Australian Broker magazine Issue 10.08

APRIL 2013 ISSUE 10.08

$4.95 POST APPROVED PP255003/06906

+INSIDE + NEWS A look at what’s been making headlines P4

+ OPINION FINDING REAL VALUE

The changing relationship between brokers and valuations P10

+ SPECIAL SECTION

Stewart Saunders: Don’t let us be misunderstood ME Bank is making serious forays into the broker channel, and national broker manager Stewart Saunders wants to clear up some misconceptions

MFAA CONFERENCE PREVIEW

A look at what to see and do as brokers descend on Sydney P18

+ WORKSHOP

F

or Stewart Saunders, much of ME Bank’s strategy for the future hinges on brokers getting onboard. ME Bank made its foray into the third-party space 18 months ago, and Saunders said the decision was driven by consumer preferences.

“The broker plays a very important role for a non-major like ME Bank. We don’t have a huge retail footprint, but through the broker market we’re able to gain access to consumers without that huge capital investment,” he said.

FULL STORY PAGE 12

FINDING YOUR NICHE

Targeting a niche market could be your key to success P22

+ SPOTLIGHT THE ELECTION AND YOUR BUSINESS Mathias Cormann on the Coalition’s plan for brokers P27

NEWS

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2

WHAT THEY SAID...

NUMBER CRUNCHING MARKET MUSCLE

WAYNE SWAN

Lenders who proved to be the big market share winners of the quarter Market share March 13

Market share Sept 12

DID YOU KNOW?

CBA 21.1%

“The four pillars policy has endured, in one form or another, through seven successive Treasurerships” P4

18.5%

JON DENOVAN

40

%

Bankwest

6.3%

“If you’re a decent lender, once the customer gets into default you would ring them up” P4

The number of Australians between 30 and 59 days in arrears has increased 40% since the September quarter

3.4%

Source: Fitch

ME Bank 2.1%

CRAIG MACKENZIE 1% Source: AFG

CREEPING UP

Housing finance sees marginal increase Jan 2013 to Feb 2013

105%

The amount mortgage payments have increased in the 10 years from 2002 to 2012

“Today mortgage brokers are far more engaged in the valuation process” P10

Source: Canstar

Total dwellings↑1.4% Owner-occupied↑1.2% Investment 1.8% Source: ABS

KEVIN LEE

“I’ve seen many people do very well out of property – and I’ve seen just as many people not do very well, if not terribly” P23

NEWS 4

brokernews.com.au brokernews.com.au EDITOR Adam Smith

Hardship regulations ‘a real shocker’

PUBLISHER Simon Kerslake COPY & FEATURES JOURNALIST Mackenzie McCarty

■ An industry figure has labelled new hardship

provisions “a real shocker” that could end up locking borrowers out of credit.

An NCCP amendment was recently issued which formalised provisions for borrower hardship. The new provisions stipulate that borrowers can give notice orally “by simply stating that they are unable to meet their obligations”. But Gadens Lawyers’ Jon Denovan says the regulation reduces the process for hardship notifications to “an offhand comment” from a borrower.

“If you’re a decent lender, once the customer gets into default you would ring them up. When you ring them up and the customer says, ‘I haven’t paid because I can’t pay,’ you instantly have a hardship notice. Then if things deteriorate and you’re about to send them a default, you ring up and they say, ‘I still can’t pay,’ there’s another hardship notice.”

Denovan said the regulations had the danger of making lenders reticent to contact customers in mortgage stress, for fear they would trigger a hardship notice.

“You would have thought it was sensible for me to say, ‘you’ve told me you can’t pay now; is there some arrangement we can come to?’ If the punter says no, the lender shouldn’t have to go through the process. But now it’s going to get referred to an EDR, and they’re going to lose a minimum of two to three months and potentially nine months where no payments are being made on the mortgage.”

PRODUCTION EDITORS Carolin Wun, Moira Daniels

MFAA blasts Swan’s RMBS move ■ Treasurer Wayne Swan has

DID YOU KNOW?

PORGES OUT AT AUSSIE ■ Following rumours of his departure, Stephen Porges

has resigned his role as CEO of Aussie Home Loans in order to “pursue other interests”, according to an official statement released this month. Executive chairman, John Symond, said he would like to thank Porges for his contribution to the aggregator’s success and wishes him well in his future endeavours. Aussie spokesperson, Tim Allerton, said the franchise brokerage will be appointing a new CEO “in due course” and that Porges has guided the company through “a number of important acquisitions”, but was unable to offer further comment.

The overall share of loans processed for major lenders increased by 3.7% in March (Source: AFG Competition Index)

announced that the government will terminate its support for the mortgage-backed securities market, a move which has MFAA CEO, Phil Naylor, disappointed, if not surprised.

“To be fair, the government has always said its support of the mortgage-backed securities market was going to be temporary and that’s been the case. We’ve argued against that in the past, saying they should take a more long-term view like they do in Canada, but we’ve never been successful.”

The Australian Office of Financial Management (AOFM), which has invested a total of $15.5bn into the market (reportedly worth $45bn in total) since October 2008, will hold on to its remaining stock for the immediate future but won’t make new purchases.

Swan said that the government has done its part and is now ready to step away from the industry.

“The four pillars policy has endured, in one form or another, through seven successive Treasurerships over more than two decades and has served Australia well in all that time.”

ART & PRODUCTION SENIOR DESIGNER Rebecca Downing DESIGNER Ginni Leonard SALES & MARKETING SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak MARKETING EXECUTIVE Anna Farah TRAFFIC MANAGER Abby Cayanan CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley MANAGING DIRECTOR Claire Preen CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR – BUSINESS MEDIA Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Adam Smith tel: +61 2 8437 4792 adam.smith@keymedia.com.au Advertising sales Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak tel: +61 2 8437 4772 rajan.khatak@keymedia.com.au Subscriptions tel: +61 2 8437 4731 fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Singapore, Toronto, New Zealand brokernews.com.au 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 Australian Broker magazine can accept no responsibility for loss.

Australian Broker is the most-often read industry publication, according to independent research carried out by the EhrenbergBass Institute for Marketing Science at the University of South Australia in December 2008.

The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.

NEWS brokernews.com.au

6

THE STRANGER SIDE OF NEWS

CALL ME EMBARRASSED

■ Brokers, like most everyone these days, are

BOQ offers olive branch, restitution

permanently attached to their smartphones.

A judge in the US had evidently had enough of this, and issued a “one strike, you’re out” policy for phones ringing in his courtroom. Anyone who interrupted proceedings with a noisy phone was held in contempt and charged a $25 fine. Imagine the judge’s embarrassment, then, when during a recent trial his new smartphone started making noise. In the interest of fairness, the judge held himself in contempt and stumped up for the $25 fine.

BROKERS INVITED TO VIRTUAL LAND GRAB ■ The founder of a social media site for real estate has

called on brokers to join a “virtual land grab” for leads.

Housenet.com.au CEO Darren Moffatt has said the social networking site will build 15,000 “micro property forums” for every suburb in Australia. He said the move will “connect people based on where they live or want to invest”.

“It’s like a virtual land grab; it’s new online real estate that could prove very valuable to brokers in the future,” Moffatt said. He called on brokers to build a presence on the site as it readies itself to focus on consumers. “Brokers who get in early and establish a voice on the Housenet forum for their suburb first stand to benefit most, both from the expansion of their digital footprint, and – more importantly – from the new relationships they can establish online,” Moffatt said.

■ BOQ has announced the

FAST FACT

6,000 Number of customers BOQ plans to reimburse after an accidental system error lasting nearly a decade failed to link mortgage offset accounts to some eligible home loan accounts

expansion of its distribution footprint through the acquisition of Virgin Money (Australia) Pty Ltd, which the lender says is a reinforcement of its intention to re-enter the broker market. The acquisition delivers BOQ exclusive Australian rights to the Virgin Money brand.

Broker scepticism around the lender has remained heavy since BOQ pulled out of the market during the GFC, but BOQ spokesperson, Jamin Smith, said it’s time to move on.

“We understand that some brokers may have this view. The reality is that the global financial crisis challenged the regional bank sector, particularly in relation to their ability to access affordable funding, and some very difficult strategic decisions had to be made – we find that most market participants appreciate this.”

Furthermore, Smith says BOQ’s current management team is committed to providing customer choice and notes that

the mortgage broker market is an important part of this.

“Our plan is to re-enter the broker market in a cautious and measured way while also seeking feedback from brokers to make sure we get our offering right. We think that BOQ, which is truly independent of the big banks, will provide choice to brokers and their customers.”

The bank has also agreed to appoint an independent expert to review its remediation processes after a nearly decade-long system error saw customers lose out on an estimated $12m.

The bank informed ASIC late last year that it had recognised the error, which involved a failure to link mortgage offset accounts to some eligible home loan accounts.

