Mortgage Professional Australia by Key Media

MPAMAGAZINE.COM.AU ISSUE 20.11

THE BIG FOUR GO LIVE The major banks answer brokers’ questions on turnaround times, channel conflict and COVID-19 SME LENDING How lenders and brokers are supporting small business

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BROKER TECHNOLOGY The tools and innovations set to help brokers through COVID-19 and beyond

JAMES ANGUS Bluestone’s chief customer officer talks about its broker-centric mindset

19/10/2020 2:01:41 PM

In real life, your clients need alternative solutions.

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Disclaimer: All applications are subject to the credit provider’s credit criteria. Terms, conditions, fees and charges apply. ©Pepper Group Pty Limited ABN 55 094 317 665; AFSL 286655; Australian Credit Licence 286655 (“Pepper”). All rights reserved. Pepper is the servicer of home loans provided by Pepper Finance Corporation Limited ABN 51 094 317 647. Pepper Asset Finance Pty Limited ACN 165 183 317 Australian Credit Licence 458899 is the credit provider for asset finance loans. Pepper Money Personal Loans is a brand of Pepper Group Pty Limited. Credit is provided by Now Finance Group Pty Ltd, Australian Credit Licence Number 425142 as agent for NF Finco 2 Pty Limited ACN 164 213 030.

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6:07 AM

NOVEMBER 2020

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

Technology is front of mind

04 Statistics

The impact of COVID-19 on lending

SUPPORTING THE SME MARKET

One year of home loans for this smartbank

06 News analysis

The industry's take on proposed regulatory reforms

FEATURES

08 Lender perspective

Small businesses have needed extra help to secure finance this year

FEATURES 48 People leadership

SPECIAL REPORT

How the environment of a business can be its best asset

Turnaround times, channel conflict and the effects of COVID-19 were big talking points at this year’s livestream

50 Getting it done

MAJOR BANKS PANEL 2020

BIG INTERVIEW

JAMES ANGUS Bluestone’s chief customer officer explains how the non-bank is transforming as it brings a broker-centric mindset to the business

A four-point plan for boosting your productivity

FEATURES

BROKER TECH IN TIMES OF CHANGE The innovations helping the industry adapt, and a look to the future of tech

44 FEATURES

CONSOLIDATING CONSUMER DEBT

Why debt consolidation is a tool brokers should have in their arsenal

PEOPLE 54 Brokerage insight

Meet the broker who struck out on his own during the pandemic

56 Other life

Mountain biking is how this broker chooses to relax

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UPFRONT

EDITOR’S LETTER www.mpamagazine.com.au

Thankful for new technology

here are months in which not a lot happens and there are months like the last one, when my email inbox was flooded. The RBA may not have cut the interest rate at the start of the October, but there was the much-anticipated federal budget and, just prior to that, the government’s proposal to remove responsible lending obligations. Add to this all the other interviews and events, and it has been one jam-packed few weeks. You can see from our report (page 14) that we recently hosted the annual Major Banks Panel. While we usually do this in front of cameras in a hotel in Sydney, that obviously could not happen this year, particularly with three of the four representatives based in Victoria. Despite it being virtual, I hope viewers got a lot out of the discussion. If you didn’t manage to log in on the day, you can read about what the panellists had to say in this issue and even watch the live discussion on the MPA website. Other interviews for this month’s magazine were around broker technology and

Technology has been a hot topic this year as we have all been forced away from the face-to-face networking the industry is so well known for SME lending. Technology has been a hot topic this year as we have all been forced away from the face-to-face networking the broker industry is so well known for. (In fact, the closest I’ve come to real face-to-face networking in the last couple of months has meeting my physiotherapist’s mortgage broker dad in the waiting room – which was a pleasure, and I thank him for his subsequent time talking to me about the industry!) But technology has been so useful; not only has it allowed us to continue with the relationships we’ve all built but it has also made lending processes much easier for both brokers and customers. In a special feature on broking technology (page 36), I speak to a few groups about what they have seen in terms of innovation this year, how they are using it to support brokers, and where they think it could evolve beyond the coronavirus pandemic. Although there’s only one more issue left this year, there is still a lot to come. In the meantime, I hope you enjoy this one.

NOVEMBER 2020 EDITORIAL

SALES & MARKETING

Editor Rebecca Pike

National Sales Manager Claire Tan

Journalist Tom Goodwin

Global Head of Media Marketing Lisa Narroway

Contributors Wendy Born, Nicola Moras, Melissa Christy

CORPORATE

Production Editor Roslyn Meredith

Chief Executive Officer Mike Shipley

ART & PRODUCTION

Chief Operating Officer George Walmsley

Designer Cess Rodriguez Traffic Coordinator Kristine Jamir

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 and Manila

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

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

www.mpamagazine.com.au

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Partnering with SFG as my aggregator was an easy decision. I was looking for a high tech and high touch model and SFG offered both. Bernard Desmond BLANK FINANCIAL

1300 303 382â&#x20AC;&#x192; specialistfinancegroup.com.au Australian Credit Licence No. 387025

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UPFRONT

STATISTICS

The impacts of COVID-19

DECLINE IN REAL ESTATE MARKETS

The coronavirus pandemic has shifted the way banks and non-banks are looking at lending WHILE THERE was a fairly positive outlook for the lending market at the start of this year, COVID-19 has brought a tidal wave of uncertainty about real estate debt. By January, the residential market had recovered almost all of the losses suffered between 2017 and 2019. Most lenders were looking for new opportunities to reduce their loan books, with 87% expected to maintain or loosen their investment credit criteria. But as new risks continue to emerge since the start of the pandemic, investors and lenders are likely to face ongoing uncertainty

60%

of lenders require 60–100% presales

93%

of banks require 60–100% presales (+8% since 2019)

for at least the next 12 to 18 months. Providing an overview of the current market, Stamford Capital’s Real Estate Debt Capital Markets Survey compares its findings from February and August 2020, based on feedback from banks, non-banks, private lenders, family offices and super funds. Among the key trends highlighted by the research are that the non-banks are moving in as banks tighten their lending criteria; there continues to be liquidity in the sector despite declining markets; and lending margins are expected to increase.

17%

of lenders expect presales to increase

The commercial office and retail markets are in decline, according to the majority of survey respondents, while around half said the same about residential development sites and apartment housing markets. Residential was already subdued well before COVID-19, due to the regulator requiring 100% presales cover, which prevented a lot of supply being built or delivered. However, the industrial market appears to have been given a boost.

51%

say residential apartments are in decline (up from 9.26% in February 2020)

50%

of non-banks require no presales

Source: Stamford Capital Real Estate Debt Capital Markets Survey 2020

INCREASING LOAN BOOKS

The market expects lending activity to continue. Just over 71% of total respondents said they expected to increase their loan books, and when looking at non-banks in particular, this grew to 82%.

70%

expect major banks to maintain or increase investment appetite

84%

expect non-banks to maintain or increase investment appetite

Source: Stamford Capital Real Estate Debt Capital Markets Survey 2020

LESS OPTIMISM ABOUT CONSTRUCTION

The proportion of respondents expecting to maintain or increase their appetite for construction loans is lower than the proportion that expect to increase their overall loan books.

57%

expect major banks to maintain or increase construction appetite

68%

expect non-banks to maintain or increase construction appetite

Source: Stamford Capital Real Estate Debt Capital Markets Survey 2020

www.mpamagazine.com.au

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35%

91%

say the industrial market is in peak phase

83%

say the retail market is in decline

40%

say the commercial property investment market is in decline (up from 4.32% in February 2020)

say the industrial market is in early growth phase

50%

31%

say residential development is in decline (up from 15.42% in February 2020)

believe the residential markets are in recovery phase

Source: Stamford Capital Real Estate Debt Capital Markets Survey 2020

ICR NOT AS MUCH OF A ROADBLOCK

The interest cover ratio (ICR) – net rental income divided by the interest cost – is less of a hurdle this year as the RBA cash rate reduction has eased some difficulty for property investors.

86%

47%

of term debt lenders are looking to maintain their interest cover hurdles

of non-banks have no ICR requirements

62%

of term debt lenders require ICR of 1.5x or higher

Source: Stamford Capital Real Estate Debt Capital Markets Survey 2020

NON-BANKS MOVING IN

As uncertainty lingers, lenders expect the majors to tighten lending across the board, but larger numbers expect the non-banks to increase their investment and construction lending margins.

52.6%

expect major banks to increase their investment lending margins

56.7%

expect major banks to increase their construction lending margins

63.9%

expect non-banks to increase their investment lending margins

70.0%

expect non-banks to increase their construction lending margins

Source: Stamford Capital Real Estate Debt Capital Markets Survey 2020

www.mpamagazine.com.au

UPFRONT

NEWS ANALYSIS

Removing the barriers After years of heavy scrutiny of loan applications, the government is suggesting reforms that would see responsible lending obligations scrapped EVER SINCE regulations were introduced a decade ago to regulate the provision of consumer credit, it has been a common complaint that banks have taken assessing living expenses to the extreme, lengthening turnaround times and making the workload for a broker much heavier than before. Treasurer Josh Frydenberg is trying to change that, however, by suggesting reforms to remove “unnecessary barriers”. The principles-based “one size fits all” framework originally implemented has become “overly prescriptive, complex and unnecessarily onerous on consumers”, he said, announcing a plan to reduce the cost and time it takes consumers and businesses to access credit. The reforms include removing responsible lending obligations from the National Consumer Credit Protection Act 2009, with the exception of small amount credit contracts and consumer leases. Banks will continue to comply with APRA’s lending standards requiring sound credit assessment and approval criteria, but the reforms will allow lenders to rely on the information provided by borrowers, “replacing the current practice of ‘lender beware’ with a ‘borrower responsibility’ principle. Putting the broker industry in a strong position The industry has responded positively to the proposed reforms. The MFAA said in a statement that while there may have been a strong rationale for the NCCP principles following

the GFC, they were “no longer fit for purpose”. Combined with the uncertainty following the royal commission, the responsible lending regime has led to lenders combing through living expenses with no consideration for individual circumstances or the likelihood of borrowers changing their spending habits, and as a result the flow of credit has been restricted. “Once these changes are implemented, we should begin to see faster turnaround times for qualified borrowers, which has been an increasing issue for lenders and a point of frustration for many of you, particularly this year,” he said. “These changes will leave the mortgage broking industry in a strong position, as the channel will now be further

but he supported the announcement anyway. “The government is right to take decisive action to promote lending at a time of great uncertainty and the biggest peacetime economic contraction since the 1930s,” Lawrence said. “This environment requires

“We should begin to see faster turnaround times for qualified borrowers, which has been an increasing issue for lenders and a point of frustration for many” Mike Felton, MFAA differentiated for customers beyond the experience, expertise, choice and convenience already offered by the channel.” Naturally, the banks have also welcomed the proposed reforms. Customer Owned Banking Association CEO Michael Lawrence said customer-owned institutions had always been responsible lenders and did not need prescriptive and complex laws to lend responsibly,

policymakers and all stakeholders to bring a new lens to all regulatory settings. “There are multiple layers of regulation applying to lending, so simplifying these regulations while maintaining strong consumer protection, particularly for vulnerable consumers, is very welcome. This is good news for borrowers and lenders. Applying for a loan will be a simpler process.”

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KEY ELEMENTS OF THE PROPOSED REFORMS Removing responsible lending obligations from the National Consumer Credit Protection Act 2009, with the exception of small amount credit contracts (SACCs) and consumer leases, where heightened obligations will be introduced. Ensuring that authorised deposit-taking institutions continue to comply with APRA’s lending standards requiring sound credit assessment and approval criteria. Adopting key elements of APRA’s ADI lending standards and applying them to non-ADIs. Protecting consumers from the predatory practices of debt management firms by requiring these firms to hold an Australian Credit Licence when they are paid to represent consumers in disputes with financial institutions. Allowing lenders to rely on the information provided by borrowers, replacing the current practice of ‘lender beware’ with a ‘borrower responsibility’ principle. Removing the ambiguity regarding the application of consumer lending laws to small business lending. Two sides to the consumer protection argument Australian Banking Association CEO Anna Bligh said it was important that the changes should strike the right balance between maintaining strong consumer protections

consumer leases. Frydenberg’s reforms seek to protect customers from the ‘predatory practices’ of debt management firms by requiring them to hold an Australian Credit Licence when they are paid to represent customers in disputes with financial institutions.

