Mortgage Professional Australia issue 17.01

MPAMAGAZINE.COM.AU ISSUE 17.1

HOT The brokers, bankers, regulators and aggregators you need to know

MORTGAGE FRAUD Are brokers really the problem?

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AGGREGATION Top aggregators on plans for 2017

UDAY SAREEN ING DIRECT’s new Australia CEO

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JANUARY 2017

CONNECT WITH US

CONTENTS

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

UPFRONT 04 Update

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FEATURES

AGGREGATORS: TACKLING THE BIG ISSUES

Aggregators explain how they’re investing in the areas you say are most important

SPECIAL REPORT

HOTLIST 2016

UDAY SAREEN

16 ING DIRECT’s new Australian CEO on how the bank is chasing primary banking customers

06 Head to head

Should lenders offer ‘tracker loans’?

We hear from experts and brokers

08 Opinion

The FBAA and MFAA face off over what your industry association should provide

10 Statistics

Start thinking about 2017 with QBE’s 15th annual Housing Outlook

12 News analysis

Are we giving mortgage fraud the attention it deserves?

MORTGAGE INSIDERS

The 30 professionals who you really need to know

THE BIG INTERVIEW

Why bank discounts need to end, and a Q&A on commercial lending with Suncorp Bank

32 FEATURES

TAKING ON STAFF

How to hire, whether you’re a lone broker in need of support or a bustling brokerage

60 Theo Chambers

How Shore Financial became Australia’s breeding ground for broking talent

63 Tim Brown

A journey through three decades of broking history with Vow’s CEO and ex-president of the MFAA

64 Jai Martinkovits

Finance broker and political activist on keeping Australia’s politicians honest

BUSINESS STRATEGY 44 Roboadvice

48 FEATURES

FRANCHISING

Looking to launch your own franchise? Steven Kazakis discusses the dos and don’ts

Why robots can become an aid to brokers and financial advisers, rather than a threat

52 Women in small business

Management specialist Karen Gately on work-life balance, self-belief and networking

56 Artificial intelligence

Technology is opening up new possibilities for finding customers, writes Matthew Michalewicz

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EDITOR’S LETTER www.mpamagazine.com.au

THE SMART CHOICE

J

ust as we were finishing this issue of MPA, Deloitte released a report on why some consumers choose banks and others brokers. The report, commissioned by the MFAA, made a deeply confusing finding: consumers who go to banks do so because they’ve done more research and believe they will get the best price from the banks. You can read a comprehensive analysis of Deloitte’s report in the next issue of MPA, but the issue of clued-up customers going to banks is worth discussing now.

It’s not that broker customers are not as smart: Deloitte found no difference in financial acumen between bank and broker customers. Yet clearly customers who regard themselves as clued-up see the bank as the more logical route to a mortgage. If a comparison site tells you every interest rate on the market, how can a broker help you?

In many, many ways, of course: at the top level, the broker proposition long ago ceased to be solely about rate. Leading brokerages now offer a range of services and advice, such as on how to structure and balance your financial

What we need now is promotion of brokers as the smart choice for smart people commitments, what could work out cheaper for the consumer in the long run, and building your wealth. From this perspective, using a broker is clearly the smart choice, as would be using a good lawyer and accountant.

Adverts by Aussie and Mortgage Choice have done a great job of promoting brokers as an option for everyone. What we need now is promotion of brokers as the smart choice for smart people. Several brokerages in our Top 10 Independent and Franchise Brokerages reports already do this, particularly those that target city-centre young professionals who often do their own research. Understandably, independent brokerages will always struggle to afford national advertising, but targeted social media and event-focused advertising – alongside referrals – could make promotion more viable.

Brokers are the smart choice. It’s time to tell Australians why.

Sam Richardson, editor, MPA PS By the time you read this, MPA will be just about to begin our Christmas break. I wish you a Merry Christmas and a Happy New Year!

PPS: I’d like to apologise to Alex Shumsky of Loan Market, who missed out on this year’s Top 100 Brokers because of a technical error. (Alex would have been 85th.) We’re working to make sure our new application system is flawless and hugely appreciate your continued support of the Top 100 Brokers report.

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JAN 2O17 EDITORIAL Editor Sam Richardson Journalist Maya Breen Contributors Karen Gately Chris McRostie Matthew Michalewicz Peter White Stefan Kazakis Production Editors Roslyn Meredith Bruce Pitchers

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

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

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

EDITORIAL ENQUIRIES

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

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ADVERTISING ENQUIRIES

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

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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

COMMERCIAL LENDING NEWS BRIEFS Growing doubts over housing markets Uncertainty was in the air at Citi’s annual Australian and New Zealand Investment Conference in Sydney, where presenters questioned aspects of Australia’s housing market. RBA governor Philip Lowe began the day by noting that “growth in rents is very low and there is a big increase in housing supply still to come”, adding that “credit growth is still exceeding income growth, although by a smaller margin than last year.”

More positively, ANZ treasurer Rick Moscati, talking later in the day about APRA’s capital requirements, noted that “a lot of that capital build is now over; banks have come to that point”, although the exact level of capital requirements was not yet clear.

Finally Nigel Satterley of Satterley Property Group painted a disturbing picture of Perth, predicting a further 5% correction in prices and no recovery until 2019. He also warned about oversupply in Brisbane, which he said could end up “a lot like Perth”. In fact, Satterley said his current favourite investment location would be Melbourne’s inner suburbs.

Leading young brokers pan mentoring The quality of mentoring in the industry is frequently not good enough, according to a panel of young professionals convened by the MFAA. The panel, which includes several award winners and MPA Young Guns, said that many mentors earned thousands dealing with dozens of new brokers, yet contacted them just once a month. One broker at the panel recalled how their mentor had never written a loan.

While the panel believed mentoring should remain compulsory, it recommended mentors be paid by their aggregators through a better split on their deals, and the number of brokers they could mentor should be capped. They also called for more vetting of potential mentors and an Uber-style rating for mentors was suggested.

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The young professionals panel also made a number of suggestions on how the MFAA could attract more people into the industry. The young professional panel’s recommendations will now be brought to the MFAA board, which has the ultimate decision on any changes.

A bitter avocado to swallow First home buyers who save 10% of their income per month will never be able to afford a property in Sydney and Melbourne, a new analysis by comparison site mozo.com.au has found. Prospective FHBs in Brisbane would have to save for eight years and 10 months for a 90% LVR mortgage; even relatively affordable Hobart requires over five years of saving.

The figures emerged after public furore at a column by demographer Bernard Salt, in which he criticised the smashed avocado-eating habits of millennial first home buyers, claiming that “$22 several times a week could go towards a deposit on a house”.

Salt’s comments made international news and spawned a major debate on housing affordability, with ME Bank subsequently launching a new property search tool, Life&Loan, which searches for property that matches the desired lifestyle of the buyer.

APRA turns focus to commercial lending APRA’s 2015/16 annual report has shown the increased scrutiny of commercial lending by the regulator. According to the report “this work has a number of complementary components: a significant data collection focusing on portfolio-wide metrics for recent loan organisations, a review of documented underwriting standards, on-site discussions with relevant ADIs, and a detailed review of a sample of transactions.” Having completed this work, the regulator plans to publish more detailed commercial lending statistics in early 2017.

CUT NO MORE Banks will need to be more selective with their discounting as margins are squeezed harder than ever, says JP Morgan 2016 has been the year of discounts. Even while the major banks came under fire for not fully handing on RBA rate cuts, they have used “unprecedented levels of discounting” to compete, according to JP Morgan and Digital Finance Analytics’ (DFA) Australian Mortgage Industry Report. Such discounting may be coming to an end. “We may have reached a line in the sand on mortgage profitability,” said JP Morgan banking analyst Scott Manning.

“Mortgage return on equity (ROE) can’t really afford to go lower than they are today.”

Fighting for market share has cost the banks: ROEs are down from an average pre-GFC 20% to 14% today, just over the 10% cost of equity. The banks need mortgages to make money, because many of their other businesses barely cover the cost of funds.

As Manning explained: “The mortgage contribution to ROE is increasingly important as the rest of the business just isn’t firing.”

JP Morgan’s report appeared in October, just as the banks began to scale back the discounts. Yet the damage has already been done: one-third of borrowers now see the size of the discount they may get as the main factor for picking a lender, and one-quarter of the mortgage book is refinancing each year.

Worst of all, for the major banks, is that they’ve merely succeeded in taking market share from each other: 50% of those refinancing from a major bank went to another major; just 1% went to a non-bank. Brokers, on the other hand, have been successful in showing clients they could do better. As DFA principal Martin North put it, “Refinancing doesn’t just happen once and then go away.” As a group the major banks aren’t gaining market share, but they

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are converting profitable back books into less profitable front books, the report warns.

In response, observed North, “We’ve seen a re-emergence of selective discounting.” In fact, JP Morgan sees selective discounting as the way to move forward, specifically discounting with a view to capital requirements: i.e. large discounts for low-LVR owner-occupier lending (the report recommends 1.3%) and premiums

“We may have reached a line in the sand on mortgage profitability” for high-LVR investor lending (around 1.2%).

What won’t happen is a repeat of 2015’s rate rises for all, believes Manning. “I don’t think you’ll see a blanket repricing of the entire portfolio, given the political backlash … I don’t think it will be so blatant,” he said.

Selective discounting could have spin-off effects, including investors aiming for discounted low-LVR loans, even if that reduces their ability to negatively gear.

Manning told MPA: “You may see an adjustment in how people invest.”

Q&A

COMMERCIAL LENDING Robynne Frost National manager SME and commercial intermediaries SUNCORP BANK

Fast fact Businesses’ intentions to increase capital expenditure and hiring in 2017 have increased markedly, according to NAB’s quarterly business report. The service sector has done best over the past year, the report added

In which industries does Suncorp see particular opportunities for brokers?

There’s a real opportunity for our broker partners to diversity into small business lending to fulfil their customer needs. Approximately 30% of our home loan customers are self-employed, which provides an enormous opportunity for brokers to start looking after their existing customers’ small business requirements.

Australia is home to more than two million small businesses, accounting for 96% of the country’s business sector, yet only 10% use a broker for their lending needs. For brokers who can provide expert advice, innovative products, an easy on-boarding process and speedy execution, the opportunities are endless.

How is Suncorp aligning small business lending with residential lending?

The SME lending space is highly competitive and can be daunting for brokers who are new to this area. One of our key drivers has been to make our small business loan application process as similar to home loans as possible, to make the transition into writing small business easier. As part of this, in an industry first, we have launched a new online process for submitting small business lending through NextGen.Net’s ApplyOnline, which is the same system our home loan brokers use. Prior to introducing ApplyOnline, we required a 39-page application to be completed manually. ApplyOnline delivers increased efficiencies, faster turnaround times and improved functionality.

How is Suncorp helping to educate brokers in the commercial space?

Our commitment to ongoing education is an integral part of our proposition, through our business essentials program for new brokers to small business and our market-leading masterclass series, supporting brokers diversify into small business lending. This is backed by the expertise and dedicated support of our team of small business and commercial business development managers.

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UPFRONT

HEAD TO HEAD

Should more lenders offer tracker loans?

Shane Oliver

Ren Wong CEO N1 Holdings

Director/finance manager Launch Finance

There is a strong case for more lenders to offer tracker loans. This is not because they will result in a better deal for borrowers. In fact, they may not if the lender’s funding cost falls relative to the cash rate and there is an outbreak of competition between lenders.

Rather, the case for tracker loans is that they provide another option for borrowers beyond traditional variable-rate loans and fixed-rate loans and that they offer a degree of certainty.

The period between 1997 and 2007 where average bank standard variable rates moved at a margin of 1.7%-1.8% above the official cash rate was unusual, reflecting low funding costs and those costs moving with the cash rate. This was not the case pre-1997 and is not the case now. But this period did provide a degree of confidence as to what borrowers would pay over the cash rate and it is this benefit that tracker loans would provide.

I think a rate-tracker mortgage risks misleading borrowers. A professional mortgage broker would tell borrowers that a rate is not the only factor in getting a loan – there are fees and structures of loans and product features to consider before deciding which lenders to go with.

Ultimately, the purpose of having a rate-tracker loan is to have transparency and to make sure lenders are honest to pass on rate cuts, but a lot of consumers don’t know that the standard variable rate is only a quoted rate; banks and lenders do pricing based on their costs of funding and a client’s profile, which is why it’s more important to speak to a mortgage broker and not just talk to a single bank.

Promoting a rate-tracker mortgage is like telling everyone rate is the only thing you would care about when taking out a home loan. Instead, this will hurt borrowers.

And besides, there are fixed-rate products and interest-in-advanced products in the market that are worth considering.

This is a good question and one that is sure to be asked a few more times once consumers start to understand the subject further.

I think it is a bit of a no-brainer. When speaking about this type of product, wouldn’t you think this is a great product for the consumer so they know the exact terms of the loan for the life of the loan?

It gives greater clarity for consumers to budget for home loan repayments and will let them understand the home loan better.

However, while one lender has brought this product out to the market, we are yet to hear about the take-up or enquiry into this loan. If the lenders bring in fees and charges that may make the loan more expensive, you will still need to review this type of home loan to another loan that may not offer the tracker feature.

My opinion is, yes, this would be good for the market. However, I still need to see what other conditions may come with the loan.

Head of investment strategy and chief economist AMP Capital Investors

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Joe Del Borrello

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UPFRONT

OPINION

Advancing the broking sector is the focus Only an industry association driven by brokers can truly understand the challenges facing brokers, says FBAA executive director Peter White

THE FBAA places a great emphasis on our statement that we are run by brokers for brokers.

It is important that, as an industry association, we are always driven by our members and what is in their best interests, and only finance brokers can truly understand the challenges and priorities of their peers.

That’s why the FBAA is outspoken on issues that affect our members, and are willing to challenge the banking sector in an informed manner when needed. While banks are, of course, an important stakeholder and we always seek to build stronger relationships with them, we are not beholden to them and have an obligation to speak openly and candidly when necessary to promote the interests of finance brokers.

While we often speak publicly through industry channels, such as this publication, most of our work is done behind the scenes, and carries the focus of advancing our industry, ensuring regulatory guidelines are framed to maximise the benefits to both brokers and customers.

The FBAA presents a strong voice to government and regulators, providing sound knowledge of the needs of our industry and its value proposition to brokers.

The correct guidance and commentary being given to government is vital in shaping our future and guiding our current needs.

As the public face of our organisation, I am continually meeting with key decision makers, regulators and senior MPs and over

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the years have built a strong and personal relationship with many of them, ensuring our voice is recognised and respected. In fact, I have spent so much time in the halls of Parliament House, I am now the only person from the broking sector to hold a personal security pass to the House.

doing this successfully. The FBAA recently conducted an audit of ASIC records under the NCCP for enforceable undertakings, bannings and disqualification of brokers in consumer lending from July 2010 to April 2016. The results were staggering, showing that during this time there were 253 actions taken by ASIC, but of these only 3.65% were FBAA members at the time of the action.

This number is greatly encouraging and shows the value of being a member.

Added to this, our national conferences ensure the ongoing professional development of the industry is sound, and our content is based on solid, consistent and

“While banks are, of course, an important stakeholder and we always seek to build stronger relationships with them, we are not beholden to them” Serving our members in the provision of value-adding education and professional development is also an important and ongoing role.

The more knowledge our members have, the better service they can provide and the more successful their businesses become.

Many members have told me over the years that their success has been directly assisted by the role of the FBAA. But education for education’s sake is not the best use of our members’ time. That is why we focus on assisting members to learn how to act according to regulation, protecting themselves and their customers.

We want to ensure that base-line education is soundly met to ensure strong foundations for future educational and professional growth.

Our goal is to exceed industry best practice, and we have proven that we are

informed messages, which is why the FBAA national conference has developed into the largest of its kind in the country.

Other important roles include compliance support and guidance by experts. The value of this was clearly shown in this year’s national tour, whereby the FBAA tackled the hard questions in relation to the minister’s directions to report broker home loan commissions.

We encourage all brokers to take advantage of the opportunities created by the FBAA as we continue to advance this great industry together.

Peter White is the executive director of the Finance Brokers Association of Australia, which was formed in 1992; White has held major positions in the FBAA since 2003. He’s worked in banking and finance since 1979.

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An association’s actions speak louder than its words MFAA interim CEO Chris McRostie says an industry association should go beyond the bare minimum to future-proof the industry

AT THE MFAA, we believe that our job is to help members be as successful as possible, while future-proofing the profession. This underpins everything we do; whether it’s initiating a LinkedIn campaign to drive clients to our equipment and commercial finance brokers, commissioning research that gives members critical insights into consumer behaviour, or running regular complimentary webinars on lead generation and client retention.