Current estimates say the error impacted approximately 6,000 customers and total refunds will be in the order of $12m. While some customers have already been compensated, BOQ says the remaining affected clients will be reimbursed within the next 10 months.

NEWS brokernews.com.au

8

More calls for Major looks cuts as funding to lend big to costs ease business ■ Bank funding costs are at their

lowest level since the GFC, raising yet more questions as to whether lenders will consider passing on any further potential interest rate cuts in full.

Australian Bankers Association spokeswoman, Heather Wellard, said the fact that funding costs have gone down isn’t necessarily cut and dry. “Basically [the RBA’s] conclusion is wholesale funding has come down but deposits are still high,” she said. Bank executives have further argued that, regardless of decreasing short-term funding costs, the price of securing longer-term funding remains high – and ongoing issues in Europe have also had an effect.

■ A Colliers International

report has found that around 816 commercial distressed properties were advertised for sale across the country last year, up from the 777 on the market in 2011.

However, this 5% rise was far less than the previous year’s 30% spike.

Think Tank CEO, Jonathan Street, said his company has witnessed a ‘moderation’ in the incidence of distressed commercial property.

“Conditions have continued to improve modestly, although we would characterise conditions as still very challenging for a large segment of property owners and businesses.”

WORLD NEWS CANADA CALGARY SHORTAGE MEANS BROKER ABUNDANCE A low inventory Calgary market is creating a seller’s paradise in that city, and placing more pressure on brokers to push the paperwork through underwriting deals.

“Inventories are really tight here, and three of my clients have run into situations of multiple offers on a single property,” said Kelly Wardle, president of Pro-Link Mortgage. “It is definitely a seller’s market, and that means we are having to work a little harder and a little faster to get the underwriting done.”

Typically, Wardle asks for a seven-day turnaround on deals, but the low housing inventories in Calgary have placed sellers in the catbird’s seat – and those sellers are pushing for quick closing dates on deals.

UK SANTANDER COPS COMPLAINTS IN UK

LOAN SIZE ON THE RISE ➹ 2002 Avg loan size/ avg repayment

2012 Avg loan size/ avg repayment

NSW

$212,400/$1,426

$341,800/$2,295

QLD

$152,700/$1,025

$289,900/$1,947

SA

$124,900/$839

$249,400/$1,675

VIC

$175,900/$1,181

$306,500/$2,058

WA

$141,000/$947

$302,500/$2,031

TAS

$94,800/$637

$218,100/$1,464

NT

$133,500/$896

$337,000/$226,283

ACT

$160,500/$1,078

$350,700/2,355

Source: Canstar Home Loans Star Ratings Report

A recent report by the UK’s Financial Conduct Authority, the rough equivalent of an EDR, found that Spanish bank Santander topped the list for consumer complaints. The bank drew more than 14,000 complaints, easily outpacing second-most complained about lender, Bank of Scotland, which drew more than 8,600. Perhaps most troubling were the proportion of complaints against lenders which were upheld.

Santander saw 33% of the complaints against it upheld, while Barclays saw 44% upheld.

Bank of Scotland saw a whopping 53% of the complaints against it upheld. Next time you complain about FOS or COSL, think of this.

brokernews.com.au

Bringing financial services together The creator of a new product says it represents the practical merger of financial services

THERE’S NO PRODUCT DIFFERENTIATION OUT THERE. EVERYTHING IS PRICE DRIVEN – MICHAEL MCALARY, WEALTHMAKER FINANCIAL SERVICES

T

he convergence of financial services is a perennial topic of conversation in the broking industry, and there is no shortage of pundits claiming that the roles of brokers and planners will become more intertwined. Most of the discussion has been mere theory, but the creator of a new product combining a residential mortgage with an investment has said his company’s product makes this convergence a reality, and he says brokers will need innovative products as a point of differentiation.

WealthMaker Financial Services managing director Michael McAlary said the convergence of financial services will see consumers looking not only for service propositions that meet the broad range of their financial needs, but also looking for products that address both sides of the balance sheet.

“There is a convergence going on between investment and lending,” he said.

With this in mind, McAlary said, the company has launched a new product he says represents the convergence of lending and investing. The company’s Aspire home loan functions as both a mortgage and investment product.

According to McAlary, this means that, should the market perform at historical averages,

the investment balance will outstrip the outstanding loan balance by year 22.

“At that point, they’ve made no extra payments but they’ve paid their house off eight years early.

If they want to go to the end of the 30-year term, not only do they end up owning their house, but they also end up with a bucketload of investments,” he said.

Should the market not perform, McAlary said the product contains gap protection to ensure that the loan term goes no more than 30 years.

McAlary touted the product as a way for brokers to differentiate their offering.

“The key thing is that there’s no product differentiation out there. Everything is price driven,” he said.

“Brokers have been going through hard times over the last five years since the financial crisis, so brokers will need a product like this as a point of differentiation,” McAlary added.

With the product merging investment and lending, McAlary said brokers recommending it would find it “in their interests to get someone with an AFSL to sign it off”, but he said this created the opportunity for brokers to forge referral relationships.

“You’ve got brokers already sharing offices with planners, and some do currently refer business to each other. This sits neatly in that space,” he said.

OPINION 10

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Brokers and valuations RP Data’s Craig Mackenzie says the advance of technology means valuations will be less frustrating for brokers and borrowers

T FAST FACT

<5%

Prior to the GFC, less than 5% of valuations came in short of the owner’s estimate. That figure has now increased to 15%

en years ago a mortgage broker was never allowed near a valuation report for a mortgage loan that was submitted to a lender. The mortgage broker was kept at arm’s length from this process, primarily for risk and governance reasons, and the valuation report and the process for procuring it was regarded as the exclusive domain of the lender or mortgage manager.

Times have changed.

Today mortgage brokers are far more engaged in the valuation process and have much greater visibility about the status of each valuation report as it is being prepared. Brokers are even able to order an AVM from some lender portals and gain an instant assessment of the estimated value of the property.

Prior to the global financial crisis, ‘valuation shortfalls’ (valuation amounts coming in short of the owner’s estimate or even the contract of sale amount) were extremely rare; typically in less than 5% of cases. The primary focus of the mortgage broker in those days was therefore focused on the first two Cs – credit and capacity and not the third ‘C’ – collateral.

It was accepted practice that the lender or mortgage manager would typically instruct a valuer to prepare either a full valuation of the subject property (internal and external inspection) or perhaps just a drive-by or kerbside (external inspection only). In the minority of cases the lender/funder may have accepted the contract of sale price in lieu of a valuation. Historically it was customary for the valuation report to take up to a week to come back and that a ‘conditional

CRAIG MACKENZIE

approval’ would be given in the interim. That is, the deal would be approved subject to the valuation amount being acceptable. Often this was enough to appease the borrower and the mortgage broker and effectively take the borrower off the market.

The changing nature of Australia’s property market since the global financial crisis, the evolution of different valuation methodologies and the technology to deliver those methodologies have changed those dynamics. Further, lenders have worked hard to seek greater engagement with their key broker partners and streamline processes for efficient loan assessment processes with minimal re-work. Lenders have also sought to design their processes to offer an unconditional ‘Yes’ as soon as possible so as to take the borrower off the market.

THE CHANGING MARKET

Looking at the changing nature of the property market first, the percentage of valuation reports coming in short of owners’ expectations has increased from around 5% pre-2008 to approximately 15% in today’s market. This has

OPINION brokernews.com.au

occurred as a result of the soft and fragmented nature of the property market since 2008, with a particular emphasis on sub-segments including Queensland coastal markets reliant on tourism, off the plan developments, and house and land packages on capital city outskirts.

This issue causes considerable angst for lenders, borrowers and brokers. Clearly lenders prefer not to invest the time, effort and expense in assessing credit aspects of a deal that ultimately falls over because the collateral valuation does not meet expectations. As a result, lenders have invested considerable effort to work with industry partners to redesign the valuation processes to obtain the valuation assessment at the earliest possible time, through a combination of leveraging alternative valuation methodologies and driving improved service level standards.

Second, the improved reliability in alternative valuation methodologies such as AVMs and desktop valuation reports, together with the valuation cascade rules that drive the use of those methodologies depending on the loan characteristics, has meant that lenders, brokers and borrowers often have a view of the collateral valuation assessment far earlier in the loan origination process.

Technology developments and the utilisation of mortgage platforms such as ValEx and VMS, each owned by RP Data, have also permitted lenders to separate the valuation ordering and management processes from the governance controls necessary to ensure that brokers are not ‘gaming the system’. In the same way funders

11

have for years permitted mortgage managers to order the valuation report from a panel of valuers approved by the funder, lenders now will permit their preferred brokers to order a valuation assessment (which may be an AVM, desktop, drive-by or full valuation, depending on the nature of the proposed deal) from a dedicated website or portal which incorporates the lender’s business rules, often returning AVM outputs within minutes.

