Mortgage Professional Australia issue 19.02

MPAMAGAZINE.COM.AU ISSUE 19.02

THE BEST-KEPT SECRET Customer-owned banks are driving better customer outcomes – with brokers’ help ROYAL COMMISSION A look at what the report said and what happens next

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$380M BROKING MACHINE The broker who steered his business from market crash to market leader

BUSINESS IN DOWNTURN How brokers are dealing with the cooling property market

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FEBRUARY 2019

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 Editorial

The industry faces upheaval

04 Statistics

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SPECIAL REPORT

THE BEST-KEPT SECRET

The customer-owned banks enjoy their moment in the spotlight as they showcase to brokers what sets them apart from traditional lenders

16 FEATURES

THE ROYAL COMMISSION

Analysis and commentary in the aftermath of the final report, which recommended changes to broker pay

38

The broker who smashed the $380m mark by turning massive change into a wealth of opportunities

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06 Head to head

Brokers discuss how they’re preparing for future business challenges

08 News analysis

How brokers plan to navigate the difficult lending landscape

10 Opinion

Canstar’s Steve Mickenbecker on how brokers can help Aussies save

FEATURES 44 Meetings

Making virtual meetings more efficient and effective

46 Workplace culture

A positive workplace culture will help your team collaborate and innovate

THE BIG INTERVIEW

SHAWN ALLEN

A quarter of Aussies are uncomfortable with their finances and struggling to save

FEATURES

COMPLIANCE AND TECH

Technology is helping brokers stay compliant and keep competition alive

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48 Competitive edge

Competition can be both a boon and a bane. Learn how to harness it

PEOPLE 52 Brokerage insight

How credit knowledge and banking experience helped this broker succeed

54 Career path

Bluestone CFO Todd Lawler builds non-conformity worldwide

56 Other life

The game that helped this broker clear his head and escape the grind

MPAMAGAZINE.COM.AU FEATURES

SPECIALIST LENDING Looking outside the square has become the norm for brokers and borrowers

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

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UPFRONT

EDITOR’S LETTER www.mpamagazine.com.au FEBRUARY 2019

Moving forward together

T

he royal commission storm well and truly hit after the final report was released earlier this month, making some big recommendations on broker pay.

We know it’s a scary, confusing and upsetting time, and many of you have been telling us your concerns about your future in the industry. We have tried to speak to as many commentators and industry groups as possible to talk through some of the changes we might see, and to look at how the industry can move forward.

We’ve spoken to mortgage brokers, and the banks and lenders that rely on them, to find out their thoughts on what the repercussions of changing broker pay will be.

Going beyond the immediate reactions, we’ve been looking at what comes next and what broker groups are doing to represent the industry.

There are advertising campaigns, petitions, and letters to local MPs, and the team at MPA will be following them and supporting you all the way. So, keep us up to date with everything you’re doing in defence of the industry!

There are advertising campaigns, petitions, and letters to local MPs, and the team at MPA will be following them and supporting you all the way Moving on to this month’s issue, we had hoped to bring you coverage of our roundtable event with the broker heads of the major banks, which was due to take place last month. Thanks to the build-up of the royal commission, this will now happen later this year.

Instead, we have a special feature on our roundtable with customer-owned banks, which took place before the final report came out. We asked them about how they work with brokers and for their thoughts on potential changes to the industry.

Our Big Interview highlights a leading broker from Canada, who will be a keynote speaker at our Broker Business Exchange event in June. He talked to us about how he used market changes and regulatory reforms over there to create opportunities for himself and his business, providing interesting insights in the context of what’s happening here in our industry.

It’s a time of change for brokers, so take a look at what the industry is saying. And remember, there are hordes of people out there supporting brokers because they know what fantastic work you do.

Rebecca Pike, editor, MPA

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EDITORIAL

SALES & MARKETING

Editor Rebecca Pike

National Sales Manager Claire Tan

Journalists Otiena Ellwand, Tom Goodwin, Abel Riototar, Edward Cranswick Contributors Emma Bannister, Stephen Barnes, Donna McGeorge, Steve Mickenbecker Production Editor Roslyn Meredith

ART & PRODUCTION Designer Cess Rodriguez Traffic Coordinator Freya Demegilio

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: +612 8437 4784 rebecca.pike@keymedia.com

SUBSCRIPTION ENQUIRIES

tel: +61 2 8311 5831 • 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, Seoul

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.

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UPFRONT

STATISTICS

Taking the financial pulse Despite the falling property market and high indebtedness, Australians are feeling better about their financial position, a new survey shows THE 2018 Consumer Pulse Report by financial comparison site Canstar surveyed 2,090 Australian consumers last November to find out their views, attitudes and expectations on issues such as financial stability, mortgage security, housing affordability and the future of banking.

The report showed that 28% of Australians expect house prices to fall. However, it revealed that, despite looming trade wars, a declining property market and jarring news of banking

25%

of Australians are uncomfortable with their financial position

misconduct, the number of Australians who feel uncomfortable about their financial position has dropped by 8% to 25%, a surprising improvement from 33% in 2017.

However, they aren’t feeling so chuffed when it comes to their savings. Twenty-seven per cent save a tenth of their income or less, and 24% save nothing at all. Gen Ys are the most likely to save money, while a quarter of baby boomers, Gen Zs and Gen Xs don’t regularly save.

24%

2 in 5

of Australians do not save any of their income

Australians are lazy about checking their balances

47%

15%

13%

No financial buffer

10%

8%

Less than one monthly mortgage payment

SAVED BY THE BUFFER As in 2017, 43% of home loan borrowers have less than three months’ mortgage repayments stockpiled. Low rates are an ideal time to get ahead of repayments, and borrowers with financial buffers should take advantage of that before rates go up, Canstar said. Yet, when asked, only 35% said they’d reached into their financial buffer.

believe Australia will be a cashless economy in five years Source: Canstar Consumer Pulse Report 2018

A REAL SHOCKER

GONE ON VACATION

When it comes to savings goals, Australians who are putting cash in the kitty have prioritised holidays, retirement and buying a house.

What are Australians saving up for?

2017

2018

Electricity has remained the biggest financial concern of 20% of survey respondents for two years running. There was also rising concern about petrol prices and stock market movements in 2018.

What are the biggest financial concerns of Australians?

20%

Mortgage interest rate

7% 9%

4%

Petrol prices

8%

Fear for job security

Retirement

House

Living costs

Home reno

Car

Investment Education property

Investment Wedding other than property

Source: Canstar Consumer Pulse Report 2018

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Stock market movements

2018 30%

Cost of electricity

Holiday

2017

10% 8%

3% 7%

Source: Canstar Consumer Pulse Report 2018

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How much financial buffer have mortgage holders saved to cope with interest rates rises and/or changes in their financial situation?

7%

7%

11%

The equivalent of one repayment

15%

15%

The equivalent of two repayments

15%

8%

The equivalent of six repayments

9%

6%

More than one year’s worth of repayments

39%

How many borrowers answered ‘Yes’ to having dipped into their financial buffer?

2017

5%

The equivalent of one year’s worth of repayments

6%

6%

More than two years’ worth of repayments

9%

9%

More than five years’ worth of repayments

35%

2018 Source: Canstar Consumer Pulse Report 2018

EXPECTING A FALL

HOME LOAN SUCCESS

Only 33% of Australians expect steady, continuous growth in house prices, declining from 47% in 2017. The number who believe prices will gradually fall jumped by 15% to 22% over the same period. Six per cent of Australians surveyed expect house prices to crash at some point in the next two years.

One in four borrowers succeeded in negotiating a better home loan rate with their banks. The number of borrowers who got a better deal through negotiations jumped by 2% from 23% in 2017.

5% Unsure

What will happen to house prices in the next two years?

47%

50 40

-14%

2017

33% 23%

25%

22%

11% No, but I’ve tried

15%

20

0

8%

7%

5% Skyrocket at some point

Continue to grow at a steady pace

28%

No, and I do not intend to

30

10

2018

Remain stable at current prices

Gradually decrease

4%

6%

Crash at some point

Source: Canstar 2018 Consumer Pulse Report Summary

Have borrowers negotiated a better mortgage interest rate with their bank in 2018?

25% Yes, I have

31%

No, but I intend to Source: Canstar Consumer Pulse Report 2018

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UPFRONT

HEAD TO HEAD

How are you preparing for business challenges ahead?

Learning from other industries and focusing on giving clients the best outcome will go a long way, according to these brokers

Caroline Jean-Baptiste

Damian Medici

“We’ve been aware of potential industry changes for some time, so this inspired me to look beyond broking. Speaking to lawyers, hairdressers, physios, tree-loppers and financial planners taught us how we could be more creative and carve out our message and look for ways to reduce our risk. We wanted to be one step ahead rather than blindsided by changes.

“Looking for ways to reduce costs and become savvier with our expenses was where we started. We have raised our profile and are educating our connections about the value brokers bring, teaching them how to look good to a lender and understand the lending landscape.”

“For us it’s business as usual. We put the client’s needs and circumstances first; this is the basis of all our recommendations. It just means that we need to dive a little deeper into lending policies and guidelines in order to ensure we have found the right solution for the client.

“When you put the client’s needs and goals first, the market and the lending climate don’t impact what we do. It just makes us work a little bit harder for the correct outcome.”

Mortgage Choice, Fortitude Valley Owner-manager

Loan Market Essendon Managing director

Anthony O’Flynn

IFA Mortgages Directing mortgage broker “Our modus operandi will persist through the next fortnight and beyond: finding where there are gaps in the market and manipulating them in a way that our staff can provide an answer that others can’t (or won’t).

“If trail commissions were scrapped, it would ravage a lot of the post-settlement that brokers offer.

“We will continue our mandate to provide the best possible outcomes for the next 30 years, protecting us from the added scrutiny that is bound to unfold, as well as ensuring growth through our greatest advertisement – our loan book.”

BEST TIME TO STEP UP Connective director Mark Haron believes that, in light of the royal commission final recommendations, brokers and aggregators will need to work on safeguarding the long-term future of the industry. However, despite having their commissions and financial incentives placed under intense scrutiny, brokers are already showing signs of increased prudence with respect to potential clients and loans. They are demonstrating greater diligence by working ahead of the banks to avoid the issues that triggered the royal commission. According to Haron, while seeking loans through banks has become increasingly complex, brokers can use the situation “to step up and make sure corners are not being cut”.

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UPFRONT

NEWS ANALYSIS

Playing the long game The downturn in the housing market is projected to continue this year, but brokers are adamant that they’ll find ways to navigate the lending challenges to get borrowers what they’re after ALL TOLD, the Australian housing market is expected to continue tumbling this year, posing some challenges for brokers who rely on the regular exchange of houses, and people’s confidence in the market, to fuel business growth.

Last year, 11.1% of residential properties sold for less than their original purchase prices, making September 2018 the weakest quarter for profit-making resales since 2013, according to CoreLogic’s Pain and Gain Report.

application scrutiny has been unprecedented of late, he rebuffs the dramatic headlines warning that the housing market is on the brink of disaster.

“People are still getting money, and they’re still buying and selling houses. In buoyant markets and in downturns, people are still trading properties all the time,” Mirams says. “[But] instead of it being a 100m-hurdle race [for brokers], it’s a 400m-hurdle race.

You have to run a few more hurdles and go a bit longer.”

“This is probably the best time for mortgage brokers to thrive by helping clients navigate through the complicated lending landscape” Effie Nie, Ayers Financial Group No one knows if that trend will persist in 2019, but in the wake of the royal commission’s final report and with a federal election on the horizon, the ratings agencies have forecast drops of 2% to 6% in some areas, with Sydney and Melbourne leading the fall.

