Mortgage Professional Australia issue 16.11

MPAMAGAZINE.COM.AU ISSUE 16.11

WHEN THE SUN’S SHINING How our Top 10 Commercial Brokers weathered a lending storm to produce record results STEVE KANE NAB’s new product line

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SPECIALIST LENDING Latest trends and insights

INTEREST RATES Why they can’t go any lower

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NOVEMBER 2016

CONNECT WITH US

CONTENTS 46

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

The latest technology in broking, with expert advice from NextGen.Net

06 Head to head

Two brokers and a buyer’s agent on working with property developers

08 Opinion

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FEATURES

SPECIALIST LENDING

Leaders from across the specialist lending world explain how you can build it into your business

38 FEATURES

STEVE KANE

18 NAB stalwart on dropping the NAB Broker brand, and the bank’s new product range

Busting the many myths surrounding ‘rentvestors’ and what they mean for brokers How ultra-low interest rates will transform competition in the mortgage space

TOP 10 COMMERCIAL BROKERS 2016

BROKER PROFILE

10 Statistics

12 News analysis

FEATURES

How the best in the commercial broking business survived and indeed prospered in a tough landscape

HashChing’s founder, Mandeep Sodhi, explains why his portal is pro-broker

REVERSE MORTGAGES

MORTGAGE INSIDERS 42 Deslie Taylor

Using customer service to transform an average client base into Top 100 success

62 Philip Lowe

Charting the career path and financial views of the RBA’s new governor

Opportunities for brokers in an oft-ignored but increasingly important sector

64 Mark Winter

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MPAMAGAZINE.COM.AU

FEATURES

DRIVING CHANGE Looking to take your business in a whole new direction? Michelle Gibbings walks you through how

The MFAA’s national Community Champion explains how he got a street named after him

NOW ONLINE: Highlights from our livestreamed aggregators roundtable Advice and expertise from MPA’s High Performance Business Summits Top brokers and brokerages in Leading Mortgage Professionals

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EDITOR’S LETTER www.mpamagazine.com.au

CAN’T SEE THE WOOD FOR THE TREES

G

oodbye, Governor Stevens. After 10 years at the helm.

Glenn Stevens has finally left the RBA building, ending one of the most tumultuous eras in financial history, and certainly the most pivotal decade for broking.

When Stevens was appointed governor in 2006, finance just wasn’t on the agenda for most Australians; their mortgage rates were high, as were their credit card debts, but for most, that was just fine.

In 2016 finance is the shadow looming behind most Australians. NAB’s Wellbeing Index for Q2 2016 found housing affordability is now people’s second-biggest concern behind jobs, but ahead of law and order, health care, and schools. This shift in attitudes has transformed the broking industry, as consumers, suspicious of the banks, are looking to save money and get on the ladder and so they turn to brokers.

You can see this shift in the media. Finance used to be something relegated to the back pages of the paper; now it’s the toast of Hollywood, with audiences flooding to watch The Wolf of Wall Street and The Big Short. When the RBA announces its decision at 2.30pm on the first Tuesday of each month, news

Finance used to be something relegated to the back pages of the paper; now it’s the toast of Hollywood outlets compete to be the very first to break the news, with success being measured in the number of seconds, rather than days, to publication.

This is a distraction; brokers can do better. In their frenzied response to August’s rate cut, which wasn’t passed on in full by the banks, angry commentators ignored the long-term issue: why the banks couldn’t pass on the cut and what this would mean for products and competition given rates aren’t rising any time soon. For brokers in particular, careful financial analysis of these issues has far more worth than being the first to update your Facebook page, blog or website.

Brokers are deluged with financial news, but as we move into an unprecedented era of ultra-low rates the industry needs to look beyond the RBA and instead at the Australian and indeed global economic reality.

Sam Richardson, editor, MPA magazine

NOV 2O16 EDITORIAL Editor Sam Richardson Journalist Maya Breen Production Editor Roslyn Meredith Contributor Michelle Gibbings

ART & PRODUCTION Design Manager Daniel Williams Designer Loiza Caguiat Traffic Coordinator Lou Gonzales Freya Demegilio

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

CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

EDITORIAL ENQUIRIES

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

SUBSCRIPTION ENQUIRIES

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

ADVERTISING ENQUIRIES

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

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

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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ANZ BDM I DO ANZ BDMs make great partners. We will be there for you in residential and in commercial.

For fixed loans and for variable loans. For your easy customers and for your complex customers. On the phone and in person, from this day forth.

Call your BDM to help you help your customers.

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anz.com/broker ANZ’s colour blue is a trade mark of Australia and New Zealand Banking Group Limited (ANZ) ABN 11 005 357 522. Australian Credit Licence Number 234527. ANR0188/BDM/MPA

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UPFRONT

TECHNOLOGY NEWS BRIEFS Asset finance added to ApplyOnline Electronic lodgement is now possible for asset finance applications through NextGen.Net’s apply online system. In July, ANZ Commercial became the first lender to use the system, and Connective and LoanKit were the first broker groups to get involved.

ApplyOnline Asset Finance pre-populates the data in the CRMs, providing real-time quotations and the entire process from application to acceptance. NextGen.Net says the system can deal with different types of asset classes, including motor vehicles, industrial machinery, boats and farm equipment.

NextGen.Net sales director Tony Carn said integrating asset finance was part of the company’s wider strategy. “To date, the bulk of Australian broking groups have invested considerable resources into efficient CRM systems that integrate with ApplyOnline … For us this is a key strategic initiative to continue to support our broker partners in enabling diversification of their income and broadening of their value proposition via technology solutions.”

New blood at Rubik Technology provider Rubik Financial has taken on two new staff as they look to re-engage with the third party channel.

Anthony Meogrossi has been appointed new head of financial services sales, and Jay Ellis has been brought on as national account manager, mortgages.

Ellis in particular brings with him specific experience from broking, having previously been PLAN’s strategic partnerships manager. Before that, Ellis worked on the national migration of PLAN, Fast and Choice brokers on to the Podium system as a Podium training facilitator.

Rubik CEO Iain Dunstan commented that “Jay’s intimate understanding of the needs of Australian mortgage brokers and the technology to support them is highly relevant to our mortgage business.

Importantly, his experience in training

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delivery we know is important to our clients as we continue to expand the number of clients and their broker networks using our Rubik technology.”

AFG partners with SME fintech Major aggregator AFG has announced a “strategic alliance” with business lending fintech Biz2Credit to improve AFG’s handling of small business lending requests. A new online portal will be created for loan applicants while AFG will utilise Biz2Credit’s analytics technology to process applications in real time. The technology will be rolled out to brokers by the end of 2016.

AFG CEO David Bailey highlighted the partnership’s practical advantages for customers: “The mobile-first digital application approach means an AFG broker can help their clients apply for credit from any device, laptop or smartphone at a time and a place that suits their client, including evenings and the weekend.”

Having lent US$1.4bn in business loans in the USA, Biz2Credit could have a major impact on the Australian lending environment, Bailey added. “The SME lending market in Australia has in our view been underserviced. Using Biz2Credit’s patented technology and AFG’s extensive broker network, competitive SME lending in Australia is getting the kick-start it needs to succeed.”

PLAN CEO to step down Phil Quin-Conroy, CEO of PLAN Australia, is to step down from his role as the aggregator integrates with Advantedge Financial Solutions (AFS).

AFS is a subaggregation business that works with financial advisers to meet the finance needs of customers.

Quin-Conroy joined PLAN in 2010 and became CEO three years later. He played a major part in the development and introduction of the Podium CRM system.

BRINGING COMMERCIAL TECH BACK TO BROKING After years of outsourcing to the fintech sector, the industry is finally developing its own commercial lending technology When in residential lending would a major bank partner with a two-man start-up – or an aggregator allow a comparison site to host part of its lender panel? Both moves sound far-fetched, yet both actually happened, the former involving Westpac and SME lender Prospa, the latter featuring Vow and short-term, unsecured and debtor finance comparison site Valiant Finance. These are just two examples; many other major banks and aggregators have gone down a similar route, including CBA with OnDeck and AFG with Biz2Credit.

Whether you see it as brave and cooperative, or simply defeatist, the third party channel has looked to fintechs for the purpose of improving commercial lending over the past two years. Some improvement is better than none, of course.

Although the fax machines are finally gathering dust, commercial applications continue to require a great deal of attention and manual data entry by brokers, deterring some from diversifying into this space. Yet there’s no guarantee that systems designed by software engineers with little knowledge of broking – and often based abroad – will understand what commercial brokers need.

It’s not that the industry has stopped innovating: in late June ANZ became the first lender to use NextGen.Net’s ApplyOnline system for asset finance; in July Suncorp allowed small business lodgement on the system. Using familiar technology such as ApplyOnline makes economic sense, as NextGen.Net’s sales director Tony Carn explained. “To date, the bulk of Australian broking groups have invested

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considerable resources into efficient CRM systems that integrate with ApplyOnline.”

However, without systematised broker feedback, lender-driven systems won’t necessarily provide commercial brokers with the best solution.

Encouragingly, it seems leading commercial brokers are stepping into the void. In August the launch of the Kubio commercial lending platform was announced. It is the result of a collaboration between Macquarie Bank and leading brokerages Allfin Financial Services, BKK Finance, Heritage Property Finance and Stamford Capital. The cloud-based system – which will be available to any commercial brokers – pre-populates application forms with

“The cost of converting existing residential systems to cater for commercial loans has been the main inhibitor” data, tracks applications from submission to settlement, and matches clients with their local commercial broker.

Hopefully Kubio will be the first of many broker-developed systems, and ironically that’s because of the fintech boom. As Macquarie told MPA, “the cost of converting existing residential systems to cater for commercial loans has been the main inhibitor”. However, fintechs “have made it easier and more cost-effective to build from scratch, which is what we have done with the launch of Kubio”.

Q&A

TECHNOLOGY Tony Carn Sales director NEXTGEN.NET

Fast fact Commonwealth Bank spent $1.5bn on technology in the 2016 financial year, ANZ spent $1.4bn in FY2015, NAB spends around $1bn per year, and Westpac is aiming to up spending to $1.3bn over FY2016.

What is the ApplyOnline Innovation Roadmap – and what’s coming up next?

We are continuously looking to the future, innovating and evolving our ApplyOnline platform to ensure we have solutions to challenges our customers may face. Our Innovation Roadmap is our pipeline of future enhancements, and new products and services. Only recently we launched Lender Docs, which enables lenders to safely and securely deliver borrowers’ loan contracts back to the broker within ApplyOnline. Shortly we will release an enhanced Broker Supporting Docs user interface, which will streamline the process, further improving efficiencies and the effectiveness of our brokers. This new service will also enable lenders to customise what, when and how they electronically receive documents from their brokers. In the future we will see new capabilities which electronically support further product diversification, enhanced APIs available at point of sale and further enhancements to the ApplyOnline app.

What’s holding back lenders from using electronic lodgement for business lending?

I think there’s a misconception out there that business or commercial lending is too complicated for electronic lodgement. This is definitely not the case. There are also great efficiency benefits for the broker.

Typically, a portion of home loan borrowers are also self-employed business owners. That means when a broker captures all the data for the home loan, that same data can be used for their application for a business loan. No rekeying required. Only the additional fields need to be completed. With most paper applications for a business loan over 30 pages long, that’s a great time saver.

What’s your number one tip for brokers looking to get more out of ApplyOnline?

I think the best tip I could give would be to invest the time in one of our free training sessions. There is definitely a return on investment.

The capabilities of ApplyOnline are vast, with many brokers unaware of some of the fundamental efficiency tools. Just this week a very successful NSW broker attended our ApplyOnline Efficiencies Tools training session and was surprised by the features he didn’t know were there. Our relationship and training managers are tasked with ensuring our customers maximise ApplyOnline. They can provide one-on-one sessions or group sessions, or organise a webinar.

Contact us at training@nextgen.net to set up a meeting.

How close are we to truly paperless mortgage applications through brokers?

I think as an industry we are continuously moving towards paperless mortgage applications. The more information we can verify electronically at the point of sale, the less paper we should need to support the application. A good example of this is the capability of ApplyOnline to verify and validate addresses, ACNs and ABNs through government data sources. A few barriers remain, though, where supporting documentation required to verify income and other loan details are still paper based – eg tax returns. When we get to a point where this data is available to access electronically to confirm details, we will be much closer to truly paperless mortgage applications.

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UPFRONT

HEAD TO HEAD

Do you work with property developers?

John Manciameli

Daniel di Conza

Todd Hunter

Hunterwood Solutions works with developers in two ways: (1) Via investment property research houses. Hunterwood clients are shown investment opportunities with developers that suit the clients’ investment property aspirations, eg positive gearing. It might be fraught with danger for brokers to refer clients direct to a developer. An investment property research house will work out the best development opportunities for clients to purchase.

On the flip side, an investment property research house can work with a developer to bring to market a certain product that best suits the demographic of the area and is therefore more appealing to investors.

(2) By providing home loans after the sale.

Hunterwood will find which lender has an appetite for the postcode and security on offer and negotiate a discount on a volume arrangement; we will approach lenders to see who will provide funding for these settlements at a price that reflects the volume coming through. The developer then advertises this service to purchasers.

Working with property developers forms one of the key referral partnerships that Acceptance Finance nurtures. These relationships are symbiotic for all parties as there is a growing desire from clients to want to add a property to their portfolio.

The collaboration of a finance provider and property developer supports that desire by combining a consistent credit application process that Acceptance Finance has refined over many years with quality property projects offered by our developer partners.

Not all of our credit advisers work with property developers, but those that do seek to establish a clear understanding of the needs of both the developer and their clients, allowing them to provide credit advice in a far more effective manner, meaning fewer complications in the application process.

Ultimately, a partnership of this nature breeds satisfied clients as the process of locating property and then financing it is simplified by the collaboration of experts in both fields.

No, we don’t work with developers. Here are the main reasons why.

As a broker and buyer’s agent, I cringe when I hear clients have purchased a property off the plan and want us to write the mortgage. The reason is that there is an above-average chance that the valuation will not come in at purchase price. The reason that occurs is developers sell their product through marketeers, mortgage brokers, financial planners and accountants. And these companies do not sell their products for free either. It allows them to hit a broader market across the world. The commission fees they are paid for this are as high as 6% per property.

Many property companies negotiate huge hidden kickbacks (as big as $60k per property) that developers pay them to sell their products. These kickbacks are never disclosed and the consumer pays for this. This is why so many valuations come in low and make writing mortgages for developers a no-go zone for us.

Principal Hunterwood Solutions

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CEO Acceptance Finance

Founder wHeregroup

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UPFRONT

OPINION

TECHNOLOGY AND TRUST Mandeep Sodhi, the founder of online broker marketplace HashChing, believes technology can enable rather than simply disrupt brokers

MORTGAGE BROKERS, in a way, have alleviated some basic problems that plagued the mortgage industry, providing on-demand service, choice and hand-holding during the entire interaction with lenders. However, many unsuspecting borrowers choose to approach lenders directly, thanks to the lack of trust caused by popular misconceptions about brokers receiving conflicting remunerations or being influenced by lender commissions. In fact, the Australian Securities and Investments Commission this year commenced an in-depth remuneration review to ensure that brokers are putting forth unbiased offerings without being influenced by commissions offered by the lenders. The results are expected at the end of the year, but I think this lack of trust is only the tip of the issues faced by mortgage brokers struggling to make good in the highly competitive Australian home loan market.

What other problems are mortgage brokers facing today?

Apart from customers not really understanding the nature of broker remuneration, brokers incur huge labour costs in engaging and understanding clients’ needs, researching suitable loan options and catering to the oftencomplex loan requirements of many clients.

Add to this the increasing marketing costs of establishing a brand to distinguish them from the competition, disseminating information about the benefits of using a broker, and acquiring leads through paid internet marketing (search engine marketing and social media marketing). Contrary to the opinion that brokers are overpaid, the labour and marketing costs involved in acquiring,

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engaging and servicing clients is leading to the reverse. I would, however, like to point out that the customer satisfaction level of broker-serviced clients is quite high, and the number of broker-mediated loans are predicted to rise in percentage terms even though the total number of home loans written may decline over the next five years.

