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Paul Eldridge:
The joy of learning With the Diploma behind them and the industry taking some time to recoup after the rush to the MFAA’s educational deadline, brokers may not want to see the inside of the classroom for some time.
P
erhaps surprisingly, Intellitrain’s Paul Eldridge doesn’t blame them. “Let me start off by saying that this industry, in a lot of cases, has not done training very well.” FULL STORY PAGE 16
JULY 2013 ISSUE 10.14
+INSIDE + NEWS A look at what’s been making headlines P4
+ ANALYSIS SILVER LINING?
A new survey shows Aussie consumers still lack confidence P12
+ MARKET TALK
THE MINING MYTH
Mining boom towns may not be the safe bet they’re made out to be P20
+ TOOLKIT ALL ABOARD
The way you bring new staff onboard can be as important as who you hire P22
+ SPOTLIGHT BROKERS AND VALUERS The battle rages on between the professions P26
+ CAUGHT ON CAMERA CELEBRATING A DECADE
AFM commemorates its 10-year anniversary P29
NEWS
brokernews.com.au
2
WHAT THEY SAID...
NUMBER CRUNCHING HOW BIG BANKS RATE WITH BUSINESS
FRANK PARATORE
The proportion of financial decision makers in companies who use the same bank for business and personal banking
90% 84%
77%
“You’re always going to hear about the isolated differences between valuers and brokers ... but I can’t say it has come back to me as a major issue”
75%
P4
CBA
ANZ
Westpac
NAB Source: Roy Morgan
BUSY AUSSIES New research shows workers are ignoring their lunch breaks
FAST FACT
$16bn* *The value of commercial property sales for 2012/13 Source: CBRE
JASON MURRAY
“Despite some experts predicting [the cash rate] will go lower, Australians are still uncertain”P14
The typical Aussie lunch break is between 15-30 mins
PAUL ELDRIDGE
“Saying a newer person can learn what they need to know to start as a broker in five days is actually insulting to those practicing brokers” P16
37% of us spend lunch time catching up on phone calls; 31% do personal admin and 30% go shopping while 24% catch up on social media Almost one in three use their lunch break to catch up on work 9% of Australians say their lunch break has become less regular in the past 18 months
7% use their lunch break to go to the gym
Source: ING Direct
DAVID BRELL
“I don’t believe there should be any negative feelings towards the valuers – it’s just a matter of working with them as professionals”P26
NEWS 4
brokernews.com.au brokernews.com.au EDITOR Adam Smith
PROPERTY VALUERS AND BROKERS CLASHING IN PERTH ■ Concerns have been raised that property valuers in
...ENDLESS POSITIVITY, INFECTIOUS ENERGY AND A RAUCOUS SENSE OF HUMOUR
Aggregator says final farewell to founding director ■ AFG is mourning the loss of one of its founding
directors, Bradley McGougan, who passed away on June 28 following a year-long battle with leukaemia. McGougan started a successful life insurance and financial planning business before co-founding Mortgage Monitors in 1992 – a company that traded very successfully over the next five years and helped to eventually fund AFG. In 1994, McGougan co-founded AFG along with Brett McKeon, Kevin Matthews and Malcolm Watkins – and is credited with coming up with the aggregator’s name. AFG bought insurance company Mawson in 1997 and on-sold it to Tower in 2002. McKeon, Matthews and Watkins say it was McGougan who ‘led the charge’ on the successful sale process. McGougan also co-underwrote Queste communications in 1998, which became Australia’s number-one listing on the ASX that same year. McGougan successfully ran AFG Financial Planning right up until its sale, stepping down two years ago to the role of non-executive director in order to ‘enjoy the fruits of his labour’. His fellow founding directors say McGougan was ‘much admired’ for his industry experience and business acumen and was well loved for his ‘endless positivity, infectious energy and raucous sense of humour’. “The industry has lost one of its greats and AFG has lost one of its most beloved family members.”