Helping members be successful also means making the industry’s voice heard when our model is under review, by building robust alliances with regulators and government ministers.

We have been communicating with our members on behalf of ASIC throughout the broker remuneration review process, and are pleased that our members were able to provide direct information to assist ASIC develop a better understanding of our industry.

We’re also strategically targeting key decision makers and politicians to help them understand how brokers deliver positive outcomes for consumers, the economy and the employment market. Professional government advisers are helping us with this, which is standard for major industry associations.

We know that value for money is top of mind for our members, and if you look at the relative cost of our services and offerings, we’re certainly delivering above and beyond the annual membership fee. We distribute three weekly content articles for free every week via our Mortgage + Finance Help website, which

brokers can share with clients. An annual membership fee is recouped after just one week of these content articles.

The sponsorship revenue we receive from lenders assists us in providing more value to brokers; for example, our Young Professionals Report provided powerful insights about how to attract and retain talented new brokers.

Our publicly available annual report contains full disclosed details of our revenue streams, member numbers and expenditure.

There has been a perception in the marketplace that the MFAA is run by the banks, which couldn’t be further from the truth. Of our 12,599 members, 94% are finance brokers. Our current chairman is a broker, as are most of our board directors, which is a constitutional requirement.

Forty-three per cent of our board directors are female brokers. So while we don’t believe an industry association should act like a union and fight every single battle for its members, brokers are absolutely front and centre for us.

Delivering first-class training and development opportunities is a vital component of helping brokers achieve success.

We’ve tested several different approaches to conferences over the years, and the model we implemented this year with the Broker 2020 roadshow produced the best results, in overall numbers and in achieving the highest ratio of broker attendees we’ve ever seen.

Instead of expecting members to travel, we are bringing the event to the broker.

An association also needs to set standards; to help brokers interpret the industry legislation and agree on behaviours and

values. Setting a high standard sometimes means anticipating future changes, and doing more than just the bare minimum.

When we introduced the mandatory diploma requirement in 2014, some in the industry weren’t happy with the decision – but most applauded our commitment to making MFAA members the best educated brokers in the industry, including the media and regulators.

Recognising high achievers is a key part of setting standards, as it provides associations with the opportunity to promote their intrinsic values.

The MFAA Excellence Awards have been running for 14 years, and through the program we celebrate brokers who espouse integrity, professionalism, innovation, community engagement and are a role model for the industry. Customer service, rather than transactions alone, should be the focus for any industry awards program.

To maintain high standards, an association should investigate members who are not operating by the code of practice and, if necessary, suspend or expel them.

The MFAA acts quickly upon learning about members who have behaved in an unethical way, and we invest in an independent tribunal to ensure a fair evaluation of any issue. More often than not, the brokers who end up in the media due to their malpractice have been found not to be MFAA members.

The MFAA worked hard on creating a five-year strategy earlier this year, and we’re committed to delivering those outcomes for the betterment of our association and the industry as a whole.

Chris McRostie was interim CEO of the MFAA at the time of writing. He has an extensive background in management going back almost three decades, including at the Royal Australasian College of Physicians and the Institute of Chartered Accountants Australia.

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UPFRONT

STATISTICS

TOMORROW’S MARKET TODAY

Australia Annual growth to June QTR 2016

-0.7% 9.3% -19.9%

QBE and BIS Shrapnel’s 15th annual Housing Outlook report provides a comprehensive view of Australia’s housing markets now, and up to 2019

WHAT AUSTRALIAN HOUSING MARKET? NATURALLY, THE housing market and the industries that surround it, such as broking, are obsessed with property prices. QBE and BIS Shrapnel’s Housing Outlook report, which has appeared every year since 2002, is well known for its prediction of capital city house and unit prices three years into the future.

For brokers, however, there’s much more in this report than just house prices. This report takes a closer look at different buyer segments across the different cities, giving brokers a better idea of who their next client could be and the challenges they could be facing. This

includes overseas investors, although the statistics the report presents don’t take in the recent cuts in lending to this group.

Most of all, QBE and BIS Shrapnel’s report shows how different the housing markets in different states are now. The Sydney-Melbourne story of first home buyers losing out and prices rocketing is simply not applicable to places such as Tasmania, where FHBs shot up by 24%, or Western Australia, where property prices, like the overall economy, are suffering. Such differences make any Australia-wide statistic on housing seem almost meaningless.

First home buyers Upsizers/downsizers Investors

BACK TO REALITY FOR INVESTORS

WHAT FOREIGN INVESTORS WANT

Although 2016 has seen a recovery of sorts for property investors, QBE and BIS Shrapnel’s report doesn’t see this continuing, stating that “a return to the 2014/15 peak in investor activity [51% of all lending] is not expected. Slowing rental and price growth is likely to contain investor appetite for residential property, while more recent tightening in bank lending policy towards overseas investors will also slow overall investor demand.” They expect investor lending to return to its long-term average:

Foreign investment in property surged tenfold between 2009/10 and 2014/15, according to QBE, reaching $60.75bn. The rise of off-the-plan purchases is particularly evident; however QBE and BIS Shrapnel note that lending restrictions, foreign buyer surcharges by state governments and tighter capital controls in China will cool foreign investment.

42%

Investors

$30

2012

2013

2014

2015

$20

First home buyers Non first home buyers

VALUE OF APPROVED FOREIGN INVESTMENT ($bn) $25

15%

$15 SHARE OF LOANS 2001-16

$10 43%

Source: QBE Housing Outlook 2016-19/Australian Bureau of Statistics

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If you look at annual growth to the June quarter of 2016 – the percentages you see here – it soon becomes clear that average figures for first home buyers, upsizers/ downsizers and investors disguise major differences at a state level.

$5 $0

Existing residential property

Individual purchase of new dwellings

Off the plan

Source: QBE Housing Outlook 2016-19, Foreign Investment Review Board Annual Review 2014/15

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Northern Territory

Queensland

-6.9% -12.1% -47%

-0.1% 5.5% -15.9% New South Wales

South Australia

-0.7% 13.2% -20%

Victoria

6.3% 10.7% -36.8%

9.3% 15.2% -16.3%

Western Australia

Australian Capital Territory

-9.3% 10% -19.6%

Tasmania

-19.7% -3.7% -13.1%

24.3% -0.1% -13.3%

BIGGEST WINNERS AND LOSERS 2016-19 Forecasting price changes from 2016-19, the report illustrates the growing divide between houses and units, with the latter generally performing worse. There’s little change in prices either way when it comes to houses in Sydney, Melbourne and Perth, with little change for both houses and units in Adelaide.

FORECAST GROWTH IN MEDIAN PRICES 2016-19 Biggest winners

Biggest losers

-8.2%

-9.0%

Darwin units

-6.8%

Melbourne units

4.5%

Sydney units

Brisbane houses

Hobart houses

Canberra houses

6.5%

Canberra units

8.5%

Brisbane units

12.5%

-10%

HOPE FOR FIRST HOME BUYERS? QBE and BIS Shrapnel’s report takes a long-term look at first home buyer trends, which it notes are important because FHBs drive demand for entry level properties, which encourages owners to upgrade.

As FHB demand is effectively fixed, as households are FHBs only once, the report argues that incentives do not create demand but simply shift existing demand through time: “Once the impacts of the changes to incentives are worked through, first home buyer demand should return to long-term averages.”

Recently many states removed grants for established dwellings, affecting demand, but fewer changes are likely over the next few years. Thus, states the report, a return to long-term average “is likely to be the case in the coming years with first home buyer incentives now being relatively stable”.

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22/11/2016 1:08:31 PM

NEWS ANALYSIS

MORTGAGE FRAUD

BAD EGGS OR BAD NEWS? International investment bank UBS suggests fraud is more prevalent in the broker channel. MPA editor Sam Richardson asks experts and industry leaders whether fraud is indeed a growing problem

WITH

THE publication of ASIC’s remuneration review imminent, broking faces a tough summer, and as temperatures rise, so do tensions within the industry. So when global investment bank UBS published a report claiming that mortgage fraud was “systemic”, and driven by brokers, the reaction from the industry was swift and predictably outraged.

In an environment of suspicion, UBS’ report is the last thing the industry needs right now. Surveying 1,228 Australians, the report found that 32% of customers who secured a mortgage through a broker misrepresented at least part of their application; and of that 32% more than half said their broker told them to do it – furthermore this figure was higher in 2016 than in 2015.

Broker clients were significantly more likely to overstate income and understate other debts, according to the report. UBS’ conclusion was damning: “We believe banks need to tighten underwriting standards via the broker channel, even at the expense of near-term market share.”

Covered by the ABC and The Australian, UBS’ findings quickly spread beyond finance into mainstream news, and have been noticed by the regulators. On being asked about fraud by the Senate Economics Legislation Committee, APRA chairman Wayne Byres noted that “we have told the larger institutions that we’ll be asking them to have their

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external auditors do a review of what are essentially fraud control mechanisms to ensure that there are mechanisms in place and … are working,” according to The Australian. UBS’ report clearly cannot be ignored so, MPA asks, should the industry be seriously concerned?

The problems with UBS’ survey FBAA CEO Peter White has made his views quite clear: “This really should not be taken seriously … I believe that not only are these figures wrong, but that they are based on claims that can never be verified.”

“I don’t see structural issues coming through. We know broker-originated loans are slightly more risky, but that’s only two to three points more risk” Martin North, Digital Finance Analytics He’s not been the only one to question UBS’ methodology. Lawyer Matthew Bransgrove, author of Avoiding Mortgage Fraud in Australia, told MPA that he is “dismissive” of the report: “It is a self-assessed survey. Obtaining money by deception is a criminal offence in all jurisdictions in Australia, so it would be surprising if those who were fraudulent were candid.”

The MFAA also criticised the report.

UBS’ approach of asking borrowers to admit they lied on applications – even under the condition of anonymity – hardly seems likely to get honest responses from people.

Yet to UBS this uncertainty is a reason for more concern, for the report states that “if anything we believe it is more likely these figures may understate the level of misrepresentation in mortgage applications, as some respondents may not want to state

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KEY POINTS FROM THE UBS REPORT UBS surveyed 1,228 Australians who’d taken out a mortgage in the past 12 months, and asked whether their application was completely factually accurate.

It then segmented the results between the direct and broker channels.

13.2%

18.8%

Is your mortgage application completely accurate?

68%

Completely factual and accurate Not completely accurate – broker did not suggest I misrepresent Not completely accurate – brokers suggested I misrepresent Note: applies to 2016 applications secured by a broker

TYPES OF MISREPRESENTATION BY BANKS AND BROKERS they were less than completely accurate despite anonymity.”

It’s possible that borrowers may simply be mistaken. Talking to MPA about fraud prevention, Mortgage Choice CEO John Flavell questioned whether borrowers really understood their application: “Can every single respondent who said their lender and/ or broker misrepresented their financials in their loan application pinpoint exactly what is was that was fraudulent?”

UBS’ report states that “respondents were required to be personally and deeply involved in the discussion and completion of the mortgage paperwork” but, again, we don’t know how or if they verified that.

As for the blame game, proving that 41% of 2016’s “not completely accurate” applications were because of brokers rather

than the borrower is, again, extremely difficult to verify. UBS’ survey was done online, and although it involved 63 questions, whether it goes into enough detail to prove a broker encouraged misrepresentation is again doubtful.

Over-represented household income

Don’t get too comfortable

Over-declared other assets

Picking holes in UBS’ report doesn’t prove broking doesn’t have a problem, however.

Fraud and misrepresentation in mortgage applications are real problems, according to Veda’s 2015 Cybercrime and Fraud Report.

Fraudulent mortgage applications made up 17% of all attempted fraud – second only to credit cards – and broker fraud had risen by a quarter, to represent 21% of fraud overall.

Meanwhile, fraud through bank branches has fallen by a quarter to 11% of fraud overall.

Brokers

Banks

5% 18%

11% 14% Under-represented other financial commitments (eg mortgages, personal loans, credit cards) 12% 18% Source: UBS Evidence Lab: Mortgages – Time for the Truth? October 2016

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FEATURE / BROKER EDUCATION NEWS ANALYSIS

MORTGAGE FRAUD Worsening housing affordability could Fraud and turnaround times UBS’ second claim is just as concerning for drive systemic fraud. Asked about fraud, brokers, and relates to turnaround times: Martin North, principal of Digital Finance “While the banks continue to target greater Analytics, noted that consumers “know they automation and faster mortgage approval have to do a double somersault backwards to process to improve get into the market”.

KEY POINTS FROM customer service and Nevertheless, North VEDA’S CYBERCRIME maintain market share, cautioned, broker advice AND FRAUD REPORT this may be coming at was “not the same as the expense of rigour in telling porkies, but I guess According to Veda’s 2015 data, credit assessment.” it’s a gradation. I don’t see since 2014 there was: Turnaround times are structural issues coming critical for brokers, and through. We know broker4% decrease in residential mortgage consistently voted their originated loans are fraud as a proportion of all fraud No.1 concern (above slightly more risky, but (now 17%) interest rates) in MPA’s that’s only two to three 24% increase in the share of fraud Brokers on Banks survey. points more risk, and it’s going through the broker channel Many banks have highpartly to do with the performer segments, business mix in that 21% decrease in the share of fraud whose members get channel.” going through bank branches preferential turnaround ASIC regularly bans 2% times; others are investing brokers for fraud, most 1% 3% 5% huge amounts in recently Bernard Meehan automating as much of in October; Jennifer 7% the lending progress as Farias in September and Current channels possible. One of these is Madhvan Nair in July.

11% 50% of fraudulent ING DIRECT, whose Since July 2010, ASIC has applications LendFast system aims to banned 74 individuals or cut turnaround times by a companies from providing 21% third and is the largest credit services, including investment in broking 32 permanent bans, and infrastructure the bank prosecuted 12 in court.

Online Dealer has ever made.

Individual cases, While agreeing that however, don’t back up Broker Phone Call fraud remains a risk, ING suggestions that fraud is Bank Branch Other CEO Uday Sareen told “systemic”. The closest to Lender Direct Marketing MPA that “there is that the industry has seen Source: Veda 2015 Cybercrime and Fraud Report absolutely no compromise was earlier this year, when Note that 2016’s figures were not available at the time of writing when cutting down Westpac and ANZ turnaround times or any relaxation in our admitted they were hit by hundreds of loan systems and policies to prevent fraud.” frauds involving fraudulent Chinese In fact, Sareen claims that by automating documents. The Australian Financial more of the workflow, LendFast actually has Review, which reported the story, claimed the opposite effect. that mortgage brokers had been involved.

“The element of discretion and rules and ANZ spokesman Paul Edwards told the AFR parameters that get hardcoded actually that “the issue is relatively small” and that the reduce the potential and the incidence of value of loans inflicted was well under $1bn. fraud,” he said.

Several of the major and non-major banks Asked by MPA, Suncorp Bank’s executive later pulled back from the foreign buyer manager of lending, Barbara O’Conor Nash, market, although this could also be attributed also pointed to automatic fraud checking, to changing capital requirements.

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noting that: “We continuously review our processes to ensure we’re addressing any known real or emerging risks. Application, property and income verification are critical parts of our lending practices and the bank also uses extensive automated fraud processes, which work in parallel.”

Automated fraud prevention has come a long way in recent years, driven by Veda’s Shared Fraud Database, which automatically flags individuals previously involved in fraud when they apply for credit.

Yet, evidently, software can only go so far: in May, CBA introduced individual checking of applications by a case officer, to help detect whether brokers are deliberately engaging in fraudulent behaviour. Mortgage Choice told MPA they also conduct regular in-depth checks of their brokers, including annual “mystery shopper” visits and annual compliance checks of multiple applications.

Fraud expert Bransgrove is confident fraud prevention tactics are getting better, not worse.

“The threat is reducing because of the Veda database, the vigilance of aggregators and brokers, and because of the good work ASIC is doing in removing the bad eggs from the industry,” he said.

UBS’ report, Bransgrove’s comments and Veda’s aforementioned figures make for confusing reading, because they point in such different directions. Veda’s figures show that mortgage fraud is down, but increasingly more likely to go through the broker channel than branches, suggesting that fraud prevention, while effective, is more effective in some areas than others. This would support UBS’ view that mortgage brokers “are a potential area of weakness” in the fight against fraud.

Clearly more research is needed to determine whether that potential weakness really translates into systemic problems in reality; Veda’s 2016 fraud report late in the year will therefore become essential reading.

Counter-intuitively, with such heightened regulator tension, simply dismissing fraud allegations may do more damage than publicly engaging with efforts to stamp out what is an age-old problem.