A lack of credit availability, tighter lending standards and stricter risk assessments by the banks have been the driving forces behind this downturn, impeding brokers’ day-to-day operations and turnover, and affecting borrowers across the lending spectrum.

While Andrew Mirams, managing director of Intuitive Finance, admits that loan

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It seems, however, that the race to the end has been extended permanently.

Tim Lawless, CoreLogic’s director of research, expects lenders’ conservative approach to continue in 2019. That doesn’t mean no one will get approved, but he suspects that “high-quality borrowers” – such as those with large deposits, low debt-to-income ratios and strong serviceability positions – will be “in the driver’s seat”.

“Overall, we expect housing finance will remain a formidable obstacle to improving housing market conditions next year, but higher-quality borrowers should be able to

secure debt at very low rates as lenders compete for their business,” Lawless wrote in his 2019 outlook.

Effie Nie, director of Ayers Financial Group, says a weaker housing market presents both challenges and opportunities for brokers.

While the lending environment has been “fairly rigorous” for the past year or two, brokers have encountered fewer channel conflicts as a result of spreading their loans across a more diverse range of lenders.

“More clients are exploring opportunities with second- and third-tier lenders who heavily rely on the third party channel.

Consequently, this is probably the best time for mortgage brokers to thrive by helping clients navigate through the complicated lending landscape,” she says.

A slowing housing market doesn’t spell bad news for everyone. “First home buyers are now finally entering the market, and high-net-

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FORECAST HOUSE PRICE CORRECTION FOR MAJOR AUSTRALIANv CITIES Greater capital city house value forecasts, % change 2018

2017

2019

2020

16%

12%

8%

4%

0%

-4%

-8%

al

n Natio

rra

e Perth Canb

ane elbourne dney Sy M

Brisb

Source: CoreLogic, Moody’s Analytics forecast, 2019

“If a person’s home is their castle, if the dwelling they’re living in is going down in value, generally they lose confidence in everything” Patrick Sheppard, Appian Way Financial Services worth investors have been very active in searching for great deals. Housing prices are gradually coming in line with their true underlying value, which sets a strong foundation of sustainable growth for the next 10 years,” Nie says.

In preparation for further headwinds, Ayers Financial Group has shifted its focus to commercial lending for the next 12 months, while maintaining its current level of residential transactions.

Mirams believes that now is the best time for brokers to leverage their experience and expertise to educate clients. His brokerage

does a significant amount of the client factfind and data collection up front.

“As an industry, we need to take a greater lead in educating our clients and the whole market; the banks aren’t going to do it.

The 25-year-old bank person that’s lending you money is probably still paying off their first car.”

But there’s another side to the cooling housing market that brokers will have to deal with, says Patrick Sheppard, principal adviser at Appian Way Financial Services.

And that’s managing their clients’ expectations and emotions.

“If a person’s home is their castle, if the dwelling they’re living in is going down in value, generally they lose confidence in everything, in consumer spending, engage­ ment and investing as well,” he says.

Just because the value of property is going down doesn’t mean it’s a bad investment. “You need to be thinking about the long-term nature of buying low and selling high,” he says.

While buying and selling won’t cease in this market, brokers need to be more sensitive as clients jump on the property roller coaster.

“The biggest impact will be managing the emotional relationship with clients when they realise that their main dwelling and asset is not worth as much as they thought it was, and that needs to be managed carefully,” Sheppard says. “Numbers speak louder than words, and numbers can be brutal, so you need to prepare them for that.”

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UPFRONT

OPINION

GOT AN OPINION THAT COUNTS? Email rebecca.pike@keymedia.com

Savings: The new king Affordability always mattered, but it’s being assessed more stringently than ever. At the same time, house prices are in decline and banks are looking for a buffer, writes Canstar’s Steve Mickenbecker AUSTRALIA’S HOUSEHOLD savings rate has been falling since 2014 when it was 8% and has now nearly hit rock bottom at almost 2.5%. This is significantly lower than rates in Europe (10%) and the US (6%).

Why are Australians so bad at saving?

We are different. Our superannuation scheme is the envy of the world and soaks up 9.5% of our pre-tax income. Canstar’s Consumer Pulse Report 2018, a recent study of more than 2,000 Australian adults, found that 16% list retirement as the number one motivation for saving. Meanwhile, the other 84% have obviously concluded that their super will take care of it.

We are world champions at household debt, with a large chunk of our income going towards home loan repayments. The worry now is that interest rates will eventually rise.

Our current savings performance suggests that households aren’t prepared for that inevitability. According to the survey, 43% of borrowers are less than three months ahead with their loan repayments.

The top savings priority for respondents to Canstar’s survey is saving for a house.

However, the data right now shows a slowdown, and we do know that banks are being tougher with their credit assessments postroyal commission.

Qualifying for a loan has become a whole lot tougher, something brokers know better than most. We have moved from escalating house prices in most parts of the country to prices declining in the two biggest markets. Banks

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aren’t going to be generous in their property valuations. The standard for borrowing without lenders mortgage insurance is still 80% LVR, but what lender is going to feel comfortable with the market valuation when values are expected to fall? A straight 20% deposit will not be enough if the bank applies a conservative valuation. So that

researched the property market to form a view of what they can afford and where they want to buy. Often they have a conditional contract in their hands. They may have explored borrowing options online or with their bank.

Importantly, and specifically for first home buyers, they may have spent the past three years putting together their deposit. It’s a bit too late to be giving them advice about saving.

But night follows day, and if banks toughen standards, loans will be declined. Brokers will be seeing more people who will not qualify for the loan they are after. The broker may either give it a shot and submit the loan to the most likely lender, or deliver a little tough love about adjusting expectations about the house and location.

The other option is to have a conversation with clients about timing, and not just about timing but what to do during that time. The ‘to do’ is a savings plan, which should outline how to clear up other debts and include a tally of the necessary deposit and transaction

We are world champions at household debt, with a large chunk of our income going towards home loan repayments means Australians’ savings will have to stretch even further.

When it comes to affordability, rules of thumb are out and analysis of the loan applicant’s actual spending behaviour is in. Lenders are reviewing the quantum of their household expenditure. A disciplined and consistent savings history is the best evidence your customers have of proving that they can meet loan repayments. Borrowers don’t have to convince the bank that they’ll be able to tighten their belts to cover the monthly repayments, but what they do have to demonstrate is a pattern of good savings behaviour over an extended period. Savings history will be king.

How can brokers help with the savings challenge?

Brokers are usually at the pointy end of the home loan application cycle. By the time the broker sees the customer, the customer has

costs. As they embark on this plan and start saving, they need to demonstrate their ability to meet future repayments.

Nobody is happy about a decline from the bank, and sometimes the broker will get the blame. But what better way to build empathy with the prospective borrower than to be frank about the reasons for the decline and advise on an action plan to get them to their objective?

Savings are the future for homebuyers, and proactive brokers who set buyers on a savings trajectory are investing in their own future as well.

Steve Mickenbecker is group executive, financial services, at Canstar. He has decades of experience in the finance sector, having worked in management, strategy and leadership roles at NAB and Suncorp prior to joining Canstar in 2008.

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PEOPLE

BIG INTERVIEW

A SIGN OF THINGS TO COME Matrix Mortgage Global CEO and Canadian broker Shawn Allen smashed the $380m mark by turning massive changes in the mortgage market – including regulatory reforms and market crashes – into a wealth of opportunities. Can he see into our future?

SHAWN ALLEN is not your average broker.

He opened the doors of his company, Matrix Mortgage Global, during the GFC; grew his business to specialise in alternative financing; and now spends about $1m a year on marketing and advertising. In the last financial year, his company settled $389m, a figure that is unfathomable for most brokers.

So, why haven’t you heard of him before?

Allen is the CEO of a firm based in Toronto, Canada, but the broking magnate is coming to Australia on 5 June to be a keynote speaker at MPA’s second annual Broker Business Exchange. While in Sydney, he’ll be talking to Aussie brokers and hosting a masterclass on how he grew his business into the staggering success story it is today during periods of turbulent change and regulatory reforms in the North American housing market – including the 2008 market crash.

Just as the severity of the US housing downturn was beginning to reverberate around the world, Allen – who became a broker in 2013 after a bad experience with one while buying his first home at 24 – decided to open Matrix Mortgage Global. The ripple

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effects were felt particularly acutely by the US’s closest ally and neighbour, Canada.

“Within a few short months, many lenders with huge market shares had closed their doors completely, and the money dried up,” Allen tells MPA. Nevertheless, he says he had “an unshakeable belief ” that he would succeed.

He cleverly steered his company through the GFC by setting his sights on becoming the top

nerships with private investors and lesserknown lenders. He forged connections with that specific customer base by investing in early advertising efforts, something most brokers usually balk at.

“Building this framework for resiliency in the market and maintaining integrity in our solutions-based lending practices has always been our mission,” he says.

“[The market crash] brought forth a clarity of vision in terms of maintaining resilience … You need to have control of the client, or the money, but preferably both” alternative lending brokerage in the business. “[The market crash] brought forth a clarity of vision in terms of maintaining resilience amid market peaks and valleys. You need to have control of the client, or the money, but preferably both,” Allen says.

That year, he homed in on alternative mortgage lending practices and formed part-

Allen learned how to adapt, be proactive and embrace change, skills that have served him well as the market has evolved over the last decade.

When house prices started to swell in the key urban areas of Toronto and Vancouver, the Canadian government took critical action to blast some of the heat out of the real estate

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PROFILE Name: Shawn Allen Company: Matrix Mortgage Global Title: CEO Years in the industry: 15 Career highlight: “Placing 10th on the Growth 500 list of the fastest-growing financial services companies in Canada” Career lowlight: “In 2011 we moved office buildings from an AAA-grade office space to a less appealing space that didn’t represent our business well”

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PEOPLE

BIG INTERVIEW

market. It intervened in 2016, and again in 2017, tightening guidelines around how lenders qualified borrowers.

The changes included a 15% tax on foreign buyers in the two provinces where those cities are situated (with some regional governments following suit); a legislated ‘stress test’ that required borrowers to qualify at two points above prime rate for income-to-debt-servicing ratios; and more stringent credit and downpayment requirements.

These changes, combined with investor speculation that the market was due for a correction, led to across-the-board decreases in maximum loan-to-value amounts and a dramatic slowdown in foreign buyers. It felt like almost overnight home values had dropped by up to 20% in some jurisdictions, Allen says.

The sweeping reforms also made it harder for borrowers in rural and suburban areas to break into the housing market and refinance.

“The regulatory changes sent some brokers’ businesses to a screeching halt as their once

expectations to manage. For us, this was all business as usual.”

As volume grew, however, Allen faced other challenges. He had to quickly scale up his brokerage’s infrastructure to meet increasing demand, while becoming more effective at tracking leads and improving conversion rates.

This involved training staff on underwriting and transforming the company culture to focus more heavily on documentation and protocol, among other changes.

Change never comes easy, but Allen has come to understand and accept the period of trial and error that comes with putting new measures in place. And no matter how difficult it may be, it’s always worth giving it a go.

In 2017, while the government was scrutinising lending policy, Matrix Mortgage Global expanded its operations Canada-wide. Once leads started flowing in from British Columbia and Alberta, his team had to familiarise themselves with those provinces’ lending guidelines.

“Local brokers were initially outperforming

“Our focus on alternative lending meant record-breaking sales for us and a significant increase in business. Our business went up as many brokers scrambled to find new lenders” A-clients were now barely qualifying with the B-lenders. Suddenly the private mortgage market share surged from 3% in 2015 to 8% in 2018, accounting for 20% of the refinance market in some urban areas,” Allen says.