Perth are undermining brokers by intentionally using out-of-date valuation data, with one local broker – who wishes to remain anonymous – claiming she’s come across cases where the difference was almost $50,000. “Valuers are really killing the market by using three to four month-old valuations; they’re valuing properties based on old data.” She claimed her broking business is ‘constantly’ filing valuation disputes, because the valuers have failed to update information. However, Ballast Finance director, Frank Paratore, said it’s not an issue he’s come across at his Perthbased firm. “You’re always going to hear about the isolated differences between valuers and what brokers are putting down or clients’ expectations,” said Paratore. “But I can’t honestly say too much of it has come back to me as a major issue. It could just be a pocket the broker is dealing with.”
PREMIUM RUSH Buyers are returning to Sydney’s premium housing market, with prices finally appreciating
3.2%
MOST AFFORDABLE HOUSING Source: RP Data
4.6%
BROAD MIDDLE RANGE HOUSING
4.8%
PREMIUM HOUSING
PUBLISHER Simon Kerslake COPY & FEATURES JOURNALISTS Mackenzie McCarty, Aidan Devine PRODUCTION EDITORS Roslyn Meredith, Moira Daniels, Danielle Chenery ART & PRODUCTION SENIOR DESIGNER Rebecca Downing 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, 1–9 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
WORLD NEWS
HOUSING PRICES TO PEAK IN 2014 ■ The possibility of a housing bubble in the next 12 months is slim, according
UNITED STATES OF AMERICA
to Citibank (Citi) research. While some economists have predicted house price increases based on auction clearing rates, Citi’s data shows once global factors and debt constraints are taken into account, house prices are unlikely to rise significantly. “Our model suggests house price inflation may peak at around 3% by March 2014 and prices could fall slightly thereafter,” said Citi spokesmen Paul Brennan and Joshua Williamson. “[The research] looks at the impact of Chinese immigration, a falling dollar, rate cuts and a number of other scenarios. Overall it said a housing market ‘bubble’ is not likely to eventuate over our forecast horizon even under the most optimistic assumptions. “We expect the nominal house price to peak in March 2014, by which time it will have increased by 3% from its current level. However, we expect the slowdown in China to flow through to the Australian housing market during 2014, causing downward pressure on house prices.”
MORTGAGE COMPANY IN HOT WATER FOR TELEMARKETING
A mortgage company that contacted people on registered “do not call” lists has been charged US$7.5m by the Federal Trade Commission, it has been reported. Mortgage Investors Corp. in St Petersburg, Florida, was a leading refinancer of veterans’ home loans, according to the FTC. This will be the largest fine and civil penalty ever charged by the FTC, it said in a press release. Mortgage Investors violated the FTC’s Do Not Call provisions of the Telemarketing Sales rule. According to the complaint, Mortgage Investors’ telemarketers called more than 5.4m numbers listed on the National Do Not Call Registry to offer home loan refinancing services to current and former U.S. military consumers in violation of the TSR Rule. The telemarketers also allegedly led servicemembers to believe that low interest, fixed rate mortgages were available at no cost, often quoting rates they implied would last the duration of their loan. In reality, Mortgage Investors only offered adjustable rate mortgages in which consumers’ payments would increase with rising interest rates and would require consumers to pay closing costs.
CANADA GOOD NEWS AND BAD NEWS
Canadian brokers are drawing attention from consumers, but it looks like many Canadian homebuyers are content to “love ’em and leave ’em”. New research by the Canadian Mortgage and Housing Corporation found 32% of homebuyers seek the advice of a broker during the mortgage process, but only 23% actually use a broker’s services. There is some good news for brokers, though. First homebuyers are relying on the third party, with 49% choosing to use a broker. But broker use among repeat buyers is only at 34%.
DID YOU KNOW?
17 years
Customer satisfaction with the major banks hit a 17-year high in May Source: Roy Morgan
Top lawyer warns against Privacy Act ‘scaremongering’ ■ A top lawyer has dubbed
allegations that access to credit will fall with the introduction of a new credit reporting amendment to the Privacy Act ‘scaremongering’. MyCRA Credit Rating Repair CEO, Graham Doessel, said credit numbers are expected to decline as more data is reported about consumers’ credit habits in March next year. “In my opinion, this is going to trip up many. With only a five day grace period proposed, it may mean many are unnecessarily banned from credit due to simple billing mistakes, lost paperwork and other payment mishaps.” But Gadens Lawyers senior associate, Amy Ciolek, said the
changes are likely to have a generally positive impact on brokers and clients. “Positive credit reporting shows if a borrower has no negative history, or their historic record doesn’t show defaults, they may be more likely to be perceived as a lower credit risk, so may have better access to credit.” Furthermore, Ciolek warned brokers to be wary of ‘scaremongering’ when it comes to the new legislation. “Credit repair agencies are a real concern in the credit environment. They frequently use scare mongering and aggressive tactics to achieve certain outcomes for individuals (who pay for the outcome).”