“There are multiple layers of regulation applying to lending, so simplifying these regulations while maintaining strong consumer protection ... is very welcome” Michael Lawrence, COBA and providing credit access to the economy. “Australian banks understand their role in supporting customers and rebuilding the economy. Ensuring the flow of credit to families and businesses, with the right customer protections, is paramount,” she said. Bligh also praised the move to protect vulnerable customers using debt management firms, small amount credit providers and

However, some groups have raised concerns about the reforms, saying they will do the opposite of protecting customers. While some in the lending industry believe the royal commission created extra hurdles, the CEO of the Financial Rights Legal Centre, Karen Cox, has said the industry should be remembering and learning from it. “Watering down credit protections will leave

individuals and families at severe risk of being pushed into credit arrangements that will hurt in the long term,” she said. “Our service has helped thousands of Australians drowning in debt, and we continue to see legacy debt that predates the Hayne royal commission. How can we have so quickly forgotten the hard lessons from the GFC and the Hayne royal commission?” Alan Kirkland, CEO of consumer group CHOICE – which has been somewhat critical of the mortgage broker industry in the past – commented that the reform plan had “disaster written all over it”. “Piling more debt onto people who can’t afford it has never solved an economic crisis,” he said. “Products like credit cards are complex. That’s why banks make so much money out of them. Banks are in a much better position to assess a person’s ability to repay, so they need to shoulder some of the responsibility.” The government will consult publicly before finalising any legislation. In the meantime, you can find out more on the Treasury website.

www.mpamagazine.com.au

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UPFRONT

LENDER PERSPECTIVE

A journey into home loans After receiving its full banking licence in mid-2019, smartbank 86 400 moved fast to offer home loans. Home lending lead Melissa Christy explains its journey over the past year WHAT A year to launch into the home loan market. Designing the first digital home loan for mortgage brokers wasn’t all smooth sailing, and then scaling it during a global pandemic wasn’t something that could be planned. We were fortunate enough that what we built was free of legacy systems and processes, so brokers didn’t need to meet a customer face-to-face, and on that front nothing had to change. Our journey to launch was built around creating a process that removed the key pain points both brokers and customers face during the home loan process – primarily, the speed to approval and the paperwork involved in lodging the deal. Once launched, it was all about piloting with brokers; we were an unknown brand and brokers couldn’t actually use us until we went live. While in the pilot phase, we spent a lot of time refining our system and processes once we were able to gauge what was working and what wasn’t. Listening to brokers to find out what they wanted from a home loan and a process was crucial. Brokers are best equipped to find the right lender and the right loan for customers, so leveraging their experience has helped us build a better solution. Scaling a smartbank We have built the first digital home loan for mortgage brokers, using a number of key vendors. Working with all of them simultaneously has its challenges, but it’s equally rewarding because they have been able to assist us in building a market-leading offering that we are continually improving. The interest we have raised over the past

12 months has made brokers very keen to become accredited and give us a go, because what we’re doing is so unique. Most recently, AFG and Connective have added us to their panels, and we are now available to over 50% of brokers in the Australian market.

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

Learning from experience So, where are we now, nearly a year on from launch? And what have we learned along the way? Well, during that time we have made over 100 changes to our process – primarily driven by broker and customer feedback – to get the best possible outcomes. We originally collected and verified 12 months of income and expenses digitally, but have since changed the verification period to three months for expenses, reducing processing times for brokers and their clients and maintaining meaningful spending patterns. We also introduced a tiered pricing structure for our variable Own home loan to power up the product as we grew and it became available to more brokers. Having a quick turnaround time was important, but it was just as important for customers with great deposits to be rewarded with an equally great rate.

Brokers are best equipped to find the right lender and the right loan for customers, so leveraging their experience has helped us build a better solution Of course, the fact that we’re so unique has also come with its challenges. Our process is very different to what’s already out there, so naturally brokers and customers have questions and need some help. What we have found is that the second or third deal that a broker lodges with us takes a lot less time than the first. Because of this they’re able to truly benefit from the speed and efficiencies of the digital process. That being said, our BDMs and broker support team are always on hand to help with any scenarios. These quick turnaround times have been a real differentiator. Being able to give a broker and their customer an answer on their finances as soon as possible removes so much stress from the process. It frees up the broker to continue building their business, and it helps homebuyers find the place that is right for them, reducing the anxiety that comes from waiting for an answer on the application.

All the changes we have made have been designed to drive better outcomes for brokers, satisfy more customers and improve internal processes in order to continue providing a high level of service.

Why brokers? Brokers help support their customers through what can be a really hard and complex decision. We have built a product that helps them do that in a new, fast and easy way, turning the home loan application process on its head. Ours is a smart alternative to all the other lenders out there, providing both brokers and their customers with the best possible home loan experience.

Melissa Christy is the home lending lead at 86 400, Australia’s first smartbank.

www.mpamagazine.com.au

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PEOPLE

BIG INTERVIEW

JAMES ANGUS: A BROKER-CENTRIC APPROACH A year into his role as Bluestone’s chief customer officer, James Angus explains to MPA how the non-bank has transformed since its launch into the prime lending space towards the end of last year

AFTER A long career at Macquarie, helping the bank relaunch into the broker space and seeing it go from strength to strength, James Angus felt it was time to step away and let the teams he had helped to build run the business. Angus had worked at the bank since 2001 and spent some of this time heading up its third party businesses in the US and Canada.

something special. In September last year, he joined Bluestone as its chief customer officer. Traditionally known as a specialist lender, the non-bank announced at around the same time that it would be launching into the prime lending space. “It was a marriage between what I was looking to do in my aspirations and the

“[Brokers are] telling us we’re doing a really good job, which is important for everyone at Bluestone because we have really invested in transforming ourselves” Looking back at his years at Macquarie, he says its current success in the broker market did not happen overnight. “It was a long journey and a lot of hard work by a lot of people,” Angus says. When he stepped back from the business in May 2019, he knew he wanted to find a role that would give him the opportunity to build

aspirations of Bluestone,” Angus explains. Angus sees his role at Bluestone as about bringing a broker-centric mindset to the business. Over his first year at the non-bank – and the first year of its prime offering – he has been pushing the notion that prime lending is not just about product features or pricing; it’s about the experience.

Angus says Bluestone doesn’t make any decisions about product, price or other material changes without first seeking feedback from brokers, and everyone at Bluestone is measured by how satisfied brokers are. In focusing on experience, Bluestone has seen its NPS scores increase from +39 to +50. “For the most part they’re there telling us we’re doing a really good job, which is important for everyone at Bluestone because we have really invested in transforming ourselves, and our success is measured by the success of our brokers,” Angus says.

The learning journey never ends One of the many things Angus loves about the broker industry is the endless opportunities to learn. Speaking to brokers and BDMs every day, he continues to ask lots of questions because he says when you stop doing that you stop learning. He adds that one of his biggest learnings over his years in the industry is that sometimes you can lose sight of how important the personal touch is, and he is making sure Bluestone doesn’t do that.

www.mpamagazine.com.au

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PROFILE Name: James Angus Title: Chief customer officer Company: Bluestone Years in the industry: 20+ Career highlight: “It’s got to be Macquarie recently being named Major Bank of the Year at the MFAA awards. It was an aspiration we had about three or four years ago.” Career lowlight: “When we made the decision to shut down our US mortgage business in early 2008 as a consequence of the GFC. We had to inform about 125 employees who we had worked very closely with that they had lost their jobs. A very difficult day...”

www.mpamagazine.com.au

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ts to ments

PEOPLE

BIG INTERVIEW

“At all times we’re going to have people connecting with brokers about their applications and customers. Our credit assessors will speak to brokers, and they’ll make sure they understand the application and what the customer wants to achieve,” he says. “There’s obvious benefits to credit scoring and automated decisioning, but don’t lose sight of the fact that brokers love having conversations about their customers and their businesses and what they’re trying to do.” For Bluestone, brokers are its “lifeblood”. Angus says this is why the non-bank has gone through such a transformational change over

A LOOK BACK AT THE INDUSTRY With more than 20 years in the finance industry, Bluestone’s chief customer officer, James Angus, has seen things change and evolve. Looking back over this time, he says the broker industry has transformed. While it used to be much more one-dimensional, with brokers focusing purely on home loans, he says brokers have really changed the way they think about themselves and their customers, and the market in general. “What’s been amazing is we now have some very sophisticated, efficient, well-led, well-capitalised broking businesses,” Angus says. “There are some very smart individuals in our industry operating big and successful broking businesses, and that wasn’t so prevalent when I first started. There were more single operators in the early days, and now we’ve got many big organisations and it’s not just home loans; it’s commercial, asset finance, financial planning, etc. It’s the sophistication and the diversity that’s changed.”

“The awareness journey never ends. We have always got to find unique and different ways of raising awareness of who we are” the past year. When the group launched its prime offering, it had to focus on educating the channel and raising awareness of what it was doing. Bluestone regularly deals with around 750 brokers, but about 12,000 are accredited with the lender. Recently, it identified that there were around 8,000 brokers who had had no engagement with the lender since it had launched prime. They had not opened emails or had conversations with BDMs, so likely knew nothing about the changes. Angus and the team set out to change that. “We identified there was a risk if a broker went to lodge an application without knowing the changes we’d made. We knew that was not going to be a great experience for the broker or their customer,” he says. “So we invited them to attend an accreditation refresher, and we had almost 3,000 brokers attend. If I look at our September applications, about a third are from those brokers that attended. “I’m raising that because the awareness journey never ends. We have always got to find

unique and different ways of raising awareness of who we are.”

Investing in the future While the prime offering now accounts for 70% of loans written at Bluestone, Angus is quick to stress that this does not mean there has been a drop in other products. In fact, they have continued to increase. Rather than being a lender that specialises in one particular area, Bluestone is able to provide customers with a more holistic experience by offering both specialist and prime lending. “Typically your specialist customer has had some sort of challenge that’s short-lived, so that customer who might have had a credit default or missed some payments on their home loans would generally work with their broker to fix that issue,” he explains. “They would have stayed at Bluestone for two years or so and then would have had no alternative but to go somewhere else. We can now work with them to move them into a prime loan with a prime interest rate.