These developments have a range of benefits: • borrowers are able to avoid the frustrations associated with valuations coming in short after considerable effort has been expended on the loan application process; • brokers obtain similar benefits and have the added benefit of having much greater involvement and visibility into the collateral assessment process than ever before; and • lenders are able to enjoy productivity benefits associated with the loan assessment process and also ‘take the borrower off the market’ by providing a “yes” rather than a conditional “yes” sooner than in the past.

Future developments in this area provide the opportunity for even greater innovation, including the potential for banks to offer pre-approved valuation assessments of a wide range of properties. Whilst this concept has many attractions to all parties, it should be remembered that the collateral is the last line of defence and that the first two Cs of credit and capacity should always be the primary focus for lenders and brokers.

LENDERS HAVE WORKED HARD TO SEEK GREATER ENGAGEMENT WITH THEIR KEY BROKER PARTNERS AND STREAMLINE PROCESSES – CRAIG MACKENZIE

NEWS

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CONTINUED FROM PAGE 1

Stewart Saunders: Don’t let us be misunderstood

A

STEWART SAUNDERS

s a non-major that’s not quite a traditional bank and not quite a mutual, Saunders said many brokers may not quite understand ME Bank’s place in the market.

“ME Bank has a very unique position in the Australian banking marketplace, and it’s often misunderstood. On the one end you have the big commercial banks which give the appeal of security, but they’re in the position where they have to prioritise shareholder returns over customer benefits. At the other end of the spectrum you have mutual banks and building societies. They deliver the customer benefits, but sometimes lack the security. ME Bank doesn’t fit in either category. We have the serious financial backing of being owned by some of the biggest industry funds, but similar to a mutual we’re built on the principle of fairness, and our profits are returned to our customers via their super,” he said.

But Saunders wants to communicate the lender’s offering to brokers. He said the channel is vitally important for the bank, with its internal research showing that more than 50% of its target customer base prefers to deal with mortgage brokers.

“ME Bank research has shown that many Australians lack financial confidence and continue to want face to face service, so ME Bank has been focusing on channelling demand by building the broker channel,” Saunders said.

With this in mind, he said the bank has heavily staked its fortunes on the broker channel. As an example of this, Saunders said ME Bank was actively winding back its retail network, a sign of its commitment to grow through the third-party.

brokernews.com.au

“We’ve been in the process of closing our branch network to focus on growing our broker network and workplace banking. The decision to close branches is a good example of ME Bank being willing to take a different path,” he said.

MAKING AN APPEAL

Saunders concedes that the bank has to work hard to find its footing with brokers. In an effort to pique broker curiosity, ME Bank recently announced an initiative to offer a commission sweetener to brokers. The promotion, running through the end of the financial year, will see the bank offer 10bps for settlements from $1m to $1,999,999, 20bps for settlements from $2m to $2,999,999 and 30bps for settlements $3m and above. But Saunders claims it’s a sharp offering to broker customers, not a commission incentive, which will ultimately get the attention of the channel.

“The commission bonus campaign for us is about just motivating brokers to give ME Bank a look. We don’t see that as the primary driver of broker volumes, but it seems to be achieving the goal of raising awareness,” he said.

For Saunders, it’s the bank’s product offering that has driven growth for the lender.

“The commission campaign is only one of several that have generated significant interest for us.

We’ve seen our fixed rates as the primary driver for the increase we’re seeing. March applications were up 250% on our February applications.”

THE DECISION TO CLOSE BRANCHES IS A GOOD EXAMPLE OF ME BANK BEING WILLING TO TAKE A DIFFERENT PATH –S TEWART SAUNDERS

CONTINUING THE JOURNEY

“Eighteen months ago when we were looking at coming into the market, we took a very consultative view talking to brokers and aggregators.”

This consultative view, Saunders said, means that the bank has taken onboard broker feedback, and is continuing to sharpen its offering to brokers. He said technology will play a major role in making ME Bank more attractive to brokers, as will products and policies.

“One of the key approaches we’ve taken is to be flexible with our offering. We’ve had significant changes to our products and our processes over the last 12 months. We’ve made over 20 major credit policy and product changes, all based on the feedback brokers have provided,” he said.

Though early signs for the bank have been positive, Saunders said, there’s still a long way to go to be fully embraced by the third party.

“We’re very early on in the journey, and we have a lot of learning and development to do to catch up with other lenders in this space,” he said.

But Saunders vowed continuous improvement as the bank works to position itself and build relationships in the channel.

“By no means are we in a position yet to be able to implement our ideal proposition in the market, but we’re building toward that.”

TOOLBOX

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14

It’s your

CALL

Many brokers can’t justify the expense of a full-time receptionist, but a new service aims to ensure your clients don’t know the difference

B

rokers want to offer a professional veneer to clients, but for solo operators working on a limited budget, this can be difficult. But a new service targeting small businesses can help one-man band brokers present a more professional image without the expense of office staff.

OfficeHQ offers brokers a bespoke answering service that is indistinguishable from a staff receptionist says the company’s founder, David Atkinson.

Atkinson says the service offers brokers and other small business owners a unique phone number, which is routed through to a team of receptionists who answer each incoming call in a personalised way.

“We can provide the customer with a number in any one of the 66 Telstra exchanges. The customer can then log into the customer portal of the iPhone app and customise their greeting.

When the phone rings, that’s

WE’RE FINDING THAT THE BROKERS WHO USE OUR SERVICE WANT TO PROJECT A PROFESSIONAL IMAGE – DAVID ATKINSON, OFFICEHQ

what pops up on our receptionist’s screen,” he says.

Atkinson says the service allows brokers to set up a personalised greeting, giving clients the impression of an in-house receptionist at a fraction of the cost.

“They can include their current status and instructions. It automatically comes up on the screen so operators can provide consistent service, no matter which operator answers,” he says.

The service is especially useful for small businesses, Atkinson says, as a full-time receptionist may be beyond the reach of many solo operators.

“Most of our clients are small one-man bands. They’re people with up to five staff, and they can’t justify a full-time receptionist,” he says.

But Atkinson says large companies also use the service, aiding their in-house staff during peak times, offering 24/7 coverage or to remain available over holiday periods.

Atkinson says the service is a good fit for many mortgage broking businesses.

“We’re finding that the brokers who use our service want to project a professional image.

Using our service offers the image of an office environment.”

And the mobile nature of mortgage broking also makes a receptionist service valuable.

“Brokers are often out and about, so with this option, if they’re out seeing clients, the call doesn’t have to go to voicemail,” Atkinson says.

He also says the company offers a range of services on a pay-as-you-go plan, with its Message Express service taking messages from callers and delivering them via email and SMS, and its My Assistant package offering an answering service capable of fielding queries and making appointments.

NEW TECH AIDS SMSFS BGL Corporate Solutions has partnered with national data and analytics group RP Data to provide automated property data to the SMSF market.

Through BGL’s ‘Simple Fund Desktop and Simple Fund 360 web SMSF administration solutions’, BGL managing director, Ron Lesh, says clients will be able to obtain property valuations, complete land title searches, request depreciation schedules and access a number of additional services provided

by RP Data.

“Clients will be able to request residential and commercial property valuations in a number of different forms through their BGL software.

The valuation details will then flow back into Simple Fund and a PDF of the valuation will automatically be attached to the appropriate fund. This is a sensational new and unique service for our clients.”

Lesh says the latest ATO statistics show around 17% of SMSF assets are held in property and that this figure continues to grow. “This new service will help our clients to provide up-to-date asset valuations and will also make it easy for property valuations to be obtained for year-end audit.”

RP Data CEO, Graham Mirabito, says the organisation is pleased to partner with BGL in order to provide access to its range of valuation and analytics services for the benefit of the SMSF industry.

“At $5.5 trillion, the Australian residential and commercial property markets are the largest asset class underpinning Australia’s wealth. BGL has recognised the strength of RP Data’s depth in property data and the enterprise grade nature of our RP Gateway product.”

ANALYSIS brokernews.com.au

15

Common sense approach on employment While ASIC has been obtuse on the issue, Jon Denovan says brokers need to use common sense to verify employment ... and follow it up with a stiff drink

“C

lear as mud,” is how several Australian Broker readers described a recent ASIC response to concerns surrounding client employment verification requirements.

Gadens Lawyers partner, Jon Denovan, says he sympathises with brokers but argues that common sense should prevail.

“Ordinarily, if you get a PAYG and you look at that, that would be sufficient in the absence of it raising any peculiar concerns. You certainly don’t need to go ringing the employer.”

However, if there’s anything that’s even ‘slightly dodgy’, Denovan says brokers need to make further enquiries.

“If this fellow gives me a PAYG slip, but I look at his bank statements and they’re not the same, then I need to make further enquiries. Also, if the consumer is in any way disadvantaged, like they’re really highly-geared, or they speak English poorly, or they’re poorly educated, then you have to make more enquiries because the law is assuming that they need more help.”