NEWS
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8
Top growth industry revealed ■ In case you needed yet another reason to consider diversifying into SMSFs, IBISWorld has just revealed that superannuation is expected to be the top growth industry in Australia over the next 12 months. MFAA CEO, Phil Naylor, tol Australian Broker the news is no surprise and brokers should
40.5%
SYDNEY
FAIRFIELD
seriously consider moving into the area – provided they do their research. “It is undeniable the super fund industry will continue to grow. Equally certain is the growing number of super funds that are looking to hold property and, more particularly, borrowing finance to do so,” said Naylor.
LIVERPOOL
Borrowers struggling to make payments ■ More borrowers are struggling to make mortgage
INDUSTRIES TO FLY
SUPERANNUATION FUNDS
22.9%
IRON ORE MINING
13.3% ONLINE SHOPPING
DID YOU KNOW?
12.7% INTERNET PUBLISHING AND BROADCASTING
-11.3% WIND AND OTHER ELECTRICITY GENERATION
-3.5% MINERAL EXPLORATION
-4.3% BOOK PUBLISHING
-5.4% HEAVY INDUSTRY
AND OTHER NON-BUILDING CONSTRUCTION
-6.7% AUTOMOTIVE ELECTRICAL COMPONENT MANUFACTURING -12.3%
VIDEO AND DVD HIRE OUTLETS Source: IBIS World. Predicted 2013-2014 growth percentages
INDUSTRIES TO FALL
repayments, despite steep interest rate cuts over the past 12 months, according to Fitch Ratings. The Fairfield-Liverpool region of Sydney had the highest share of borrowers who were more than 30 days behind on their mortgage. The NSW Central Coast had the next highest share of missed repayments, followed by the Gold Coast, Caboolture Shire in Queensland, and outer southwestern Sydney. The best-performing regions were Boroondara City in Melbourne, south-east inner Brisbane and Sydney’s lower North Shore.
2.37%
The FairfieldLiverpool region of Sydney had the highest share of mortgage delinquencies in the nation over the past 12 months. Source: Fitch Ratings
CUSTOMERS SPEND LONGER WITH THEIR BANKS THAN WITH THEIR SPOUSES ■ Clients spend an average of 16 years with the same
bank – nearly twice as long as the average marriage, according to a Bank of Queensland study. The lender said a bond with a client’s bank is ‘much stronger’ than with a loved one and is well ahead of the duration of relationships with doctors and lawyers (11 years), accountants and dentists (nine years), vets and a mobile phone company (eight years). BoQ chief operating officer, Jon Sutton, said banking relationships often form with customers from a young age – but keeping them has become more difficult as the industry becomes ‘super competitive’. “There is a strong relationship between a customer and their bank, particularly when you consider banks are there when you make life-changing decisions,’’ he said. Given the average home loan borrower refinances after about three years, we’re not sure how broker/client relationships stack up.
NEWS brokernews.com.au
10
Brokers encouraged to take heed of immigration figures
Commercial property sales reach $16 billion
■ Australia’s population growth rate over the 2012 calendar year was
property sector is continuing to strengthen, with new CBRE data highlighting that June quarter 2013 sales were up 24% on the previous corresponding period. Sales for the 2012/13 financial year totalled $16bn, a rise of 12% on 2011/12. The data takes into account all office, retail and industrial sales valued over $5m. CBRE’s head of research, Australia, Stephen McNabb, said the year was characterised by an increase in the number of larger deals, as highlighted by the fact that 423 transactions “We’re seeing a lot were reported during the of purchases below period, down 12% on the 2011/12 the $5m mark going to self-managed financial year. “This divergence is consistent super funds” – JONATHAN STREET with a market in which an increasing volume of institutional funds have been allocated back to higher yield asset classes,” said McNabb. Think Tank director, Jonathan Street, tells Australian Broker his commercial lending business can relate to the apparent upswing over the past 12 months, but maintains some reservations. “Our experience would correlate with that. We’ve certainly seen an uptick over the last quarter in purchases. But, equally, we’re seeing a lot of purchases below the $5m mark going to self-managed super funds.”