Moving on, another issue faced by brokers is exactly that: ‘moving on’ to sophisticated software, to replace the ancient CRM systems in use for over a decade. CRM systems help brokers manage customer data before and after the engagement, but due to pre-mobile

per-lead basis; brokers are only charged on settlement, giving them confidence in the quality of leads generated through HashChing and making it a more profitable, efficient and time-effective platform for both borrowers and brokers.

HashChing uses technology to drive down marketing costs for brokers by bringing them qualified leads and helping them service clients better through sophisticated technology. With experience, I can point out that key success factors for brokers in the industry hinge on excellent reputation; exceptional client service, keeping clients updated on their loan applications; maintaining a constant flow of leads; and efficient cash flow management.

HashChing powers brokers with the latest technology to collect customer information for easy management and updates. The algorithm and the idea behind it ensure that good brokers are rewarded with more qualified leads by constantly analysing brokers’ behaviour and customers’ reviews and ratings to provide more leads to the most efficient, responsive and recommended brokers. The portal provides real users’ reviews and ratings of each broker, letting their quality of service speak for them, resulting in better leads and heralding a transparent and structured service design that

The portal provides real users’ reviews and ratings of each broker, letting their quality of service speak for them, resulting in better leads systems in use, brokers have to use multiple systems to procure and manage information on clients, bringing down efficiency and increasing time and costs. We at HashChing aim not only for a transparent, on-demand service and competitive pricing for borrowers, but also set out to solve these issues faced by brokers. Once brokers sign on to the HashChing platform, they get an intuitive dashboard with all the business tools essential to effectively manage leads through custom reminders, document collection and other digital functions. Brokers save on marketing costs as well. We do not charge borrowers anything, nor do we charge brokers on a

helps build consumer trust in brokers and thus finally tackles one of the key challenges faced by them.

Just before this article went to print it was announced that Siobhan Hayden, former CEO of the MFAA, would be joining HashChing’s advisory board.

Mandeep Sodhi is the CEO of HashChing, an online marketplace for home loans that connects borrowers with brokers. It was founded in 2015 and reached $1bn in loans in July this year. Previously, Mandeep worked at Westpac and for other major and non-major banks.

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UPFRONT

STATISTICS

THE REAL RENTVESTORS LJ Hooker’s new report shows that the much-discussed ‘rentvestor’ may be older and more established than previously thought RENTVESTORS – who purchase properties to rent out while renting elsewhere – are one of the most useful yet misunderstood client groups in Australia. LJ Hooker invented the term in 2013 but of course people have bought in one place and lived in another for years.

Unlike first home buyers and investors, rentvestors are not specifically identified in lending statistics by the ABS; they fall into the investor group because of the purpose of their purchases.

It has long been thought that rentvestors form part of the first home buyer group: young professionals who enjoy the inner-city lifestyle and want to get on the property ladder without

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THE THREE TRIBES OF RENTVESTORS

There are various reasons to become a rentvestor.

Of 10 rentvestors:

moving out to the suburbs as previous generations did. However, a new report by LJ Hooker casts doubt on these assumptions, finding that rentvestors are a much more diverse group than previously thought.

Clearly, more research is needed. Either way, tighter lending restrictions on investors mean rentvestors need brokers in order to get finance.

LJ Hooker predicts that the number of rentvestors will rise due to affordable rental markets, unaffordable capital city house prices, and the transition from a mining to non-mining-based economy that is pushing people to move elsewhere for work.

HOUSEHOLD TYPES

NOT SO YOUNG PROFESSIONALS

Rentvesting has been associated with socially mobile young professionals, but in keeping with LJ Hooker’s findings on age and income, it appears couples make up the majority of rentvestors (67%).

Of these, slightly more are couples with children.

According to the survey, only 19% of rentvestors are single people, which is not surprising given the financial commitments involved in getting together a deposit and covering mortgage repayments alongside rent.

Single people with children account for 8% and ‘other [household type]’ make up 6% of renvestors.

Many of the discussions surrounding rentvestors focus on generational differences, arguing that young people are much more attracted to inner-city life than their parents were. However, LJ Hooker found that rentvestors come from a far broader age group, with the biggest single age group being aged between 45 and 64 years. This reflects LJ Hooker’s above-mentioned suggestion that rentvesting is driven by more than ‘lifestyle choices’.

30% 25% 20% 15% 10% 5% 0%

18 to 24 years 25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 64 to 70 years RENTVESTOR AGE

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3 do so because it’s too expensive to buy where they want to (Generally rent in inner-city locations and buy in another capital city)

4 do so due to work or study commitments

3 see it as part of their investment strategy

(Tend to own properties a long way from where they live – often in another state)

(Own properties relatively close to where they live; mostly within 5–20km)

WEALTH: A GREY AREA

PROPERTY APPETITE

Bear in mind that the figures below refer to household rather than individual income.

As 77% of LJ Hooker’s respondents were couples, it’s not entirely obvious what wealth brackets individual rentvestors fall into. However, the fact that 62% of rentvestors have a household income of above $100,000 suggests they are professionals.

Sixty-seven per cent of rentvestors own just one investment property, 17% own two properties and the remaining 16% own three or more.

LJ Hooker puts this down to the trend of rentvestors eventually moving into their investment property or buying another property to live in as their circumstances change.

67% In terms of types of properties, 16% 61% of rentvestors go for established houses, 24% for existing apartments or townhouses, and 1 investment property just 15% for new dwellings or house 2 properties and land packages.

3 or more properties Lending restrictions on new apartments will presumably therefore have little direct impact on these clients.

32%

RENTVESTOR ANNUAL HOUSEHOLD INCOME

15%

18% 14%

16%

5% Less than $49,999

$50,000 to $75,000 to $100,000 to $150,000 to $200,000 or $74,999 $99,999 $149,999 $199,999 more

17%

Source: LJ Hooker Rentvestor Survey 2016

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NEWS ANALYSIS

ULTRA-LOW INTEREST RATES

ZERO CALLING Australia’s cash rate has hit a record low and lenders are unable to keep up. MPA editor Sam Richardson envisages a world in which competing on rate is no longer an option and efficiency will make or break brokerages

AUSTRALIA APPROACHED zero like an out-of-control spender. A cash rate cut here, a cut there, and everyone benefited (if you ignore first home buyers, savers and many others, of course). In August the RBA announced another cut, and giddy brokers prepared themselves for another housing boom, but like an obstinate ATM the banks simply didn’t cough up, refusing to pass on the full 25bp cut. Then the anger began.

This debate wasn’t just confined to the industry. Prime Minister Malcolm Turnbull summoned the banks to explain themselves – as they will now have to do every year – while FBAA CEO Peter White backed Labor’s royal commission into the banks, accusing banks of “filling their pockets”.

Yet many were less surprised. Then-RBA governor Glenn Stevens didn’t expect the banks to pass on the cut, as he later admitted to the Australian Financial Review: “We don’t have enough precision to say they will do X. We just felt probably if we cut 25[bp], they won’t – that won’t all come through.”

The debate the industry should have had wasn’t about why; it was about when. Bank interest rates are determined by the cost of funding: the cash rate plus the cost of doing business plus the costs of raising funds in wholesale markets, which have risen in recent months, explains Michael Witts, treasurer of ING DIRECT. “Even if the Reserve Bank had

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done absolutely nothing, the funding costs of the banks raising five-year money have increased by 40bp,” Witts says.

At 1.5%, the cash rate is low and not likely to go up again in the foreseeable future; in fact November could see another cut, according to CoreLogic’s head of research, Tim Lawless. Whether you look domestically or internationally, at the Australian economy or at the US Federal Reserve, the arguments against the RBA bringing the cash rate down to the low levels of other developed economies

“There is a theoretical lower limit below which you’ll never see a mortgage product priced. We’re getting close to that; I reckon it’s 3.5–3.6%” Martin North, Digital Finance Analytics are few and far between. That’s what APRA recognised in its Corporate Plan 2016–20, observing “below-average growth for the global economy and expectations of low interest rates ... negative interest rates are now featured across a growing share of government debt around the world”.

Negative interest rates remain an unlikely scenario in Australia, but a cash rate of close to 0% is becoming a real possibility. What’s less clear is how lending will fare in an

environment in which rates cannot fall much further, or what a prolonged period of ultralow rates would do to the housing market and wider economy. MPA consulted bank leaders, industry experts and academics to see how brokers would fare in a 0% world.

What zero looks like Ultra-low rates have a number of immediate effects, many of which we’re already seeing.

Falling rates bring down mortgage repayments

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AUSTRALIA’S CASH RATE STILL ABOVE AVERAGE A 1.5% cash rate seems low, but it’s still well above the norm. The US Federal Reserve, which sets the tone for worldwide interest rates, was planning to raise prior to Brexit but has now delayed these plans.

Central bank interest rates as of 13/9/16: NZ

2.00% Australia

1.50% USA

0.50% Canada

0.50% UK

0.25% Japan

0.00% Eurozone

0.00% and thus make them more affordable; Adelaide Bank/REIA’s Housing Affordability Report for the June quarter found housing affordability was at its highest level since 2009, with repayments requiring 29.4% of household income. But at the same time, first home buyers lose out, as they find it more difficult to save for a deposit amid rising prices; FHBs now comprise just 14.3% of the owner-occupier market.

Lower repayments give borrowers more disposable income to put into the economy, but it appears this income is actually being used to repay loans faster. Mortgage Choice’s fullyear financial results found that the average loan life of existing loans has come down from five years in 2011 to just 3.9 years today.

“When you see a continual cycle of cuts in the cash rate as we have, people don’t necessarily

reduce their rates by a corresponding amount,” said Mortgage Choice CEO John Flavell.

“Accordingly, you see the rate of amortisation accelerate a little ... We’re alert in relation to loan life, but we’re not alarmed.”

If the cash rate actually fell to 0% it could mean chaos for the banks. A recent report by Credit Suisse predicted it would take an average of 9% off major bank earnings; around $2.7bn, based on their 2016 forecasts.

Earnings from standard variable mortgages would fall 41%, and the consequences for brokers could be extreme: head bankers looking to cut costs would quickly round on the sponsorships and hospitality associated with the broker channel.

Zero per cent is a nightmare scenario, but arguably just as scary is the realisation that lowering rates won’t necessarily produce the

outcomes the RBA wants it to. Clearly Sydney and Melbourne’s housing markets have benefited from recent rate cuts, but results for the rest of the country and indeed the economy have been mixed. Professor Elisabetta Magnani is the head of the economics department at Macquarie University and a sceptic regarding ultra-low interest rates.

“Interest rates are already very low, to the point where the nominal interest rates cannot really be reduced any further … the RBA is losing one important tool: to manipulate and boost the economy,” she says.

Magnani believes low interest rates only benefit certain groups, a point also made by Digital Finance Analytics principal Martin North. “I can think of very few logical reasons for why you would want to head towards 0% interest rates … there are very few winners in a

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FEATURE / BROKER EDUCATION NEWS ANALYSIS

ULTRA-LOW INTEREST RATES “Some people are going to be rate focused, and that’s always going to be the case, and there are others that have a longerterm relationship with an organisation” Simone Tilley, ANZ Bank low interest rate environment,” North says.

Looking at economies in Europe and Japan, where 0% rates are a reality, he argues that “0% rates have not worked … the case for 0% intervention I don’t think has been made”.

Further interest rate cuts may continue to drive house prices, but they’re not going to bring first home buyers back into play, says CoreLogic analyst Cameron Kusher. “Lower interest rates are unlikely to draw out buyers who can’t currently afford to purchase; what they do potentially do is encourage those people that weren’t previously thinking of buying to purchase a home.”

The commercial property space has its own issues to contend with, CBRE’s head of research, Stephen Nabb, told MPA. “If you look at the response of things like business confidence and capital expenditure to the RBA cuts we’ve seen, it’s been fairly muted.”

With lots of capacity in the business sector there’s no need to expand, Nabb says, and the situation is not helped by cautious businesses.

“We’re caught in a situation where no one wants to borrow more than their income growth, and income growth is fairly low across the country, because of things like commodity prices.”

Crucially, interest rate cuts don’t reduce all the costs associated with lending. Labour costs, from brokers, branches and credit teams, don’t go down to zero, which has led DFA boss North to the conclusion that “it’s almost impossible for banks to take their rates lower than they are … there is a theoretical lower limit below which you’ll never see a mortgage product priced. We’re getting close to that; I reckon it’s 3.5–3.6%. That’s pretty much as low as you’re going to see in the short to medium term”.

How lending will need to change If we really are approaching rock bottom for interest rates, then how can banks compete?

It’s unlikely that borrowers will immediately forget about rates.

“There’s obviously markets that are totally price-driven,” Steve Kane, head of broker at NAB, told MPA. “They’re your online-type

AVERAGE LOAN LIFE FALLING Low rates have encouraged borrowers to refinance, or to keep their repayments up and pay their loans off faster, with implications for loan life, as Mortgage Choice’s FY16 Full Year Results make clear.

Existing loans 6

New settlements

AVERAGE LOAN LIFE (YEARS)

5 4 3 2 1 0

Mar-09

Mar-10

Mar-11

Mar-12

Mar-13

Mar-14

Mar-15

Mar-16

Source: Mortgage Choice FY16 Full Year Results Presentations

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FEATURE / BROKER EDUCATION NEWS ANALYSIS

ULTRA-LOW INTEREST RATES MARKET RESPONSE TO RBA’S AUGUST CUT In theory, cuts to the cash rate should lead to a nationwide growth in house prices. However, a look at CoreLogic’s Home Value Index for August – after the RBA’s 25bp cut – shows that Sydney and Melbourne were by far the main beneficiaries.

Monthly change in dwelling values in August Sydney

Melbourne

situation where they’re purely price-driven; they’re not looking for features.” Kane was talking about NAB’s new product range, which includes a basic low-rate product for these types of borrowers.

However, banks are trying to move the conversation away from rate. Speaking to MPA, Simone Tilley, head of retail broker distribution at ANZ, noted that “interest rates are important, but fortunately for ANZ it’s not the only area we wanted to excel in”. Instead she said they were “looking at things through a more holistic lens” and looking at the type of

mortgage from one property to the next. “It’s $1,800–$2,000 per mortgage just to write the mortgage,” North says. “With interest rates so low, and net margins being squeezed, anything that you can do to reduce origination costs is really interesting.”

Another way to reduce origination costs – and a third element of the new competitive landscape – is by applying technology to the broker channel, North says. “We still have a situation where the banks and to some extent brokers believe the future is about face-to-face conversations. It’s not. It’s clear to me from my

“That whole element of being able to turn it around quickly is as important as the rate … that is a big driver for us” Uday Sareen, ING DIRECT

Brisbane

Adelaide

Perth

-1.2 -0.9 -0.6 -0.3 0.0 0.3 0.6 0.9 1.2 1.5

Cumulative property price growth across the entire growth cycle (June 2012 to August 2016)

64% Sydney

44% Melbourne

Source: CoreLogic Home Value Index

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customers they want to attract. “Some people are going to be rate-focused, and that’s always going to be the case, and there are others that have a longer-term relationship with an organisation,” Tilley said.

Traditionally, non-major banks have competed most on rate, yet they are even less able than the majors to cut costs to compete in a low interest rate environment. MPA asked ING DIRECT’s new CEO, Uday Sareen, how he planned to respond. “Rate is one key component where we do have a competitive advantage,” Sareen replied, referencing the bank’s lack of branches. He believes, however, that the real game changer will be the bank’s LendFast project, which aims to reduce turnaround times by one third. “That whole element of being able to turn it around quickly is as important as the rate … that is a big driver for us,” he said.

Nevertheless he does believe there is further room to cut rates from their current level.

According to DFA’s North, improved bank service will be one area of competition; another will be innovation and packaging. Packaged products are already popular and are consistently named Product of the Year in MPA’s Brokers on Banks survey (currently Suncorp Home Package Plus), but North is most interested in the possibilities for portable mortgages, where a borrower can take a

research that more and more households are wanting to do more on the mobile device.”

The major banks are already moving fast to provide phone payments, while the first fully electronic mortgage was signed and delivered with Bank Australia in early September. Yet having the opportunity to innovate and actually doing something in a different way to their competitors are two very different things for Australian banks. North believes the banks will continue to march as a herd: “I think there is very little evidence in Australia of any differentiation or innovation across the banks, and that’s because effectively they’re still making pretty decent margins on their current proposition.”

