Mortgage Professional Australia issue 17.09

MPAMAGAZINE.COM.AU ISSUE 17.09

BROKERS ON NON-BANKS With non-banks competing to fill the gaps left by regulation, you’ve told us who’s passed with flying colours

Outsourcing When lower costs mean higher quality

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Mark Woolnough Transforming ING DIRECT’s turnaround

Commissions The big players and what they want

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SEPTEMBER 2017

CONNECT WITH US Got a story or suggestion, or just want to find out some more information?

CONTENTS

twitter.com/MPA_Australia facebook.com/Mortgage ProfessionalAU

UPFRONT 04 Statistics

Examining the link between ownership, mortgages and financial anxiety

COVER STORY

18

FEATURES

34

OUTSOURCING

How outsourcing and offshoring are enabling small brokerages to become a big deal

ING DIRECT’s Mark Woolnough explains why he’s bringing together the bank’s broker and direct channels

14

08 News analysis

Self-regulation, industry politics and the battle to decide the future of commissions

10 Opinion

Diane Tate of the Australian Bankers Association on collectively building trust

52 John Kolenda

We reveal your favourite lender in a sector becoming increasingly important to brokers, investors and regulators

MARK WOOLNOUGH

What’s the biggest gap in your clients’ financial knowledge? Three brokers spill the beans

MORTGAGE INSIDERS

BROKERS ON NON-BANKS

THE BIG INTERVIEW

06 Head to head

FEATURES

42

AGED CARE

The expanding world of aged care finance and how it improves your offering

Finsure’s managing director on the evolution of aggregation, and what brokers now expect

55 Mark Churchill

Going from young auctioneer to award-winning commercial broker

56 Donald Tang

Meet the broker who’s bringing the share bike craze from China to Sydney

BUSINESS STRATEGY 50 Make yourself the expert

Broker and author David Ham explains why writing a book gives you an edge over salespeople

46 FEATURES

CAR FINANCE

Why car finance can be more lucrative than home loans

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UPFRONT

EDITOR’S LETTER

VERTICAL INTEGRATION’S NEW LOOK

A

s the rest of Australian business frets over the arrival of Amazon, not one but two major players have entered broking. By the end of 2017 both Domain and REA Group (realestate.com.au) will have a presence in the industry, the former through a joint venture with Lendi, the latter through the acquisition of Smartline and a partnership with NAB. Real estate players, admittedly, are yet to seriously disrupt broking. However, Domain and REA Group are more than two extra players in a crowded market; they are a new form of vertical integration.

Classic vertical integration – with banks taking large stakes in broker groups – is a concept well understood by brokers and regulators. REA Group’s 80.3% stake in Smartline certainly fits this mould. The new face of vertical integration is the brokerage it is separately setting up, offering home loans through realestate.com.au.

Made up of ex-Choice Home Loans brokers, offering (among other products) white labelled NAB products, this brokerage will arguably be more clearly ‘in partnership with NAB’ than any of the NAB-owned aggregators.

That clarity is a positive, but brokers and regulators should not underestimate the influence Domain and REA Group have on consumers. As broker Darren Moffat has pointed out, a huge number of potential borrowers go through these websites and can be passed straight on to their preferred brokerages. With

The new wave of vertical integration will not be about ownership or clumsy incentives for recommending particular products a seamless digital transition from one provider to another, and no refilling of forms, these borrowers will see little point in seeking independent advice.

The new wave of vertical integration will not be about ownership, or clumsy incentives for recommending particular products. Instead, it will be about controlling information and funnelling borrowers to a range of white labelled products to cover all their needs, without the messy business of encouraging independent brokers to offer these products.

This approach is not new – RAMS has been doing it for years and LJ Hooker is also introducing this model. With digital, however, borrowers won’t need to find a branch; they’ll simply need to press ‘next’ on their web browser.

That is why independent brokers and the lenders that rely on them should be seriously concerned.

Sam Richardson, editor, MPA

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www.mpamagazine.com.au SEPTEMBER 2O17 EDITORIAL Editor Sam Richardson Journalist Maya Breen Contributors Diane Tate David Ham Production Editor Roslyn Meredith

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

CORPORATE

ART & PRODUCTION

Chief Executive Officer Mike Shipley

Design Manager Daniel Williams

Chief Operating Officer George Walmsley

Designer Loiza Caguiat Traffic Coordinator Freya Demegilio

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

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

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

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UPFRONT

STATISTICS

MAKING ENDS MEET

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The latest data reveals we are a little less anxious about our finances IN THE first quarter of 2017, Australians in general experienced less financial anxiety than in the previous three months, according to NAB’s Financial Anxiety Survey Q1 2017, which asked respondents to rate their level of concern around their future spending and savings plans. The score was 60.7 points out of 100 (100 = ‘extremely concerned’), a drop from 63.4 in Q4 2016.

However, among young Australians (aged 18 to 29) and middle-income earners ($50,000 to $74,999) it was the reverse. These groups had higher financial anxiety, particularly young

4/10

Number of Australians who experienced financial stress

60.7

Average score for financial anxiety across all Australians

women – a group already reporting the highest levels of financial anxiety (68.6 points) across all demographic groups (and noticeably higher anxiety than for young men at 60.7 points).

In general, the survey showed Australians were less worried about all financial stress drivers, especially when it came to medical and healthcare bills, providing for the family’s future, mortgage payments, rent and housing costs, and credit card repayments.

The NAB survey is based on responses from over 2,000 Australian consumers.

68.6

Highest score for financial anxiety – reported by young women

50+

Age group with the lowest level of financial anxiety

50

40

30

20

g 0 cin nt ,00 cy n 2 a $ g en Fin ireme isin merg a er t R ne i

Source: NAB Financial Anxiety Survey Q1 2017 (June 2017)

THE TYPICAL AUSTRALIAN

MORTGAGE REPAYMENTS ACROSS AUSTRALIA

Data from the 2016 Census describing the typical Australian may surprise you.

38 years old Female (50.7% of the population)

There is quite some variation in median monthly mortgage repayments between states, with Darwin having the highest and Hobart the lowest.

MEDIAN MONTHLY MORTGAGE REPAYMENTS Darwin

$2,200

Sydney

$2,167

$2,000

Perth

Owns 3-bedroom house with a mortgage

$1,861

Brisbane

2 children in family

$1,800

Melbourne Adelaide

2 vehicles

Hobart Source: ABS 2016 Census (June 2017)

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$2,058

ACT

$1,517 $1,402 Source: ABS 2016 Census (June 2017)

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DRIVERS OF HOUSEHOLD FINANCIAL STRESS NAB’s Financial Anxiety surveys asked Australians which financial issues caused them the most stress – and housing costs weren’t far up the scale

r / ls ills re tia ut) g fo re b n n i l e a a ss g o vid utu dic lthc n-e , eatin Pro ily’s f o Me hea N ys fam lida (ho

nt, hly s e t r n , ge costs Mo d bill a g l rt g eho Mo ousin s u h ho

n ’s loa ts ren on l d l a i i n n Ch ucat rso ayme e d P e rep

Q4 2016 Q1 2017 100 = ‘extremely’ concerned

c asi es b / d iti Foo cess ne

d car ts t i d n Cre ayme rep

Source: NAB Financial Anxiety Survey Q1 2017 (June 2017)

% INCOME SPENT ON A MORTGAGE

WE’RE LIVING CLOSER TOGETHER

The latest census shows that Australians are spending a huge chunk of their personal incomes on servicing their mortgages, with a national average of 66%.

Although the majority of homes in Australia are standalone houses, the number living in these has fallen from 76% of households in 2011 to 73% in 2016. In contrast, there has been a rise in the number of people choosing to settle down in other types of living quarters, with more than a quarter of housing today including higherdensity options such as flats, apartments and townhouses, compared to 2011, when the figure was 23.5%.

% OF INCOME TO MORTGAGES (PERSONAL)

% OF INCOME TO MORTGAGES (FAMILY)

Sydney

75%

27%

Melbourne

67%

25%

Adelaide

61%

24%

Hobart

55%

22%

Perth

69%

26%

Darwin

52%

23%

Brisbane

66%

26% Source: ABS 2016 Census (June 2017)

0.3% 12.7%

Separate houses

13.1%

Flats, apartments Semi-detached, row or terraced, townhouses Caravans 72.9%

Source: CoreLogic Property Pulse report, 25 May 2017

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UPFRONT

HEAD TO HEAD

What’s the biggest gap in your clients’ financial knowledge?

Matthew Carr

Lloyd Thomas

Stephanie Carello

Director MC Mortgage Solutions

Director Direct Property Network

Senior mortgage consultant My Mortgage Freedom

Our clients are struggling more than ever to keep up with the impacts of current regulatory changes on the cost of borrowing. I spend more time explaining the reasons for the regulatory changes and their impacts on interest rates; the pros and cons of P&I versus IO, and any interest rate loading that may apply as a result.

With effectively four tiers of standard variable interest rates (PPOR P&I, INV P&I, PPOR IO and INV IO), our role now is to be that trusted adviser who finds our clients that perfect financial solution while educating them in this ever-changing financial landscape. Our services are in demand now more than ever. What a great time to be a broker.

At DPN, we work with those who have mortgages as well as those looking to get into the property market. We’ve found that many people simply don’t have a strategy and are unaware of how to achieve their financial goals.

We show our clients what they will need for the retirement they want. Often, this is a big surprise as they simply had not thought about just how much will be enough, or think they are too young to worry about it.

We firmly believe in getting a strategy towards financial independence and helping our clients not only recognise what they need to do to reach their retirement goals but how they can access a tailored investment strategy to build wealth.

The biggest gap in my clients’ knowledge is their lack of understanding and education on how banks assess their income and their borrowing capacity.

When borrowing potential is not as high as clients expect, I often find myself explaining the basics of lender assessment rates and why they need to allow buffers when it comes time to calculating maximum borrow.

When I chat to my FHBs, they generally don’t know the difference between having a good deposit and what the bank will allow them to borrow. With easy access to servicing calculators and mortgage repayment calculators online, I find it tends to give the client a false sense of knowledge.

COSTLY IGNORANCE A recent ME survey found that a risky combo of high confidence and low financial literacy among Australian borrowers could be costing them thousands. “Seventy-four per cent had no clue about home loan comparison rates,” says ME head of deposits and transactional banking Nic Emery, “meaning they may not be aware of the fees they are paying; while 61% mistakenly believe they’d lose money if their bank went under despite the government guarantee, which means they may be ignoring higher deposit rates at smaller banks.” Furthermore, 36% of respondents didn’t realise that the shorter the loan term the less interest is paid, and 35% admitted they had taken no steps to educate themselves on banking products and services.

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UPFRONT

NEWS ANALYSIS

CARDS ON THE TABLE Brokers and bankers have finally given the Treasury their proposals for the future of commissions and begun an ambitious process of industry self-regulation, writes MPA editor Sam Richardson THE FINAL day of June was no ordinary day for broking; it was the day the industry had to finally put its cards on the table.

Commissions have been the topic of endless bluster over the past two years, in the form of angry press releases, reassuring speeches and drawn-out reviews, but the closing of the Treasury’s consultation on 30 June meant that industry stakeholders had to present to regulators their final views on the future of broker remuneration.

Stakeholders responded to six proposals made by ASIC, the first of which – ‘Improving the standard commission model’ – has been the subject of most interest. Yet the consultation process had another purpose: gauging whether

Association did not respond to repeated requests for comment.

Improving the standard commission model The ASIC Review of Mortgage Broker Remuneration report called for remuneration to be reformed “so that brokers are not incentivised purely by the size of the loan”, suggesting that remuneration could be determined by other factors such as LVR. Industry responses sit along a spectrum.