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THE BIG INTERVIEW

UDAY SAREEN

“For the past 18 years we were branchless, and we are branchless now: this is the key channel for us”

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UDAY SAREEN: A NEW CHAPTER ING DIRECT’s new CEO tells MPA editor Sam Richardson how the non-major will become the primary bank used by more Australians

MPA: You recently referred to a ‘Chapter 2’ for ING DIRECT in Australia, with the focus on becoming customers’ core bank.

How do mortgage brokers factor into this, given ING is branchless?

UDAY SAREEN: We actually commenced our business in Australia in 1999, and our first product was mortgages. We were branchless then; we are branchless now. In many ways we’re actually an 18-year-old fintech in Australia, and clearly our business model has been, on the mortgage side, through the broker channel. Clearly the relationships with brokers have grown from strength to strength, and close to 90% of our mortgages today come through the broker channel, and this is a key and significant channel for us.

So my response would be that brokers are at the heart of our strategy, and that’s not going to change; that will continue. I think the broker channel provides an informed choice and, most importantly, independence for our customers, and we think that is vitally important for a healthy and competitive mortgage market. So, clearly, as we start to diversify our products and grow our primary banking relationship with our clients, this is a channel which over the years we have partnered tremendously with, and that’s going to remain significant for us.

MPA: You’ve said you want to double the number of primary bank customers at ING DIRECT. Do you have a similar target for mortgages?

US: From a mortgage perspective I think it’s

reasonable to assume that over the next couple of years we should be able to grow at 8–10%. Today we have a 3% market share, and if you look at our residential book, while we are planning to diversify and launch products and grow our balance sheet, clearly, from a mortgage perspective, we already are growing faster than market.

There’s another part of the mortgage segment which is growing even faster this year, and that’s commercial lending. While that is part of the mortgage section it’s different from residential, and whilst we’re starting from a small base here, over the past year we’ve grown up to 20% in that segment.

So, overall, 8–10% is a reasonable estimate, and whilst I don’t want to get into forwardlooking statements, close to 20% in the commercial segment, which is starting from a small base.

MPA: If ING DIRECT is going to gain market share, where is it going to come from: the majors, non-majors or non-banks?

US: I’ll talk about market share when we get to double digits! We’re at 3% market share, and so it really doesn’t matter where it’s going to come from. Of course it will have to come from competition, and 80% of the banking landscape is with the majors. We’re a low single-digit number, and I think from our perspective we’re confident about the strength of our proposition and product and pricing, and the fact we have industry-

RECENT INNOVATION AT ING DIRECT Although ING has a global network, many of its more recent initiatives started in Australia:

Bank in a Box First launched in Australia in 2012.

Made it much easier to modify and develop new software within ING’s IT systems, allowing new technology improvements to be brought to market more quickly.

Zero Touch First launched in Australia in 2014.

Transferred all of ING DIRECT’s systems on to a private data cloud, the first of any bank in Australia. This allows ING to test systems without any downtime for customers using the website.

Project DNA First launched in Spain in 2015.

An attempt to improve ING’s digital presence by using analytics to make it more bespoke, such as creating a personalised wallet for customers that tracks their spend on consumables.

LendFast First launched in Australia in 2016.

Aims to minimise the number of manual interactions with applications and so reduce turnaround times.

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THE BIG INTERVIEW

UDAY SAREEN UDAY SAREEN’S CAREER PATH

1994 Senior vice president of Citigroup

2007 Joins the ING Group’s Indian operation, ING Vysya, as head of private banking based in Bengaluru

2012 Moves to Europe, joining ING DiBa, ING’s German bank in Frankfurt, as chief strategy officer

2014 Returns to India as deputy CEO of ING Vysya, now renamed Kotak Mahindra Bank

2016 Replaces Vaughn Richtor as only the second ever CEO of ING DIRECT Australia

Education MSc (Hons) Electrical and Economics, Birla Institute of Technology and Science, Pilani, 1992; MBA, University of Delhi, 1994

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leading advocacy which is really driving growth in customers. So from our perspective it’s a small number, and there’s opportunity for us to grow it.

MPA: ING is known for particularly competitive rates. Will your proposition continue to revolve around rates or move to other areas?

US: ING’s value proposition has always been central to our offering. And when I say value, rates are a significant part of the value proposition, but really, if you look at the price-value equation, value for our customers has always been important, and I think, given our business model and our cost-efficiencies, we are able to pass on that value to our clients, of which pricing and rate are a significant component.

We will always ensure customers get value, now and in the long term, and I think increasingly products are getting commoditised, and the differentiation there is really

gets streamlined, supporting our broker network. Ultimately, the bottom line is a more efficient and faster experience for brokers and customers.

That’s come on track last quarter, and we expect over the next few months the system to get stabilised, and then we’ll start to see significant improvements in our turnaround time and efficiency, in addition to specific features that provide real-time and empowering information to brokers and partners. This has, I must reiterate, been the largest investment in the back-end mortgage origination system that we’ve seen at the bank.

MPA: Does trying to cut turnaround time as much as possible risk compromising the fraud prevention strategies that all lenders need to have in place?

US: We are diligent with our policies, and clearly there is absolutely no compromise when cutting down turnaround times, or any relaxation in our systems and policies to

“Over the next couple of years we should be able to grow at 8–10%” about user experience and how that user experience can be personal and digital and frictionless. Those are the components which drive value, so you’re right: pricing is key. We will always be competitive and have an edge over competition, but our overall value proposition is central to us.

MPA: What is the LendFast project and how it will help brokers?

US: We’ve actually undertaken, over the last three months, our largest mortgage origination project in the bank ever. We’ve just gone live, late last quarter, and the objective is the following: we’re looking a value proposition that is not just about rate.

The highlight of [LendFast] is that it cuts the turnaround by one third, and then adds benefits to our broker proposition and our customers: live updates, and it empowers our brokers to do more with real-time information on the state of the application.

Basically, the whole acquisition workflow

prevent fraud in our portfolios. You’re right: I think the larger risk on the mortgage side is the operational risk aspect. So we work closely with regulators to ensure that we are well ahead of where we need to be in terms of risk management, and collaboratively with other international units across ING’s global network to ensure we have the best global practices.

We have the advantage of industryleading tools and insights from our global ING practice: we are the third-largest mortgage book in the ING Group after the Netherlands and Germany, and so we are able to access insights from a fraud prevention perspective.

I’d just like to highlight here that there’s absolutely no question of any sort of relaxation of any policies. In fact, what acquisition workflow and LendFast do is actually enhance our capabilities in fraud prevention because it automates workflow, minimises manual intervention, hence the

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element of discretion and rules and parameters that get hardcoded actually reduce the potential and the incidence of fraud, in addition to the tools and insights we have, not just from ING Australia but from our group all over the world.

rollout, with the next stage looking at our existing customer base.

Like I mentioned, brokers are a key channel for us, and next on the anvil is a credit card: we’re currently trialling the product with our staff, and later this year

“Increasingly, products are getting commoditised, and the differentiation there is really about user experience” I agree it’s a key concern in our business.

We are mindful of that, and so there’s no question of relaxation or offsetting of any of these policies to reduce our turnaround times.

MPA: Are there any new products, offers or initiatives on the horizon as we move into 2017?

US: I’m happy to say that just last month we had a significant launch, the launch of our first insurance product. We launched our home and contents insurance in partnership with Auto & General and we’ve launched that for our new home loan customers through the broker channel, and this is hot off the press, just days old.

It’s a clear and simple experience for the customer, and whilst this was launched just last month we’ve got a good response from our customers, and in the coming months we’re going to expand it through a staged

and early next year we’re looking to launch … currently we’re just launching with our staff, and ideally there’s the opportunity for us to take this to our partners and channels.

Our broker distribution channel is central to us, and as we start to diversify our products we can really work in tandem and take this partnership with brokers to the next level.

MPA: How would you like brokers to view ING DIRECT 12 months from now?

US: I started off by saying that for the past 18 years we were branchless, and we are branchless now; this is the key channel for us, with more than 90% of business through brokers. Clearly our intention is to partner with this channel and grow with the channel, and my endeavour is that they continue to see us offering great value and being easy to work with.

It’s not just about pricing or the rate. Of course we have to be competitive, but the entire value proposition, not just for brokers but for customers, is key and central to us.

It’s about having great service, being there for our partners and our channel, and transparency is key here for us always. What you see on our website and what we publish is open and transparent and empowers our brokers and customers, so they always know that if there’s a particular pricing on the website, that’s exactly what they’ll get: there are no hidden deals.

The other piece is about being clear and easy; simple and efficient. Ultimately the bottom line is we have to add value to the brokers’ businesses, their customers and their partners. I just want to reiterate this is a channel that is key to us and significant to us, and we will continue to partner with brokers.

I’ve had the opportunity also, in my first four months, to travel interstate and visit Melbourne, Perth, Brisbane and Adelaide, and at each of these places we’ve had our annual broker roadshows. I’ve personally travelled to them and had facetime with close to 450 of our broker channel partners.

That for me is absolutely key and important to us. I think we have had a great partnership over the years, and my endeavour is to make sure we take it to the next level. I always have time for them and I believe that’s key and central to who we are as a business.

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SPECIAL REPORT

HOT LIST 2016

HOT 2016 Meet the top professionals reshaping your industry from the inside out

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WHO MATTERS most in broking? On the grand scale you’d have to look at regulators, the government in power and the biggest brokers and aggregators. On a day-to-day scale the most important person to your business could be an inspiring mentor – or, more negatively, a useless processor holding up your application. The Hot List, on the other hand, is a list for all brokers, no matter who you work with and where you’re based.

Making MPA’s Hot List requires making news. There are several powerful franchise and aggregation chiefs who have a major influence in broking, but haven’t made any major changes to their organisations this year, so aren’t on this list.

We’re interested in those operators whose effects will make broking in 2017 significantly different to broking in 2016, whatever the size of their organisation.

Nor is the Hot List a popularity contest.

This list includes more brokers than ever before, not simply because they’re awardwinning but because, in doing so, they’ve shown other brokers new ways to approach the job. If you’d like to find more about these brokers, you can read more about them on our website mpamagazine.com.au.

Of the non-broker members on 2016’s Hot List, you’ll find a preponderance towards regulators and technology. ASIC’s remuneration review has set the tone for broking this year and forced industry associations and aggregators to step up in defence of the channel.

In technology, we’ve seen countless start-ups attempt to disrupt the channel, but just a handful succeed, often through working with brokers rather than against them.

You might not be on the Hot List, but the Hot List for you and your business.

Understanding who’s shaping broking can go a long way to helping your business navigate the shifting market and regulatory tides we’re sure to see in 2017.

WHAT’S HAPPENED IN 2016:

11% growth in the median Sydney dwelling value (Perth prices fell 8%)*

27 trophies were handed out at the Australian Mortgage Awards

53.6% of residential mortgages in Australia now go through brokers**

160 brokers and brokerages recognised in MPA’s special reports

$10.1bn in residential loans written by our Top 100 Brokers *Source: CoreLogic Home Value Indices, figures refer to 31 January – 31 October 2016 (most recent stats available) **Note: figures refer to September 2016 quarter (most recent stats available)

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SPECIAL REPORT

HOT LIST 2016 PHILIP LOWE Governor Reserve Bank of Australia

When Philip Lowe succeeded Glenn Stevens in September, it truly was the end of an era: Stevens headed the RBA for a decade. Lowe, who was hailed as “the most qualified person to have ever been appointed to the role”, has wasted no time in making his own views known, saying the bank aren’t “inflation nutters” and that rate decisions will be guided by other factors, including risks in the housing market. According to Lowe, a struggling labour market would be the main driver for a further interest rate cut.

ANJA PANNEK CEO PLAN Australia

STEVE KANE

After years of shedding brokers, PLAN underwent major changes in 2016, including a proposed integration with financial advisor sub-aggregator Advantedge Financial Solutions and the departure of CEO Phil Quin-Conroy. In his place is Anja Pannek, who has a long history with PLAN, having played a part in its original acquisition by Challenger, as well as several years in personal banking with NAB. Pannek’s challenge is to redefine PLAN’s value proposition while satisfying both its broking and financial planning members.

GEORGE KARAM Director BF Money

George Karam has done the commercial broking double; he’s No.1 in MPA’s Top 10 Commercial Brokers list and AMA Broker of the Year, both for the second year running. He’s also found time to rebrand his brokerage from Byblos Finance to BF Money, and move offices, while navigating an increasingly difficult lending landscape for property developers driven by fears around oversupply. Karam is now looking to expand his presence in the residential lending space, and brokers in Sydney and beyond should take notice.

General Manager NAB

Having brought confusion to countless brokers and customers, NAB Broker finally disappeared in 2016 and the ghost of Homeside was put to rest, as broker lending was fully integrated into National Australia Bank. Broker customers now have access to the full suite of NAB products and resources, including a bundled product package and a portfolio-style facility.

Thanks to Steve Kane, the transformation has gone further: brokers now have access to dedicated bankerbrokers, to improve relations between brokers and branches and reduce channel conflict, which NAB claims has been applauded when piloted by brokers.

We wait on the results of 2017’s Brokers on Banks survey to see if killing off NAB Broker has really made a difference.

TONY MACRAE General manager third party distribution Westpac & St George Banking Group

Tony MacRae now works across one major and three non-major banks, a huge demand for any exec, but evidently he’s not taken his eye off the ball. This year saw Westpac again top MPA’s Brokers on Banks survey, with huge support for their BDM support and turnaround times (among other factors). MacRae told MPA that he’ll look to share good practice between his growing stable of banks, while keeping their key differences and regional identities.

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SPECIAL REPORT

HOT LIST 2016 BRETT HALLIWELL General manager Advantedge

The growth of white-label lending may be “one of the greatest stories in the industry in recent times”, as Brett Halliwell puts it; but it’s also one of the most overlooked: although 85% of brokers now have access to Advantedge products, the lender is seldom in the limelight. Halliwell wants to change that, moving the focus away from its background in mortgage management and presenting Advantedge as an equal of – and a threat to – the non-major banks.

DANIEL O’BRIEN Owner PFS Finance

This year’s Australian Brokerage of the Year at the AMAs, PFS Finance proves that the small brokerage model can excel at the highest level, beating much larger rivals to the prize. Nevertheless, much of that success must be attributed to Daniel O’Brien, who clinched ninth place in this year’s Top 100 Brokers. O’Brien prizes organisation and delegation within the brokerage; his support staff and business partner deal with the banks to ensure he spends 100% of his time on his clients.

LISA CLAES Managing director CoreLogic

Lisa Claes is well known as an advocate of technology, female financial consumers and professionals. August 2016 marked a major change for Claes’ career as she moved from ING DIRECT to succeed Graham Mirabito as CoreLogic’s managing director for Australia and New Zealand. With a head office in the US, partnerships in Asia and a small business in the UK, CoreLogic is an international company and its property indices and reports set the tone for the mortgage industry, regulators and political decision makers. It also won this year’s Australian Mortgage Award for best industry service.

RACHELLE EYNDHOVEN Director Sphere Finance

As the abundance of male faces in this hotlist suggests, broking has a diversity problem. While broking hasn’t lacked female industry legends – Wendy Higgins and Katrina Rowlands come to mind – these same faces have tended to reappear over the last few years, hardly reflecting the influx of new female brokers into the industry.

Rachelle Eyndhoven is a breath of fresh air: she’s gone from 2015’s Australian Young Gun of the Year at the AMAs to writing serious numbers in this year’s MPA Top 100: $124m in residential loans over the 2015/16 FY to be exact. At 19th, she’s the highest ranked female broker in a number of years, and we hope her success inspires more female brokers to aim for the top.

IAN MCPHEE Independent governance expert Australian Bankers’ Association

If you’ve heard of Ian McPhee, it’s probably due to his work as Commonwealth auditor general, a role from which he retired in 2015. McPhee resurfaced this year, appointed by the Australian Bankers’ Association to review its own review into banking, including questioning how commissions – for both bank staff and brokers – affect consumer outcomes. Although it’s tempting to dismiss the ABA’s review as a political move to avoid Labor’s royal commission, it could lead to major changes for the broker channel.

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PETER KELL Deputy chairman ASIC

In the job since 2013, Peter Kell is not new to broking, nor has he made any career moves in the past year. Yet Kell’s organisation has cast a shadow over broking this year, as its review into broker remuneration questions the financial basis of the profession. As the man leading that review, Kell matters more to your business than the Prime Minister or the governor of the RBA, depending, of course, on the course of action that ASIC recommends.

