Mortgage Professional Australia issue 18.12 by Key Media

MPAMAGAZINE.COM.AU ISSUE 18.12

A NEW ERA OF LENDING

Non-bank lenders on the opportunities emerging from change SAM BOER On leaving CBA to start a new chapter at Smartline

00_OFC_SUBBED.indd 2

COMMERCIAL DIVERSIFICATION Safeguard your business from future headwinds

ROYAL COMMISSION Banks, broking franchises bare all in misconduct documents

19/11/2018 1:38:23 PM

01-IFC_Contents_SUBBED_Pic missing.indd 1

19/11/2018 3:07:31 PM

DECEMBER 2018

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 02 Editor's letter

The year ends where it began: with all the talk about remuneration and misconduct

04 Statistics

Why small business owners are mentally and emotionally exhausted

06 Head to head FEATURES

COMMERCIAL DIVERSIFICATION Why embark on a new business strategy now, and what’s it worth to your organisation?

SPECIAL REPORT

NON-BANKS ROUNDTABLE

Eight non-bank leaders discuss the implications of the royal commission, broker remuneration, and supporting underserved borrowers in a tighter credit environment

What brokers have learned from being challenged to improve

08 News analysis

New documents from royal commission delve into banks’ and brokers’misconduct

10 Opinion

How to make providing customer feedback worth customers' time

FEATURES 36 The MPA trophy winners

Recapping our surveys, listings and events

44 Business insurance

Protecting a business for future growth

48 Teamwork

THE BIG INTERVIEW

SAM BOER

The new Smartline CEO reflects on his tenure at CBA and his vision for the future of broking

FEATURES

WHITE LABEL LOANS

The offering that’s soaring in popularity – and that will be here for the long haul

Build a better team and say goodbye to workplace dysfunction

PEOPLE 52 Brokerage insight

Nancy Youssef finds a higher purpose

54 Career path

Mary Ploughman on leading two brands forward under a unified banner

56 Other life

A broker takes fitness to the extreme

FEATURES

YEAR IN REVIEW

Connective’s Mark Haron reflects on the industry’s biggest takeaways from the past year

MPAMAGAZINE.COM.AU NOW ONLINE: Our daily newsletter. Keep on top of property market trends, business strategy, and what industry leaders have to say.

www.mpamagazine.com.au

01-IFC_Contents_SUBBED_FIXED.indd 1

20/11/2018 5:54:26 AM

UPFRONT

EDITOR’S LETTER www.mpamagazine.com.au DECEMBER 2018

Looking back on a tumultuous year

s the year comes to a close, things seem to only be ramping up for the broker market. In November, the royal commission not only released the banks’ and broking groups’ original submissions on misconduct that had occurred in their workplaces over the last decade (see page 8), but it also published numerous groups’ reponses to the interim report. In that collection of documents, the major banks unveiled their thoughts on broker remuneration and the best interests duty. While they were all aligned on implementing the CIF’s ‘facility utilised, net of offset’ reform, their opinions varied on whether a ‘best interests duty’ or something of the like should be applied to brokers. But will these tweaks be enough to satisfy the royal commission? You can read more of our analysis on this at mpamagazine.com.au. It was good timing then for MPA to host its annual Non-Banks Roundtable, giving leaders from that sector a chance to speak their minds on the same topics. Now that we’ve heard what the majors, non-majors and non-banks have to say about remuneration, we might be able to come to some conclusions about what the royal commission might recommend in the end. As we gear up for the holiday parties and a couple weeks of rest, we wanted to reflect on the year that was. On page 42, Connective’s Mark Haron talks about what the broking industry learned after this tumultuous year. We also have an interview

We’ll be back in print in January to tackle the big issues ahead, and to reveal the youngest hotshots in the industry (page 12) with Sam Boer, who took the industry by surprise when he announced that he would be stepping down from CBA to take on a key role at Smartline. And if you’ve been debating whether to add commercial lending to your business, the story on page 28 might convince you that it’s a worthy goal for 2019, if only to insulate your business from the headwinds ahead. Many residential brokers are beginning to adopt this strategy, with MFAA data showing that the number of brokers writing commercial deals more than doubled in the last two years. We’ll be back in print in January to tackle the big issues ahead, and to reveal the youngest hotshots in the industry. In the meantime, stay tuned to our website for daily news analysis and features. Wishing you all the best over the holidays and a happy new year. Otiena Ellwand, editor, MPA

EDITORIAL Editor Otiena Ellwand Journalists Tom Goodwin, Abel Riototar Contributors Rose Bryant-Smith, Simone Poulter, Jason T Smith Production Editor Roslyn Meredith

ART & PRODUCTION Designers Cess Rodriguez, Pia Tandog, Martin Cosme Traffic Coordinator Freya Demegilio

SALES & MARKETING National Sales Manager Claire Tan Marketing Manager Danica Mendoza

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 4792 otiena.ellwand@keymedia.com

SUBSCRIPTION ENQUIRIES

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

ADVERTISING ENQUIRIES claire.tan@keymedia.com

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

Mortgage Professional Australia is part of an international family of B2B publications and websites for the mortgage industry CANADIAN MORTGAGE PROFESSIONAL neil.sharma@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.

www.mpamagazine.com.au

02-03_Editorial_SUBBED.indd 2

19/11/2018 3:10:33 PM

02-03_Editorial_SUBBED.indd 3

19/11/2018 3:11:58 PM

UPFRONT

STATISTICS

Taxed-out SMEs The enormous mental pressures besetting small businesses every day make some owners regret their ventures – and worryingly that feeling is most prevalent among millennials BUSINESS REGRETS

THE BANK of Queensland launched its inaugural Business Balance Report last year to highlight the challenges SME owners confront, particularly in relation to work-life balance and mental health. “As a bank that values our relationships with our customers, we feel it is important to raise awareness of the issues that impact small business owners and support them when times get tough,” BOQ business group executive Brendan White said in the 2018 edition.

57%

of SME owners worry about local and international competition

The latest research found that the significant challenges impacting the mental health of business owners are more evident now than 12 months ago. However, the stigma around seeking help for mental issues is gradually fading. The latest report was published to coincide with World Mental Health Day on 10 October to draw attention to the burdens SMEs face and the importance of looking after one’s mental health. Some of the findings illuminate a dark side to small business ownership.

13%

18%

increase in diagnosis rate for depression, stress and anxiety among SME owners

Almost 17% of small business owners say they now regret starting their enterprises because of the heavy emotional, financial and family burdens they face. And that feeling is particularly prevalent among millennials, with more than half of owners aged 18–29 and close to one third of those aged 30–39 admitting that they wouldn’t have pursued it had they known the toll it would exact. As for what SME owners worry about the most, it’s that work might keep them from enjoying time spent with their loved ones.

17%

of business owners feel isolated from family and friends due to work demands

of SME owners regret starting their business because of the many burdens it has caused Source: BOQ 2018 Business Balance Report, October 2018

MONEY WOES

SLEEPLESS SMES

Managing finance and cash flow remains the most stressful aspect of running a small business, significantly greater than in 2017. Although debt continues to cause worry, more owners feel compelled to find ways to effectively market their business and keep customers satisfied.

A third of small business owners say their enterprise keeps them awake at night. More than one in five say they frequently wake throughout the night. Consequently, more than a quarter of small business owners are constantly fatigued or burnt out.

Year-on-year comparison: SME pressure points 2017

2018

50%

Year-on-year comparison: Top emotional strains

2017

Wondering how I can generate enough funds to keep the business afloat

28% 33%

Managing admin and finances while trying to run a profitable business

25% 31%

The tiredness I feel from running a business

30%

28% 27%

Ensuring I don’t neglect my partner/ family while focusing on the business Having little quality time with my family

Managing finances and cash flow

Managing healthy work-life balance

Marketing my business effectively

Keeping customers/clients satisfied

Being in debt

Uncertainty about my future

Source: BOQ 2018 Business Balance Report, October 2018

Lack of social life due to business demands

2018

21% 24% 17% 23% 22% 22%

Source: BOQ 2018 Business Balance Report, October 2018

www.mpamagazine.com.au

04-05_Statistics_SUBBED_FIXED.indd 4

19/11/2018 9:10:07 AM

HAS SMALL BUSINESS OWNERSHIP IMPACTED YOUR MENTAL WELLBEING?

WHAT DO SME OWNERS WORRY ABOUT THE MOST? Cumulatively, time spent on these fears per year equates to the following days out of business

working days

66%

65%

worrying about not being around for loved ones

56%

63%

working days worrying about the threat of local and/or global competition

working days

worrying about missing after-work activities

47%

67%

working days

worrying about being a good boss

worrying about missing lifeâ€™s everyday small moments

69%

Food and beverage (66%)

Trade services (47%)

Wholesale (63%)

Professional services (56%)

Healthcare (67%)

Technology and web (65%)

Retail (69%)

Source: BOQ 2018 Business Balance Report, October 2018

WOMEN NEED A HOLIDAY

WANTED: BUSINESS MENTOR

A greater number of female small business owners than male said running a business had kept them from ticking off common milestones such as taking a holiday, getting married and starting a family, and buying a home.

Compared to last year, demand for support on a peer-to-peer level and from business mentors went up. This reflects the tangible support services SME owners are calling for that would help improve the success of their businesses.

What has your SME stopped you from doing?

Support needed to improve business health Business mentor

Taking a holiday

50% 45%

Attending a major family event

33%

Renovating my house

35%

Marketing/social media

10% 32%

34%

Tech support Access to a psychologist/counsellor

19%

27% Getting a health check

27%

Buying a home

24%

25% 21% Source: BOQ 2018 Business Balance Report, October 2018

Legal counsel

28%

HR recruitment Source: BOQ 2018 Business Balance Report, October 2018

www.mpamagazine.com.au

04-05_Statistics_SUBBED_FIXED.indd 5

19/11/2018 9:10:17 AM

UPFRONT

HEAD TO HEAD

What have been your biggest learnings this year? The challenges raised by the royal commission and lending policy changes have taught brokers to adapt and innovate

James Hasselle

Sharon Lee

Director Mortgage Choice

Personal mortgage adviser Smartline

“During what should be noted as the most turbulent and uncertain year for our industry in its entire existence, one learning that came out of it and will always ring true is: whoever the customer chooses will eventually win. “The broker market share has grown more than at any other time in our history. More people came to us for help with one of the most important decisions of their lives. The royal commission and regulatory changes have made the whole loan process more complicated for the general public. We’re not talking about privileged, private bank-assisted barristers; we’re talking about moms and dads who want to own their home. Change creates opportunities for us all.”

“We have learned to be resilient and to accept that many of the changes to how we work are outside of our control. Clients are quite nervous now and often they feel judged by the extra layer of scrutiny they are subjected to. We have become educators who are helping them understand how their financial behaviour impacts their borrowing capacity. We have to accept that it now takes a medium-term approach to get customers to become ‘credit ready’. “We are also returning to first principles: staying close to our customers and remaining positive, which I believe are key drivers for continued growth amidst a tough regulatory environment and slowing property market.”