At one end is Connective, whose submission considers various options and concludes: “Connective does not support any of these alternatives as they are unworkable and each

“ASIC and the Treasury have been very clear with all the meetings that we’ve had that they’ll give the industry a chance to self-regulate” Mike Felton, MFAA the industry is capable of orderly selfregulation, or whether new rules will have to be imposed by ASIC. Not all stakeholders were willing to share their Treasury submissions with MPA. The MFAA, CHOICE, Connective and AFG gave us their full submissions. The Australian Bankers Association and the FBAA agreed to be exclusively interviewed about their submissions. The Customer Owned Banking

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have the potential to lead to other bad consumer outcomes.”

The MFAA says commission ‘pivoting’ on LVR (higher percentage of loan size for lowerLVR loans) is “potentially suitable [but] with unintended consequences”. Both the MFAA and AFG look favourably on upfront commission that is based on the drawdown rather than the total approved amount, and tentatively support linking commissions to loan quality.

The ABA told MPA that “we don’t think that the concept of upfront and trail should be abandoned” but, repeating the conclusion of the Sedgwick review, added that “we do believe that the standard commission model will need to be delinked from loan size”. The ABA promised, however, to work with the industry to decide the exact figures of the new model.

Most critical of the status quo was an alliance of CHOICE, Consumer Action, Financial Counselling Australia and the Financial Rights Legal Centre. Their combined submission called for trail commissions to be removed “as they offer no benefit to consumers”, with upfront replaced by fixed fees and all commissions uncoupled from loan size.

Self-regulation If remuneration does change, its new structure may not be decided by ASIC but instead by the ‘combined industry forum’.

Three months ago, with the Sedgwick review calling for changes to broker commissions and industry associations feuding with each other, a combined forum of the MFAA, the FBAA, the ABA and COBA would have seemed laughable, but that’s exactly what took place in June,

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ASIC’S PROPOSALS The Treasury called for the industry to respond to ASIC’s Review of Mortgage Broker Remuneration report and its six proposals: Improving the standard commission model Moving away from bonus commissions and bonus payments Moving away from soft-dollar benefits Clearer disclosure of ownership structures A new public reporting regime [More] governance and oversight Although this article mainly covers proposals 1 and 6, you can find coverage of other proposals on our website at mpamagazine.com.au. followed by another forum meeting in July.

The forum’s initial aim is to come up with an industry response to ASIC, which some have taken to mean self-regulation. MFAA CEO Mike Felton says, “ASIC and the Treasury have been very clear with all the meetings that we’ve had that they’ll give the industry a chance to self-regulate … if we don’t, it will be taken out of our hands and

Felton believes regulators will allow. The forum does, however, face a number of other challenges to reaching a solution.

Australia’s laws against monopolies mean participants have to be above suspicion of commercial collusion, with lawyers always present and the forum closed to the public, although some brokers and aggregators have been invited to take part.

“We do believe that the standard commission model will need to be delinked from loan size” Australian Bankers Association done for us or done to us.”

Self-regulation was appealing “in principle”, the ABA told MPA. They explained that the forum’s “initial objective is providing a solution to the government for them to consider and, depending on the government’s response and acceptance of the solution, we would look at self-regulatory mechanism to implement it”.

Rough road ahead The combined industry forum will take months (a timeline was drafted in July), which

Another risk is that forum participants may take unilateral action, undermining the process. The ABA has promised that “in terms of activity outside the forum, the ABA’s energy is invested in pursuing the objectives of the forum”. Nevertheless, “our member banks are also committed to implementing the recommendations of the [Sedgwick] review”, with implementation being completed by 2020, unless the forum can negotiate an alternative approach.

Consumer advocate groups have demanded

to be included in the forum or, failing that, for regulators or the government to lead reform.

“Reform must be focused on what’s best for consumers, not what works for brokers, aggregators or lenders,” said the submission, “Several recommendations from the review leave solutions to widespread industry problems in the hands of industry. This is not good enough.”

The ABA indicated to MPA that the forum had always planned to set up a channel to address consumer views, meaning the strong views of CHOICE and others regarding broker remuneration will need to be addressed.

Finally, the industry’s faith in selfregulation may itself be premature.

“I question whether it’s the right terminology,” FBAA CEO Peter White told MPA. “It is impossible for us to self-regulate as we are regulated by ASIC.” Ultimately, ASIC and the Treasury will have to approve the combined industry forum’s suggestions, and White doesn’t believe ASIC will compromise just because the industry has other ideas. Australia’s regulators are happy for the industry to draft rules “so long as they can tick the box: if they don’t agree, the box doesn’t get ticked”.

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UPFRONT

OPINION

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

TRUST GAP MUST BE ADDRESSED The Australian Bankers’ Association’s executive director of retail policy, Diane Tate, explains how banks want to work with brokers to improve Australians’ trust in finance

OVER THE past few years, Australia’s banks and the broader financial services industry have been scrutinised like never before. There have been over 20 government or regulatory inquiries into almost every aspect of financial services since the GFC. In the past year or so, another 17 inquiries, reviews and investigations have commenced.

Banks understand that they have not always lived up to the standards expected of them, even the standards they expect of themselves.

Shifting community expectations of the relationship between institutions and their customers isn’t only a challenge for Australia’s banks; there is also a global transformation in the way people work, consume information, and interact with service providers.

In this environment, Australia’s banks must earn back community trust if they are to continue to operate effectively and offer products and services in the ways their customers want.

To achieve this, banks are changing many aspects of how they do business under the industry’s Better Banking program, in order to improve their products, services and, most importantly, culture.

Customer research and stakeholder feedback have shown that a key factor in restoring trust is changing how banks pay their customer-facing employees, the supervisors and managers of these employees, and, more broadly, third parties such as mortgage brokers.

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In July 2016, the Australian Bankers’ Association asked former public service commissioner Stephen Sedgwick AO to conduct an independent review into how banks paid their retail banking staff.

After an extensive nine-month review in which Sedgwick sought wide-ranging views, he concluded that, while there were no systemic issues warranting the outright banning of product-based payments, some

operate sustainable business models that reward them appropriately.

Equally, mortgage brokers should be able to demonstrate to customers that they are putting their interests first and managing actual and perceived conflicts of interest. If brokers don’t do this themselves, regulators and politicians will inevitably do it for them, as we have seen happen with financial planners and we are now seeing with banks.

Banks support all the recommendations of the Sedgwick report, most of which relate to the banks themselves and not mortgage brokers, and are implementing them as quickly as possible.

They will be seeking guidance from ASIC around the recommendations to change payments to third parties, particularly given ASIC’s own report into mortgage broker remuneration and ongoing involvement in that process by Treasury.

On 9 June of this year, the mortgage industry came together to discuss ASIC’s review and the potential impact on brokers, aggregators and lenders. This forum

Banks appreciate as much as anyone that half of all customers obtain their mortgages through brokers practices needed to be changed because they could promote behaviour inconsistent with customer interests.

Some in the mortgage broking industry have claimed that Sedgwick’s review was an attempt by banks to screw down broker commissions or influence what regulators should do, to the detriment of the mortgage broker industry.

Nothing could be further from the truth.

Banks appreciate as much as anyone that half of all customers obtain their mortgages through brokers. Brokers are important to customers and to banks.

Mortgage brokers play a vital role in supporting competition in the home lending market. Banks want to preserve competition and maintain customer choice as well as ensure that mortgage brokers can

was attended by the ABA, the MFAA, the FBAA and COBA, as well as mortgage broker practitioners and other industry representatives.

This forum was the first step in the mortgage industry coming together to make sure that remuneration and governance arrangements deliver better customer outcomes, and industry action builds customer and community trust.

Diane Tate is the executive director of retail policy at the Australian Bankers’ Association, which represents all of Australia’s major banks and a number of non-majors. The ABA commissioned the Sedgwick review into remuneration in retail banking, although the review was carried out independently of the ABA.

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ADVERTORIAL

Increasing your conversion rate

We share the secrets of top-performing brokers THE MFAA’S new Industry Intelligence Service (ISS) has reported lower conversion rates than in the previous years. They put this down to “more promotions by lenders, a low point in the interest rate cycle, more conservative lending policies and intense competition amongst brokers”.

The ISS also reported that the proportion of brokers not settling a single loan in six months has increased, suggesting these may be brokers who are new to the industry or established brokers living off trail commissions.

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completing application forms) and free up your time to follow up new leads, focus on existing customers and their evolving needs, and build your network 4. use Deposit Guarantees to grow your business

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PEOPLE

BIG INTERVIEW

MARK WOOLNOUGH: BRIDGING THE GAP ING DIRECT’s broker chief is now heading all distribution, pulling together all the bank’s resources to better support brokers and customers, he tells MPA editor Sam Richardson

BEGINNING A new chapter in a big organisation is easier said than done. In 2016 ING DIRECT bid goodbye to its CEO of almost 17 years – its CEO since entering Australia in 1999 – and his replacement, Uday Sareen, declared the beginning of a ‘Chapter 2’ for the branchless non-major.

Sareen has called for 8–10% growth to take the bank beyond its current 3% market share. To achieve that goal, the past 12 months have seen a number of changes, with a new head of retail banking, Melanie Evans, poached from Westpac in January, and now the promotion of Mark Woolnough to head of distribution.

Woolnough is well known to brokers and played a crucial role in ‘Chapter 1’ of the bank. Mortgages were ING’s first product, and brokers are the bank’s primary distribution channel, bringing in around 90% of business. Combining the direct and broker channels allows better allocation of resources and encourages the passing of more complicated leads, such as SME clients, from the bank to brokers.

It will also benefit mortgage customers, Woolnough argues. “It’s essentially bringing the two channels together – the broker channel and the direct channel – and

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ensuring there’s a single voice for mortgage customers.”

But not just mortgage customers. What ING is chasing – what ‘Chapter 2’ is really about – are primary bank customers.

“We’ve invested a lot in recent years in putting the broker at the centre of the relationship with the customer,” Woolnough explains, referring to ING’s Broker Referral Program. The program pays fees to brokers

and broker,” Woolnough says. “If they have a positive experience with the lender it bolsters the broker and drives advocacy.”

Sorting out turnaround times Before Woolnough can expect customers to put their faith and funds in ING, he needs to convince brokers. ING already enjoys high customer satisfaction ratings, and was rated the number one non-major in Canstar Blue’s

“We’ve invested a lot in recent years in putting the broker at the centre of the relationship with the customer” when mortgage clients get ING’s Orange Everyday transaction account or the Living Super account.

With a new credit card for mortgage customers, Orange One, Woolnough is looking to brokers to help create primary banking customers.

“We don’t want brokers to worry that if we’re talking to their clients about other banking solutions, we want to reassure the customer about the choice of lender

survey, but events in 2016 sorely tested many brokers’ patience. Sharp interest rates drove a surge in applications, which overwhelmed the bank, leading to a blowout in turnaround times. This was reflected in ING’s performance in MPA’s Brokers on Banks survey, in which ING came first in the interest rates category and last for turnaround times.

“Turnaround times have been a challenge for us,” Woolnough admits. He says the

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PROFILE Name: Mark Woolnough Title: Head of distribution Company: ING DIRECT Years in the industry: 17 Career highlight: Introducing the Broker Partner Program in 2011.

“We invested additional resources and people into brokers, beyond the business development managers; we expanded sales support; we introduced the desk-based relationship manager level … that’s the legacy I can safely say I left,” Woolnough says.

“I changed the whole distribution model and what we stood for. It’s been recognised internally as well, being replicated on the direct side to create this one big ‘mortgage centre of excellence’.”

Career lowlight: Dissatisfied customers and brokers.

“When you speak to a customer or broker and you can hear that we’ve really let them down, whether it’s been through an error or not meeting the brand promise.”