So there is a clear retention strategy behind launching prime.” As Bluestone continues to invest in its people and broaden its network, its decisions towards the start of the COVID-19 pandemic have left it in good shape to move forward. Due to the type of lending Bluestone had done historically, it saw customer hardship much earlier on than other lenders and was able to react faster and educate its customers at the start of the hardship process. Now, about half of those customers who were in hardship are making their repayments because Bluestone took the time to understand their individual circumstances. Angus says there are a few things the lender will be working on in the year ahead, including a platform upgrade and new products. With a focus on people, the new technology will provide better workflows and tools, allowing for a better experience for brokers and customers, as well as an enhanced capability around product development. The other big piece Bluestone is working on is brand awareness as it continues to educate the industry and customers that it is about more than just non-conforming lending. “What we want is for people to recognise the Bluestone brand and recognise that we are a strong brand in the Australian market,” Angus says.

www.mpamagazine.com.au

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SWITCHING PAYS Refinance cashback

3000

Switch your client’s home loan to Westpac and they could get $3000

Max LVR 80%. Min loan $250k. Excludes Portfolio Loans, switches, owner occupier with interest only repayments and refinances of home loans within Westpac group. First refinance application only, apply by 31/01/2021. T&Cs, exclusions, fees apply.

westpac.com.au/brokers

Things you should know: Credit criteria, fees, charges apply. T&Cs available at Westpac. Offer current as at 18/09/2020. Only 1 $2,000 cashback per property refinance will be paid regardless of the number of loans involved. Only 1 $1,000 bonus cashback will be paid regardless of the numbers of customers, properties or applications involved. Offer may be varied or withdrawn at any time. Excludes Portfolio Loans, switches and refinances of home loans within the Westpac Group which include St.George, Westpac, Bank of Melbourne, BankSA and RAMS. Offer not available for Owner Occupier Interest Only loans or residential lending originated under family or company trusts. Premier Advantage Package: T&Cs and a $395 annual package fee apply and is payable from an eligible Westpac Choice transaction account. You must hold a Westpac Choice transaction account to qualify and receive the benefits of the Premier Advantage Package. Read the Westpac Choice transaction account T&Cs and consider if it’s right for you. See westpac.com.au. The cashback will be paid into a Westpac Choice transaction account within 60 days of settlement. The transaction account must be linked to the home loan at the time of settlement and kept open for 60 days after settlement. Tax consequences may arise from this promotion for investors and customers should seek independent advice on any taxation matters. © Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714. 20147/1020

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SPECIAL REPORT

MAJOR BANKS PANEL 2020

2020

MAJOR BANKS PANEL After a year like no other, the four major banks gathered again for MPAâ&#x20AC;&#x2122;s annual livestream, except this time it was virtual. Discussing turnaround times, channel conflict and, of course, COVID-19, the representatives of the big four explained how they have continued to support the broker channel in 2020

www.mpamagazine.com.au

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THE COMPLEXITIES and challenges of 2020 have been very different to those of recent years. They were not born out of commissions, changes in legislation or economic impacts. The industry – like all industries – has had to navigate the environment without really knowing what lies ahead. As one of the big four began by saying, there has been no blueprint for this year. When borrowers started losing their jobs, or having their salaries reduced, brokers kicked into action to help find a solution. At the same time, many borrowers saw the changes and incentives from the government as their opportunity to get into the housing market. In this year’s Major Banks Panel, the heads of third party at the big four had the opportunity to explain how they were supporting brokers as they adapted in the face of these changes. Of course the pandemic also meant that MPA’s annual livestream interview with the major banks had to be done virtually this year; three of the four participants live in Victoria so were definitely not able to join an in-person event. Rather than holding the interview behind closed doors – or screens – we felt it was important to continue the tradition of the live interview with the big four, allowing brokers unedited

access to what the major banks had to say. And while there were the usual challenges that come with virtual conversations, such as connection issues and being unable to read body language, everyone is more or less used to this way of conducting business now, so the panel discussion ran fairly smoothly. There were questions prepared beforehand, but we also received more than 200 questions from brokers. The strong engagement was not surprising after the last few months. Most of the questions received were on bank turnaround times and SLAs, which became the main focal point of the conversation. The topic that attracted the second-highest number of questions was channel conflict. A number of brokers said they were facing slower turnaround times than if the customer went directly to the bank, as well as different policies. The four major banks tackled these topics and more during the hour-long conversation. Read the full report on the following pages, and if there are any further questions you have, the banks are encouraging brokers to reach out to their BDMs. Thank you to the major banks for taking the time to join in on the day, and to all the brokers who watched and sent in questions.

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SPECIAL REPORT

MAJOR BANKS PANEL 2020 THE PANELLISTS

HOW HOME LOAN FINANCE HAS CHANGED DURING THE COVID-19 CRISIS

203,780

Number of new home loans settled between April and August 2020

Adam Croucher General manager, third party banking, Commonwealth Bank

Simone Tilley General manager retail broker, ANZ

Steve Kane General manager, broker distribution, NAB

Warren Shaw Head of broker distribution, Westpac

137,372

Number of loans refinanced between April and August 2020

9.2%

Growth in the value of new home loans from March (pre-COVID) to August 2020

vw We’ve all faced a difficult year,

and brokers have worked hard to navigate the complex environment. What are you doing to reassure brokers that you are working in their best interests? At the start of 2020, the broking industry was full of positivity. Almost a year on from the royal commission’s final report, brokers were going into a year in which things were going to be clearer and more certain, or so they thought. Instead, the first year of the new decade turned into the least clear or certain period many had ever experienced. As life changed

work over the last several months. Warren Shaw, head of broker distribution at Westpac, said brokers were uniquely placed to play the role they have this year. As thousands of small businesses across Australia struggled with consumer caution and lockdowns, brokers were among them, understanding their issues better than any large organisation, he said. “Westpac sees it as a partnership in terms of helping customers through the times that we’ve been through in the last eight months, and there are a number of things that we’re doing to support customers clearly, and brokers,” Shaw said. “But first and foremost,

“There’s a lot coming from every lender out there, so we’re just trying to make sure we’re clear and simple in our communications” Adam Croucher, Commonwealth Bank for people across Australia, brokers switched into gear. Keeping up with the stream of updates from banks and the government, they helped borrowers refinance, organised repayment pauses, supported small businesses needing finance, and dealt with first home buyers trying to get onto the property ladder. The major banks began the livestream panel by thanking brokers for their hard

it’s about working with mortgage holders to make sure we don’t put customers in a position that they can’t get out of.” Shaw mentioned actions like repayment pauses and individual assessment of needs, which many banks introduced earlier in the year. He said Westpac joined other lenders in acting quickly at the outset to reassure brokers that trail would not be affected, and

37.3%

Growth in the number of first home buyers from August 2019 to August 2020

4.6%

Drop in the value of investor loans from August 2019 to August 2020

Source: Ratecity.com.au

provided both technology and policies to help brokers’ customers – but he admits it was not all smooth sailing. “Technology normally outpaces policy, but in the last few months we’ve had policy changes to adapt to dealing with people remotely, where technology hasn’t kept up,” Shaw explained. “I think as we get those changes in they’ll get better, less clunky, but it was all about acting with speed, and that was the key thing to give people confidence in the system.” ANZ’s general manager retail bank, Simone Tilley, added that it had been a huge year for everyone, praising what had been achieved as “remarkable”. Priding itself on its partnership with brokers, ANZ has delivered key changes to the market beyond just the pandemic. Tilley gave examples of the bank’s qualitative file reviews and net-of-offset

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“We also saw record volumes, the highest in ANZ’s history, and those volumes were unquestionably driven by the partnership we have with Australian brokers” Simone Tilley, ANZ commission changes. Leaders at ANZ are also active in the Combined Industry Forum, with Tilley herself becoming co-chair earlier this year. She also called out the bank’s investment in its BDMs, its operating model and education programs, as well as the services it has offered due to the pandemic, with support including a free confidential wellbeing service for brokers and staff. “We did this just to ensure that we’re doing everything possible to support the industry during these unprecedented times,” Tilley said, but she acknowledged there had been some challenges. “We know this year we’ve had SLA deterioration, but one thing I do want to reiterate is that every single week we send a note out to aggregators sharing our SLAs across refinances and purchases just so you’re able to communicate and manage the customer’s expectations along the way,” she explained. “I’m confident that, SLAs aside, when brokers think of ANZ more broadly, they know we act in the best interests of brokers, and I think we’ve evidenced this over an extended period of time.” On top of similar wellness events and keeping brokers on top of their borrowers’ circumstances in terms of things like deferred repayments, NAB has put its focus on speeding up innovation to cater for the inability to meet face-to-face. Making sure that brokers could not only continue to write business and speak to customers but also do so in a way that complied with regulations, the bank intro-

duced facilities like DocuSign. Within two weeks of the first lockdowns NAB staff were up and running, supporting brokers in virtual sessions. “It was really important to us that we provided excellent service to brokers, who once again as small business operators or single operators would be by themselves, so we very quickly adapted,” said Steve Kane, NAB’s general manager, broker distribution. “It’s imperative that if you’re going to be in this market you recognise the value that brokers contribute. Where there were massive changes that were happening because of COVID-19, it was our responsi-

bility to do as much as we possibly could on a technology front, a relationship front and a support front.” Echoing the sentiment of the previous three speakers, Commonwealth Bank’s general manager, third party banking, Adam Croucher, said what had been achieved over the past year was phenomenal. He said one of the areas the major bank had been focusing on was making sure it had the data and analytics to get brokers through this challenging period; it also added more than 600 extra staff to its financial assistance lines to support both brokers and customers. Croucher said that while it would be great to have all the answers, lenders had done an excellent job of being agile and feeding information back to the aggregator groups. “Beyond the economic impacts, brokers have had to stay up to date with regular policy changes,” Croucher said. “One area we’ve been really focused on is making sure they have direct access to credit managers so that brokers can stay up to date by having regular conversations with our credit assessors.

GROWTH IN FIRST HOME BUYERS

13,000 12,000 11,000 10,000 9,000 8,000

Aug 19 Sep 19 Oct 19 Nov 19 Dec 19 Jan 20 Feb 20 Mar 20 Apr 20 May 20 Jun 20 Jul 20 Aug 20 Source: ABS, Lending Indicators, August 2020

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SPECIAL REPORT

MAJOR BANKS PANEL 2020 HAVE PRODUCT RANGES AND PRICING IMPROVED OR WORSENED OVER THE LAST YEAR?

Improved significantly

10.60%

Improved

43.46%

No difference

38.87%

Worsened Worsened significantly

6.71%

“First and foremost, it’s about working with mortgage holders to make sure we don’t put customers in a position that they can’t get out of ” Warren Shaw, Westpac “I think we’ll continue to see a number of policy changes over the next few months, and a key differentiator for us is making sure that our dedicated support, our relationship managers, our phone lines and our CommBroker email blasts are up to date and relevant. But we also understand that there’s a lot coming from every lender out there, so we’re just trying to make sure we’re clear and simple in our communications.”

What insights can you share from the last six months? What kinds of borrowers have come through to you? The four major banks have all seen similar trends over the past year: while some borrowers needed help with their repay-

ments, new business continued to come in to the banks. Looking back at 2020, Croucher said he had seen significant shifts. For instance, for the first time internal and external refinancing accounted for more than half of all mortgage lending at CBA. First home buyers have also been a strong segment this year as new borrowers were supported by the First Home Loan Deposit Scheme. As one of two major banks participating in this scheme, CBA has helped around 3,000 first home buyers purchase new properties. “We’re also seeing a large shift towards fixed rates, from nearly 10% of new business flows prior to March to nearly 40% of volume in June, driven by historic low

0.35%

Note: Based on survey responses from January 2020, before the COVID-19 restrictions. Source: MPA Brokers on Banks 2020 survey

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THE BANK BEHIND THE BROKER behind Alfie’s new playground

When it comes to helping families find their happy place, our BDMs are with you every step of the way. We give you unrivalled support, education, news and tools to help you do your best by your clients. Contact a NAB BDM or visit nabbroker.com.au

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SPECIAL REPORT

MAJOR BANKS PANEL 2020

fixed rates,” Croucher said. “So there are certainly some trends that we’re seeing, and we’re expecting to see those trends continue in the short to medium term as we enter a sustained low-rate environment.” ANZ has seen the same in terms of the rise in refinancing and fixed rate loans. Tilley also pointed out the work the bank had done with brokers and customers, particularly in the earlier stages of the pandemic. It sped up innovation, worked with its branches to reduce human contact, and assisted customers with requests for loan repayment deferrals. Alongside the increase in borrowers wanting to refinance or fix their mortgage rates, Tilley said ANZ had run a campaign that saw huge success. “That really took off, but now I have to say we are really back to far more normalised, sustainable levels,” she said. “We also saw record volumes, the highest in ANZ’s history, and those volumes were unquestionably driven by the partnership we have with Australian brokers.” NAB also experienced high levels of refinancing thanks to strong incentives, and Kane said this had created a problem for service. But with NAB’s financial year ending in September, he said it had probably been the strongest year for the broker business since he joined the bank. Shedding further insight into first home buyers, Kane said around 45% of this market were borrowing for new builds. Furthermore, he added, “We know that around 65% of all applications approved by NAB came through the broker channel, so the broker channel supported customers in that area strongly, and that’s a very good thing because that’s enabled first home buyers to get into the marketplace.” Expecting refinancing to remain strong into 2021, Shaw noted that purchaser activity had also been high at Westpac, but investor activity had dampened. He added that this had created the opportunity for first home buyers to get into the market, which was “a great thing”.