Fortunately for Matrix Mortgage Global, which had already diversified its approach by focusing on existing homeowners and equity lending, the changes worked in its favour.

“Our focus on alternative lending meant record-breaking sales for us and a significant increase in business. Our business went up as many brokers scrambled to find new lenders, new ways of underwriting, and new client

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us, and our conversion rates were not as good for those areas, but our experience and effort to make connections and gain a deeper understanding of new markets has begun to level that out,” Allen says.

In the last 11 years, Matrix Mortgage Global has seen many ups and downs, but thanks to Allen’s dynamic leadership style and willingness to take chances, he’s been able to confront these challenges head-on.

Allen can’t predict the future for Australian brokers, but he does know that those who want to ride it out need to embrace change and adapt – after all, look where it got him.

HOW DO MORTGAGE BROKERS GET PAID IN CANADA? Brokers are paid average commissions of anywhere from 0.5% for one-year terms with the banks and A-lenders, to about 0.8%, or 80bps, for a five-year term with A-lenders.

B and C deals (non-banks and private lenders) command commissions of anywhere between 1% and 5% of the mortgage amount.

The average mortgage commission for Matrix Mortgage is CAD$4,800 (approx. AU$5,100) per deal. The brokerage primarily does private second mortgages.

Second mortgages go in behind first mortgages. They are used by borrowers of all kinds when they do not want to break the terms and conditions of their existing mortgages.

A second mortgage might be used, for example, to pay out a borrower’s credit card debts, or to take out equity for renovations before the sale of a property.

The average first mortgage amount is $450,000, and the average second mortgage is $150,000.

The fee is paid on closing; there is no trail commission.

Brokers get paid both by banks and directly by the borrowers, depending on the lending institution and type of loan.

The Bank of Canada has hiked rates five times since the summer of 2017. Its interest rate now sits at 1.75%. The prime interest rate is currently 3.95%.

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FEATURES

ROYAL COMMISSION

A look at the royal commission After months of speculation the broking industry is coming to terms with the recommendations Commissioner Kenneth Hayne included in his final report

UNLESS YOU have been living under a rock, you will know that the final report of the royal commission was handed down earlier this month, with some strong recommendations affecting broker pay.

Speaking after the release of the report, Treasurer Josh Frydenberg confirmed the government would be taking action on all of the recommendations, including the complete abolition of trail commissions and volume-based bonuses for brokers.

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The report also recommended eventually removing upfront commission, and Frydenberg said this would be reviewed in three years to determine the potential impact of doing this, considering that previous reports have all recommended otherwise.

While there is still a lot to be done before the 1 July 2020 cut-off of trail commission, brokers, industry associations and wider supporters are understandably concerned about the impact these changes will have.

Steve Mickenbecker, Canstar’s group executive of financial services, has said mortgage brokers won’t be going anywhere, but he raised concerns that their numbers could reduce.

“The two intermediary groups – financial planners and mortgage brokers – look to be taking the brunt of the whole formal recommendations approach,” he added.

“The fees and trails people have been getting from banks – try justifying that and getting that from the borrower who’s already stretched. It’s going to get a lot tougher.

“With the level of commissions that brokers might have earnt in the past, it’s going to be very difficult to stay in this environment. That must lead to the law of supply and demand; it’s going to be a less lucrative industry, so the number of brokers must decline, and that will push people back into the bank channels.”

Mickenbecker said smaller banks and lenders were reliant on the broker channel, so they might have to make some changes in order to survive.

“There will be brokers around, there’s no question. I think we do have to test just how many consumers are prepared to pay a broker,” he added.

“We would have to think that online origination platforms are going to have to

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“We run the risk of losing great brokers with years of invaluable experience, experts that we hoped would mentor the next generation of brokers” Bianca Patterson, Calculated Lending get better and get better fast to survive in a declining distribution model.

“Then obviously we don’t want to see a destruction of competitiveness; we want to see competitive­ness increasing. I think people will have to invest heavily and fast in online originations.”

Melos Sulicich, CEO of MyState Bank – which relies heavily on mortgage brokers as a distribution channel – is hoping that any legislation will not skew in the direction of the big banks.

“It’s a pivotal point to ensure that

consumers’ best interests are looked after in the future. Smaller lenders like MyState rely on mortgage brokers for our distribution.

Without them the playing field is skewed towards the big banks,” Sulicich said.

“Mortgage brokers are very pro competition, and as a consequence of that the mortgage broking industry has to be financially viable for all the participants in that industry. If it’s not financially viable and the industry starts to shrink, then the cost of mortgages for the Australian public will go up.”

In order to help level the playing field for smaller lenders, Commissioner Hayne recommended a Treasury-led working group that would look into whether banks should also charge a fee for facilitating a loan and how that would work.

The recommendations for mortgage brokers did not stop there. Hayne also suggested the establishment of a best interest duty. The Combined Industry Forum has already been working towards developing and implementing a ‘customerfirst duty’.

Hayne acknowledged the CIF’s efforts in his report, but said it was not clear what would be the content of the customer-first duty. He said it appeared to be a duty that would give preference to the customer’s interests only in cases where their and the broker’s interests did not align.

Mark Haron, director of Connective and deputy chair of the CIF, said, “We’ve always supported a movement towards a customerfirst duty, and therefore fundamentally support Hayne’s recommendations for a best interest duty.

“The devil is in the detail, however, and we are particularly interested to see how the best interest duty will extend to all lenders, including the banks. Improving customer outcomes requires a level playing field.

“Rather than recommending sweeping change for the sake of change in every sector

ROYAL COMMISSION IN NUMBERS

69

1,133

days of public hearings

pages in three volumes of the final report

61%

10,323

submissions related to banking

submissions received

9%

12%

submissions related to financial advice

submissions related to superannuation

6%

submissions related to mortgage brokers

of financial services, we believe the existing laws and CIF’s reforms should be given a chance to have an impact.

“The unintended consequences of Hayne’s recommendations in relation to the mortgage broking industry is reducing competition and handing yet another free kick to the big banks. Competition needs to be fiercely protected now more than ever.

Reducing choice is not the answer.”

www.mpamagazine.com.au

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The fight goes on Now that the government has said it will take action on the 76 recommendations in the report, we take a look at what that will actually look like

AFTER MONTHS of wondering what Commissioner Hayne would recommend in his final report, the industry has to think about what will happen now that we know.

While Treasurer Josh Frydenberg has said he will accept the recommendation to ban trail commission and volume-based bonuses for mortgage brokers, there is more to be done before that point.

According to a senior lecturer at the University of New South Wales, the implementation of these recommendations could be “watered down” by the time they are legislated, particularly with the lobbying being carried out by the industry.

Marina Nehme explained, “There will be a public consultation within the sector just because it’s a controversial move. Then a bill will be put forward in front of the Parliament, and with support it will pass.

“Some of those recommendations do not need legislation, like the ones that deal with the regulators like ASIC enforcement, because this is something that can be done internally. “[For broker remuneration] you need to regulate how much remuneration is paid, so to make it clear that you can’t get paid by the banks, then probably yes, we would need legislation. But there’s strong lobbying from the industry, because the question is, how will the industry survive if

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the remuneration will be paid by the clients?

Will they be willing to pay this remuneration to mortgage brokers? That’s a big question, and there is this issue that if you remove the remuneration structure, will that affect competition in the banking industry?”

Asked whether there was a chance the

legislation affecting broker remuneration would not make it through Parliament, Nehme said, “There’s always a chance.

Nothing is set in stone yet. How watered down it will be down the track is just a case of wait and see and how much lobbying there is, because there will be a consultation.”

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IMPACT ON CHOICE AND COMPETITION “Choice matters for Australian homebuyers and it has to be protected; choice fuels competition and competition should keep all the players honest and accountable,” said Mark Haron, Connective director.

“Removing access to choice and competition in the home lending sector is simply handing more power back to the major banks, which is exactly what Australians don’t need.

“The model for how mortgage brokers are paid is not fundamentally broken. There is always room for improvement, but broker remuneration has been scrutinised in multiple reviews over recent years, with none of these studies finding systemic misconduct and none advocating substantial reform.”

Speaking of lobbying, there are already a number of campaigns underway to defend mortgage brokers, including from industry association MFAA. The group launched a national advertising campaign within days of the final report being released.

Working with a number of industry partners, the group is encouraging consumers across Australia to search for and write to their local MPs using the ‘Your Broker Behind You’ campaign website.

Brokers are encouraged to share the link with their customers, who MFAA CEO Mike Felton expects will also feel disappointed at the result of the final report.

Voicing concerns echoed by many, Felton questioned how brokers had come out of the final report so badly, when the royal commission was called to review the behaviour of the banks.

“The royal commission was set up to protect them from big bank power, but has simply entrenched it further,” Felton said.

“How mortgage brokers can be front and centre of the recommendations is inexplicable to me. A massive new bank fee added to the cost of buying a home cannot be a good outcome for Australians.”

He added, “Brokers are critical to competition in home lending. As such, the MFAA is leading a campaign to call

20

attention to this issue and help Australians understand that low interest rates, competition and the services they receive from brokers for just under six out of every 10 new home loans are under threat.

“We have launched a national advertising campaign this week, and we are calling on everyday Australians to join us in a grassroots campaign to protect competition by letting their local representatives know they support the broker channel.

Broker mental health While many brokers may feel like they are in limbo and are concerned for their businesses as a result of the changes, Lifeline said it was perfectly common to feel uncertainty and stress. Last year the group began working with the MFAA to run sessions on mental health.

“Mortgage brokers will justifiably feel uncertainty and fear about how their businesses and livelihoods will be impacted, so it is important for workplaces and communities to be sensitive and alert to the mental health and wellbeing of its members during these turbulent changes in the industry,” Lifeline said.

“It’s important to understand that it’s OK to feel any to all of the emotions that anyone might feel at the potential loss of their

“How mortgage brokers can be front and centre of the recommendations is inexplicable to me.

A massive new bank fee ... cannot be a good outcome for Australians” Mike Felton, MFAA

business, livelihood and customers’ trust – shock, fear, anger, helplessness, anxiety, a sense of injustice, depression and even feeling suicidal.

“These are all understandable responses to the uncertainty and stress people might experience, so it is vital that we learn how to recognise when these emotions arise and to know when and how to reach out for help.”

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Voices of the industry MPA spoke to the people who will be impacted by the recommendations of the royal commission, from mortgage brokers to the smaller banks and lenders that rely on them

WHILE THE recommendations of the royal commission’s final report were not entirely unexpected, the revelation that Commissioner Hayne had actually included a recommendation to switch to a borrowerpays fee for service was still a kick in the teeth for most.

The biggest concerns are how the broking industry will survive, how smaller lenders will be able to compete with the larger players, and how those issues combined will affect the borrower. Commentators are warning of higher interest rates and increased difficulty in accessing finance.

What do brokers think?

In an interview with MPA, two seasoned brokers gave their thoughts on the possible consequences the decision would have for both brokers and customers.

According to Graeme Holm, Infinity Group Australia director and 2018 MPA Top 100 Broker finalist, the recommendation was made “with a complete lack of understanding of the ongoing service provided to consumers”. He believes the move will only hand back monopoly to big banks and remove that customer focus brokers pride themselves on.

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ROYAL COMMISSION

“It’s a huge concern, and I worry it will turn a customer-service-based profession into a transactional-based sales industry, which is the exact opposite of the intent of the RC. The recommendation really did not consider the consumer,” Holm said.

“It shows the urgent need for actual case studies of why the majority of consumers look to brokers.”

For Calculated Lending director Bianca Patterson, the most concerning unintended consequence of the commission’s recommendation is that it could cause small businesses to re-evaluate their teams or service propositions to keep their doors open.