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PEOPLE

BIG INTERVIEW

blowout was “partially driven by demand; not just the interest rate but also what the brand stands for”. ING’s new LendFast system, intended to reduce turnaround times by one third, was also to blame; initially “the performance wasn’t great, and certainly something we weren’t happy with as we went through that learning and adaption stage”, Woolnough says.

One reason ING struggled to handle the surge was that around 10% of brokers it was dealing with hadn’t used the bank for a year or longer and so were unfamiliar with many

centred on fair value and we didn’t risk putting customers in a worse financial position.”

New mortgage customers and existing ING customers will be eligible for the card, which is designed to assist them with paying off debt. To this end the repayment minimum is higher than the norm: 10%, compared to 3%, speeding up repayment by more than three quarters.

Orange One’s success rests in part on brokers understanding the product and having faith in the bank. To increase brokers’ trust in ING, Woolnough is running a technology-

“Orange One is a product we believe is a responsible approach to credit; it’s not just another credit card” of its processes. “It changed the way we put together our [staff] training; it changed the focus when they were meeting brokers to not just talk around product features,” Woolnough recalls, “but to make sure brokers and in some cases their support staff understand ING’s requirements to make sure the customer experience is a pleasant one.”

Cross-sell With the LendFast system now bedded down and his staff retrained, Woolnough can look to the future and the task of creating primary bank customers.

In May 2017 ING launched its Orange One credit card, the first credit card the bank has launched in Australia, the lack of which was a “glaring omission” in ING’s product suite, Woolnough believes. Orange One has been promoted as a “new class of credit card” and Woolnough is keen to stress its differences.

“It’s a product we believe is a responsible approach to credit; it’s not just another credit card,” he says. “It’s a product we took a long time to develop and test, to ensure that it’s

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focused broker roadshow series, visiting every state and territory capital city this year.

“It’s an opportunity for executives to listen first-hand to brokers about client experiences and opportunities for new products,” says Woolnough. In addition to his team, ING executives from the finance, treasury, contact centre and processing teams will be present.

There will also be a presentation by a futurist and a section on verification of identity using video calling, to help brokers to enter their own ‘Chapter 2’ of development.

With the roadshow, credit card and an increasing presence in commercial lending, Woolnough’s new role as head of distribution has already become about far more than just residential mortgages. It’s just the beginning, he says. “We’ll continue to look at other products that fit the mould in terms of providing true value to clients, and allow us to deepen relationships.” Woolnough’s challenge is to keep the best of ING’s Chapter 1 – the sharp rates and simplicity – while offering broker clients services that’ll keep them there long after the deal has settled.

THE NUMBERS BEHIND ING DIRECT Launched in Australia in 1999, ING DIRECT now has on its books more than..

$32,527,000 in owner-occupier loans1

$9,397,000 in investor loans1

$38,617,000 in deposits1

3.49% of loans by AFG brokers in February 2017 were ING loans2 In 2017’s MPA Brokers on Banks survey, ING DIRECT’s most notable achievements were:

1st for interest rates

ING’s Orange Advantage Package was among the top three products recommended by brokers, who commented on its low rate and low fees for a packaged product Source: 1APRA, Monthly Banking Statistics, April 2017; 2 AFG Competition Index, March 2017

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SPECIAL REPORT

BROKERS ON NON-BANKS

BROKERS ON NON-BANKS Non-banks are stepping up to deal with the chaos caused by regulation, but they’ve become regulators’ next target.

We asked brokers how and why they use non-banks, and which non-bank impressed them the most

THIS IS the biggest survey of non-banks MPA has run for years, not only because it has more participants, more medals and more respondents, but also because it comes at a time when brokers are finally discovering how much the non-bank sector can offer.

Brokers who operated pre-GFC will be well acquainted with non-banks, but the intervening years have seen these lenders forgotten by many. Yet non-banks are now big business and include global players as well as more niche, fast-moving new entrants, all competing to fill the lending sectors vacated by the banks: investors, foreign buyers, the self-employed, and the simply unusual.

Our Brokers on Non-Banks survey asks which non-banks are stepping up and which are falling behind. Brokers rated each non-bank

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they had dealt with from 1 (very poor) to 5 (very good) across 10 categories of service: the non-bank with the highest average rating won the award for MPA Non-Bank of the Year. We also asked brokers which individual non-bank product was their favourite, and this was named the Non-Bank Product of the Year.

This year we introduced seven additional awards, for ‘Preferred Lender’ in various categories. We asked brokers which non-bank best served certain niche areas of clients, including non-conforming, first home buyers, property investors, commercial clients, alt/low-doc, SMSF and foreign non-residents.

The most-picked non-bank for each client group was named the Preferred Lender for those clients. You can find Preferred Lenders and overall winners listed in the ‘Final Results’

section near the end of this report.

Our Brokers on Non-Banks survey is not all about awards, however. We also asked brokers why they use non-banks, why they don’t, and how consumers see this sector. While different non-banks target very different groups of clients, they share a common challenge of achieving broker and consumer awareness, with only the biggest non-banks being able to mount sustained consumer campaigns.

One group that has certainly noticed non-banks is Australia’s regulators. The 2017 Federal Budget saw APRA allocated additional resources and potential legal reforms in order to bring the non-bank sector under control.

Hence our final question: if non-banks were restricted by APRA in the same way as banks, would you still use them?

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OUR TYPICAL RESPONDENT

2 or less

based in NSW (29%), Vic (26%) or Qld (25%)

aged between 46 and 55

writes $10m–$20m in mortgages a year

20%

15 or over

22%

23%

Years as a broker

3 to 5

6 to 15

35%

WHAT DO BROKERS WANT FROM NON-BANKS? 1 = not important; 5 = very important Turnaround times

4.50

Credit policy

4.48

BDM support

4.45

Interest rates

4.17

Product range

4.14

Communications, training & development

3.76

Online platform & services

3.73 3.54

Commission structure

3.45

Product diversification opportunities Brand recognition*

3.15 *in 2016 this category was named ‘Marketing and brand awareness’

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SPECIAL REPORT

BROKERS ON NON-BANKS

WHY USE A NON-BANK? Although consumer awareness remains a challenge for non-banks, an increasing number of consumers have nowhere else to go

IF YOU’RE sceptical about non-banks,

WHAT IS THE MAIN BARRIER TO PUTTING MORE BUSINESS THROUGH THE NON-BANK LENDERS?

consider this statistic: 85% of consumers are open to considering non-bank products, according to our respondents. While this figure was slightly lower in Victoria and Western Australia – and consequently higher in NSW and Queensland – our survey goes some way towards proving that consumers are more open to non-banks than many brokers believe.

One could argue that our respondents had clients who were interested in non-banks because they, the brokers, were non-bank specialists. Yet for three quarters of our respondents less than 40% of their loans went to non-bank lenders – ie these are not necessarily specialist brokers. In fact, our survey suggests the opposite: that brokers themselves play a large part in slowing the growth of the non-bank sector.

Brokers do of course provide the only distribution channel for the majority of non-bank lenders. However, less than half

Poor commission

Lack of brand awareness

1% 3% 4%

38%

Poor service Poor turnaround times

9% 28%

Other

16%

Too expensive

Customers want a branch network

THE NON-BANK OPPORTUNITY GAP Percentage of loans through non-banks

Actual Ideally

20

0–20

53% 24%

21–40

41–60 20%

29%

21%

61–80

81–100 12%

9% 16%

6% 9%

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of our respondents could see themselves sending more than 40% of their loans to non-banks. Encouragingly for non-banks, most of our respondents were nevertheless interested in writing a higher proportion of non-bank loans than they do today.

Unlike our other surveys, Brokers on Non-Banks respondents were typically more experienced, having worked in broking for more than six years, on average. While this suggests it’s never too late to change broker attitudes to non-banks, lenders should also be asking themselves whether new brokers are finding it too hard to access – or are simply unaware of – non-bank options.

How can non-banks bridge the opportunity gap? According to our respondents this could be as easy as through improved marketing, as ‘lack of brand awareness’ came ahead of ‘too expensive’ and ‘customers want a brand network’ in the list of factors stopping brokers from using non-banks.

Our results suggest that this marketing should be targeted, and cannot work without specialised products. This year’s Non-Bank of the Year, La Trobe Financial, and runner-up Liberty, were named the Preferred Lenders for foreign buyers and property investors respectively. It’s no coincidence that foreign buyers and investors are two groups of clients that, until relatively recently, could have gone straight to the banks, but now increasingly rely on non-banks, even if their interest rates are higher.

With many brokerages entirely dependent on these clients, our top-rated non-banks have provided a lifeline for both brokers and clients, and the trust they have built is reflected in this survey.

HIGHLIGHTS: USING A NON-BANK Brand recognition

Liberty

Pepper Money

La Trobe Financial

Bluestone

La Trobe Financial

Bluestone

Homeloans Ltd

Commission structure

Liberty

Credit policy

La Trobe Financial

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SPECIAL REPORT

BROKERS ON NON-BANKS

PRODUCTS AND PRICING Non-banks with the credit policies to target investors and foreign buyers are surging ahead of the competition

PRODUCTS AND specifically credit

NON-BANK PRODUCT OF THE YEAR: LIBERTY STAR For the third year running, brokers picked Liberty Star as their favourite product. Aimed at owner-occupiers and investors, Liberty Star offers a maximum LVR of 95%, a 100% offset facility, and interest-only options (albeit with higher interest rates) What brokers told us about Liberty Star: “Competitive interest rate, fast turnaround times and assessors are generally very willing to assist.”

“It’s very comparable with the majors for product spec ... much better for servicing.”

“Easy to use, great rates, great comms. Win-win.”

“For clients at a high LVR being able to borrow up to 100% of the value of the property essentially is a great niche.”

policy are at the centre of the non-bank proposition. Arguably this has always been the case – non-banks have long served groups such as credit-impaired customers – but non-banks’ different approach to credit policy has been pulling in new types of clients and, consequently, brokers who would previously gone elsewhere. The data proves this: 21% of our respondents said they would pick a non-bank over a bank because ‘recent regulatory changes have prevented clients going to the bank’.

Our Non-Bank of the Year, La Trobe Financial, demonstrates how important this trend can be. In 2016 La Trobe ranked ninth in our Brokers on Non-Banks survey – a poor result given the small size of the sector. This year La Trobe came first

WHAT IS THE MAIN REASON YOU WOULD PICK A NON-BANK LENDER OVER A BANK? Takes a wider view than customer’s credit score

32%

Recent regulatory changes have prevented client going to the bank (ie investors)

21%

More personalised services

16%

More competitive rates

16%

The client lacks standard documentation (ie payslips)

7% *At the time of writing in July, La Trobe had paused lending to non-residents, although they say it will resume.

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SPECIAL REPORT

BROKERS ON NON-BANKS

HIGHLIGHTS: PRODUCTS AND PRICING Interest rates

Firstmac

Homeloans Ltd

La Trobe Financial

Liberty

Homeloans Ltd

La Trobe Financial

Liberty

Product range

La Trobe Financial

Product diversification opportunities

Homeloans Ltd

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overall, winning the service categories of credit policy (by a margin), product range and BDM support.

La Trobe is one of very few lenders who continue to lend to non-residents (hence being voted by brokers as the Preferred Lender for foreign buyers) and so you’d expect it to win the awards for credit policy and product range. La Trobe’s win for BDM support suggests that once you give brokers a reason to start using a non-bank they will start to appreciate the service that non-bank can offer.

Exactly the same argument applies to runner-up Liberty, which has established itself as a leading alternative in the property investor space and has seen a huge increase in business as a consequence. Third-placed Pepper Money seems to have impressed brokers through more traditional means, providing solutions for alt-doc and nonconforming clients and taking a leading role in educating brokers and promoting these clients to the industry. Brokers named Pepper as their Preferred Lender for both of these client groups.