Rooma Nanda Director All R Loans

“The past year has reinforced the belief I’ve long held: if you continue to do what you have been doing, you will continue to get the results you have been getting. My organisation has grown and matured over the years, but we will adapt to newer ways of doing business and infuse more technology into our service model. “The lending industry is being transformed with tighter regulation and more funding choices. Our customer demographic is changing as younger generations become more tech-savvy and more inclined to self-service solutions. Our customers seek transparency in lending and quicker decisions on their loans. In order to grow, our processes and thinking need to adapt.”

IS EVEN TIGHTER LENDING ON THE HORIZON? Residential mortgage lending will likely further tighten as a result of the royal commission, according to Moody’s Investors Services. The royal commission’s interim report has scrutinised lenders’ lack of verification of borrowers’ living expenses, and overreliance on the HEM benchmark. The final report is still to come, but with those issues looming over the banks it’s unlikely they’ll ease up on their rigid underwriting standards any time soon. The tightening of credit has already manifested a downside. According to Moody’s, it has contributed to the decline of house prices in Sydney and Melbourne.

www.mpamagazine.com.au

06_Head_to_Head_SUBBED_FIXED.indd 6

19/11/2018 9:40:01 AM

UPFRONT

NEWS ANALYSIS

Confessions of misconduct A trove of documents released by the royal commission reveals new details about the nature, extent and repercussions of banks’ and brokers’ misconduct over the last decade

IT WAS another nightmarish day for the banking and broking sector when the royal commission released a torrent of documents on 7 November detailing hundreds of incidents of misconduct and reprehensible behaviour dating back to 2008. While most of the worst cases had already been heard during the public hearings, this trove of 215 documents unearths some of the smaller deeds of deception and wrongdoing that have so far evaded public scrutiny,

whether it could be attributed to the group’s culture or governance practices. Hayne reprimanded the big four banks in particular for failing to provide sufficient detail, and asked them for comprehensive lists of misconduct from the last five years. During the first round of hearings, he said he understood that things could go wrong for a number of reasons, but “one thing that I may have to look at is what the attitude ... of the industry generally … is to the notion of obedience of the law”.

“One thing that I may have to look at is what the attitude ... of the industry generally … is to the notion of obedience of the law” Kenneth Hayne, royal commission including those involving brokers. Ninety-four financial services entities, including the major and non-major banks as well as broking franchises, provided written submissions in response to a request made by Commissioner Kenneth Hayne last December. He asked them to identify any misconduct that had occurred over the last decade, detailing the nature, extent and effect of it. He also asked them to explain what steps had been taken to deal with it; what was being done to prevent such behaviour from occurring again; and

“There may be a difference between a breakdown in controls and an acknowledgement of breach of law,” he said. Submissions by major mortgage broking franchises – Yellow Brick Road (Vow Financial), Loan Market, AFG, Mortgage Choice and Smartline – delved into cases in which brokers were involved in fraud, document falsification, theft, breaches of the NCCP Act, and even money laundering (although this occurred outside of the franchise). Most of the groups claimed these were

isolated incidents that did not indicate broader systemic or cultural issues within the organisations. They addressed the consequences the brokers had incurred – often termination – and the measures they would put in place to prevent it from occurring again. Aussie Home Loans provided the most extensive list of offences out of all the broking franchise groups by far, detailing 182 incidents of misconduct. Not only were cases of fraud, privacy data breaches, and false and misleading information provided to lenders, but also allegations of abuse, sexual harassment and discriminatory and homophobic remarks directed at customers. In one such case, the customer was paid $10,790 in compensation. There were also regular customer service complaints, such as “customer claims broker was rude; new broker allocated” or “poor communication by broker, unsatisfactory customer experience”.

www.mpamagazine.com.au

08-09_News_Analysis_SUBBED_FIXED.indd 8

19/11/2018 9:49:50 AM

COMPLAINTS RECEIVED BY MFAA IN 2017 v 7.27% Contractual

23.64%

1.82% Unidentified

Misleading conduct

5.45%

27.27%

Misleading advertising

Improper dishonesty

34.55% Fraud

Source: MFAA submission to the royal commission

“In the face of financial success, we grew complacent. We were too slow to identify problems ... and too slow to put things right for our customers” Matt Comyn, CBA Aussie said these were isolated cases of “unacceptable conduct” involving staff and contractors over a period of 10 years. In each instance, it took appropriate and swift disciplinary action, including termination of employment and contractor agreements. “Aussie provided the royal commission a detailed and exhaustive table of incidents as a result of building a culture of actively encouraging and facilitating staff, contractors and customers to speak up and report unacceptable conduct,” the company said in a statement.

“Aussie will continue to actively encourage reporting of unacceptable conduct, to enforce its zero tolerance policy for such conduct and to enhance its systems and process to prevent, detect and deter such conduct.” At CBA’s annual general meeting, which happened to pre-empt the release of the documents on 7 November, CEO Matt Comyn acknowledged that there had been far too many instances when it had let customers down. “In the face of financial success, we grew complacent. We were too slow to identify

problems, too slow to fix underlying issues, and too slow to put things right for our customers,” Comyn said. He also announced the establishment of an external advisory panel.

Putting the misconduct into context These cases of misconduct should be seen in perspective. Over the last 10 years the MFAA has received a total of 1,470 complaints against brokers, with only 154 matters reaching an adverse finding. In 2017, it received just 55 complaints, with fraud and improper/dishonest behaviour being the top two complaints. “The industry-wide remedies which the CIF has recommended will be consumer tested to ensure that they are strengthening consumer outcomes, and the new governance and reporting framework which the CIF is developing will ensure that any future practices which lead to poor customer outcomes are identified and addressed,” the MFAA said.

www.mpamagazine.com.au

08-09_News_Analysis_SUBBED_FIXED.indd 9

19/11/2018 9:49:59 AM

UPFRONT

OPINION

GOT AN OPINION THAT COUNTS? Email otiena.ellwand@keymedia.com

Asking for the truth When requesting customer feedback, the broking industry needs to make it worth the customer’s time, writes Simone Poulter BROKING INDUSTRY stakeholders will soon make decisions on your behalf to help mitigate the impacts of the royal commission. One of these decisions relates to the collection of post-settlement customer feedback. As these are your customers, I think you should be part of the conversation – or at the very least understand the solutions available. However, there’s one problem: customers are suffering from survey fatigue. We’re approached too regularly by businesses that we don’t have a relationship with, or care to have one with. Feedback is valuable for every business, and I’ve seen how it can positively impact retention and referrals. But for its collection to be effective, we need to ask the right questions at the right time in the right format. We need to demonstrate to the customer that their feedback will be listened to and respected, and it will create improvements. Here are two examples highlighting the core principles for collecting customer feedback. When I went overseas I relied heavily on TripAdvisor. I wanted to find hotels that were rated highly for cleanliness and proximity to attractions. Upon checkout, a few of the hotels requested that I rate them on TripAdvisor. I had the best intentions of doing so, but it would have required me to find an internet cafe, log in, then spend another five minutes crafting a review. Needless to say, I didn’t get around to it – I was on holiday. On the flip side, I recently received a package from an online store. Shortly after, I got an email from Australia Post asking about my experience. The request didn’t make sense – my purchasing decision lay with the retailer. While I was the recipient, I wasn’t their

customer; the online store was. Delivery decisions weren’t up to me. Here’s what the broking industry needs to consider going forward.

Know your audience As a customer, I want the time I invest in providing feedback to improve my future

Make it fast If you’re going to the effort of asking, you want your response rates to be as high as possible. That means you’ve got less than five minutes – anything longer and customers get distracted, or start to question the value of the task. Ask simple questions, make it multiple choice or a score, and make the feedback form mobile-responsive.

Make it useful How are you going to use the data you collect? Is it to tick an operational box, or reassure prospective customers, or improve performance? The metrics you focus on matter. A simple five-star rating may be fine when selecting a restaurant, but as per my TripAdvisor experience, I needed more information when choosing a hotel. In your industry, a prospect is seeking someone they can trust. They’ll want to understand what customer experience you can deliver.

We need to demonstrate to the customer that their feedback will be listened to and respected, and it will create improvements experience. If our relationship is purely transactional and I don’t expect to deal with you again (overseas hotel), or it’s a necessity rather than a choice (Australia Post), then the likelihood of me investing time in providing feedback is slim to none. However, if I seek an ongoing relationship, then I expect to be asked questions that will improve it in the future. What worked/didn’t work? Are my expectations being met? Do I trust you? Am I satisfied? Did you communicate effectively? Did I feel valued?

Make it easy In the case of TripAdvisor, I did intend to leave feedback, but it was just too timeconsuming to do while travelling, particularly as the effort was all mine. On the other hand, Australia Post’s online survey would have been easy to complete, but it was coming from the wrong source. The online store should have been the one asking me (it didn’t).

Don’t apply pressure Asking for feedback on the spot is a no-no. Generally, as humans, we avoid confrontation and try not to cause offence. Putting customers on the spot is likely to skew your results; great for your ego but not for authenticity. It doesn’t give the customer an opportunity to reflect on their experience, and defeats the point of collecting feedback in the first place. Customer feedback is like a mirror for a business, and there are numerous reasons for collecting it. If a post-settlement customer feedback strategy is deployed, the industry needs to consider what metrics will best achieve its objectives and that of its customers. Simone Poulter is co-founder of MyNextAdvice and has more than 17 years’ experience in brand communications, business development, traditional marketing and sales. For more information, visit www.mynextadvice.com.au.

www.mpamagazine.com.au

10-11_Opinion_SUBBED.indd 10

19/11/2018 9:53:28 AM

10-11_Opinion_SUBBED.indd 11

19/11/2018 10:20:36 AM

PEOPLE

BIG INTERVIEW

SAM BOER: SWITCHING SIDES After four years as GM of third party banking at CBA, Sam Boer has become one of the most recognisable names in broking. Now he’s shed that title and switched sides. The new Smartline CEO reflects on the past and his vision for the future

AFTER MORE than 30 years in banking, including a four-year stint as the head of broker distribution at CBA, Sam Boer decided he’d had enough. “I was ready for a change, a career refocus,” he tells MPA. When the opportunity came up to join Smartline as CEO, Boer “grabbed it with both hands”. “I think I’ve got a lot to offer on this side of the fence to support the industry through this chapter,” he says. “I’m excited about being able to work with a team of people who are genuinely passionate about growing this business and delivering on the standards that we’ve set ourselves.”

requiring a certain level of education and face-to-face experience of writing residential loans. CBA has made a number of other changes as well, including a restructuring of its volume-based service model for brokers, reducing it to just two tiers; eliminating its SMSF and reverse mortgage products; and continuing to focus on its proprietary lending

The past informs the present It may be a challenging time to be the head of a leading franchise group, but it’s probably not going to be as stressful as being a top manager in the biggest bank’s home loans department. CBA hasn’t always seen eye to eye with brokers this past year, particularly when it introduced stricter accreditation standards

channel, which accounted for 63% of its home loan flows in 2H18. Boer reflected on the new accreditation requirements at an MPA roundtable in February, where he acknowledged that he knew he hadn’t been popular among brokers for taking that position. During our recent interview in October, Boer said he wouldn’t call the bank’s changes

controversial, nor did they play any part in his decision to resign. “The strategy that the CBA is putting forward is absolutely the right strategy,” he says. “You can question some of the executional processes, and maybe they can be done a little bit better, but fundamentally, supporting and raising professional standards is the right thing to be doing.”