“If these changes come into effect, we run the risk of losing great brokers with years of invaluable experience, experts that we hoped would mentor the next generation of brokers. This is a loss that clearly was not considered and just can’t be quantified until it is too late,” Patterson said. “It is truly a sad day for our industry and consumers.”

Patterson said abolishing trail and replacing it with a fee-for-service model would render broking a service only the wealthy could afford, when in reality it was needed more by first home buyers and low-income earners.

Another 2018 MPA Top 100 Brokers finalist, Anthony O’Flynn from IFA Mortgages, echoed this concern, saying he had asked his clients whether they would pay a fee for service, and even his most loyal clients said they would not if the banks could offer it for free.

“The issue I see is that banks don’t care about any product other than their own, and this type of change would ravage the industry, reduce competition, and divert all power away from consumers and towards the big four,” he added.

What have the associations said?

The MFAA and FBAA have slammed the

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THE GROWING MARKET SHARE OF BROKERS AND AGGREGATORS Market share of new residential home loans originated by all mortgage brokers and aggregators as a percentage of ABS Housing Finance commitments 60%

59.1% 51.5%

50%

52.6%

53.6%

15 20

16 20

55.7%

46.4% 40%

30%

20%

10%

0% JULY AUG SEPT

13 20

14 20

17 20

18 20

Source: MFAA Quarterly Survey of Brokers and Aggregators compiled by CoreLogic Comparator

recommendations, both being concerned about the level of power going back to the big four banks. They warned of decreasing competition and higher interest rates with poor outcomes for borrowers.

MFAA CEO Mike Felton said it was effectively a “multi-thousand-dollar tax on borrowing”, adding that it would “put the broker channel at severe risk, damaging competition and access to credit and entrenching bank power.

“As reviews by ASIC, the ABA and the Productivity Commission have found, brokers drive competition by providing a shopfront for smaller lenders, particularly for rural and regional customers. We are critical to the health of Australia’s mortgage lending market,” Felton said.

“I fail to see how decimating the broker channel, leaving Australians with a handful of lenders to choose from, is good for competition, or good for customers.”

The managing director of the FBAA, Peter White, accused the royal commission of failing to understand the role of mortgage brokers, in particular the competition they brought to the market.

“Commissioner Hayne wants to hand even more power to the big banks and eliminate competition, which is a ridiculous scenario and shows just how out of touch he is when it comes to brokers,” White said.

“If a user-pays model was implemented, we know that most borrowers wouldn’t pay, and banks would make more money and standards would drop further.

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Wednesday 5 June • The Westin Sydney

FUTURE-PROOF YOUR BUSINESS Hear from award-winning brokers:

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Navjeet Singh Matta CEO Gain Home Loans MPA Top 100 Brokers 2018

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Shawn Allen Principal Owner Matrix Mortgage Global Canada’s Top Mortgage Broker

MPA has been a proud supporter of the broker channel since 2001. In light of the recommendations following the royal commission and with a Federal election looming, there’s never been a more important time for a national forum to address the issues impacting the industry.

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FEATURES

ROYAL COMMISSION

“It’s very disappointing that the royal commission wants to destroy some 20,000 small businesses for the monetary gain of the big banks, and we trust the government will see clearly on this and continue to work extensively with our industry to improve consumer outcomes.”

How do the lenders feel?

“Pepper Money supports the broker channel because we believe they provide a wide variety of loan choices to borrowers from all walks of life” Mario Rehayem, Pepper Money

26

Also affected by any changes to the mortgage broking industry are the smaller banks, digital banks and non-banks which do not have the branch presence that the big four do. Most of them rely on brokers as their main distribution channel and now face concerns about how they may have to adapt in order to reach borrowers.

The Customer Owned Banking Association (COBA) immediately responded to the report, urging caution regarding any policy changes and the need to ensure that the focus on competition was not lost.

COBA CEO Michael Lawrence said, “The broking channel is an important one for many smaller lenders. We are keen to proceed with caution to ensure that there is no adverse impact on consumers’ access to lenders and that competition in the home lending market isn’t eroded.

“It is critically important that the focus on competition is not lost. We have a banking market that is dominated by four major players, who throughout the royal commission have proved that their focus is not always on the customer’s best interest.”

Echoing concerns over competition, the CEO of SME lender Scottish Pacific, Peter Langham, said that although the report was aimed at mortgage brokers, he was worried about the impact it would have on the whole broking sector.

“Adding a broker fee for service is likely to be detrimental to anybody who can’t get funding from the banks,” he said.

“Brokers play a major role in putting non-bank lending alternatives to their

clients, providing real solutions for business owners when the banks can’t or won’t lend to them.

“Fee-for-service is likely to drive borrowers straight to those with the biggest advertising budget.

“Brokers have helped drive lending competition and increased the visibility of non-bank lenders. Australia’s ability to provide diverse lending options for consumers and SMEs could go backwards if the fee for service is implemented.

Whatever happens to brokers will be critical to the whole consumer and SME lending space.”

Pepper Money has also voiced its support of the broking industry.

“Many brokers we have spoken with say they are being forced to reassess their futures in the industry,” CEO Mario Rehayem said. “Pepper Money supports the broker channel because we believe they provide a wide variety of loan choices to borrowers from all walks of life, something the banks frequently do not do.

“By taking the time to understand a customer’s individual borrowing needs and sourcing appropriate loans, expert and customer-centred brokers are part of the process of creating wealth for first home buyers, young families and professionals.

“Pepper Money also believes brokers play a vital role in supporting competition in the financial services industry. It is no coincidence that brokers’ market share has grown to close to 60% of all mortgages written. Australians have voted with their feet to support the broker channel.”

Voicing concerns that the recommendations were forcing brokers to reassess their futures in the industry, Rehayem concluded, “Pepper Money expects to play a leading role driving a regulatory outcome on the remuneration model issue that is both in the best interests of borrowers and sustainable for brokers.”

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SPECIAL REPORT

CUSTOMER-OWNED BANKS ROUNDTABLE

BEST-KEPT SECRET The customer-owned banks enjoy their moment in the spotlight as they showcase what makes them different – and more appealing to brokers – than the majors

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THE ROYAL COMMISSION’S interim report found that the mainstream banks’ emphasis on selling and generating a profit trumped honesty, good judgment and diligent leadership, allowing customers’ best interests and needs to go neglected.

Most will agree that 2018 was not a good year for the banks. Their reputations and brands were damaged, customers and shareholders were angered, and cracks were exposed between executives and board members as bonuses, private conversations, decisions and practices were scrutinised in public.

The findings cast a dark shadow over the entire banking sector, except for one small, little-known portion of it: the customerowned banks.

Just the name alone demonstrates something different – that customers are top of mind.

The customer-owned banking industry, which encompasses mutual banks, credit unions and building societies, is different from regular for-profit banks. As the

Customer-Owned Banking Association (COBA) explains it, profits are not paid to external shareholders but are put back into better products and services for customer members and the local community. Customerowned banks are in the business of putting people before profits, which they regularly demonstrate through their investments in community and conservation projects.

“With the customer-owned model, 100% of profits are used to benefit the customers.

Our sector is profit-making but not profitmaximising. We’re not trying to squeeze our customers to please shareholders. We’re not perfect, but we are not conflicted about who we are working for,” said Mike Lawrence, CEO of COBA. So, while most banks faced some degree of public discontent last year, the customer-owned banks’ profiles and books grew as customers sought out better alternatives. Residential lending in the mutual sector increased by 6.6% in 2018 to $89.5bn, according to the KPMG Mutuals Industry Review.

The customer-owned banks’ total assets grew to almost $116bn from $113bn, according to APRA’s September 2018 quarterly banking figures. On top of that, the sector’s deposit and housing loan growth outperformed the major banks and system on both an annual and quarterly basis.

As customer-owned banks build on this momentum in the coming years, they will no longer be “the best-kept secret” but will instead see themselves working alongside brokers to drive competition and good consumer outcomes in a lending landscape that urgently needs professionals with high moral and ethical codes.

Broker heads from Bank Australia, Heritage Bank, Beyond Bank Australia and Teachers Mutual Bank discussed all this and more at MPA’s inaugural Customer-owned Banks Roundtable held in January. Read on to find out more.

Note: This roundtable interview was conducted in January before the royal commission’s final report was released.

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SPECIAL REPORT

CUSTOMER-OWNED BANKS ROUNDTABLE

THE PANELLISTS BANKERS

Vincent Lewis Manager partnerships, Bank Australia

Darren McLeod Head of third party, Beyond Bank Australia

Mark Middleton Head of third party distribution, Teachers Mutual Bank

Stewart Saunders Head of broker distribution, Heritage Bank

BROKERS

Gio Migheli Principal, Astute Financial

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Patrick Sheppard Principal adviser, Appian Way Financial Services

What reforms do you think are most needed to improve the broker sector and broker remuneration?

“For me, a lot of the heavy lifting is done,” said Vincent Lewis, partnerships manager at Bank Australia, who kicked off the conversation by commending the work of the Combined Industry Forum. Many of the major and second-tier banks have now removed bonus and soft-dollar incentives and based upfront commission on the funds drawn down net of offset.

“Those were the key issues I saw that were the bugbear of everybody, and certainly [Commissioner] Hayne has focused greatly on that. I don’t think we should be looking at the flat-fee structure. I don’t think there is any relevance to that, but we’ll wait and see,” Lewis said.

arise] post-royal commission is that we are focusing on the need for more changes to the broker sector. Whilst this is important, we’re of the view that we need to appreciate what’s just been completed by the CIF. “I believe if there are any changes to come, we’d want to see brokers appropriately remunerated for their hard work,” Middleton said. “They are an essential part of the home loan industry.”

Not only would a flat-fee model affect brokers directly, but it would have consequences for various other industries and consumer choice.

“There are 27,000 people employed in this sector. You don’t want to have 27,000 unemployed people,” he said.

Brokers have played a huge part in growing the footprint of Teachers Mutual Bank, which entered the broking sector in

“We’re seeing and hearing that people want a change from their bank because of the behaviour demonstrated during the royal commission” Mark Middleton, Teachers Mutual Bank As for trail, he thinks that’s a topic that deserves more discussion.

“Trail should continue, but I think there probably is a good argument to say trail should be continued based on the commitment to review it annually or biannually to justify it. We all know it’s justifiable, but the market out there is saying there is concern.

Just refuse that argument by having a process around it, which I think they have been doing in the financial planning environment for some time,” Lewis said.

Mark Middleton, head of third party distribution at Teachers Mutual Bank, which includes UniBank and Firefighters Mutual Bank, said, “One of the issues [that might

late 2013. “Without brokers, our sector would not have the same level of brand awareness, and our ability to grow would be inhibited.”

Stewart Saunders, head of broker distribution at Heritage Bank, said that while it was important to recognise the headway the CIF had made, it was equally important to remember that the work was not over.

“It’s about continuing to evolve. What we did as an industry 12 months ago is very different to what we’re doing now, and we are continuing to provide better customer outcomes, and we need to constantly focus on that,” Saunders said.

“Whatever comes out in February from the royal commission will be further changes,

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CUSTOMER-OWNED BANKS OUTPERFORM THE MAJORS

6.5%

5.0%

$bn 100

94.0

96.7

98.8 81.1

80

$trn

YoY growth

84.7

YoY growth

2.5 2.14

86.4

2.17

2.19

2.0 1.58

60

1.5

40

1.0

20

0.5

0

SEP 2017

JUN 2018

SEP 2018

SEP 2017

Deposits

JUN 2018

SEP 2018

0

3.4%

2.2%

SEP 2017

Housing loans Mutual banks

JUN 2018

SEP 2018

Deposits

SEP 2017

1.63

1.64

JUN 2018

SEP 2018

Housing loans Major banks Source: APRA’s September 2018 quarterly banking figures, COBA

and we’ll look at driving those outcomes, but it doesn’t stop next year once they’re implemented. We need to continue to ensure that the industry is moving forward and is driving better outcomes and is really delivering for customers.”

