stanley, reporting on the sector in June 2015, called Australia “a market to watch

A BRIEF GUIDE TO ALTERNATIVE FINANCE Alternative finance is a catch-all term for lenders and funding models not associated with existing banks. While marketplace lending and peer-to-peer (P2P) lending are often assumed to be the same, marketplace lending includes both individual and institutional (bank) funders; peer-to-peer is strictly funding from individuals. The 2016 Asia-Pacific Alternative Finance Benchmarking Report used the following definitions: Marketplace/P2P business lending Individuals or institutional funders provide a loan to a business borrower Marketplace/P2P real estate lending Individuals or institutional funders provide a loan secured against a property to a consumer or business borrower Balance sheet business lending The platform entity provides a loan directly to a business borrower Invoice trading Individuals or institutional funders purchase invoices or receivable notes from a business (at a discount) Equity-based crowdfunding Individuals or institutional funders purchase equity issued by a company

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FEATURES

ALTERNATIVE FINANCE “When you see disruptions in other markets it doesn’t take a rocket scientist to see the trajectory in your market” Robert Wardrop, Cambridge Centre for Alternative Finance … recent changes in credit reporting, among other factors, bode well for innovators”. Our financial system is being ‘disrupted’ – even if the extent of that disruption can be debated – and brokers are perhaps for the first time one of the incumbents. Alternative finance providers, and the fintech sector more generally, launched with an ambition to challenge reigning incumbents by going direct to the consumer, Wardrop explains. “Fintech entrepreneurs say, ‘we’re going to put the banks out of business’ – and here you can substitute ‘broker’ for ‘bank’.” Or as Mitchel Harad of marketplace lender SocietyOne put it at the AltFi Summit: “I find the Australian

ALTERNATIVE FINANCE SECTORS IN AUSTRALIA Balance sheet business lending Invoice trading Marketplace/P2P consumer lending

$13.07m

$12.47m $2.73m $34.32m $10.82m $7.26m

Reward-based crowdfunding

$37.29m $27.47m $5.36m

$56.96m

2015 2014 2013

$9.31m $0m $0m $14.02m $5.78m $3.55m

Donation-based crowdfunding Real estate crowdfunding

$138.67m

$0m $0m

Equity-based crowdfunding

Marketplace/P2P business lending

$159.22m

$52.26m

$10.08m $0.59m $0m Source: Harnessing Potential: Asia Pacific Alternative Finance Benchmarking Report, CCAF, March 2016

market to be dramatically more enticing; the Australian consumer gets absolutely screwed.” In this piece we look at the areas of a broker’s business that are being touched by marketplace lending: unsecured consumer lending, SME finance, and even mortgages. We’ll consider how these lenders work (or don’t work) with brokers, and what brokers can learn from their approach to sales. We’ll also look at the rate of growth; marketplace lending for mortgages is small, but with huge prospects, according to Wardrop. “What you’re going to see is that as these markets develop, this segment explodes in growth. I mean, explodes.”

Understanding the development of alternative finance Three events mark the ‘arrival’ of alternative finance as a real force on these shores. The first was the above-mentioned AltFi Summit; the second – for reasons that will be explained later – was Westpac’s venture capital fund buying into marketplace lender SocietyOne in March 2014, and the third was the publication of the CCAF’s Asia-Pacific Alternative Finance Benchmarking Report in March 2016, which provided detailed data on Australia’s alternative finance sector. According to the report, Australia’s alternative finance market grew 320% in 2015, leading the region on balance sheet lending and invoice trading. The report noted that “the development of the alternative consumer and business lending sector in Australia has been able to scale rapidly in such a short time, bolstered by institutional funding”. Threats to growth could come from regulation, the report noted, which 30% of surveyed platforms in Australia thought was too strict and excessive. At the AltFi Summit, there was a sense that alternative lenders were waiting for regulators to catch up. Tony Triebel, CEO of marketplace lender Spotcap, told MPA’s sister publication Australian Broker that a legal framework “fosters credibility and trust amongst our target client base and gives the framework for good and solid players to function in”. Overall, however, lenders were positive, and most of the discussion of the day centred on the SME space. “I think there’s a huge opportunity in the Australian market to grow that small