“I think I’ve got a lot to offer on this side of the fence to support the industry through this chapter” “The feedback I had from the industry was [that CBA had] been applauded and supported by the associations and the aggregators themselves. And I think in time the other lenders will follow suit. In fact, we’ve already started to see that.” After navigating bank bureaucracy at CBA and ANZ for three decades, Boer has a deep understanding of how decisions are made

www.mpamagazine.com.au

12-15_Big_Interview_SUBBED.indd 12

19/11/2018 3:13:51 PM

PROFILE Name: Sam Boer Company: CEO Title: Smartline Years in the industry: 30 Career highlight: “CBA’s home loan flow through the broker channel when I first joined 14 years ago was quite low, so hitting 50% of the total flow through brokers in a six-month period was certainly a highlight. I don’t think anyone in the organisation thought that we’d be able to do that.” Career lowlight: “How long have we got? How many mistakes have I made? I’ve had a lot of lessons over the years. I think the thing that probably I’ve learned the most is never judge people too quickly. Always seek to understand first. … Everyone’s got something to offer. “Over the last five years, what I’ve also learned is you should never be complacent and rest on your laurels.”

www.mpamagazine.com.au

12-15_Big_Interview_SUBBED.indd 13

19/11/2018 3:14:06 PM

PEOPLE

BIG INTERVIEW

and executed in those environments. In today’s climate, having any insight into how things work inside the bank is a huge advantage. Since joining Smartline in August, Boer’s spent the last few months getting to know the team, listening to franchisees, and learning the company’s processes and systems. “It’s been a steep learning curve,” he says. “It’s a smaller business, so the infrastructure, support and how we get things done is different.” Now he says he’s finally getting to the point where he can ask, “What does the future look like and what are the changes that we need to make to get the most out of the opportunities that present themselves in this very difficult environment?” What Boer says brokers want to know is how the franchise is going to make their jobs easier and provide them with more support, especially as lending conditions tighten and compliance increases.

KEY FACTS AND FIGURES

Smartline brokers settle

>$6bn

in loans annually

Total loan book

$25bn

More than

300

franchisees

and reporting and analytics capabilities to aid Smartline brokers. The real estate listing giant acquired an 80.3% stake in Smartline in June 2017, complementing its own distribution through realestate.com.au Home Loans. At the time, the group said the acquisition would give it greater scale and capability for the long term. With 17 million hits per month on its property searches, Boer says there’s a huge opportunity to connect the online consumer

“My greatest personal fear is that we end up in a world where changes are being recommended and the proposed solution is far more severe than the reality and the truth of what’s actually happening” “Smartline has a fantastic track record in this area. [But] we need to do more than we have to ensure that we stay ahead of that curve, because the expectations are increasing every day. We’re very much focused on investing in that area,” he says. Some of his other priorities include helping franchisees remain and become more productive; preserving the teamwork and family-oriented Smartline culture “because it’s a core competitive advantage”; and utilising REA Group’s digital, recruitment,

experience with the homebuying process. “The question is: will there be integration with REA and Smartline? At some point in time,” he says. “I’m looking to leverage more of the support behind the scenes – the best of REA to help enhance the Smartline proposition.” While one of those future outcomes presumably could be leads for brokers, Boer is not convinced that they are the panacea. “It’s really about having an efficient business practice, efficient processes and the right

No lender holds equity in Smartline

REA Group acquired

80.3%

of Smartline in 2017

support and risk management behind the scenes to ensure we’re delivering on all those expectations. That’s why the investment in the systems and the platform is so critical.” Setting up for the future Boer says in his experience at CBA he never saw any evidence to suggest there was a systemic problem with broker-submitted loan applications, or that a huge shift or change in the industry structure was needed. “My greatest personal fear is that we end up in a world where changes are being recommended and the proposed solution is far more severe than the reality and the truth of what’s actually happening,” he says. While he realises that there are still areas for improvement in the mortgage industry – and the emphasis on continuing to boost professionalism and good consumer outcomes is welcome – he’s concerned that whatever is recommended could go too far. “At the end of the day, the industry has certainly moved a long way from where it was,” he says, pointing to the high levels of customer advocacy and usage of the channel as proof. Boer believes the Combined Industry Forum and the process of self-regulation is the best way to navigate the changes ahead. “That’s the right solution to address the issues that are being called out. To do anything more would be potentially disastrous for the industry, and I don’t think that’s in Australia’s interests.”

www.mpamagazine.com.au

12-15_Big_Interview_SUBBED.indd 14

19/11/2018 3:14:14 PM

12-15_Big_Interview_SUBBED.indd 15

19/11/2018 3:15:36 PM

SPECIAL REPORT

NON-BANKS ROUNDTABLE 2018

2018

NON-BANKS ROUNDTABLE Eight leading non-bank lenders discuss the implications of the royal commission, broker remuneration, and supporting underserved borrowers as the credit environment continues to tighten

www.mpamagazine.com.au

16-27 Non-Bank Panel_SUBBED_FIXED.indd 16

19/11/2018 4:34:00 PM

CONFUSION and complexity have defined this year’s lending environment for both brokers and borrowers. With added compliance pressures and a contraction in credit, brokers have had to lift their game, explore new opportunities and seek solutions elsewhere. These headwinds have motivated them to begin adapting and evolving – actions that will strengthen their businesses to withstand future challenges. And maybe it was time for this awakening. In the last year, the industry has made significant changes, such as moving away from bonus commissions, bonus payments and soft-dollar benefits; and changing the standard commission model. By the end of 2018, there should be clearer disclosure of ownership structures in place, and a new reporting regime. Amid all these changes, the lending landscape has shifted. Brokers are sending

more business to the non-banks, and the segment is now absorbing 8% of total broker loan flows, the highest market share recorded by the MFAA’s Industry Intelligence Service. Nevertheless, the MFAA’s latest research, covering the period from October 2017 to March 2018, also shows that the value of new business to non-banks has declined by 8.5% since the prior period, highlighting the effects of a cooling property market, the royal commission, regulatory changes and other factors. What this data demonstrates is that the non-banks are becoming more influential and relevant to brokers and their customers. At MPA’s last roundtable of the year on 26 October – when a record number of brokers tuned in – the non-banks discussed the implications of the royal commission interim report, as well as broker commissions, the tightening credit environment and how the lending sector as a whole should restore

its reputation and trust in the community. The non-banks were eager to make it clear that while they had seen an uptick in loan volumes and were taking on borrowers who had been turned down by the banks, they were not doing anything ‘shadowy’ in the process. They insisted that they were just as stringent with their credit policies and underwriting standards, but more flexible and personalised in their approach. The new reality is that brokers and borrowers will likely be dealing with nonbanks a lot more often, so over the following pages we aim to familiarise readers with where they stand, what they think, how they operate and what they offer. Many thanks to the non-bank lenders who were involved: Better Mortgage Management, Bluestone, Firstmac, Homeloans, La Trobe Financial, Liberty, Mortgage Ezy and Pepper Money.

www.mpamagazine.com.au

16-27 Non-Bank Panel_SUBBED_FIXED.indd 17

19/11/2018 4:34:33 PM

SPECIAL REPORT

NON-BANKS ROUNDTABLE 2018

THE PANELLISTS

NON-BANKS’ RELIANCE ON BROKERS Proportion of loans originated through brokers in 2015, by type of lender

Non-bank lender

Foreign bank

Cory Bannister Vice president and chief lending officer, La Trobe Financial

Daniel Carde General manager, third party distribution, Homeloans

Other bank

Major bank: subdivision Major bank

Customer-owned banking institution

Royden D’Vaz Head of sales and marketing, Bluestone

Murray Cowan Managing director, Better Mortgage Management

By value of loans

20%

60%

80%

100%

By number of loans Source: Productivity Commission analysis of ASIC data

Commissions

40%

Joanna James General manager, Mortgage Ezy

Aaron Milburn Director of sales and distribution, Pepper Money

John Mohnacheff Group sales manager, Liberty

Jake Sanders Head of third party sales, Firstmac

In the royal commission’s interim report, Commissioner Kenneth Hayne did not speak highly of value- and volume-based remuneration for intermediaries. “What is plain ... is that value- and volume-based remuneration for intermediaries in the home loan industry has been an important contributor to misconduct and conduct falling short of community standards and expectations and poor customer outcomes,” he wrote. While no recommendations have been made yet, he did say that in order to get to the bottom of misconduct, one must understand how it may be linked to remuneration. The royal commission compiled research from the Sedgwick review into retail banking remuneration, the ASIC review into mortgage broker remuneration, and submissions from banks, aggregators and broker groups.

It also highlighted case studies from the first round of hearings, in which both Commonwealth Bank and ASIC identified some of the consequences of value-based broker remuneration, including higher leverage, higher incidence of interest-only loans, higher LVRs, and, over time, an increased likelihood of borrowers falling into arrears. The Combined Industry Forum has pledged to make changes to broker remuneration, including paying commissions based on the amount of funds drawn down instead of the total approved facility. Many major lenders have already begun implementing these reforms, with NAB kicking this off in September. Up to print time, none of the non-banks had followed suit, so MPA wanted to find out more about where they stood on the possible changes to broker commissions.

www.mpamagazine.com.au

16-27 Non-Bank Panel_SUBBED_FIXED.indd 18

19/11/2018 4:35:13 PM

entice a less scrupulous broker to encourage a borrower to extend their capacity, maybe under the guise of future renovations or a purchase down the track,” she said. “But the truth of that is that trail commission is a much lower value than upfront commission, and there is a place for trailing commissions so brokers can have the ability to, on an ongoing basis, service their clients.”