As publication is not due until late 2016 (certainly not at the time of writing), it’s unclear what the results of that review will be. ASIC ran several stakeholder roundtables early in 2016 and later requested data from several broking groups, but only made minor amendments to the review.

What Kell is open about is that ASIC is conducting a review, not an investigation, telling MPA: “There seems to be a lot of people in the sector who believe ASIC – without even really commencing the whole review – has already made its mind up on exactly what it is going to find and what recommendations it is going to make. I ensure you this is not the case.”

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SPECIAL REPORT

HOT LIST 2016 STEVEN DEGETTO Head of bank intermediaries Suncorp Group

After years of Suncorp presenting itself as “the genuine alternative” for brokers, 2016 saw it really deliver, clinching fourth place in MPA’s Brokers on Banks survey. That made it the highest rated non-major in the survey, and placed it above Macquarie and NAB, a huge result. Sharp interest rates and a popular packaged product played a part in this, as did investment and transparency around improving turnaround times. Suncorp also launched Elevate, a new broker rewards program.

MARSHALL CONDON CEO

YUVAL BLOOMFIELD

Neue Black

Broker

Marshall Condon has been a regular fixture of MPA’s Top 10 Commercial Brokers report in recent years, a great achievement for a young broker. Yet one couldn’t help but feel broking within a franchise was holding back Condon’s potential – a situation that changed when Condon established his own brokerage, Neue Black, at the start of this year. Targeted at wealthy millennials, the brokerage is a masterclass of branding, and writes both residential and commercial loans. Furthermore, Condon made it to No.2 in this year’s Top 10 Commercial Brokers report.

JACI SMITH CEO My Local Broker

My Local Broker has burst onto the aggregation scene this year, aiming to shake up the industry through their new CRM system Chief. Unlike many of the older legacy systems used by other aggregators, Chief has an open application programming interface, which means it can be easily updated. Although My Local Broker was originally launched in 2012 as a broker directory site, it needed to become an aggregator and technology provider in order to “make sure it wouldn’t become obsolete”, Smith told MPA back in March.

1st Street Home Loans

2016’s emerging star is undoubtedly 1st Street’s Yuval Bloomfield, who walked away with the Australian Young Gun award at this year’s AMAs. Bloomfield certainly hasn’t come from nowhere; after working in the UK (including at the prestigious Arsenal Football Club) he spent a decade at CBA and then NAB, rising to the position of senior business banking manager at the latter.

With an established reputation and contacts in the industry, Bloomfield was well placed to enter the industry.

Joining a brokerage such as 1st Street provides another advantage altogether: Bloomfield is working alongside multiple award winners, including Jeremy Fisher and Mardee Thomas-Blackwood. With such talent and support, Bloomfield’s rapid rise – he only started broking in 2015 – looks set to continue.

MARIO REHAYEM Managing director, Australian mortgages and personal loans Pepper

You may have noticed Mario Rehayem’s title change this year – and though the move from director of sales to managing director may seem technical, it puts Rehayem in a position of influence at an international lender that is continuing to grow. Pepper now has a presence in Europe, Asia and Australia and Rehayem’s repeated claims that non-conforming is much bigger than brokers think appears to be becoming a reality. Pepper is also continuing to run its roadshows and online learning courses for brokers.

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SPECIAL REPORT

HOT LIST 2016 RAY HAIR General manager sales Homeloans

2016 was a great year for Homeloans, which swept to victory and the No.1 spot in this year’s Brokers on Non-Banks report. The lender was praised by brokers for its wide product range and excellent BDMs, and it raised its public profile through a successful sponsorship of the Perth Scorchers in the Twenty20 cricket. Ray Hair must take much of the credit for that. In July it was announced that Homeloans and RESIMAC were to merge – their combined portfolio to be worth $13bn.

LOUIS KOVANIS CEO Genius Loan Solutions

If you discovered the most profitable niche in broking, how long do you think it’d stay a secret? When MPA dubbed Louis Kovanis “the mortgage doctor” in late 2014, coming from his success working with wealthy medical professionals, we assumed hundreds of brokers would move onto Kovanis’ patch. Yet this has not been the case, and far from a one-hit wonder, Kovanis is climbing the ranks; he now sits at No.3 in our Top 100 Brokers report, and aims to write $250m in residential loans over the next financial year.

MANDEEP SODHI CEO HashChing

After a certain number of fintechs, they all begin to blur into one: promises of disruption, glossy spreads in the newspapers and quiet failures a couple of months down the track. Not HashChing: the broker online marketplace is thriving, hitting $2bn in lending in October and hiring ex-MFAA CEO Siobhan Hayden in an advisory capacity. Perhaps the difference with HashChing has been Sodhi’s willingness to acknowledge and work with brokers, showing that disruption and true innovation are markedly different forces.

SIMONE TILLEY National head, retail broker distribution ANZ

Back in May, Simone Tilley came to ANZ’s broker chief role from a background in agribusiness and commercial banking, which included working with brokers.

One of her first acts has been to form a broker innovation think tank: a group of BDMs who will advise the bank hierarchy, rather than the other way around. As Tilley said: “We saw a need to create a forum where seniority didn’t get you a seat at the table, rather your willingness to participate and make a genuine difference did.”

The challenge for Tilley is to turn that feedback into tangible improvements that push ANZ above its current third place in MPA’s Brokers on Banks survey, particularly by changing negative broker perceptions around ANZ’s commissions and interest rates.

KEITH CAINE Owner Mortgage Choice Glenelg

Mortgage Choice Glenelg is Australia’s most successful franchise brokerage and Keith Caine is its new owner. Caine, who has worked at the brokerage for six years having come to Australia from the UK in 2009, bought the business from Wendy Higgins, who retired this year. The challenge facing him is immense: to engage with many of Higgins’ old clients and keep volumes high despite South Australia’s struggling economy, while ensuring Mortgage Choice Glenelg remains the brokerage to beat.

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MARK DAVIS Director The Australian Lending & Investment Centre

To put it simply, Mark Davis is Australia’s top broker, co-managing Australia’s top brokerage.

There are many ways of defining broking excellence, but at MPA we do it by the numbers: Davis was No.1 in our Top 100 Brokers report, writing $335.9m in residential loans over a single financial year. Likewise The Australian Lending & Investment Centre was No.1 in our Top 10 Independent Brokerages report, for the third consecutive year. That’s not to mention Davis being named Australian Broker of the Year at 2016’s Australian Mortgage Awards.

It’s tempting to look at Davis’ achievements and put it down to an established reputation and extremely hard work – both of which are true – but the success of ALIC and its brokers is also due to innovation.

At some expense, the brokerage has brought in consultants to find out how it can better motivate its staff.

It also has a structured learning program that involves Davis taking on wannabe brokers as his seconds-in-command.

Davis himself places a high importance on staying efficient.

“As a broker you’ve got to back yourself,” he told MPA. “You have to get a support person; you’ve got to get rid of the non-value items.”

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SPECIAL REPORT

HOT LIST 2016 GEORGE SAMIOS Broker MADD Loans

Considering Samios established MADD in 2012, has twice appeared in MPA’s Top 100 Brokers report and is an AMA finalist, you may be surprised to hear he’s still in his 20s. In fact, Samios was one of the youngest brokers in this year’s Top 100 and came 11th, missing out on the top 10 by just $100,000.

MADD’s brand is one of very few brokerage brands that can be considered genuinely distinctive, thanks to hilarious TV adverts featuring celebrities, lime green MADD cars and a slick website. If you look deeper, you’ll also find that Samios has a network of real estate referrers and a highly delineated process for dealing with clients.

Evidently Samios is no young gun – he’s a paid-up member of the broking elite.

PETER WHITE CEO FBAA

Peter White has been a tireless advocate for the broker channel this year, commanding far more influence than the FBAA’s membership alone would suggest. Whether it’s his regular meetings with minister for revenue and financial services Kelly O’Dwyer, his blistering attacks on the banks or defending brokers against inaccurate reporting in the mainstream press, White’s willingness to step up has impressed many non-FBAA aligned brokers.

Despite all this work, White’s success will be judged mainly by the outcome of ASIC’s remuneration review. White has been more vocal about his dealings with ASIC than the MFAA, promising to deliver a “global research document” to show how brokers are paid in other countries. Whether White has done enough publicly and behind the scenes to preserve the status quo will only become evident in 2017.

HONOURABLE MENTION: WENDY HIGGINS Principal Mortgage Choice Glenelg (retired)

The industry waved goodbye to one of its greats in 2016, as Wendy Higgins officially retired. Higgins is, in broking, about as close as you come to the definition of an industry legend: buying her Mortgage Choice franchise in 1998, Higgins went on to top MPA’s Top 100 Brokers ranking several times.

Furthermore, her brokerage, Mortgage Choice Glenelg, came No.1 in MPA’s Top 10 Franchise Brokerages report for the fourth consecutive occasion this year, defying South Australia’s struggling housing market.

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IAN ROBINSON AND BRAD SEWELL Directors Robinson Sewell Partners

In regional Australia, Robinson Sewell Partners are finance heavyweights.

Ian Robinson Brad Sewell Routinely driving from Victoria to the NSW Riverina and up into central Queensland, they help family owned agricultural businesses get a better deal with the bank. Agribusiness is a $258bn industry, yet agribusiness brokers have until now kept a low profile. This year saw the duo’s broking talent begin to be recognised beyond dedicated regional awards: they were named best brokerage with two to five loan writers in this year’s MFAA National Excellence Awards.

UDAY SAREEN CEO ING DIRECT

Uday Sareen’s arrival at ING DIRECT heralds, according to the man himself, “chapter two of our franchise in Australia”.

Sareen made it clear early on that he is looking to build upon ING’s traditional strengths in savings and mortgages and double the number of primary bank customers.

Whether or not you believe that’s possible, Sareen joins at a pivotal moment for the bank. ING accounted for 5.2% of lending in AFG’s September competition index, putting it far ahead of other non-majors. With a background in the crowded German and Indian banking markets, Sareen has the experience to take market share from the big banks in the mortgage space. That’s assuming ING doesn’t slip up: poor turnaround times or rapid policy changes could easily alienate brokers.

MHAIRI MACLEOD Principal Astute Ability Finance

Highly commended at the AMAs, a finalist at the MFAA’s awards and a small business champion, it’s clear that Mhairi Macleod and her Central Coast brokerage are a serious operation. Astute Ability Finance is unusual in that it started in the asset finance space, financing niche items such as horse floats, and brings a new perspective to the diversification debate.

Yet broking is just a fraction of the work that MacLeod does: working with the MFAA’s WIMBN panel, she has emerged as a leading advocate and example for both community outreach and female brokers. That includes speaking at schools and running financial literacy sessions at the MFAA’s Global Money Week initiative.

MacLeod now advises other brokers how they can get involved in community work.

MARK CHURCHILL Director Allfin Financial Services

Kubio is a cloud-based commercial lending platform that brings much needed efficiencies to the commercial broking channel, including pre-populating application forms with data, tracking applications, and matching clients with their local commercial broker. Unusually, it’s been developed by brokers themselves: Dominic Lo Surdo of Stamford Capital, Brian Kelly of BKK Finance, Alastair Philp of Heritage Property Finance and Mark Churchill (pictured) of Allfin Financial Services, and backed by Macquarie Bank. It’s available to all commercial brokers and is a hugely encouraging development in making lending software more broker-driven.

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FEATURES

TAKING ON STAFF

Growing the family Support staff aren’t just for elite brokers: MPA, in partnership with Choice Aggregation Services, looks at the ways you can get the support you need, within your resources EVERY YEAR at MPA, we ask the leading brokers in our Top 100 Brokers report what distinguishes them from the competition: superior technology, natural sales ability or a perfect brand? None of them, in fact – the most popular answer was relatively simple: a well organised team of support staff.

“Anyone who’s writing over $3m a month should consider a PA,” noted WA’s biggest broker, Colin Lamb. “A mortgage broker should never be licking the back of a stamp.”

It sounds all so simple but, of course, taking on staff can be daunting. Chris White, Choice’s partnership manager for South Australia and the Northern Territory, typically finds brokers have two concerns: “Am I generating enough revenue to sustain this? The second, and probably most important one, is finding the right person.”

MPA spoke to Karen Goodrich, of Goodrich Home Loans, and Chris Burns, of Australian Mortgage Award-winning KeyInvest Lending Services, both in Adelaide, to see how they overcome these challenges.

Generating enough revenue Goodrich started her brokerage in 2012 and by 2014 she found the admin work was making it harder to service new clients, so she took on a part-time staff member.

“I felt I was close to being at that point,

and I had built up some trail by then,” Goodrich explains. “I calculated what I would need to pay an extra staff member, and I felt the free time would enable me to do that.”

Her assistant started on 20 hours a week – four hours every morning – so client files were continually looked at. Now the assistant is on 30 hours a week and Goodrich is mentoring a new broker.

KeyInvest Lending Services is a much bigger brokerage, with 84 staff, and CEO Chris Burns has been taking on staff from day one, back in 1998. He did this through offering shares in the business: a 5% holding

each for the initial brokers. “That’s probably the best move I’ve ever made,” Burns says.

“Today two of three are still with me [one passed away in 2008] … the four of us had the most fantastic relationship.”

Burns says he’d do the same if he was starting the business today, but would leave more shares available for other brokers to buy in with further down the line.

As in Goodrich’s case, many brokers wait until their trail has built up before hiring, figuring that their trail can pay for bills and wages in an emergency. However, White warns that could mean leaving it too late.

“What I find is if you’re looking at a new business, if the need comes up before the trail is at that level … we’d say if you’re not finding the time to spend with customers about new business, or referrals, then you need assistance to ease your workload.”

Finding the right person When hiring her first assistant, Goodrich took a traditional route: hiring a family member.

Although aware of the pitfalls, Goodrich was reassured by knowing exactly who she was taking on: “I knew he’d be keen to work in the business; I knew he’d be ethically sound and supportive of the business and loyal.”

To make it easier to delegate, she put together a manual, spelling out everyone’s

WHERE TO FIND NEW RECRUITS A study by the MFAA found that brokers aged under 35 came from the following backgrounds: High school/TAFE

47% Finance industry eg: worked in a bank

2% 6% Career Path 12%

White-collar roles

Blue-collar roles

19%

Wealth knowledge industry, eg: financial planner, accountant

12% Other

16%

University

Source: MFAA, Young Professionals report 2016

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Sponsored by

MESSAGE FROM OUR SPONSOR

roles, and got advice from other brokers in SA who had already taken on staff.

At KeyInvest, they’re still hiring, and have

resourcing in place, we’ve managed to retain 99% of them,” says Burns, who believes new employees should not be left to “sink or swim”.

“Because we’ve got systems, people and resourcing in place, we’ve managed to retain 99% of new employees”

A business is only as good as its people.

And as a business grows, finding quality people and implementing quality systems to manage them is critical.

As our industry continuously evolves, broker businesses are growing, and with that growth comes fresh issues to tackle.

At Choice, many of our members are on strong growth trajectories and providing them with the support they need to expand is a high priority for us.

From the legal responsibilities of HR management, through to the moral responsibility to help new team members develop, building successful, engaged and efficient teams can bring a string of new challenges.

But with the right support, systems and guidance, expanding your team doesn’t have to be something to fear. With the right approach, growing your team can provide the perfect platform to take your business to the next level.

If you’re looking to grow your business’ headcount, I hope this feature article provides you with some valuable insights.

Stephen Moore CEO Choice Aggregation Services

Chris Burns, KeyInvest Lending Services two BDMs on the hunt for new-to-industry brokers with degrees, aged between 25-40.

However, according to Burns, it’s once new employees get into the office that the real work starts: “We’ve built a huge number of systems for these brokers.” These include an on-boarding procedure, a buddy and mentor system and extensive training.

As Burns explains, on-boarding helps ensure that the effort put into hiring isn’t wasted on new employees who don’t work out. “Because we’ve got systems, people and

White says Choice can help brokers looking to hire, whether in the interviewing, with background checks and – through its recent partnership with HR Assist – in the technical and legal aspects of hiring. To help with retention, he suggests brokers put together a role purpose statement, so employees know exactly what they’re doing and why it matters.

Advice on becoming a manager Taking on employees isn’t just about growing

your volumes; you could also learn something.

“We totally recognise that success means different things to different people,” White says. But he believes hiring should matter to all brokers: “It allows you to grow from being a loan writer to a business owner.” As Burns adds, brokers need to “see themselves as a business person, not a broker”.

However, this transition is not an overnight process, as Goodrich has found: “I’m still going through that … it takes a big mindset shift and I’ve got a long way to go.”