It’s because of this focus on certain client groups – foreign buyers, property investors and non-conforming – that potential regulation by APRA is such a threat to non-banks. We asked brokers whether they would still use non-banks even if they were more heavily regulated, and while most brokers were supportive of non-banks, a large number questioned what the nonbank sector stood for without its alternative approach to credit policy. One could argue, therefore, that just a few APRA directives could leave next year’s Brokers on NonBanks report looking very different.

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SPECIAL REPORT

BROKERS ON NON-BANKS

TECHNOLOGY, TURNAROUND AND SERVICE With turnaround times becoming so important for brokers, non-bank lenders that struggle to maintain them are losing out WHEN IT comes to non-bank services, brokers’ demands have remained fairly consistent. With almost equal importance ratings, it appears that turnaround times, credit policy and BDM support remained brokers’ top three priorities this year, and it’s no surprise that La Trobe Financial, which won two of these three service categories, was brokers’ favourite non-bank overall.

Across all non-banks, however, turnaround times are worsening, according to 40% of our respondents, compared to 25% who said they were improving. It’s possible that increased business going to non-banks as a result of changes to investor and foreignbuyer lending, initially overwhelmed lenders with limited resources for processing, as one respondent suggested. “With the influx of new deals non-banks cannot coop the turnaround times. They are not geared to

HOW HAVE TURNAROUND TIMES AND COMMISSION STRUCTURES CHANGED OVER THE PAST YEAR?

Turnaround times Improved significantly Improved

4%

Commission structures

21%

1%

Improved significantly

8%

Improved

8%

Worsened

1% Worsened

32%

Worsened significantly

8%

Worsened significantly

HOW COULD NON-BANKS IMPROVE THEIR SERVICE LEVELS?

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25%

21%

20%

17%

16%

More BDMs/credit assessors

Better technology

Simpler income verification process

Better-trained BDMs/credit assessors

Other

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handle or less committed in resources”.

Yet when you look at the non-banks who have profited most from these borrower groups – La Trobe Financial and Liberty – this argument becomes questionable, because these two lenders were also ranked number two and number one, respectively, for turnaround times. However, a number of non-bank lenders received average service scores of under 3.00 for turnaround times, ie brokers saw their performance as less than satisfactory.

When it comes to improving service levels, brokers’ demands are also very similar to

last year – split between the need for more BDMs/credit assessors, better technology, simpler income verification and better training for BDMs/credit assessors. It’s possible that inexperienced non-bank staff could be behind the slide in turnaround times, with one broker commenting that “credit assessors are now less skilled than previously as new lenders have had to employ new staff & be trained by brokers too. The new lenders haven’t had the quantity of staff to match the new volumes either”.

Just as interesting as the services brokers

judge to be important are those services they ignore. Brand recognition was the lowestranked service this year, behind product diversification opportunities and online platform and services.

Given that lack of consumer awareness is also one of the biggest factors holding brokers back from recommending non-banks, this finding is confusing, to say the least. Perhaps what brokers are saying is that a slick advertising campaign doesn’t excuse poor turnaround times or BDMs who won’t pick up the phone.

HIGHLIGHTS: TECHNOLOGY, TURNAROUND AND SERVICE Turnaround times

Liberty

Communications, training and development

La Trobe Financial

Firstmac

BDM support

La Trobe Financial

La Trobe Financial

Pepper Money

Liberty

Online platform & services

Liberty

Homeloans Ltd

Pepper Money

Firstmac

La Trobe Financial

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SPECIAL REPORT

BROKERS ON NON-BANKS

WHAT YOU’RE SAYING With increased regulation imminent, we asked brokers: If non-banks were restricted by APRA in the same way as banks, would you still use them?

This is what they told us

YES Yes, I would, because: 1) There will be no channel conflict; 2) Better turnaround times; 3) Better customer service from BDM; 4) Better product range in some cases and 5) Better retention.

Yes. Good variety and policy differences (Best fit) still trump ‘interest rates’. If non-bank lenders were restricted, interest rates would rise, but policy tends to decide lender, not so much interest rates, especially in these days of more complex scenarios.

Yes. I imagine there will be some constraints on the investor loan book and PI/IO options. However, as long as the flexible credit assessment criteria is in place along with alternate income verification methods, I will still use these lenders.

Yes. APRA will have an effect on non-banks like it or not through warehouse facilities. Non-banks will still win out by using niche products and better services.

Yes for many Lo Doc scenarios where clients can’t provide BAS and that banks are unable to assist with. APRA restrictions could slow use of non-banks; especially the ability to expense existing liabilities at the actual repayment figure.

The personalised service of non-banks compares favourably to that of the banking sector. More visits by non-bank BDMs, ability to discuss deals directly with credit analysts and flexibility of product means that non-banks will have a place in the market for some time to come.

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NO If non-banks were restricted by APRA I would not use them because they offered that out of the box situation, I would expect there to be further requirements but not to restrict them, then it will be [a] uniform process and we might as well say goodbye to customer choices and their option to choose which institute they want to go with.

Probably not, I believe that the greatest advantage that non-banks have are their servicing calculators, if those policies were to change they would lose the upper hand.

There would be no point as their policies would be the same.

The reason we use them is that these funders can see deals that are “out of the box” but are still deals. They have more options to prove income than just the standard payslips.

There would be less use for non-banks if they couldn’t go outside of the box. High LVR lending has become non-existent with most of the big banks. Investors are restricted with the big banks; non-banks give them another opportunity to expand in the market.

If full APRA restrictions were imposed on Non-Banks, the current pricing differential would need to be removed …

Clients currently understand that Non-Banks’ “less stringent” requirements [mean they] do need to impose a premium in terms of their rates and charges. If Non-Banks were governed by the same requirements for banks, with the current pricing differential, there would be no incentive to use them.

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SPECIAL REPORT

BROKERS ON NON-BANKS

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

NEW: BROKERS’ PREFERRED LENDERS This year we asked brokers to pick a preferred lender for each key category of borrower. The lender with the most mentions per category won:

Non-conforming

First home buyers

Property investors

Pepper Money

Homeloans Ltd

Liberty

Commercial

Alt doc/Low doc

SMSF

La Trobe Financial

Pepper Money

Liberty

Foreign non-residents

La Trobe Financial

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OVERALL RESULTS Non-bank

Overall score

1st

La Trobe Financial

3.51

2nd

Liberty

3.47

3rd

Pepper Money

3.44

4th

Homeloans Ltd

3.40

5th

Firstmac

3.39

6th

Bluestone

3.19

7th

Better Mortgage Management

3.02

8th

Australian First Mortgage

2.99

9th

RESIMAC

2.92

10th

Nationalcorp Home Loans

2.87

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LA TROBE FINANCIAL This year’s standout performer has come a long way since 2016.

Last year La Trobe not only received a poor rating overall; it also failed to win any categories. This year, La Trobe has won three categories and was among the top three lenders in seven other categories, as well as being named Preferred Lender for foreign non-residents and commercial clients.

It would be easy to put La Trobe’s success down to being one of the few lenders to play in the non-resident space.

However, while this may have pushed brokers to use La Trobe for the first time, they were evidently happy with the service they received, as wins in two key categories of BDM support and credit policy – and second place in turnaround times – makes clear.

Nor was La Trobe’s status as Preferred Lender for commercial clients achieved by accident. La Trobe’s product range is broad and continues to expand, embracing rural lending, aged care and parent-to-child loans, to name just a few.

La Trobe paused lending to non-residents in July, after this survey had finished, although it says this will resume. Whether La Trobe’s excellent service will continue to draw brokers in the absence of a unique product offering is a question with consequences for all non-bank lenders.

LIBERTY Close in second place, Liberty continued to hugely impress brokers.

As the Preferred Lender for property investors, Liberty has dominated a major revenue stream, which will only grow as the banks continue to cut down on investor lending.

Paired with brokers’ favourite non-bank product, Liberty Star, and with wins in the categories of turnaround times, commission structures and brand recognition, it seems only major restrictions by APRA could prevent Liberty from achieving another excellent result in 2018.

HOMELOANS LTD With a broad product suite, Homeloans Ltd continues to appeal to brokers, including in some unusual sectors. Homeloans was voted Preferred Lender for first home buyers, a sector usually dominated by banks. With a win in the category of product diversification opportunities, a second place finish for interest rates and increased investment marketing, it should come as no surprise that Homeloans can compete within and beyond the non-bank space.

4th

PEPPER MONEY It was a great year for Pepper Money, with brokers voting the global non-bank as their Preferred Lender for alt-doc/low-doc and non-conforming clients. Through its roadshows, online training modules and regular media commentary, Pepper has done as much as anyone to put alt-doc and non-conforming clients on brokers’ radars, and our respondents recognised this, rating Pepper number one for communications, training and development.

Moving up in the overall rankings will require Pepper to excel across all service categories as it occasionally missed out on the top three in some areas.

FIRSTMAC Remaining in the top five, Firstmac had a good year.

It was rated by brokers as the top lender for interest rates, and took second place for online platform and services and third place in the key category of turnaround times.

Although Firstmac didn’t score particularly poorly in any one category, what’s keeping the non-bank from the top spots is its failure to achieve top three finishes in many categories, particularly the key categories of credit policy and BDM support.

5th

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SPECIAL REPORT

BROKERS ON NON-BANKS

HOW LA TROBE FINANCIAL HIT GOLD Cory Bannister, vice president and chief lending officer of Non-Bank of the Year La Trobe Financial, explains how quality relationships, flexibility and a broad product range made the difference

MPA: Why did brokers pick La Trobe Financial as their favourite non-bank lender this year?

Cory Bannister: Firstly, we are delighted to be recognised by brokers as the best non-bank lender this year, and are humbled by that recognition.

It is currently a highly competitive market and the industry has really raised the bar in terms of providing quality outcomes for consumers. To be held in such high regard by our broker partners among the many other extremely credible and impressive operators is something we are extremely proud of.

As to why brokers chose us as their favoured non-bank lender, we would hope that it is a combination of three things: a high-quality working relationship between brokers and our credit and sales teams; a collaborative and flexible approach to lending; and providing access to one of the broadest product ranges in the market.

MPA: BDM support was a category La Trobe Financial dominated. What makes a great non-bank BDM? CB: We are incredibly fortunate to have an extremely stable, long-serving and awardwinning BDM team that have the following five key characteristics in spades.

Sound credit skills: Brokers want a BDM to, firstly, understand what they are talking about, and, secondly, actually be able to help

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them by providing guidance on any issues immediately, or be able to make a decision on the spot without having to refer to someone else.

Support from their credit team is also very important, as is accessibility and responsiveness. A detailed understanding of lender policies and processes is essential – unlike brokers, BDMs do not have to have in-depth knowledge across multiple lenders’ products, so they should know their own extremely well.

Finally, BDMs should not spread themselves too thin – quality of relationships over quantity is very important.

MPA: La Trobe Financial was brokers’ Preferred Lender for commercial. Why should brokers consider non-bank lenders for commercial clients?

CB: We are often told that non-banks make commercial lending easy by removing all unnecessary complexity. For us, this meant breaking down the barriers to entry and simplifying the process.

We removed the need for any additional

‘commercial’ accreditation requirements for brokers – if a broker is accredited to deal with us via their aggregator, then they are accredited to write all of our products. We have designed our commercial products and associated forms, documents and policies to look and feel like our standard residential products – we use the same application form, serviceability calculator, income verification methods and loan documents, ensuring first-time users can write them confidently and competently.