Best interests duty The Productivity Commission recommended that the government impose a best interests duty on mortgage brokers, as was done in the financial planning space in 2013. Along these lines, the royal commission expressed concerns that, while a borrower might believe and expect an intermediary to act in their best interests, their statutory duty was only to determine whether a loan was unsuitable. The Combined Industry Forum has decided to meet the Productivity Commission

NON-BANK LENDERS’ GROWING MARKET SHARE AMONG BROKERS 8.0%

$4bn

7.7%

Value of loans settled

Market share 6.9%

$3.5bn $3bn

7.0% 6.0%

5.7%

5.6%

4.9%

$2.5bn

8.0%

7.5%

4.7%

5.0%

4.6%

4.0%

$2bn 3.5%

3.4%

$1.5bn

3.0% 2.4%

$1bn 1,177,763,303

2,170,859,738

2,041,049,275

2,239,710,960

2,241,289,554

2,454,044,879

3,205,637,280

3,624,350,944

3,755,273,228

3,441,007,682

$500m

2.0% 1,471,796,423

Joanna James, general manager of Mortgage Ezy, started off the discussion by pointing out that the mortgage manager had never experienced broker misconduct as a result of commissions. In fact, she refuted the perception that brokers were pushing borrowers to take out larger loans just to generate a few extra dollars. “Brokers are successful business people. They’re looking for referrals from happy clients; they’re looking for clients who will work with them many times, perhaps over many years,” she said. “[Increasing the loan amount] is simply not to the benefit of a professional broker, so from our perspective we have not experienced that.” Royden D’Vaz, head of sales and marketing at Bluestone, agreed. “We are a referral-based industry; without referrals a lot of these brokers wouldn’t have their business. … If they do the wrong thing by their customer, they’re not going to get any referrals whatsoever, so it would be very shortterm thinking.” While it’s difficult to get a sense of what the royal commission might recommend in regard to broker commissions in its final report due out next year, the Productivity Commission sounded a clear alarm about trail. “There is little, if any, evidence to substantiate the claim that trail commissions are a payment for the ongoing provision of services to borrowers. In practice, trail commissions have the effect of aligning the broker’s interests with those of the lender, rather than those of the borrower,” the Productivity Commission wrote in its inquiry report into competition in the Australian financial system.

La Trobe Financial’s vice president and chief lending officer, Cory Bannister, defended the use of trail. “The premise of trailing commission is to preserve that ongoing customer contact as well. I think it would become very transactional without trailing commission. The rolling risk is that you’d see some broker consolidation if broker trail was removed. Broker businesses would probably find it unviable to continue as it would have a direct impact on consumer choice, so you’d channel more business back to the major banks,” Bannister said. Another concern is that, if the royal commission recommended the removal of new and grandfathered trail, it would erode brokers’ trail book value, he said. James added that Mortgage Ezy had seen no evidence to suggest broker misconduct was enhanced by paying trail commissions. “It is the misalignment between upfront payment and a trailer payment that may

883,074,307

The royal commission has said that value- and volume-based remuneration for intermediaries has been a contributor to misconduct. What should be done to tweak commissions in your view, and how are you responding?

JAN FEB MAR 2015

APR MAY JUN 2015

OCT NOV DEC 2015

JAN FEB MAR 2016

APR MAY JUN 2016

JUL AUG SEP 2016

OCT NOV DEC 2016

JAN FEB MAR 2017

APR MAY JUN 2017

JUL AUG SEP 2017

OCT NOV DEC 2017

JAN FEB MAR 2018

1.0% 0.0%

Note: No data was available for July–September 2015 quarter Source: MFAA

www.mpamagazine.com.au

16-27 Non-Bank Panel_SUBBED_FIXED.indd 19

20/11/2018 6:17:49 AM

SPECIAL REPORT

NON-BANKS ROUNDTABLE 2018 somewhere in the middle. In its July progress report, it said it would be expanding its definition of a ‘good consumer outcome’ to incorporate a ‘customer-first duty’, which revolves around putting the customer’s interests first and matching their needs with the right home loan product and lender. The details of that are still being worked out. The royal commission noted in its interim report that it was unclear how a ‘customerfirst duty’ differed from a ‘best interests duty’. “If the two forms of duty are to be given different content, why should the duty a mortgage broker owes to a borrower differ from the duty a financial adviser owes a retail client,” the commission wrote. “Nor is it clear, if the two forms of duty are to be given different content, why the duty a mortgage broker owes to a borrower should differ from the duty a financial adviser owes a retail client.”

Do you think the best interests duty is a fair move, and if the government does adopt it, how will it affect brokers? This conversation around best interests duty came about because brokers’ current legal obligation to make sure a loan was “not unsuitable” was vague, D’Vaz said. But if a best interests duty was adopted, the challenge would be defining it. “When it comes to measuring, will it be about writing the lowest rate? Is that meeting their clients’ needs and objectives? That’s an interesting debate on its own,” D’Vaz said. “It will just be business as usual” for those brokers already doing the right thing, he said. Aaron Milburn, director of sales and distribution at Pepper Money, said brokers shouldn’t be overly concerned because they already acted in the best interests of their customers. The question wasn’t whether brokers acted in the best interests of their customers but how they demonstrated that they did. “At the roadshows we’ve been running for the last five years, we’ve been saying it’s about documenting and making sure you have a process in place to show why you chose that

“The premise of trailing commission is to preserve that ongoing customer contact as well. I think it would become very transactional without trailing commission” Cory Bannister, La Trobe Financial particular solution for your customer,” Milburn said. “It takes a real understanding of the person’s circumstances to ensure that you place them in the right loan in the best interests of them and their family.” Jake Sanders, head of third party sales at Firstmac, agreed that the emphasis should be on formalising brokers’ documentation processes, which could add another layer of compliance. “If it’s handled the right way, I don’t see it being too labour-intensive [compared to] what brokers already do.”

Royal commission The commission’s interim report, which was released on 28 September, focused on the misconduct of the major and non-major banks. The seventh round of public hearings started on 19 November and covered policy

questions arising from the first six rounds. The commission’s final report should offer recommendations to the government on a number of matters affecting the broker channel, including its commission structure. While the non-banks are not part of the commission’s purview, they have been watching from the sidelines in anticipation of the ripple effects.

How will the royal commission affect how non-banks operate, if at all; and what do you think will be the long-term effects of this inquiry on the entire industry? Daniel Carde, general manager of third party distribution at Homeloans, said the non-banks were already conforming to the heightened regulatory environment, just

www.mpamagazine.com.au

16-27 Non-Bank Panel_SUBBED_FIXED.indd 20

19/11/2018 4:36:09 PM

16-27 Non-Bank Panel_SUBBED_FIXED.indd 21

19/11/2018 4:37:38 PM

SPECIAL REPORT

NON-BANKS ROUNDTABLE 2018 like the mainstream banks were doing. “Will we see some change? I think we’ll see some more robustness around the regulators and how they handle any misconduct, but in terms of how the lenders are operating today, I don’t think we’ll see a lot of change. Whatever is implemented will be across the board,” he said. Bannister addressed one of brokers’ major concerns, which is whether the commission will affect the availability of credit. Numerous sources, such as the RBA, Moody’s Investors Service and UBS, have acknowledged that this is a likely outcome. On the frontline brokers are already receiving many clients who used to go directly to the banks but are now being turned away.

only, so I would say you need to have a portion of your book in commercial, SMSF and motor. If you haven’t already done so, now is the time to make sure you have other avenues of revenue in your business,” Bannister said. Sanders noted that having the conversation with a non-bank could be the difference between writing the deal or not. “Go into those client meetings with your eyes wide open, look for opportunities, be more holistic in your approach to how you service your customer,” he said. Murray Cowan, managing director of Better Mortgage Management, said it was worth looking at how New Zealand handled the removal of trail in 2006. “Numbers did drop at the time, but those

“We are all in this together as an industry, and whatever comes out of this royal commission impacts us all” Daniel Carde, Homeloans Assisting this underserved market is where the non-banks come in. “It’s our time to shine,” Bannister said. “UBS made some interesting observations around credit tightening and the potential credit crunch scenario. … If you go down the credit crunch theory, according to UBS, where the banks are conducting very detailed due diligence on the same pieces of information, that [underserved] market opens up to $70bn to $90bn. So for all of us it’s an incredible opportunity, but one that comes with incredible responsibility.” In the meantime, D’Vaz added, “we’ll sit on the sidelines, watch, wait and listen, and we’ll just adapt. We’re an industry that adapts very quickly”. Upon returning to this theme later in the roundtable, MPA asked how brokers should prepare for the future changes that might come out of the royal commission. Diversification was highly recommended. “Some of these issues around trail commissions are likely to impact code-regulated space

that sustained got into selling life insurance or referring life insurance, and they did diversify in that regard and got stronger on the back of that. A lot of New Zealand brokers make similar commissions from life and risk insurance to what they do from mortgages,” he said.

Non-bank turnaround times and SLAs The contracting lending environment has started to take its toll on brokers in the form of lower conversion rates and loan values. A sure sign of that was revealed in AFG’s latest Mortgage Index, which noted that lending volumes for AFG brokers had dropped by about 5% compared to the same quarter last year. The MFAA’s Industry Intelligence Service report found that conversion rates had hit their lowest point in five years, with brokers converting about 72% of loan applications to settlements. Brokers’ loan flows are also shifting, with more of their business going to the nonmajor banks and other lenders. Their market

WHAT HAVE BEEN YOUR BIGGEST LEARNINGS OVER THE PAST YEAR? Jake Sanders, Firstmac “It’s time to evolve; be more to your client.”

Royden D’Vaz, Bluestone “The non-banks have more relevance as the majors are tightening their lending criteria. And the relevance of this group here has become more and more apparent.” Aaron Milburn, Pepper Money “If I was a broker out in the field at the moment, I would feel very proud – proud of the industry and how I help customers to achieve their goals every day. That is a unique opportunity and it’s a privilege to be a part of it.” John Mohnacheff, Liberty “This is the first little bit of headwind that we’ve faced since 2008. That was tricky, but we survived and continued to grow. This is an evolutionary process. If we only get headwinds once every 10 years, God bless Australia is all I can say. We’ve had 27 consecutive years of growth; we haven’t had a recession. So is it a headwind or is it just a little bit of distraction and white noise? Focus on our business. Let’s be the best that we possibly can. Let’s engage with our consumers and I guarantee you we will survive this and come out better and stronger.”

www.mpamagazine.com.au

16-27 Non-Bank Panel_SUBBED_FIXED.indd 22

20/11/2018 6:25:10 AM

www.mpamagazine.com.au

16-27 Non-Bank Panel_SUBBED_FIXED.indd 23

19/11/2018 4:39:19 PM

SPECIAL REPORT

NON-BANKS ROUNDTABLE 2018

share was 32.7% from April to June 2018, up from 21.4% more than four years ago. On the other hand, the major banks recorded their lowest level of broker loan flows, at 45.7%, down from 58.5% in 2018. Compounded, all of this has left a huge gap for the non-banks to fill, and most are seeing an uplift in loan volume. While this is welcome news for the non-banks, it doesn’t always sit well with brokers, who are often on the receiving end of slower turnaround times and reduced service as a result. These non-banks say they’re doing their part to ensure that, as volumes rise, brokers won’t be put out.