While some of this can be done through self-regulation, other matters that drive different competitive interests will need to be regulated by the government, he said.

“And hopefully there aren’t any unintended consequences.”

As for trail, that’s something that would be

very difficult to change without legislation, Saunders said.

“I think all of us around the table would agree that there is nothing fundamentally wrong about the current model, and there are alternative models that could potentially work. It is a big change that would need to be looked at holistically.”

Darren McLeod, head of third party at Beyond Bank, said that what the CIF had been able to achieve in such a short period of time compared to other industries was remarkable.

“If you look at all the statistics, especially the ones that the MFAA has come out with around complaints in the broker sector compared to retail, there is so much evidence to say that [the broker model] is not broken,” McLeod said. “I don’t think the broker sector directly needs any more reforms.”

However, he noted that whatever changes the royal commission recommended to lenders around responsible lending and living expenses would be passed down to all distribution channels, including brokers.

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SPECIAL REPORT

CUSTOMER-OWNED BANKS ROUNDTABLE How have these changes affected you as brokers, and how are you handling the increased workload that comes with it?

If a fee-for-service model was introduced, it would reduce the overall flow through brokers, which mutual banks were reliant on.

“This will have a negative impact on our organisations’ flows and threatens to stunt our growth objectives,” McLeod said.

As lenders have tightened up on credit requirements, brokers have already seen the impact on their bottom line. Broker loan volume dropped by 3% from $51.7bn to $50.1bn between the September 2017 and September 2018 quarters, according to data from the MFAA and Comparator.

CoreLogic’s Pain and Gain Report showed that, during the September 2018 quarter, 11.1% of properties across the country resold for less than their purchase price, making this the weakest quarter for profitable resales since 2013.

Gio Migheli, principal at Astute Financial in North Sydney, said that since all brokers under the Astute aggregation group had been looking at living expenses and getting three months’ worth of bank statements from customers for some time, it wasn’t a big adjustment for them.

“It is getting a little tougher as some of the banks drill down into those statements more and more … that’s taking more time now, whereas before you accepted what they had and if it was roughly around HEM you would lodge it,” he said.

Over the last 12 months, with the major banks tightening their purse strings and

lead times stretching out to two weeks, Migheli has started looking elsewhere for funding.

“We’ve used Bank Australia a bit in the last 12 months because I’ve found them to be very easy, with good products and great rates, and I’m looking at the other mutuals.”

He estimated that about 70% of his loans were now going to banks other than the big four.

What challenges and/or opportunities do you think the royal commission’s recommendations will present for customer-owned banks?

A recurring theme at the roundtable was the alignment between the philosophy and principles of customer-owned banks – which

TOP 10 MUTUALS BY TOTAL ASSETS – 2018 Total assets of the mutual banks increased by 5.5% to $117.3bn in 2018. The sector together comprised 2.4% of total assets across all ADIs as at 30 June 2018. The top 10 grew their combined assets by 5.1%, according to the KPMG Mutuals Industry Review 2018.

CUA

$15.62bn Newcastle Permanent

9.0%

$10.72bn

Heritage Bank

1.6%

$9.52bn

People’s Choice

1.6%

$8.39bn

6.3%

Teachers Mutual

$7.07bn

5.8%

Greater Bank

$6.71bn

6.8%

IMB

$5.91bn

3.5%

Beyond Bank

$5.82bn

7.5%

Bank Australia

$5.65bn

9.6%

P&N

$4.15bn

4.1%

Source: KPMG Mutuals Industry Review 2018

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SPECIAL REPORT

CUSTOMER-OWNED BANKS ROUNDTABLE

are beholden to their customer members, not shareholders – and good consumer outcomes. The roundtable participants representing banks said that since their organisations were not driven by increasing profit margins they were able to deliver better customer outcomes as a result.

Customer-owned banks have an opportunity in the post-royal commission climate to showcase what a great alternative to the for-profit banks they are, Saunders said.

“That doesn’t generate the headlines that some of the scandals have, but I think you need to look at what the fundamental difference is for customers in the customerowned sector where you don’t have that favour of profit over everything else.”

The royal commission showed that much of the banks’ poor behaviour and misconduct was driven by greed. Generating more money for shareholders was put before customers’ interests.

Patrick Sheppard, principal adviser at Appian Way Financial Services, said, “For me as a broker, it’s about philosophy and culture, and about how you treat your partners in business and your customers.

You never want to put a client that you’ve got a good relationship with with a lender that’s going to treat them poorly, because that will reflect poorly on you.”

Sheppard has found that the customerowned banks generally provide brokers with better service. “It’s less ‘computer says no’ and more ‘pick up the phone and ask them what’s going on and what’s outside the square and let’s find the solution’.”

Middleton said Teachers Mutual’s service was about taking people’s feedback on board and doing something about it. “We ring back and say, ‘We’ve addressed that; here’s the outcome’, and they’re surprised that someone has actually listened to them. This is not

the experience at other banks,” he said.

Lewis was frank about the value that customer-owned banks provide. “We are the best-kept secret,” he said.

He explained that the difference between customer-owned banks and the big four was who they were responsible to (members/ customers); the type of lending they engaged in (responsible lending; companies that do no harm); and their underlying values that prioritised giving back and helping the community.

KEY FINANCIAL RESULTS FOR THE MUTUAL SECTOR – 2018

Residential lending up

6.6% $89.5bn to

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Total loan portfolio up

6.3% $96bn to

Deposits grew

5.0% $91.9bn to

Technology spend increased

5.7% $182.9m to

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SPECIAL REPORT

CUSTOMER-OWNED BANKS ROUNDTABLE

“That’s not well known, but once people do discover that they’ll come to us in droves,” Lewis said.

While customer-owned banks still face competition from other second-tier and non-major lenders, as well as neo banks and fintechs, Lewis doesn’t believe these lenders can provide the same high level of customer service and good consumer outcomes that customer-owned banks are known for.

Have you received more business from brokers this past year?

Over the last year customer-owned banks

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have seen an increase in business, which is partly due to brokers seeking more ethical

“As an industry, the brokers have been very supportive of the new opportunities

“There probably is a good argument to say trail should be continued based on the commitment to review it annually or biannually” Vincent Lewis, Bank Australia and sustainable options for their clients, Middleton said. Teachers Mutual Bank had its biggest 12 months on record.

as mutuals have come in. We’re very thankful that brokers have taken to us,” Middleton said.

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“Constantly, we’re seeing and hearing that people wanted a change from their bank

In the last three to four months, Lewis said Bank Australia had seen a massive

“There are winners and losers out of every change that’s made, and we need to be very careful of the unintended consequences” Stewart Saunders, Heritage Bank because of the behaviour that had been highlighted during the royal commission, and they wanted out.”

uptick in business. In November the bank received more than 500 loans when it usually received around 250.

What brokers appreciate most about Bank Australia is that it keeps them in the loop.

“Our scenarios team doesn’t just say no,” Lewis said. “We talk about how we can structure it. … We’re constantly communicating [with the broker].”

However, customer-owned banks are facing some challenges of their own. The royal commission’s recommendations mean there are many unknowns ahead for the smaller lenders.

“The concern is how the findings will impact the customer-owned banking sector and that we have to bear the sins of the majors as well,” Saunders said. “Being smaller organisations, increased regulation has a disproportionate impact on us. There have been no negative findings for customerowned banks, yet we will have to bear the same regulatory pressure as the major banks.

“There are winners and losers out of every change that’s made, and we need to be very careful of the unintended consequences of those changes.”

That one-size-fits-all approach to regulation disadvantages smaller lenders, as do capital requirements, McLeod added.

“We got really heavily penalised [by the APRA investor and interest-only caps], and our business really suffered as a result.”

McLeod said the cost of implementing the new systems and processes designed to deal with the changes is another barrier.

“Obviously, money and resources are not as easily accessible as they are for the big four – smaller mutuals especially will find it tough to keep up with what’s required and compete at the same time,” he said.

“Competition is tough and fierce at the moment. Beyond Bank Australia is entering new markets, and brand awareness and the cost of marketing is a real challenge for a mutual our size.”

Looking forward, though, the pros seem to outweigh the cons for customer-owned banks, which are seeing a shift in what the new generation of bank customers are looking for – companies that act ethically and sustainably and abide by the values they espouse.

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12/02/2019 2:48:31 PM

FEATURES

COMPLIANCE

Keeping compliance efficient Compliance is a key factor for both lenders and brokers, and ensuring all information is captured efficiently and correctly from point of sale is paramount. Tom Goodwin speaks to Tony Carn, sales director of NextGen.Net

FOR TONY CARN, sales director at NextGen.Net, efficient and standardised compliance is a focus. Ensuring that brokers have access to the best possible tools for electronic lodgement and assessment of loan applications is of high importance, with new compliance measures emerging as a key issue in the past 12 months. Carn intends for NextGen.Net to stay at the forefront.

“The success of the broker industry is in our DNA,” says Carn. “Our future is

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intimately tied to theirs, so we work closely with both brokers and lenders to ensure the industry continues to thrive.”

The NextGen.Net platform, ApplyOnline, itself plays a pivotal role in ensuring compliance, particularly through implementing common reporting standards and requirements and objectives for responsible lending. Living expense capture and other modelling are factored in. Serviceability calculations are typically embedded into

the application itself, so even before it’s sent brokers can see if it aligns with the lender’s policies.

“ApplyOnline and the compliance benefits it brings are well embedded for new loans; however, the majority of variations continue to be done in a non-standard paper-based way,” says Carn.

“Approaching variations with the same solution as new loans is something we see as particularly important to ensure

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a standardised approach to compliance for all applications.”

Tools such as these are something that Carn sees as key. In principle, products are becoming more streamlined, but the reality of regulatory changes means that requirements grow ever more comprehensive.

“We’re seeing more and more consumers turning to brokers to navigate the loan landscape,” says Carn.

“Our aim is to minimise the burden on the broker and consumer alike by working with them to ensure there are uniform standards and solutions.”

“A business case needs to start by answering the question, ‘What problem am I trying to solve?’” says Carn. “Is it a real problem, or are there other issues we should be looking to solve instead?”

The same applies on the human front.

“Managers need to be asking their staff

“Our aim is to minimise the burden on both the broker and client by working with them to ensure there are uniform standards and solutions”

Building the case for change It’s clear that tech has not only made significant inroads in broker businesses but is becoming an increasingly essential tool.

The advantages are obvious: faster and more accurate loan applications, broader insights from lenders, and an overall better experience for customers.

It’s for these reasons that Carn remains a staunch advocate of keeping up to date with the latest changes in the industry, even if not all of them are ultimately adopted by an organisation. Having a finger on the pulse is nothing short of essential.

Yet Carn isn’t a fan of change for change’s sake. In the broker tech space, it’s crucial to present a realistic case before sweeping reforms are made.

The other key challenge that Carn sees is around long-term and existing customers.

Sending off an application for a new customer is easy, he says, but what about longer-term customers who are looking to change the current terms of their financial arrangements?

Tony Carn, sales director, NextGen.Net which areas they feel the need to be upskilling in,” he says. “Without the right investment in employees and tech, there can be a real risk that the company itself falls behind its competitors.”

Risks, challenges and rewards The mortgage broking industry is not without its own risks and challenges as potential regulatory changes loom in the wake of the royal commission. As has the wider industry, Carn and NextGen.Net have been watching the findings closely.