Denovan says that while it largely comes down to common sense, it is a change from the old situation, where, before ASIC regulation, ‘you could cop what you were given’.

“You can no longer cop what you’re given, you have to receive, think and decide – and if you fail to go through those steps, then you’re in breach of your licence regulations. My favourite test is where I put myself in the borrower’s situation and I say, ‘if I was a borrower, would I borrow this money?’

That’s what you’ve got to do at the end of the day to ensure that the loan is not unsuitable.”

Surprisingly, Denovan doesn’t believe ASIC could be any clearer in defining adequate employment

JON DENOVAN

verification. “We’ve talked a lot about getting further guidance, but the whole problem is that it is scalable. For example, if I came to you and said ‘I’ve been employed at the same job for 20 years and I want to borrow a 20% LVR’, then the enquiries that you would make would be completely different to someone on a job for six months and wanting to borrow at 95% LVR. In between those two extremes is a lot of scalability – and common sense needs to prevail…Whether it’s good law or not is a different bloody question.”

The reality, he says, is that people come to brokers wanting them to find a loan and many brokers find it tough when the law stipulates that they aren’t supposed to help certain people.

“I think brokers are [confused] and they get different messages from different lenders – and I think some of the people who go around providing compliance services scare the sh*t out of [brokers] by making it all complex. But, at the end of the day, it’s like my business; it’s heavily regulated being a lawyer. I just use common sense and act honestly and I’ll be apples. And that’s what the brokers need to do.” On a final note, Denovan offers one more piece of advice.

“I think maybe the only solution might be to drink more.”

WORKSHOP 16

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Exposing the myths of the WORK-LIFE BALANCE Competitive sports may provide the key to juggling your work life and your personal life, says Natalie Ashdown

O

Natalie Ashdown is the CEO of the Open Door Coaching Group and author of ‘Bring Out Their Best - Inspiring A Corporate Culture in Your Workplace’. Contact Natalie at www. opendoorcoaching. com.au

ne of the most popular goals in workplace coaching programs is to find ‘work-life balance’. Work-life balance is such an overused term, as far as I am concerned, because many people don’t do ‘balance’; they are involved in some elaborate juggling act. I think of a circus character walking across the tightrope, metres up in the air, with no safety net, just a big pole to create balance.

Left side goes down (work), right side goes up (home life), and up and down and backwards and forwards as you move across the wire. Add in a nice dose of peer pressure, guilt, stress about getting from home to school for an early meeting, drop-offs, pick-ups, arranging care and babysitting and it makes for one complicated work-life balancing act!

I had the pleasure of talking to Sean Richardson, sports psychologist, to offer us a new paradigm for balance that explodes once and for all the work-life balance myth.

There is so much that we can learn from competitive sport and its application to the corporate workplace.

The culture of competitive sport is an old school culture that pits individuals against each other, assesses their capabilities, and ranks them accordingly into winners and losers. It’s aggressive, physical and high pressure, with high stakes.

In contact sports the physical stakes are high with the risks of being hurt, as are the mental aspects.

The high-pressure nature of the game helps our understanding of how people lead in tense environments, and how it’s difficult to change this style of leadership. The traditional leadership approach in highpressure, high-stakes, highphysical environments is to drive

LEADERS IN THE WORKPLACE NEED TO UNDERSTAND THAT THERE IS A TIME TO PUSH AND DRIVE, AND A TIME TO RECOVER!

the team to be as tough as possible, and to push them hard to peak performance.

But the message from Sean is about balance – the balance between stress and recovery.

It’s okay to push your team to achieve deadlines, but leaders have to remember that just like physical stress and recovery, employees need to have recovery time, or downtime, to recover from their mental and emotional exertion.

There are many things about Sean’s message that resonate with me. I remember the long corporate hours, pushing the envelope and then putting myself into bed for a week, laptop on my knee, tears every now and again because I was exhausted and couldn’t get the job done, and not recognising the very obvious signs of burnout.

Recovery or taking a day off just wasn’t an option. I remember saying, ‘I put in more hours than everyone else so that when I want a day off or some time in lieu to go home early, nobody will question me!’ And then a coach asked me, ‘How many days do

you take off?’ The answer was ‘None!’ Ten years of working overtime so I could take a day off, and I didn’t ever do it!

Sean asks a great coaching question: ‘What am I doing to balance the stress I am putting on myself? What relief am I giving myself to recover from the stress going on in my head?’ And it doesn’t need to be stress in a negative sense. Stress is any way that you are stretching yourself, and this can be innovatively and creativity. When muscles are stretched and put under stress, they get stronger. Fatigue and soreness are not bad; they are a sign that the body has been stretched. The key is that you have recovery time.

Leaders in the workplace need to understand that there is a time to push and drive, and a time to recover! They need to understand when you can push people and when you need to support them. In sport it is easy to focus on push, but if we don’t pull back and make athletes feel good as human beings, they won’t perform and over the long term they will break down.

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MARKET TALK 17

SPECIAL REPORT

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18

MFAA Convention guide The MFAA Convention is upon us yet again, this time at the Sydney Convention and Exhibition Centre. As the broking industry prepares to descend on the Harbour City, Australian Broker offers a guide to what to expect, where to go and what to see during the MFAA’s annual gathering

Must see sessions Floating in and out of the Expomart, catching up with old friends and sleeping off the previous night’s festivities are some of the attractions of the MFAA Convention, but there are some speaker sessions brokers should consider as imperative. We offer a look at a few of the sessions not to be missed.

Don’t miss …

CREEL PRICE Thursday, 1:30PM “Serial entrepreneur” Creel Price is an incredibly motivating, interesting and humorous speaker. His story of starting a business on a shoestring budget only to sell it 10 years later for $100m should inspire any entrepreneur. Price’s insights will motivate you as a leader and give you tools to take your business to the next level.

Don’t miss …

Don’t miss …

JOHN FLAVELL Thursday, 9AM

ANDREW INWOOD Thursday, 4:15PM

NAB Broker distribution head John Flavell has one of the keenest economic minds of anyone in the industry. His presentations regularly give a crystal ball gazing view of the global economy, and drill all the way down into its likely impact on individual brokers.

Plus, Flavell has fascinating things to say on the way banks interact with brokers, and changing consumer dynamics.

Inwood, the principal and founder of CoreData, drills down into the details of the MFAA/Commonwealth Bank Home Finance index. The index is a great forward indicator of changing consumer behaviour and demographics, and can help you prepare to cater to shifts in client demand and buying habits.

Don’t miss …

Don’t miss …

TIM LAWLESS Thursday, 11:15AM

JOHN HOWARD Friday, 11:30AM

The Australian housing market hasn’t been too flash of late, but it’s also avoided the perilous falls predicted by property doomsayers.

RP Data’s research director examines conditions across Australia’s key markets and gives brokers insights into whether a sustained recovery is on the way, or if 2013 is set to bring more of the same.

Whether or not you were a fan of his policies, the former Prime Minister should be a fascinating speaker. With the Federal Election approaching, expect Howard to have a lot to say about the current Government’s policies and industry regulation. He’ll also be dissecting the current global and economic environment, and its impact on business.

Entertainment

Jessica Mauboy

Stephen K. Amos

Performing at the MFAA Gala Dinner, the much-loved Australian songstress is sure to entertain. The evening is a masquerade ball hearkening back to the Italian Renaissance, and the gala dinner entertainment always gives way to a great evening of music and dancing.

The English comedian headlined the comedy lunch a couple of years ago, and is reliably hilarious. He pushes the boundaries of taste, but his personal warmth and charm somehow manage to make even the most ribald jokes go over well with a broad audience. On top of that, Amos is incredibly accessible and friendly to fans.

SPECIAL REPORT 19

Sydney city guide If you’re not a Sydneysider or if it’s your first time in town, it can be a bit daunting trying to find the best places to spend your down-time. One thing is for certain: don’t be fooled into hanging around Darling Harbour the entire time. While there are plenty of pubs and eateries surrounding the Convention Centre, most of them are astronomically over-priced and generally avoided by locals. A short jaunt into the CBD will open up your options.

Hyde Park

Darling Harb

EAT HERE

DRINK HERE

our

GO HERE 5.

2.

1.

4.

1.

Jamie’s Italian 107 Pitt St

OK, most celebrity chef restaurants are cheap tourist attractions designed to separate out-of-towners from their money, but Jamie’s Italian is different. With shockingly reasonable prices and an extensive menu and wine list, Mr Oliver’s Sydney effort is well worth the visit. The restaurant does limited bookings for groups of six to 20, but you can usually walk up and have a table well inside an hour. And while you wait, there are plenty of pubs within a stone’s throw.

2.