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FEATURES

AGGREGATORS

AGGREGATORS: TACKLING THE BIG ISSUES Aggregators respond to your top concerns around commission payments, lender panels and compliance support and tell MPA what they’re doing to improve

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WHAT DO BROKERS WANT? 1 = not important, 5 = very important

Services Accurate and on-time commission payments

4.60

Quality of lending panel

4.58

Compliance support

4.41

IT and CRM support

4.37

Communication with brokers

4.33

BDM support

4.26

Training and education

4.18

Change from 2015

and choose, but changing aggregators remains a major challenge. To justify the disruption to your business, you need to have absolute confidence in how changing aggregator could help your business, which is why for several years we’ve detailed aggregator strengths and weaknesses in our Brokers on Aggregators survey.

Highlighting problems doesn’t necessarily mean they get fixed, however. Furthermore unlike banks, which heavily promote new offers, improvements within aggregators can be gradual and difficult to discern. That’s why we decided to go back to seven leading aggregators to find out how they were investing and improving in the areas you told us were most important to your business: accurate and on-time commission payments, their lender panel and compliance support.

Although these concerns have been around for as long as aggregators have existed, they’ve acquired a sense of urgency over the past year.

Commission payments are the lifeblood of a brokerage, and as brokers acquire ever more complicated referral networks, aggregators cannot afford to slip up.

When it comes to lender panels, a profusion of new tech-driven personal and business finance lenders offers brokers new opportunities – but only if their aggregator properly finds and on-boards these lenders.

Finally, compliance has become the shadow hanging over their business due to constant reviews by regulators and lenders. Brokers need timely information on regulatory changes, and we asked aggregators what guidance they could provide.

Evidently, aggregators are evolving, as the long list of new lenders on their panels demonstrates. There are several examples of better software being used to improve commission payments and compliance support. Yet personal support – that one-toone chat with your partnership manager – remains the bedrock of aggregator support

Importance indicator

WHEN IT comes to lenders you can pick

Additional 3.77 income streams Marketing support

3.63

White label offering

3.35

Lead generation

3.00

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FEATURES

AGGREGATORS

LENDER PANEL ADDITIONS Part 1 We asked all aggregators involved in this feature to outline the lenders they’ve added to their panel over the past year: Choice Aggregation Services Credit Union South Australia eChoice Aggregation Mildura Finance (asset finance) Rate Setter (personal loans) Now Finance (personal loans) Resicom (non-conforming) Bank Australia (residential) FAST Virgin Money (residential) Victorian Mortgage Group (self-employed) Capital Finance (equipment/ car finance) Arch Finance (commercial property) Bank of Queensland Commercial (business loans) FAST Xpress (asset finance) St George Asset Finance Bank of Melbourne Asset Finance Bank SA Asset Finance (Please turn over the page to find lender panel additions at NMB, PLAN, Outsource and Specialist.)

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and it’s encouraging to see more aggregators going beyond generalised PD days to offer more personalised coaching.

Before reading this report, have a look at the MPA’s Brokers on Aggregators survey, from which the topics of this report are drawn. You can find it in MPA 16.10, which is available online as an e-magazine.

Accurate and on-time commission payments Every year, accurate and on-time commission payments are the most important service an aggregator provides, according to brokers. Yet commission payments remain an area of friction, where differing lender and broker systems clash and late and missed payments are an all too frequent result.

Finding better ways to manage that clash is hugely important to aggregators.

As National Mortgage Brokers (NMB) managing director Gerald Foley says, “As an aggregator who works on a commissionshare model, we have a vested interest in maximising the amount of commission our lenders pay us.”

Aggregators take a number of different approaches to that challenge. PLAN Australia uses an independent trustee for its weekly commission payments, which new CEO Anja Pannek says delivers “a secure cash-flow system and peace of mind”.

Outsource pays commission twice a month, for lenders who pay before and after the 20th, ensuring that “members do not have to wait weeks for payments from lenders that pay after the normal commission run disbursement”, explains CEO Tanya Sale.

Specialist Finance Group takes yet another approach, with their “no orphan commissions” policy, whereby any commissions received are paid out and no unclaimed commissions are permitted to remain on the books.

While most aggregators are not planning to radically change their approaches, many look to IT to increase transparency around commission payments.

eChoice Aggregation’s FLeaTS CRM system is being continually improved, explains general manager Blake Buchanan, and now allows brokers to access reports including “specific information on their conversion statistics, lead origination details, lender specific reporting, settlements and commission data”.

“Our greatest challenge around accuracy is getting timely and accurate information from some suppliers” Gerald Foley, National Mortgage Brokers Choice Aggregation Ser vices is incorporating commission data into brokers’ CRM systems, says CEO Stephen Moore, “to help brokers segment their database and identify those customers who are of the highest value to them.”

Another advantage of integrating these two data sets is quicker reconciliation of referral disagreements, adds Simon Southwell, head of southern region at FAST. FAST also provides automated reporting of commission monthly variations to keep brokers in the loop.

Transparent systems have another advantage, in helping brokers manage increasingly complicated referral networks.

Aggregators have picked up on this, and PLAN and Outsource both mention referrerrelated improvements.

PLAN allows incoming commissions to split between referral agreements, which Pannek claims can reduce bureaucracy for brokers. Outsource aims to help brokers strategically manage their referrers, and has developed a new IT system that allows members to “track settlements related to their referrers and to be able to create a

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FEATURES

AGGREGATORS

LENDER PANEL ADDITIONS Part 2 We asked all aggregators involved in this feature to outline the lenders they’ve added to their panel over the past year: National Mortgage Brokers Allianz (general insurance) PLAN Australia Virgin Money (residential) GoGetta (car finance) Arch Finance (commercial property) Metro Finance (commercial asset finance) Silver Chef (hospitality industry finance) Outsource Moula (business loans) Finance 1 (personal/business car loans) Latitude (personal loans) Heartland Seniors Finance (reverse mortgages) AMF (Yamaha) (marine/motorcycle finance) Specialist Finance Group NLG Leasing (asset/equipment finance) Heartland Seniors Finance (reverse mortgages) Prospa (business loans)

report of the settlements for the current year and conduct a comparison to settlements in the previous year.”

“Aggregators and lenders across the country need to work together to ensure that commission payments are paid more accurately and on time” Simon Southwell, FAST Training also plays a role in many aggregators’ strategies.

“Accuracy depends on the input from the members and ensuring that our members know the intricacies of the lenders,” says Sale.

Therefore Outsource offers online videos and courses to its members. Similarly, FAST uses its network of partnership managers “so they know what to expect and when”.

For all the investment in IT, new systems and training, commissions require collaborative action across the industry, as several of our aggregators pointed out.

“Our greatest challenge around accuracy is getting timely and accurate information from some suppliers,” says Foley. “We are continually chasing lenders for commissions due to our brokers. This is an area where many lenders need to step up their service delivery.”

According to Southwell, “aggregators and lenders across the country need to work together to ensure that commission payments are paid more accurately and on time.”

FAST are leading a working group, involving 11 major aggregators, to create common standards for commission payments and address other commission-related challenges. As Southwell explains, its aim is to agitate “for positive change regarding commission payments that will benefit not only FAST brokers but the whole industry.”

Quality of lending panel Five years ago, there was little to differentiate aggregators’ lending panels: all the majors, many of the non-majors and a smattering of established non-banks.

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Today that situation is completely different; we’ve seen a deluge of new tech-driven lenders, many of them in the commercial,

personal lending and assets space. However brokers expect more from their aggregator than simply adding all new lenders to the panel – it’s about selecting quality lenders and showing brokers how to use them.

You can find a full list of each aggregator’s recent panel additions in the accompanying sidebar. A quick glance at these new lenders gives an idea of the changing face of lending.

Says Sale: “What we’ve seen in the last 12 months is the need for a reverse mortgage product, personal lending that is away from the normal holidays/cars and more to the leisure side, such as marine crafts and motor bikes and a commercial offering that’s unsecured.”

Responding to these needs, Specialist added reverse mortgage provider Heartland Seniors Finance and unsecured commercial lender Prospa to their panel. Almost every aggregator’s panel added several asset finance providers, from Mildura Finance at eChoice to Silver Chef at PLAN. FAST even launched their own white-label asset finance product FAST Xpress, funded by Westpac – the first time a major has funded a white-label asset finance product, according to Southwell.

2016 actually saw very few big name panel additions; only Virgin Money’s launch with PLAN and FAST really made waves. Instead, the focus is turning to the aforementioned asset finance providers and smaller former and current mutuals and credit unions, such as Bank Australia, who eChoice added to their panel this year.

In order to find other smaller and alternative lenders, Buchanan says: “We have a series of proactive steps to regularly audit

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FEATURES

AGGREGATORS

ARE AGGREGATORS KEEPING YOU IN THE LOOP? Our Brokers on Aggregators survey asked how well aggregators are keeping their members informed, and judging by these results, communication is an area of strength for most aggregators.

35%

27%

40

Very well

Well

25%

OK

8%

Badly

5%

Very badly

and engage our brokers so the whole network benefits from the collective information and experience gathered at the industry coalface.”

Specialist and FAST also noted that they conduct regular reviews of emerging lenders to make sure potentially useful additions aren’t overlooked.

While generally enthusiastic, some aggregators were wary about adding unproven smaller lenders to their panels.

“You have to be careful about thinking you can be everything to everyone – this will only end in tears,” says Sale. “Why waste everyone’s time if you might be able to give them a deal now and again? Outsource gets approached all the time and us being totally transparent will provide a form of respect.”

Foley says NMB “would much rather provide greater flows to our current lenders who have supported us over many years,

look at commercial lenders to add to their panels next year.

Another development was the addition not of lenders but of insurers and service providers to aggregator panels. Many of these provided services to clients: eChoice added ALI Group, Allianz, Credit Fix Solutions, Hub (utility connection), Before you Bid (property due diligence), as well as the services of a buyer’s agent, through Cohen Handler.

Increasingly, aggregators add service providers for brokers’ use. PLAN, for instance, added Lawlab, which offers conveyancing services, and HR Assured (outsourced HR services) and discounts on brokers’ personal insurance through a partnership with Allianz.

Choice also offers HR Assured, and in October announced a partnership with PRDnationwide, to help brokers establish links with their local real estate agent.

“You have to be careful about thinking you can be everything to everyone – this will only end in tears” Tanya Sale, Outsource Financial rather than bringing on new lenders.”

Our aggregators made it clear that diversification has become the main determinant of their lender panel additions.

“The aim is to assist members to transition from transaction-based to relationship-based, mitigate risk and increase their income through diversification of services,” says Frank Paratore, Specialist’s national operations manager.

PLAN notes that 24 of the 58 lenders on its panel offer commercial finance. To introduce the new lenders PLAN has launched new summits, such as its annual Commercial and Asset Finance Digital Summit, held at the end of 2016.

Sale says Outsource now offers “an innovative mentoring program for commercial and business lending that will allow our members who want to diversify into this specialist area to do so.”

Choice and NMB say they will specifically

Adding a lender to the panel is only half the story, of course; getting brokers to use them is the other. While previously a note in the monthly newsletter might have sufficed, aggregators now adopt a multi-channel approach to getting news out there.

Southwell explains how FAST’s Xpress product was launched: “[Starting with an internal briefing], we then communicated the product, its features and information on how to get started – including a demonstration – through a series of emails and webinars. We also included details in our monthly newsletters and organised dynamic accreditation sessions in every state.”

Other channels used by aggregators included industry media, lender expos and, in the case of Specialist, an online advisory group.

Its online real-time advisory panel is open to all brokers, and is made up of lenders and experienced financial consultants, who can help with scenarios; while lenders are

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FEATURES

AGGREGATORS

THE IMPORTANCE OF IT While not among the top three concerns of brokers, IT problems lie behind many commission- and compliance-centred issues and, in many cases, IT is the solution. Our Brokers on Aggregators survey examined how IT factored into brokers changing aggregators:

36%

Poor IT and CRM support is the biggest reason to leave

28%

Data migration/IT issues are the biggest obstacle to leaving

17%

IT and CRM support is the biggest reason for brokers to pick their alternative aggregator*

*We asked brokers if they had to change aggregators, who they’d choose and why.

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encouraged to workshop niche scenarios to help brokers learn how to use the products.

Compliance support Compliance shot up the charts this year, pushing IT and CRM support out of the top three aggregator services. The reason is obvious: increased scrutiny from ASIC, whether it be through their remuneration review, investigations into interest-only lending or reviews of other areas. This barrage of regulatory changes will only increase when ASIC publishes its findings on remuneration next year.

Communicating and explaining regulation has therefore become a continual process.

As Foley says: “Communication around compliance is a permanent part of our overall aggregator-broker engagement.”

“Brokers [can] segment their database and identify those customers who are of the highest value to them” Stephen Moore, Choice Aggregation Services PLAN, Choice and FAST communicate these changes through monthly updates. “[The updates] may include areas of compliance that need greater focus, hints and tips, best practice and feedback from regulators on what they’re looking for,” says Moore.

FAST has also started explaining changes in on-demand videos. Outsource are also creating compliance videos, as well as posting updates and amendments on their secure member website.

PD days and conferences continue to be used to explain changes. Often these events are highly specific, such as Choice’s lender expos, or Outsource’s quarterly fraud and compliance workshop, which is mandatory for

members and is part of a national initiative to reduce fraud. Nevertheless, much compliance coaching is highly personal. NMB recently appointed a dedicated credit services manager, who coaches brokers about new regulator expectations, particularly know-your-customer requirements and record keeping.

More personalised support may become more common as aggregators advertise their investment in compliance support.

In the case of Specialist, Paratore says, “The ongoing enhancement of compliance services was among the highest priorities during the year, with key management resources devoted to the project ensuring industry best practice for members ahead of continued legal compliance framework.”

At FAST, personal support is given once a year by credit advice consultants, who take brokers through what FAST describes as a “comprehensive review progress” featuring structured feedback. Similarly, Outsource has compliance managers who talk one-to-one with brokers.

Other methods complement one-to-one attention. As Buchanan explains, eChoice uses a compliance scorecard: “The broker is easily able to identify the key areas for improvement if needed and can draw on the specialist expertise of our team for additional support.”

NMB aims to make compliance easier through technology; its NMB pro sales software has integrated compliance requirements. Pannek says PLAN’s aggregator is working with lenders “on upgrading systems and processes, catering for document indexing and electronic documents to help brokers with their applications overall.”

As in the area of commission payments, aggregators insist that collaboration between lenders and aggregators is unavoidable.

Outsource works with lenders to coach brokers that show up on the lenders’ quality/ error report. According to Sale “[it] is going to be imperative to both aggregators and lenders to work together to ensure that both parties put together an ongoing plan to lift the quality of application and reduce [the level of ] errors that are occurring.”

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21/11/2016 1:35:26 3:48:11 PM 22/11/2016

BUSINESS STRATEGY

ROBOADVICE

AT THE HEART OF ADVICE The human element of the home loan process is not one that roboadvice can easily replace, but it can add another tool to a broker’s armoury, writes Maya Breen

ROBOADVICE,

DIGITAL advice, automated advice are all one and the same.

Despite the imagery of metallic hands and humanoid robots often seen alongside these terms, it is basically advice provided using technology without a human adviser in the picture.

ASIC has the provision of digital advice under its watchful eye and noted its increased popularity in Australia since 2014, which the regulator expects will only continue.

Although roboadvice may appeal to consumers for its convenience, low-cost and time-saving capabilities, the human connection and lifelong relationships that brokers forge with their clients every day are not ones that computer-driven algorithms can easily replicate.

MPA spoke to a lender, a major mortgage franchise and a number of top brokers who are at the forefront of innovation within the industry to find out how roboadvice will change the future face of broking and whether they believe it will ever replace the client-broker relationship.

“Roboadvice should be treated as a means to complement the human touch, instead of a simple plug and replace thing. I know there are a lot of people who think technology can replace humans, and there are also a lot of people reluctant to incorporate technology and stick to the full, traditional human-only way of doing business.”

Chief executive of eChoice Peter Andronicos points out that financial services are complex and a one-size-fits-all solution just doesn’t work in such a marketplace.

“People will remain at the heart of facilitating any transaction or advice,” he says, adding that context is the key to whether Australians will identify with roboadvice.

“Australians take their financial choices very seriously, because most transactions come with high emotion and high value. So context is key. Technology in its role as an enabler can present opportunity and efficiencies and that coupled with the guidance of a broker or adviser allows decisions and options to be presented in context with that individual. For that reason they are not mutually exclusive of each other.”