“We’re hoping that sanity will prevail and keep competition in the broker market alive,” says Carn.

COMMITTED TO DATA SECURITY Information security remains a significant area of investment for NextGen.Net. With robust security features and hardware in place, the company is dedicated to protecting its data.

“The business is built around hosting data onshore in Australia,” says sales director Tony Carn. “All of the maintenance work is also carried out here – it doesn’t make for lower costs, but it does mean there’s greater transparency around data security.”

Data security is an essential factor for all players in the market and a big part of risk management, says Carn.

“Does the industry need to invest more heavily in how they can handle the needs of existing customers and the quality of their transactions?” Carn says.

“That’s something we’re constantly asking ourselves, because we need to ensure we can service existing customers properly too.”

Yet there is also significant cause for optimism. Open banking and compre­hensive credit reporting are gaining considerable popularity, and NextGen.Net is well prepared for their advent.

“We’re well positioned in that space as we’re already familiar with the API, which open banking uses,” says Carn.

“Additionally, drafts of technical standards are now being published; NextGen.Net is already looking at the best ways to be involved.”

But perhaps most of all, the ability to adapt and embrace change presents opportunities, with survival of the fittest remaining a key maxim.

“In an age of new technologies, personal trust remains the key disruptor,” says Carn.

“That’s something crucial for brokers to remember. Technology enables a better experience for everyone, but its use is still contingent on the skill of the broker.”

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FEATURES

SPECIALIST LENDING

Helping hand from a specialist lender As more borrowers look outside the traditional banking system, specialist lenders are becoming an increasingly crucial part of the modern mortgage marketplace. MPA’s Tom Goodwin talks to Aaron Milburn, director of sales and distribution at Pepper Money, to find out more

WITH LENDING restrictions from the major banks continuing to tighten, many brokers – and in turn their clients – are finding themselves left out in the cold, unable to secure loans at a prime rate. This segment of the market is frequently underserved and undervalued by the bigger players, opening the opportunity for specialist lenders to rise up and provide alternative sources of finance.

For Aaron Milburn, director of sales and distribution at Pepper Money, providing solutions to help customers that fall outside of the prime profile is a key part of his job.

Milburn is genuinely passionate about every Australian being able to understand their financial options.

“We’re here to support the people who may not fit the prime customer profile of the major banks at any juncture of the market cycle,” Milburn says.

Specialist lenders aim to provide borrowers with a broader range of loan products than traditional banks, with an emphasis on catering to consumers who may sit outside the banks’ traditional or preferred client base.

After all, the customer doesn’t change in this marketplace, says Milburn. Rather, it’s

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the banks’ perception of who constitutes a prime customer that has evolved.

“Major banks typically provide a standard product, which becomes an issue if the customer doesn’t fit their profile,” Milburn says. “A specialist or non-bank lender, however, will provide a suite of solutions which are aimed at helping more families get into more homes with the right product, first time.”

Outside the prime With near prime currently the fastestgrowing segment in the wider loan industry, Milburn believes the broker’s role is paramount in educating clients about the options non-bank and specialist lenders can offer. Brokers who are solely focused on traditional bank lending put both themselves and their clients at a disadvantage, he says.

“If I was a customer walking into a broker’s office, I’m there because I need help,” Milburn says. “My expectation would be that the person helping me understands all facets of the market and knows where they can find a solution for my needs through the correct lender. But to do that, brokers need to be aware of the broader lending market beyond the majors.”

This is especially important for clients who may have previously had a credit event, Milburn notes. While their circumstances may differ from those of prime customers, these clients’ fundamental needs remain the same. Too often, he says, clients arrive at Pepper with multiple credit hits on their files due to being steered in the wrong direction previously.

“This customer has built up the courage to come and sit in a broker’s office and say, ‘Actually, I’ve had some issues, and I need your help’, and they need to be treated with care,” Milburn says. “If you get it wrong, the impact on the customer and their family can be substantial. That family has to go home every night, sit around the kitchen table and

“Plenty of people see only headwinds, but I see opportunity. More brokers … will begin to understand the true value that non-bank lenders can provide for them” Aaron Milburn, Pepper Money say, ‘How are we going to get back on our feet?’, when they could have been connected to the right lender the first time.”

But the appeal of specialist lenders is far broader than many brokers may realise.

Milburn says Pepper aims to help any borrower who falls outside of the major banks’ prime parameters, and that’s an ever-expanding spectrum. It’s not simply limited to people who’ve had a credit event.

SOCIAL MEDIA MARKETING FOR BROKERS Pepper’s module, ‘A Real-life Guide to Social Media’, aims to help brokers become more active on social media and make their clients aware of alternative lending providers. From beginner to seasoned social media user, there’s something useful for everyone in the guide, which includes: a simple beginner’s guide to help brokers get their network up and running a suite of free, ready-to-go content for Facebook, LinkedIn and Instagram tips on how brokers can optimise their social profiles to get the best out of their social presence and posts an introduction on how to automate posts These tools are available to Pepperaccredited brokers via the Pepper Money Broker Portal.

Investors, the self-employed and families, to name a few, are all potential clients who can benefit from a specialty lender.

Year of the broker Looking ahead, Milburn believes those brokers who educate themselves about specialist lenders will be the ones who are able to withstand changes while continuing to grow and see their businesses flourish in the future.

The results are already starting to be seen in practical terms, too. The repeat use of Pepper by brokers for multiple deals has grown exponentially month-on-month since early 2017.

Milburn remains firmly convinced that the industry is set to grow further in 2019 and beyond. With the growing propensity to use specialist lenders over the last few years, it’s an increasingly attractive model for brokers and borrowers alike.

Based on current data, it seems that once a broker has experienced working with a specialist lender, they are inclined to keep coming back, Milburn says. And he intends to keep pushing in this direction.

“My view is that 2019 is the ‘year of the broker’, and those that see the opportunities lying ahead will continue to capitalise,” Milburn says.

“Plenty of people see only headwinds, but I see opportunity. More brokers – and, in turn, their customers – will begin to understand the true value that non-bank lenders can provide for them.”

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FEATURES

ASSET AND EQUIPMENT FINANCE

Flex commission ban means better business ASIC’s ban on flex commissions signals a move towards a more customer-friendly motor lending model. Yet as Liberty tells MPA, it’s also better for business – streamlining transactions and opening up positive lending opportunities for customer and broker alike FOR LIBERTY, the company’s long-term success as a lending business is predicated on trust – between lender, broker and customer.

While the recent ban on flex commissions means that brokers can no longer inflate their commissions by setting an unduly high interest rate, business overall is likely to improve due to the more consistent, efficient, and transparent provision of services.

“By increasing standardisation around pricing, brokers are able to offer motor finance with greater certainty. Through this transparency, brokers are now better placed to compete with car dealership financiers,” said John Mohnacheff, group sales manager at Liberty.

A more streamlined process means more streamlined transactions.

Because lending interest rates will now be determined with reference to a customer’s financial position and credit score, time wasted in back-and-forth negotiation will be reduced, and the broker will have more time to explore further opportunities to expand their own revenue stream, as well as

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WHAT ARE FLEX COMMISSIONS? With the old flex commission system, lenders would set a base rate of interest, but it would be at the discretion of the dealer or broker to charge the customer more than that base rate. The difference between the lender-set base rate and the brokerdetermined rate is known as the margin – and the broker would take a percentage of that margin as their commission.

This incentivised brokers to charge higher interest rates to the detriment of the customer. ASIC banned flex commissions as of 1 November 2018.

provide additional and more precise services to customers. New fields of financing are opened up.

“With more clarity around pricing, those brokers that have not explored asset and equipment finance can approach it with more

confidence. This makes it easier for them to expand into this new and growing revenue stream,” Mohnacheff said.

Importantly, Liberty believes the changes will not significantly impact how motor brokers conduct their business. All the same considerations apply, although brokers may have to adapt to the increased pace of business. Mohnacheff said “brokers new to this type of lending should be aware of the speed and efficiency that is required and expected by customers”.

While he concedes that the ban on flex commissions may “have a small impact on a broker’s bottom line”, the increased efficiencies and savings for customers will open up opportunities mutually beneficial to broker and customer.

“Astute brokers will recognise the opportunity this presents to offer other services, like loan protection insurance.

This will not only provide another level of service for the customer but help broaden the broker’s revenue stream,” Mohnacheff said.

Sounds like a win-win.

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and that’s why we’ve invested heavily in these capabilities over the past 20 years,” Mohnacheff said.

Building broker resilience in the new environment

“With more clarity around pricing, those brokers that have not explored asset and equipment finance can approach it with more confidence” John Mohnacheff, Liberty How does Liberty help its brokers?

Much as a broker needs to be continually engaged with their customers, Liberty also emphasises engagement and “face-to-face meetings” with its brokers. That way it can keep brokers informed of all the latest developments and varieties of loan scenarios.

“One example of this approach is our current ‘Do More’ presentations, which brokers are responding well to. These sessions are designed to help brokers understand how they diversify and best offer their services.

We’ve also invested in putting more BDMs on the road to make motor lending even more accessible to our broking partners.”

We asked if Liberty had made any new

innovations in its product offerings.

Although the lender is justifiably proud of its current products, Mohnacheff made special mention of “a new facility for private motor sales which empowers the broker and the borrower to facilitate the loan”.

This is achieved in part by identifying “multiple points in the customer journey to increase user-friendly tools to move the deal along”, he said.

Ease of use for both customer and broker means better and more efficient outcomes, and, for Liberty, technology is indispensable in the development of its business.

“Technology is playing an increasingly crucial role in the way brokers operate,

When asked how brokers might build resilience and diversify their businesses this year, Mohnacheff stressed the importance of the fundamentals.

“Brokers should stop thinking that diversifying is complex or complicated,” he said. “Although experience always helps, the fundamentals are similar, and it’s easier than many may think. If you take the time to understand the customer’s needs and financial position, then all the broker has to do is work with various lenders to find solutions.”

Diversifying isn’t a matter of complex strategy, then, but rather a commitment to knowledge, research and big-picture thinking. One example cited by Liberty is that of Jason Campbell, an adviser at Liberty Network Services, who “has successfully used motor lending to find more residential customers”.

Instead of thinking about a loan in isolation, he works hard to understand the customer’s overall life situation. This fosters a relationship between broker and customer, and means that their work together on the initial loan “helps ensure customers return when other financing requirements arise”.

After all, the “majority of my mortgage clients also have motor loans and other forms of credit”, Campbell said.

His emphasis on accuracy, transparency, and the constant updating of his knowledge, and his commitment to always “offer better solutions to my customers” is what builds client loyalty, he said.

Greater loyalty, more referrals, better business. It sounds like a winning model. For Campbell, as for Liberty, it’s all about trust and the fundamentals.

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FEATURES

MEETINGS

How to run successful virtual meetings With more people working remotely and on flex hours, virtual meetings have become the most convenient way to gather a team.

Donna McGeorge explains how to make your virtual meetings more efficient and effective

DOING ANYTHING by distance takes twice the time and is half as good. We have to navigate time zone differences, language barriers and technological inconsistencies, while still running effective meetings. The three biggest criticisms of participants in virtual or distance meetings are that people are not fully present on the call and are checking emails or having side conversations with their phones; that often the speaker or presenter simply reads the slides; and that they go on for too long and much of the content is not relevant to everyone.

Unfortunately, if our face-to-face meetings are bad, then it’s likely our virtual meetings will be twice as bad (at least!). Good protocols, for physical or virtual meetings, are important.

Some tips for handling virtual meetings follow.