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business space,” Lisa Jacobs, chief strategy officer of Funding Circle, told Australian Broker. Balance sheet lending for businesses is the biggest form of alternative finance in Australia, worth almost $160m, according to the APAC report, followed by invoice trading, and while marketplace lending to businesses ($9m) lags behind its consumer counterpart ($57m), it’s apparent that marketplace lenders here, including the above-mentioned Spotcap, Funding Circle and SocietyOne, are focused on businesses. Real estate lending has been much slower to develop, for various reasons: the large sums involved; the reluctance of borrowers, and, adds the CCAF’s Wardrop, the complexities of dividing secured lending between multiple lenders. However, his ‘explosion’ prediction is beginning to materialise in the UK, where finance funding of real estate grew to $700m in February, according to the CCAF’s UK benchmarking report. There are growing marketplace lenders for mortgages in the UK, with the first being Landbay, whose founder talked to MPA about the challenges involved for this type of lender. “From a borrower’s perspective we’re no different from any other lender,” explained CEO John Goodall. “Some of them wouldn’t even know we’re a peer-to-peer lender, and we don’t advertise that.” While the underwriting is more complicated on the investor side, the basic process is simple: “You can invest £100 upwards; we divide mortgages into micro loans, and you get fractional ownership of mortgages”, Goodall said. As Landbay is regulated as a peer-to-peer lender, rather than a mortgage lender, it only lends to investment properties. Investment properties are a huge market in Australia, for many of the same reasons as in the UK. Marketplace lenders in this area can get funding from retail investors because of public familiarity with property investment, Wardrop explains. “Everybody here has a neighbour who has built the retirement portfolio successfully over the past 15–20 years with buy-to-let properties.” On the demand side, the UK Government has been working to restrict bank funding for investors – which is not too dissimilar to APRA’s intervention in this market in Australia. Goodall is “sure”

marketplace mortgage lending will come to Australia, and Wardrop says “subject to the regulatory environment you’re going to see this happen faster than two years”.

Taking an alternative approach to lending Marketplace lending is new for two reasons: its peer-to-peer funding base, and the way it lends – online through smart data. That funding base, however, may not be so disruptive after all, according to Mike Abel, managing director of financial services at Accenture Australia. “Peer-to-peer is not a space that we focus a lot of attention on, and probably I’m answering your question with that statement alone,” Abel says. Instead peer-to-peer lending is an area of interest for Australia’s banks, he says. “They look at it and follow it, only because it’s a potential disruptor and it has had a disruptive influence in overseas markets – the US and UK.” Australia’s major banks survived brokers, the GFC and the efforts of non-majors and aren’t too concerned, as CBA’s head of partnerships, Toby Norton-Smith, noted at the recent AltFi Summit. “It’s fairly clear as a bank we don’t see a meteorite approaching ... [however] the rate of evolution has increased.” Norton-Smith’s attendance at the summit was prompted by a different reason: banks are increasingly partnering with marketplace lenders who lend in a different way. “Anyone can originate; anyone can fund businesses,” David Goldin, CEO of Capify, told Australian Broker. “The real challenge and the real talent is having the underwriting model and the discipline to make sure you’re helping business owners, not hurting them.” Many marketplace lenders are also fintechs; unburdened by legacy systems they can use big data to make smarter and quicker lending decisions, with borrowers applying online. Morgan Stanley saw why that technology would be attractive for banks back in 2015. “The fastest growing marketplace platforms are not really peer-to-peer but institutional investors,” analyst Smittipon Srethapramote wrote, “partnering with tech platforms to cherry-pick borrowers, often with offline marketing.”

“I think there’s a huge opportunity in the Australian market to grow that small business space” Lisa Jacobs, Funding Circle

www.mpamagazine.com.au

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FEATURES

ALTERNATIVE FINANCE TAKING ACTION IN YOUR BROKERAGE

Next time you’re dealing with an SME, see if there are any alternative lenders on your panel. Consider reaching out to reputable off-panel lenders now

Keep an eye on the news for altfi mortgage providers expanding to Australia, particularly in our sister publication BrokerNews.com.au

Look at cost-effective ways to help buyers across the entire lending process. Our report on diversification in MPA 16.5 talks to brokerages that are pioneering this (and includes an extensive interview with Cube Central)

Australian banks are more than just interested: CBA recently partnered with SME lender OnDeck, and Norton-Smith noted that “the talent that is associated with [fintechs] is an incredible pool of innovation for banks to tap into”. Additionally, Westpac is funding Prospa and ANZ is partnering with SME tech platform Honcho; and smaller lenders have also got in on the game, with Auswide partnering with MoneyPlace. Marketplace lenders are enthusiastic about these partnerships, with Spotcap boss Triebel commenting that “the biggest

brokers. “I think the brokers are in the same boat as the banks,” says Accenture boss Abel. “Right now they provide a particular product across a much wider service: that service is buying a house … there will be trouble when somebody comes along and provides the whole process.” Abel suggests brokers should diversify in order to provide services across the entire home-buying process, and indeed some already do: in MPA 16.5 we looked at diversifying brokerages, including Cube Central, run by Scott Beattie. Cube Central has a service called

“Some [borrowers] wouldn’t even know we’re a peer-to-peer lender, and we don’t advertise that” John Goodall, Landbay groundbreaking innovation will probably come from collaboration: collaboration with banks, collaboration with institutions”. Would marketplace lenders be so enthusiastic about partnering with brokers? In fact, they already are: all of the lenders mentioned so far in this article, with the exception of OnDeck, currently work with brokers. Landbay, the UK mortgage lender, has “more demand from brokers than we can handle”. The UK underwent a process of ‘reintermediation’, according to AltFi Summit organiser David Stevenson, because marketplace lenders needed the credibility and distribution network brokers could provide. Brokers provide the emerging market place lending sector with a helpful leg-up, but alternative finance has not developed far enough in any market to demonstrate what comes next. “These online platforms are a threat for a poor broker and an opportunity for a good broker,” argued Wardrop. “A broker reputation with a track record becomes a signal of quality for a deal.” Nevertheless, CCAF’s Wardrop believes some lenders will always see brokers as a dispensable part of an “inefficient” system. “What’s going to happen is you’re probably going to see brokers start platforms and say, ‘we need to change our business model or diversify’.” Diversifying could solve two problems for