First impressions Aussie’s prefer face-to-face communication, and it isn’t something that will be replaced in the foreseeable future, says Ren Wong, CEO of N1 Holdings. He suggests brokers take a hybrid approach to roboadvice opportunities, embracing the technology to add value to their existing business model.

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Enhancement or threat?

As a broker, you may be feeling slight apprehension about the ways roboadvice may impact your business and relationships with your clients. Donald Tang, founder of Alliance Mortgage Solutions, believes it could be a useful tool for brokers rather than a

threat: “Roboadvice would make people’s lives easier; human financial advisors would make people’s lives better.”

He says the rise of automated advice could make face-to-face advice from a fellow human even more valuable and makes comparisons to similar instances in history.

“Just like people used painting to record their views when there were no cameras in the world – painting is still a respectable job nowadays, and normally a painting would be sold at a higher price than a photo. Also like when we use machines to make clothes; we still need tailors in modern times.”

Wong, however, says brokers shouldn’t

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“Roboadvice should be treated as a means to complement the human touch, instead of a simple plug and replace” Ren Wong, N1 Holdings underestimate how fast technology can evolve: “An adviser’s experience is an invaluable asset to a client seeking advice; advisers, however, can probably add more value by embracing technology. I couldn’t imagine how much one could do if roboadvice was embraced by the invaluable human touch and experience.”

Yellow Brick Road’s former CEO Wealth Management, Matt Lawler (he has stepped down since talking to MPA) sees roboadvice as a catalyst for a wider group of people experiencing a financial conversation.

“The notion that during someone’s first experience with financial advice they will hand everything over to an individual they

just met in the first meeting is incredulous.

It’s more likely that people will feel more comfortable building their trust with an individual or organisation over a number of experiences,” he says.

“It’s likely the initial experience will be helping them with small issues, facilitated more by technology. In this case, roboadvice becomes a stepping stone to a longer relationship. The entry might be a simpler one, evolving to a more complex one.”

“Whatever happens, brokers will continue to play an important role in helping customers to navigate the complexities of home ownership,” says Mark Woolnough,

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22/11/2016 1:38:31 PM

BUSINESS STRATEGY

ROBOADVICE

IN THE REGULATOR’S SIGHTS The Australian Securities and Investments Commission defines roboadvice as: “The provision of automated financial product advice using algorithms and technology and without the direct involvement of a human adviser. It can comprise general or personal advice, and range from advice that is narrow in scope (eg advice about portfolio construction) to comprehensive financial product advice.”

“ASIC supports the development of a healthy and robust digital advice market in Australia. In an environment where only around 20% of adult Australians seek personal advice, we think that digital advice has the potential to offer an attractive, convenient and low-cost advice service to clients who may not otherwise seek financial advice,” ASIC stated in a report.

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Source: ASIC

head of third party distribution at ING DIRECT. “There are three approaches to financial management: ‘I’ll do it all myself ’, ‘You do it all for me’ or ‘We’ll do it together.’

As an industry, we need to be able to provide great service to our clients tailored to their preferences, so I don’t think we will see one particular model reign supreme.”

Connecting with the consumer When it comes to roboadvice, Wong says there may be a disconnect between what the broker and the consumer expect from the technology: “I spoke to mortgage brokers and advisers and quite a number of them don’t believe [in] roboadvice, but when I speak to consumers, they all expect a hybrid approach to using technology should already be a norm.

“I think we’re a bit disconnected here between the industry and consumers. As brokers or planners we like to disregard

currently at and where they will be in the future if they continue on the same path,” says Lawler. “The technology provides options and illustrations to simulate strategies and outcomes for various approaches in line with a customer’s goals.”

He says that Guru sparks conversations between their branches and customers who previously may never have had financial advice on their radar, or assumed advice was for retirees or the very wealthy.

“We want to continue to innovate and disrupt the financial services industry. We believe we can’t ignore a growing trend of people wanting to access advice in different ways,” Lawler says.

He believes that human guidance through the use of technologies such as Guru is more beneficial to consumers.

“It’s our view that human intervention at the conversation stage, or when it comes to

“Whatever happens, brokers will continue to play an important role in helping customers to navigate the complexities of home ownership” Mark Woolnough, ING DIRECT changes and are reluctant to embrace technology, a lot of the time we forgot we should cater for consumers’ needs to continue mortgage broking or financial planning as a sustainable industry proving its value to the market.

“In short, the impact is probably more on generating the awareness among the consumers of what they can expect out of mortgage brokers or financial planners, but we probably didn’t act enough. This can be a valuable tool to gain competitive advantage.”

Last year, Yellow Brick Road announced its first exploration into robo-technology, in the form of Guru.

“Guru is a customer experience that doesn’t provide financial advice, but rather provides a clear picture of where a person is

implementation, is more valuable than just the customer exploring the technology.”

Andronicos believes roboadvice will best suit those who don’t have complex financial requirements or investors with experience who only need facilitation. Whereas Wong says the younger generations will probably embrace roboadvice first, as they’re a techsavvy group that has grown up alongside electronic developments.

“They hail a cab, order a pizza and look up a property to rent on their smartphones.

Some even get medical advice from the internet,” he says. “When Airbnb launched, I am sure a lot of people thought who would want to give up the comfort of a full-serviced hotel and stay at a stranger’s idle room, or what kind of landlords would want a stranger

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“We believe that the majority of people will always want to deal with another person when the emotive issues of money and financial futures and goal setting are on the table” Matt Lawler, ex-Yellow Brick Road to show up in their empty rooms? Sometimes things that we think wouldn’t work might well click with younger generations.”

But Woolnough mentions their research showed that although the current young generations are tech-orientated, 80% of their Gen X and Y respondents indicated they wanted face-to-face interaction for financial advice, at least in the initial interaction.

“When borrowing a large sum of money, trust and value are key and a face-to-face, personal relationship is central to this,” he says.

“However brokers themselves will probably be more digital in their approach.

More and more we’re seeing brokers operating beyond the traditional face-to-face model, with greater online presence and bringing digital into the home loan process with digital signatures and verifications.”

Bright horizons Yellow Brick Road is eliminating a great deal of the technical and operational tasks in financial advice to make it more affordable, says Lawler, and so more people can choose to seek advice as an option.

“However, we also believe that the majority of people will always want to deal with another person when the emotive issues of money and financial futures and goal setting are on the table. This is why we believe facilitated roboadvice is the right mix.”

Woolnough says brokers will always be central to helping people get into their homes or make their next investment: “Indeed, more than 90 per cent of ING DIRECT’s mortgage business comes through brokers and they’re a key part of our future growth plans.”

We’re moving towards omni-channel – one seamless experience for clients regardless of channel, according to Woolnough.

“The third-party channel is becoming more diversified. We know that people are interested in discussing other products with the broker, for example superannuation.

Many brokers are in turn offering a more holistic solution for their clients, across residential, commercial and financial management more broadly,” he says.

He believes that the increased use of technologies brings transparency, simplicity and personalisation to the industry, which is only a good thing for its growth and clients.

Roboadvice can offer brokers a great deal of opportunity if they choose to embrace it, but brokers will always have something automated advice can’t impinge on: the human connection.

“Sometimes things that we think wouldn’t work might well click with younger generations”

GEN X & Y OPT FOR HUMAN CONNECTION Younger generations of Australians appear not to embrace roboadvice as much as expected, as almost 80% revealed they wanted a face-to-face advice relationship in a report by ING DIRECT. “Relationships have always been the cornerstone of successful and sustainable advice partnerships and it’s refreshing to see that the more digitally savvy younger Australians recognise the value of face-to-face financial advice,” Mark Woolnough of ING DIRECT said, commenting on the results.

“Less than 5% of Gen X and Gen Y currently have a financial adviser, but more than half intend to seek advice in the future. The net wealth of Gen X and Gen Y is approximately $1.4trn, and coupled with an intergenerational wealth transfer of $2.4trn occurring during the next three decades, that’s a huge opportunity for advisers.”

Source: ING DIRECT report, The Truth About Gen X and Gen Y

Peter Andronicos, eChoice Buying a house is one of the biggest decisions we make in life, and it doesn’t look like people are ready to go through that journey with only a machine to guide them any time soon.

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BUSINESS STRATEGY

FRANCHISING

IS YOUR BUSINESS READY FOR FRANCHISING? Business strategist and author Stefan Kazakis guides you through using franchising as an expansion strategy and deciding whether it’s suited to your business WHILE FRANCHISING has in recent years slowed down from the rapid rates in the 1990s and early 2000s, franchising is an exciting method to grow your business. But the decision to travel down this route is often more a bright, shiny light-driven campaign than a well thought out plan. And this, in turn, ends in failure.

However, with the right foundation, franchising your business can be a very effective way of expanding your business and growing your brand quickly.

For businesses that are well run, with systems and processes, procedures and rules, franchising will provide benefits and satisfaction for both parties. However, be under no illusion, this is not an easy path to take. Establishing a business model that can be considered for franchising has to be undertaken with education, skill, patience and, not surprisingly, capital.

So how do you know when your business is ready to be considered for franchising? Here are my top seven tips: Proof of concept, establishing a franchise

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system and preparing it for market can take as long as three years. The business needs to be making a healthy predictable profit – this is non-negotiable.

The business is making a positive cash flow without the key/critical staff being present.

Having the right management structure is also non-negotiable.

There needs to be uniqueness, however not extreme uniqueness. The best uniqueness is often found in a customer delight system.

Your business has a predictable operations procedure with good systems and how-to manuals for all tasks, including the testing and measuring for all activities.

Has a defined and proven lead generation system delivering leads within a cost per lead budget.

Has a progressed and defined sales system to ensure a 60% conversion on all leads regardless of the sales skills of the person doing the selling.

Demonstrates a strong culture of open and honest communication.

And I have two bonus tips, which I will explore a little further in the article: you simply must have a defined target market and you must know how many of them there are to serve.

So what should business owners do if they believe their business has what it takes to become a franchise opportunity?

You need to be assertive but fair. You need to be clear on the vision. Who needs to do what by when.

You will continue to work harder with even greater laser focus. You are now accountable to other business owners who are buying into your vision – being a franchisor is not for the faint-hearted.

Strong ownership of the brand and the ability to share it with a new network

of business owners who must and will embrace it as their own. You must be OK with this.

You will be OK to not have all the greatest ideas in your business and, more importantly, you are OK to encourage this.

You will have taken legal advice and have a franchise agreement that has been developed with an authentic reputable franchise development and legal team. It should be noted that, as a minimum, the investment for this is $70,000.

A training arm needs to be developed for all franchisees that comprises internal and external consultants/trainers.

Having a recruiting system for franchisees that is more about deselection than selection. You need a much progressed system and track record for saying thanks but no thanks.

So before anyone invests in your franchise, you need to be absolutely sure that you can define your target market.

You need to be clear about who will buy the product and why. You need to be able to identify them with great clarity. If you are a

ICONNECT: A NEW TYPE OF FRANCHISE iConnect is the branded retail aggregation arm of Connective, which was rolled out earlier this year. For Connective, an established wholesale aggregator, launching iConnect required more than just exporting a proven business model; they had to create one.

The iConnect value proposition is that brokers will receive leads from several digital resources: adverts on established real estate websites, a new educational loan website, a comparison site, a loans.com.au type website and a broker-find site.

In return Connective will take 20% of the broker’s commission, rather than the flat-fee model of their wholesale aggregation offer.

As a wholesale aggregator, one of Connective’s distinguishing traits was the relative ease by which brokers could leave the organisation. Their general manager of strategy, distribution and digital Steven Heavey claims this will be replicated at the retail aggregation level: “We want to provide a fairer agreement to brokers … if you want to revert back to your own brand, or the business becomes more about you than the brand, then we would welcome you back with open arms to the wholesale aggregation. No fees whatsoever will be involved.”

“Establishing a business model that can be considered for franchising has to be undertaken with education, skill, patience and, not surprisingly, capital” bookstore owner and someone is considering a franchised book store, it’s no good you just saying, “You can expect book lovers and students to buy the books. I know there are plenty of them out there, so you’ll be fine.”

There’s no room for vagueness, guessing, crossing fingers or hopeful estimations when it comes to this stuff.

The skills and tools required to create an idea are very different to the skills and tools required to grow market share.

It’s the same for someone who is

considering a coffee shop franchise in the city centre. If the extent of their strategic planning is that lots of people come into the city, lots of people like coffee, so if they open a nice coffee shop in the city they should be fine, then that’s not great market research.

In fact, that isn’t market research, but you’d be surprised how often franchises get started like this. You won’t be surprised to know they don’t last long if they don’t wake up real fast.

Having made the decision that you

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BUSINESS STRATEGY

FRANCHISING TAKING ACTION IN YOUR BROKERAGE

Look at your profit and cash flow in recent years, especially when you and other key staff haven’t been present

Ensure you have the financial resources available to initiative the franchising progress, including legal costs (Kazakis suggest $70,000 as a minimum)

Do research on your target market, along the lines of Kazakis’ six questions

Initiate a discussion with your aggregator, or look for another aggregator who may be more supportive

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are going to franchise your business, your franchisees are going to want to know that this will provide them with a product or service that they think other people or organisations want to buy. But thinking this and knowing how and why it will happen are two very different things. At some point in their busy lives, with all sorts of other options available to them, you want people to look at the product and say, “Yes, this is what I need.”

These people or organisations are referred to as the target market, and you and the franchisee need to know who they are, and

Where do they congregate in their greatest concentration? Where are they being influenced?

What is their desired No.1 big outcome?

What is the problem you solve for them?

When is their highest level of frustration?

When will they say, “I need to buy this”?

One in 10 of your future clients is not ready to buy right now, but is thinking about doing so. When do they say, “Now is the time”?

“The skills and tools required to create an idea are very different to the skills and tools required to grow market share” how you are going to grow and service them.

Why is this so important? Because if someone is investing in a franchise, they have to be focusing on how they can serve your target market; they cannot be everything to everyone or they will actually be no good to anybody. It’s important to know who the target market are and how to attract and farm for new opportunities.

So, who are they?

So now that you know why it’s so important to find out who your target market is, let’s have a look at how you go about doing it.

There are six questions you must be able to answer about your target market. If you can’t answer all of these questions, you won’t be able to meet the needs of your target market and therefore will not be able to share this information with the franchisee.

These six questions are: Who is the person or organisation you wish to serve? You need to be able to define them in detail. For example, parents is not a well-defined target market. What age are they? How many kids do they have?

Where do they live? How much money do they earn? Are they married? Are they single? Defining parents as a target market is just the beginning.

Why will they choose you? Why will they discriminate in your favour and open their wallets for you? This is one of the hardest questions to answer. Whatever your product or service, your potential A-clients have other options available to them. Your challenge is to ensure you make it easy for them to buy from you.

How do you expect them to do business with you? How do you expect them to communicate with you, contact you, and correspond with you? How can they let you know they are interested in your services? Will this be online, face to face, over the phone, or a combination? In our modern, highly connected world, it’s more important than ever to make it easy for people to interact with you and buy from you. There are always other businesses they can buy from if you make life hard.

How can you let them know about you and your service or product?

The more you understand the who, where, what, when, why and how of your target market the better you’ll be able to shape your franchise. Remember, you need to create your own uniqueness that will define your franchise, customer delight is of paramount importance.

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Once you have the clarity of who your target market are, you then need to understand how many of your target market are out there waiting to hear about your products and services.

To establish the size of your target market, you now need to define how you plan to carve up areas for franchising opportunities. What areas are you going to target? This can range from local to global and anything in-between.

For example, a fruit shop can be highly successful just focusing on people in the target market in surrounding suburbs, but this is not likely to work for a carpet cleaner.

People buy fruit weekly but only have their carpets cleaned occasionally, so the carpet cleaner would need to focus on an entire city to have a large enough target market. An accounting firm with 20 staff might service the whole of Victoria, and a firm with 250 staff might work the whole of Australia.

It’s about focusing on a market that is appropriate to the scale of your business – there’s no right or wrong answer. For some it’s the eastern suburbs, for some it’s Melbourne or Perth or Adelaide, or a particular rural region. For some it’s the whole of Australia and for some the opportunities can be in various countries overseas. And it might change over time as you grow. I started off targeting Australia and now I operate globally. This is fine as long as it’s part of your strategic growth plan and not random, disorganised expansion just for the sake of it.

It is up to you, before you start to consider franchising your business it is important to understand three crucial things about your target market: How big is it?

What market share do you currently have?

What market share would you like to have and in what time frame?

Most franchising plans fail because business owners miss these two important steps. They simply have a gut feeling or experience in the industry or just wild dreams that tell them willing customers are out there. But to succeed and grow you

need to be proactive, certain and precise.