Felix Bistro 2 Ash St

If you’re looking for something a bit more upscale and Sydney-specific, try this popular bistro tucked away in a tiny laneway off George Street. Laneways in Sydney are finally taking off as the city desperately tries to transform its CBD into something a bit less corporate and a bit more Melbourne.

Felix and the adjacent Ash St Cellar are helping lead the charge. Make sure to book ahead, and expect to pay handsomely for the restaurant’s authentic French fare.

3.

6.

3.

Grasshopper 1 Temperance Ln

Another laneway gem at the end of an ironically named alley, Grasshhopper is a tiny, quirky space that specialises in cocktails. Try the #74, a mix of honeyed whiskey, orange and black tea. Or give the #80 a go. It’s made with sake, port and Aperol.

Boutique Beer Café 4. Redoak 201 Clarence St

If cocktails aren’t your thing and you’d rather stick with a good beer, Redoak has some of the best in town. The spacious café functions as a microbrewery, and happens to be Australia’s most awarded.

Don’t expect to go here for a VB or a Pure Blonde. This is beer for beer enthusiasts.

5.

Hyde Park Barracks Museum

Queens Square, Macquarie St These barracks, built in 1819 to house convict men and boys, are an amazing piece of Australian history right in the middle of the CBD. You can easily spend half a day working your way through the interactive exhibits, and it’s well worth the $20 price of admission for families ($10 for a single adult).

6. Cockatoo Island

You’ll have to hop a ferry to get there (King St Ferry Wharf 3), but it’s worth the trip. You can spend an entire day exploring this history rich island on your own. Since 1839, it’s served as a penal colony, a reformatory school and a shipyard.

The best part about the island is how deserted it often is, leaving you to wander the creepy abandoned warehouses and tunnels at your leisure.

MARKET TALK 20

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Property no-go zones As tentative recovery gets underway in parts of the country, Redwerks’ Jeremy Sheppard finds out if areas once considered no-go zones for investors are starting to stir

Jeremy Sheppard says there is ‘light at the end of the tunnel’ for Gold Coast investors

M

ost property investors who’ve had their finger on the pulse of the Australian residential property market for the last several years will know that there are some ‘no-go zones’.

These are markets that have some kind of chronic problem that would put informed investors off buying there in most cases.

The Gold Coast comes to mind as a good historical example.

But is this still the case? Let’s look at what the recent data is telling us to see if there is light at the end of these dark tunnels.

Perhaps it is time to capitalise on the stigma while it is still there.

THE GOLD COAST

Jeremy Sheppard is the inventor of DSRScore.com. au (demand-tosupply ratio) and is research director at Redwerks.

Why it became a no-go zone: It wasn’t long ago that retirees were moving into holiday or resort-style locations all up and down the east coast of Australia. This was a phenomenon that property investors were cashing in on – and developers, too. It seemed like the whole world was soon retiring and they all wanted sun and sand.

Developers went crazy in places like the Gold Coast and Sunshine Coast, whipping up high-rise apartments in particular. So of course a state of oversupply was eventually reached. The frenzy faded from buyers and prices tanked. Then the GFC came along and just made everything even worse.

Chances of recovery: Sooner or later the Gold Coast and Sunshine Coast markets will recover. They are still beautiful places to live in, after all. But it takes a long time for property markets to re-balance and even longer before they start looking like healthy investment locations once again. Volatile markets like this are what property investors can take advantage of – that’s if

you know what to look for and when to make your move.

To analyse these markets to see where they’re at right now, I’m going to use the Demand to Supply Ratio.

Prices will rise if demand exceeds supply. As investors, we want to invest in markets where the demand exceeds supply by the greatest possible margin. In other words, we want the maximum demand to supply ratio.

Both units and houses on the Gold Coast have had an increasing margin of demand to supply for over a year now from quite a low base.

This doesn’t mean now is a good time to invest in the Gold Coast since this ratio is still low.

Unless the trend accelerates, it doesn’t look like the Gold Coast will be a ‘buy’ recommendation even by the end of 2013.

However, existing owners of property in both the Sunshine Coast and Gold Coast can expect the slide of property values in some suburbs to abate in later 2013 – that’s if the strong upward trend in the demand to supply ratio continues. In other words, there is light at the end of the tunnel for those investors hanging in there.

MELBOURNE (CENTRAL)

Why it became a no-go zone: The boom in prices in some parts of Victoria over 2010 brought a lot of developers out from their caves. The less informed among them started

FAST FACT While demand for units has dropped, demand for houses has increased in Carlton, Carlton South, Carlton North, Docklands, Flemington, Kensington, Melbourne, St Kilda Road, North Melbourne, East Melbourne, West Melbourne, Parkville, Port Melbourne, Southbank, South Wharf and South Yarra

raising apartment complexes in locations already well supplied.

It is now widely held that this market is in a state of oversupply. But what do the statistics say?

Chances of recovery: Units were all the rage in 2010. Since then, the demand to supply ratio has dropped. Interestingly, it has increased for houses.

However, the current demand to supply ratio and the drop in demand to supply ratio for units in Melbourne are not as pronounced as I would have thought, given the level of media commentary on oversupply.

It does take a long time for significant movements in large markets to take place. Note that the demand to supply ratio is not really a cause for concern and is slightly better than the markets we looked at in Queensland. But it does tip the scales into the realm of oversupply.

From what I see of the Melbourne statistics, I’d be in no panic to sell if I already held property in this market.

Similarly, if I already held property in the Gold Coast or Sunshine Coast, I would be in no hurry to sell. However, I would definitely not be entering into these markets right now with a new investment – there are simply too many other better opportunities out there.

Both investors and developers have been hurt by not paying attention to the state of supply and demand.

MARKET TALK 21

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When Irish eyes aren’t smiling

ARREARS RISE NO CAUSE FOR ALARM

A controversial economist warns the Aussie housing market could bear a troubling resemblance to Ireland

E

conomist Leith van Onselen is no stranger to controversy, and his views on the Australian housing market and the possibility of a bubble are well known. But van Onselen says Australians need to have a serious look at other global markets, and learn from their mistakes. For a glimpse at Australia’s possible future, he points to Ireland.

Ireland’s house values have collapsed by 50% on average since 2007 and the nation’s homeowners have collectively lost the equivalent of A$315bn.

Back in 2004, notes van Onselen, Ireland was known as the ‘toast of Europe’ and one of the world’s wealthiest

countries, boasting GDP levels per capita around 20% above the European average.

“How things change… As is the case with most housing bubbles, Ireland’s was fuelled by a number of inter-related drivers: easy credit, speculation, and unresponsive supply.”

In 2007, the Ireland Central Bank’s Financial Stability Report showed lending restrictions on investor mortgages were relaxed in the mid-1990s, enabling property investors to borrow at the same interest rate and on similar terms as owner-occupiers.

“This led to a surge of property investment... In fact, as at June 2007, investors accounted for around 27% of total mortgage lending – slightly below Australian investor’s share of 32% of total mortgage lending.”

The sharp rise in property prices prior to the GFC forced rental yields down as well.

“As such, recent investors were cash flow negative in 2007, since rental income nowhere near covered holding costs.

So just as property investors in Australia rely

predominantly on capital appreciation to make ends meet, investors in Ireland were doing the same.”

The Irish planning system also contributed to the bubble, van Onselen argues, by creating a system of supply that was unresponsive to market demand.

Governments granted planning permits ‘too late’, resulting in the building of large numbers of standardised, small, poor-quality homes in satellite locations far from city centres – something van Onselen believes is currently happening in certain parts of Australia, including Melbourne.

There are, of course, significant differences between the Irish and Australian economies, and van Onselen believes that an Australian housing bubble, while certainly possible, wouldn’t likely be as dramatic as the Irish one.

“There are some pretty big differences. Ireland’s exchange rate and monetary policy is set by the ECB, while Australia has control over its own economy.”

Ireland also doesn’t have Australia’s mining sector, but van Onselen warns that, if we were to experience a mining bust, “that could be our catalyst”.

A slight uptick in arrears has been dismissed, with overall delinquencies sitting far below their past peaks.

Fitch Ratings’ Dinkum Report has revealed an increase in borrowers 30–59 days behind on their mortgage, up by 1.46% in the fourth quarter of 2012 compared to 1.36% in the third quarter. But the ratings agency said the rise was “not a concern”.

“The increase is a return to average, as Q3/12 levels have been far below the average since 2007 of 1.44%,” the agency said.

Fitch said delinquency rates in Australia remain low compared to other countries. The agency said it expected arrears to remain stable in the coming quarter, with an increase due to holiday spending to be partially offset by December’s rate cut.

The agency has also pointed out a decline in 90+ day arrears, which have fallen to their lowest level since December 2010.

WORKSHOP 22

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3

approaches to NICHE MARKETING Marketing guru Clifton Warren reveals how you can level the playing field by finding your niche

A

re you one of the many financial services firms who is trying to be all things to all people?