Failing substantial innovation, therefore, it seems likely that lenders will expect brokers to also become more efficient in 2017 and could be put in a position of strength by ASIC’s remuneration review, which reports in December. That’s not to say the broker proposition will be diminished: Mortgage Choice CEO Flavell sees complexity around products, pricing and credit policy as a “wonderful opportunity” for brokers. What it could mean is that efficiency – rather than diversification or referrals – sets the agenda for broking as it enters the ultra-low interest rates era.

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THE BIG INTERVIEW

STEVE KANE

“It’s a relaunch of NAB into the broker market, to put the full weight of the NAB brand and the full weight of the organisation behind the broker market”

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STEVE KANE: AUF WIEDERSEHEN, NAB BROKER NAB Broker will finally become NAB, says its GM, with a new set of products and, more importantly, a whole new approach to branch-broker relations

MPA: In brief, what changes are brokers about to see from NAB in the coming months?

STEVE KANE: This is really the final change in a journey that started with the rebranding from Homeside to NAB Broker some two years ago. We recognised that we’d put a barrier in between brokers and their customers when they had to explain what the Homeside brand was; we weren’t taking account of the value of the iconic NAB brand … that was just the start of the journey.

Putting the customer at the centre of everything, we wanted to make sure that the customer had the full opportunity for services, products and interactions with NAB, whether it be through branches, through brokers, the internet, over the phone. No matter how they interacted with NAB they needed to be treated as a NAB customer, exactly the same as any other customer. So the second phase of making this happen was to take the NAB brand and remove the NAB Broker part, so it’s a relaunch of NAB into the broker market, to put the full weight of the NAB brand and the full weight of the organisation behind the broker market.

There will be all of the NAB products made available to brokers, and that will strengthen their position to their customers and give them much more choice. We’ll also see a drive to make sure broker customers are treated with and given the same high level of service

that any NAB customer gets. That’s the methodology behind it and the reasoning behind it. We’re putting the customer at the centre of everything by recognising the value and the connection and the relationships that brokers have with their customers ... it’s like CBA, or ANZ or Westpac or whatever the brand is that they run on; we’ll be running on the NAB brand in the broker market.

years ago – say Homeside or NAB Broker; they can say they’re recommending NAB. It makes the conversation much simpler and gives the customer the opportunity to understand what’s going on. It also gives the customer a much wider product set.

We’re doing a number of other things as well, simply focused around the customer and the broker. We’ve been piloting a number of

“Brokers will be competing on an absolutely level playing field with the proprietary channels of the bank” MPA: Is this move an admission that NAB Broker failed?

SK: Not at all. Our business is going from strength to strength. What we’re saying is: the overall NAB organisation has put the customer at the centre of everything we do.

We recognise that these customers are introduced to the bank by the broker channel, which is a very important channel for the bank, and we recognise that value that is being created by brokers in introducing customers.

To ensure customers get an even better service than what they do today, we’re making a change to the NAB brand to really reflect that when a broker sits down with their customer and says “we’re recommending NAB”, they don’t have to – as was the case two

officers in branches [banker-brokers, or as NAB refers to them, customer advisorbrokers] that deal specifically with brokerintroduced customers, to make sure, first and foremost, that their first interaction with the bank is a positive one, everything is set up, all of the accounts are set up, all of the facilities work from day one; and secondly that they create relationships with the broker and are really introducing other broader branch staff to ensure that everyone understands the value that the broker and customers introduced by the broker are providing.

So this is just saying we’ve not maximised the opportunity for brokers and their customers, and it was time we used the iconic NAB brand in all the services and facilities we

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THE BIG INTERVIEW

STEVE KANE NAB’S NEW PRODUCT RANGE Going from NAB Broker to NAB is more than a branding move, Steve Kane insists. Replacing the old Homeplus products will be four new home loans: Base variable rate Low-rate, no-frills loan for investors and owner-occupiers with a max. LVR of 90%/95% respectively.

Interest-only for five years available.

Tailored home loan Fixed or tailored options available, along with 100% offset. Interestonly available and can be used for construction lending. Tiered discounts on variable rate available.

FlexiPlus The NAB FlexiPlus Mortgage allows a customer to unlock the equity available in their home and use that as a flexible line of credit to fund renovations, purchases or personal investments.

NAB Choice Package Bundles Tailored Home Loan/ FlexiPlus into a banking package with one annual $395 fee replacing application fees, credit card fees and transaction accounts. Includes discounts on home loan interest rate and general insurance.

Source: NAB Broker Reference Guide.

Note details correct when printed on 22 August.

offer, and [ensure that] the reputation of the broker is enhanced because they’ve recommended the customer come to us.

MPA: Among the new products, are there any that are significantly different from what was previously available?

SK: We will be offering exactly the same suite of products that a customer coming through the proprietary channel would get; those products will be available to broker customers.

In fact we’re piloting them through NABBroker.com at the moment … brokers will be competing on an absolutely level

“We think there will be a natural uplift because of the broader product spectrum and the fact we will be touching more markets” playing field with the proprietary channels of the bank. They’ll also get the benefit of the things we offer the broker channel, such as ramped trail, LVR pricing for risk-tiering; those things will still remain.

In terms of products, there’s still the basic product and the NAB Choice Package bundled facility, and then there will be a portfolio-style facility and we’ll release that in November.

The full suite will be available in November; the first three go out right now.

There’s a broader range of products.

They service customers right through from your first home buyer through the Choice package, through to portfolio-style facilities.

So we’re covering all the bases in all markets, while we had a narrower product set in the NAB sphere.

MPA: In a low interest rate environment, is competing with rate now a viable strategy in any area, and will your cashback and waived fee offers remain?

SK: All of those styles of offers will still remain; in fact the Velocity [frequent flyer points] campaign will remain right through to December, and that’s across all channels of the bank, including the broker channel. We’re not necessarily saying this is a total rate/pricedriven thing; in fact what we’re saying is we are offering the full suite of product features

20

that customers can choose from, from basic products right through to a very fully featured portfolio-style facility.

It’s around product features, and it’s around service as well; it’s around accessibility to all the channels of the bank through these products. So if the customer, having taken one of these products out, walks into a NAB branch, the branch staff will know exactly who that customer is, what that product is, how to service that customer, and in particular they’ll know who the broker was that introduced the loan; they’ll know that this was a brokerintroduced customer.

MPA: So is this what customers now want from products: more features; more ways to connect?

SK: There are obviously markets that are totally price-driven. They’re your online-type situation where they’re purely price-driven; they’re not looking for features. Different customer segments look for different things; there’s no doubt about that. It’s really the choice we’re talking about. You’ve really got a wider choice of a range of products so we should be able to satisfy more broker customers’ needs. Each customer has their own individual set of needs … this is just making sure brokers can offer this to their customers.

MPA: You’ve hinted at coming service improvements – what exactly will brokers be seeing?

SK: The advocacy that customers have for their brokers is determined to a greater or lesser extent by the service they receive from the lending institution their broker puts them with … this is really where the people that we’ve been putting within the branch networks – and we’ve been piloting in Sydney and Melbourne – has really come to the fore. We’ve been able, after six months and a number of customers going through this process, to track what’s happening in terms of how the

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customers feel about it, and it’s been an overwhelming success. We measure on net promoter score, and the NPS for those customers that used that service is much greater than the standard mortgage NPS for all institutions. We know now that it absolutely works. It works for the broker; it works for the broker’s customer. It’s really changing the face of service to that customer.

Part of their role is understanding that any customer introduced to the bank through a broker is an NAB customer … it’s their role to educate other branch staff about this, setting up broker hubs to manage these customers that are already existing, but will be expanded as well.

MPA: Are there any changes to commission with these new products?

SK: Same ramped trail, same commissions; absolutely no change at all.

MPA: Will NAB having an identical product range for brokers and branches do anything to reduce channel conflict?

SK: Yes, absolutely. Part of the benefit of having one product set means there is no real necessity and no drive, in terms of giving the customer the correct product and correct service at the right time, to look at channel conflict.

We think that the same product set will go a long way to doing that. We also know that having established these broker-banker associates to look after broker customers

specifically, [that there’s an] education process which they provide. We’re already seeing, in the four pilot areas, that the opportunity to help and service that customer is far greater than trying to create any conflict between the broker, themselves, and the customer … we’ve also changed incentive schemes to ensure that there is no value in transferring a loan from NAB to NAB Broker or NAB Broker to NAB. The reality is they won’t need to do it.

MPA: How would you like brokers to view the ‘new NAB’ 12 months from now?

Do you expect an instant response from brokers in taking up these products, or does NAB need to earn brokers’ trust?

SK: I think you’ve always got to be earning the trust of your customers – and that in this instance is the brokers who use NAB as a supplier to their customers. We think there will be a natural uplift because of the broader product spectrum and the fact we will be touching more markets within the brokers’ portfolio of customers. But we also recognise that as we build the trust through these relationships we’re setting up through the branch network … initially it’s “oh, we’re not too sure”, but after having one or two customers going through these branches, they think it’s the best service they’ve ever received … we’re really looking not so much to talk about the products – that’s the facilitator.

This is about the full power of NAB standing behind the broker channel.

NAB’S BANKERBROKERS Banker-brokers – known as ‘customer adviser-brokers’ (CABs) within NAB – are in-branch personnel whose purpose is to onboard broker-introduced customers, identify cross-sell opportunities and upskill retail staff.

A pilot ran from March 2016, in which 400 mortgage brokers from high-concentration areas (eg Parramatta in Sydney) were paired with banker-brokers in four NAB retail branches, split between Sydney and Melbourne.

A broker can refer their customer to a CAB, and once the loan is approved the CAB contacts the customer. Then an in-branch or phone meeting takes place between the CAB and the customer, and lastly the customers’ needs are discussed and addressed with the CAB. The CAB keeps the broker in the loop with how this goes, and any queries related to the loan are referred directly back to the broker, to respect the primacy of this relationship.

NAB says that given the success of the pilot, banker-brokers will be rolled out more broadly in late 2016.

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SPECIAL REPORT

TOP 10 COMMERCIAL BROKERS

TOP 10 COMMERCIAL BROKERS Overcoming reluctant banks, APRA pressure and a slow economy, this year’s top commercial brokers have a lot to teach residential brokers about weathering a storm

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SPONSORED BY

WHAT IF, one day, banks suddenly decided to stop writing home loans for the centres of Australia’s two capital cities? We’re not talking about altered LVRs, postcode exemptions or higher serviceability demands, but about a complete shutdown in lending. What would MPA’s Top 100, Young Guns or even the AMAs look like if brokers simply couldn’t find lenders for their clients?

This year’s Top 10 Commercial Brokers give us a vision of that dystopian future. Property development specialists in the Top 10 have had to deal with major banks simply refusing to lend, in many cases, or demanding essentially risk-free developments. Business lending specialists have had to contend with a sluggish Australian economy, banks reluctant to lend, and businesses reluctant to invest. APRA is turning its gaze towards commercial property, which chairman Wayne Byres flagged as a danger area in a speech in late August.

Despite all this, broking has reasons for optimism, because this year’s Top 10 are doing extraordinarily well. The total amount of lending, number of loans, and average volume have gone up, in some cases substantially. Rather than retreating to their core client base, many of these brokers are gearing up, diversifying and taking on staff – some in expectations of better times ahead, but most because they believe it’s the best way to weather the storm.

From tips on quality applications to applying technology and improving your process, there’s a lot that commercial and residential can learn from this year’s Top 10. Arguably the biggest lesson, however, is about resilience. All but two members of 2015’s Top 10 made it into this year’s Top 10, despite numbers going up all round. This contrasts with a residential space in which top brokers come and go (have a look at the Top 100’s top 10 over the years if in doubt). Evidently, the Top 10 Commercial Brokers have much to teach their residential counterparts about building businesses that prosper both in good times and when the weather turns bad.

A MESSAGE FROM OUR SPONSOR Westpac is proud to sponsor the 2016 MPA Top 10 Commercial Brokers list – the industry’s most recognised and highly sought-after broking honour for commercial brokers in Australia. This prestigious list seeks to recognise the highest-performing brokers and highlights the contributions they have made to our industry and within their own communities.

As we know, our economy continues to change rapidly, and there is no doubt that the past 12 months have been an ever-evolving period for Australia’s third party industry players; however, there are always positive signs in the markets, especially across industry specialisation, trade and invoice finance, asset equipment specialist finance, and with working capital cash flow opportunities.

That being said, the most professional commercial brokers continue to adapt and evolve to overcome the challenges, in order to provide a greater value proposition to their clients. This behavioural outlook is underpinned by the industry’s traditional values of quality, professionalism, integrity, versatility, passion and innovation.

As Westpac builds towards celebrating our 200th year serving Australia ahead of our third century in 2017, our deep, strong partnership journey continues – to grow and help make commercial broker business stronger, always connecting you to the best of Westpac, supporting you through the journey to help your clients realise their dreams and financial goals sooner.

On behalf of Westpac, we would like to congratulate the commercial brokers who have made this year’s MPA Top 10 Commercial Brokers list and for stretching yourselves to achieve nothing less than excellence.

Janelle Pearce, national head of Westpac commercial introducers

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SPECIAL REPORT

TOP 10 COMMERCIAL BROKERS

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DAVID KIMMORLEY Balmain’s Canberra Office is consolidating its strong growth and revenues are stable, thanks to a process of reorientation

WHILST DAVID Kimmorley is a new entrant to this

Total value of commercial loan settlements 2015/16

$84,241,685

Number of commercial loans settled

26

Average commercial loan size

$3,240,065

Years as a commercial broker

9

Aggregator

Balmain Commercial 24

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year’s Top 10, Balmain Commercial are certainly not a new entrant to the commercial space. For more than 30 years they’ve been straddling the broking, asset management and investment industries, with offices in Australia and New Zealand. Balmain is enjoying record volumes in the commercial lending space despite a tough environment, as Kimmorley’s office Balmain Canberra demonstrates.

The Canberra office had a record year in 2014/15 answering the call of existing and new ACT clients for funding solutions, in particular where they were affected by retreating bank appetite for construction funding. In 2015/16 a lot of effort was put into servicing the expanded client base and providing quality service to large development exposures. Many have turned to non-bank funders, Kimmorley included: “it can save them money by being ready earlier. We try to accelerate projects by helping clients get started earlier, and that delivers them a better overall financial outcome.”

Where major bank funding is still a possibility, Kimmorley has been blunt with developers on what will be required to access it, namely “putting together an application that will get approved, rather than the dream of what the developer might get…developers have often got their loan specs from what was available six to 12 months ago rather than what is available today.”

The types of funding they’ve been providing have also shifted, to more mezzanine and hybrid focused arrangements.

The biggest change however, has been working with existing clients in new areas, Kimmorley explains: “we focused on bedding down some construction deals and helped good clients achieve other business goals.” This has been a chance for Kimmorley to draw on Balmain Commercial’s diverse resources and offer different types of finance; however they’ve also been adding these in office: “we hired and are training a further staff member to assist with SME and home loans growth capacity.”

Thanks to these changes by the brokerage, revenues have remained stable, and Kimmorley is positive about

the future. The first quarter of 2016 saw an increase in investment loans, and there’s even light at the end of the tunnel for property development finance, Kimmorley believes: “I think it will stabilise for a while: the APRA changes have been pushed through, and then it depends whether the Sydney and Melbourne markets – and to an extent Brisbane – continue to have the demand which they once had.”

Nor should Canberra be forgotten: although small in size, Australia’s capital is expanding, with its airport getting an international service and the Canberra Times predicting the population could surpass 400,000, driven by young people looking for work. It’s convenient, therefore, that Balmain Canberra also offers home loans, including through its own fund.

Good times do tend to attract competitors, however, and Kimmorley warns that commercial brokers need to reassert the value of their expertise: “With the current focus on residential brokers selling commercial finance and new-to-market entries, the focus needs to remain on knowledge, communication, service and product access to deliver a superior client outcome.”

SPONSORED BY

DANIEL ZADNIK For Zadnik and his brokerage, Hawthorn Finance, business lending continues to be about long-term, reliable service and relationships

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DANIEL ZADNIK is an established fixture in the Top 10, and indeed the entire commercial finance world. Melbourne-based Hawthorn Finance – part of the national Bentleys Group – was established in 2008, but prior to that Zadnik had been at ANZ for 18 years in business banking. His success is built on this considerable experience and permanence in this market.