Looking ahead, Shaw said people were going to begin considering what the next 12 to 18 months were going to look like, and this could be good news for brokers. “We’re starting to see some customers think about lifestyle choices: whether the home they live in is going to be suitable for long-term working arrangements from home in particular,” he said. “If you look at the search engines you see a 30–40% increase around searches

for things like studies and gardens and those aspects, so I think the broking community should feel quite buoyed by the fact that there’ ll be strong underlying purchase activity through 2021.”

A number of brokers have sent in questions around channel conflict, saying that customers get better turnaround times and credit policies by going directly

“It’s imperative that if you’re going to be in this market you recognise the value that brokers contribute” Steve Kane, NAB

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“COVID hasn’t been easy for us [but] I’m very proud that we’re making sure we’re looking at the best interest of the customer” Adam Croucher, Commonwealth Bank to a bank branch. Are you doing anything about that? In this year’s Brokers on Banks survey, eight in 10 brokers said channel conflict was a problem. The issue has clearly not diminished in the eyes of brokers, as it was the topic that received the second-highest number of questions in the lead-up to the panel discussion.

Brokers asked why loans were processed faster through a bank branch than through a broker and why branches were able to offer better deals than brokers. Others asked how the banking culture could change to enable banks and brokers to work together. The first to respond, Kane said there was no difference between credit policies for the first party and third party channels,

DO YOU BELIEVE CHANNEL CONFLICT EXISTS?

17.31% 32.51% 50.18%

Not a problem Minor problem Major problem

BROKER QUESTION Why are you continuing to offer cash incentives when turnaround times are already blowing out?

Warren Shaw, Westpac: A competitive marketplace is something we all want, so I think that would be broadly welcomed by the industry. There are competitive offers in the marketplace that brokers can talk to customers about, whether it be a refinance to reduce costs or a better deal on their next home, so offering those incentives should be embraced. They’re related to turnaround times to a degree, but for a multi-channel business I could choose not to put them in the broker market and only allow the first party business or the digital market to take it, but that would be the wrong thing. Adam Croucher, Commonwealth Bank: If you think about the market and what it’s done over the last six months, it’s certainly played a big part with the rebates to drive that stimulus and to keep brokers exceptionally busy. And without that, when we understand that the new purchases have slowed down, there has certainly been a place for that. We’ve recognised and remained in the market with a consistent rebate, and I think the competitiveness for the customer is a great outcome and certainly great for the broker to make sure their businesses and our businesses are flourishing throughout this time, which is really important to the economy.

Source: MPA Brokers on Banks 2020 survey

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SPECIAL REPORT

MAJOR BANKS PANEL 2020 “First and foremost, it’s about working with mortgage holders to make sure we don’t put customers in a position that they can’t get out of ” Warren Shaw, Westpac and where conflict did arise NAB followed the direction of the customer. If there were duplicate applications, the bank would speak to the broker and review any discrepancies in decisions. He said incidents like these did not happen often, but they were taken seriously when they did. “For NAB, the broker channel provides signficant introduction of brand-new customers, new business and opportunity,” Kane said. “We don’t prefer any channel. If the [customer] chooses to use a broker, or if they choose to come via the proprietary channel, that’s the customer’s choice, and we will honour their choice.” Looking at how brokers and the retail channel could work better together, NAB has been trialling a service that enables retail bank staff to work with broker-introduced customers and the broker in order to ensure a smoother application and transaction process. It will be rolling that out soon, allowing brokers and customers easier access to the bank when they need it. NAB has also made a number of changes, driven by the need for a one-way process for home lending regardless of what channel it comes through. “That process has begun already, and brokers will see the results of that coming through in mid to late FY2021, when there will be absolutely no difference whatsoever in the processing of home loans regardless of how that customer enters the bank,” Kane said. Agreeing, Croucher said it was incumbent on the bank to make sure “the customer holds the key”. CBA has worked over the past two years to understand how duplicate applications happen, and while

this means that they very rarely occur now, when they do, the bank continues to try to learn what it can do differently and consults

with both the customer and the broker. While credit policies do not differ between the first and third party channels, Croucher said turnaround times were a little more difficult. “We have proprietary being able to verify under the bank licence, so there’s always going to be some difference there,” he said. “I can’t apologise for that. In the third party channel things have to be verified the way that they are, but we will try to make

BROKER QUESTION

We’re all becoming more reliant on technology. What are you offering brokers to help make their jobs easier?

Simone Tilley, ANZ: This pandemic has really amplified digitisation and automation, so to turn a negative into a positive, I think everyone can be incredibly comforted by the fact that we’re seeing more of this. We’ve got Access Seeker being rolled out to brokers to undertake credit checks on customers, which is a free service. In addition, we’ve launched the ANZ E-Verify platform at the end of May 2020. And E-Verify allows customers to complete their verification of ID electronically. We also launched ANZ E-Sign in early July, and we’re very excited to have implemented key functionality for brokers’ customers to be able to sign pre-approval documents electronically using ANZ E-Sign through intermediary parties, whether LoanApp or ApplyOnline. Steve Kane, NAB: As Simone mentioned, the need to do something different and very quickly in light of COVID meant that we rapidly moved to digital verification of identity through IDyou. Will we be using digital verification into the future? I think the answer is yes, and it will become the norm amongst a number of other methods for identification. Currently the bank will accept IDyou and ZipID in that digital ID space. We’re also working with NextGen’s ApplyOnline in relation to the document verification service. Adam Croucher, Commonwealth Bank: COVID brought forward a lot of the projects we were looking at from a digital, end-to-end point of view, so if there’s anything good to come out of it, certainly in terms of what we’re going to do in the future and what we’re going to accept in our end-to-end processes, we’re all looking at simplification. It makes sense, and to be comfortable around our risk profiles and risk appetite across all of our organisations is really where that sits. Warren Shaw, Westpac: It’s similar for Westpac, trying to get clunkiness out of processes, etc. We’re putting a new origination platform into the broker business next year, which is a huge step towards making us easier to do business with. A new portal will launch this year to support brokers with managing customer expectations, and we’ll spend more money in 2021 on broker infrastructure than we’ve spent at any time in our history, so that’s a huge vote of confidence from Westpac in the broker channel.

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SPECIAL REPORT

MAJOR BANKS PANEL 2020 that process as simple as we can so that there is no differentiation in the turnaround times. “COVID hasn’t been easy for us, as we’ve all explained, with the complexity faced by the industry, but I can certainly say I’m very proud that we’re making sure we’re looking at the best interest of the customer and learning from any examples of where there is poor behaviour.” While Shaw said there would always be friction at the edges of any multi-channel business, he added that it was something the bank was continually getting better at. Although he had not seen an increase in channel conflict, where it did happen he said the bank worked to satisfy itself as to which channel the customer wanted to deal with. In terms of the differences arising between turnaround times and credit policies, Shaw said Westpac had invested millions of dollars in a one-banking platform that would be coming to the broker channel in 2021 and should provide a more consistent experience. He added that trying to eliminate conflict often in fact created longer turnaround times.

“If my first party colleagues want to put a campaign on to support their sales efforts, I’ve got two choices: either support that and manage the elongated wait times, or I create conflict by not allowing those offers

“I’m confident that, SLAs aside, when brokers think of ANZ more broadly, they know we act in the best interests of brokers” Simone Tilley, ANZ to be put into the third party channel, and that creates a whole other set of issues,” he explained. “I’m sure there is no one watching who would rather not have the ability to give an offer to a customer, whether it be a rebate or a very good fixed rate, for example. They’d much rather be able to manage the customer’s expectation and deal with those customers with that offer.” Conducting a “channel agnostic” strategy, Tilley said, ANZ recognises the importance of brokers and gives no preferential treatment to one channel over the other. But

BROKER QUESTION Isn’t a lender’s prioritising of a broker’s loan submission based on volumes lodged (rather than quality of application presented) contradictory with a broker’s independence?

Simone Tilley, ANZ: In terms of the overall model that we have, we haven’t prioritised one cohort against another. Of course, with Sedgwick we have to make sure that we consider qualitative and quantitative factors equally. As a consequence of the volumes that we’ve seen transpire this year, whilst we do have a premium broker proposition, we’ve had to park all that and just get through the work, so we haven’t preferenced one group over the other. Steve Kane, NAB: We don’t differentiate around volume, so if a broker is lodging one or 10 loans with us, each is treated equally. The broker’s responsibility is of course to do the best they can to make the deal complete. If the deal is complete and all the information is there, the answer comes very quickly and the service to their customer is first-class.

she added that there had been SLA differentiation and she was keen to explain why. “We have had a long-established process of auto-decisioning in our network business due to the fact that they can complete

document verification, and we are now adopting an automation program across broker and mobile channels so that similar levels of automation can be adopted across all channels,” Tilley said. “Given the large volume that has come through the broker channel, which at this point is 100% manually assessed, there have been unintended SLA differences which we are working hard to address.”

What are you doing to ensure that brokers can provide answers to their customers in a fast time frame? All four of the major banks admitted that there was more work to do after the broker channel saw lengthier turnaround times this year. Volumes at ANZ had definitely had an impact on SLAs, Tilley said, but even leading up to the pandemic the major bank was working on streamlining the home loan processes by investing in its people and technology, which meant that it could act fast when COVID-19 did have its effect. “We implemented a taskforce dedicated to improving our work in progress, which has assisted us in reducing assessment times and also improving capacity, because we recognise we need to do more,” she said. This goes along with the innovations ANZ has introduced in recent months, such as digital verification, Illion’s Access Seeker and automation processes.

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248035

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SPECIAL REPORT

MAJOR BANKS PANEL 2020 “If the [customer] chooses to use a broker, or if they choose to come via the proprietary channel, that’s the customer’s choice, and we will honour their choice” Steve Kane, NAB “The measures we’ve put in place over the last few months will unquestionably improve the robustness of our processes, and we intend to continue that work as we go,” Tilley added. Croucher said CBA had maintained strong SLAs as it went into the “perfect storm” that was the First Home Loan Deposit Scheme, the Homebuilder scheme and the pandemic. In the nine weeks prior to the panel, he said the bank had recorded

around 7,000 hours of overtime. “There’s those impacts that we all felt as a result of the extended flows at the start of COVID and the consistency across the period that we are in at the moment, so I think for us to maintain five days has been really key,” he said. “It’s very expensive, but the commitment to make sure that we keep that agreement to a controllable level has been exceptionally important to us.”

MORE FHBS CHOOSING BROKERS OVER BRANCHES Research from the National Housing Finance and Investment Corporation shows that almost half of first home buyers taking part in the First Home Loan Deposit Scheme went through the broker channel.

5.1% 10.4%

Mortgage broker

46.1%

Bank branch Mobile lender

38.4%

Other

Source: National Housing Finance and Investment Corporation First Home Loan Deposit Scheme Trends & Insights report, six months to 30 June 2020

Westpac has also spent the last seven to eight months putting new processes in place to deal with things either from a credit perspective or make it easier to help customers and assist them in meeting requirements. It has also moved a number of its resources away from other areas in the bank in order to assist customers in hardship. As part of its continued efforts, the major bank is also bringing jobs back onshore. While its offshore call centre arrangements had worked well in the past and allowed Westpac to increase capacity, Shaw explained that large-scale shutdowns due to the pandemic had caused a problem. “Westpac announced a while ago that we would bring back onshore call centre activity and mortgage processing activity in the next 12 months,” he explained. “The mortgage broker side of things will be impacted first, so we are recruiting now to stand up those resources onshore, and that just takes out of the equation any instance of us not being able to manage the disaster recovery situation better and have it in our control. It’s important for the economy as well; clearly, 1,000 jobs are well needed here, and we’re happy to support it in that way.” To help with turnaround times at NAB, Kane said the biggest focus was on technology to make sure processes were smooth and simple so the possibility of mistakes slowing down transactions was reduced. NAB is working with NextGen.Net on several areas, in order to help give brokers a much clearer and automated picture of what is missing. “We have a strong focus on delivery of service,” he said. “There is absolute understanding that the broker’s reputation and the veracity of their ongoing referral basis is always underpinned by the service of the lender they’ve recommended. So, if we don’t provide a good service it impacts on the broker’s reputation, and we’re very focused on that.”