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Use the camera This is particularly useful for one-on-one meetings or smaller groups; not so useful once you have more than six people on the call. Using the camera creates a stronger connection, and we gain access to the visual cues that an auditory interaction can’t provide. Of course, there are exceptions. Your teammates on those late-night conference calls don’t need to see you in your pyjamas. When videoconferencing: Speak clearly and slowly. This is especially important for multicultural meetings.

Accents can be hard to understand.

Move and gesture slowly and naturally.

Depending on the bandwidth, movement can slow things down, or create pixelated images.

Look into the camera. Don’t look at yourself on the screen.

Dress appropriately. Often we think that distance means we can be more casual, but this is not true; we still need to be professional.

You also need to think about colours and patterns that may be jarring on the screen.

Be prepared – make sure everyone knows why they are there and what is expected of them. Send out an agenda, or at least a purpose statement, so that people are clear about the reason for the meeting.

Put your microphone on mute. When you are not speaking, be aware of background noise and keep your movement to a minimum.

Be punctual – start and end on time. As the meeting convenor, be online at least 10 minutes earlier so you can manage any tech issues.

Use the ‘hands up’ function. This is a better way to let people know you have something to say, rather than speaking over the top of others.

Be present – and keep it short.

Distractions are everywhere, so by keeping virtual meetings to 25 minutes or less, you are more likely to keep people focused.

In addition to improving how we meet generally, when it comes to virtual meetings there are other things we need to consider.

Stay focused and present. Keep focused on the task at hand, just as you should at an in-person meeting.

Run it like a radio show Next time you are listening to the radio, pay attention to how the announcer refers to the

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WORKERS EXPECT MORE WORKPLACE FLEXIBILITY

75%

of the workforce will be millennials by 2020, who believe they can work from anywhere at any time

62%

of people work from home or at offsite locations

audience. Typically, they don’t say, ‘Welcome everyone out there in radio land’. They say things like, ‘Thank you for joining me today’.

This is because they realise that the relationship between the radio announcer and listener is one-on-one. The listener is often alone in a car, or sitting at a desk, or listening via headphones, so referring to ‘everyone’ creates a disconnect.

It can be the same when running virtual meetings. In many cases the participants are sitting in a room, or at their desks with headphones on, looking at a screen. Even when using the camera, the radio principle applies to create inclusion and engagement. Instead of saying things like, “Thank you all for coming” or “Many of us have”, try saying, “Thank you for making the time”, or “You have”.

Tell ’em and tell ’em again Everyone in a meeting has to have a role.

This is especially important in a virtual meeting. You need to be very clear on what

level of participation you need from everyone involved. Let them know in advance that you may call on them specifically for input or information. Remind them that we can’t afford for people to not be fully present. In addition, to get the best from your virtual or distance meetings, you also need to: use the video to see people’s faces, not to share slides be considerate of other attendees’ time zones and schedule meetings appropriately encourage those in remote locations to speak or contribute first encourage those dialling in to book a room or private space for the meeting (not just be at their desk) use different methods of communication to remind people of your expectations of the meeting; for example, instead of sending out an email, maybe take the time to send a personal instant message to make sure people are clear

75%

of business travellers take three devices with them, with their primary device being a smartphone

88%

of HR managers report that employees have quit due to a lack of telework flexibility

make sure the meeting charter for recurring meetings is available to all run a training session on how to effectively use the technology; don’t just assume people know how Given a choice, face-to-face meetings are always going to be more effective, but for those times when you need to do virtual meetings, remember that, as the meeting leader it’s up to you to set the tone and expectations, no matter where in the world people are.

Donna McGeorge is a speaker, author and mentor who helps people make their work work. Using a creative, practical approach, she improves workplace effectiveness while challenging thinking on leadership, productivity and virtual work. She’s the author of The 25-Minute Meeting: Half the Time, Double the Impact. Find out more at www.25minutemeetings.com.

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FEATURES

WORKPLACE CULTURE

Bringing your vision and culture to life Maintaining a positive workplace culture as your business grows will help drive collaboration, innovation and creativity, writes Emma Bannister

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I HAVE a classic kitchen-bench start-up story: creating avocado sandwiches with one hand for my baby daughter while preparing PowerPoint presentations with the other.

This was back in 2006 when I was a graphic designer and tech geek who loved PowerPoint. I was clear and focused on my vision of ‘making PowerPoint sexy’ for my clients.

At the start, our culture, values and vision were loud and clear. As a result, my business really took off and grew. Yet as I added more and more people to my team, it became tough to adhere to those values, to keep cultivating the kind of creative culture I had longed for.

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The mission evolved into helping our clients experience the value of their presentations, and we hired for passion and proof of our values: being creative, supportive, passionate and collaborative.

‘Vision’, ‘values’ and ‘culture’ have become buzzwords that are bandied about in meetings and by organisations. There’s a lot of talk acknowledging that “we need them”, but how many of us can define what they are exactly? More importantly, how do we bring them to life, especially as the business grows?

Be transparent The overall vision of the organisation must be set by the leader. It should describe the future direction that everyone in the team

example and asking questions, listening and communicating clearly.

This also means being open and honest with your team when things are not going to plan, or tracking well. There is nothing worse than working for a business and feeling like you’re just being lied to – transparency is the key to trust and a thriving culture. lt has a massive impact on your bottom line.

Celebrate together Your culture really dictates how everyone behaves in your business. It’s made up of the shared values and beliefs that you set and say are essential. These values, however, are more than slogans on posters or coffee cups.

While a lot of people bring in the big guns

Your culture really dictates how everyone behaves in your business. It’s made up of the shared values and beliefs that you set and say are essential and throughout the business is heading in. It’s only when people feel like they are part of something bigger that they start to achieve together as a team.

As a founder, leader or someone in the executive team, it’s essential to provide regular, consistent updates to everyone.

Without constant communication, the vision gets lost, and motivation to meet the goal dies a slow and painful death – and can be really hard to resurrect.

I’ve found that being transparent about the numbers and my role, and what I’m doing day-to-day, is crucial. Be present and connect with your team, and be there to listen to their ideas and challenges.

Transparency alone doesn’t equal trust; that comes from consistently leading by

to help come up with a few summary words, they require much more than just a set-itand-forget-it activity.

For example, one of our values is creativity, so we regularly get together to help boost each other’s creativity through: presentations to each other about our personal passions popcorn sessions at which we watch videos, animations, TED talks or debates creative food days – when different recipes or new cuisines are shared walking meetings through the centennial parklands

life drawing and watercolour classes in locations throughout the city sharing life experiences and listening to each other’s stories as a way of connecting and exploring We invest lots of time and energy in creating activities that include the whole team. It’s not about drinking or holding office parties. (Many of our team don’t drink, and that’s the same throughout many businesses I know.) Instead, the focus is always on a mix of different things to ensure everyone is included.

Strengthen your team When you facilitate this kind of collaboration, even if it’s not 100% work-related, then each of us becomes more innovative, and the office becomes more fun overall.

As I have experienced, keeping the culture going is the biggest challenge you have as your business starts to grow. When there are only a handful of people in your team, then really everything is just an extension of you – your passion is felt across the table and in a small room, and it’s easy to make that felt. As you expand, it’s vital to strengthen your management and build a leadership team that is responsible for ensuring the message – your vision, values and culture – is clear and translated to everyone.

Emma Bannister is passionate about presenting big, bold and beautiful ideas.

She is the founder and CEO of Presentation Studio, APAC’s largest presentation communication agency, and author of Visual Thinking: How to Transform the Way You Think, Communicate and Influence with Presentations.

For more information, visit www.presentationstudio.com and www.emmabannister.com.au.

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FEATURES

COMPETITION

Reaping the rewards of workplace competition Competition can be both a boon and a bane, depending on how it’s applied in the workplace. Leaders need to learn how to harness competition so that it increases morale, boosts performance and fosters productivity, writes Stephen Barnes “LIFE’S NOT a competition,” our parents may have told us, along with their stories about Santa and the Easter Bunny. However, in business and the workplace, competition is both inevitable and indeed valuable.

Some industries and roles, such as sales, are more conducive to workplace competition than others, like IT. However, while competition on the sports field or during a board game is lauded, competitiveness within the workplace is often thought of as a negative attribute.

So, how can healthy competition benefit individual workers and the business, and how do you go about creating the right type and amount of competition?

Workplace competition can push us to excel, take chances and better ourselves. But there is a fine line between these positives and the dark side of workplace competition that can exacerbate stress and drain morale. The key is to compete on your own terms – maximise your strengths and take opportunities when they present themselves.

Competition can be a useful self-analysis tool that may result in changing work habits to become more organised, setting personal goals and stretching targets, which can motivate you to add further skills or

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qualifications in order to deliver higherquality work. Competition also drives creativity and can improve the quality of work produced. It develops the same skills and attributes that are needed for innovation.

While workplace competition can drain morale, it can also boost morale and increase performance and productivity. If your goal is to outpace a colleague, you are more likely

to get more done than if there wasn’t a competitive element. ‘Winning’ can be selfvalidating and improve personal morale.

Workplace competition can push you outside of your comfort zone and zap complacency. Many years ago, I worked for a large corporate that performance-ranked employees. I had a team member who was great at his job, dedicated and quite happy

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FEATURES

COMPETITION

to stay in his current role, in which he was comfortable. Unfortunately, he didn’t realise that the performance management system valued those who went outside of their comfort zone and strived to improve, and that he was competing for his role every day, as the bottom 10% of employees in the performance reviews were made redundant. Performing at the same (albeit competent) standard was actually regarded at this company as going backwards. This employee needed to push himself, and boost his performance and productivity. Workplace competition is ubiquitous and ever-present, so become comfortable with it, embrace it and make peace with the fact that it exists.

Competition, especially collaborative competition, can widen your network. This might be achieved by forming relationships, connections or alliances with people in other areas of the company, or even outside the company; or by seeking out a mentor to inspire and guide you, or a sponsor to support you and your ideas. A sponsor can help you gain exposure or help facilitate stretch assignments that test or showcase your abilities.

Competition is not a zero-sum game. You might need to rethink workplace competition – it’s not necessarily that one person wins and one person fails. Workplace competition can make you assess how you measure up to your competitor. It can make you think about who a role model could be and how to emulate their skills or success. You can also learn from your competitors, so instead of feeling threatened, think about what they are doing differently to you and how you could follow their lead.

Workplace competition can be good for the business too. It can create an environment in which employees push each other to exceed the norm, resulting in increased production.

Higher productivity at an individual level results in higher productivity at the team level, and so on, right through to the overall

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business level. Workplace competition can also engender a sense of teamwork, community and accomplishment. This can translate to a better customer experience and a greater sense of community, benefiting the business as a whole.

How to promote healthy competition 1. Elicit excitement In a Harvard Business Review study, 204 employees from a variety of industries were asked how their company policies made them feel (eg bonuses, performance management, promotions).

They were also asked to think about the behaviours that distinguished them from their colleagues. These behaviours were creative, such as searching out new processes and ways of doing things, or coming up with new or improved product ideas, and some were unethical, such as taking credit for a colleague’s work or agreeing to help a colleague but planning not to follow through.

The results of the study showed that when employment policies elicited excitement, employees were more likely to use creativity. Conversely, when employment policies made employees feel anxious, or there was a culture of fear, the employees tended to go into sabotage mode or use unethical techniques.

2. Strive for ‘cooperative competition’ Rooted in game theory, cooperative competition suggests that by working together team members will push each other to be more productive and to produce stronger work. Working together and helping one another releases chemicals in the brain that enhance motivation, pleasure and bonding. The distinction here is that competition is created so that people work together for a common purpose rather than working against each other.