It’s something that Zadnik is acutely aware of.

“The biggest selling point we have as an owner of a business is that we tell the clients that they will have a long-term relationship with us and they don’t have to keep educating the next relationship manager at the bank.” There’s been no change in service provision: the brokerage continues to offer commercial finance, asset finance and residential lending, and the client base continues to be small businesses. “I don’t think [these] clients really shop around for commercial brokers,” says Zadnik. “I think if they meet you and are happy with the expertise you bring to the table they will engage your services.”

Zadnik has a considerable advantage when it comes to getting clients. The Bentleys Group is a network of independent accounting and advice firms across Australia. It has recently expanded into Brisbane, which Zadnik sees as a good growth market. Bentleys covers a vast range of industries: Zadnik mentions property, manufacturing, agriculture, professional services, hotels, pharmaceutical, real estate, “just to name a few”.

Bentleys heavily promotes Zadnik and the broking side of the business, providing a stream of referrals.

These referral relationships work both ways. Having the network in place means, as Zadnik puts it, “we have all bases covered”, allowing him to refer to specialists in accounting, taxation, superannuation, audit and financial planning.

This flexibility is essential. Zadnik offers almost all types of finance, including residential home loans, which he says are “complementary to commercial loans as the majority of business owners have home loans and investment loans”. Covering all bases, however, has

Total value of commercial loan settlements 2015/16

$85,139,409

Number of commercial loans settled

38

meant that Zadnik has been hit by changing lender appetites in the property development space: his volumes dropped by $40m from 2015. The problem is credit, he argues. “It has been significantly harder to get funding in 2016, particularly property development as the banks have really tightened up in this segment.”

It is possible that this turbulence could end up being to Zadnik’s benefit. Hawthorn Finance’s target client would traditionally have dealt with a local business banker, and many continue to do so, according to Zadnik. “My experience is if they don’t engage you then they are generally happy dealing with their bank directly.” If those clients find themselves unable to obtain credit from their bank of choice – or feel let down by the long delays in decision-making and lack of transparency regarding those decisions – they may join their counterparts in seeking out brokers like Zadnik, to give them more confidence and a choice of options.

Those clients will be looking for the reputation and stability which they had previously associated with their bank – attributes that make Zadnik, Hawthorn and Bentleys well suited to fill that vacuum.

Average commercial loan size

$2,240,511

Years as a commercial broker

8

Aggregator

AFG

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SPECIAL REPORT

TOP 10 COMMERCIAL BROKERS

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JASON ARNOLD Jason Arnold is building up Quattro Commercial Property Finance as tight credit in the property development space drives developers his way

PROPERTY DEVELOPMENT is a tough space

Total value of commercial loan settlements 2015/16

$96,564,617

Number of commercial loans settled

22

Average commercial loan size

$4,389,301

Years as a commercial broker

15

Aggregator

FAST

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to be in this year, with fears of oversupply and cutbacks on lending by the banks feeding into an atmosphere of uncertainty. The last thing on people’s minds is expansion, but down in St Kilda you’ll find a brokerage that’s bucking the trend.

Jason Arnold’s volumes have gone up, from $85m to almost $97m, and so have his staff numbers. He’s taken on a number of young credit analysts without any banking experience – “raw, fresh, smart young blokes who we could teach our way of doing things”, as he puts it, as they “tend to have a crack a bit more at technology than I would and have ideas a bit left of centre to mine”. Having these credit analysts take on more of the process, and auxiliary areas such as residential lending, has freed up Arnold to find new clients. However, Quattro’s success has not just come from finding new leads; it’s come from picking those projects most likely to succeed.

For a broker, the main problem is that property development finance applications are taking longer, with the broker having to take a magnifying glass to every element of risk, from marketing to the choice of builder, in order to satisfy the banks. While the client’s situation is the main determinant of how long a deal will take, Arnold explains, “we’re doing more work per transaction ... we’re going that little step further on every element of the transaction”.

Better developers are now realising how much the game has changed. “The experienced clients have packaged up their development so they can start straight away,” Arnold says. “The holding costs aren’t there: they haven’t got the six-month lead-in period before constructing. They’ve hired experienced developers and experienced builders so they’ll get in and out a lot quicker. When you’re using very expensive money it means you’ve got to get in and get out a hell of a lot quicker.”

Quattro is still dealing with less experienced developers, because Arnold believes they give his young staff a chance to ‘cut their teeth’. The key is

correctly sizing up the clients prior to taking on a project, he says. “We like to see them start on a lower scale and build up progressively. If they’re fly-bynighters who want to shoot the stars on deal one and haven’t got enough equity, we’ll probably pass on that transaction.”

The queue at Quattro’s door is certainly getting longer. Having settled some complicated deals over the past two years, the brokerage’s reputation has been spread by word of mouth, which is why Arnold is optimistic. “We’re certainly looking at a growth model. We think the enquiry levels we’ve seen over the past couple of months will increase a fair bit. My challenge is to search for and find reliable non-bank sources of funding.” He’s been looking at non-bank funding – two deals worth $75m and $78m were recently done through non-banks – but also newer funds and larger funds that are starting to consider smaller deals in the $10m–$60m range. It’s still a work in progress. “That’ll continue to be the case over the next 12 months as I can’t see it getting any easier in the major bank sector,” Arnold says.

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26/09/2016 2:41:22 PM

SPECIAL REPORT

TOP 10 COMMERCIAL BROKERS

7

JAMIE GILES Giles is at a new brokerage and is broadening his scope, taking his holistic advice approach from health care to retail and beyond

2016 SAW a huge change for Jamie Giles as he

Total value of commercial loan settlements 2015/16

$108,473,721

Number of commercial loans settled

141

Average commercial loan size

$769,317

Years as a commercial broker

3

Aggregator

Astute Financial Management 28

moved from Green Finance Group to Astute Financial in July. In many ways Giles was striking out on his own, having first moved into broking at Green Finance in 2013, following almost three decades in banking. And while Giles’ numbers in this year’s Top 10 relate to his time at Green Finance, his reasons for leaving are intricately tied in with his approach to broking.

As Giles explains, having an established reputation in a niche area can also be restrictive: “In Green Finance we were restricted to healthcare transactions, but we’ve decided to branch out, and we’re doing a lot of retail and different types of businesses now.” Giles predominantly dealt with and continues to deal with medical centres, dental practices and pharmacies, helping finance acquisitions, equipment and more.

Although he works in a niche area, the way Giles approaches broking has relevance throughout the commercial sphere and beyond. “The type of client that we get sticks with us because we can give them guidance throughout the process, whereas a bank would say, ‘You need to go see your accountant or solicitor to get everything sorted, then come back and we’ll give you a finance solution’,” Giles explains.

He engages with those associated specialists – or recommends new ones if required – and his proposition is as much about long-term advice and saving time and effort as it is about saving money through lower rates.

Another way to understand Giles’ approach is by looking at his interview technique. He’s not afraid to go beyond the “staples of a transaction”, that is questions such as how much do you want; what’s the security; how are you going to pay it back? Instead he advises brokers to ask the “key questions”: why are you making this move; what’s the difference between being a paid consultant rather than your own business owner, and do you have the skills to be able to operate that? Giles is comfortable with the risks associated with such an approach. “If they’re taken

aback they’re probably not the client for me,” he says.

“But at the same time, people come to me because I might look at things slightly differently.”

The challenge for Giles is balancing his image, between the 25 years of varied banking experience that gives him the ability to provide widespread advice, and the risk of being shoehorned. “You have to re-engineer the way that you represent yourself in the market all the time. I don’t want to be seen as the person they come to just to get a piece of equipment finance, or the person they go to just for the business side of things … I want to be part of their overall journey.”

Being a healthcare specialist, Giles concludes, doesn’t preclude offering services in other areas; in fact it necessitates it. “One of the things we understand is just because we’ve got a doctor, who’s very good at being a doctor, doesn’t mean he doesn’t want to be in property development, or have a good residential portfolio. We can’t restrict ourselves just to business transactions; we’ve got to look at all of those elements.”

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26/09/2016 2:41:38 PM

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MARWAN RAHME Rahme and his brokerage, Kanebridge Capital, are gearing up for what they expect will be another property boom in Sydney

6

FROM EIGHTH to seventh to sixth, Marwan Rahme has gone up a place each year, he jokes, and so in six more years he could reach the top. Yet Rahme could be seeing a number one finish quite a bit sooner than that, if his reading of the market turns out to be correct.

Kanebridge Capital is based in Sydney’s Baulkham Hills, at the heart of the recent Sydney construction boom and – in recent months – its virtual hibernation.

As Rahme sees it, banks “[have] almost – and in brackets almost – closed in the last six months, which has forced the developers and builders to seek other funding … our expertise is needed and warranted, which makes getting clients a lot easier.”

In addition to an established reputation, Kanebridge has a number of other assets that put it in a position to do well. It has an existing database of developers, many of them repeat clients who have recently found themselves turned down by banks and in need of Rahme’s help. It has long had an in-house quantity

“The development doesn’t proceed unless it gets funded; it doesn’t get funded unless there are presales in place” surveyor, and recently signed up an architect to be a full-time development manager. These specialists are invaluable, Rahme explains. “Having someone like that in-house allows us to give feedback to the developer about what he needs to change early on to get funding, rather than leaving it to the last minute.”

Having in-house specialists has been central to Kanebridge’s unique value proposition; however, there are good reasons for other brokers to follow this approach. “The development doesn’t proceed unless it gets funded; it doesn’t get funded unless there are presales in place.” Small, pokey apartments might have sold

Total value of commercial loan settlements 2015/16

$131,545,370

Number of commercial loans settled

18

18 months ago, but “these days buyers are a lot smarter; they’re looking for true value”. Developers have to work smarter to provide that value, he says, reducing useless space, such as hallways, wherever possible.

There’s also an overwhelming demand for efficiency from funders, Rahme says. “The biggest thing today is reducing construction costs, because construction costs have gone up.” Kanebridge estimates costs have risen by 15–20% over the past 24 months.

Beyond adding much-needed expertise, the act of taking on a new development manager during hard times is in itself a statement. “What we’re predicting is a loosening up of credit,” Rahme explains. “We believe liquidity will be more extensive and the banks will have more funds to lend in Sydney. In-house, our analysts don’t believe this is a long-term funding issue.”

A lack of starts over the last six months, matched with continuing demand, low interest rates and thus repayments, and banks beginning to see a payoff from earlier construction booms, means Kanebridge is “gearing up … to deal with the influx which we believe is round two or three of the Sydney property boom”.

Average commercial loan size

$7,308,076

Years as a commercial broker

16

Aggregator

AFG

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SPECIAL REPORT

TOP 10 COMMERCIAL BROKERS

WHAT AN ELITE COMMERCIAL BROKER LOOKS LIKE IN 2016 Looking at the data behind this year’s Top 10 Commercial Brokers provides a number of insights into their businesses and the commercial sector as a whole

THEY’RE RAISING THEIR GAME Drawing comparisons between different years can be problematic, as you may simply be comparing brokers. However, in the case of the Top 10 Commercial Brokers this becomes less of a problem: five members of 2014’s Top 10 made it into 2016’s Top 10.

Between 2014 and 2016:

The average total loan volume per broker

Up 81% to $150m

Number of loans per broker

Up 153% to 70

THEY’RE WORKING HARDER TO GET FINANCE

Harder No change

30

0%

Easier

0%

Much easier

Is it getting harder to get finance from the lenders you usually work with?

Up 44% to $84m

To put this in context, annual economic growth is presently just

3.3%

GETTING THE APPLICATION RIGHT

This year’s Top 10 have confirmed what many brokers, businesses and developers have suspected for a long time: it is getting harder to get finance. Both developer-focused and business-focused brokers in this year’s Top 10 experienced difficulties 10% 70% getting finance from their usual lenders.

Much harder

Loan volume required to enter the Top 10

20%

While there are many areas of commercial lending, this year’s Top 10 have a few tips that can be applied to all areas of lending: “I think the key to any good application, regardless of the industry, is transparency of information. So many times you go straight to the staples of a transaction – how much do you want, what’s the security, how are you going to pay it back, rather than asking the key questions: why are you making this move; what’s the difference between being a paid consultant rather than your own business owner, and do you have the skills to be able to operate that?”

Jamie Giles

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TECHNOLOGY IS ONLY BEGINNING TO MAKE AN IMPACT In 2015/16 lenders and technology providers began to look at the commercial space, which has lagged behind residential lending in software provision due to the increased complexity of the applications. There may be another division opening up: those brokers who saw technology improving the application process were largely business-lending focused; those concentrating on property development were far more likely to see ‘no change’. See our News Update at the front of this magazine for more on technology in the commercial lending space.

Has technology improved the application process for commercial finance in any way?

50%

No change 40%

Improved Much improved

10%

Tech innovator: Mark Churchill The only broker to see technology have a big impact on their business was Mark Churchill of Allfin Financial. Allfin is one of the co-creators of Kubio, a cloud-based software platform for processing commercial loans from beginning to end.

T “We have a pretty defined process that ensures we demonstrate that we actually have taken it [the deal] to the banks … we do a process to review the deal before it goes to banks, and get the client to sign off on it. Then once we go to the banks we come back with the four main options and they choose which bank they want to go with … everything’s been defined upfront before they make a commitment, so they know what they’re getting themselves into.”

Mark Churchill

“A great application always starts with a great relationship, and we take the time to get to know our clients really well … We pride ourselves on the quality of our applications.

We don’t just forward the information to the bank; we actually write the full application ourselves. In most cases, the bank will use our application as their own, which saves a lot of time in the assessment process … We pre-empt all the usual questions and requirements from credit upfront, and it’s rare for us to have to go back to the client more than once to get an application processed and approved.”

Daniel Green

WHAT THEY’RE OFFERING What’s evident is that all commercial brokers need to have a diversified offering, including services other than their core specialism. All of our brokers offer equipment finance, for instance, and specific types of business finance.

Furthermore, all offer home loans, and some are setting up dedicated divisions for residential lending.

In terms of their core specialism, however, this year’s Top 10 can be divided into two groups: those specialising in development/construction finance, and those specialising in business lending.

Property development specialists wrote fewer and much bigger loans (25 loans with an average value of $7,543,633); business specialists wrote a larger number of loans with a lower value (115 loans with an average value of $1,343,928). The Top 10 is evenly split between the two groups.

10

brokers offer home 10 loans

10

brokers offer 10 equipment finance

8

brokers offer property 10 development finance

5

brokers offer 10 debtor finance

10

brokers offer other, 10 industry-specific types of finance

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SPECIAL REPORT

TOP 10 COMMERCIAL BROKERS

5

MARK CHURCHILL Niches shouldn’t hold you back, as Mark Churchill and Allfin Finance are demonstrating, using pharmacy finance as a basis for excellent results and new broking technology

IN A list that is somewhat dominated by property

Total value of commercial loan settlements 2015/16

$132,779,422

Number of commercial loans settled

112

Average commercial loan size

$1,185,531

Years as a commercial broker

5

Aggregator

PLAN Australia

32

development, it’s easy to forget about other areas of business. Yet it’s taken a broker from a particularly niche space – pharmacy finance – to add $40m to his settlement total, disrupt broking technology and break into the top five, all over 12 months. To add even more confusion, as Mark Churchill explains, in terms of pharmacy turnover “it was actually the worst year we’ve had”.

Allfin Finance, located in South Melbourne, is a pharmacy specialist, providing finance for equipment, refinancing, but primarily acquisitions, which is why the annual rate of acquisitions dropping from an average of 500 to 150 is such a concern. Nevertheless, five years of educating clients are “starting to pay off ” says Churchill, with more refinancing work, and business beginning to come in from other areas of health care.

“I think the general commercial market is just hard with banks,” says Churchill. “In the past, policy was just a guideline, and they’d do deals outside that.

Now it’s become the general rule.” Consequently, lenders’ rigid application of policy has resulted in the average time for an acquisition deal being pushed out from eight weeks to up to 12.