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SECTOR FOCUS

SME LENDING

Securing finance for SMEs As the pandemic moves on, SMEs continue to look for finance. So, how can brokers best serve their clients during this difficult time? MPA speaks to three leading figures in the non-bank space to find out more

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THE YEAR is drawing to a close, and SMEs have found themselves battered and bruised by wider world events. While there’s no question that many have been able to successfully pivot their business models and benefit in spite of the pandemic, there are many more who have had their plans derailed and faced tremendous setbacks. The uncertainty is grim, particularly given the uneven way that the pandemic has affected different parts of the country, let alone the world. How sustainable are

these changes? Will businesses find themselves pivoting too far, only to be hamstrung once things return to some semblance of ‘normal’? There’s no clear answer, and in truth there likely won’t be for some time. But the wheels of industry must keep turning, and businesses must grind on. Amid this upheaval is the very real need for SMEs to secure finance. There’s been a predictably mixed response from lenders across the spectrum. Ever since the GFC in 2008 the big banks have tended to take a more conservative approach to their lending criteria, and it’s not unreasonable to assume that the events of 2020 will push them further in that direction. But that doesn’t mean there aren’t opportunities to be had. Brokers will have more opportunities to demonstrate their value to clients as lending criteria shift and become more labyrinthine. Similarly, non-banks have the potential to demonstrate their value to borrowers and brokers alike by providing finance to

LENDER’S TAKE MPA: What have you been offering SMEs? Peter Vala, Thinktank: With the challenges of 2020, our standard loan features of no annual reviews and no regular revaluation requirements have provided significant peace of mind for all our borrowers, particularly SMEs. As cash flow has never been more critical, we have continued to focus our efforts on solutions to ease lending pressures, with many of our borrowers taking the opportunity to refinance their loans to a longer term (up to 30 years) and/or consolidate debt to reduce monthly loan repayments.

remote sales and logistic services. “The need to work remotely has placed never-before-seen pressure on businesses, with some being able to adjust and many –

“A well-placed broker will be one who not only offers the best financial solution for the client but also the best hassle-free solution” Peter Vala, Thinktank those who have had their lives disrupted by the pandemic. Peter Vala, general manager partnerships and distribution at Thinktank, sees the greatest challenge to the SME space as the change to – or in some cases, the closure of – working environments. This has led to a drastic shift in dynamics, from the way internal teams now work together to new customer buying patterns, diminished walk-in trade and increased reliance on

particularly those in retail, hospitality and tourism – having to close their doors,” says Vala. “Hopefully it’s a temporary measure, but there’s no question it’s changed how SMEs operate.” Managing cash flow in the face of these challenges has been the number one priority to protect businesses, Vala says. There’s been a heavy focus on negotiating lease and creditor terms, making employee arrangements and accessing government subsidies.

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SECTOR FOCUS

SME LENDING “While some SMEs have struggled during the COVID-19 challenges, others have thrived,” Vala says. “Those experiencing financial difficulties have turned to their lending partners to restructure their funding arrangements and/ or seek relief in managing their financial commitments. This has required trust and understanding for all involved – the client, the broker and the lender.” Vala notes that it’s been heartening to see that not all businesses have suffered, with many sourcing additional capital to scale up to meet an unexpected increase in demand or new opportunities. The other good news is that, unlike in the late 1980s, the cost of finance isn’t prohibitive. The use of SMSF structures also hasn’t diminished, offering further options for SMEs to shore up or expand their businesses. “In fact, it’s the opposite,” Vala says. “This has provided greater flexibility in lending capability, allowing business to still acquire commercial and residential property, as well as release equity for working capital and expansion of business activities.” Tas Tzimos, head of sales at Moula, says there have been changes in demand, depending on the industry. Sectors have not been equally impacted and, accordingly, the sorts of services required are undergoing a shift. One of the biggest challenges for SMEs this year, Tzimos points out, is the overall uncertainty of how things will play out. “For example, we’ve seen less demand from sectors hardest hit by the pandemic, including accommodation and food services, arts and recreation, and education and training,” he

ABOUT THINKTANK When we formed Thinktank in 2006, our aim was to provide a superior range of borrowing options and level of service in meeting the needs and preferences of SME and selfemployed investors and owner-occupiers. Fourteen years on and we have become Australia’s leading independent commercial, residential and SMSF property lender through offering our brokers and their clients a genuine alternative to the banks. We’re committed to fairness, transparency and professionalism in all that we do across all of our relationships with borrowers, introducers, professional service providers, institutions and government. We think that’s what you should expect from a lender. And it’s why we’ve been able to meet the needs of borrowers throughout Australia in writing more than $3.0bn in loans and issuing over $1.45bn in AAA-rated bonds (by Standard and Poor’s) to Australian and international institutional investors.

says. “At the same time, we’ve seen greater demand from other sectors, including wholesale trade and financial and insurance services. “Another key challenge has been maintaining cash flow. It’s always one of the biggest challenges for SMEs but has become more pronounced for some sectors.” Tzimos sees it as an opportunity for brokers to shine, highlighting both their services and the benefits of non-bank lenders, while also expanding their reach to new clients in the process. “Although it’s a challenging environment for many SMEs, we expect to see increased demand for alternative business finance solutions,” says Tzimos. “Brokers who become familiar with business lending and take the time to learn about their clients’ needs will be well placed to reduce risk through diversification and grow their businesses.” Dean Koutsoumidis, managing director of Equity-One, is philosophical about the shift in

conditions. For a Melbourne-based office, the cancellation of the F1 Grand Prix was a significant moment, he notes, and initially there was some uncertainty about what was waiting ahead – but by April these concerns had started to fall away, and enquiry activity from borrowers started to “bubble away” again. “Borrowers’ needs haven’t actually changed per se,” Koutsoumidis says. “They still need a competitive non-bank alternative for when the banks aren’t willing to dance. Our focus is primarily on commercial borrowers seeking a smart, fast solution, so although I don’t want to minimise the difficulties that people are facing, a lot of the day-to-day remains very similar for us.” Koutsoumidis also notes that while on one level borrowing from the banks and other major ADIs has become challenging, there is also more competition in the non-bank space, which has resulted in the costs of borrowing coming down. “This is good news for borrowers,” says Koutsoumidis. “The challenge for borrowers is

SME SENTIMENT

67%

of SMEs report negative revenue due to the pandemic

50%

of SMEs are positive about bank support for business customers

62%

of SMEs need finance for cash flow/working capital

43%

of SMEs who sought finance were unsuccessful

64%

of SMEs are concerned about survival of their business due to the pandemic Source: ACA Research SME Sentiment Tracker, week ending 13 September

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Source: Sensis Business Index August 2019

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SECTOR FOCUS

SME LENDING LENDER’S TAKE MPA: What have you been offering SMEs? Tas Tzimos, Moula: We have been offering SMEs unsecured business loans of up to $250,000 with an easy application, and lending decisions within 24 hours. We make it easy to repay early and don’t charge penalties or scheduled interest for early repayment. In addition, our Moula Pay product helps B2B businesses improve their cash flow by getting paid upfront and not having to wait for invoices to be paid.

ensuring their LVR covenants stay intact, but if that can be ticked off, then borrowers can feel confident that there are choices for them out there. There is no question that the number of property transactions has been affected by COVID-19, so lenders have to keep their offerings as sharp as possible to continue being relevant.” The government assistance issued to businesses during this period has also proved to be a somewhat contentious issue, both in the wider media and among businesses themselves. The lending space is no different. While the overall sentiment is positive, there are understandably concerns about the longterm consequences. Tzimos describes the SME Coronavirus Guarantee Scheme as a “helpful initiative” that’s had some positive impact on lending appetite in an otherwise uncertain environ ment. But he nonetheless has some questions about its implementation. “There were elements of that scheme which mandated borrowers into repayment schedules with six months repayment-free,” says Tzimos. “While this would have been welcomed by some, we’ve found that a one-size-fits-all approach to lending doesn’t make sense. Business lending requires a holistic approach to looking at a business’s needs and tailoring the funding accordingly.” Vala is a staunch supporter of the govern ment support initiatives, describing them as “critical” to helping the economy and businesses to keep turning.

“This assistance, combined with efforts of brokers and lenders to reduce loan and lease pressures, has enabled many businesses to maintain enough cash flow to cover expenditure,” Vala says. “These arrangements will need to continue in some form once restrictions ease to enable the SME industry to recover sufficiently.” Koutsoumidis expresses a certain degree of scepticism around the initiatives, while conceding that they have yielded some benefits. In a situation as unprecedented as this one – “Who would have thought we’d be facing these sorts of challenges back at this time last year?” he says – he is keenly aware that sometimes there isn’t a perfect solution to

that regard all the support offered will undoubtedly help.” All three non-banks agree that brokers have an important role to play in the recovery process; after all, they have become an increasingly important part of the loan landscape over the last decade or so. They also play a key part in raising awareness of the important role of non-banks in offering finance to SMEs that might not otherwise have access to it. “Brokers play a crucial role in the servicing of the commercial and retail loan markets in Australia,” says Koutsoumidis. “I know of brokers that have been very busy helping their clients with all manner of assistance, and this

“Although it’s a challenging environment for many SMEs, we expect to see increased demand for alternative business finance solutions” Tas Tzimos, Moula cover all possible outcomes. It’s best to work with the tools available. “Love them or hate them, the government subsidies, grants and supplements have helped stave off the economic consequences,” says Koutsoumidis. “Some may feel that they may have made things worse by deferring the inevitable consequences. I see it as a little bit akin to a good dose of antibiotics that aren’t quite needed. You’re happy when you get it and will deal with the problems later on. But with that said, I believe that business needs to charge on to assist with our recovery, so in

is great to see. Ultimately it bodes very well for their relationships in their business. Where we can, we are there to assist brokers with communications and outcomes to help their clients.” Tzimos notes that in the three and a half years leading up to September 2019, the value of commercial loans settled by mortgage brokers through aggregators in Australia almost doubled, reaching a record high of $43.1bn. “It’s likely this trend will continue into the future,” says Tzimos. “Our BDMs work closely with brokers to help them understand the

ABOUT MOULA Founded in 2013, Moula is an Australian fintech focusing on backing good business and simplifying access to finance. With products spanning both the lending and payments ecosystems, its proprietary platform empowers a business to use their cloud accounting or transaction data to access finance. Moula offers brokers a simple application for its unsecured business loan, and credit decisions within 24 hours.

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LENDER’S TAKE

“Brokers play a crucial role in the servicing of the commercial and retail loan markets in Australia” Dean Koutsoumidis, Equity-One business finance options available to their clients and how we can assist them. We’ve also been running webinars that help brokers understand trends in business finance and how to benefit from them.” Vala says it’s important that brokers are aware of all of the options available. “Some lenders have seen a tightening of credit policies, whilst others are beginning to relax and provide slightly more flexibility,” he says.

“A well-placed broker will be one who not only offers the best financial solution for the client but also the best hassle-free solution where transactions can be approved and settled with the least amount of inconvenience to the borrower.” But what about brokers who are working with SMEs for the first time? What sorts of things do they need to consider before entering the playing field?

MPA: What have you been offering SMEs? Dean Koutsoumidis, Equity-One: All our loans offer a flexibility to repay early with no break costs at any time. When an SME is uncertain of what’s lying ahead – with the possibility of an inevitable improvement – this flexibility is very helpful to them. Just as we were in the pre-COVID-19 landscape, we’re here to offer competitive non-bank funding to commercial clients and will continue to do so.