Furthermore, by making our credit team available for every transaction, we have experienced strong conversion rates. Brokers tell us that the stability in our policy and reliability in achieving a successful outcome are what is driving them to us.

“We are incredibly fortunate to have an extremely stable, long-serving and awardwinning BDM team”

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LIBERTY MPA: Brokers named Liberty their Preferred Lender for property investors. What makes you better at finding solutions for these clients?

John Mohnacheff, group sales manager: Being named the Preferred Lender for property investors directly reflects Liberty’s commitment to providing flexible solutions coupled with market-leading service and turnaround times. Consumers are savvy and expect solutions with minimal fuss and effort.

Brokers understand this and the importance of engaging a lender who provides certain and consistent consumer solutions, which Liberty provides.

“Consumers are savvy and expect solutions” HOMELOANS LTD MPA: First home buyers are not normally associated with non-banks, but Homeloans Ltd was the number one non-bank lender for brokers in this space. Why would FHBs use you?

Daniel Carde, Homeloans general manager – third party distribution: Homeloans’ comprehensive product range is well suited to all borrower types, including first home buyers. When considering first home buyers, our product range covers those borrowers seeking a higher LVR, borrowers with or without genuine savings, and even a high-LVR uninsured option for those borrowers who may not meet mortgage insurance guidelines.

We can also assist first home buyers who may be self-employed but unable to produce up-to-date financials, and those with minor credit impairment. Homeloans has a solution to suit most borrower types in almost any situation, including those buying their first home.

PEPPER MONEY MPA: Pepper Money was brokers’ Preferred Lender for non-conforming and alt-doc/low-doc. What have you been doing to highlight the importance of these borrowers?

Mario Rehayem, managing director, Australian mortgages and personal loans: Since 2011, Pepper Money has been at the forefront of educating the industry on the need to address the largest underserved market – those who have endured some form of life event or have fallen victim to an overnight change in credit appetite and policies.

Over the past three years, Pepper Money’s National Insights Roadshow, attended by a record 3,200 brokers, has demonstrated who these consumers are, where they live and how to offer specialist lending alternatives through new tools, technologies and techniques.

For Pepper Money, the ultimate outcome of these significant investments is that every consumer deserves to know their financing options.

FIRSTMAC MPA: Firstmac was number one in the category of interest rates. Why does a sharp rate matter for a non-bank lender?

Kim Cannon, managing director: A sharp rate is especially important for a non-bank lender because we don’t have the huge marketing budgets and name recognition of the big banks.

Firstmac competes in the most sought-after segment of the market, so borrowers have many alternatives to choose from.

We only write prime residential loans and well over 90% of our new business flows are 80% LVR or less. That means a good rate is crucial.

We offer low rates to reward our customers for providing multiple security properties or for settling multiple loans.

Our intention is to maintain clients long-term and work with brokers by being more competitive for low risk and high-quality clients.

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OUTSOURCING/OFFSHORING

Sharing the load Feel like you’re being crushed by mountains of A4? Itching to get out and clock up more client time? Outsourcing or offshoring some time-consuming aspects of your business could help. Maya Breen talks to three service providers and a broker about how to make it happen

IF YOU’VE ever wished you had a bit more time with your clients and spent less time poring over your paperwork, going the route of outsourcing or offshoring may well transform your brokerage and eradicate that time-poor workday.

MPA speaks to three service providers about the options available, the reasons why brokers choose to take them up, and when the move is appropriate for your brokerage.

We also hear the experiences of a broker who successfully offshored parts of his business operations himself.

But first, how do outsourced processing and offshoring/hosted staffing compare?

Both involve a team contributing efforts on behalf of your brokerage, but that’s about all they have in common. With outsourcing, you give up ownership of a function of your brokerage so an external business can take care of it. It’s a hands-off solution for the broker. Offshoring involves having a team of your own employees in an overseas location, and you still have control over the processes or services they are responsible for.

How can it help you?

Offshoring and outsourcing remain a relatively new idea when it comes to the Australian market, explains Michael Galilee, chief executive of offshoring/outsourcing service provider Galilee Business Support

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Services (GBSS). GBSS favours offshoring for its clients, and Galilee points out that it is not just an option for bigger-sized companies.

“Any support that can be given to take away the basic administration function that brokers can get caught up with during their day can free up their time to focus on the core function of their business, which is really what offshoring is all about.”

AMA-winning Boutique Outsource Services (BOS) also covers both offshore and outsource services but with a focus on offshoring. “Most businesses think about offshoring but don’t know where to start, and they need help in making the initial jump as they are spooked by the unknown,” says managing director Garry Driscoll. “This is where we assist with all the arrangements, finding the right staff and setting them up in our office. People are always really surprised how easy it is to have someone working offshore as we do all the work and this can be done start to finish in a matter of weeks, not months.”

Loanworks Technologies (LWT) is a specialist in outsourcing services and loan-

specific software. “Outsourcing can deliver benefits to different parts of a broker business at different times in its life cycle,” explains Andrew Duerden, director sales and business

the growth cycle stabilises, they will have achieved a variable cost base for their backoffice and customer service operations, and have a strong relationship with an outsource

“The decision needs to be made if it is better to spend time on paperwork or is your true value to the business in networking, marketing and loan writing” Garry Driscoll, Boutique Outsource Services development. In the early stage, brokers can free up time to grow their client base by outsourcing loan processing services.

“As their business grows they can then extend their use of outsource services, which could include establishing their own dedicated outsource team. The range of outsourced tasks associated with loan processing, PA support, general admin and customer service support post-settlement can also be extended,” Duerden says. “As

provider. Together they can look for further transformations that deliver greater returns to the broker’s business.”

The trigger point As the service providers talk about what ultimately is the decider for brokers choosing to take up their services, the words “bogged down” are mentioned more than once.

Driscoll says the broker will ultimately reach a limit of loans they can physically

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OUTSOURCING/OFFSHORING

“Once a broker starts to reach a level where they are finding they are being bogged down and distracted from the core function of their business, then it is time to consider offshoring”Michael Galilee, GBSS write themselves before the paperwork and compliance required for each one becomes overwhelming.

“The decision needs to be made if it is better to spend time on paperwork or is your true value to the business in networking, marketing and loan writing. This decision is easier when you can have someone working for you offshore with a simple set-up and attractive ongoing costs,” he says.

Galilee adds, “Once a broker starts to reach a level where they are finding they are being bogged down and distracted from the

core function of their business, then it is time to consider offshoring.”

Referring again to the three stages of a business’s life cycle, Duerden explains in the early stage that a broker’s tipping point in choosing to outsource is often “when their hourly rate of earning drops and they are ‘burning the candle at both ends’ of the day to maintain customer satisfaction”.

During the growth phase, he says, brokers may be prompted to explore outsourcing options when they feel constrained by fixed operating costs and a larger team pulling time and money away from an effective sales growth strategy. “For a broker with a mature business, there is often a desire to take a step back and leverage their learnt experience in a management and leadership role. However, they need to retain the return on their investment even though they are no longer generating new business personally.

This often leads to a review of their operating expenses and how they can change to a more variable cost base.”

WHY COMPANIES OUTSOURCE Cost-cutting tool

59%

Enables focus on core business

57%

Solves capacity issues

47%

Enhances service quality

31%

Critical to business needs

28%

Access to intellectual capital

28%

Manages business environments

17%

Drives broader transformational change

17% Source: Deloitte’s 2016 Global Outsourcing Survey, May 2016

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Where to start?

You may be a broker that has reached that trigger point and wants to outsource or offshore a part of your business. But how much or little should you consider and which areas? Loan processing is the most popular area to outsource, LWT has found. “This may only be lodgement to lender or also include loan tracking,” says Duerden. “After loan processing, the next most common outsource requirement is for dedicated loan admin staff who undertake loan processing tasks and PA/ general admin tasks. We are expecting our new customer care service to meet a very large need in the broker market, particularly

as a greater emphasis is placed on brokers to maintain valuable long-term relationships and ensure they deliver good consumer outcomes over the life of a loan.”

LWT offers three main outsource services to support brokers: mortgage processing, managed staffing, and customer care.

Duerden says the first of these covers all tasks required to lodge and track a loan.

With the second, brokers can opt for fulltime dedicated staff at a monthly cost (from $1,750 per month).

“We provide a full complement of HR, payroll, IT and facility management support services,” he says. “We provide all the personal

equipment the staff needs and support them with an employee value proposition that delivers very low attrition (below 10% per annum) and long tenure. We source, hire and onboard talented staff that meet the client’s position description. We also train the staff on the broker’s CRM tool and Australian mortgage processing.”

The third service ensures regularly checking in with a broker’s client base to strengthen their long-term relationships.

When it comes to offshoring staff, Galilee says the option is only hindered by what your particular industry will allow. “Back-office support and administration roles are always

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OUTSOURCING/OFFSHORING

a good starting point for any client. Anything from personal assistants, receptionists, accounts, IT support, developers, and within the broker sphere the broker support roles are very common.”

At BOS, offshore staffing is provided but not mortgage processing. “Our model works really well as the staff member is part of the broker’s business, not someone simply doing processing,” says Driscoll. “They have more buy-in and really want to assist to grow the business as they are part of the team. There is more engagement and focus and they also get to understand the unique offering that their company provides. Not all brokers are the same, so it is important that the staff member knows the differences and maintains the right culture.”

He says the high skill level and diverse capabilities of the staff mean they can cover all areas in mortgage processing. A few include accounts processing, appointments and scheduling, after-settlement calls and compliance checking.

“What BOS provides is the office, infrastructure and expertise to identify, source, document and facilitate the employment of a staff member on behalf of the broker. It’s a very quick, simple and costeffective way of offshoring staff, which is equally suitable for one staff member through to hundreds of staff.”

OUTSOURCING SUCCESS STORIES Chris Hall of Blue Crane Capital says he views outsourcing as an extension of his business. He has found peace of mind that his clients’ transactions are well looked after and his time has been freed up thanks to smooth turnaround times and consistent communication. He says the MPS service has made sure he is staying on top of NCCP and regulatory requirements and given him more client time.

Oxygen’s Fiona Milligan chose a managed staff outsourcing model for helping out with standard administration tasks. She says the time it gives her to focus on other things and the benefits of the business still progressing when she’s on leave have been invaluable.

Leah Knight of Mortgage Choice Erina says outsourcing managed staff led to the company’s biggest month in 18 years, enabling them to process 36 loans with only one admin support person in their Australian office.

Source: Testimonials from Loanworks Technologies’ clients

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What’s the downside?

Clearly there are many benefits that come with choosing to outsource or offshore part of your business operations. Cost and time savings are the two major ones. Galilee says the savings on salary (including fees from GBSS) range from 50% to 70% on what you might find yourself paying in Australia. “But the benefits are much more than the simple savings found. Offshoring or outsourcing is all about strengthening the core function of your business by providing support staff to assist in the back-office support or

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administration roles.” So what are the more unfavourable aspects of these services?

Galilee says one negative is the amount of preparation and thought required around how to distribute work through to the staff member after they join the team. “There is some preparation that needs to go into it to ensure that clients get the most out of offshoring, but really this can be turned into a positive, as it gives the client the opportunity to look at their business and do a process map and see where they may find the benefit.”

Although LWT is an outsource service provider, Duerden says there are certain roles

“Outsourcing can deliver benefits to different parts of a broker business at different times in its life cycle” Andrew Duerden, Loanworks Technologies best kept in-house for a brokerage business so as not to lose the trust relationship that is so vital between a broker and their clients. “This can be in the scenario research/customer coordinator role and settlement handholding of customers. In these activities, personalised customer contact adds value,

helps manage customer expectations and identifies customer priorities.”