recorded at 1.75% – the most rapid rate of population growth in three years – and brokers should take notice, according to RP Data’s latest Property Pulse report. More than 394,000 new residents were added to Australia in the last 12 months, 60% of whom are the result of net overseas migration, and RP Data’s Tim Lawless said that, with overseas migration being such an important driver of housing demand, it’s worth providing an update on where most of these settlers are coming from. “The vast majority of overseas migrants are (still) coming from the Oceania region (mostly New Zealand). Just over 34,400 long term and permanent migrants originated from the Oceania and Antarctica region over the year to April 2013, equating to about 23% of all migrants to Australia over the past year,” said Lawless. New Zealanders alone accounted for 28,750 new migrants. “There has been quite a bit of attention lately suggesting that housing demand from Asian nations, particularly China, has been rising in Australia and based on the migration figures that is likely to be true (at least from a population growth perspective),” said Lawless. “For a variety of reasons there is much less attention placed on housing demand flowing from our easterly neighbours in New Zealand, which accounts for a much larger flow of migration movements. Lawless stressed that brokers need to be aware of their target markets. “With overseas migrants seeking out Australian housing, be it to buy or rent, think about the regions that are most appropriate and ensure you are communicating appropriately.”
North-West Europe
15,930
■ Investment activity in the Australian commercial
South-East Asia
22,100
North-East Asia
23,010
North Africa & The Middle East
9,820
Southern & Central Asia
SubSaharan Africa
28,580
8,680
■ People who are involved in ‘workplace giving’
Americas
4,360
Another reason to engage in charity work
Southern & Eastern Europe
4,020
Not Stated/ Inadequatly described
960
Oceania & Antarctica
34,410
programs are more engaged and prouder of their employer, new research from The Australian Charities Fund has revealed. Workplace giving ranges in format, and includes payroll giving, employers matching donations, workplace funding and employer grants. The study found allowing workplace giving generated more engagement in the workplace, correlating an increase in productivity. It also revealed those interested in workplace giving held the importance of their organisation’s image, as well as its community involvement, in high regard. The highest-ranking forms of workplace giving were (in order): payroll giving, community partnerships; disaster appeals and volunteering time.
ANALYSIS 12
brokernews.com.au
Struggling to find the silver lining A new survey of mortgage expectations shows an Australian public still riddled with uncertainty about the country’s economic future
T
Mortgage holders staying put
he Credit Union Australia National Mortgage Survey reveals a gloomy sentiment among Australian consumers. Australia can’t seem to shake the sense of pessimism that’s pervaded over the past couple of years, and negative sentiment continues to impact the decisions prospective homebuyers make. CUA general manager of products and marketing Jason Murray walks us through the survey’s results.
Doom and gloom prevails Australians remain down in the dumps when it comes to the economy. Pessimism prevails in Australian consumer sentiment, and the dour mood is flowing through to the way Aussies make financial decisions.
“Prevailing issues in the current economic environment are clearly making Australians cautious about making financial decisions,” Murray said. “Even a new or reinvigorated government following the federal election doesn’t appear to be buoying their outlook.”
ECONOMIC OUTLOOK NOT SO SUNNY
29% PROPORTION OF BIG FOUR CUSTOMERS WHO SAID THEY WOULD SWITCH LENDERS FOR A 0.5% CHEAPER RATE
Around four in 10 Australians have a mortgage, and 17% say they’re looking to get a home loan in the near future. It come as little surprise that major banks still dominate the home loan market, accounting for 62% of all mortgages. And the message of competition may not be getting through, as less than one in 10 respondents had switched home loans in the past six months.
AUSTRALIAN MORTGAGE BREAKDOWN
24%
5% 46%
8%
Will the economy get better or worse over the next six months?
17%
48% 10%
Fixed rate
Worse 48%
Variable rate
Better 10% Stay the same
42%
Fixed/Variable combo
42%
No mortgage/Don’t intend to get one in the next two years
No mortgage/Intend to get one in the next two years
13
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LENDER LETHARGY Have you switched or considered switching loan providers in the past six months?