You need to get the numbers to make good decisions in your business. And let me make

“You need to get the numbers to make good decisions in your business. And let me make something clear for you right here: whatever your type of business, this information is available” something clear for you right here: whatever your type of business, this information is available. You might be able to buy existing market research, and you can certainly do some yourself or pay to have it done. There’s no excuse for not being able to answer these questions. If you can’t, it is not because the information isn’t available; it is because you haven’t done the work required.

This is crucial, factual information that you need to be fully aware of, otherwise you are building your business on the random hope that someone out there at some time might buy from you because you have an awesome product.

So in conclusion, how do you tell when your business is suitable for franchising?

When you know your business inside out!

Your business is ready when you are not motivated about the initial capital investment by a franchisee. Ultimately, you will be ready when you already have enough money in your bank account; you will continue to invest in the training of your franchisees ensuring the reputation of your brand and concept continues to grow relevance against your competition.

And the most important piece of advice I give my clients who ask about franchising is? Are you ready? Keep in mind that even the best laid plans will result in failure if the underlying business model is not ready for franchising. If you are serious, take a step back and ask yourself, “Am I really ready? Am I clear on what I’m prepared to lose?” As the question of gain is aligned with vision.

Stefan Kazakis is a renowned business strategist, sought-after presenter and founder of Business Benchmark Group, which helps clients from a variety of crossroads and industries seize opportunities to achieve ongoing business success and substantial profit growth. Stefan is also the author of From Deadwood to Diamonds.

For more information please visit www. businessbenchmarkgroup.com.au or email info@businessbenchmarkgroup.com.au

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BUSINESS STRATEGY

WOMEN IN SMALL BUSINESS

EXCELLING AS A WOMAN IN BUSINESS Being a woman in business still brings with it a particular set of challenges, but there are easily implemented, practical solutions, writes management specialist Karen Gately

FOR ANYONE, growing and leading a small business can be tough. Maintaining focus on working in the business as well as on it is a challenge faced by most business leaders. In a services industry it can be especially difficult to maintain a high standard of service delivery while also investing the time and energy needed to successfully manage financial, operational and people performance.

For many women the journey of business ownership can be especially difficult to navigate. When working in a traditionally male-dominated industry the path to success can be even more challenging. Juggling the demands of family and work, overcoming prejudice and having the self-belief needed to succeed are among the common challenges female leaders in small business face.

The challenge: work-life balance The demands of any small business can be unpredictable and at times intense. Being available to meet these demands can be difficult with children to raise and care for.

A growing concern for many Australian women in the later stages of their careers is the need to care for ageing parents while at the same time maintaining the focus required to effectively lead their businesses.

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Managing time in and out of the business is another common challenge women face.

For those who choose to have children, taking maternity leave and then returning to work can create their own complexities. When you consider that for some women this means leaving and re-entering their business on numerous occasions, the potential impacts on their ability to succeed become evident.

Strategies Empower the people on your team to assume leadership roles irrespective of the positions they hold. Every member of your team needs to feel responsible for the success of not only their job but also your business. Allow people to play the role they are capable of. Reflect carefully on what you can and should be delegating.

Encourage people to use their best judgment and make decisions in your absence. While of course there will always be things that need to be escalated to you, reflect on the decisions you make each day and look for opportunities to empower others to take ownership of them. The more your team is empowered to do while you are in the office, the more they will feel confident to do when you are not.

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Hire well. Employ people who want to make a positive difference and behave with integrity. Look for those who want to invest their full potential in supporting you to deliver to a high standard, regardless of whether you are at work or not. Finding the right people is key! Reflect on how much time and energy is wasted when we get hiring decisions wrong.

Choose to share the load. Carrying a larger burden of family responsibilities will inevitably undermine your ability to succeed in all areas of your life. Changing this reality begins by first understanding the role you are choosing to play and how your own behaviours influence the extent to which you have the support you need.

Ask for support. Expect other members of your family or household to step up and do their part. Don’t hesitate to put your hand up when the load of responsibility gets too much to carry. While of course it may take time and persistence to shift the motivation and behaviours of some, setting new expectations and enforcing them is essential.

Allow people to help you. It’s common to hear women say they would rather do things themselves because that way they will get them done properly. How often have you heard men complain that they can never seem to meet their partners’ expectations when it comes to packing the dishwasher, organising the kids or doing the laundry? Reflect carefully on the expectations you hold and whether you are allowing people to do more.

The challenge: self-belief and sacrifice Low self-confidence and a tendency towards self-sacrificing behaviour are common traits that hold many women back from pursuing, let alone achieving, their professional aspirations. All too often women choose to forgo opportunities because they feel obligated to put the needs of other people ahead of their own. Women are less likely to ask their family to make sacrifices so that

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BUSINESS STRATEGY

WOMEN IN SMALL BUSINESS “Every member of your team needs to feel responsible for the success of not only their job but also your business”

they can achieve their career goals.

Women often believe they need to be more highly qualified or experienced than they in fact do to embark on a business venture.

Compared to many of their male counterparts, women are more likely to be hesitant to step forward to seize opportunities. Some women even fear being seen to ask for something they haven’t yet earned.

Many women enter the world of business ownership believing they need to act in a certain way to get ahead and survive in a man’s world. Some feel they need to adopt a stereotypical male attitude towards doing business. It’s common to hear people complain about female leaders who are unnecessarily forceful and demanding in their approach to exerting influence.

Strategies Understand you. We all have the power to choose our thoughts, to choose the emotions we invest in and ultimately the ways in which we behave. With greater awareness we are able to make more deliberate choices that allow us to achieve the outcomes we want. Reflect for a moment on the thoughts, emotions and behaviours that enable not only your own success but also that of your team and business. Reflect on those that undermine success. What impact do you have and what do you need to change?

Value you. Understand the qualities and talents you bring. Have self-respect and

give yourself fair credit for the things you achieve and impact you have. Recognise the ways in which you are able to support your clients to achieve their objectives and the value you bring to your team.

Appreciate your own strengths and how these can be leveraged to drive the performance of your organisation. Never be afraid to stand in your spotlight and showcase the talents that will build confidence in your brand and team.

Prioritise you. There is a reason airlines tell you in the case of an emergency to put on your own oxygen mask before assisting others. While as a parent, for example, you may want to first ensure your child’s safety, the reality is that if you are unconscious that’s difficult to achieve.

Putting ourselves first is not about being selfish – it’s about ensuring we have the health, vitality and resources needed to succeed. Having strength, whether that be financial security, family support or emotional resilience, positions us to help other people.

Be you. Choose to be who you truly are.

Strive to be the best possible version of yourself, not an imitation of someone else.

While of course we can always learn from how other leaders approach their roles, have confidence in your own character and capabilities. Understand that it isn’t necessary for women to act like men.

TOP 100 FEMALE BROKERS Twelve female brokers made 2015’s annual Top 100 Brokers list. Here we look at three of them: Deanna Ezzy, Trilogy Investment Property Funding Ezzy has burst on to the investment lending scene, establishing herself as a specialist. She’s taken an imaginative approach to networking in Canberra, joining Canberra Women in Business and even organising ‘trackworking days’ where she invites referral partners to share her passion for motorsports. Read more about Ezzy in MPA 16.3

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Wendy Higgins, Mortgage Choice Glenelg A Top 100 legend, Higgins has clinched the number one spot in the Top 100 Brokers list several times, and her brokerage, Mortgage Choice Glenelg, was 2015’s top franchise brokerage. Her approach focuses on doing what is best for the client, even when that requires giving them the hard truths: “It gets back to not being an order taker, but giving all-round advice.”

Read more about Higgins in MPA 15.3

Bianca Long, Mortgage Choice Glenwood Based in Western Sydney, Long deals with a large number of younger buyers, and having recently bought a property herself she finds she can connect with them, while managing their expectations and, occasionally, their parents’.

She recently opened up a second brokerage in Kellyville.

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What really matters is your ability to be assertive, to act with courage and behave with conviction.

Step forward. Don’t be afraid to ask for the opportunities you want. Have confidence in your readiness to take on a challenge and find the courage to ask for the opportunity. Find strength in your experience; understand all of the qualities that have allowed you to achieve everything you have already. Never allow limiting beliefs to hold you back from choosing to give things a go. As Nelson Mandela famously said, courage isn’t the absence of fear, rather the triumph over it.

The challenge: networking Generating leads and finding new customers are challenges that many women in business find difficult – the reasons for which are reflected in everything we have explored thus far. A lack of time, energy and confidence stand in the way of many women building and leveraging their professional networks to win new business.

It’s not difficult to appreciate how challenging it can be to weave time spent networking into a hectic business and personal schedule. With networking events typically convened outside business hours it can at times be impractical to attend. Many women opt out of events they would benefit from participating in because it’s simply too complex and draining to organise to do otherwise.

Strategies Be targeted. Choose to spend your time at events or in meetings from which you believe you can extract real value. Know who it is you want to meet, what impact you want to have, the messages you want to convey and ultimately the actions you want them to take. While you may not have a certain person or even organisation in mind when attending a function, understand the profile of your ideal client or prospect and how to identify them.

Extract value. Follow-up is key to realising the value of your time and energy spent networking. There is little point in having someone’s business card if you don’t reconnect. It’s naive to think people will remember you months or years down the track when they suddenly have a need for what you do. If you believe someone is a good prospect for a particular reason, validate that fact by taking the time to talk to him or her further.

Recognise your fears. If meeting new people and engaging in meaningful conversations at networking events is confronting, understand the fears standing in your way. Do you fear not being good enough or taken seriously, or not being able to respond to questions intelligently? Do you worry that you will struggle to connect with people and inspire them to listen to what you have to say? Understanding what you are fearful of is an essential first step to moving forward with confidence.

Recognise what you offer. Overcoming fear requires that you recognise contrary evidence. For example, having a clear view of how and why you have been successful in the past will help you to challenge thoughts you are entertaining about likely failure. Knowing you are capable and able to find solutions to challenges that arise, and remembering when you have been able to come back from setbacks and hardship, will allow you to step forward with confidence.

ORGANISATIONS FOR WOMEN IN BROKING MFAA WIMBN The MFAA’s WIMBN (Women in Mortgage Broking Network) was relaunched with a broader mandate covering social responsibility, opportunities for women, lifestyle/ mental health, and diversity and inclusion (hence its acronym SOLD).

WIMBN now addresses both gender and ethnic diversity as well the mental health issues affecting both male and female brokers.

FAST Women in Business FAST’s Women in Business seminars are run across five states and bring together female commercial brokers and guest speakers, explains FAST CEO Brendan Wright, “as part of our commitment to empowering women and to highlight the value of diversity in the industry”. FAST claims to be the only aggregator to have dedicated professional development for female brokers.

There are a range of general business organisations for women, such as Women’s Network Australia, Success Women’s Network, Business Chicks and SheBusiness (to mention just a few of the national organisations).

Karen Gately is a leadership and people-management specialist and a founder of Ryan Gately. Karen works with leaders and HR teams to drive business results through the talent and energy of people. She is the author of The People Manager’s Toolkit: A Practical Guide to Getting the Best from People (Wiley) and The Corporate Dojo: Driving Extraordinary Results Through Spirited People. For more information, visit www.karengately.com.au or contact info@ryangately.com.au.

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BUSINESS STRATEGY

ARTIFICIAL INTELLIGENCE

WHEN ARTIFICIAL INTELLIGENCE MEETS SALES Matthew Michalewicz explains how smart software can help salespeople offer personalised solutions and continue to impress customers with information at their fingertips

BUYING A home in the 1980s was a very different experience to what it is today.

The typical homebuyer would meet with a real estate agent, describe their ideal home, neighbourhood and price range, and then rely on the broker’s knowledge of the local market to match their requirements against a selection of properties. After a number of visits, inspections and possible refinement of the homebuyer’s search criteria, a suitable match might be made, leading to negotiation of the offer price and closing conditions.

Today, the experience is different largely because the typical homebuyer does an inordinate amount of online research before their first meeting with an agent. To narrow the field to a few suburbs and home options, they might check property records and details, local real estate trends, recently sold homes, historical sales transactions, and any other public information they can find. What this means is that the typical homebuyer of today is far more educated and sophisticated than their predecessor of a few decades ago.

Information asymmetry This concept is referred to as ‘information asymmetry’, where one party in a transaction has more or better information than the

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other. And in the 1980s, most salespeople (not just brokers) had more information about the products or services they were selling than their customers did – in effect giving them an information advantage.

That changed with the advent of the Internet in the 1990s, when the information that once resided with the salesperson (and made them an ‘expert’ in their field) was liberated and available for all to look up and consume. As the Internet

the salesperson to the customer in recent times – is manifesting itself across countless industries, and is being compounded by another trend called ‘mass personalisation’.

Better informed and educated, customers are increasingly dictating what they want and demanding a more personalised service when they buy.

They also want to deal with salespeople who educate them and provide contextually relevant information, and to not waste

Today, many customers are better informed than the salespeople they engage with, largely due to the substantial amount of research they do beforehand gained widespread adoption, the information asymmetry between salespeople and their customers began to shrink, then disappeared altogether, before finally moving in the opposite direction.

Today, many customers are better informed than the salespeople they engage with, largely due to the substantial amount of research they do beforehand.

This well-documented phenomenon – of information asymmetry swinging from

time on probing questions that highlight ignorance. This amplifies the pressure on sales and marketing departments, who are finding themselves on the wrong end of these trends and ill-equipped to cope. Unable to reverse the tide, many salespeople are finding their once-lucrative jobs disappearing and being replaced by self-service models, and corporate margins are under siege by wellinformed consumers who shop the market for the best deals.

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Artificial intelligence Where will it all lead? Enter artificial intelligence. Although much has been written about the potential loss of jobs to artificial intelligence software and robots, a far more interesting and immediate application of articifial intelligence revolves around its ability to make certain jobs more productive – in particular, within sales and marketing departments. In fact, the ability of artificial intelligence to quickly shift through very large amounts of data and convert generic information into specific knowledge, is fundamentally changing the face of sales and marketing departments in many industries.

Consider that artificial intelligence can automate the complex analytical and research tasks required to create information

INDUSTRY VIEW: PHIL QUIN-CONROY, EX-CEO, PLAN AUSTRALIA While artificial intelligence might not be part of the broking world any time soon, technological advancements are already supporting brokers in many ways.

PLAN Australia’s broker platform, Podium 2.0, powered by the world’s leading CRM system, Salesforce, has been designed in direct response to the evolving needs and roles of brokers and can raise a broker’s game in the sales and marketing space.

Brokers may need to make contact with a prospective customer as many as five times before they become a client, and it can be difficult to keep track. An automated CRM system like Podium 2.0 keeps brokers up to speed on how often they are communicating with clients and can also remind them of good opportunities to touch base with them. This could include sending them personalised, automated messages such as a ‘thank you’ following settlement, wishing them many happy returns on a birthday, or offering them loan health checks on loan anniversaries.

The platform is also fully compatible with tablets, saving brokers time and allowing them to access customer data more easily while on the move.

At the time of writing Phil Quin-Conroy was CEO of PLAN Australia and a leading commentator on technological innovation in the third party channel.

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BUSINESS STRATEGY

ARTIFICIAL INTELLIGENCE DIGITAL WARRIORS In their 2016 Australian Mortgage Report, Deloitte brought together brokers and lenders to discuss the impact that ‘digital warriors’ would have on broking.

ING DIRECT’s Lisa Claes defines digital warriors as “the 16–34 age group, who like to DIY, [and] may only require validation rather than delegation in their interaction with a broker”. Essentially they are the consumers who are most empowered by changing information symmetry; they can research, learn about and compare financial products before going to a broker; and they are less interested in delegating that research to a broker.

While these consumers could go straight to a bank, they will still look to a broker to validate their research. Claes believes the impact of these consumers will force brokers to move away from a purely delegator model. Deloitte partner James Hickey, who co-authored the report, noted at the launch of the report that “it may be that the broker model evolves to be more of a supplementary model for those types of customers”.

symmetry, and boost the return on sales and marketing initiatives through better allocation of resources and improved (ie personalised) messaging and pricing.

Large productivity gains can be achieved by directing salespeople to the most promising opportunities, arming them with customerspecific research As an example, large productivity gains can be achieved by directing salespeople to the most promising opportunities, arming them with customer-specific research for each visit, and helping them recommend the best combination of products, services and pricing to each customer.

Without enabling technology that can automatically find the data and analyse it, carrying out such tasks on a daily basis would become highly complex and unwieldy, quickly falling into the toohard basket – especially for businesses that employ large sales teams and serve

insights, such as “visit this customer”, “deliver these messages and insights”, and “offer this mix of products at this price”.