But he says there is no reason why all activities associated with a transaction-based process, such as loan processing, general admin and customer care should not be outsourced. He says if brokers do this then

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OUTSOURCING/OFFSHORING

they can “achieve a variable cost base, focus their investment in their sales and marketing plan, and maintain flexibility within their back office so they can better manage seasonal fluctuations and growth.”

“We see that for a lot of brokers support is actually a big challenge. A lot of top brokers are great at dealing with customers but not so good with all the forms and following up and all those kinds of things” Otto Dargan, Home Loan Experts Perhaps you may be at the stage where outsourcing or offshoring would be a good step to take, or maybe it doesn’t feel necessary just yet. But when the back-office duties are feeling overwhelming, there are a raft of possibilities to lighten the load so your business reaches its full potential.

“Having the opportunity to have that extra level of support can really help to evolve any business and help take things to the next level,” Galilee says.

Broker case study: Successfully offshoring in Nepal Otto Dargan, managing director of Home Loan Experts, heads up a team of 80. He decided to offshore part of his business five years ago after a trekking trip in Nepal.

He started with one person, and this has ballooned to 45 staff in 2017. The Nepal office is split into different teams to support his brokers in Australia, covering mortgage administration, post-settlement and the ‘assistant broker’ team, which handles longterm and low-value enquiries.

“We see that for a lot of brokers support is actually a big challenge,” Dargan says.

“A lot of top brokers are great at dealing with customers but not so good with all the forms and following up and all those kinds of things.”

Dargan embarked on the offshoring process himself and cautions brokers not to take this step lightly as the initial set-up is a long, difficult process, and training staff to the level where they can train other staff takes time.

Unless you grow a team to more than five to 10 people in an offshore location, Dargan says it just isn’t worth it.

“Unless they are going for scale or have unique business needs that can’t be met by

OUTSOURCING FOR INNOVATION Many companies are turning to outsourcing not just for cost-cutting but also to drive innovation in their business.

Of the respondents to Deloitte’s 2016 Global Outsourcing Survey:

31%

are using outsourcing to raise top-line growth by driving innovation into the business itself

40

59%

said outsourcing enables reducing costs and 20% said it improves efficiency

35%

are measuring the value of innovation in their outsourcing relationships

78%

felt positive about their outsourcing relationship

27%

represent the financial services sector Source: Deloitte’s 2016 Global Outsourcing Survey, May 2016

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outsourcing, then I wouldn’t recommend it unless they are really willing to invest the time and money to make it successful.”

THE BENEFITS OF OFFSHORING Boutique Outsource Services lists what offshoring can offer your brokerage:

Dargan’s top three tips for offshoring: 1 The first two to three people you hire offshore should be “phenomenal” performers 2 Identify if your business’s needs can

be met by an existing provider before deciding to offshore yourself 3 Only undertake offshoring if you’re

planning to go to scale

Significant cost savings

Security of working with someone you can trust

High level of service Top-quality staff

Fixed cost, which assists with budgeting

Quickly ramp up staff numbers without high upfront costs

Flexibility to wind back staff if business conditions dictate

Full-time dedicated staff

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FEATURES

AGED CARE LOANS

Finance for the golden years Funding extra care in old age can often be a stressful and emotional experience for the borrower.

MPA explores La Trobe Financial’s aged care loan and hears from two specialist brokers in the space

IF YOU’RE well into your twilight years and find yourself, either suddenly or gradually, needing the services of aged care, finding the finance to pay for it can be a daunting prospect, not only for the borrower but their family too. This is where the aged care loan can make a world of difference and is what some brokers have crafted their entire business around. MPA explores aged care finance with La Trobe Financial and two brokers specialising in the space.

Finding finance in old age “Australians are witnessing the beginning of a demographic wave that will drive demand for aged care loans for decades ahead,” says Martin Barry, head of aged care products at La Trobe Financial. “ABS figures show that the number of people aged 85 and over has increased by 153% over the last two decades. This trend is only going to accelerate, with the baby boomer cohort starting retirement age in 2011 and the aged-85-plus cohort doubling by 2030.”

A population that is only getting older will inevitably increase demand for aged care, Barry says, which is good news for brokers in the aged care space. And aged care loans can sometimes be needed at very short notice.

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“Currently, prospective residents must pay a lump sum RAD (refundable accommodation deposit) or a DAP (daily accommodation payment). Both can be significant, with RADs in major cities frequently over $500,000,” says Barry. “What’s more, the trigger for a move to aged care is frequently an accident or sudden decline in health, meaning that decisions must be made and funds sourced at short notice over a period of a few months.”

He expects the RAD amount will only get larger as lack of supply fuels competition.

“So the role for a trusted adviser to finance this large expense is a real win-win for clients and brokers,” says Barry. “A targeted aged care finance product that can fund a RAD or

other transitional costs has an important role to play. With around $20bn held in RADs at present and an annual demand of circa $3bn and growing, financing demand is only going to increase in the years ahead.”

Marguerite Taylor is the director of Aged Care Finance Solutions and has worked in seniors finance for 11 years. Although experienced in residential and commercial broking, she now specialises solely in aged care loans and reverse mortgages. She points out some key differences between an aged care loan

AN AGEING AUSTRALIA 7.8% of the Australian population aged 65 and over (270,559 people) were in residential aged care over the 2013/14 financial year Average age for women was 85.8 versus 81.6 for men

Of those in aged care: 1 in 100 identified as Indigenous 2 in 3 were women 3 in 10 were born overseas Source: Australian Institute of Health and Welfare; AIHW 2016. Residential aged care and Home Care 2014–15

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and a reverse mortgage. Reverse mortgages are for an owner-occupier, with the loan term ending when the last borrower has left the home for good; there is one loan repayment at the end of the term, and the clients are generally very active, she says, and excited about their retirement stage of life.

Aged care loans, in contrast, are for when the borrower has left the home to move into aged care, and loan terms are between three, five and seven years, she explains, as often people do not live for more than two years in an aged care facility. The client is often a family member and has power of attorney, because the borrower is usually well into their old age.

The RAD will be refunded to the family estate if the person leaves aged care or passes away.

A special kind of broker Darren Moffatt, founder and managing director of award-winning Seniors First, has almost two decades of lending experience. Aged care finance involves dealing with vulnerable people and hence is not for everyone, and Moffatt says

brokers need to ask themselves if they are the right fit for the market.

“The aged care/seniors market is not where you’re going to make a fast buck,” he says. “The seniors in the aged care market require a lot of care; you’ve got to be really hands-on with the clients and emotionally invested.” He says patience is vital but there are rewards too.

“It’s very much a feel-good market. Because you’re dealing with seniors and the elderly, if you get a good result you get the finance, and the transaction means that someone is moving into the nursing home that they really wanted to get into but thought was, for instance, unattainable – well, that’s a great outcome.”

There is a sense of satisfaction when a resident goes into care and is happy, which then leads to happiness in their children and their family.

“If you’re the type of broker that likes to use your skills to give back to the community a bit, then this might be a good market to get into.”

Taylor says enjoying the aged care world is crucial to making it work as a broker. “You’re dealing with families that are very distressed

Moving a loved one into an aged care facility can often be a traumatic experience. The financial side of this can add even more stress, with pressure to find significant funding in a short space of time. Often a Refundable Accommodation Deposit is required and this can commonly exceed $500,000. How to fund this payment is a complex problem for many families. La Trobe Financial offers a loan that can be used specifically to make this payment, reducing the stress for families at a very emotional time. Our experienced team has developed a product that is easy for the client and their family to set up, making the transition to aged care less complicated.

Martin Barry, Senior vice president, head of aged care products, La Trobe Financial

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AGED CARE LOANS Sponsored by

BENEFITS OF AGED CARE LOANS The aged care loan can provide a number of emotional and financial benefits for the borrower and their family too, including: Ability to hold on to the family home Ability to rent out the property and deduct loan interest No fire sale of the property needed Reducing family complexity in terms of who pays for care No need to provide guarantees to the aged care facility Source: La Trobe Financial Services

– when someone is moving into aged care they are at the end of their life – so it’s quite a sad time for them. So you’re dealing with all sorts of emotions going on, as well as making very complicated financial agreements … and you spend a lot of hours with those people helping them. But you get a lot of satisfaction from it because they are just so grateful for the help.”

Aged care loans are a niche within a niche,

“You’re not just dealing with your National Consumer Credit Protection Act … you’re also dealing with the Aged Care Act as well” Marguerite Taylor, Aged Care Finance Solutions explains Moffatt, and are likely suited to the more established broker that has a greater affinity with the age group. “Often it’s the broker’s experience of aged care first-hand through family that will get them involved in this space,” he says.

Taylor adds that brokers need to be aware that it is a heavily regulated area too. “You’re not just dealing with your National Consumer Credit Protection Act in that case; you’re also dealing with the Aged Care Act as well, so it’s a whole different area of legislation.”

Aged care focus If the aged care market sounds like it might suit you, and finding clients is on your mind, Moffatt recommends keeping it local first.

“If you’re going to get into aged care loans as a focus, you need to build relationships with aged care facilities, nursing homes, and in particular what they call the DOMs [directors of nursing] – they usually control the admissions process, and/or the financial controller of the aged care facility.”

Also, because those requiring aged care usually need someone with power of attorney to deal with the loan process, which

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is often their children, Barry says a broker’s existing client base is a great place to look for opportunities.

“Very commonly, the children are actually the key decision-makers for their parents, and brokers are ideally positioned to be the children’s trusted advisers. This intergenerational strategy is critical.

“In short, brokers’ existing clients are likely

to be the actual decision-makers, so education and awareness amongst existing borrower clients is key.”

Barry says La Trobe’s product is a straight­ forward one that allows the customer to borrow up to 50% of their property value over a sevenyear term, which they can repay any time.

“Interest can accrue on the loan or be paid, and the current interest rate is 5.6% per annum, which is less than the governmentmandated interest rate known as the Maximum Permissible Interest Rate. The security pledged for the loan is the applicant’s residential property and the Refundable Accommodation Deposit,” he explains.

La Trobe Financial’s Aged Care Loan can also be helpful if used as a form of bridging finance so that a property can be sold at a later date. In the long term, he says, “keeping the property and using finance to pay for aged care entry can improve pension and meanstested care fee outcomes, so it’s important to consider this. We have recently developed a cash flow scenario comparison tool comparing a property sale against keeping the property using an aged care loan, and this is freely available to brokers and their clients”.

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FEATURES

ASSET FINANCE

Car finance: worth your while Not convinced about asset finance? ANZ’s Trent Cummings explains to MPA why the numbers do add up and why ASIC’s changes are finally giving brokers the edge over car dealers AS HEAD of ANZ’s third party asset finance arm, Trent Cummings has spent years persuading brokers to take an interest in car finance, and he’s heard all the excuses.

“A car’s an average $40,000 and everyone says, ‘Trent, it’s not worth it to me’,” which is a typical reply, Cummings explains. The problem is that the numbers just don’t add up. Brokers tend to look at the size of a total home loan and a typical car loan and determine – correctly – that commission on the typical home loan is considerably larger.

Yet the actual size of the market, Cummings says, isn’t determined by one home loan – it’s the number of deals available. A average of 86,250 home loans are written per month, compared to 100,476 car purchases, counting only new cars.

Furthermore, he explains, “For every household there is – and I’m trying to be conservative here – 1.65 cars, so for every two home loans you do there’s three cars available to you.”

That’s why Cummings believes asset finance has a clear advantage. “From the size of the pie to the number of opportunities – that’s why you should step into asset finance,” he says.

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Work and reward As competition in broking grows, time per deal has been increasingly discussed as a marker of success. At MPA’s HighPerformance Summit in Melbourne, Jason Back, managing director of multiaward-winning brokerage The Australian

Lending & Investment Centre, did an entire presentation on the topic, emphasising return on investment.