Cube Connect, which is all about what happens after the loan settles. “Chances are when you move into your new home you’re going to need phone, electricity, gas; we arrange all of those things for you … it has probably the least effect on income generation, but it’s the thing we’re getting the most positive feedback from,” Beattie told MPA.

Keep an eye on the technology Abel’s ultimate message – that the method by which marketplace lenders lend is more important than where they get their funding – is also a good takeaway for brokers. It’s extremely difficult to predict the degree of disruption that marketplace lending in terms of peer-to-peer funding will have on the market. While there are certainly immediate opportunities in partnering with these lenders, brokers should keep an eye on where the technology is moving, because the banks are certainly watching with interest. Most of all, brokers must accept that they, along with the banks, are the incumbent force disruptors are targeting. As Wardrop explains, that’s a concern which should be constantly on brokers’ minds. “So as long as no one moves, nothing’s going to change, but someone’s going to want to disrupt an inefficient market at some point; it’s inevitable.”

www.mpamagazine.com.au

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PEOPLE

CAREER PATH

ON BOTH SIDES OF THE FENCE As a banker, Darren Little saw the third-party channel become a serious player. Now, as general manager of Smartmove, he wants to take that development a step further

1988

Little began his career at Bank SA, starting his job on 8/8/1988 – a propitious day according to Chinese culture, which sees the number 8 as symbolising wealth. However, Little’s first job didn’t have much to do with broking or wealth, he recalls. “My first role was actually folding statements, and then we’d put stamps on and put them in envelopes.”

BANK SA

2000

ENCOUNTERS BROKING Having worked his way through the bank – in roles such as mobile lender and in credit – Little was given the opportunity to become a branch manager. There he had his first encounter with the third-party channel. “I was in the credit area when we started dealing with brokers, and seeing those first few applications come through, I just saw the industry evolve.”

2006 2010

ST. GEORGE After four years heading broking at Bank SA, Little moved to St.George and to Sydney. There he continued to see the third-party channel develop. “If you look at where a broker was 15 years ago compared to where they are today, it’s a lot more of a chosen profession. It’s a genuine career alternative for young guys, rather than going into a bank. You can build a career out of it, and that excites me.”

HEAD OF THIRD PARTY Little was appointed Bank SA’s head of third party and specialist distribution, a a role he took on because of his increasing interest and belief in the channel. “I had a real passion for the residential side of things … the opportunity to take on that business at Bank SA was very appealing. It was consumer-led; consumers where choosing it, and that gave me my interest in it.”

2014 2015

SMARTMOVE Smartmove was shortlisted for an Australian Mortgage Award in 2015 (which it already had several of in the trophy cabinet). Targeting a broad range of clients, which he sees as a sustainable strategy, Little wants Smartmove to grow through personal referrals, while taking on new-to-industry brokers. “When I was at the bank we used to talk about customer service, which I thought was a short-term play; what we can do at Smartmove is genuinely take the long-term interests of the client.”

CROSSING THE DIVIDE After 26 years in banking, Little made an unusual move, into broking, as Smartmove’s general manager. Smartmove was a strong business partner of St.George; he already knew the team well and he liked the culture of the firm. “I didn’t actually see it as a big change, to be honest.”

“I knew what the banks are looking for, but also [know a lot of] technology providers, service providers, training organisations … as a small brokerage we wouldn’t get access to those types of insights” www.mpamagazine.com.au

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PEOPLE

OTHER LIFE

$300,000

The listing price of guitarist Ronnie Wood’s portrait of the Rolling Stones, which was sold in 2013

A PIECE OF ROCK HISTORY

FirstMac’s founder Kim Cannon is also a passionate collector of music and sport memorabilia ODDLY ENOUGH, Kim Cannon’s passion for art and memorabilia started with a book. That book – Live in Japan, about George Harrison’s concert in the country – cost $750, and just two copies were sent to Australia. Cannon clinched one of them, and it started a collection which has grown ever since.

Cannon’s collection includes paintings by the Rolling Stones’ Ronnie Wood, as well as Pink Floyd guitars and records. Through collecting he’s met many celebrities, including Ringo Starr and Yoko Ono. However, much of Cannon’s collection is sport-related – mainly cricket. He is also a sponsor of the Brisbane Broncos.

Of all Cannon’s pieces, his favourite is a signed photo of cricket legend Don Bradman by the fireplace in his house. Another prized piece is the first Allan Border medal, with a signed print of the winners. Cannon believes the value of the piece will only be realised 20–30 years from now, by which time his collection will have grown larger still.

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