Not that process isn’t important to Allfin; in fact it’s central to its value proposition. The aim is to walk the client through the process, says Churchill. “We demonstrate that we actually have taken it [the deal] to the banks … we do a process to review the deal before it goes to the banks, and get the client to sign off on it. Then once we go to the banks we come back with the four main options and they choose which bank they want to go with.”

This process “builds trust between us and the client – we’re not just giving them a name; we’re showing them the process and giving them the choice, and I think that’s paying off ”, Churchill explains. Another way that the brokerage seeks to build trust – and quite an unusual one in the commercial space – is by avoiding overly close

relationships with other specialists. “I think that’s why people come to us, because their accountant also does their finance; he’s a pharmacy broker and does value-add services: the line starts to become blurred in terms of whether they’re getting the best deal or not.”

Allfin also aims to take a proactive role in regular reporting of the client’s position to the banks. “Most brokers don’t get involved in that at all, but I see it as a way to drive conversations with the client and make sure we’re in front of them once or twice a year.”

As the year comes to a close, Allfin is diversifying – into the software business. They’re co-creators and major shareholders in Kubio, a cloud-based platform that can process loans from start to finish, developed in conjunction with other commercial brokers and Macquarie Business Banking. Churchill believes the platform will have a huge impact. He says: “The concept will change this industry …

I came on board with the healthcare piece. We’re already national but we want to get bigger, and we need the platform to do it.”

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26/09/2016 2:42:31 PM

SPONSORED BY

DANIEL GREEN Edging closer to the top, Green Finance Group continues to expand its offering, but its director is taking a more hands-on role

4

GREEN FINANCE Group is probably the closest thing broking has to a one-stop shop – a term that Daniel Green himself admits is bandied around far too much in the industry. The brokerage offers a vast range of finance types, from the niche (hair and beauty finance anyone?) to the general, including financial planning and residential lending. Over 2015/16 Green wrote an impressive 183 loans – the most prodigious writer in this year’s Top 10 – with an average value of under a million.

The brokerage isn’t done yet, however, and has continued to diversify with the introduction of a carbuying service. It’s a great example of diversification, says Green. “By engaging a car buyer, you not only ensure that your client gets the best deal but you also keep them away from the dealerships’ own financial services … we can organise finance and insurance quotes on the spot. We can even organise for the car to be delivered. People literally do not need to leave their home to buy a new car.”

In 2016 the brokerage has also consolidated; it has bid goodbye to some brokers and closed down its relatively new Sydney office. Perhaps the biggest change has been Green himself moving to a more hands-on role, going back out on the road, talking to clients and referral partners. Oddly enough, it’s the brokerage’s success that has made this essential, explains Green. “With the volumes constantly increasing, there’s a strong temptation to stay in the office and concentrate on getting the deals written.

However, this is not a sustainable strategy if you want to continue to grow.”

Green has concentrated on getting in contact with clients, making 20 phone calls a week to past clients.

Commercial brokers who’ve previously sat back and waited for referrals need to be more proactive, he argues. “Especially when the general economy is slower than usual, you need to be out there building your presence and profile to make sure that when an opportunity comes up, you are the first person people think to call.”

Total value of commercial loan settlements 2015/16

$154,503,702

Number of commercial loans settled

183

On the topic of hiring those new staff, recent experiences have convinced Green that “nothing will ever be a substitute for on-the-ground experience”. By this he means banking experience. “To competently negotiate for a client, you need an intimate understanding of how banks work and what is achievable within their frameworks. You need to know who to approach and how.” Brokers without this experience often end up fighting the banks and prolonging the experience for the customer, Green warns. Ultimately he wants staff that “don’t just forward the information to the bank” but actually write a completed application the banks can use instantly.

There’s no easy solution to the problem of writing big numbers, dealing with small clients, and managing a brokerage. Nevertheless, Green is confident in his approach. “I have always been a big believer in making sure that you can help all customers – big and small … I’ve never turned a transaction away for being ‘too small’, and we treat all our clients with the same level of respect and importance. Ultimately, those ‘small’ customers are the ones that stay with you for life.”

Average commercial loan size

$844,283

Years as a commercial broker

6

Aggregator

Astute Financial Management www.mpamagazine.com.au

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26/09/2016 2:42:43 PM

SPECIAL REPORT

TOP 10 COMMERCIAL BROKERS

3

GLEN BARNES Flying the flag for the one-man band, commercial property broker Glen Barnes has not only broken into the Top 10; he’s done it without any support staff

GLEN BARNES’ story is the classic broking story. An

Total value of commercial loan settlements 2015/16

$168,000,000

Number of commercial loans settled

100

Average commercial loan size

$1,680,000

Years as a commercial broker

10

Aggregator

FAST

34

unsung one-man band who after years of effort building good relationships finds all his chickens return to roost in the same year, getting him the recognition he’s long deserved. Yet in many ways Barnes’ story is even better than that: he’s broken the elite club that is the Top 10 Commercial Brokers wide open, writing an astonishing $168m over 100 loans and clinching the third spot.

Barnes and his brokerage, Barnes Finance, are based in Southeast Queensland and write commercial property loans, development finance, asset finance and also home loans. The 2015/16 financial year saw a number of longterm clients decide to act. “I’ve had some very large clients for a very long time, and they’ve all come together in a perfect storm where they’ve all wanted me to do something all over the previous 12 months,” Barnes says.

While he wrote a relatively high number of loans, a couple were particularly large, one for $32m and another for $25m, including industrial subdivisions and CBD commercial office buildings.

Barnes met many of his clients at NAB, where he worked for 20 years until going into broking in 2006.

Of course, keeping a client for a decade requires work from the broker. Barnes has a diarised calling program, usually contacting clients every month or three months, after a fair follow-up period. He also uses email, text and LinkedIn, sending over relevant information, articles and links. Brokers can’t get too comfortable with their clients, Barnes warns. “You’ve got to be on the front foot, and you’ve got to be calling all the time, because if you’re not calling, someone else is calling.”

This degree of client contact is made all the more astonishing given Barnes has zero support staff; he is the only broker in this year’s Top 10 to do without. “I work extremely long hours,” says Barnes. “I’m running to keep up with everything all the time; I’m just very structured in my daily work.” It’s not an approach anyone can manage, he admits. “You have to have excellent time management skills, you’ve got to be able to block time out to process things, and you’ve got to have a bit of work-life balance.”

“You’ve got to be calling all the time, because if you’re not calling, someone else is calling” Barnes also observes that his is not an approach that everyone would choose. He picks when he works – for example an early-morning stint before driving the kids to school – but ultimately “you’ve got to give up a bit of sleep and a bit of personal relaxation time”. Nevertheless, Barnes has no plans to take on anyone soon. “I have considered support staff but, to be honest, I like doing what I do the way I’ve done it; I’ve been successful at it.”

With the deals and commissions rolling in, his approach is clearly working. “It’s reward for effort: if I make a lot of money, it all goes to me … I just don’t think they would do more than what I could do anyway; I just manage.”

Furthermore, his performance so far this financial year suggests more top results could be on the way, meaning his story will be more than a one-off.

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26/09/2016 2:43:04 PM

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MARSHALL CONDON Neue Black’s founder is reaping the benefits of patience, while constantly looking for new ways to finance his clients in the property development space

MORE THAN doubling one’s volumes – from $119m to $256m – is a startling achievement.

Leaving the franchise system and going independent in the same year is an entirely different challenge.

Yet that’s what Victoria-based Marshall Condon has achieved, and having gone from sixth to fourth to second in the Top 10, his upward career trajectory is crystal clear.

Condon’s numbers have been years in the making, he explains. “A lot of those transactions are larger transactions that take a while to settle. One of the transactions in there was $160m, a tower we financed, and that’s taken probably three years to do.” The dayto-day brokerage is kept ‘ticking along’ by residential lending; with the commission from the larger deals “we keep [it] in the bank for a rainy day to iron out the ebbs and flows that we get”.

In fact the client behind the tower was Condon’s first deal while at Mortgage Choice. Condon has built relationships with property developers from his time at Bankwest, through his time at Mortgage Choice and then Neue Black. Nevertheless, founding Neue Black was a big change for Condon. The brokerage is a masterclass in branding – slick, corporate and openly targeted at millennial buyers and investors.

Yet Condon insists he’s not sidelining commercial.

“There’s a long-term strategic direction to line up the residential and commercial side in a more sophisticated way,” he says.

For now, individual reputation rather than brokerage brand matters most in property development, Condon says. “The market we work in is quite a small space, so they know who’s who, and who delivers on what they say they will.” Clients and brokers are faced with the challenge of overconcentration, where banks won’t lend to larger developers who already have multiple deals with them, and Condon prides himself on finding a bank that will, and acting as a ‘translator’ between lender and developer.

If Condon’s success this year has been a delayed effect of the development market’s success over the

2

Total value of commercial loan settlements 2015/16

$255,644,500

Number of commercial loans settled

16

last few years, then the question arises as to what Condon’s numbers will look like a few years from now. The year 2016 has seen banks pull back from lending to developers in certain areas – many of them in Melbourne – and brokers are looking elsewhere for finance. Condon in particular is thinking ‘out of the box’. “The main lenders are pulling out, but that doesn’t mean that a large hedge fund from America, for example, won’t want to come in and start offering first mortgages.” He knows of two hedge funds currently doing so, in addition to various Chinese lenders.

For Condon, development finance faces a period of transition. “Will it be as cheap? Probably not. Will it be as available? Probably not. So you’ll still need to know the right people. I think there will be a delayed effect, because credit has tightened now and there aren’t many other options yet, so I think in the next two to three years this whole issue of oversupply will fix itself given tightening credit.” Even when the tap does get turned back on, “it’s going to take a good developer to get a good return out of these sites”.

Average commercial loan size

$15,977,781

Years as a commercial broker

3

Aggregator

Finsure

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26/09/2016 2:43:14 PM

SPECIAL REPORT

TOP 10 COMMERCIAL BROKERS

GEORGE KARAM Byblos Finance has overcome a tough year to hold the top spot, and Karam is making some fundamental changes to the business and its brand

CLINCHING THE number one spot is only half the

Total value of commercial loan settlements 2015/16

$278,920,637

Number of commercial loans settled

41

Average commercial loan size

$6,802,942

Years as a commercial broker

16

Aggregator

FAST

36

challenge; the other half is holding on to it. In George Karam’s case he’s not only kept the trophy in Parramatta; he’s actually added $109m to his total volume, enabling him to stay ahead of his competitors. Yet despite his evident success, Karam’s clearly been shaken over the past year, and he’s surprised to be back at the top. “I’m more stoked than at any time I’ve been in the Top 10; it has been a very challenging year,” he says.

As with so many other brokers in this year’s Top 10, Karam was caught at the centre of the pullback of banks from property development lending, or as Karam himself puts it, “over the last 12 months there’s been a fundamental shift in the property development financebroking dynamic”.

While many banks have curtailed lending, according to Karam the problem owed just as much to confusion.

“Either [developers] were turned down or just experienced a lack of transparency because the lending appetite or credit policy wasn’t communicated effectively by their bank manager or to their bank manager.” Other brokers have looked to non-bank, international and hedge fund lenders, as had Karam, albeit “with varying degrees of success. With some of the lenders we start doing quite well with them, then they find out they’re doing too much of that type of lending or they’ve lent out more than they can.”

By getting out there and having “robust discussions” with lenders, Karam was able to find those funders.

However, the experience raised some integral questions of Byblos as a business. Having Karam both as a figurehead and the only broker was the first problem: there simply wasn’t the time for him to do both. Karam feels it’s time for a radical solution.

“We’re going to pull the process apart and put it back together again: what are the critical points where we really need people at the top of their game to be

involved in?... if you’re taking on too many clients so the experience of each client will be diminished.”

Byblos is trying to adopt the approach used by many residential brokerages, whereby different staff members will handle a deal at different points rather than using the single-person, cradle-to-grave approach.

This approach is relatively new in the commercial sector, however, and Karam believes the transition will only succeed with staff training and improved technology. “That’s why we’ve made significant investments into the technology and CRM, to make it specific to the commercial space.”

Those investments include a brand-new CRM system housed in a brand-new office. “[Technology] doesn’t take away from the craft of commercial mortgage broking; not at all,” says Karam. “With the amount of leads we’re getting through, with the amount of information we have on file, [technology’s role is] allowing you to distinguish the good from the bad, and allowing you to hone in on where you spend your resources and where you allocate them.”

Bolstered by new software, the brokerage is diversifying beyond its “private property banker” brand of previous years, explains Karam. “What we’re trying to do now is trying to meet more of the needs of our client base. Whilst property finance is still in the DNA, and so is the development lending, as you can see by the numbers … we’re now attracting a wider range of clients.” As well as offering other types of commercial finance, Karam is setting up a residential lending division under a separate brand, although Byblos has long written its own white label home loans through its mortgage management business.

Even the core Byblos brand isn’t safe: Karam hints that a major rebrand is currently underway. By 2017, Byblos Finance could be winning a whole new set of awards and Karam’s reputation could extend far beyond the commercial space.

“We’re going to pull the process apart and put it back together again”

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26/09/2016 2:43:25 PM

SPONSORED BY

George Karam (right) is presented with the Top 10 Commercial Brokers trophy by Rajan Khatak, publisher of MPA magazine

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26/09/2016 3:46:09 PM

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REVERSE MORTGAGES

Simply irreversible A combination of economics and demographics is bringing reverse mortgages back into the spotlight, and there’s a need for brokers to write them. MPA, in partnership with Heartland Seniors Finance, explains how you can bring reverse mortgage lending into your business

DEMOGRAPHIC TRENDS rarely make for a viable business strategy. For instance, we all know that Australia’s population is ageing, but how can you actually cater for older customers with no intention of changing properties?

That’s where reverse mortgages come in.

Reverse mortgages – which enable borrowers to release equity in their homes – have been brought back to prominence by an ageing population who want to stay in their homes, and by government policy and economics. By 2030, 3.6 million more Australians will be aged over 65 and thus eligible for reverse mortgages, according to CommBank, which has dubbed these customers ‘Peter Pans’. More immediately, the Coalition Government has already begun making changes to super pension rules, and most obviously, the cash rate is now at a historic low of just 1.5% and annual price growth has risen by 9% in Sydney and 7.2% in Melbourne.

Lenders are seeing the opportunity: the number of reverse mortgage providers has recovered substantially from a low point of five following the GFC. For one of those lenders, Heartland Seniors

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Finance, potential reverse mortgage clients will look at brokers. CEO Andrew Ford says “brokers play a key part in mortgages and the mortgage market in Australia … brokers are the most valuable part of our distribution”.

Accordingly, they’re making it easier to get accredited, putting their course and test online in October. Heartland has its own

consumers want a broker’s assistance, says Darren Moffat, managing director of Seniors First. “In some respects it’s a simple product, but it also has lots of implications if handled incorrectly. Seniors like to have someone guiding them through the process, particularly around product selection and lender selection.”

Moffat, who’s based in Sydney, has been writing reverse mortgages since 2005.

He’s seen the sector undergo two rounds of regulation – the NCCP in 2010 and more specific regulation in 2011 – but doesn’t believe it’s made his job much harder.

“There is more paperwork, but if you were doing the right thing beforehand you wouldn’t find it onerous; certainly we haven’t,” he says.

Like some other brokers, Moffat views increased regulation as an encouraging development. However, Peter Bolitho, director of Reverse Mortgage Finance Solutions on the Sunshine Coast, who’s been working with reverse mortgages for over 20 years, notes there’s “definitely been more regulation, but there are areas of regulation which still cause me some concern”.

Reverse mortgage clients come to Bolitho through referrals from branches, other brokers and increasingly through the company’s website as older people make more use of the internet.

“Seniors like to have someone guiding them through the process, particularly around product selection and lender selection” Darren Moffat, Seniors First accreditation, while some providers require brokers to complete a course through Senior Australians Equity Release (SEQUAL), the industry association for providers of equity release products.

Reverse mortgages are an area in which advice is essential – indeed, independent legal advice is mandatory – and that’s why

Brokers should take note of who’s making the application, he warns. “My concern is when you have a son or daughter making an application on behalf of their parents, the danger of elder abuse is too great, I think.”

Brokers and lenders need to make sure that the funds will primarily benefit their borrower, but “without face-to-face contact it’s

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Sponsored by

REVERSE MORTGAGE KEY FIGURES

“We’ve got a really robust and thorough fulfilment process which includes independent legal advice and gets the customer to talk to their family” Andrew Ford, Heartland Seniors Finance very difficult to establish that”.