When it comes to asset finance, that return is clear, says Cummings. “The actual time to deliver a car is considerably less than to deliver a home loan, from a broker’s perspective, and that’s particularly the case when the car is ancillary to the mortgage … you’ll have instances where you’ve already had all the necessary conversations with your customer and the client to be able to do a home loan and also a consumer car loan very quickly thereafter.”

When looking at a client’s living expenses for a home loan, for instance, you’ll be able to see how much they’re paying for their car, the term of the loan and when it is due for renewal – an obvious trigger to talk about asset finance with your client.

Don’t forget that customers also have limited time: many will be looking for their broker, who already has their financial information, to do the loan for them with as little contact as possible. Conversely, given that households more frequently turn over vehicles than property, asset finance gives you additional opportunities for contact

CAR FINANCE VS MORTGAGES According to ANZ, the average car loan offers considering time-saving and thus a good return on hours invested: Time spent per mortgage Lead generation & conversion

Time spent per car loan

1 hour

Ancillary

Data, document & signature collection

2 hours

30 minutes

Research & credit advice

2 hours

45 minutes

Compliance, loan processing & tracking

1.5 hours

30 minutes

Customer service & settlement support

30 minutes

15 minutes

7 hours

2 hours

$649 per hour

$697 per hour

Total Average commission

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Sponsored by

with clients after the deal’s done.

Self-employed customers can be particularly important to brokers here, as they may need finance for several commercial vehicles, which could be worth a lot more than the average car. For instance, a broker could earn $3,000 in commission by arranging finance for a $130,000 truck. Given that 25% of ANZ’s new home loans are for self-employed customers, says Cummings, “whether you like it or not, you’re already playing in that field”.

Finally, as asset finance pays upfront commission, rather than waiting for trail to come through you can use the proceeds for instant expansion and improvement of your business.

Sunset of the dealer Car dealers have traditionally dominated car finance, talking to customers long before they meet a broker, but in 2018 this dominance could come to an end.

ASIC is prohibiting flex commissions for dealers, effective from September 2018, preventing dealers from deliberately

KEY STATS

“From the size of the pie to the number of opportunities – that’s why you should step into asset finance” Trent Cummings, ANZ increasing rates or, in some cases, reducing rates by adding the cost to that of the car. The latter practice could disadvantage brokers, but Cummings expects that the situation will reverse. “Point-of-sale exceptions – the car dealers – they won’t be able to actually discount, whereas the broker, the ACL holder, will be able to discount.”

Dealers won’t disappear. Instead, many will look to acquire their own credit licence, presenting a threat to brokers. “Car dealers are going to lose income with the prohibition of flex commissions because they can’t make the

margin,” Cummings says, “but they’ve got the customer there, they’ve got the asset finance there, the ability to go and actually do their home loan, and these guys are very good at finance.”

At present, asset finance remains a diversification opportunity for brokers. Soon, however, it’ll become a necessity, with asset finance providers from broking and beyond looking to poach your home loan clients, Cummings warns. Therefore, taking a longterm view, “asset finance is a fundamental part of your offering as a broker and a builder of relationships with your clients,” he says.

100,476 new cars sold per month

$3bn (approx.) in commercial plant & equipment financed per month

86,250 (approx.) home loans written per month

1.65 cars (approx.) owned per household Source: Australian Bureau of Statistics

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PEOPLE

BROKERAGE INSIGHT

iSELECT HOME LOANS MPA talks to Alan Caputo, iSelect’s group executive of financial services, about combining brokers and technology and pioneering the 100% digital home loan MPA: How does iSelect’s mortgage broking business fit into the third party channel, in your opinion?

Alan Caputo: In today’s day and age, particularly with online research being so prevalent, there’s a massive customer base who want to look at home loan options in their own homes in their own time. The way I look at it is that we’re creating an ecosystem that allows you to do that, so you can actually look at what options there are to refinance your

home, or buy a new home; and whatever that might be, do that research at home using digital platforms with a human touch.

There are a lot of things that we have online, and in our sales funnel that takes the customer from the research journey right through to settlement, and there are tools that make that quicker. Effectively, we remove the pain points so customers aren’t having to run around to various locations or have someone in their home, or sign massive

THE FULLY ONLINE MORTGAGE iSelect’s 100% digital home loan has a fully online application process; once the loan is approved, some paper documents are involved. PEXA may eventually solve this problem, creating an online conveyancing solution for buyers, sellers, lenders and legal representatives to interact. The timeline for implementation is as follows: NSW

VICTORIA

WA

SA

Standalone mortgage discharges

Mar 2017

Aug 2016

Aug 2016

Apr 2017

Standalone mortgages (consumer)

Mar 2017

Aug 2016

Aug 2016

Apr 2017

Standalone mortgages (commercial)

Aug 2017

Aug 2017

Aug 2017

Q4 2017

Refinances

Aug 2017

Aug 2017

Aug 2017

Q4 2017

Standalone caveats and withdrawals

Jul 2018

Dec 2017

Non-ADI discharges, mortgages and refinance

Jul 2018

Dec 2017

Oct 2017 Source: PEXA

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piles of documents or those sorts of things.

We feel, from a strategic point of view, that we’re effectively simplifying the process and guiding you through it right through to settlement.

MPA: iSelect’s 100% digital home loan process launched last year. How does it work and how are consumers using it?

AC: There are various platforms and pieces of technology that we’ve plugged in to assist that, but effectively we have the ability to lodge an application without a wet signature.

That means we can service the nation from any location with a very quick service offering.

We have the ability to do that because we use tools such as Proviso and DocuSign.

With a tool like Proviso we’re able to get financials within 20 seconds, and compliance documents signed within the hour. You send it through to the customer via email; they read it; there’s no wet signature required: they can sign it via DocuSign and be done and dusted. Whereas if you think of the old method, you’d have to send out a pack for them to read. That could take a week; it might get lost in the mail; they might sign it in the wrong spot and send it back; a lot of toing and froing – that’s all been completely eliminated now.

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FAST FACTS Year founded 2011 Number of brokers 24 Headquarters Cheltenham, Vic Owner Publicly listed on the ASX Income • Owner-occupiers • Investors • Asset finance • Commercial lending

“Make no mistake; there is a lot of work that goes on behind the scenes to make it seem like a seamless, efficient process to the customer” MPA: Why do consumers switch between digital and talking to a broker when looking for and applying for a mortgage?

AC: When you think of a home loan it’s someone’s greatest asset, right? It’s the biggest decision they’re going to make, so they’re quite happy to do a lot of the research online, which we know people do, but they want that affirmation and support from a qualified broker to help guide them through the process.

Where the broker is really involved is when

they make that recommendation and take it from the application phase right through to settlement.

MPA: With realestate.com.au and domain.com.au entering online broking, how are you going to stay ahead over the next 12 months?

AC: Make no mistake; there is a lot of work that goes on behind the scenes to make it seem like a seamless, efficient process to the

customer. There’s a lot of work we need to do internally to continually pioneer change within the industry, and we’ll continue to do that, but after being in the mortgage market for six years now we’re in a place where we’re continually refining our product offering; we’ve got the ability to offer approval within 12 hours for certain segments … we feel we’re at the right stage now where we can start to scale the business and really target that customer base.

We feel where we sit at the moment we’ve got a pretty compelling value proposition, because we’re able to support the customer with the home loan, but we can also support the customer with their gas, electricity and telco needs in one spot. For us, the next 12–18 months are going to be massive; it’s a very exciting time at iSelect.

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BUSINESS STRATEGY

MARKETING

MY ULTIMATE MARKETING TOOL Forget brochures, websites and business cards – broker David Ham explains why writing a book made him an expert to his customers and drove sales LIKE EVERY broker, I want people to see me as not ‘just another mortgage salesperson’, but instead as their trusted expert for home loans.

As a broker, I am not selling home loans; I am selling myself to borrowers as the person they should trust to help them get that home loan. In the same way, a real estate agent doesn’t sell houses; rather, they sell themselves to the vendor as the best person to sell their house. Yes, the next part of choosing a loan or selling a house is very important and will determine whether you have a happy client or not, but you always need to get the client to choose you first.

We are all looking for a shortcut to being seen as an expert – for example through brochures, websites, business cards and logos. All of these are simply tools designed to present us as an expert worthy of trust. But there is one marketing tool that outperforms all others when it comes to personal sales.

I believe that marketing tool is writing your own book, because it positions you as an expert in the eyes of your potential clients. That’s why I wrote The 7 Easy Steps to Mortgage Freedom.

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All else being equal, who wins the client?

Is it the broker who hands them a business card and brochure or the broker who gives them a copy of their book on home loans with their face on the cover? People respect authors; being an author means you are an authority – it’s even part of the word! To the client it moves you from the category of salesperson to the category of expert.

Steps to Mortgage Freedom on Facebook for the first time, she messaged me. The message started with “I always thought brokers were a bit dodgy”, but ended with “Can you do a loan for me and also for my son?”

Essentially she went from an unspoken opinion that “brokers are a bit dodgy”, to

Although she only ever saw the cover of the book, that was enough to move me in her mind from the category of ‘dodgy brokers’ to trusted broker Brochure vs book Writing a book isn’t unique or revolutionary; it’s a well-trodden path to sales success.

One clear example of how well it works was the reaction of one of my old school friends who is now a friend on Facebook. She knew I was a broker but had never discussed loans with me. However, when I showed The 7 Easy

seeing my book, to trusting me with her loans. In fact, although she only ever saw the cover of the book, that was enough to move me in her mind from the category of ‘dodgy brokers’ to trusted broker.

Having a book is not a magic bullet, but it is the closest thing I have come to for building trust and credibility, opening doors

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MAKING YOUR POINT In The 7 Easy Steps to Mortgage Freedom, Ham uses a number of sidebar-type sections to make his point, which he describes in the introduction: Key point Explains a big mistake to avoid, a smart strategy to use, or an important tip to help you.

Example Gives case studies or examples you can learn from. Often an idea or topic is best explained by working through and seeing how the numbers look. It’s also a great way of showing you how a strategy or topic works in real life.

Icon/Call-out Highlights important quotes from the book, as well as sharing with you quotes and wisdom from other famous people.

Valuable resource Suggests a website to view; a document, template or calculator to download; or contact information for where you can get professional assistance.

Amended extract from The 7 Easy Steps to Mortgage Freedom

and starting conversations. It starts the relationship in a much stronger way and advances the sales process dramatically.

There isn’t anything revolutionary in the book; it is basically a glorified brochure that sells the benefits of mortgage brokers.

But a big benefit of a book over a brochure is that a brochure is clearly marketing material that sells your services, but a book is ‘marketing by stealth’. The client sees it as valuable to them and will hang on to it, but I know at the same time it is really promoting me.

I always have copies floating around in my car, and my 10-year-old daughter was flicking through one of them one day. I jokingly asked her if she was ever going to read it, and she replied, “I already know what it says – use a broker!” And she is exactly right.

I don’t care if people read it or not; all that matters is that it tells people I know enough to have written it in the first place. From their perspective, that elevates me above other brokers, which is all I really want.

Saving time and effort So why doesn’t every broker write their own book? The big concern brokers have about writing a book is that it will be a big effort and take a lot of time.

And yes, that is true. But the effort it takes to create is also why it works – anyone can make a website and brochure, but consumers want to work with someone who they see goes the extra mile.

In practice, though, it is a huge time saver because of the sales conversations that I no longer need to have, trying to convince people to trust me. My book is my little salesperson that I put out into the world to do the selling for me, so I now do a lot less. Not to mention it is so much more pleasant to talk to people who see me as an expert from the outset – not with thoughts of ‘dodgy brokers’ in the back of the minds.