“Ongoing cash flow is one of, if not the most important factor for any SME,” says Vala. “So, establishing the current cash flow and financial position of the client is the broker’s first priority. Remember, there is a difference between sales, profit and cash. It’s cash derived from sustainable cash flow that repays loans and other financial commitments.” Another factor, Vala explains, is that

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SECTOR FOCUS

SME LENDING

there’s more than one way to prove an applicant’s loan serviceability. “Be mindful of alternative income verification methods for non-full-doc loans,” he says. “For example, BAS may not be the best method of verification to indicate a client’s current earnings, particularly when you consider that the last couple of quarters of trade may have been subdued and not reflect true earnings.” Tzimos says more people are looking for a single solution that bundles their multiple financial needs together. Most mortgage brokers will already have clients with business lending needs they can assist with. “You probably don’t need to start by

looking for totally new customers,” says Tzimos. “Stay in touch with existing ones and check in to see if they have business finance needs.” However, he does caution that business lending is not the same as mortgage lending and can often be more nuanced. Business lending, Tzimos explains, is usually tied to a growth opportunity, and finding the right product or solution is about truly understanding a business’s needs and making sure the finance will help them achieve that growth. “It’s not only about the interest rate. More often than not it’s about ensuring the right outcome to meet the business’s needs,”

ABOUT EQUITY-ONE Equity-One was established over 20 years ago and has become one of Australia’s most recognised secured asset lenders. We have developed a ‘deliberately simple’ lending approach that consistently produces great customer outcomes. We are commercially sensible and professional in all our dealings. Our clients come in all shapes and sizes, so we know from experience that no one size fits all. We take the time to understand our customer’s situation and circumstances. Our loan offers are fully customised based on client needs.

says Tzimos. “Sometimes this means that speed is a key factor, and sometimes it’s about flexibility, and working with a lender to tailor the finance to the situation.” Koutsoumidis stresses the relational aspects of working with clients. Being willing to ask the lender for more information to get the best possible outcome is a net positive. “Good relationships are never more important than in tough times,” he says. “Form good relationships with trusted partners. With respect to the lenders they deal with, don’t worry about leaning on their BDMs too much to extract enough knowledge and information to achieve a good outcome for your clients. After all, it’s what lenders are there to do, so feel good about working closely with them to the benefit of your client and your respective businesses.” There’s no question that uncertainty still lies ahead. But there’s hope too. Though it might be too early to call it a full-blown ‘recovery’, it’s clear that there is resilience among both the broking and lending sectors. With the right tools and support in place, mortgage brokers can be well primed to make their mark on the space.

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FEATURES

BROKER TECHNOLOGY

Creating a digital home loan experience Improving turnaround times, overcoming COVID-19 restrictions, strengthening compliance, and simply helping us to stay in touch: technology has played a larger role this year than we ever would have imagined

INNOVATION IN the finance industry has been advancing for years, but in 2020 it has progressed faster than ever. With restrictions on face-to-face interactions and social gatherings, the world has adapted to a more virtual way of living. For brokers it’s been no different; instead of meeting with their customers in person, they have been quick to find new ways to continue their relationships. But it goes much deeper than that. With brokers unable to see their customers in person, banks have had to move quickly to allow digital verification of identity and document collection. Many lenders had adopted this even before the coronavirus pandemic, but this year forced those who hadn’t done so to speed up their processes. As the biggest player in broker technology, NextGen.Net has been doing a lot of work to

“It’s not just about having an online interface that looks good. You’ve got to have an integrated end-to-end process from start to finish to support that” Tony Carn, NextGen.Net ensure its systems are smooth and up to date. Chief customer officer Tony Carn says this year hasn’t necessarily seen brand-new “earthshattering” technology, but it has brought to life a new awareness of tools already available. In particular, the company has focused on electronic signatures and document verification services, allowing documents like passports and driver licences to be verified in real time.

“Those tools were out already, but the changes in circumstances saw lenders and brokers adopt those tools and increase usage dramatically,” he says. NextGen.Net has also upgraded its Supporting Documents capability and made some other “unsexy” improvements like ensuring that broker CRMs map data effectively to ApplyOnline.

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“The CRM mapping has been important because there are a lot of ongoing changes, such as how lenders capture living expenses,” he explains. “It’s important that when a CRM system sends data to ApplyOnline it maps correctly, and also that lenders can correctly consume the data we’re sending them. So, it’s unsexy, but we’ve been doing a lot of work in ensuring those integrations are effective and smooth.” NextGen.Net’s investments in Supporting Docs and its checklist to help brokers identify what needs to be done have been particularly beneficial to brokers this year. The company has also been working on metric services that connect the APIs of lender and broker groups, enabling brokers to do servicing calculations around what lenders will lend in a certain scenario, what the maximum borrowing

amounts are, etc. Carn says brokers may not even realise this data sharing technology is being used, but broker groups have been benefiting from it a lot more this year. “It cuts out a lot of inaccuracies and version control issues that brokers have,” he explains. In turn this should speed up the processing times for applications, something that has been vital this year as lenders fight to keep turnaround times down. With repayment deferrals on top of increased business coming from refinances and first home buyers, many banks have seen stretched-out SLAs. Carn says one of the biggest things slowing down applications is rework requests, and while there is “not one silver bullet” to fix that, there are various tools NextGen.Net has on offer that can make a difference. “All of those little things like identity documents and ensuring signatures are on application forms – they typically account for about 10% each of ‘more information’ requests,” he says. “So, when a lender can cut those out of their processes, it means their turnaround times are suddenly 20% faster, allowing brokers to give a qualified answer to customers a lot faster – and less time is spent on responding to those requests for more information.” Having been in the industry for more than 20 years, Carn says it’s not too long since brokers were faxing their paper applications. This was not only time-consuming and laborious but also unsecure. Now, the technology for applications goes beyond just completing digital forms. Brokers can use technology to see whether their application is aligned to a lender’s policy, and they can upload documents, validate data in real time and have everything stored and completed in the same space. But while tech is only going to continue moving forward and upward, there are elements of the broker role that cannot be replaced by innovation: the human relationship.

DO YOU THINK TECHNOLOGY IS GOING TO PLAY AN INCREASINGLY IMPORTANT ROLE? Tony Carn, NextGen.Net: Absolutely. The better use of tools and that awareness of them and being forced to embed those into the way we do business is an enormous efficiency gain. I think also working from home we’re now seeing the right balance of being able to do that and drive great productivity gains too. Going beyond the obvious aspects of technology, I do call out one of the biggest things that has come out this year, which is the introduction of the Consumer Data Right on 1st July, or open banking. While that will not be an immediate ‘turn on and change everything’ overnight, it really is an important and pivotal turning point in the way mortgages are written in this country.

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FEATURES

BROKER TECHNOLOGY

WHAT FEEDBACK HAVE YOU BEEN GETTING FROM BROKERS ABOUT YOUR PLATFORMS? Blake Buchanan, Specialist Finance Group: Our brokers love SFGconnect because it’s a platform they keep open all day and refer to often as an effective tool for managing their workflows and ensuring applications are processed quickly, without the need to jump into different systems for resources like Veda, CoreLogic, BankStatements and lots more. These are all integrated and operate within SFGconnect. We receive positive feedback every day from brokers who tell us they don’t know how they could keep up with the demands of their business without our digital solutions. Brokers regularly comment that our CRM functionality, combined with our Client Portal, video conferencing, e-signatures, marketing, Partner Portal and workflow automation features, keeps our users ahead of the game in the current digital revolution.

“Those [tech] developments have focused on making brokers’ lives easier and less complicated so they can get on and do their jobs in the way they want” Ian Rakhit, Bankwest Carn says that while technology is a great efficiency enabler, customers want to deal with a real person when it comes to their home loan. “It’s not just about having an online interface that looks good; you’ve got to have an integrated end-to-end process from start to finish to support that,” he says. “People want that broker engagement, and ultimately faceto-face is a better way to do it. I think people are yearning for that face-to-face contact, albeit in reduced quantities going forward.” Demonstrating how much this year has intensified the need for technology, Bankwest has seen a 43% increase in unique visitors to its broker portal over the last financial year. General manager of third party Ian Rakhit

says technology has always played a crucial role in helping brokers deliver the best possible service to customers, so the bank puts an emphasis on developing new features and content in partnership with brokers. “We want to be known as the best broker bank in the country, and we can only do that by working with brokers to deliver productivity enhancements that make their dealings as simple and easy as possible,” he says. In responding to COVID-19, Bankwest has introduced electronic VOI, creating an end-to-end digital home loan experience. It has also started using comprehensive credit reporting information to validate data where possible. Rakhit says this enhances the safety of

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FEATURES

BROKER TECHNOLOGY

WHAT BENEFITS DOES TECHNOLOGY HAVE FOR CUSTOMERS? Melissa Christy, 86 400: Brokers don’t need to trawl through statement data to understand a customer’s financial situation. Data that is collected can prefill the application for them and reduce the amount of paperwork involved in a normal application. This, along with customers being able to provide digital signatures at their own convenience, means the time it takes to get an approval is significantly reduced. The biggest benefits technology has for customers is that it creates efficiencies in all of the existing processes. It can simplify the process by reducing paperwork and allowing the customer to meet the broker virtually. All of this can then be supported with faster turnaround times, which can make the whole homebuying or refinancing process an easier one.

brokers and their customers by reducing the requirement for manual documents, while they continue to undertake appropriate due diligence and comply with regulatory expectations. “The health and wellbeing of our customers, colleagues and the community has been a focus of Bankwest throughout COVID-19, and that includes ensuring we provide the required support that enables our critical broker network to deliver the best possible service to customers and help them put a roof over their heads at a time of unprecedented uncertainty,” Rakhit says. Other digital offerings from Bankwest include features on its broker portal such as its Policy and Postcode tool, which provides an immediate LVR for any postcode in Australia, as well as its Pricing tool, making required customer details easily accessible for brokers, all in one place. “Our end-to-end digital home loan process, which enables customers to sign documents even on their smartphone, has reduced error rates, increased efficiency, and in some cases resulted in documents being submitted, processed and returned to brokers in the same day – far quicker than the usual two weeks of manual processing,” Rakhit adds. As brokers have come to rely on new and existing technology, Bankwest has worked to improve its onboarding experience with targeted communication at key points in the broker’s journey with the bank. This has been complemented by the development of virtual broker accreditation training, allowing brokers to gain accreditation despite the COVID-19 restrictions. Rakhit likens the evolution of technology to the ‘chicken and the egg’ situation, explaining that brokers adapt to changing needs and expectations of their customers in the same way that Bankwest does. Talking of “collaboration” and “partnership” when it comes to designing tools, he says it’s important that the bank understands brokers’

needs and expectations so it can deliver new initiatives and enhancements. “Those developments have focused on making brokers’ lives easier and less complicated so they can get on and do their jobs in the way they want,” he says. “Constantly reviewing and improving the ways in which we’re available to brokers – be that face-to-face with a BDM, over the phone with our broker teams, virtually via web chat, or self-service via the broker portal – is a key component of that. “Being there when and where brokers need us so we can listen to them and understand their needs has ensured that we’ve been able to meet their expectations as the demand for self-service technologies grows.” As a 100% digital bank already, 86 400 did not have much to change in terms of its offering. While other lenders have had to adapt the way they interact with their customers and brokers, 86 400 was already set up with systems and processes that allowed borrowers to get a home loan without having to meet anyone face-to-face. “Our biggest difference is that we started building our home loan business from scratch, so there were no legacy systems, policies or processes,” home loan lending lead Melissa Christy says. “The technology we use is not different to what other banks are using, but there is no other home loan lender in the broker market solely relying on data collected electronically to assess a home loan. We were able to develop our system, policy and assessment process around using this data.” Being new to the mortgage market and relatively different to other banks and lenders, the smartbank has found that education is key. Brokers have praised the training and support offered by the bank’s BDMs as well as the dedicated broker support provided by the Loanapp team. While the bank does need to spend a little extra time with brokers upfront to help them

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with their first deals, once they are ready to go, brokers benefit from the fast turnaround times that the digital offering provides. Brokers do not need to go through statement data to understand a customer’s financial situation; applications can be prefilled with data collected, and customers

technology is the future of banking, but 86 400, along with the rest of the industry, will need to continue to keep up as it changes. “I think many other lenders will change the way they do things, not just because of COVID and what that has forced us to rethink but because customers will