72
No
7%
21
%
%
Have considered, but haven’t switched
Have switched
REASONS FOR ROAMING Borrowers gave the following reasons for considering a lender switch
44%
30%
Found a lender with a lower rate
Found a lender with lower account fees
28%
16%
Current lender failed to follow RBA cut
Bad customer experience with current lender
13%
13%
Came to end of fixed rate period
Wanted to move to fixed rate
11%
8%
Needed to release equity
Moved home/ change in circumstance
ANALYSIS 14
brokernews.com.au
Aussies think rate cuts have run their course Industry commentators have continued to predict further cuts from the RBA, but consumers aren’t so certain. Most Australian consumers don’t foresee another cut.
“The official cash rate is already at a 30-year low and despite some experts predicting that it will go lower and also given the current economic landscape, Australians are still uncertain. Our research does however highlight that women are more inclined to think rates will increase towards the end of the year than men – 47% versus 28%,” CUA’s Jason Murray said.
Homeowners still looking to fix
Homeowners’ uncertainty about the direction of rates means people are still looking to lock in. While variable rates have fallen significantly, buyers still seem wooed by the security offered by fixed rates, Murray said.
“For home-owners, uncertainty about interest rates may invariably trigger a trend towards mortgage fixing. CUA’s Survey certainly reflects this, showing that almost four in 10 (36%) Australians who currently have a variable rate mortgage are planning to fix their mortgage rate in the future. This has increased by 7% from January 1 when three in 10 (29%) had this intention. Young Australians under 30 are more likely to seek certainty in their repayments, with more than half (56%) planning to fix their mortgage in the future.”
PLANNING TO LOCK IT IN More than a third of Australians plan to fix their home loan:
RATE OUTLOOK
11%
Australians are evenly split on whether rates will go up or down by the end of the year, but most think they’ll stay the same
25%
64%
22%
56%
22%
RATES UP
RATES THE SAME
RATES DOWN
Plan to fix in the next six months – 11% Plan to fix outside the next six months – 25% Don’t plan to fix at all – 64%
YOUTH AND CAUTION FIXING JITTERS Australians who have fixed home loans are the most convinced rates will go up
Borrowers under 30 are most likely to fix. Planning to fix mortgage rate:
22% 41%
42%
22%
36%
RATES UP
RATES THE SAME
RATES DOWN
56% Under 30 – 56% 30-50 – 41% Over 50 – 22%
ANALYSIS 15
brokernews.com.au
Holding rate cuts dear
What’s stopping spending?
Australians are still showing a conservative bent in their spending habits, and a penchant toward saving. Most would not splash out for personal items with any extra cash as a result of a rate cut.
A variety of factors are influencing Aussies’ financial decisions. Three-quarters will either stop making financial decisions or at least think twice before making them due to the increasing cost of living, while the falling Australian Dollar and the expected dwindling of the resources boom are giving more than half of Australians pause.
RATE CUT WINDFALLS The likeliness that mortgage holders would use the cash saved from a rate cut on:
DECISIONS, DECISIONS
25%
78%
52%
42%
42%
45%
45%
14%
13%
13%
Upcoming Federal Election
Falling Australian Dollar
Predicted end of the mining boom
53%
49% 34%
41% 29% 20%
22%
High cost of living
Extra repayments on home
Extra money in savings
Investing in renovations
Treating self
Investing in other assets e.g. shares
This will stop me making financial decisions This will make me think twice about making financial decisions This won’t affect my financial decisions
NEWS 16
brokernews.com.au
CONTINUED FROM PAGE 1
The joy of learning The industry often hasn’t done justice to the importance of education, says Intellitrain’s Paul Eldridge
E
ldridge said he doesn’t necessarily mean franchises and aggregators are falling down on their in-house PD training. Rather, he said, most broking groups are putting a high degree of effort into their educational offerings, and delivering value to their brokers. Specifically, Eldridge feels the industry has fallen down on the way it has delivered qualifications such as Cert IVs and diplomas. “Most people in the industry will know we’ve seen two waves of education,” he said. “The first being the requirement for the Cert IV and the second being the requirement to upgrade that qualification to the Diploma. If we take justification/reasons off the table for a minute and just look at the outcomes for the industry from an observational standpoint, RTOs competed for enrolments in a captive market leading to massive (and unsustainable) price reductions, course delivery time frames were severely reduced [and] education was promoted with a ‘big stick’, ‘you must do it’ [approach] rather than ‘what will you gain from it’ approach.” Eldridge argued the industry has placed more value on “holding the piece of paper” than on the new skills a qualification can deliver. “When we have a situation where the industry is prepared to accept a five-day Cert IV course where the participants all sit down on the Friday and do the assessments together and then receive their ‘pre-printed’ Certificates, something is clearly wrong.”