With the major banks tightening up on lending and pulling out of certain segments (SMSF, low doc, reverse mortgages), how has this impacted non-banks’ business and how are you maintaining your SLAs? What sort of customers and deals are coming your way now? Mortgage Ezy is mostly a vanilla loan lender, but it is very strong in niches, such as nonresident, alt doc and SMSF, which is where it’s seen the most growth, James said. Despite that, she admitted that the mortgage manager “is not a machine”.

“We don’t credit score. Every application is looked at by a person, so essentially for us it’s about resourcing,” she said. Last year, during the peak of the nonresident changes, Mortgage Ezy received $203m in deals in 10 days of business. “We managed to process that even with changing policies and guidelines. And we still managed to maintain our SLAs. Like brokers are a service business, we are a service

from the back end and the sales side of things. We doubled our sales team to cope with that extra activity. We hyperventilate when it gets over two days.” Similarly, Better Mortgage Management reacted by growing its processing team. But Cowan said there could still be really busy weeks that were difficult for a small lender like itself to manage, something many brokers could surely relate to.

“Go into those client meetings with your eyes wide open, look for opportunities, be more holistic in your approach to how you service your customer” Jake Sanders, Firstmac business,” James said. “We look at clients as individuals, so it’s important that brokers present the actual picture, the story of why the loan is being structured in that way.” According to D’Vaz, Cerberus Capital Management’s investment in Bluestone in March came at the perfect time. “I’d liken it to a perfect storm for us. As the mainstream lenders were tightening up, we geared up from a resource point of view, both

“I think we’ve done reasonably well, but it’s been challenging at times when you throw in illness or an absence,” he said. Cowan said the mortgage manager had seen an increase in alt-doc, SMSF and prime borrowers who had been turned away by the banks. “Some brokers that are quite skilled and know that those customers will get knocked back are coming to us first time around,” he said.

www.mpamagazine.com.au

16-27 Non-Bank Panel_SUBBED_FIXED.indd 24

19/11/2018 4:45:32 PM

16-27 Non-Bank Panel_SUBBED_FIXED.indd 25

19/11/2018 4:42:29 PM

SPECIAL REPORT

NON-BANKS ROUNDTABLE 2018

Similarly, Firstmac has also seen a huge lift in prime business. “The advantage we have is we’re able to take a common-sense approach to our credit, so if it makes sense and we’re able to verify and validate it, then we’re open to using that,” Sanders said. “These are real-life situations. If you get enough documentation and information in order to get yourself comfortable around it and can meet your responsible lending guidelines, I think that’s been our advantage.” Eager to address a common misconception about non-bank lending, Milburn acknowledged that while there was extra volume coming in, that didn’t mean there was any further credit risk. “The credit policies and the ways we underwrite deals have remained the same, so because a bank or a non-major subsidiary of that bank has decided that a customer’s profile is no longer prime to them does not

increase the credit risk of that customer,” he said. “I wouldn’t want anyone watching this to think that volume is going into non-banks and they’re changing credit policy to bring all that in; that’s absolutely not the case. The same strict parameters for credit are still in place today as they have been for the years prior; it’s just the banks and the non-majors see the customer as different to that.” Pepper manually assesses each customer so it can better understand their needs and service them accordingly, Milburn said. “It’s not a straightforward approved, declined, automated system; it is a very personalised system for a very personalised set of circumstances.” When asked whether clients would have to pay more to use the non-banks, the panel vehemently disagreed with that assumption. John Mohnacheff, group sales manager at Liberty, said the non-banks assessed deals

on their case-by-case merits. “We understand risk-based pricing, rate for risk. That’s in our DNA,” he said. “Everything is focused on, ‘Is this the best outcome for the borrower?’ We have reputational risks here. We do not want to be appearing in front of anybody. We want to grow our businesses; we want to grow them sustainably. “When it comes to SLAs, whether it’s 12 hours or 18 hours, does it really matter if we’re diligent with what we’re doing and we’re getting the right outcome for the borrower and the broker?” Mohnacheff said SLAs were a two-way street between lender and broker. Each lender had its own underwriting criteria and preference for how a deal should be submitted. This was up to the lender to communicate to the broking channel, but it was up to the broker to ask questions, get clarification if necessary, and provide all the information up front. “If you package the deal properly and get it to us, I guarantee you it will fly through. But if we’re going backwards and forwards and there are missing pieces of information, that’s where the roadblocks happen,” Mohnacheff said. If something is missing from the lender’s checklist in the application, Carde suggested that brokers add a note explaining why it wasn’t included and what had been provided instead. “There’s no difference between a major bank, a non-major and a non-bank; the lending standards are all the same. … Whether you’re sending a loan to Homeloans, La Trobe or CBA, the bare minimum expectations are not going to change. Sure, there are going to be a few little idiosyncrasies in some of the policies that are required, but the general underlying requirements of the loan don’t change irrespective of where it goes,” Carde said.

Reputation Deloitte’s recently released Banking Trust Index 2018 showed the depth at which the

www.mpamagazine.com.au

16-27 Non-Bank Panel_SUBBED_FIXED.indd 26

19/11/2018 4:44:11 PM

royal commission had affected the banking sector’s reputation. Out of 2,000 customers surveyed, only 21% said they felt banks in general had their best interests at heart, and only 26% thought banks would keep their promises. Fortunately for the sector, when asked those questions in regard to their own banks, the results improved significantly. “Banking customers want banks to demonstrate the right mindset by treating them with respect and integrity. This is most important. Only then will the right price, technology and product become significant,” said the report’s author, Willem Punt.

As a non-bank, how are you dealing with, and setting yourself apart from, the reputational damage that the banking industry as a whole has suffered of late? According to Mohnacheff, the answer is something that every panellist touched on. “Do the right thing by the customer each and every time. Do not deviate. We have got age-old proven processes on how we go about providing loans; be they home loans, car loans or commercial loans, it doesn’t matter,” Mohnacheff said. “The outcome has to be in the absolute best interests of

that individual. If you do the right thing by the customer, very rarely will you get into trouble.” The CIF will continue to play a part in proving to regulators and the public that the industry is serious about lifting standards and improving professionalism. Carde added that it was important to remember that “it’s not an us versus them mentality”. “We’re all in this together,” he said, “so whilst the major banks have had their fair share of publicity, we are all in this together as an industry and whatever comes out of this royal commission impacts us all.”

www.mpamagazine.com.au

16-27 Non-Bank Panel_SUBBED_FIXED.indd 27

19/11/2018 4:44:21 PM

FEATURES

COMMERCIAL DIVERSIFICATION

THE MANIFOLD FUTURE OF FINANCE With the pressure on to increase both revenue streams and sources of income, diversification has pushed itself to the forefront of many brokers’ consciousness. But why embark on a new strategy now, and what’s it worth to your organisation? “SHOULD I DIVERSIFY?” is a question that’s on the lips of nearly every broker around the country at the moment. It’s no surprise either. With numerous housing markets taking a downward turn and the increased scrutiny in the wake of the royal commission, the motivation to look for new business outlets has gone far beyond idle curiosity. The good news is that diversification doesn’t mean abandoning your core knowledge base in favour of totally uncharted territory. For brokers who equip themselves properly, diversification presents an opportunity to bring in new clients and revenue streams, expand their skill sets and protect their businesses from the vagaries of the market. Importantly, it’s also a means of working even more closely with existing clients – and, at a macro scale, contributing to the public restoration of trust in the wider broking industry.

Why diversify now? Though diversification may seem like a daunting task, it’s a project that can yield long-term benefits, potentially increasing revenue streams while also helping to secure the future of an organisation. John Kolyvas, national sales manager,

www.mpamagazine.com.au

28-33 Sector Focus_SUBBED_FIXED.indd 28

19/11/2018 3:02:00 PM

commercial, at ING, sees diversification as an integral part of any business’s risk management strategy. “As far as managing the risk associated with your business goes, I always think it’s a good time to diversify, and it’s probably more important at the moment,” he says. “By having a spread of business across all facets, you are really protecting yourself against volatility in the marketplace.” Long-time brokers are well aware that the residential market is a separate entity to the commercial market, while business lending and SME lending are also markets unto themselves. Accordingly, brokerages that rely solely on one stream of revenue can find themselves facing serious issues, particularly when there is a downturn in their chosen market. Peter Vala, head of sales and distribution at Thinktank, says, “Financial and debt funding markets are forever dynamic, be it from internal or external forces. The best way to manage change is to evolve, develop and fortify your business from current and future headwinds.” There are practical considerations, too. The royal commission is very likely to result in legislative and cultural changes. And while the commission’s final recommendations won’t be known until next year, some educated guesses can be made. “It would be fair to assume that any changes to trail commissions will initially affect credit code-regulated home loans,” says Equity-One managing director Dean Koutsoumidis. “Any broker that has a large majority of their work in residential home loans should see what is happening as an opportunity to diversify into other areas of the market and ensure they have a more balanced book.” Diversifying doesn’t just benefit your business; it’s geared towards providing better service to customers. Fundamentally, broking is a service-based business that is

built on relationships and referrals. While engaging with multiple brokers may be a necessity for some individuals, for most people it seems entirely counterintuitive. Why would a client spend extra time shopping around for multiple brokers when they could simply funnel all their borrowing needs through one outlet? Accordingly, brokers who can diversify into other areas of the market – whether home loans, commercial loans, SMSF loans or even car loans – can add value to the relationship with their existing and new clients. It enhances their own business prospects, while deepening the broker-client relationship in the process. “Clients want to be able to have their needs serviced by one person they can trust,” Koutsoumidis says. “They don’t want to have to visit three different brokers depending on the nature of the loan.

What’s the next step? For brokers considering diversifying, it’s crucial to be equipped with the right tools. Those looking to specialise in commercial lending might wish to think about aligning themselves with complementary partners such as financial planners or accountants who can be a good source of referrals for commercial transactions. “In addition, they should consider promoting themselves to their aggregator BDM/state manager as a broker who specialises in commercial transactions,” says Cory Bannister, vice president and chief lending officer at La Trobe Financial. “Often the brokers who are not experienced with commercial loans will contact their aggregator BDM for assistance or advice, and this can be a good source of referrals.” While the initial investment in diversification doesn’t necessarily need to be a big one, there are a number of steps a broker can take to prepare, and these will vary from business to business. Following are some examples.

LOOKING BEYOND MAINSTREAM PROVIDERS Cory Bannister, vice president and chief lending officer, La Trobe Financial “A top commercial broker is one who understands the specific needs of the borrower both in the immediate and over the longer term, which is often solution-based, not pricedriven,” says Cory Bannister, vice president and chief lending officer at La Trobe Financial. “Top commercial brokers know where to find the best commercial product that will meet the borrower’s needs and requirements and can look outside mainstream providers to do this.”

www.mpamagazine.com.au

28-33 Sector Focus_SUBBED_FIXED.indd 29

19/11/2018 3:02:18 PM

FEATURES

COMMERCIAL DIVERSIFICATION

HELP YOURSELF WHILE HELPING YOUR CUSTOMERS John Kolyvas, national sales manager, commercial, ING “There are a lot of brokers leaving money on the table at the moment by just focusing on one type of loan,” says John Kolyvas, national sales manager, commercial, at ING. “Look at all aspects of what the customer has, and what you, as the broker, can help them with. Banks often talk about a ‘wholeof-wallet’ customer relationship, and I think more brokers need to take that approach.”