Once upon a time, all that you needed in order to be successful was good product knowledge and a few satisfied clients. Today, however, simply being competent is not enough. The industry playing field is rapidly changing with new entrants, mergers and acquisitions.

The good news is that, regardless of your size, you can reduce the effects of competition and level the playing field. Niche marketing is not about putting all of your eggs in one basket – in fact, it’s just the opposite. It’s a smarter way to invest your time, resources and marketing dollars.

The competitive advantage of highly successful financial services firms is that they have successfully positioned themselves as being someone special to a group of people by making the decision to focus on a few markets in which they have acquired special expertise and knowledge. To become a niche marketer, there are three key steps you need to take:

TECHNIQUE OF THE MONTH:

How to create an ideal client profile An ideal client profile will save you time by acting as a filter to quickly identify highpotential clients within your niche market.

Start by: »» Classifying your clients into A, B, and C categories »» Identify the ideal traits of your ‘A’ clients »» Rank your ideal clients in order of priority »» Your client profile will help you to identify the potential clones of your ‘A’ clients within your chosen niche market

A MARKET THAT FITS YOUR 1SELECT COMFORT ZONE

There are thousands of market niches to choose from. For example, if you provide financial services to individuals (business-to-consumer or B2C), niche markets for consideration include: • Births • Marriages • Recently promoted • Engagements University graduations list If your focus is the business-to-business (B2B) market, possibilities include: • Small enterprises • SOHO – single office, home office • Professional services • Less than 50 employees • Greater than 100 employees Once you have identified your niche(s), you can purchase lists or use directories to identify highpotential prospects. The Australian Business to Business Database published by JPM Media provides information on over 47,000 companies and 55,000 executives. Most public libraries now provide online access and apps to magazines and journals across virtually every subject.

2

BECOME AN INSIDER

After selecting your market, become an insider by learning everything possible about the industry, its methods of operations, problems, challenges, needs and opportunities. You can do this by:

• Attending conferences • Becoming active in industry trade associations • Subscribing to and reading industry publications • Speaking with current and past clients • Reading and following industry blogs and LinkedIn group discussions.

A VALUE 3CREATE PROPOSITION

Once you have located a list of high-potential prospects, get their attention by crafting an attractive value proposition that aligns your services to their needs.

A value proposition is a statement of the results a client will receive from using your services. Your financial services offering is largely an intangible idea, and a good value proposition will translate this into a tangible idea that a potential prospect will recognise. An attractive value proposition will differentiate your services by aligning with your prospects’ needs.

SUMMARY

Niche marketing is the ideal strategy for financial firms of all sizes. It can help you become the dominant player in your market and displace your competition. Niche marketing can be your key to producing higher revenues and client retention.

THE COALFACE

23

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INVESTING IN ADVICE Kevin Lee uses his experience to guide and mentor investor clients

I

t was love at first sight for Sydney-based broker, Kevin Lee, who met with Smartline directors 14 years ago as a representative of ANZ. Lee, who worked as a business development manager for the major bank at the time, says he knew “immediately” that he’d found his future career path after an evening spent with the then-start-up mortgage broking franchise.

“As a representative of ANZ, I met with the directors of Smartline and that’s where I saw my future, because the difference between being employed by ANZ with just one brand and being self-employed with many brands, meant that I was actually doing for clients what I had said I’d be doing all along, which was getting them a loan they’d be happy with.”

Moving from ANZ and being responsible for his own results there, Lee admits, was a big decision. “But it was the best decision I’ve ever made.”

Now, over a decade later, Lee has pulled a second business out of his hat – a property investment service dubbed Smart Property Adviser aimed at providing reliable, trustworthy advice in an environment Lee himself describes as ‘disgraceful’.

“After 18 years of being in the finance game, I’ve seen many people do very well out of property – and I’ve seen just as many people not do very well, if not terribly. There are so many crooks in the property investment industry; it’s just disgraceful.”

The problem, he says, is partly due to there being no qualifications required to become a property adviser – and those that have been suggested, he says, have been initiated by groups with ulterior motives.

“There has been a move to professionalise the area and I think that’s mostly being perpetrated by one particular company that wants to own the market, which is a bit sad.”

OPINION

KEVIN LEE

THERE ARE SO MANY CROOKS IN THE PROPERTY INVESTMENT INDUSTRY; IT’S JUST DISGRACEFUL –K EVIN LEE

Lee says his credentials stem from working in finance for 18 years and having written an estimated $850m worth of finance – on his own.

“I haven’t seen it all, but I’ve seen a fair bit and it’s disgraceful when things are done for people dishonestly – and that does flourish [in Australia]. I’ve helped, guided and mentored clients for as long as I can remember on investment properties; I also invest myself.

So my own experience as an investor… and the experience of people who have come undone for whatever reason, has shaped what I do.”

However, despite Lee’s passion for property investment advice, he doesn’t recommend it for most other mortgage brokers.

“I don’t think many of them have got the skills. There would be a handful – but most of them don’t really think that far into it.

Most people in the mortgage industry are happy just doing what they’re doing.”

FINANCIAL SERVICES 24

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ASIC delays adviser test

A

SIC has announced that it will delay the introduction of a mooted national exam for financial advisers “to allow appropriate time for other reforms to be implemented in the financial advice sector”.

The regulator says it will continue to explore options to start the exam at an appropriate time after FoFA reforms have been bedded down. ASIC released the consultation paper on the proposed exam about two years ago, proposing the following: • All new and existing financial advisers who provide Tier 1 financial advice pass a Financial Services Competency Certification exam (Entry Stage); • All new financial advisers following Entry Stage to be supervised by a supervisor (who has at least 5 years’ experience in

$2m

Those with about $2m in super will lose tax concessions

the industry) for a minimum period of 1 year full time or equivalent • All financial advisers to undertake a Knowledge Update Review every three years on changes to laws, market issues and new products; and • On-going continuing professional development requirements The exam proposal is part of a push for financial planning to be seen as a profession, by having “consistent national standards” for planners.

A poll by Australian Broker sister publication Wealth Professional asked advisers what they thought should be required to become a financial planner and the most popular vote at 43% was for a mandatory degree.

A quarter of respondents said RG146 was enough, while 20% said advisers should need a number of years’ experience.

Twelve per cent called for something completely new.

Feedback from the sector for ASIC’s exam has been mixed, with associations such as the FPA, FSC and Australia New Zealand Institute of Insurance and Finance (ANZIIF) saying the exam will create unintended costs for the clients.

+$2m Assets earning a rate of 5% return are effected

SOFTWARE FIGHTS TO STOP INSURANCE FRAUDSTERS A piece of software that asks policyholders to add their photo to their insurance policy online has been developed by an online facial recognition technology company to reduce claims fraud.

The photo can be screened against a database and fraudulent multiple claims can be identified at the point of first contact. Policyholders can easily add their photos using a webcam on their laptop, tablet, ipad or mobile phone.

The software has been developed by Facebanx, a division of OhHi. An independent review of the cost-benefits of the software estimated that it would save insurance companies $70 on every insurance policy sold in addition to the commission saved from a sale via an aggregator.

$350m The amount the changes will save over the forward estimates period

60 Withdrawals will remain tax free for those aged 60 or over

SWAN’S SUPER CHANGES TO HIT WEALTHY The wealthy will be targeted by the super changes announced by Treasurer Wayne Swan.

According to reports in major news, those with about $2m in superannuation will lose tax concessions under the new changes. This is estimated to affect about 16,000 people in 2014-15.

For people with more than $2m in super assets supporting income streams, the reform will affect assets earning a rate of return of 5%. It will save about $350m over the forward estimates period, according to the reports.

A tax exemption on superannuation earnings supporting pensions and annuities will be capped at $100,000, and anything above that level taxed at a rate of 15% during the accumulation phase.

Mr Swan said there was a disproportionate level of government support that flowed to a select few.

“There is something wrong in the system where working Australians on average wages are providing excessive support to people with millions in their superannuation account,” he

told reporters.

“Why should someone who has millions of dollars in a superannuation account pay no tax on their earnings while someone on $80,000 a year pays a marginal tax rate of 37 cents in the dollar on every additional dollar they earn.”

Withdrawals will continue to remain tax-free for those aged 60 and over, and face the existing tax rates for those aged under 60.

The Government will provide an unindexed $35,000 concessional cap to anyone who

meets certain age requirements – available to those 60 and older from 1 July 2013, and accessible to people aged 50 and over from 1 July 2014. The general concessional cap is expected to reach $35,000 from 1 July 2018.

Excess concessional contributions will be taxed at the individual’s marginal tax rate, plus an interest charge. Clients will be allowed to withdraw any excess concessional contributions made from 1 July 2013 from their super fund.