“The home loan interview a broker has with their client doesn’t need to be face-to-face – we don’t require it for our process” Melissa Christy, 86 400 can provide digital signatures, Christy says. “We deliver faster unconditional approvals than are currently seen in the market as we are not manually going through payslips and statements,” she explains. “We can give them and their customers a quicker decision, which takes a lot of the stress and legwork out of the application process.” With this being the case, Christy says

demand it,” she says, adding that while many customers will still want face-to-face service, that too could change. “The home loan interview a broker has with their client doesn’t need to be face-toface. We don’t require it for our process,” Christy says. “This year has proven that most things can be done remotely. Meeting a customer via Skype or Zoom can be much

more convenient for both brokers and customers, and the same outcomes can be achieved.” As an aggregator, Specialist Finance Group has not only offered its own technology but seen the positive impact of quality technology combined with seamless internal processes. Aggregation, acquisition and strategy manager Blake Buchanan says the aggregator has seen that those businesses set up with existing technology-based solutions were able to quickly adapt and succeed despite the pressures of this year. “There is an essential need for any business in 2020 to operate and thrive with efficiency,” he says. “Technology is the crucial and most important element. We have seen some major industry players struggle to adjust to the changing landscape, which includes remote working arrangements and other challenges. However, brokers who were prepared to pivot have not suffered any downtime because technology is providing solutions to everyday challenges.” The aggregator also offers its own digital

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FEATURES

BROKER TECHNOLOGY

platform, SFGconnect, with integrated platforms providing digital solutions for bank statement collection, digital communication, property reports, credit check reporting, digital and automatic workflows, and more. “SFGconnect provides a competitive advantage for our brokers because it offers so many solutions in one package,” Buchanan says. “The simple broker and client interface allows for fact-finds to be completed in real time and with ease over the net. Combine this with integrated VOI, digital signatures and a document repository portal for their clients, and all of a sudden you are the most digitally

own sake,” he says. “Technology must play an important role for brokers wanting their business services to remain current as consumer expectations evolve. This is also about more than just improving the client experience; the broker experience should also be cultivated to ensure long-term career viability. “Both brokers and consumers need to extend their work-life balance, increase efficiencies and find value in every part of the service offering.” While Buchanan has seen brokers who embrace technology achieve great success, he says there is nothing that will replace

“Brokers who were prepared to pivot have not suffered any downtime, because technology is providing solutions to everyday challenges” Blake Buchanan, Specialist Finance Group enabled broker in the Australian market.” It goes beyond developing new technology and sending it out, however. The aggregator spends time with its brokers to help them identify weaknesses in their processes and ensure they find technology that meets their needs. SFGconnect has a built-in Help Desk feature that allows brokers to speak to a real person within minutes, and staff around the country are on hand to offer support and in-person training where possible. Buchanan believes that technology will continue to be more front of mind for brokers as they learn to implement small tech features in a way that has a large impact on their business. “The key to innovation is using technology to provide a real or perceived value to your clients, not simply using technology for its

the human interaction. Technology merely complements a broker’s offering. “On my travels, I have met highperformance brokers who have been using digital processes for years, but equally, I have met high-performing brokers who will only do face-to-face appointments but may use technology to speed up their processing after the appointment,” he says. Having seen the digital offering grow over his time in the industry, Buchanan notes that it is not just about systems; the digital delivery of training and education has also been hugely important. “As broker market share has grown, so has the national geographic spread of brokers, so it is vitally important that one of our brokers based in Wagga, as an example, has the same access to information that one of our brokers in a capital city has,” he says.

DO YOU THINK THE ROLE TECHNOLOGY PLAYS WILL BE INCREASINGLY IMPORTANT BEYOND COVID-19? Ian Rakhit, Bankwest: Technology has always played a critical role in ensuring brokers are supported in delivering the best possible service to customers, but we believe the relationship Bankwest has with its broker network is equally important and complements those tools, features and services. The COVID-19 pandemic has redefined people’s expectations of how they will interact with each other and with businesses, and it’s likely that every Australian has in some way changed their routines and behaviours in response. Those changes have brought about efficiencies and new ways of life that will undoubtedly remain, but that won’t impact the emphasis Bankwest places on the relationship between its BDMs and brokers, which has always been a point of difference for us.

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FEATURES

EXPERT SPOTLIGHT

Refinancing for financial freedom Debt consolidation is a powerful tool for borrowers â&#x20AC;&#x201C; and one that brokers should be adding to their arsenal too. MPA talks to Siobhan Williams of Pepper Money, who explains more

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MPA: What are some of the common features of debt consolidation via a mortgage? Siobhan Williams: There are a few different situations in which debt consolidation loan can help: such as paying off solicitor bills, business and tax debts or credit card debts, for example. If a customer is having difficulty keeping track of their debts, consolidating them all and refinancing their mortgage could help them get things back under control. By rolling all debts into one, a customer could increase their cash flow by getting a lower overall interest rate and see a reduction in fees and charges as well as the cost of maintaining multiple debts. Of course it’s critical that brokers do their due diligence with clients, as this approach may not be suitable for their individual circumstances. As with any loan, a customer should not be recommended an option that would leave them worse off.

LENDING BY THE NUMBERS In July 2020, lending:

8.9% increased 8.9% for housing loans

6.9% rose 6.9% for personal fixed term loans

25.1% fell 25.1% for business construction loans Source: ABS

“From a customer standpoint, if I’m walking into a broker’s office, it’s because I need help” Siobhan Williams, Pepper Money MPA: How can refinancing offer benefits to borrowers? SW: Simply seeing an improvement in their regular cash flow is a relief for many borrowers. It can provide immediate relief and also allow them to revisit future goals that they haven’t been able to focus on in the past. There are many different borrowers who may be looking to consolidate their debts into a mortgage – from mums and dads struggling to keep up with repayments and high interest rates, all the way through to self-employed borrowers who are looking to tidy up a mix of business and personal debts. Sometimes it’s done in advance of actually purchasing a property, too.

Pepper Money has helped some first home buyers consolidate their unsecured debts to improve cash flow and fast-track their savings journey with the goal of getting into the property market.

MPA: How can brokers best propose debt consolidation as a solution for existing and new clients? SW: From a customer standpoint, if I’m walking into a broker’s office, it’s because I need help. My expectation is that the person about to help me will understand the market and how they could provide a solution for me. So, fundamentally, there is no difference in how a broker would approach offering a debt

consolidation loan to a customer compared to any other loan. Of course, refinancing through a debt consolidation loan isn’t always the first thing on the client’s mind either – some will have never considered it at all. If the customer’s short-term objective is to improve cash flow, then the broker may well talk through options that could meet this need and compare the current outlay on their unsecured debts to a proposed new repayment amount consolidated into their mortgage. The solution offered by the broker may be at a slightly higher interest rate than the customer has seen advertised by major lenders, leading them to focus on that point. When this happens, Pepper’s Five Step Process can assist the broker in helping the customer accept the solution by showing them how their immediate goal of improving cash flow may be met by the alternative being offered. Looking at it from a broker’s perspective, you’re still applying the same line of enquiry in relation to the borrower’s requirements, objectives and financial situation. Those enquiries identify both the short- and longer-term needs of the borrower. Often, improving their cash flow in the short term will help them achieve their longer-term goals at a faster pace.

MPA: How can recommending debt consolidation complement other areas of the broker’s relationship with their client? SW: Debt consolidation offers a positive outcome on a number of fronts, because it means debtors are able to free up their cash flow more effectively. If it’s handled correctly, everyone in the process benefits. From a broker perspective, customers who benefit from debt consolidation loans can go on to rank among your best advocates. At Pepper Money, we often get feedback from brokers demonstrating how grateful

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FEATURES

EXPERT SPOTLIGHT

ABOUT PEPPER

the customer is and how it has changed their situation. A story often told is an experience from a couple of years ago – an extremely grateful customer sent their broker a jar of all of their credit cards cut up into tiny pieces,

the likelihood of debt consolidation loans being considered by many customers. Australia isn’t alone in seeing a reduction in people’s variable incomes, which has placed pressure on household income. Customers

“Simply seeing an improvement in their regular cash flow is a relief for many borrowers” Siobhan Williams, Pepper Money thanking them for what they had done by getting them out of the debt they were in. It’s a gesture that speaks volumes about the role brokers have to play in the process and the positive impact they can have on people’s lives as a result.

are reviewing their spending habits and looking for ways to improve their cash flow. They’re also becoming increasingly aware of comprehensive credit reporting, the impact it has on getting finance, and the importance of paying debts on time, so there’s added incentive on that front.

MPA: Do you think we’ll continue to see an increased emphasis on debt consolidation post-COVID? SW: It’s going to be interesting to see how

MPA: What role do alternative lenders play in the refinancing process? SW: Broadly speaking, I think alternative

the landscape shifts into 2021. There’s no question the pandemic has had an impact on people’s finances and accordingly increased

lenders have much the same role to play as they would in any other loan situation where our services are required. Traditional

Pepper is Australia’s number one alternative lender, and we live our mission: to help people succeed. For nearly 20 years, we have been providing a variety of home loan solutions, including some the banks won’t offer. We also provide car loans, personal loans, loans for professional equipment, and commercial loans. We’re a well-established global credit provider with specialist experience in our core disciplines of consumer lending and asset servicing across the residential and commercial property sectors. Our offices span Australia, New Zealand, Asia and Europe – including Ireland, the UK, Spain and South Korea. For more information on Pepper Money home loan solutions and broker tools, such as the Pepper Product Selector and Five Step Process, head to the Pepper Money broker portal at pepper.com.au/broker.

banks have grown increasingly conservative in their risk appetite and are therefore more restrictive around the type of borrower they’re willing to lend to. Products have also become more rigid to align with these standards. Refinancing isn’t an exception to that, so many people are openly looking elsewhere for their financial solutions. Of course, this isn’t to say that people only use alternative lenders due to not fitting in with the big banks. In some cases, either they or their brokers have used our services previously, and they’re aware that their needs will be able to be met. We also find that borrowers and brokers alike enjoy the comparative flexibility of our products; irrespective of your existing financial circumstances, that’s an important consideration.

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To find out more, chat to your ING representative or visit introducer.ing.com.au For the curious: Information is correct as at date of publication and subject to change. All applications for credit are subject to ING’s credit approval criteria. Any advice in this advertisement does not take into account your or your customers’ objectives, financial situation or needs and you should consider whether it is appropriate for you or your customers. Before making any decision in relation to any of our products you and your customers’ should read the relevant Terms and Conditions booklet, fees or limits schedule or relevant Product Disclosure Statement available at our website. Products are either issued or are promoted by ING Bank (Australia) Limited ABN 24 000 893 292, AFSL and Australian Credit Licence 229823. ING is Australia’s most recommended bank according to RFi XPRT Survey February 20 - July 20 ( n= 4,067) when compared to customers of 20 other banks operating in Australia. ING 3098 09/20

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19/10/2020 7:01:47 AM

FEATURES

LEADING PEOPLE

Creating a safe space for your team It’s not only important to have a physically safe workspace for your employees, writes Wendy Born, but a psychologically safe space. She explains why your company’s work environment could be your best asset as a leader

AS LEADERS we have an obligation to provide our employees with a safe work environment. A place that safeguards our people, ensuring they can leave at the end of the day to return to their loved ones. But how often do we think about the other often-unconsidered type of safety? The psychological kind?

the solution without being judged, they feel incentivised to do more.

their thoughts, views and opinions without fear of being judged, ridiculed or excluded. This is becoming harder and harder as society evolves to becoming more openly judgmental of people. We feel it’s our right to be able to slam people for their views and opinions if they don’t align with ours. When we are on the receiving end of this outrage – or even see other people experience it – we learn that it isn’t safe to say anything because our reputation, career and status will be put at risk. People are now afraid to say anything for fear of someone becoming outraged. Yet studies by Barbara Fredrickson from North Carolina University show that when we create psychologically safe environments for our teams to operate in, we see increases in positive emotions and results, and we become more open-minded, resilient, motivated and persistent.