Partnering with an industry mentor Drawing on the experience of a mentor who’s experienced in the area you’re looking to break into can be incredibly valuable. Arrangements will vary, of course: some brokers are able to provide their time for free, while in other cases it may mean splitting commission in order to gain learning experience. A short-term sacrifice can pay much longer-term dividends.

Taking on new employees or contractors If you have the resources, taking on new staff – who may already have experience in the field – can be beneficial. When handled correctly, it can also reduce pressure on existing staff.

Attending educational seminars/courses This is a must if you’re looking to move into unfamiliar territory. Even if you don’t plan to directly involve yourself in this new aspect of your business, being better informed is always a good thing – and it can be an important tool for keeping other staff accountable.

Scouting business prospects This is arguably the most important step; after all, many businesses have expanded beyond their traditional territory only to discover that there is little market interest. Diversification is about creating or taking advantage of market demand, not expansion for the sake of expansion. Kolyvas suggests starting simple and small. “Whale hunting”, in his words, brings a whole new set of challenges that may be too much for novice brokers, and doesn’t always pay off. Rather, he suggests looking closer to home and checking your existing client base for prospective opportunities. “The problem with those big deals is that they fall over easier as well,” Kolyvas says. “You can spend a lot of time with no reward. But if you start small and look at some of those

smaller commercial transactions with your existing customers where you’ve got a bit of a captive audience, that’s a good way to get a quicker return on your investment.”

Searching for new products Many lenders are well aware of the challenge brokers face when moving into unfamiliar territory, and craft their products accordingly. “We keep the commercial process easy for new entrants by mirroring our residential loans,” Bannister says. “We have streamlined our lending processes to keep the approval steps simple. If you can write a residential loan, then you can write a commercial loan, and with our experienced commercial team of 35 dedicated commercial underwriters and 28 national BDM support staff, we can provide the necessary assistance and training.” Thinktank deliberately aims to provide a broad spectrum of products to its brokers. “Thinktank has a range of commercial products to assist with purchase, refinance and equity release opportunities,” Vala says. “Our longer-term offerings of up to 30 years, regardless of security type, can assist in improving a customer’s cash flow when faced with traditional lesser-term solutions. Not to mention we remain an active and strong contender in the SMSF space.” Equity-One encourages all new brokers to contact them to speak to the staff who approve the deals, so they can walk through the scenario step by step. This helps ensure that everyone is on the same page in achieving the right outcome for the client. “Our commercial lending products are purposefully kept very simple and flexible, and we try not to overcomplicate the application process,” Koutsoumidis says. “By doing this, it enables a fast turnaround approval process.” ING runs one-day workshops that cover all aspects of commercial lending and offers products that are focused on ease of use for new entrants into the field.

www.mpamagazine.com.au

28-33 Sector Focus_SUBBED_FIXED.indd 30

19/11/2018 3:02:33 PM

“Our process is quite similar to a home loan,” Kolyvas says. “The application form is very similar to the home loans, and the way we assess it is similar to home loans as well. There are some differences; we’re a little bit more commercial in our approach, obviously.”

Building better customer relations Brokers who know their clients, understand their needs and have access to the relevant products can develop relationships with their customers that will see them coming back time and again. This is particularly pertinent if your client has not been effectively accommodated by the banks in the past.

TAKE THE PLUNGE: BORROWERS NEED YOU Dean Koutsoumidis, managing director, Equity-One “Brokers shouldn’t be apprehensive about stepping into commercial broking,” says Equity-One’s managing director Dean Koutsoumidis. “There are many commercial borrowers out there crying out for a good commercial broker to step in and guide them in the right direction, because at the end of the day the borrower wants to focus on their business. That’s what generates their income and wealth, and will ultimately see success go the way of their broker too.”

www.mpamagazine.com.au

28-33 Sector Focus_SUBBED_FIXED.indd 31

19/11/2018 3:02:43 PM

FEATURES

COMMERCIAL DIVERSIFICATION

With this in mind, it’s entirely likely that the first ‘new’ clients you approach as part of your diversification efforts will actually be existing clients. It’s a blindingly obvious approach: if you have a good existing relationship with a customer, why not see if they have additional needs? Brokerages should certainly be aware of the potential risk of ‘double-dipping’ and use a light touch when reaching out to existing clients to offer new services. Overselling a customer on your services will only damage the relationship in the long run. Still, the truth is that many of your clients are likely to have other financial relationships beyond the interactions you have with them. Not only are you presenting them with a new product that may be of benefit but you are also offering the chance to consolidate their other financial matters. The time will eventually come to move beyond this initial pool, though. Here, the

level of understanding of the customer’s financial and economic circumstances, along with their outlook. Vala explains that “this may include asking questions about the customer’s specific industry to highlight issues or opportunities that are available in their market sector, or what a customer’s long-term wealth management and succession plans may be and how they intend to get there”.

Towards a more diverse future Though many companies are anxious about the best path forward for their business, it seems evident that the future of the broking industry will belong to those who are willing to branch outside of their traditional purview. Diversification is no longer merely a novelty; it’s already verging on a necessity. Yet there’s no reason to feel daunted by this, as it also represents greater opportunity.

“There really has never been a better time to step down the diversification path than right now” Peter Vala, Thinktank value of referrals can’t be underestimated, hopefully coming from your existing (and satisfied) customers. Even in an age of heavy digital interaction, word of mouth remains an incredibly powerful tool. Too often the phrase “it’s only business” is used as a glib way to excuse poor behaviour on behalf of a financial institution – totally neglecting the fact that people want to do business with people they like. Broking is no exception. “This industry is a referral-based industry,” Koutsoumidis says. “The broker is the most important part in the relationship between a lender and a borrower, and a good outcome for the client will always see long-term rewards for their broker.” Accordingly, relationships also need to transition from transactional to a deeper

CREATING A PLAN TO MEET YOUR CLIENT’S NEEDS Peter Vala, head of sales and distribution, Thinktank “Now more than ever, customers need a broker’s assistance to navigate through the current maze of funding options,” says Peter Vala, head of sales and distribution at Thinktank. “Diversification brings a holistic view to a customer’s current and future debt funding needs, and effectively creates a plan to move forward to meet their personal and business objectives. This might include the acquisition of assets, improving cash flow, restructuring assets and loan facilities, or providing working capital for business growth.”

“Finance brokers have a golden opportunity to increase industry market share, and the best way to capitalise on that opportunity is to become a diversified shop for their clients, removing the confusion and complexity from their lives,” Bannister says. “Monoline businesses will get left behind in the wake of full-service, diversified operations.” Diversification is not without risk, but for businesses willing to make educated and calculated investments there are rewards to be reaped, and there’s no time like the present. “There is a tremendous amount of support on offer between industry associations, aggregators and lenders, so there really has never been a better time to step down the diversification path than right now,” Vala says.

www.mpamagazine.com.au

28-33 Sector Focus_SUBBED_FIXED.indd 32

19/11/2018 3:03:03 PM

28-33 Sector Focus_SUBBED_FIXED.indd 33

19/11/2018 3:04:37 PM

FEATURES

WHITE LABEL LOANS

White label: Here for the long haul White label loans are soaring in popularity because they’ve evolved alongside the industry and continue to fulfil brokers’ and customers’ primary needs, writes Advantedge GM Brett Halliwell ADVANTEDGE’S FINANCIAL year results for 2017/8 show that white label home loans have continued to benefit from strong growth, driven by increased demand from brokers and end consumers. This is despite 2018 being a challenging year for the Australian property market, which dropped by 2.7% since peaking in September 2017, according to data from CoreLogic. Yet against this backdrop, white label home loans have continued to grow in popularity.

White label across industries

White label products have grown their footprint in the mortgage market and also across other industries. In the retail space, for example, consumer appetite for non-branded supermarket products is soaring, with major retailers actively investing in white label. Coles is aiming to increase white label products to 40% of its product range over the next five years. There is rising awareness among

retailers that white label has the potential to improve margins and be a point of difference in a competitive marketplace. First introduced in Australia by Advantedge, white label home loans had a quick uptake among brokers and aggregators because of the many benefits this offering brought their businesses. Now more than eight in 10 brokers have access to Advantedge’s white label loans. According to research from the MFAA,

www.mpamagazine.com.au

34-35_ Exclusive Feature -Advantege_SUBBED_FIXED.indd 34

19/11/2018 2:41:15 PM

Sponsored by

steps need to be taken to minimise that risk. An effective IT policy is the base to build from, with an appropriate cyber policy as back-up in the event of a cyber incident. “Cyber liability insurance seems like a no-brainer,” he says.

Protecting your reputation Professional indemnity insurance protects small businesses against losses that occur as a result of negligent acts, errors or omissions in providing their services. It is undoubtedly the most important form of insurance for finance and mortgage professionals. One of the key benefits is that it not only covers the business against legal costs and claims by third parties for damage arising out of acts, omissions or breaches of professional duty, but it also protects the business financially if it is required to defend itself against such claims, including libel and slander. “You don’t need to buy all forms of insurance, apart from compulsory professional indemnity cover, but you must purchase insurance to cover you when the financial risks of being uninsured are too large for you to manage,” Gottlieb says.

Are you protected by your aggregator? While aggregators do sometimes arrange professional indemnity insurance that covers

STAYING PROTECTED On BizCover’s website, customers can see what’s available in the marketplace and compare policies and pricing. Policies can be purchased instantaneously, with documents sent over right away. “Our absolute focus is to simplify the process of buying insurance while providing brokers with sufficient choice,” says BizCover’s CEO, Michael Gottlieb. “Therefore our aim is to provide a broker with three quotes from well-respected insurers.” For brokers, there are four primary types of insurance to consider:

Professional indemnity Protects against claims by third parties arising out of negligent acts, omissions or breaches of professional duty in providing their services

Public liability Protects against your liability to pay compensation as well as the legal costs of defending a third party claim for accidental personal injury or damage to their property arising from your business activities

would be required to operate under their own policy, but that’s a discussion each broker needs to have with their aggregator. However, irrespective of the agreement with the aggregator, it is the responsibility of the ACL to ensure they are adequately insured.” The FBAA and the FBAA Code of Conduct dictate that brokers must have

“Even if the broker is found to be not negligent, the costs involved in defending a claim alone are enough to send a broker out of business” Michael Gottlieb, BizCover their individual brokers, this isn’t necessarily guaranteed. “Whether or not a broker is covered by their aggregator’s insurance comes down to the agreement each aggregator has with its brokers,” Gottlieb says. “Typically, a broker

professional indemnity insurance, but there is considerable ambiguity around the specifics – the indemnity limit and the endorsements required are largely at the discretion of the individual broker. The MFAA sets clearer requirements, which can serve as useful

Business insurance Protects the physical assets of an organisation, eg building and contents, from unexpected events like fire, theft or accidental damage, and can also provide cover for financial loss due to business interruption

Cyber liability Provides protection for the expenses and legal costs associated with data breaches, being hacked or the theft of client information

guidelines for brokers who are unsure about their own needs.