ANALYSIS brokernews.com.au

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FORUM 26

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LMI premium increases a ‘slap in the face’ Genworth’s move to increase premiums on LMI was met by broker cynicism

BROKERS VS PLANNERS: HAVE WE FINALLY FOUND COMMON GROUND? Trigon Financial founder Alan Rich recently argued for joint ventures between brokers and planners that let each retain their individual identities. He said this was the best formula for integrating financial services. While some brokers argued against integration, Patrick said the industry was moving inevitably towards it.

Each issue, Australian Broker will publish the best online comment from the previous fortnight – along with your other feedback.

So get online, and get participating!

BROKERNEWS. COM.AU

“I have been a mortgage broker since 1997, and in 2007 I diversified into financial planning. This has created an increasing supplementary revenue stream to offset run off in mortgage book trailers.

Not all brokers would have the capacity to be good advisers, but this is just a part of the overall upgrade in professional standards which the industry seems to be slowly addressing.”

Patrick on 12/04/2013 at 10:46AM

S

ydney mortgage broker Kevin Lee recently lashed out at mortgage insurer Genworth over the company’s decision to increase LMI premiums. Lee called the move “gouging”, but Genworth chief commercial officer Bridget Sakr defended the increase, pointing out that Genworth prices over “a longrun cycle”.

Regional broker argued that the lack of competition in the LMI sector allowed for wanton increases.

“When you have a duopoly in the mortgage market, they don’t compete with one another, they just follow the lead of the other.

LMI has been an area where the banks won’t complain as they pass the increase onto the client.”

But AaronG commented that insurers shouldn’t be bashed for looking to turn a profit.

“Are we suddenly a bunch of Commies complaining about this? Why the heck shouldn’t the insurers be able to set their own prices? In fact, until recently they couldn’t discriminate between a

HOUSING BUBBLE SPECTRE RAISED

Controversial economist Leith van Onselen recently drew comparisons between the Australian housing market and the collapsed Irish market. As usual, his comments stirred debate, with some brokers labelling him a “prophet of doom”.

Jim Kinnear 11/4/2013 at 9:45PM “Leith van Onselen is a permabear and has been exposed as making up a lot of lies about the Aussie housing market.”

James 9/4/2013 at 11:18AM “Why do you label this guy a ‘prophet of doom’ for simply outlining some downside risks, namely that the mining boom could unwind in a nasty manner? Whether it does or it doesn’t is beside the point. But burying your head in the sand and saying that a painful correction is not possible here is delusional.”

LMI HAS BEEN AN AREA WHERE THE BANKS WON’T COMPLAIN AS THEY PASS THE INCREASE ONTO THE CLIENT shaky deal and a rock solid deal and charge accordingly, so they just didn’t do the shaky deals. Is that what brokers want?”

Mega Broker said LMI was helpful in and of itself, but argued that insurers shouldn’t be able to double-dip.

“I personally have no issues with LMI as it gets people into properties that otherwise they may not. My beef is with the ‘theft’ by an insurer that cost my client upwards of $6,000 and all they did was substitute security.”

What do you think? Leave your comments at brokernews.com.au

OLIVE BRANCH REJECTED

Bank of Queensland is eyeing off the broker channel after having beaten a hasty retreat in 2004. The Bank wants brokers back onside, but some are still feeling the sting from the lender’s departure.

Melbourne Broker 11/4/2013 at 12:02PM “The previous CEO of BOQ David Liddy did not see a need for brokers at all, particularly as they were going down the route of franchise branches. He was not backward in coming forward and made consistent disparaging remarks about the broker channel.”

Positive Broker 11/4/2013 at 11:32AM “Let’s be sensible guys. BOQ left the market nine years ago. I say if they bring some competition to the table that’s a good thing.”

SPOTLIGHT 27

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ONE YEAR ON

$4.95

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ISSUE 9.08 April 2012

Diploma bring as deadline to sociation ‘chop’

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falling behind the education MFAA’s may soon deadline the associ opt to leave ation

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g MFAA Diploma will flock to rival see many brokers associatio associatio ns – or to n at all, no according training to one organisat ion.

As the 30 June deadline approach es, the MFAA claimed has Homeloa 75% ns Ltd eyes are on track of its 11,800 members broker network embattle to complete d Diploma their by the end of April.

Phil Naylor CEO has also Page 2 not expect said he does a large members after this hip cull “line in the sand”.

However, AAMC Training Group managin g director Mazzini Jeff has predicted MFAA members a fallout hip as brokers for shirk the deadline.

“The fact is if you Denovan put here apportio table with everything on the ns EDR system blame the the potential associations, there’s to chop a members lot of Page 6 .” they may Mazzini Jeff Mazzini miss the claimed Inside deadline in touch the number brokers to get with the who have this issue of associatio completed discuss Mazzini Diploma Coalface n to their situation. said regulatio the is low, but causing said some now rushing But other n is brokers Making sense 16 are brokers to baulk standard the Diploma may eschew cut-off. “The to enrol before of new JVs at higher s. the Viewpoi numbers an associatio altogether in favour “If an associatio nt one stage a few monthsI heard at n with lower of and Getting an 18 education that only saying brokersn is coming out online strategy al standard 3,000 people back is Opinion must do days and Mazzini s. Some, completed had 30 PD then ASIC said, may it. and saying is coming The truth even opt associatio is not high The completion for no about valuations 20 out they’re happy n members rate at this point, only do 20, hip at all.

Insight of them “Lending if you but a lot well, who’s are coming volumes People will Australia the are out woodwork Three successfu 22 say, ‘Bugger boss? and lenders down in and saying, of the ASIC says l broker traits loans on have this want to ‘I have to Market I only need them. the books. get finished talk said.

There will lenders by the end to do 20’,” June’. out there Perth investors be he 26 of that will deals if the But Mazzini wake up Naylor urged take People quality is said brokers brokers flee the right, the broker doesn’t who feared MFAA due who even if Westpac’s 28 to its education belong to associatio Kokoda challenge al requirem an n,” he said.

Insider ultimatel ents are y disadvan taging themselv Logic in reverse 30 es.

Refund

lifeline

What a difference a year makes … or not. Australian Broker reflects on the punditry, news and influential trends that made headlines 12 months ago Australian Broker Issue 9.08

How your vote could impact your business

EDR defen

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4/20/2012

3:59:23

PM

Diploma deadline to bring association ‘chop’

As the April 2012 deadline loomed for MFAA members to complete their Diploma, one industry pundit predicted an exodus of brokers who had failed to up-skill.

While the MFAA at the time said 75% of its members were already well on track to completing their Diploma, AAMC Training Group managing director Jeff Mazzini predicted a fallout for the association as brokers shirked the deadline.

What’s happened since: The Diploma deadline ended up getting extended all the way to 31 January of 2013. When that deadline came and went, the MFAA said it was confident that the vast majority of its membership had completed the requirement. While this proved to be true, the MFAA did axe 1,100 brokers – or around 12% of its membership – for failing to complete the required education.

Too early to tell on Refund deal, says Homeloans

Scott McWilliam

In the infancy of the company’s move to acquire the beleaguered franchise brokerage, Homeloans, then-general manager of funding and operations Scott McWilliam said it was difficult to gauge the impact the deal could have on Homeloans’ branded distribution model. With Refund spending months in administration and many brokers choosing to depart, McWilliam said it was difficult to tell how many franchisees could potentially come across following the buy-out.

What’s happened since: The Refund deal ended up an enormous windfall for Homeloans’ branded broker proposition. The company – which previously had 20 branded brokers – added a further 54 through the acquisition. For his role in the takeover, Scott McWilliam was bumped up to chief operating officer, and eventually CEO.

The Shadow Minister for Finance makes an appeal to brokers

Y

our vote could have a major impact on your business, Shadow Minister for Financial Services and Superannuation, Mathias Cormann, tells Broker TV. Increasing competition in the banking sector, for one, is a major concern for many in the financial services industry and Cormann says this is a key focus area for the Coalition.

“Joe Hockey has already released a nine-point plan on how to increase competition, but principally what we will do is hold a financial systems enquiry… which will very much focus on all of the policy areas that require increased competition in the banking sector.”

However, Cormann says the effects of the National Consumer Credit Act remain to be seen and the Coalition won’t be making any significant changes in the near future, should they come to power in September.

“Our view is that there’s been a lot of change in recent years and, really, it’s time to actually let some of these changes settle down. We haven’t been happy with everything the government has pursued in recent years and we’ve been able to successfully argue for some changes as legislation went through Parliament. But the important thing, really, is to let the dust settle, see how things are actually working before we jump at making more changes.”

But Cormann is far more decisive when it comes to banking competition, claiming some of the changes the current government has made in the wake of the GFC have, if anything, led to a concentration in banking services.

“We certainly think there is some scope to revisit some of the things the government has done – but we will have more to say about that as we get closer to the election.”