And even better, the real power of the book is getting other people to hand it out for me.

I set up seven real estate agencies over a couple of months to hand out co-branded versions of

the book to their buyers and sellers. They do it because it promotes them at the same time as promoting me. So not only do I now have the leverage of the book spouting my sales message, but I have other people distributing it for me to people in the market for a home loan!

All of this is why I call it my ‘ultimate personal sales and marketing tool’. For something that costs me about $6 per copy to produce, it’s a pretty good deal.

The next evolution of my book is that I’m creating versions customised to a limited number of other brokers. For a fraction of the effort and expense, this is the next best thing to writing your own book and making it your ultimate personal sales and marketing tool.

David Ham is managing director of Mortgage Australia and author of The 7 Easy Steps to Mortgage Freedom, on which this article is based. He is also the author of Mortgage Broking: Lead Generation and Sales Mastery, which includes further marketing advice.

Go to www.mortgageaustralia.com.au/brokers for a customised version of The 7 Easy Steps.

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PEOPLE

VENDOR FOCUS

JOHN KOLENDA: TRUE PARTNERSHIPS Finsure’s managing director sets out his vision for the future of aggregation, when brokers will be able to call on their aggregators for business planning, marketing, legal, recruitment, and much more MPA: Finsure ranked sixth in last year’s BRW magazine’s Fast 100 list. Why are so many brokers joining Finsure?

John Kolenda: The principal reason brokers are switching to Finsure is our ability to provide a comprehensive business solution capability as brokers’ businesses mature and need more diverse and complex solutions. Our brokers can rely on us to get all of their business needs met via our range of in-house services in conjunction with our trusted network of service partners.

A good aggregator can make every difference to a broker’s business. We see ourselves as a business partner in every single one of our brokers’ businesses. It doesn’t matter what industry you’re in, or how good at business you are, if you have the wrong business partner you won’t maximise results.

Across our organisation we dedicate ourselves to servicing our broker partners in the same way that an exemplary broker would service their clients.

At the heart of our ethos is being big enough to deliver, and small enough to care.

Our numbers regarding recruitment and retention demonstrate that this is something brokers value.

MPA: What should an aggregator provide beyond the standard CRM, commissions

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Sponsored by

and basic marketing offering?

JK: The role of an aggregator has dramatically changed over the years. To stay ahead of the competition aggregators can no longer just provide a CRM platform, commissions processing and a monthly newsletter.

Rapid changes in technology and a vastly different regulatory landscape have resulted in brokers requiring their aggregators to specialise in more and more areas. Finsure was created with the changing needs of brokers in mind and to build a complete business-to-business solution that would help our business partners stay ahead of the game. Every division within the group understands its role is to help our brokers with their business, and any solution they need we will be there to assist them.

Those services include but are not limited to annual business planning, setting up their website, branding/marketing, lead sourcing and qualifying expertise, legal and compliance services, and even recruiting brokers on behalf of our partners to help them expand.

When it comes down to it, the aggregators that can maintain the strongest offering

across all services will be the ones that succeed in this market.

MPA: What sort of broker switches to Finsure and why do they make the switch?

JK: Quite simply, we look to attract any broker that is looking to better their business.

Our business-to-business solutions are equally effective in assisting either a new entrant or the seasoned veteran in taking

immensely dissatisfied with their current aggregator, but rather see an opportunity to partner with an aggregator who will assist them in growing their business.

MPA: In our most recent Brokers on Aggregators survey, Finsure ranked number one for marketing support.

In today’s competitive market, does a monthly newsletter no longer cut it?

JK: Absolutely not. Marketing is no longer

“It doesn’t matter what industry you’re in, or how good at business you are, if you have the wrong business partner you won’t maximise results” their organisation to the next level.

We concentrate on providing brokers with unrivalled business support coupled with market-leading remuneration plans.

By delivering this to our members we attract brokers who may not necessarily be

as simple as a newsletter or putting an ad in the local paper. The variants of marketing activities have become extremely vast and more and more specialised. Finsure has evolved with the changing needs of broker marketing to create a bespoke service

JOHN KOLENDA’S KEY TRENDS FOR 2017–18 Greater information-sharing We will see continued and heightened ASIC surveillance, which is likely to result in more information being shared between the regulators, lenders, aggregators and brokers. This in turn will produce greater insights and structured relationships that help drive and support better customer outcomes.

Increased diversification of revenue Lender commissions will also come under the scrutiny of the regulator, looking to potentially commoditise the broker service proposition. This should lead to brokers looking for a greater share of wallet in cross-selling or referring other services to diversify their businesses and revenues (insurance, wealth, investment, etc).

Continued emergence of online lenders Online lenders will continue to increase their market

presence. If brokers don’t embrace the internet and social media in the mortgage space, they face the possibility of being locked out of a significant segment of the market, particularly if they do not adopt a strong online presence within five years.

We are also likely to see the emergence of large consumer brands into the mortgage space in the near future from companies with significant client databases (eg Coles, Woolworths and Google).

Brokers need to ask themselves: what will their 2020 customers look like?

Technology enhancements Not only will lenders need to be technology-driven, but so must aggregators and brokers in order to cater for the next generation of borrowers. Competition will drive increased investments in technology development, systems, processes and monitoring, which in turn will flow into brokers and customers.

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PEOPLE

VENDOR FOCUS Sponsored by

KEY MILESTONES FOR FINSURE 2012 February 2012 John Kolenda and Calvin Ng co-found Finsure

2013

2014

2015

2016

2017

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August 2013 Finsure acquires mortgage aggregator LoanKit from Mortgage Choice

December 2015 Finsure exceeds $1bn in mortgage settlements in a month, less than five years after the company was founded

April 2016 Launch of the Finsure Broker Academy, a 24-month mentoring program for new-toindustry brokers

October 2016 Finsure reaches 1,000 brokers nationwide

November 2016 Finsure ranked sixth fastest-growing Australian company in BRW magazine’s Fast 100 list

model to support our members. Our brokers can design and commission virtually any marketing activity they wish, and with the help of our specialist marketing team we will design and implement a customised, tailored and individually branded campaign on behalf of broker partners.

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

MPA: What service providers does Finsure work with and how do they help your brokers?

JK: Most of our services are provided in-house; however, there are a couple of instances where we partner with some trusted providers.

One example is the introduction of the Finsure Broker Academy program last year. Finsure has partnered with training

responsible lending in the home loan sector.

There will be more reporting, reviewing and support required for brokers. This is also likely to lead to more information being shared between the regulators, lenders, aggregators and brokers, which will mean more insights and structured relationships that help drive and support better customer outcomes. Consequently, there will be increased investments into technology development, systems, processes, and monitoring, which in turn will flow into brokers and customers.

MPA: What can we expect from Finsure in the year ahead?

JK: We will look to build on our success and continue our growth plans. Finsure is aiming to have a $30bn loan book and circa 1,500 brokers by 30 June 2018.

In order to achieve this, we will continue to strengthen our complete service proposition. Primarily brokers have been

“With the help of our specialist marketing team, we will design and implement a customised, tailored and individually branded campaign on behalf of broker partners” organisation AAMC to produce a 24-month mentoring program that incorporates a Cert IV in Finance and Mortgage Broking, a Diploma in Finance, plus a range of practical skills to equip graduates with all the expertise needed to maximise their chances of success over the long term.

We also work in conjunction with some external providers to provide legal, accounting and property advisory services.

Another area of focus for Finsure in supporting brokers will be in the area of compliance, which is crucial with ASIC announcing more measures to promote

switching to Finsure in order to partner with an aggregator who they can see will support them more effectively in all aspects of their business, so we will continue to invest and add value into as many areas as possible.

One example of this investment is the recent addition of a credit coach. This resource will form a new support service to help brokers workshop, structure and place deals.

I never see a day when we will stop investing back into the business and building on our complete service proposition. The year ahead will be no different!

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PEOPLE

CAREER PATH

THE RELATIONSHIP FORGER Top 10 Commercial Broker Mark Churchill’s journey through leasing and banking led him to create the award-winning healthcare brokerage Allfin Financial Services Having to leave home at a young age, Churchill started a threeyear stint in auctioneering the very same day he drove INTO THE to Melbourne to find a job.

FRYING PAN “I pretty much got kicked out of home at 17 and became one of the youngest registered auctioneers in Australia … I did everything from timber to carpet to smashed cars and plant equipment.”

1992

2004

CHANNEL ISLANDS CAREER BREAK After nearly a decade in leasing, and having started at a young age, Churchill chose to take a break and venture overseas on a six-month working holiday to Guernsey in the Channel Islands.

“A mate of mine ran a pub over there,” he says. “Guernsey has about 96 pubs on the island – it has the most pubs per capita in the world.”

2010

REDUNDANCY TO BOSS MODE In 2010 he took a redundancy from CBA, which was one of the most challenging points in his career. “It lets you know where you are in the world,” says Churchill.

In 2010 he founded Churchill Financial Services, specialising in financial solutions for pharmacy owners. “I had a couple of good clients and just basically went out and hit the pavement, started from scratch.”

“I basically started the business in the front room of our house – me and the golden retriever” 2016

KUBIO LAUNCH Kubio is a commercial application processing and data management system that Churchill launched along with three other independent commercial finance brokers (BKK Finance, Heritage Property Finance and Stamford Capital), backed by Macquarie Group.

“It ties back to when I originally started back in the old commercial asset days – developing a system that would make things a lot easier for everyone.”

1995

FROM AUCTIONEERING TO LEASING After leaving auctioneering behind, Churchill spent the next seven years at LeasePlan in relationship management, which turned out to be his forte. Running the self-insurance scheme for motor vehicles for accident damage played a significant role in his career, he explains, as his current brokerage now runs a self-insurance scheme for pharmacy.

2005

JOINS BANKING INDUSTRY Upon his return from abroad, Churchill joined the banking world in management and executive roles, first at National Australia Bank and three years later at Commonwealth Bank. At NAB, he was introduced to the healthcare niche as the portfolio he worked on was primarily pharmacy.

“Leasing was probably the best grounding I ever could get in finance” 2014

NEW PARTNERSHIP A few years after the Melbourne brokerage was founded, Churchill Financial became Allfin Financial Services under a new partnership.

Churchill brought on a partner and dedicated home loans broker, as well as an asset finance broker.

“That totally and utterly changed the numbers – we were able to turn around deals a lot quicker.”

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PEOPLE

OTHER LIFE

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

6,000 bikes Number of Reddy Go bikes that will be available in Sydney

$1.99/ 30 mins Cost of using a Reddy Go bike

450,000 Number of share bikes on the streets of Shanghai

REDDY, STEADY, GO! AMA-winning broker Donald Tang is diversifying… into Sydney’s first ever bike-sharing service SUCCESS IN broking is often defined by driving a big car, the flashier the better.

Not for Alliance Mortgage Solutions founder Donald Tang. Sydney’s crowded CBD makes walking unavoidable and often slow, Tang explains. “This idea of sharing bikes comes from my own pain points.”

Tang is launching Reddy Go, using an

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approach that’s hugely popular in Europe and China. Unlike in Melbourne, Reddy Go bikes won’t be dispensed from pods.

“That loses the concept of convenience.

With sharing bikes, you can basically park anywhere as long as it’s easy to park.” You book and unlock bikes using your phone.

The first shipment of 140 red bikes

arrived in July and 480 more are on the way. Tang is hoping the bike-sharing concept will be quick to take off in the Harbour City.

“I knew there’d be somebody who’d say no to my bikes, but I just do the best I can do to provide people with convenience and a solution for short-distance travel.”

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AMA 20

Finalists will be announced in the next issue

Friday 27 October • The Star Sydney www.australianmortgageawards.com.au Event Partner

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