Other considerations Other things brokers should consider when they take out a policy are the indemnity limit; sub-limit amounts, like loss of documents or attendance at regulatory inquiries; whether the policy is inclusive or exclusive of costs; the run-off cover period; and the retroactive date. “They should also be looking at the policy wording to check for any endorsements or exclusions that specifically exclude cover for the business activities they perform, and to also ensure it meets the Code of Practice requirements of their industry body,” Gottlieb says. “For example, MFAA requires a minimum of 12 months’ run-off cover, yet we offer up to seven years.” Unfortunately, no one is immune from mistakes – and when a mistake occurs, it’s often the insurance policy that can keep a company in business. Having the right tools in place now is crucial to preventing issues in the future.

www.mpamagazine.com.au

44-45 Exclusive Feature_BizCover_SUBBED.indd 45

19/11/2018 4:55:45 PM

FEATURES

BUSINESS GROWTH

Transform your business in five steps Doing away with rigid job titles and descriptions, and the top-down hierarchical approach to business, may be the best way to improve and evolve your brokerage

self-actualisation that were practised in real time. As a result, our people got better and we got faster. Here are five ways to transform your business using elements of this model:

1. Rethink identity

GOOD BUSINESSES are about products and services. Great businesses are always about people. No matter what industry you are in, what problem you are solving, or which customers you serve, the core of every high-performing business is an excellent team. Here’s one case study. Back In Motion Health Group, which I launched in the early 2000s, is Australia’s only franchised physiotherapy network. Over the last two decades it has enjoyed excellent growth, from start-up to becoming ANZ’s largest allied health group. This success is largely a function of its innovative approach to people and teams, and works whether you’re a business of five or 5,000.

Early growth was driven by entrepreneurial spirit, agile thinking and extraordinary courage. As the company expanded to have a national footprint, the traditional top-down linear hierarchy of board, executive management and support staff created unnecessary barriers to getting stuff done. So we created ONEteam. We abandoned the top-down hierarchical model in favour of our own innovative design. It was a model that revolved around cross-functional collaboration, shared authority and peer accountability. Our model wasn’t flat, matrix or pyramidal – it was spherical. We promoted leadership over management, embracing principles of

Deeply reflect on who you are as an organisation and who you want to become. Far too few teams know why they exist, or what they are here to create. They might have individual champions on their teams, but they do not function like champion teams. At Back In Motion we rethought the firm’s identity, including its mission, purpose, vision, strategy and values. We sought conviction and calling, and not just a sound business plan. We had to feel it deep in our gut. We spent over a year soul-searching our intention, ensuring it was a shared experience. The DNA of the team was made clear. Without it, we would have been guilty of continued frenetic activity at risk of little accomplishment.

2. Rethink culture All organisations have a culture – the one they set… or simply the one they get. We wanted to build ours on purpose. We encouraged respectful disagreement, innovative thinking and free speech to extract real opinions. In time, and with practice, the cultural attributes became natural, even habitual.

www.mpamagazine.com.au

46-47_Bizstrat 1_SUBBED_FIXED.indd 46

19/11/2018 5:05:36 PM

3. Rethink titles Nobody lost their jobs because of our restructure, but we all lost our business titles. Formal designations evaporated, and business cards were binned. Titles are so inadequate to describe what we do as part of a high-functioning team. They are often ambiguous, incomplete and selflimiting. Workplace titles are just words. Words can carry enormous power, or, if misunderstood, be entirely powerless. Titles also put people in category boxes. For us, what they implied was more about what people couldn’t do than what they

to people who understood what our health clients and workforce really needed.

5. Rethink performance assessment People don’t want to be measured and evaluated by a few people at the top. They prefer a regime in which their process becomes as important as their results. The opinions and observations of their peers have to count for as much as those of their supervisors. And the supportive contribution someone might make to another’s overall result should not be overlooked in an other-

Once we refreshed our value proposition … using our new model, we recovered speed, performance and impact should do. We needed greater possibilities. Colleagues needed to be encouraged to make their best contribution based on what they were excellent at and what they loved. This rarely falls into the neat confines of another organisation’s definition of what a line manager is or what a qualification should allow. Opt for genuine peership over artificial platforms of illegitimate hierarchy. Distribute authority to those who are deserving, capable and accountable. It wasn’t a system of equal work contribution, but it should be a system of fair reward for shared effort.

4. Rethink your position descriptions Then comes the dismantling of pro forma job descriptions. If there is no need for contrived titles, then rethink the verbose corporate parlance that makes up most position templates. We created nimble role profiles that evolved in real time and clearly articulated people’s authorities (privileges) and accountabilities (responsibilities) as they adapted to the organisation’s needs and opportunities. As a result, we moved decisionmaking to the frontline of our organisation

wise overly simplistic assessment. Remember, you get more of what you celebrate. Measure and manage the holistic attributes of your team culture to lead a workplace revolution. We created modified balanced scorecards and displayed screens in our offices that highlighted the key activities promoting our mission. We weight-shifted our bonus systems to focus on team achievements above individual excellence. Performance reviews became live roundtable experiences that sought to promote our people with constructive input and personal acknowledgement in equal measure. Through use of our new structure, we have been able to boast about some wonderful achievements. We are an award-winning international franchise network in the coveted allied health sector. We have a mature domestic footprint in most states of Australia and have launched in New Zealand, with burgeoning opportunities in North America and the UK. And we are about to apply our model in new health markets as we integrate and synthesise our learnings. All businesses go through seasons of

KEY BEHAVIOURS OF THE ONETEAM STRATEGY • Champion team (not just a team of champions): Placing the best interests of the team above yourself. • Over-lead and undermanage: Leading naturally if you’re the right person to do so. • Distributed authority: Empowering those in the right position, with the right skills, to make the right decisions. • Peer accountability: Ensuring the best of me helps to achieve the best of you. • Collaboration: Choosing to listen, communicate and learn without prejudice and with an open mind. • Free speech: Speaking up at the right time, with the right people, in the right way. • Best contribution: Playing to my strengths for the benefit of the team. • Fulfilling commitment: Doing what I said I was going to do; taking ownership as though it all comes down to me. • Trust-parency and safety: Being trustworthy and open; making others feel safe in the process. • Equity and fairness: Considering others as I would like to be treated. review and reset. Once we refreshed our value proposition, workplace culture and organisational workflow using our new model, we recovered speed, performance and impact. Mostly, we became a team we were proud to belong to, living out our convictions with congruence and fulfilment. We will keep living, working and evolving ONEteam as a leadership model. It will change, as we do. But you, too, can harness its simple elements to your own advantage. Jason T Smith is an award-winning entrepreneur, thought leader, and author of the new book Outside-in Downside-up Leadership. He is the founder of the Back In Motion Health Group, the Iceberg Leadership Institute and the SOS Health Foundation. For more information, visit www.jasontsmith.com.au.

www.mpamagazine.com.au

46-47_Bizstrat 1_SUBBED_FIXED.indd 47

19/11/2018 5:06:03 PM

FEATURES

TEAMWORK

Put an end to team dysfunction Dealing with a dysfunctional team is not only bad for workplace culture, business efficiency and retention, but it can also be extremely costly. Workplace adviser and author Rose Bryant-Smith offers her tips to help you build a better team

JUST LISTEN to the conversations around you on public transport or at the pub and you’ll not be surprised to learn that unhappy workers and dysfunctional teams are common in Australian workplaces. In 2016, research by Lindsay McMillan found that 14% of workers described their workplace environment as ‘toxic’, and 20% had experienced major problems in communication with a co-worker or boss. A massive 50% of Australian workers have experienced one or more serious incidents of conflict or other negative conduct at work. Problems in team functioning reduce productivity, divert management attention and drive good staff to leave. After all, why would your best performers tolerate a toxic or underachieving team when they could thrive elsewhere? To avoid all this wasted effort, additional costs and heightened risks, leaders and managers must be able to understand the causes, spot the signs of dysfunction early, and take action. Here are the most common causes of team dysfunction, from the micro to the macro: An individual employee in the team who is behaving in destructive ways also holds power in the organisation – whether or not they have formal authority or

www.mpamagazine.com.au

48-51_Bizstrat 2_SUBBED.indd 48

19/11/2018 5:09:29 PM

48-51_Bizstrat 2_SUBBED.indd 49

19/11/2018 5:10:27 PM

FEATURES

TEAMWORK seniority – such that no one is prepared to take them on. There is a lack of clarity in terms of roles, responsibilities, accountabilities and reporting lines. Some team members are trying to implement improvements, while others remain happily responsible to no one and accountable for nothing. Manipulative or malicious employees exploit the confusion to their own ends.

Failure to manage badly behaving individuals is allowing them to set the tone for the team culture. A sexualised, gossiping, bullying or undermining culture has crept in.

A fundamental disconnect exists between the values that the organisa-

consider offering training to the team in how to have difficult conversations, give negative feedback reasonably and respectfully, and intervene when they see poor conduct in the workplace. These interpersonal skills are anything but ‘soft’; they will enable your colleagues to check each other when behavioural standards slip. If one individual is breaching the organisation’s rules and standards for how to behave in the workplace, that person must be reminded of the organisation’s expectations and counselled and supported to change. If they fail to improve their conduct, they should be disciplined or removed from the organisation. The alternative – tolerating the toxic employee – costs the average business an additional $15,169 per year, according to Harvard Business School, primarily due to

Problems in team functioning reduce productivity, divert management attention and drive good staff to leave tion says it holds (what we say we believe in) and the operational reality (the way we are actually behaving). If these causes are familiar to you, or you’re already grappling with conflict, misconduct or an undesirable culture in your team, don’t panic. There are effective interventions that managers and leaders can use to get the team back on track. Conflict should be addressed in an honest and sophisticated way. The team’s manager, an HR manager or a consultant can facilitate a team discussion or hold a mediation between two warring employees. These processes enable individual employees to understand each other’s perspectives better, identify the ideal future state and guide them to design the ground rules for how they will work together in the future. Although you can’t teach emotional intelligence to those who inherently lack it,

loss of valued team members who can no longer put up with the negative atmosphere that the toxic employee creates. Can you afford to ignore that one employee’s conduct that is dragging everyone else down? Address any lack of clarity with respect to how the team should function by reviewing the organisation’s values and employment policies. Check that the individual team members are all clear about what they are accountable for achieving, and make sure that everyone has a direct manager. Dotted or blurry reporting lines only work for the most diligent, achievement-driven employees, and even they will tire of the confusion. When managing a dysfunctional team, a manager can often feel frustrated, distracted and ineffective, despite their formal authority. To turn around a team that is crippled by infighting, gossip, resentments and other problems, the manager needs to develop influence, negotiation and leadership skills.