He says the Coalition plans to pay particular attention to small business owners should they be elected to government. “We’ll be very serious about cutting red tape. The current government has increased more than 21,000 new pieces of regulation – that is a lot of additional bureaucrats who are making life harder for small business.”

PEOPLE

brokernews.com.au

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Mutual lender grabs corporate responsibility award

T

eachers Mutual Bank (TMB) has leapt up the international CSR ladder, jumping from Bronze to Gold status in the annual Corporate Responsibility (CR) Index published in the Financial Times, London.

Achieving Gold status with a score of 90%, TMB significantly increased its rating from its previous status of 79% in 2012.

Developed in the UK, the CR Index is one of the world’s leading and most in-depth voluntary benchmarks of corporate responsibility for business. Teachers Mutual Bank – relatively small by comparison – has achieved one of the highest CSR accolades alongside heavyweight international CR Index member competition, including Barclays Bank, the BBC, Zurich and Marks & Spencer.

TMB CEO, Steve James, says that as a small Australian financial institution

AS A MUTUAL BANK, WE BELIEVE THAT PROFIT HAS A PURPOSE - S TEVE JAMES

competitively benchmarked against large global companies, the boutique lender is “punching well above their weight”.

“As a mutual bank, we believe that profit has a purpose. In the past 12 months, we’ve continued to improve our organisational performance to become a national and international leader in sustainability,” says James. “We are honoured to receive such a high accolade for our effort.”

Measures that contributed to the bank’s performance and

BROKERS GET SOCIAL A recent broker roadshow has several brokers touting the growing importance of social media for reaching customers. NAB’s crosscountry broker tour featured presentations from digital marketing guru Stephen O’Farrell, director of digital marketing at The Royals.

O’Farrell shared practical tips to get brokers engaged with social media, and the message seems to have sunk in.

“If consumers are spending 30 hours a week on the internet, we need to be there and do whatever we possibly can to get our website rankings upwards,” broker Frank Chillura of Clearlight Financial Solutions said.

Tracey Pye of Mortgage Express agreed, and said while it was difficult for brokers to engage with the myriad of social media platforms, Facebook and Twitter would be vital tools for client engagement in the future.

Following the workshop, more than three quarters of brokers said they planned to start using or increase their use of social media.

score include: • Total community investment of 4.18% of pre-tax profits, 10 times the finance sector average; • Platinum Sponsorship of CUFA, the development agency for the Australian mutual banking sector; • Awarded the Equal Opportunity for Women in the Workplace Agency (EOWA) Employer of Choice for Women citation; • A 17% reduction in greenhouse gas emissions, a 25% reduction in paper usage, and an increase in paper recycling of 63% “Sustainability is a core business value at Teachers Mutual Bank. We believe success is not only measured in terms of profit and growth, but also by how we engage with and support our members, our communities, our employees, and how we minimise our impact on the environment.”

MOVERS & SHAKERS ■ MAJOR SEES EXECUTIVE

SHAKE-UP

NAB has announced that executive general manager of growth partnerships Antony Cahill and general Antony manager of broker Cahill distribution John Flavell will move into new executive roles with the bank. Cahill will become executive general manager of digital and direct, while Flavell has been promoted to executive general manager of wealth advice.

Former executive general manager of business operations for John Flavell NAB Personal Banking Anthony Waldron will replace Cahill, with Flavell’s replacement to be announced shortly. Waldron praised Cahill and Flavell’s contribution to the broker channel.

“Antony and John are well respected in the industry and will continue to provide great leadership for NAB in their new roles.”

BROKERS GET SOCIAL – THE PROPORTION OF BROKERS WHO USE SOCIAL MEDIA

Facebook

LinkedIn

79.5%

78.6%

Twitter

Blogs

57.7%

52.5%

CAUGHT ON CAMERA 29

brokernews.com.au brokernews.com.au

IN FOCUS

T

he Independent Finance Brokers Forum recently held a question and answer session, bringing together MFAA CEO Phil Naylor and FBAA president Peter White.

The forum allowed brokers to ask the associations about their value-add to the industry.

View more photos from this event at brokernews.com.au/industry-events

INSIDER

brokernews.com.au

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CLIENTS FROM HELL

IRELAND SCORES DUBIOUS TOP POSITION

Your clients are your livelihood, the reason you’re in business – and most of them are probably wonderful, likeable people. But sometimes, just sometimes, you get someone who just makes you want to tear your hair out.

Insider has compiled some of the best ‘clients from hell’ stories posted anonymously by people working in a variety of industries.

US-based website designer Client: “Which way will the website appear in Australia?”

Videographer “I was at the airport, ready to leave for vacation when I got a panicked phone call from a client.

She stated that the video I sent her – part of a large marketing campaign – was missing the sound. After a lot of shouting and threats on her part, I agreed to go to her office to try and fix it.

After being escorted into her office, I played the video and double-checked her computer’s sound options. Then I plugged in her headphones.

Then I billed her for my missed flight.”

Website designer

!!!

Broker “I told my client I would be at my step-mother’s funeral for the day and would be completely unreachable by any form of communication until the following day.”

“A nugget of wisdom I got from an Eastern spirituality, self-help author: ‘I know you’re upset that we haven’t paid you yet for your work on the website, but take it from me, life isn’t all about money. If you had taken the time to absorb the message in the content, you’d see that and be more patient’.”

Client: (email) I really need your help! I can’t open the file you sent me.

Client: (text) Did you get my email? I need you to resend me that file NOW. Client: (voicemail) You are being completely unprofessional and ridiculous! I can’t believe you are ignoring my frantic pleas for help!! You can bet your sorry ass that I’ll remember how unhelpful and unprofessional you are being.

Client: (text) AMBER! (not my name) CALL ME NOW!!

Client: “I’m a banker. Are you really going to try and get away with charging me late fees?”

Publisher

*Source: Clients from Hell website

Unknown

Me: “Can you give me a list of printing companies you have a relationship with so I can get an estimate?”

Client: “No, sorry. We owe them a bunch of money.”

$315 bn

The amount Ireland’s homeowners have collectively lost in property value over the last six years If you’re feeling out of sorts given recent housing figures, spare a thought for the folk of the emerald isle: Ireland’s homeowners have collectively lost an estimated ¤257bn (A$315bn) in property value over the last six years, according to the Irish Independent.

The 50% collapse in values since the country’s 2007 peak also means that, by the Central Bank’s own estimates, Ireland’s crash has now become the worst experienced by any country anywhere in the world.

The PTSB/ESRI Index, Ireland’s former national price barometer, showed average house prices standing at ¤310,632, or A$381,313, at the start of 2007 – and the average loss to an Irish household stands at a horrific ¤155,316 (A$ 190,656).

One high-profile victim of the Irish housing bubble is boyband Westlife singer Shane Filan, who filed for bankruptcy mid-last year after the collapse of the property business he owned with his brother, Finnbarr.

Between them they owed more than ¤5.5m (A$6.75m) to Ulster Bank and Bank of Ireland in relation to failed property investments.

DIRECTORY brokernews.com.au

LENDER

Mango Credit 02 9555 7073 www.mangocredit.com.au Page 1

BANK

Liberty Financial 13 11 33 www.liberty.com.au Page 3

Quantum Credit 1300 135 212 www.quantumcredit.com.au Page 8

TECHNOLOGY PROVIDER

FINANCE

RAMS 1800 616 082 http://www.rams.com.au/aboutrams/franchising-opportunities/ rams-franchising/ Page 11 Versara 1300 CAVEAT (228 328) www.versara.com.au Page 4

WHOLESALE

AGGREGATOR / WHOLESALE BROKER Choice Home Loans 1800 188 288 www.choicehomeloans.com.au Page 7

Commonwealth Bank 13 20 15 www.commbank.com.au Page 5

ARAP NSW & VIC 0415 210 434 QLD, WA & SA 0434 254 798 Page 6 Rhino Money www.rhinomoney.com.au 1300 654355 Page 12 Semper Capital Pty Ltd 1 800 SEMPER (1 800 736737) www.semper.com.au enquiries@semper.com.au Page 21

LEGAL SERVICES BRANSGROVES Bransgroves Lawyers LAWYERS

31

(02) 9221 9522 info@bransgroves.com.au www.bransgroves.com.au Page 10

Homeloans Ltd 13 38 39 www.homeloans.com.au Page 9

NON BANK LENDER

Rent4Keeps 1300 76 30 20 www.rent4keeps.com.au Page 15

SHORT TERM LENDER

Interim Finance 02 9982 2222 www.interimfinance.com.au Page 2

NextGen.Net 02 9929 5999 sales@nextgen.net www.nextgen.net Page 13

Resimac 1300 764 447 www.resimac.com.au Page 32

OTHER SERVICES RP Data 1300 734 318 Page 23

Trailerhomes 0417 392 132 Page 27

To advertise in Australian Broker call Simon Kerslake on 02 8437 4786