Heartland Seniors boss Ford says brokers should feel comfortable writing reverse mortgages. “We’ve got a really robust and thorough fulfilment process which includes

Total reverse mortgage book

$3.66bn

(at the end of 2014)

Total equity held by Australians over 65

$500bn

Average reverse mortgage size

$92,000 and growing

Brokers and planners write

31%

Discharge rate

12.5% p.a.

of reverse mortgages

(approx.)

Source: Deloitte Reverse Mortgage Report, September 2015

independent legal advice and gets the customer to talk to their family – and attest to the fact they have.”

Among other safeguards ‘hard coded’ into the product is the obligation to give the borrower a loan projection using ASIC’s calculator, and to explain alternatives – whether the borrower would be better off downsizing, or borrowing from friends and family – as well as

how a reverse mortgage could impact on their pension and inheritance. With oversight from the broker, lender, client’s solicitor and possibly a financial planner, “if there’s something that consumers are uncomfortable with it’s going to be discovered somewhere along the line”, says Senior First’s Moffat.

The timeframes involved in reverse mortgage lending can be incredibly diverse.

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FEATURES

REVERSE MORTGAGES Sponsored by

2017 AGE PENSION CHANGES On 1 January 2017 the government is making changes to the asset test thresholds, which determine how wealthy you can be before losing your pension. AMP estimates that: 300,000 will have their pension cut 100,000 will lose all aged care entitlements homeowners will now be able to hold assessable assets (other than the home) up to $250,000 (singles) and $375,000 (couples) without their full pensions being impacted According to Peter Bolitho from Reverse Mortgage Financial Solutions, these changes will make consumers consider alternative options such as reverse mortgages. “I think we’re going to see more people staying in their homes and wanting old-age care, consistent with the government’s push for people to stay in their homes, and people will look at reverse mortgages as a way to pay any fees on top of the government’s support package,” he says.

Seniors First’s Darren Moffat believes the government could take further action in the next five to 10 years to reduce support for wealthy retirees.

“My personal feeling is you will see some fairly radical changes coming down the pipeline in this area, and there’s likely to be some restrictions on pensions for people who own significant property.”

Source: www.amp.com.au/news/ 2016/may/changes-to-the-age-pension-assets-test

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While lenders’ turnaround is typically a couple of weeks – longer if refinancing is involved – the main delay is the client’s decision time: unlike buying a new house, there is no ‘trigger’ for reverse mortgage borrowers, explains Bolitho. There can be triggers – the client running out of money due to a car breakdown, for example – although these are generally

advance, as this can have consequences for pension eligibility. ASIC also advises borrowers to check the conditions for live-in partners should the sole title-holder pass away.

Although commission rates are similar, the amounts involved in reverse mortgages are typically small – around $90,000 at Heartland Seniors Finance – and this presents a challenge

“I’ve had probably one client in the last five years that complained about [fees]. Clients understand that, as long as they’re getting that level of service” Peter Bolitho, Reverse Mortgage Financial Solutions preceded by the client researching reverse mortgages as a solution. At Seniors First, Moffat finds the client’s decision-making time is typically six to eight weeks (although his longest client took seven years); Bolitho’s figure is four to six weeks.

Many elements of applying for a reverse mortgage will be familiar to brokers: submitting paperwork, credit approval and receipt of funds. When deciding which product, however, there are a couple of details to watch out for. The interest rate is crucial, given many lenders won’t require any payments and thus interest gets compounded. Regular fees should also be watched out for, for the same reason – Moffat says he tries to avoid them – and the LVR may be crucial to the client if they’re looking to get as much money out as possible.

In terms of conditions, there is some differentiation among lenders. Since 2012 the law has stipulated that reverse mortgage borrowers can never owe more than their house is worth. At Heartland Seniors they also guarantee clients lifetime occupancy, explains Ford, and allow partial or full repayment at any time without a penalty. Some lenders allow flexibility as to whether they receive the funds as a lump sum, a line of credit or a regular

for brokers. Most brokers cover the gap with a fee, explains Bolitho. “I believe that the majority of brokers in this area now charge a fee-forservice, which is discussed with and divulged to the client, because it’s the only way you can maintain a specialisation in this area.” Clients rarely take issue with a fee, he adds. “I’ve had probably one client in the last five years that complained about it. Clients understand that, as long as they’re getting that level of service.”

Reverse mortgages, it should be noted, typically stay on the books for longer and increase as clients draw out extra funds, meaning that over the long term they can form an important part of a broker’s book.

Furthermore, for Moffat, writing reverse mortgages is a ‘feel-good experience’. “You’re actually helping people: these loans have a very significant impact on people’s lives. That aspect of the work shouldn’t be underplayed; it’s why we do what we do.”

There’s another reason: necessity. As Moffat concludes, “this [over 60s] demographic is the fastest-growing part of the population; reverse mortgages provide a great opportunity for brokers to tap that part of the market … over the next 10 years you’re going to see this part of the market grow very rapidly.”

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PROFILE

DESLIE TAYLOR

DESLIE TAYLOR: TURNING WATER INTO WINE Top 100 leading lady and Mortgage Choice high-flyer tells MPA how her business deals with everyday customers yet produces outstanding results 29–33-30: judging by her MPA Top 100 positions over the last three years, Deslie Taylor hasn’t been doing badly. That’s only half the story, however. Maintaining one’s position in the Top 100, given average volumes have increased year by year, actually means raising one’s game every year. Taylor has done this, and done it with an unexceptional client base, within a franchise system and with just one seemingly obvious business mantra: consistently excellent customer service, backed up by solid processes and a standout team.

The brokerage Like many brokers, Taylor’s introduction to finance was through a bank – starting in 1995 as a teller at Suncorp; and like many brokers, banking showed her how not to do customer service. “You were there to meet your targets and make sure your managers had all the reports for the day to tick the i’s and cross the t’s and make their bosses happy. But it just didn’t allow you the time for what is most important, and that’s to give your clients customer service.”

Taylor knew she was ‘emotionally ready’ for a change. “At no time did I second-guess or question my decision, so I knew I was ready.”

Even before acquiring a Mortgage Choice greenfield site in 2007, she had done her cash flow forecasts.

“If I only had to do one tenth of what I was doing at the bank, I would be earning similar money, whilst giving myself time to give the

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clients the service they needed – and it evolved from there.”

Ormeau, halfway between Brisbane and Surfers Paradise, is not at the centre of the house price boom, has few foreign investors and lags far behind Sydney and Melbourne in the ‘crane index’. Instead it has the ‘warm and fuzzies’, Taylor’s own term for her clients: young couples buying their first homes, upgraders and those dipping their toes into the investment world. It’s a mixed bag, and Taylor likes it that way, she says. “I’ve never specialised in a specific field, and I’m so glad I haven’t.”

One of the major spin-offs of excellent customer service are customer referrals, and 87% of Mortgage Choice Ormeau’s business now arrives this way. Its customer base has spread far, far beyond Ormeau, all the way south to Tasmania and back up the east coast as far north as Cairns. Face-to-face interactions have been replaced by phone calls, Skype and Facetime, which can be just as valuable, Taylor says. “I’ve got some clients in Melbourne, and I Facetimed them, and the kids are in the background saying ‘Hi Deslie!’ It’s all quite fun.”

In fact Taylor now only leaves the office for around one in 20 clients. While that saves time, the ‘warm and fuzzies’ still require evening appointments, where both clients can be present. “They want to know that information together; they want to be together when they’re sitting and making these decisions.” Consequently, “every evening I’m booked up still … and some Saturdays”.

TAYLOR’S TROPHY CABINET

From 2008 onwards

Mortgage Choice National High Flyers 2012

Finalist in the Franchise Council of Australia 2013/14/15

MFAA Top 100 Brokers 2014

Finalist MFAA National Mortgage Credit Advisor 2015

Winner MFAA Qld Mortgage Credit Advisor

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“I’ve never specialised in a specific field, and I’m so glad I haven’t”

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PROFILE

DESLIE TAYLOR TAYLOR’S ANGELS Mortgage Choice Ormeau has an all-women team. Taylor has interviewed men for jobs before but never hired any, to the surprise of some clients. “Some people’s impression of a mortgage broker is still a 1970s used-car salesman.

They’re very surprised when you’re here giving them all these options; they’re very calm and at ease.”

Having an all-woman team could increasingly make a difference, as women are increasingly financial decision-makers. Of women who are married or in de facto relationships: 1% 6% 66%

27%

are joint financial decision-makers make the majority of financial decisions make some of the financial decisions defer to their partners Therefore, says Taylor, when meeting couples “my job is really to engage the female. Don’t get me wrong; I speak to the husband, but you find you really need to be engaging the female … she’s the one making the decisions; she’s the one who calls me to ask the questions; if she doesn’t like you, then they won’t be using you.”

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The process Once the interview is scheduled, the customer service begins, and Mortgage Choice Ormeau really earns its stripes. Taylor takes on the difficult topics early. “I do point that out at the

refer them to the local branch, to get the account set up, to get the credit card set up; all that stressful stuff is done. I don’t have to fear that the branch is going to take that client, or put a foul taste in the client’s mouth.”

“When a client is trying to get finance, if they haven’t heard from us for a day, that day feels like a week” very beginning of the interview; our customer charter explains what we do and how we are paid.” Over the years Taylor has seen customers become more and more interested in broker remuneration, and she’s responded by being more transparent, including quoting an exact figure for her own earnings and explaining Mortgage Choice’s pay-the-same commission policy. “The figure is actually outlined for their loan; it highlights what I’m getting paid for their application.” The clients then sign off on this figure at their preliminary assessment.

“Our process is the same for every single client,” Taylor explains. “I don’t give out settlement gifts ultimately because all my clients are wanting is the service they got from me; for whoever they refer to me, they want to make sure that person gets the same service, because their neck is on the line.”

The day of submission, the client receives a text to let them know the loan has been submitted. Then Taylor’s processer, Jodie Brookes, calls the client the day after submission to let them know the lender has all the details to move forward, and explains the lender’s timeframe to the clients. Then as the application continues, the brokerage will attempt to contact the client every second day, by phone or failing that SMS, regardless of the status of the application. They also offer to keep real estate agents and other involved parties in the loop. Keeping in contact, even when there’s nothing to report, is important to Taylor and her team. “When a client is trying to get finance, if they haven’t heard from us for a day, that day feels like a week.”

This process doesn’t just build trust with the client, adds Taylor. “As soon as a client’s loan is approved, no matter what client we’ll

The future With such a high number of touchpoints, Mortgage Choice Ormeau’s operation depends heavily on its loan processors, a point that Taylor is the first to admit. “I’ve got an amazing team behind me. My team is made up of girls who make sure every client’s needs are met, and no stone is left unturned.” One of those loan processors, Sheree Pendergast, has just become a loan writer, building on five years of interacting with clients, explains Taylor.

“Sheree already has a relationship with 99.9% of my clients.”

Bringing a second loan writer on board is not just important to Taylor, but to her business, she says. “It’s now at a point with the volumes that we’re writing … it will give me a bit of work-life balance back, and one or two evenings back. If I’m booked two weeks in advance of a meeting, that’s not customer service, if I’m not available for two weeks.”

Taylor will continue to deal with her existing clients; Pendergast will handle walk-ins and some referred clients.

While there are plans for a second loan writer or possibly a financial planner on the horizon, Taylor is more focused on the present.

“The next six months is making sure my loan writer Sheree is comfortable in her role. There on out I’m probably going to be looking at 12 months embracing a bit of ‘me’ time – just a little bit of me time! Being able to have a date night with my husband once a week would be very nice.”

With two loan writers, Mortgage Choice Ormeau can run more appointments, creating even more satisfied customers and repeat business. Taylor wrote $110,204,112 to make last year’s Top 100, and it seems this figure can only go up.

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FEATURES

SPECIALIST LENDING

BORROWING OUTSIDE THE BOX Top lenders tell Maya Breen how specialist lending has evolved in the past year, and how brokers can maximise their presence and create a hassle-free experience for their clients

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“SPECIALIST LENDING is all about providing solutions,” says RESIMAC’s Daniel Carde, director product, marketing and strategic partnerships. Certainly, if you are a broker who enjoys problem-solving, thinking outside the square and gaining a very appreciative client, then specialist lending is for you.

As Pepper’s director of sales and distribution, Mario Rehayem, puts it, “specialist clients come from all walks of life, in the form of the affluent white-collar investor to the emerging self-employed blue collar purchasing their first home”. And it seems many people are waiting for a broker’s helping hand as Rehayem points out that six in 10 eligible borrowers are being turned down when applying for a mortgage, just because brokers are not offering alternative products to those available from the banks.

“We also know prime is a moment in time, and an increasing number of clients that were deemed prime yesterday are now deemed specialist clients simply due to a lender’s fluctuating credit appetite.”

Of course, specialist loans also cater to those with ‘bad credit’ – borrowers who may have one or more negative listings on their credit file or a low VedaScore, perhaps because of unpaid bills, late repayments, previous credit rejections or becoming bankrupt. All these things can lower their chances of obtaining a loan with a traditional lender, and that’s where specialist lenders come in. “If they understand the alternative products available in the market, brokers have a real chance of helping to find a solution for these customers,” Rehayem says.

MPA asked leading lenders in the specialist arena how the sector is evolving, the opportunities it offers brokers new to these loans and how those already in the space can maximise their presence. We also explore how lenders can make it easier for brokers doing business with specialist clients and how brokers in turn can make it easier for lenders when submitting loan applications.

Changes in specialist lending Many of the lenders were unanimous in reminding brokers that specialist loans are

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viewed exactly the same as non-specialty loans from a regulatory standpoint.

“I think the key for brokers is to remember that in the eyes of the regulator a mortgage is a mortgage – there is no difference between specialty and non-specialty lending,” says La Trobe’s VP and chief lending officer, Cory Bannister. “Brokers should approach all customers with the same high level of integrity and compliance.”

As a lender that has been in the business for 64 years, La Trobe has seen the specialist space grow. What were once ‘conforming’ loans are now ‘non-conforming’, in light of banks tightening their lending policies.

“From a market perspective, RESIMAC has seen tremendous growth in our specialist lending volumes over the past 12 months,” says Carde. “We are seeing more and more brokers embrace specialist lending, treating it as an extremely valuable addition to their overall service offering.”

He notes that specialist lending products have been particularly geared towards ‘near prime’ borrowers in the past year, which Bluestone Group’s national head of sales and distribution, Royden D’Vaz, has also noticed.

“The near prime space (such as borrowers with relatively minor credit issues, or self-employed borrowers who haven’t completed their tax returns) has been the part of the market that has grown the most in the last few years as the mainstream lenders slide up the credit curve with their risk appetite,” says D’Vaz. “The specialist lending part of the market is definitely growing at a rapid rate, [which is] a very good reason why brokers should be playing a big part in this market.”

More than half (55%) of loans written

by Bluestone are for self-employed borrowers, and as this area grows, D’Vaz says, “it’s time to dust off some of the myths and misconceptions that may exist” so that brokers don’t watch opportunities pass them by. “Post-National Consumer Credit Protection Act [NCCP] there is a sentiment that some brokers may be sticking to prime mortgages because they mistakenly think non-conforming or specialist loans are

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FEATURES

SPECIALIST LENDING non-compliant with NCCP. This is certainly not the case. NCCP legislation actually adds to visibility and transparency for clients, helping to foster that image of professionalism.”

Troy McLachlan, general manager of Future Financial, which also has a niche in the self-employed borrowers space, agrees.

“Brokers can feel very confident that by simply complying with their responsible lending obligations, as in their normal course of business, writing specialist loans are compliant

that exist for borrowers with circumstances that don’t fit squarely in the lending criteria of traditional lenders.”

So, with growth of outside-the-box loan solutions burning bright, what are the opportunities that brokers may be missing out on who are yet to delve into the specialist sphere? Well, one thing they’re missing out on is a very loud client.

“Specialist customers are some of the most vocal about their endorsement of their

“The specialist lending part of the market is definitely growing at a rapid rate, [which is] a very good reason why brokers should be playing a big part in this market” Royden D’Vaz, Bluestone under NCCP and provides a valuable income stream that complements their existing business.”