3. Understand that people are different Everyone is different, and not everyone responds to competition in the same way. Research cited in Top Dog: The Science of Winning and Losing by Po Bronson and Ashley Merryman suggests that 25% of people are unaffected by competition, 25% fear competition, and 50% benefit from competition. Women tend to be more conservative about their chances of succeeding in a competitive environment and tend to avoid competition. Men tend to be overconfident in their abilities and less fearful of the risks inherent in competition. Good leaders must match the competitive landscape to the styles and preferences of individual employees.

4. Recognise that not all competition is productive Leaders should use competition judiciously, understanding the significance of instigating competition and the subsequent ramifications. Be prepared to shut down competition if it is causing damage.

5. Have fun The time spent at work takes up a huge proportion of our week. It can seem even longer if there is stress and fear. Try creating some fun workplace competitions, such as competing to bake the best birthday cake, or having a darts competition at Friday night drinks. A little fun competition enhances relationships and collaboration, which can transfer back to the day-to-day workplace.

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Stephen Barnes is the principal of management consultancy Byronvale Advisors. He has over 20 years’ experience in advising clients, from new business start-ups to publicly listed companies across a wide array of industries.

He is also the author of Run Your Business Better. To find out more, visit www.byronvaleadvisors.com.

^The R 2019 or 5 Y name a borr the bo linked date. are is Inform

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Are your customers ready to make the jump?

Customers who switch to an eligible Suncorp Home Loan could receive $1,500.^ Talk to your Suncorp Business Development Manager or visit businesspartners.suncorp.com.au

^Apply by 28 February 2019, settle by 31 May 2019. $250,000 minimum refinance. Available only for owner occupied home loans in the “Home Package Plus” or “Back to Basics with Better Together Special”. 1 Year Fixed Special Offers Excluded. Further T&C’s and eligibility criteria apply.

^The Refinance Offer is applicable when you apply and settle an Eligible Home Loan with Suncorp Bank. An Eligible Home Loan is a loan that is: (1) applied for between 8 October 2018 – 28 February 2019 and settled by 31 May 2019; (2) refinanced from another financial institution; (3) $250,000 minimum loan refinance with a Loan to Value Ratio of 80% or less; (4) a Standard Variable or 2, 3 or 5 Year Fixed Rate loan in the Home Package Plus (Line of Credit / Access Equity and 1 Year Fixed Special Offer are excluded), or Back to Basics Better Together Special; (5) not established in the name of a company, business or trust. Refinancing of an existing Suncorp Bank home loan or pre-approvals are ineligible for the Refinance Offer. A limit of one (1) payment of $1,500 will be made to a borrower and if there is more than 1 borrower one (1) payment will be made to them jointly. Each borrower, whether individually or jointly, can only ever receive a payment of $1,500 once. If any of the borrowers have received a payment whether individually or jointly under the Refinance Offer previously then no further payments will be made. The $1,500 cash payment will be credited to the linked Everyday Options account which forms part of the Home Package Plus; or to the transaction account linked to the Back to Basics Better Together Special only, within 30 days of the settlement date. Suncorp Bank reserves the right to terminate the offer at any time. Applications subject to credit approval. Full terms and conditions will be included in our loan offer. Banking products are issued by Suncorp-Metway Ltd ABN 66 010 831 722 AFSL No 229882 Australian Credit Licence 229882 (“Suncorp Bank”) to approved applicants only. Please read the relevant Product Information Document and the Terms and Conditions before making a decision regarding any Suncorp Bank products. Fees, charges, terms and conditions apply and are available on request.

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12/02/2019 3:02:42 PM

PEOPLE

BROKERAGE INSIGHT

In search of new lending solutions Unique Finance Services director Vishal Gupta tells MPA why knowledge of the credit industry has been key to his success as a broker

SINCE 2011, Unique Finance Services has been developing an impressive reputation for satisfying clients and meeting unique needs in the mortgage space.

At the head of the organisation is founder and director Vishal Gupta. Coming into the industry with an extensive background in banking, Gupta saw broking as a natural way to leverage his existing financial skills in a new environment. Initially kicking off as a one-man operation, Unique Finance Services has expanded in the past decade to encompass eight employees working across virtually all fields of broking.

“It’s hard to put into a few bullet points; it’s changed so drastically and completely since those early days,” Gupta says. “Year on year, the business has gone from strength to strength.”

This success didn’t spring from nowhere; Gupta started his career with the major banks, spending time with big players like ANZ. Yet it was Citibank that would arguably prove most influential in his future career. During his eight years in the bank’s credit department, he gained a tremendous amount of experience learning where to spend his time on any given deal – a skill set that has been immensely helpful in his current broking role.

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“If you have a thorough knowledge of credit, you can always utilise it in the broking market because you know what the strength of an application will be,” Gupta says.

Client diversity is key In practical terms, this has translated to a diverse client base for Unique. In 2018, diversification is an essential part of any

“Our clientele is equally divided across [SMEs], first home buyers and investors … we have made a conscious effort to ensure we have a segmented client base” Vishal Gupta, Unique Finance Services “I believe that if you know what is going to work for the client, you will be in a better position than hundreds of other brokers.”

brokerage, with over-reliance on any one sector to be avoided – but Gupta has been striving for this since day one. It’s an approach

BRINGING A HUMAN TOUCH TO TECH Having worked in finance for close to 20 years, Vishal Gupta has seen drastic changes to the way technology is used to aid brokers in their role. But while new technology has helped fast-track and streamline the process, he says the decision-making capabilities of the broker must not be relegated.

“We have a new generation of brokers coming through who are perhaps too heavily reliant on it,” Gupta says. “We used to make a decision from the numbers and a gut feeling, not a spreadsheet telling you it’s a pass or fail. We still need to have the human touch alongside the data.”

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FAST FACTS Company: Unique Finance Services Owner: Vishal Gupta Location: Wentworthville, Sydney Year founded: 2011 Services offered: Residential home loans, commercial loans, construction loans, franchise loans, cash flow, equipment finance Number of employees: 8 Major awards in 2018: Top 100 Brokers – MPA 2018 Top 100 Brokers – MPA 2017 Top 100 Brokers – MPA 2016

that has yielded impressive results so far: 2018 was a successful year for Unique Finance Services and Gupta himself was named one of MPA’s Top 100 Brokers for the third year in a row.

“Our clientele is equally divided across small-to-medium businesses, first home buyers and investors,” Gupta says. “We haven’t done as much with overseas buyers, but we have made a conscious effort to ensure that we have a segmented client base.”

Over the last two years, he says, this push for a broad clientele has also led to increased investigation of self-employed business owners. It’s an oft-overlooked area of mortgage broking, but one in which Gupta feels his skills can be effectively utilised to help others grow their businesses.

“That’s where we see some key opportunities coming – individuals who have started a business, say, a couple of years ago and they’re now in a position where they’re looking to expand.”

Future focus The next 12 months or so promise to be an intriguing time not only for Unique Finance Services but for the mortgage industry as a whole. The market has begun to shift out of the boom period, and property prices are already starting to fall around the country.

“We had very strong growth from late 2012 right up to 2016 across commercial and residential,” Gupta says. “I don’t think we’re heading for a GFC, but I think we’ll see a slowdown until at least 2020. It’s part of the

natural market cycle, along with other factors, like the royal commission and the increased regulation that’s likely to follow.”

Yet while there are uncertainties ahead – particularly in light of the upcoming federal election – Gupta remains confident that there are still opportunities to be found in the changing mortgage landscape.

“I think our focus for the next couple of years will not be to seek more business from outside but to retain clients and find them new solutions,” Gupta says. “We need to make sure their needs are looked after and they are trying to grow their portfolios – expanding horizontally, rather than vertically.”

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PEOPLE

CAREER PATH

A NON-CONFORMING PATH Bluestone’s new CFO, Todd Lawler, has helped establish non-conforming lending businesses in Australia and around the world Todd Lawler started his career journey at KPMG Sydney as an undergraduate. After five years, he became a chartered accountant at the firm. In 1996 he moved to KPMG Minneapolis in the US and took on a senior audit managerial role.

“My main accomplishments revolved around becoming the technical expert on several key issues in the US firm at the time.”

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VENTURES ABROAD

2002

TAKES ON MULTIPLE FINANCE ROLES Following his initial assignment at GMAC-RFC, Lawler became the corporate controller of the international businesses, then CFO of the Continental European businesses, and CFO of the Australian operations, where he helped establish the business with the CEO. “These businesses were sold during the financial crisis in 2009 due to the parent company’s issues in the US.”

2018

STEERS FINANCIAL OPERATIONS Last year, Bluestone hired Lawler as its new CFO. He currently oversees the finance, treasury, credit, legal, risk and compliance functions of the business.

“My focus is on steering the financial operations of the business to make sure it is best placed to sustain its recent growth and to take advantage of the market opportunities that are here right now” 54

1999

PROMOTES NON-CONFORMITY

Lawler held several positions at US-based non-bank GMAC-RFC, where he focused on non-conforming lending across several continents.

“Initially I was in charge of technical accounting policy, which evolved into proficiency with securitisation structuring in the US, UK, Continental Europe, Canada, Central and South America and Australia.”

2009

BUILDS FUNDING FOOTPRINT After a move to Pepper Money as CFO, Lawler reopened the global non-conforming securitisation markets in December 2010 with the first non-conforming RMBS deal since 2008. He was also the key figure in Pepper Money’s $5bn GE mortgage book acquisition in 2011, which allowed the non-bank lender to grow both in Australia and overseas.

“Given the immense funding task this created, I moved to full-time group treasurer in 2011 and concentrated on building the Pepper RMBS and ABS funding footprint internationally up until my departure in 2018.”

2019 and beyond

LEVERAGES RESOURCES AND EXPERTISE For Lawler, Bluestone (which was recently acquired by Cerberus Capital Management) possesses the resources and capacity to develop its offerings to meet the needs of even more borrowers – “to help the business capitalise on its core strengths of lending and servicing, and to leverage the resources and expertise our parent company Cerberus brings to the table. To also ensure we are well positioned for the growth we see coming”.

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MPA top

2019

ARE YOU AUSTRALIA’S TOP COMMERCIAL BROKER? If you have celebrated a successful year of strong commercial deals, we want to hear from you.

Simply share some basic figures around your total individual settlement volumes for the 2018 calendar year for your chance to be named one of MPA’s Top 10 Commercial Brokers.

Survey close 22 March at www.mpamagazine.com.au

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PEOPLE

OTHER LIFE

TELL US WHAT YOU GET UP TO Email rebecca.pike@keymedia.com

“I have since made a commit ment to ma king a n effort to play sport a nd be a ctive beca use I believe having a mental a nd physical bala nce in life is always mu ch better tha n being work-driven”

2014

Year Nguyen started playing rugby

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Number of times he plays each weekend

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Tries scored in 2015 in games played across Melbourne

KICKING OUT STRESS Option Finance Australia credit adviser Andy Nguyen maintains a healthy disposition by making rugby a regular part of his life WHEN OPTION FINANCE AUSTRALIA credit adviser Andy Nguyen was in high school, rugby was something he enjoyed watching and playing. After he entered the workforce, it became a way for him to escape the grind and clear his head.

“When I’m having a bad day, rugby is something for me to look forward to playing or watching with my friends,” Nguyen tells MPA. “It’s the type of sport that never gets boring. To watch all the players make their spectacular sprints and outrun the other team is something I find magical.”

Nguyen usually plays during winter and in the mornings when he and his friends feel more energised. After the game, they head out to grab lunch and talk about their week.

There was a time when work so consumed Nguyen that it was the first thing he thought about when he woke up. When it became too much to handle, he brought rugby back into his life.

Ever since he started playing rugby again, Nguyen has noticed positive changes. He’s proud that the enthusiasm he brings to work matches what he demonstrates on the field when it’s about winning a game.

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