By automatically providing such insights to in-field salespeople and telesales operators, productivity and yield increase because they begin targeting better opportunities, with the correct mix of products, at the optimal price point, with the customer in turn receiving a higher-quality engagement and personalised service.

AI in practice Science fiction? It’s already a reality. As one example, Australia’s own Complexica has recently launched an artificial intelligencebased software product called ‘Larry, the Digital Analyst’, which fetches data from the internet and overlays it with existing customer data to build granular ‘customer profiles’. These profiles are then used by ‘Larry’ (think Siri, but for business) to: • find prospective customers that have the same profile as that of highly profitable customers • carry out customer-specific research to prepare salespeople for each individual conversation • provide salespeople with value-adding insights that can be shared with each customer (such as “customers just like yours are doing/buying/selling xyz at the moment” or “this is what’s selling well in your area”)

Customer data can be automatically captured, automatically analysed, and automatically delivered to a salesperson in the form of actionable insights thousands (or hundreds of thousands) of customers.

However, through the use of artificial intelligence the customer data can be automatically captured, automatically analysed, and automatically delivered to a salesperson in the form of actionable

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• personalise the conversation by providing customer-specific offers, bundles and pricing A new field of ‘automated analytics’ is emerging to deliver such advanced functionality, and companies like food

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distribution giant PFD Foods (with $1.6bn in revenue) and Liquor Marketing Group (with more than 1,400 retail outlets) are using it to help their sales and marketing departments generate win-win outcomes for their suppliers and customers.

They are not alone, and represent the future of sales and marketing – a future that requires sophisticated technology to tackle information asymmetry and mass personalisation head-on, and properly analyse the mountains of data created each day to find needle-in-the-haystack insights that salespeople can use with their customers.

Today, a quality product is a given – to stay truly competitive and relevant businesses need to raise their game in sales and marketing, and artificial intelligence

is one of the technologies they are turning to. From banking, insurance and real estate through to manufacturing, wholesaling, and retailing, artificial intelligence is changing the way companies market their products, engage with customers and, ultimately, differentiate themselves in what has become an increasingly commoditised and noisy world.

TAKING ACTION IN YOUR BROKERAGE You may be able to get more out of your CRM software. Contact your aggregator to arrange extra training for your staff.

CoreLogic has a great deal of data about property which can be used to create more personalised offers.

Matthew Michalewicz is CEO of Complexica, a provider of artificial intelligence software that helps large organisations increase revenue, margin and customer engagement through automated analytics. He was named the Pearcey Foundation Entrepreneur of the Year, and made the Business Journal’s ‘40 under 40’ list of accomplished business leaders. Matthew is the author of several books, including Life in Half a Second, Winning Credibility, and Puzzle-Based Learning,

Consider offering a scaled-down service to those ‘digital warriors’ who need you to validate the research they’ve already done.

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

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

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PROFILE

THEO CHAMBERS

THEO CHAMBERS: TALENT INCUBATOR The CEO of leading independent brokerage Shore Financial tells MPA how he’s bringing a new generation of brokers into the distinctive brand

A TECHNOLOGY director at JP Morgan; Vodafone’s lead architect; the director of UBS Wealth Management – Theo Chambers’ testimonials page sounds like the table plan of a dinner party in one of Sydney’s more exclusive suburbs. And that’s not far off the mark.

Shore Financial, which Chambers co-founded with Alex Nochar in 2013, has developed a distinctive white-collar brand to suit its client base in Sydney’s lower North Shore and eastern suburbs. This was a brokerage whose move to a new office was specially covered by the Australian Financial Review.

It’s a brand that’s translated into success: Chambers made 2016’s Top 100 Brokers list, and he wasn’t the only broker from Shore.

Furthermore, the brokerage was a finalist for Independent Brokerage of the Year (≥6 staff) at the Australian Mortgage Awards. Most impressively, Shore Financial is producing a new generation of talented brokers, many of them new to industry, with two finalists in the AMA Independent Young Gun category, as well as MPA Young Guns over consecutive years.

Shore’s DNA can be traced back to the careers of its founders. Chambers entered finance through retail banking at Commonwealth Bank. He trained as a lender within the bank, but “never really was able to sink my teeth into it”, being posted to a small branch in the quiet Sydney suburb of Lindfield.

Chambers first encountered broking as a customer. “Ironically, I was buying my first property at the time, and despite being at CBA I got my mortgage through a broker,” he says.

“He got me a better rate and then offered me a job at the end of it.”

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because we’re a white-collar brand with whiteThat broker worked at Oxygen Home collar staff,” says Chambers, “but those things Loans, a large brokerage that works with are easier said than done.” A common problem McGrath Estate Agents. Oxygen is also where in negotiating arrangements with real estate Chambers met Nochar, who had a background agents is that they want to in vehicle finance.

CHAMBERS’ own the loan book, whereas Oxygen added a new YOUNG GUNS Shore looks for a profitdimension to their approach sharing arrangement. to lending, Chambers recalls.

Paris Galombik While most top brokerages “That’s where we really got to An MPA 2016 Young Gun, now deal with high net worth understand how a real estate Galombik came to Shore Financial clients, Shore’s white-collar agent operates their business from major accountancy firm Grant brand is more pronounced. and what’s important to them Thornton. She wrote $50m in loans That’s partly by virtue of in terms of integrating into over the 2014/15 financial year, location: Sydney’s northern their business … how to be a and was a finalist for Young Guns and eastern suburbs are home value-add instead of being just of the Year – Independent at the to some of Australia’s highest an additional revenue stream.”

Australian Mortgage Awards. property prices and highest Being a value-add meant earners. However, Shore’s helping agents to find and Harry Favetti white-collar brand is more sell properties, and providing Since arriving at Shore in about what the brokerage an important conduit for 2013 as an assistant, Favetti has offers than being just a open communication between made a name for himself as a method of picking clients, agents and buyers, given broker and was a finalist in two Chambers observes. “We buyers typically trust brokers categories at the 2016 MFAA wouldn’t have a target as more than agents.

Excellence Awards. He was also a such; it’s just anyone with a finalist for Young Gun of the Year – High-end diversification home loan. But our services Independent at the Australian The broker-agent partnerships probably are tailored to Mortgage Awards.

Chambers encountered at more affluent individuals, Oxygen are built into the fabric just because we can offer Thomas Hawley of Shore Financial. Among them more; we can do more Number 26 in this year’s their partners are Sydney for them.”

MPA Top 100, with a residential loan chains Richardson & Wrench Shore’s offering could total of $109,033,000, and and Phillip Pantzer Donnelley, be described as high-end previously an MPA Young Gun, and Victoria-based Fletchers diversifi­cation. As Chambers Hawley’s background was in Real Estate. “Generally we’d explains, “more affluent securities trading. He has since left prefer a white-collar brand individuals can get more out Shore to set up his own brokerage. with white-collar clients of our service, because we

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“Our services probably are tailored to more affluent individuals, just because we can offer them more; we can do more for them�

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PROFILE

THEO CHAMBERS talk about things like tax structures; we’ve got boutique brokerages and larger interstate three chartered accountants in-house”. organisations. The brokerage has had a second This diversified approach was there from office in Melbourne since 2014; in the next the beginning, he adds. “We always wanted 12–24 months Chambers expects to open a new financial planning; we think the two products office in Brisbane. However, the biggest change go hand in hand. We just haven’t been able has taken place in the Sydney office with the to find the right financial planners as easily introduction of a new management structure, as we’ve been able to find the right mortgage including making Chambers CEO and Nochar brokers.” Lending is split 50/50 between managing director. owner-occupied and investment loans, Like most brokerage owners, Chambers although clients usually get a and Nochar were already TRAINING NEW range of loans at the same doing the jobs of CEO and time rather than one after BROKERS AT managing director rolled into SHORE FINANCIAL one. “We recognised each another.

Chambers also believes other’s strengths,” Chambers The biggest change at that Shore’s holistic offering says, “and my strength was I Shore Financial over the beats the services offered by was good at managing people past year has been the private bankers. “It’s never in and driving momentum; I introduction of a tailor-made their interests to give the best was naturally already doing six-month training program for new service or best overall loan the role, but it was just about brokers. As well as doing their service to an individual,” he putting a label on it.” diploma and essential broking says, “because the more they Yet with almost 50 staff, education, the brokerage’s high can rip off someone the more 21 of whom are brokers, profile and 110-seat conference they can personally make … leading Shore has become a centre means that “we can have when we come up against demanding affair. Spending guests come and educate them on them as a competitor, I feel more time working ‘on’ the pros and cons of buying an we can always win that the business has had investment property and the relationship quite easily.” consequences for Chambers’ hurdles they have ... and so on and Another group that results as a broker: his Top so forth”, Chambers explains. benefits from Shore’s 100 volume went down from Shore Financial is one among a educational approach is first $130,570,000 last year – growing number of independent home buyers. As many putting him in 15th place – to brokerages that are investing brokers in affluent areas have $81,000,000 in 2015/16. heavily in training and salaried found, FHB clients often earn Now he only deals with repeat positions in order to hire impressive incomes and have clients and delegates work new-to-industry brokers, including clear credit histories but to his experienced assistant Top 10 Independent Brokerages struggle to get deposits whenever possible.

Alliance Mortgage Solutions, Iconic together. Shore overcomes In addition to Chambers Home Loans and The Australian this obstacle in two ways, and Nochar, the brokerage Lending & Investment Centre.

Chambers explains. “Most has brought on or promoted people end up getting four other staff to work ‘on’ assistance from parents, either getting a the business: a head of marketing, customer guarantor loan or just getting cash for a service representative, operations manager deposit as a gift. That comes back to the and learning and development coordinator. market we work in: most of them come from The latter, Chambers explains, “is a full-time the lower North Shore or the eastern suburbs, resource for training new brokers … she’s and most of their families have got some been an assistant for two years writing big money behind them.” back-office volumes; there’s no one better to teach brokers how to process than her”.

Brokerage to business Creating a full-time role for learning and Shore Financial is now entering what is largely development is a major investment even for uncharted territory: the space between smaller a medium-sized brokerage and, combined

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with a tailor-made training program (see box), underlines Shore’s focus on hiring young talent. Chambers has no problem putting money into training staff. “We’re happy to do that, because we’re good at that to date, and we’ve been doing that for the last few years.” Furthermore, Harry Favetti and Paris Galombik, Shore’s Young Gun finalists at this year’s AMAs, do not come from broking backgrounds; both were approached

by Chambers to do the job.

A finance background is not all-important to succeed at Shore, Chambers explains. “We do like the novices … they’ve got no bad habits that we need to break.” Instead Chambers is after particular personalities.

“What I’m looking for is people with relationship-building skills, someone who can build rapport.”

He’s not against hiring bank retail staff but avoids existing brokers or bank lending staff. While top brokerages tend to take on potential brokers as assistants to current brokers, Shore is moving towards giving the new recruits more responsibility. “We’ll probably feed them with some leads … it’s probably good they do both [selling and processing].”

With a large number of young, ambitious professionals and a high degree of autonomy, the success of Shore’s young recruits is easy to understand. As Chambers sees it, “it’s a fastpaced environment; it’s very competitive amongst each other, and sometimes we just want to outdo each other”.

While Chambers and Nochar still lead the business, Shore’s restructuring has made the brokerage more of an independently functioning organisation, Chambers observes.

“There’s five people working on the business, which is great … we can train and manage people a lot better.” With the training program in place, it’s time to get used to seeing Shore brokers appearing in MPA’s Young Guns report and collecting trophies at the AMAs. Shore will need every one of those brokers in the coming two years, Chambers concludes.

“I think expanding Sydney and Melbourne are the big ones, opening a Brisbane office in the next 12–24 months. There are 136 desks we have in the Sydney office that we need to fill!”

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PEOPLE

CAREER PATH

THROUGH THICK AND THIN Over 36 years in finance, YBR CEO of lending Tim Brown has built the third channel from both sides of the fence, heading up banks, brokerages and the MFAA

Brown entered the finance industry as a teller at the Bank of New South Wales, Australia’s first bank, which merged with the Commercial Bank of Australia in 1982 to become Westpac.

1980

BANK OF NEW SOUTH WALES

1996

AUSSIE HOME LOANS

The Aussie that Brown moved to was quite a different place in 1996: not yet a broker and still offering its own product through Macquarie.

Even remuneration was significantly different.

“When Aussie mobile lenders used to work for us, there was no trail: if they brought in a deal they’d get $300 up front.”

2003

LJ HOOKER HOME LOANS

Suncorp owned LJ Hooker, but it took a long time for LJ Hooker to set up a broking arm, Brown explains. “They sat on it for quite a few years before they realised that people who buy houses might buy finance.” However, the struggling new business was quickly ditched by the bank, which offered Brown the master franchisee position. Brown says it was “an opportunity for me to run my own business, which I’d always wanted to do.” In 2005 LJ Hooker bought back the business.

“In the early days I was basically operating out of the basement of my house, running a national business” 2011

VOW FINANCIAL Post-NCCP aggregation was changing. Higher compliance and technology costs meant that “it was becoming apparent that tier two aggregators wouldn’t be able to survive in this new world”. Macquarie took the opportunity to merge three aggregation businesses into Vow, with Brown joining as CEO a year in. YBR bought Vow in 2014 and Brown became CEO of lending in 2016. In November it was announced that Brown would leave YBR and Vow at the end of this year.

“I think tier two [aggregators] will always struggle if they don’t have a good strategy or business plan or reasonable scale.”

1983 AVCO

Avco Financial Services was one of many smaller firms emerging as the financial sector began to deregulate, Brown recalls. “In those days consumer finance companies were like Aussie or YBR or RAMS; on every street corner there was a consumer finance company.” It offered second mortgages, personal loans and renovation loans, among other services.

1999

SUNCORP BANK Brown was brought in by Suncorp to establish an intermediaries business.

With trail commission coming into the broker channel, the bank wanted a more formal relationship with brokers, Brown says. “They had branches dealing with referrers and paying out a fee, but they really didn’t have a centralised third party area.”

2005

MACQUARIE BANK Going back into banking, Brown headed up sales and distribution for mortgages as Macquarie attempted to move from funding mortgage managers to selling its own branded trust. Then the GFC hit, ushering in, as Brown puts it, “a more unfortunate time to be at Macquarie!” As it was entirely reliant on securitisation markets, which closed, the bank had to simply cease lending for two years. “They always intended to return to the market, Their intent was to maintain those relationships until the point came, because they knew the GFC wouldn’t last forever.”

2013 MFAA

Brown was president of the MFAA between 2013 and 2015, taking the role after first being involved through their aggregator committee. “I took the attitude at the time that you can sit on the sidelines and throw rocks, or you can make changes … I felt very strongly about where the association was going and where it needed to go.” www.mpamagazine.com.au

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PEOPLE

OTHER LIFE

QUEEN, COUNTRY AND BROKING Finance Ferret broker Jai Martinkovits is also a dedicated political activist and writer, campaigning for political accountability and the monarchy GRUMBLING ABOUT politics is easy, but making a difference is hard; harder still if you’re running a small business at the same time. Yet that hasn’t stopped Finance Ferret managing director Jai Martinkovits from taking a stand as a political writer and executive director of Australians for Constitutional Monarchy (ACM), a post previously held by ex-prime minister Tony Abbott.

When he started his career, Martinkovits had “zero political interest” but got involved in the ACM after dating the secretary of the organisation and attending some events.

“I thought it was a pretty important and fundamental issue that I wanted to spread awareness of amongst young people.”

Martinkovits is also a political voice in his own right, with published pieces in the Daily Telegraph, and he is the co-author of Give Us Back Our Country (2013), a call for

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more political accountability from the two major parties. “I like to hope that I have a voice in the sense that I contribute to the marketplace of ideas,” he explains. “One day I may pursue that, but I think you can have a lot of influence from outside.”

Balancing broking and activism is a challenge, Martinkovits admits, but one that can’t be avoided. “Once you get involved in politics it gets into your blood and never really gets out!”

He believes that brokers looking to make a difference should find an issue they care passionately about, rather than a political party. “There are a lot of groups which centre around issues, and that’s probably the best place to get started.” And while activism isn’t for everybody, he concludes, “everybody has a responsibility to be informed about political issues, if for no other reason than we have a mandatory vote in Australia”.

Jai Martinkovits (right) with ex-prime minister Tony Abbott and fellow Finance Ferret broker Joshua Geurts (left) at a lunch hosted by Martinkovits, at which Abbott was guest speaker

Get political Members of the public can write to government committees, as well as their local MP and senator. You can also watch many committee meetings and Parliament itself live on the Parliament website at www.aph.gov.au.

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