As more brokers embrace specialist loans, so, too, do more consumers choose to seek alternative options to the traditional lenders, says Bannister. “Thanks to the great work performed by finance brokers choosing to present specialist alternatives to their clients, consumers’ acceptance of lenders other than those occupying ‘main street’ has also increased significantly, with the APRA changes getting plenty of airplay in the media, effectively resulting in free advertising for the specialist lending market.

“A driver for future growth in the specialist space is likely to be the take-up of millennials (Gen Y) and the iGeneration (Gen Z), who are more likely to accept challenger brands as mainstream alternatives, so the future looks bright.”

A sector of opportunity “To be able to offer specialist lending solutions to clients opens a host of new opportunities for a broker’s business,” says Natasha Sultan, national sales manager at Australian First Mortgage (AFM). “A broker opens a whole new market segment for their business when they understand the options

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broker,” says Murray Cowan, Better Mortgage Management (BMM) managing director.

“They become very loyal customers and outspoken advocates for their broker. In specialist lending, if you go the extra yard for your customers, they will reward you with more positive customer reviews and referrals.”

Homeloans’ general manager national sales, Ray Hair, agrees that the very nature of a specialist loan means you will be finding a client in a difficult financial situation, but once you help them out of it they will often be doubly appreciative. “Specialist lending clients are looking for a solution to their immediate problem, arising from financial, marital or other life-changing circumstances,” Hair says. “Providing a solution to the immediate problem provides a potential opportunity to refinance the client when their circumstances improve; a loyal customer for life; and powerful referrals from an incredibly appreciative customer.”

Not only do specialist clients tend to be loyal but their situations often make them prime candidates for refinancing opportunities later on. “Brokers that diversify their core prime residential offering to include specialist or non-conforming borrowers have the opportunity to genuinely help clients access

A SLOWDOWN IN SPECIALIST LENDING? Year-on-year there has been a fall in credit offered for low-documentation (-16.2%) and other non-standard loans (-8.5%), according to APRA property exposures data for the June 2016 quarter.

But Pepper’s Mario Rehayem said these figures didn’t correlate with Pepper’s results as it had seen exponential year-on-year growth across all its mortgage products and a solid increase in brokers choosing to use a Pepper product.

Future Financial’s Troy McLachlan also said it had seen a strong increase in self-employed full-doc and low-doc loans.

But Liberty’s John Mohnacheff said the figures were reflective of the current environment. “The drop in specialty lending might be indicative of the current low-interest environment which leads to better cash flow,” he said. “Liberty is fortunate to span across all parts of the lending market, so we’ve seen a steady increase of broker activity over the last 12 months and expect this will continue.”

Source: CoreLogic/APRA

finance now, while at the same time highlight the goal of accessing cheaper finance down the track once their situation has changed or their credit impairment gets cleaned off their credit report,” says Bluestone’s D’Vaz. “This provides the broker with revenue from the newly settled loan plus the strong possibility that the client will return to refinance the loan again in 18 to 24 months.”

He adds that even if the client doesn’t need to refinance, they most often stay loyal because their broker helped them when they needed it most. “Everyone remembers the person that helped them in a time of need and helped them overcome adversity to achieve their goals. A borrower knows when their loan situation is complex. So they will respect and value the broker that can help them get a solution to suit their needs.”

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FEATURES

SPECIALIST LENDING Standing out It may seem obvious, but often the most straightforward question is the forgotten one. “If you ask your customers and referrers, would they know that you offered specialist lending?” points out BMM’s Cowan. “One of the best ways for brokers to increase their presence in the specialist lending space is to let their customer base and their referrers know that they offer specialist lending.”

And keeping an open mind is vital too if brokers want to make themselves known in the specialist lending space, stresses Ray Hair of Homeloans. “Far too many brokers see specialist lending as too complex, too time-consuming and ‘not my type of business’, when in reality specialist lending provides potential clients for life.”

Product knowledge and education are also critical when it comes to specialist clients, especially when an explanation is required as to why they may or may not qualify for a particular loan, says AFM’s Sultan. “Brokers looking to maximise their presence in the specialist lending space need to focus on education, specifically around lender policies, NCCP, and the various products/solutions available to them and their clients.”

Know your products, urges John Mohnacheff, national sales manager at Liberty Financial. “The key to maximising your presence in the specialty lending space all comes down to knowing the products so you can recommend them when customers ask. Too often we hear brokers say they are hesitant to embrace specialty lending because they think it is too complicated. The truth is, it is not dissimilar to mainstream residential lending, and it can be a really profitable way to diversify your business and grow new revenue streams.”

One of the biggest challenges for brokers first tackling specialist loans is finding a niche that suits their area, be it geographical or the expertise of referral sources, according to Future Financial’s McLachlan. “We always suggest for brokers to first of all look at what loans they have had declined or even leads that they were unable to set, and then work back from there. Generally you will identify

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“A broker opens a whole new market segment for their business when they understand the options that exist for borrowers with circumstances that don’t fit squarely in the lending criteria of traditional lenders” Natasha Sultan, Australian First Mortgage reasonably quickly the area where you may be missing out on some opportunities for income.”

Lenders with brokers in mind With specialist loans already demanding more time and energy, at the end of the day all parties involved – lender, broker and client – would like a loan to be processed quickly, successfully and with as little hassle as possible. We asked lenders to share methods and checkpoints they have in place to make things easier for the broker and their specialist loan clients.

La Trobe relies almost exclusively on the third party channel for loan originations, which Bannister points out has led to the broker experience being planted firmly front of mind. “This starts with making all of our products available to brokers without a requirement to be separately accredited for each. Further, we purposely use the same forms and documents for all of our products to ensure brokers have familiarity, making it easy for brokers to diversify. This extends to our residential, commercial, SMSF, and construction and development products.”

AFM makes it easy for brokers to do business by including multiple funding channels on one application form. “A broker does not need to package a whole new application if a submitted loan doesn’t quite fit,” says Sultan. “We simply reassign the loan in our system and keep the application moving. This helps limit the CRAA enquiries and runs an application through five-plus policy guides.”

RESIMAC has also employed time-saving processes in its services, using technology to

ON THE FLIPSIDE: SHOULD HIGH CREDIT SCORES EQUAL INTEREST RATE DISCOUNTS? Sixty-seven per cent of Aussies believe a good credit score should lead to cheaper interest rates on loan products, like it does in the US, according to a recent survey by Finder.com.au.

Only a third thought everyone should receive the same rate regardless of their credit score, and Gen Y (74%) were the biggest supporters of financial products being more heavily weighted to credit scores, with baby boomers (66%) and Gen X (65%) not as enthusiastic.

“Rewarding those with a good credit score could promote better financial management by Australians,’ said Finder.com.au money expert Bessie Hassan. “It may give borrowers incentive to keep up to date with their repayments and bills.”

But risked-based pricing could also create more difficulties for low-income or single-income households. “A national risk-based pricing system may hurt borrowers that already struggle to meet their repayments, which would make it more difficult for them to service ongoing debt, such as a mortgage,” said Hassan.

“In a sense, risked-based pricing could discriminate against younger borrowers, as well as low-income earners and elderly borrowers such as pensioners.”

Source: Finder.com.au

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FEATURES

SPECIALIST LENDING provide brokers with a large array of online tools to help them through specialist lending assessment. The tools cover location suitability, LVR and loan amount limits, credit history analysis, mortgage history analysis and serviceability.

With a well-carved niche in the selfemployed space, Bluestone’s lending options are expressly designed for this type of client.

“With the launch of their latest product, Crystal Blue, brokers will be able to help more customers more often,” says D’Vaz. “Three of our products are designed for selfemployed borrowers at various stages of their business. Our Business Easy, Lite Blue and

“Far too many brokers see specialist lending as too complex, too timeconsuming and ‘not my type of business’, when in reality specialist lending provides potential clients for life” Ray Hair, Homeloans Crystal Blue products cater for borrowers with ABNs that are three, 12 and 24 months old respectively.”

McLachlan explains how Future Financial has been particularly focused on removing

LA TROBE’S TOP 5 TIPS FOR BROKERS AND THEIR NON-CONFORMING CLIENTS Listen carefully and keep an open mind It is important to listen closely to your clients as their story can often uncover important information that could affect the outcome of their solution, and it is important to listen with an open mind – show empathy and do not judge as unfortunate events can happen to anyone.

Ask for the whole truth and nothing but the truth It is important that your clients are completely transparent about their past, present and foreseeable future situation. Nothing stops an approval in its tracks faster than uncovering an undisclosed issue, whereas often if lenders are aware upfront, they can find a solution.

Ask them to be truthful, and then ask again, “Are you sure you have told me everything?”

Complete ‘reasonableness tests’ Fundamentally, you first need to make sure the client’s story makes sense – do you feel as though you have captured the full story; does it fit their actual situation? If it passes the first test and you source a solution from a specialist lender, you should ask: does this meet the client’s requirements and objectives? If both tests are passed, you can proceed with confidence.

Educate clients about their options, both now and in the future It is important to honestly appraise the client’s situation and present them with their options, both now (the current solution to their need) and for their future (when their situation changes). In some cases, the options may be limited now; however, it is important to educate clients that they may open up down the track.

Speak to a specialist lender early in the process Engage in discussions with a specialist lender early in the process to ascertain their needs and requirements to reach an approval.

Workshop the scenario with your BDM or the credit team directly to gain comfort that the deal has a strong chance prior to spending time preparing and lodging an application.

52

the frustrations and guesswork for brokers from the equation via a detailed online scenario form, complete with tracking ID, a dedicated scenario hotline and a team to manage scenarios. “Our process ensures that instead of a relationship manager giving a broker a simple ‘Yes, we can consider that’ while in between appointments, we actually ask all of the relevant questions required, respond with a detailed response in a consistent, easy-to-read format, and attach all of the correct forms and calculators required to get a loan settled.” [See the product guide at the end of this feature for further details.]

What lenders look for At the same time, there are a number of things brokers can make sure they do to make life easier for the lenders as well. Providing as much information as possible and as early as possible was a common thread among lenders’ responses.

“Supplying all the relevant information and documentation as early as possible will allow lenders to assess and place accurately, avoiding problems later on in the process and ensuring everything runs smoothly,” says D’Vaz. “Not every application gets across the line, and deals do fall over for various reasons, the most common being lower-thanexpected valuations.

AFM’s Sultan adds: “If we know the full story from the outset, including the strengths and weaknesses of the application, we are in a far better position to fit it with one of our products right from the start.”

Homeloans’ Hair says just talking with a BDM beforehand can make a big difference.

“The best way a broker can assist us and their client is to discuss the deal with their BDM

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prior to submission to ensure we have all the necessary information, understand the borrowers’ circumstances and identify any risk mitigants,” he says.

A special client The specialist lending space is clearly one to watch as it continues to attract the interest of borrowers with its alternative solutions that are evolving each year. While many borrowers use this type of lending to move to a better credit position, the benefits it holds for brokers are long-term. These outside-the-box borrowers certainly appear to hold their brokers close to heart and remain loyal clients for life. As Bluestone’s D’Vaz says, “not only are brokers generating business for themselves by offering solutions that secure funding for their customers; there also comes a sense of reward in being able to give a helping hand when others won’t”.

BDMS TO BROKERS: TOP 5 TIPS FOR SPECIALIST LENDING Better Mortgage Management BDMs Glen Gillespie (SA, NT and Qld), Andrew Costello (Vic and Tas) and Paul Crutchley (WA and Qld), give their five top tips for specialist lending:

1

Always check your client’s Veda report carefully and ask your customer about anything on the report that needs clarification or doesn’t seem right.

2

Ask your client to provide you with personal bank statements to ensure that they are declaring all debts.

3

Don’t try to sell these products on interest rate. Focus instead on selling the products based on the solutions they offer your potential clients.

4

Expect a thorough assessment throughout the application process. You may need to go back to your client two or three times to ask for more information. This is normal for specialist lending.

5

Check with your lender’s BDMs about location if in doubt, as specialist lending is often location-sensitive.

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FEATURES

SPECIALIST LENDING

FEATURED SPECIALIST PRODUCTS

We asked specialist lenders to provide details of their non-conforming and specialist products. This list should be viewed in the context of non-conforming lending: rates and LVRs are tied to the clients’ individual situations and can therefore vary; these details are for guidance only.

Note that all details are correct to the best of our knowledge at the time of writing (early September).

BETTER MORTGAGE MANAGEMENT Interest rate

Comparison rate

Interest rate type

Flexi Ultimate Alt Doc

Starting at 4.54%

4.78%

Variable

$2,000,000

P&I

Capital Specialist Gold Alt Doc

Starting at 5.59%

5.98%

Variable

$1,250,000

Capital Specialist Plus Alt Doc

Starting at 6.19%

6.64%

Variable

Premium Specialist Clear Alt Doc Starting at 5.69%

5.81%

Variable

Interest rate

Comparison rate

Interest rate type

4.84%

5.00%

Variable

Product name

Maximum 100% offset loan amount Repayment type facility

Loan establishment fee

Ongoing fee

Available

$695

$10 per month per split (maximum 4 splits)

P&I

Not available

$695

$15 per month per split

$1,500,000

P&I

Not available

$695

$15 per month per split

$1,500,000

P&I

Available

$695

Not Specified

FUTURE FINANCIAL Product name Self-Employed Home Loan F580D

Maximum 100% offset loan amount Repayment type facility $1,000,000

P&I

Yes

Loan establishment fee

Ongoing fee

$200

$10

HOMELOANS Product name

Interest rate

Comparison rate

Interest rate type

Maximum loan amount

100% offset facility

Loan establishment fee

Ongoing fee

Homeloans Accelerate Red

5.29%

5.56%

Variable

$2,000,000

Yes

$599

$15 per month

Homeloans Accelerate

5.59%

5.86%

Variable

$2,500,000

Yes

$599

$15 per month

Homeloans Accelerate Red Lo Doc

5.54%

5.91%

Variable

$2,000,000

Yes

$599

$15 per month

Homeloans Accelerate Lo Doc

5.74%

5.01%

Variable

$2,500,000

Yes

$599

$15 per month

Homeloans Flexichoice

5.59%

5.64%

Variable

$1,500,000

Yes

$599

Nil

Homeloans Flexichoice Lo Doc

5.69%

5.74%

Variable

$1,500,000

Yes

$599

Nil

Homeloans Envizion

4.94%

5.28%

Variable

$1,500,000

No

Nil

$15 per month

Homeloans Envizion Lo Doc

5.19%

5.53%

Variable

$1,500,000

No

Nil

$15 per month

LIBERTY FINANCIAL Interest rate

Comparison rate

Liberty Super Credit

5.49%

5.69%

P&I and IO

Liberty Nova

4.39%

4.69%

P&I and IO

Product name

54

Interest rate Maximum type loan amount

Repayment type

100% offset facility

Loan establishment fee

Ongoing fee

$3,000,000

Weekly, fortnightly, monthly

Yes

$990

$10/month

$1,500,000

Weekly, fortnightly, monthly

No

0

$295

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MPA br

Mortgage Professional Australia (MPA) is the leading business magazine for the mortgage and finance industry.

• • • • •

Profiles and case studies of successful brokerages Interviews with industry leaders Special reports and surveys In-depth features on specialist lending Business strategy content

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23/09/2016 26/09/2016 11:12:15 2:58:39 AM PM

FEATURES

SPECIALIST LENDING

LA TROBE Product name

Interest rate

Comparison rate

Interest rate type

Maximum loan amount

Repayment type

100% offset facility

Loan establishment fee

Ongoing fee

Residential Full Doc

From 3.99% p.a.

4.28% p.a.

Variable

$2.500,000

P&I or IO

No

0.75% of loan amount

$15 per month

Residential Lite Doc

From 4.99% p.a.

5.28% p.a.

Variable

$2.500,000

P&I or IO

No

1.25% of loan amount

$15 per month

Residential SMSF

From 6.59% p.a.

n.a.

Variable

$1,000,000

P&I or IO

No

1.25% of loan amount

$15 per month

7.19% p.a.

7.85% p.a.

Variable

$1.500,000

P&I or IO

No

1.25% of loan amount

$15 per month

From 6.69% p.a.

n.a.