HOW DOES YOUR WORKPLACE COMPARE?

14%

of workers described their workplace environment as toxic

20%

had experienced major problems in communication

50%

had experienced one or more serious incidents of conflict

$15,169

is average cost associated with tolerating a toxic employee for a year The manager has a key role in holding everyone accountable for their own individual behaviours, and engaging everyone in the effort to rebuild their team.

Rose Bryant-Smith is a director of workplace advisory firm Worklogic, and co-author of Fix Your Team. Worklogic works with employers across Australia to fix dysfunctional teams, resolve disputes, investigate complaints, and build positive workforce cultures. For more information, visit www.fix-your-team.com or www.worklogic.com.au.

www.mpamagazine.com.au

48-51_Bizstrat 2_SUBBED.indd 50

19/11/2018 5:12:24 PM

bbx fp ad

Australia’s leading independent national broker event returning in 2019

SAVE THE DATE

5 June 2019 • The Westin Sydney Exhibitor

Official publications

Organised by

www.brokerbusinessexchange.com.au bbx fp ad_mpa.indd 1 48-51_Bizstrat 2_SUBBED.indd 51

15/11/2018 19/11/2018 4:19:58 5:12:10 PM PM

PEOPLE

BROKERAGE INSIGHT

Finding a higher purpose Classic Finance CEO Nancy Youssef’s boutique brokerage and mentoring business has helped aspiring homeowners and budding brokers locally, as well as disenfranchised communities globally, to find a better way forward IN NANCY YOUSSEF’S mid-20s, while her friends embarked on Contiki Tours, she walked into a bank and applied for a loan. She had a bit of money saved, but no knowledge of property or finance. All she knew was that she wanted to be financially independent. “I think I was too naive to be scared,” Youssef tells MPA. She bought a two-bedroom unit in southwest Sydney. One thing that stood out from that experience was the female bank manager who guided her and gave her a crash course on finance. “Coming from an immigrant family from Lebanon, my parents worked really, really hard when they came out here to get where they had. I wanted to work smarter, and so I got into property.” Sometime later, she had a meeting with another bank manager about a refinance. “I was the client from hell,” she says. Youssef wasn’t willing to accept the first offer that came her way; she was keen to shop around and find the best deal. She was relentlessly inquisitive. By the end of that meeting, after he’d “had an earful from me”, he offered her a job as a BDM. She told him she had no experience in banking, but he didn’t care. “He hired me on attitude more than experience,” she says.

It took some convincing but finally Youssef accepted the job. Within the first 12 months she started exceeding her targets. “It was a whole new world and a steep learning curve,” she recalls.

differently. She knew then that broking was her calling. In 2003, and before turning 30, Youssef launched Classic Finance 10 years earlier than she’d originally planned to be her own boss.

“Mentoring is not just fulfilling a requirement; it’s investing in [brokers’] growth and development” Nancy Youssef, Classic Finance After three years of working closely with brokers and referral partners across three roles encompassing BDM and training and education, Youssef developed a deep passion for education. She realised that, had she known better when she was buying her first property, she would have done a lot of things

She started her brokerage without any entrepreneurial experience and before the establishment of any formal mentoring programs. Brokers at the time weren’t willing to part with their trade secrets. “It was very much a tight and competitive industry … There wasn’t a lot of room for collaboration,” she says.

LEAVING A LEGACY Nancy Youssef is actively involved in raising funds for the Hunger Project, a worldwide organisation endo vrsed by the UN that aims to empower people in impoverished communities to find solutions through education and microfinance initiatives to problems that affect their daily lives. Over the last four years she has organised and hosted four black-tie gala balls, raising more than $135,000. Being involved in charity work has given Youssef and her business a purpose beyond profit. “I strongly believe small business owners have the power to change the world. The job is no longer just up to big corporations.”

www.mpamagazine.com.au

52-53_Brokerage_Insight_SUBBED.indd 52

19/11/2018 3:00:34 PM

FAST FACTS Company: Classic Finance Group and Classic Mentoring and Coaching Owner: Nancy Youssef Location: Barangaroo and North Strathfield (Sydney), NSW Years founded: 2003 and 2011 Services offered: Home loans, commercial loans, leasing and insurance, mentoring and coaching Number of employees: 6 Major awards: 2016 • MFAA Best Loan Administration - NSW and National (for one of her team members) 2016 and 2017 • MFAA Excellence Awards for Best Social and Community Champion (NSW)

Youssef learned the ropes by building good relationships with BDMs and other industry leaders who she looked up to. She also networked with professional business owners outside of broking to learn how they attracted clients. Having studied marketing, Youssef experimented with creative campaigns to make her business stand out. In the first couple of years, while income was lumpy, Youssef took a side gig teaching the Cert IV and diploma courses to brokers. “That was great for two reasons. One, it got me out of the office where it’s quite lonely as a solo operator; and two, it gave me insights into how really good brokers ran their businesses.”

Youssef ended up teaching the course for six years across three states. Her reputation as both a broker and an educator blossomed. When the MFAA released its new requirements for mentoring, Youssef was approached about becoming a mentor. Initially she said no. She was too swamped with running her own business, doing everything from broking to bookkeeping. But as her business’s 10-year anniversary dawned, Youssef began to ponder a life beyond broking. Many new brokers were still reeling from the GFC and the introduction of the NCCP Act and were having difficulty staying in the market. “I knew I could do

more. I just didn’t know what,” she says. In 2011, she founded Classic Mentoring and Coaching, an MFAA-approved mentoring program that aims to empower and teach new brokers how to build and grow sustainable businesses. In the last seven years, Youssef ’s program has enrolled more than 130 brokers, many of whom have gone on to receive high praise and awards. “Mentoring is not just fulfilling a requirement; it’s investing in their growth and development. They’ve got a support network, so when they’re going crazy and are about to throw in the towel because it’s too hard, they can come in and we talk.”

www.mpamagazine.com.au

52-53_Brokerage_Insight_SUBBED.indd 53

19/11/2018 3:00:44 PM

PEOPLE

CAREER PATH

MEETING FUNDING NEEDS RESIMAC’s joint CEO, Mary Ploughman, confronts the challenges of securitisation and acquisition to yield business growth

Mary Ploughman began her career in what would become securitisation in Macquarie’s structured finance department. For over 11 years 1999 THRIVES IN Ploughman climbed the ranks to SECURITISATION TAKES the position of director of corporate CONSULTING WORK finance and leasing. She arranged funding After taking two years’ maternity leave, Ploughman worked for clients and helped develop Macquarie’s thriving part-time at Price Waterhouse Coopers as director of securitisation. securitisation business. In 1992, the bank won the IFR Deal of the Year for its For three years, she advised customers on how to achieve their funding work on the securitisation of the water rates of Melbourne Water. “At that time, needs. “That was when I was advising RESIMAC as a client. It was a good gig, but Macquarie was a very exciting place to work. It encouraged innovation and we consulting was not really my thing. The RESIMAC CEO said to me, ‘We can’t do it worked on what was the start of the securitisation market in Australia.” ourselves’, and offered me a job over lunch.”

1986

2003

2008

A RADICAL TURNAROUND

Since joining RESIMAC as a director, Ploughman has helped reverse the lender’s funding. She oversaw the purchase and growth of a New Zealand subsidiary, and led other mergers and acquisitions in Australia and New Zealand, including the purchase of the $1.8bn RHG portfolio. “The first three to four years were about rebuilding trust with banks and investors, and building the funding program. Then the GFC hit and it was about how we would survive. Then came the growth years, the mergers and acquisitions. This has been the most exciting time in my career, but it was very hard work. We now have an opportunity to put our foot on the accelerator and become known as a great financial institution. That is what motivates me.”

2018 and beyond

A NATURAL EVOLUTION Two years after merging, the Homeloans and RESIMAC non-bank lending brands have unified under a new incarnation of the RESIMAC brand. Ploughman says the move reflects the entities’ history as challengers and innovators in the market. “It really is taking the best of both worlds, and we are confident it will help take our business to the next level.” 54

LOBBIES FOR CHANGE During the GFC, Ploughman was part of the team that successfully lobbied the Australian government to support the securitisation industry, and started the ‘Women in Securitisation’ initiative through the Australian Securitisation Forum in 2010. Women in Securitisation has since gone global and been replicated in the US and Europe.

2016

MERGER WITH LEADING NON-BANK In 2016, Ploughman was appointed to the RESIMAC board and was integral to RESIMAC’s merger with non-bank lender Homeloans in the same year. She was appointed joint CEO of Homeloans following the merger. “People thought I was crazy joining Resimac at the beginning when it had so many problems. But when something is difficult, you have a real opportunity to make a difference.”

“I absolutely love what I do. Debt capital markets are my passion, using the assets we have to raise funds efficiently. My other favourite thing in the world is mentoring young women in their careers. It has been very satisfying”

www.mpamagazine.com.au

54-55_Career Path_SUBBED_Fixed.indd 54

19/11/2018 5:23:30 PM

Funding

54-55_Career Path_SUBBED_Fixed.indd 55

19/11/2018 5:22:31 PM

PEOPLE

OTHER LIFE

TELL US WHAT YOU GET UP TO Email otiena.ellwand@keymedia.com

FIT TO COMPETE Chris Montague’s passion for CrossFit has brought honour to his state WHEN MONEYQUEST Lonsdale Street Melbourne broker Chris Montague started CrossFit four years ago, he never expected that the healthy habit would turn him into a competitive athlete. Perhaps his trainer had other ideas. “Given I love chasing numbers and achievements, the [CrossFit] methodology is well set up for me,” Montague told MPA. “I was hooked!” In September, he represented Victoria at the Masters League national CrossFit competition. Team Victoria won the tournament for the first time. To prepare, Montague added two to three afternoon sessions to his five-days-per-week morning workout routine. Being a broker gave him the flexibility to add extra training sessions when required. Fitness and health allow people to sustain success and enjoyment in life, empowering them to do the things they like to do, only better and for longer, he says. Montague loves the feeling of achievement and ongoing improvement that he gains from CrossFit. “In addition, how good is breakfast after working up the sort of appetite that comes from training?”

Sept 27–29

Average number of days per week Montague trains

When the national CrossFit Masters League was held this year

5am

Time Montague wakes up to train

“F itness and health prepare you better for the varying levels of stress and anxiety that you experience in professional life”

www.mpamagazine.com.au

56-OBC_Other Life_SUBBED_FIXED.indd 56

20/11/2018 8:01:57 AM

56-OBC_Other Life_SUBBED_FIXED.indd 57

19/11/2018 5:27:16 PM

56-OBC_Other Life_SUBBED_FIXED.indd 58

19/11/2018 5:28:31 PM