A psychologically safe environment

Open and constructive debate

Creating a psychologically safe environment for your team means providing a space that enables people to openly and honestly share

Having a diverse array of views and opinions is important for any team because it allows for a broad set of perspectives, particularly

their authentic selves at work was ‘a safe environment where no one is judged’. This was twice as important as ‘feeling valued and respected’ and having ‘trust and transparency from their supervisor’. Based on his research, Llopis also notes that when employees are asked what they think about a problem and are able to safely provide input into

Creating a psychologically safe environment for your team means providing a space that enables people to openly and honestly share their thoughts, views and opinions In his book Leadership in the Age of Personalization: Why Standardization Fails in the Age of ‘Me’, Glenn Llopis reports on a survey of more than 14,000 leaders and their employees at a broad range of companies across the US, highlighting that the number one thing employees wanted in order to be

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when decisions need to be made. A 2017 study by Forbes concluded that diverse teams make better decisions 87% of the time and make them twice as fast with half the meetings. But with diversity come different views and often conflict. Ensuring we set up a safe environment to enable teams to have constructive conflict is critical.

conflict model, is a great way to help them build self-awareness around their individual approaches to conflict.

Clear expectations and consequences In a 2015 survey conducted by US firm Harris Poll of more than 1,000 ‘people leaders’, 37% found it difficult to provide their people with

By ensuring that your people have a safe environment to work in, you will see improvements in their creativity, performance and accountability You can do this by setting the ground rules for debate from the start, such as not making arguments personal, openly assigning a devil’s advocate, and establishing rules of engagement. Also, understanding how the team responds to conflict, using tools such as the Thomas-Kilmann

feedback on their performance. Additionally, approximately 20% found it difficult to give their employees clear directions. As a people leader, one of the most important jobs you can do is to set clear expectations for your people, along with associated consequences. Clear and concise expectations provide you

with something to measure performance against. As Gallup research from 2018 highlights, when you create this clarity for your people, they are eight times more likely to be engaged. When we have psychologically safe environments these conversations are easier to have and hear. Taking the time to understand what you want your people to achieve enables you to communicate it clearly. If you don’t know yourself, you can’t expect anyone else to know. You can also set out priorities using tools like the SMART model of goal-setting (Specific, Measurable, Achievable, Realistic and Timely). This is a great model because it provides you with an easy framework and structure. And please hold your people accountable if they don’t deliver. A Gallup poll from 2019 showed that 86% of respondents were not inspired to improve performance by their performance review. If people don’t expect to be held accountable, why would they want to do any better? When people expect accountability, they know they need to deliver. By ensuring that your people have a safe environment to work in, you will see improvements in their creativity, performance and accountability. They will feel comfortable to speak up and say what they think without fear of being judged, ridiculed or criticised. Performance and personal accountability also improve because your people know what’s expected and by when. Putting time into this upfront will set you and your team up in an environment that drives success. Wendy Born is the author of Raising Leaders and helps leaders maximise their talent and strengths to achieve extraordinary results. As an engaging facilitator, coach and speaker, she works with executives, senior leaders and leadership teams to create high-performance organisations.

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FEATURES

PRODUCTIVITY

The key to getting it done Being a business owner comes with a lot of work and responsibility, so it’s easy to feel like there aren’t enough hours in the day. Nicola Moras explains her four-point plan for getting more done in less time

BUSINESS OWNERS all have one thing in common: there is always so much to do and finite time to do it in. The famous quote “We all have the same number of hours in a day as Beyoncé” may be true, in that we all have 24-hour days; however, we don’t all have the luxury of the support that Beyoncé has. It’s what you do with the hours you have available that actually matters. Some of the cracks begin to show when your to-do list starts spanning two, three, four, five or more pages. But you’re not alone. That’s going to be overwhelming for anyone. Feeling overwhelmed leads to inaction and distractedness. Add to the mix the constant juggle of family time with trying to finish work on time or even

early. Then add school runs, homeschooling (à la COVID) and the constant pressure to do more, be more and get more done.

it comes to productivity they often have the opposite effect. It can feel never-ending. Over the past decade I have used a rock-

Our smartphones have done wonders for us in many ways, but when it comes to productivity they often have the opposite effect What’s worse is that we are more connected than ever, and there is a more common expectation that you’ll be available beyond 6pm, often stretching out to 8, 9 and even 10pm for some. Our smartphones have done wonders for us in many ways, but when

solid process that never ceases to fail – for myself and for clients. In fact, the only time it fails is if it doesn’t get used. Read on to find out how to make it work for you, every single time. Get more done in less time while being efficient and effective.

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FEATURES

PRODUCTIVITY

Dream

It might seem strange that one of the keys to getting more done is to do less. Dreaming doesn’t have you sitting at the keyboard, tapping away incessantly, does it? Many business owners and entrepreneurs get caught up in the hustle – in the day-to-day push to tick more boxes, add more

path you’re on right now leading you towards achieving that?

Plan

The tendency to launch straight into action is huge once you’ve had some time to dream. But it’s time to practise ‘Patience, young grasshopper’. First, you

Smaller, bite-sized focal points make it easier to implement an action plan because you only need to focus on getting those specific things done things to the list, and be seen by their peers as heroes because they got less sleep than them. “Hustle harder,” they cry! No. No. No. This is unhelpful! I’m all for the hustle, but only during a set number of hours and when it’s conducive to producing a sustainable result. Take some time to dream about where you want to be in the next 12 months. What does that look like for you and your business? What are the goals that you want to hit? Is the

must plan. When you look at what you want to achieve over the next 12 months, it’s easy to become overwhelmed when you think about all the tasks that need to be done. Start by breaking down your 12-month dream into a 90-day plan. What can you do over the next 90 days to get a quarter of the way towards your goal? What are the specific projects you need to work on to get there? From there, it’s time to break that 90-day

plan down into a 30-day action plan. What are you going to do specifically over the next 30 days? What key projects can you tackle or undertake over the next 30 days? This becomes your 30-day focus plan. All you need to do now is break this down into four sections of focus for each seven-day block within the month. You now have a weekly action list that you can implement each day for the next five workdays. Easy-peasy! Smaller, bite-sized focal points make it easier (and faster) for you to implement an action plan because you only need to focus on getting those specific things done. You’ll repeat this every month in each quarter.

Accountability

This is the cornerstone of getting things done. Find someone who will be your accountability partner (or part of your accountability group). This could be a peer or a mentor. It’s crucial that you have someone you can report to who will kick your butt if you haven’t done what you said you were going to do!

Take massive action

When you put in place this strategy and focus on bringing each task to completion every day, you will triple your productivity and likely your results. The only way to create a result is to take steady and consistent action. Follow these steps and I know you will achieve your goals sooner than you could ever have dreamt of, and feel a lot less overwhelmed.

Nicola Moras is an online visibility expert and author of Into the Spotlight, a guide to help you step up your online visibility, become a rock star in your industry and make your business thrive.

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AMA20

CONGRATULATIONS TO THE 2020 WINNERS AND EXCELLENCE AWARDEES Despite an unprecedented year for the industry, mortgage professionals have continued to raise the bar in terms of service, innovation, professionalism and leadership. And nowhere is this more evident than in the 2020 Australian Mortgage Awards winners and excellence awardees. MPA, Australian Broker and publisher Key Media extend warm congratulations to them all. The winners and excellence awardees will be profiled in MPA Issue 20.12, out in November, which will take an in-depth look at their achievements.

For the full list of finalists or more information, visit australianmortgageawards.com.au

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19/10/2020 7:31:59 AMPM 14/10/2020 11:57:45

PEOPLE

BROKERAGE INSIGHT

With borrowers for the long haul After working with another broker and then in the first party space at a bank, Blue Owl Finance owner Aidan Hartley decided to strike out on his own, and even a global pandemic was not going to stop him

STARTING A new business in the middle of a global pandemic might not be everyone’s idea of a good time, but that is exactly what Blue Owl Finance owner Aidan Hartley did. After he began working as a mortgage broker’s assistant around six years ago, he says he was “hooked” and knew broking was something he wanted to do himself.

at St. George, he now has to understand numerous lender policies and niches so he can decide which will best fit his clients. While Hartley is just a one-man band at the moment, his fiancée is helping out as he builds the brand and business – something many business owners will recognise from their early days. One of the tasks she oversees is the sending out of gifts to clients at settle-

“I’m not just here to do your refinance or your purchase ... Whatever it is, I want to be the guy that you turn to” Helping to write around $400m a year in home loans at that brokerage, he later joined St. George Bank as a senior home lending manager and helped more than 500 Australians into their own homes. At the start of this financial year, Hartley founded Blue Owl Finance, and he says he has loved working in the business over the past few months. One of the challenges he has to get used to is learning the different lender policies: where there was just the one policy to know

ment. Hartley says he does this because to him it’s all about the relationship. “My whole business is based on word of mouth, client referrals. Unhappy clients don’t refer to you; only happy clients refer their friends and family to you,” he says. “If I’m not providing a good service and getting results, I don’t get any new business. I spend zero on marketing, so I’m just relying on those relationships to help me bring in new clients and keep them on as existing customers.

THE CHALLENGE OF BRINGING IN BUSINESS Even after eight years in the Australian lending industry, Aidan Hartley still had concerns and faced the same challenges when he decided to branch out on his own as a new broker. He says the thing he had to focus on the most was where he was going to get his business from. “It was probably the main fear I had when I started: am I going to get enough business through the doors to support me?” he says. “I think in terms of learning the policies, learning the process – everything else you can pick up as you go along.”

“In every conversation I say, ‘I want to be your broker for the next 15 years’. That’s how I start a lot of conversations: that I’m not just here to do your refinance or your purchase; I’m here when you want to fix your loan, when you want to change your repayments, when you downsize, or upsize.

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FAST FACTS Company: Blue Owl Finance Manager: Aidan Hartley Location: Sutherland Shire Year founded: 2020 Services offered: Residential

“I’m trying to be great at what I’m already good at as opposed to being pretty good at everything” Whatever it is, I want to be the guy that you turn to. “I’d rather have 50 loyal clients than 200 that come in and then go out the door.” The clients Hartley deals with at the moment include word-of-mouth referrals and many friends and former colleagues.

He adds that the loans he has written have been predominantly for owner-occupiers and a lot of first home buyers. One of the biggest trends he has seen over the last few months is the number of clients coming to him who understand the value of buying over renting.

“We’ve got a good portion of those who are actually saving money from owning a property versus renting week-on-week,” he says. “Sometimes it is cheaper, and that is because the rates are so low.” Hartley remains cautious that the first home buyer market may not be so prevalent for much longer, as responsible lending changes may come into play in March next year. If lending rules are relaxed, more people will be able to borrow more, he says, and “I only see this driving up prices, bringing back investors and in turn potentially pushing out first home buyers”. While it is difficult to know where the next year will take the world, Hartley is focusing on Blue Owl Finance and “helping as many Australians into homes as possible”. With the business continuing to grow, he says he will concentrate on providing the best service in mortgage lending rather than trying to diversify and be a “jack of all trades”. “I’m trying to be great at what I’m already good at as opposed to being pretty good at everything,” he says. “They’re probably my favourite type of loans; they stay with you for longer, and it’s a great feeling helping someone into their home rather than helping someone getting their fifth investment property. It makes your day that bit brighter.”

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PEOPLE

OTHER LIFE

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

Mou ntain biking takes fitness a nd skill a nd often becomes a n adventure, especially when you're riding u nfa miliar tracks

2011

Year David Thomas bought his first bike

2–3

Number of times a week he rides

Number of trips he's made to the hospital with cuts and bruises

GETTING OUT INTO NATURE Trilogy Funding managing director David Thomas loves to explore the mountain trails on his bike WHEN SOME friends introduced Trilogy Funding MD David Thomas to the thrills of mountain biking, he discovered a new way to relax after a week of looking through client files. Living in Canberra, surrounded by some of the country’s greatest mountain bike trails, he manages to get out on his bike two to three times a week, and loves

it because it gets him out into nature, exercising with friends. Thomas says the best place to ride is in Queenstown, New Zealand, where “the mountains are bigger, the trails are steeper, and every day is an epic adventure”. He’s also ridden throughout the Canberra region, in Tathra on the south coast,

Nerang on the Gold Coast, Thredbo in the Snowy Mountains, and across the ditch in Auckland. Thomas adds that having the occasional crash “is part of the sport”. He says he has made two trips to the hospital for cuts and bruises but plans to continue avoiding broken bones.

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MPA -Full Page (w) 210mm x (h) 268mm

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