Variable

$1.500,000

P&I or IO

No

1.25% of loan amount

$15 per month

5.99% p.a.

7.81% p.a.

Variable

$750,000

IO

No

$2,500

$15 per month

Residential Construction Rural Residential Aged-care loan

PEPPER Product name

Interest rate

Comparison rate

Interest rate type

Maximum loan amount

Repayment type

100% offset facility

Loan establishment fee

Ongoing fee

Pepper EASY Full Doc (LVR 65%–90%)

5.29%–6.68%

5.62%–7.15%

Variable

$2,000,000

P&I or IO

Yes

$995 (includes 1 standard valuation)

$15 per month

Pepper EASY Alt Doc (LVR 65%–85%)

5.69%–6.95%

6.03%–7.40%

Variable

$2,000,000–$650,000 (reduces with higher LVR)

P&I or IO

Yes

$995 (includes 1 standard valuation)

$15 per month

Pepper Advantage Full Doc (LVR 55%–90%)

5.34%–8.10%

5.67%–8.61%

Variable

$2,500,000–$750,000 (reduces with higher LVR)

P&I or IO

Yes

$995 (includes 1 standard valuation)

$15 per month

Pepper Advantage Full Doc PLUS (LVR 55%–80%)

5.79%–7.19%

6.17%–7.66%

Variable

$1,000,000–$750,000 (reduces with higher LVR)

P&I or IO

Yes

$995 (includes 1 standard valuation)

$15 per month

Pepper Advantage Alt Doc (LVR 65%–85%)

5.74%–7.70%

6.08%–8.21%

Variable

$2,500,000–$650,000 (reduces with higher LVR)

P&I or IO

Yes

$995 (includes 1 standard valuation)

$15 per month

Pepper Advantage Alt Doc PLUS 65%–75%

6.14%–7.04%

6.55%–7.51%

Variable

$1,000,000–$750,000 (reduces with higher LVR)

P&I or IO

Yes

$995 (includes 1 standard valuation)

$15 per month

RESIMAC Interest rate

Comparison rate

Interest rate type

Maximum loan amount

Repayment type

100% offset facility

Loan establishment fee

Ongoing fee

Specialist Clear Full Doc

From 5.39%

From 5.50%

Variable

$1,500,000

P&I or I/O

Yes

$699

Nil

Specialist Plus Full Doc

From 5.91%

From 6.02%

Variable

$1,250,000

P&I or I/O

Yes

$699

Nil

Specialist Assist Full Doc

From 6.59%

From 6.70%

Variable

$1,000,000

P&I or I/O

Yes

$699

Nil

Specialist Clear Alt Doc

From 5.49%

From 5.60%

Variable

$1,500,000

P&I or I/O

Yes

$699

Nil

Specialist Plus Alt Doc

From 6.22%

From 6.33%

Variable

$1,250,000

P&I or I/O

Yes

$699

Nil

Specialist Assist Alt Doc

From 6.92%

From 7.04%

Variable

$1,000,000

P&I or I/O

Yes

$699

Nil

Product name

56

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MPA AD

MAGAZINES

SPECIAL REPORTS

ARTICLES

Shop MPA online today at

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23/09/2016 26/09/2016 12:21:19 2:58:59 PM

BUSINESS STRATEGY

DRIVING CHANGE

DRIVING CHANGE IN YOUR BUSINESS Taking an established business in a new direction can be a daunting prospect. Here, change and leadership expert Michelle Gibbings presents a step-by-step approach to making change happen

THERE’S A famous saying “May you live in interesting times”. There’s debate as to the saying’s origin, but there’s certainly no doubt that it applies today. Change is everywhere – impacting on both large and small organisations. For leaders this means they are leading in an environment that is often: • Ambiguous – The environment in which they are working is uncertain and shifting, which can leave people questioning their roles and what they need to do.

• Boundaryless – Things are changing and the normal boundaries of roles, organisations and work are altering.

• Complex – Problems are not predictable, nor are the solutions.

• Disruptive – People and organisations are constantly searching for the next ‘big’ thing and the quest to be innovative is neverending.

To survive and flourish in this environment, organisations need to master four key steps: 1. Build and implement a sustainable approach.

2. Know the landscape.

3. Develop leadership followship.

4. Maintain momentum.

58

1

Build and implement a sustainable approach

A 2013 Towers Watson study reinforced what other studies have shown – that the majority of change efforts fail in organisations. This is due to a number of factors, including a lack of leadership, the difficulty of sustaining momentum, and ineffective or absent mechanisms to support the change.

Many change efforts are started before the necessary planning and analysis takes place. For example, there’s often no assessment of the organisation’s capacity to absorb the change, or understanding of the capability of impacted stakeholders to adopt the change. Instead, there are multiple change programs occurring at the same time, often impacting on the same group of people.

This creates confusion, particularly when the implementation efforts are disconnected from each other. All the end user sees is a barrage of changes coming down the pipeline, but little information as to how the changes connect back to the organisation’s strategic agenda, and what it means for them holistically.

The organisation needs to ensure its change approach is thoughtfully considered and executed.

There are five elements to this: • Ensure strategic alignment – This involves understanding what’s driving

the change. Is it external (such as new regulation or new entrants) or internal factors (such as a new CEO or productivity challenges)? Also be clear on where the organisation wants to get to, and how this change connects and supports the organisation’s vision and strategic agenda.

• Consider the options – Develop and review the options available, and their potential risks and impacts. The options selected should have a clear benefits case.

That way the organisation can measure if the intended benefits of the change have been delivered.

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• Develop the plan – Undertake the necessary planning to map out the steps to be taken to make the change happen. This is not about creating an inflexible plan, but it is about having a strong sense of direction, and clarity on the way ahead and what is needed for success.

• Check the infrastructure – Identify and ensure that the necessary infrastructure to implement the plan is available and in place. This involves architecting the way in which the change program is sequenced, monitored, governed and executed to account for the organisation’s capacity, capability and objectives.

• Balance the people equation – This is one of the most important elements, and it is more than just communication and training. Helping people to cope and thrive through change is most effective when it operates at a mindset, values and behaviour level. This includes providing people with the personal and technical skills and tools to help them best operate in changing environments.

2

Know the landscape

Once the approach to the change has been outlined, it’s a good idea to do a stocktake and determine if the organisation is ready, willing and able to change. This assessment

helps the organisation understand if there are gaps or areas that need to be addressed to help improve the likelihood of a successful and sustainable change.

• Ready – The organisation knows where it wants to get to and has a plan for execution, with a logically and thoughtfully sequenced change road map. There are always unknowns with change, and it can be impossible to plan for everything.

Organisations can, however, ensure they are ready to be flexible and adaptive through the change. This way it can take advantage of opportunities, and respond swiftly to issues as they arise.

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BUSINESS STRATEGY

DRIVING CHANGE TAKING ACTION IN YOUR BROKERAGE

Go through Gibbings’ Change Checklist to ensure your ambitions are realistic

Identify who in your brokerage will support or resist change (especially if working in a partnership)

• Willing – The organisation has effective leadership and the roles and responsibilities of those involved in the change are clear.

For example, there may be a sponsor who is accountable for the change, and a project team helping to deliver the change.

They need to know what roles they need to play. So, too, do the leaders across the organisation. Their accountability in leading the change can’t be delegated to someone else.

• Able – The organisation has the capacity and capability to execute the change and is able to invest the resources to ensure that impacted stakeholders are well prepared for the change. The organisation needs to devote both financial and people resources to ensuring that those impacted on by the change are not only able to cope with it but know what is expected of them and have the behavioural and technical skills to thrive through it.

If the answers are in the negative, the organisation needs to do further work on designing and refining its change approach.

Define some goals that your changes will involve and ultimately achieve

60

3

Develop leadership followship

Warren Buffett said: “A leader is someone who can get things done through other people”.

Leaders don’t lead if there is no one following them. Leaders who can inspire and support those around them are essential in times of change, and this requires the organisation’s leaders to be able to build engaged and healthy teams – teams which in turn create a groundswell of support and movement towards the change.

In times of change it is not just the team and individuals who need to change. To consciously lead change, leaders need to be prepared to change themselves – their mindsets, operating styles and leadership behaviour. This is more than just pinpointing new technical skills. It’s about delving into the meaning that drives the leader’s behaviour, and the mental models they are applying to the decisions they make.

One way to do this is for the leader to identify their ‘leadership moments of truth’.

These are the actions that they take – often subconsciously – which define how their leadership style is viewed by colleagues, peers and team members. They include, for example: • what they pay attention to • what they prioritise • how they react to issues and when things go wrong • what they say, and what they do and don’t do • how they allocate resources and rewards, and recruit and promote Red flags arise when a leader’s behaviour is inconsistent or if they are playing favourites with team members. Team members quickly notice when a leader says one thing and then does another. If leaders want followship they need to create an environment in which people feel valued and that their opinions matter.

How leaders engage with, support, involve and communicate with their teams will determine if a change is landed safely or not.

It’s therefore critical to ensure that leaders, at all hierarchical levels, are equipped and motivated to lead their teams through change.

This is critical as the change needs to be driven by the leaders, and they need to have the confidence and accountability to take this on.

4

Maintain momentum

Harvard professor Rosabeth Moss Kanter talks about the trap of failing in the middle. In relation to getting change to happen, she says: “Everyone loves inspiring beginnings and happy endings; it is just the middles that involve hard work”.

This is natural. As a change starts, challenges will inevitably be encountered.

Obstacles and roadblocks that weren’t expected will arise, making progress slower and more difficult than planned. What looked easy in the beginning seems much harder in the middle.

As reality hits home, leaders can become anxious and uncertain as they see momentum waning and milestones slipping. The team starts to question their ability to deliver, and teamwork starts to suffer as people look for

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This is not about creating an inflexible plan, but it is about having a strong sense of direction, and clarity on the way ahead and what is needed for success someone to blame for the lack of progress.

It is at this point that deliverables start to be de-scoped and activities reprioritised, and the project team is often restructured.

This is the time that change leadership really needs to come to the fore. Leaders have two options: they can lose their nerve, or they can confront the challenges head-on. If they chose the latter, they need to: • Be clear on the project’s goals and what every person in the team needs to do to get there. Don’t get sidetracked by interesting but irrelevant matters.

• Ensure these goals are able to be delivered in a meaningful and relevant timeframe so that the team can show regular progress.

• Highlight the progress being made and ensure it is visible to every team member.

Celebrate this progress in a way that is meaningful to each team member, and share this success with your stakeholders.

• Know where the leader’s and team’s efforts will produce the most effective results.

This is the old 80/20 rule. Focus on where you know you will get results.

• Work to eliminate the friction in the system that makes the change harder than it needs to be. This may involve removing bureaucratic processes and unnecessary activities.

• Make it safe to fail so that the team is encouraged to try new things and new ways of working, otherwise the team will be discouraged from trying to find better and faster ways of achieving good results.

• Be open with the team about what is working and what isn’t working. Seek their

input on how the team can work better to produce more effective results While it is hard battling through the ‘middle’, bravery and tenacity pay off.

5

The change checklist

Compelling case • Is the appetite for change enough to sustain the organisation through the transition from current to new state?

• Is the change linked to the organisation’s strategy and mission so its purpose and rationale are clear to stakeholders and team members?

Clear vision • Is there a compelling vision of the future?

How was this vision created and shared across the organisation? Is it understood and do team members buy into it?

Leadership alignment • How much time are the executive team and other leaders devoting to the change? Do they see leading the change as a core part of their role?

Benefits realisation • Is there an agreed benefits realisation framework and approach that helps ensure the realisation of the expected benefits from the change?

Program governance and monitoring • Is there an agreed way of monitoring and reporting on progress with the change?

Process for change • Is there an agreed methodology or process

for designing and implementing the change?

• Is the change appropriately resourced with the right mix of skills, expertise and decision-making authority?

Sequencing and integration • Has the organisation’s capacity to absorb the change been assessed? If necessary, have adjustments been made to implementation timings to ensure the best outcome?

Maintaining momentum • In what ways will momentum be sustained through the change, particularly during periods of difficulty (ie the ‘hard middles’)?

Culture and communication • Is the organisation’s culture considered a critical aspect that can affect the success of the change? What culture changes are needed to support the change?

• Will the communication be frequent enough, targeted and two-way, enabling team members to provide feedback and contribute through the change process?

• What level of experience do the leaders have in coaching and guiding their teams through change?

Empowering team members • Do team members have the competencies, skills and tools to be able to change?

• If not, what will be done to support and upskill them? How will they be involved in the change?

Michelle Gibbings is a change and leadership expert and founder of Change Meridian. Michelle works with leaders and teams to help them accelerate progress. She is the author of Step Up: How to Build Your Influence at Work. For more information: www.michellegibbings.com or contact michelle@michellegibbings.com.

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B

PEOPLE

CAREER PATH

CASH RATE KING The RBA’s new governor, Philip Lowe, has been hailed as “the most qualified person to have ever been appointed to the role”, with almost four decades of experience under his belt Lowe begins his 36-year career at the RBA with roles in the International Department and Economic Group. In 1991 he receives a PhD from the elite Massachusetts Institute of Technology.

1980 RBA

1997 2003

LOW-RATE WARNING In 2000 and 2002, while on secondment to the Bank of International Settlements, Lowe writes research papers warning that low rates could drive asset price booms. Then, in 2003, the RBA controversially raises rates, a move later hailed as preventing the house price collapse experienced in the US.

ECONOMIC RESEARCH Lowe is appointed head of the Economic Research Department, which undertakes longer-term research into economic trends.

He later moves to head up the Financial Stability Department.

2004

FINANCIAL STABILITY He becomes assistant governor of the Financial System Group; one of its tasks is to produce the Financial Stability Review. He holds the position throughout the tumultuous GFC years, switching to assistant governor of the Economic Group in 2009.

2012

DEPUTY GOVERNOR At an economists’ conference shortly before the announcement of his appointment as deputy to then-RBA governor Glenn Stevens, Lowe criticises commentators who focus on numbers above economic forces:

“the unfortunate reality is that in the area of forecasting, it is normal for forecasts of economic activity to be wide of the mark” 62

2016

GOVERNOR In May it is announced that Lowe will replace Stevens as governor.

Treasurer Scott Morrison cites Stevens’ opinion that Lowe is “the most qualified person to have ever been appointed to the role”. Labor Treasury spokesman Chris Bowen applauds Lowe as:

“one of the finest economists of his generation”

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PEOPLE

OTHER LIFE

IT’S A LONG ROAD TO YOUR OWN STREET

PR

Through his charity work, Loan Market broker Mark Winter literally put himself on the map

MFAA SOLD resources MFAA members can access professionally templated presentations to help them provide financial education in schools – an easy way to get involved. They also help brokers run a 10-week School Entrepreneurs program. Find out more at wimbn.mfaa.com.au.

Mark Win t er

64

MARK WINTER’S trophy cabinet is a trophy cabinet with a difference. A long-term supporter of good causes, he is this year’s MFAA Community Champion, as well as a former AMA finalist in several broking categories and the holder of two medallions from the City of Ipswich for his community work. More unusually, he now has a street named after him: Mark Winter Court, in his home town of Springfield, Queensland.

It’s a far cry from Winter’s original plan when he first set up as a broker and started sponsoring local events. “Initially it was to put my name out there with the rugby union, and then that turned into the golf days,” he says. “We started to support different charities.” Winter’s focus quickly turned to local charities: his local area, Springfield, southwest of Brisbane, is growing rapidly. “There’s a huge need; every day they [Westside Community Care, a charity Winter supports] do a food run that helps struggling families; a basketful of food worth $20 that can feed them for a week.”

Today, Winter, his family and the brokerage support a variety of local and international projects. “I’d say as a family the balance is 50:50; we help financially 50% and then [put forward] our time 50%.” Often they’ll get involved in the same event in several ways; for example Winter’s wife might volunteer at a fun run, the family will do the run together, and the brokerage will sponsor it.

They’re involved with Westside Community Care, sponsor multiple sports clubs, and Winter is organising finance to build an orphanage in Fiji. Encouragingly, with all these sponsorships and five Loan Market-branded motor vehicles in the area, Winter is now seeing at least three leads a month generated by this brand awareness.

There’s no reason all brokers can’t support good causes, Winter believes. “It’s only an hour and a half per week, and you could make a difference to those communities that support us.”

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