QUALITY OVER QUICKNESS
So, is Eldridge actually advocating longer course times and higher delivery costs? “Yes, that’s exactly what I am saying. How can we see a single mum who is wanting to become a Bookkeeper be prepared to take two to three months’ study time and pay up to $4,000 to invest in her education to learn what she needs to know to work as an independent bookkeeper, but in this
industry, we want to pay less than half that and want it done in a week?” In fact, Eldridge believes it’s insulting to practising brokers to imply someone new to the industry could learn the skills they need to operate by taking a five-day course. “A proper qualification says you have undertaken a level of study and gained a benchmarked set of skills and competencies that is nationally recognised. We have to stop trying to push people through in ridiculously short time-frames at ridiculously low course prices,” he said. It may seem an odd position, given that Eldridge’s own RTO has operated on a model of keeping fees low and delivering in short timeframes. He said this has come as a result of competitive pressures from other RTOs. “We have had to sacrifice the amount of training days in the classroom in order to compete with the cut-price RTOs in the market. It’s been really frustrating for us seeing the behaviour of some RTOs who seem to be only interested in getting as many ‘bums on seats’ as they can and from my perspective don’t seem to have the same commitment to the student experience – nor to the industry as a whole for that matter.” But Eldridge argued that Intellitrain “never sacrificed our integrity” in cutting down its course times, instead opting for learning outside the classroom setting. “You know, you look at our Cert IV program and you see it’s three days and people might wonder, ‘Well, isn’t that insufficient?’ But that is just the physical classroom component, targeting the key aspects of the course. “The reality is all of our programs are blended so the majority of the training actually comes from online self-paced and online instructor-led webinars and webtutes, plus interactive e-learning modules. So you don’t get the Cert IV after three days,” Eldridge said.
MONEY NO OBJECT
WE HAVE TO STOP TRYING TO PUSH PEOPLE THROUGH IN RIDICULOUSLY SHORT TIMEFRAMES AT RIDICULOUSLY LOW COURSE PRICES
But to increase the quality of education, RTOs will have to walk a tightrope. Longer course times mean higher delivery fees. This is where Eldridge has said Intellitrain has found a solution to keep training affordable while increasing quality. “I think a game-changer for us is we have secured VET Fee Help. We’re the first in this industry to do so,” he said. VET Fee Help, Eldridge explained, is essentially a “study now, pay later” option funded by the Federal Government.
NEWS 17
brokernews.com.au
PAUL ELDRIDGE & ANDREW HETHERINGTON
“Essentially it’s the same as HECS at a Uni level, where you pay off the student loan once you earn over a certain threshold. If you never earn over that threshold you never pay it back,” he said. Eldridge said the move would help benefit several categories of brokers. For new entrants to the industry, it would mean a pathway into broking without the barrier of upfront education costs. It would also mean new entrants receive a better quality of education, with a Cert IV program running over four weeks, including 10 days of classroom time and live webinars. “This means we can really give the students a solid foundation, which includes running through numerous lending scenarios so they won’t just leave us with technical knowledge. They will have had time to run through client interviews, plural – we’re going to do at least five of them.” The development would also mean a pathway for brokers who chose not to do the Diploma upgrade in the first place, Eldridge said. “As per our new Cert IV program, our new Diploma upgrade program will have at least six classroom days and be spread over a number of months. They won’t be consecutive days so brokers don’t lose too much time out of their business but the course is also not so condensed that they are rushed through. We will have time to really explore.” And Eldridge believes the option of VET Fee Help will also make continuing education appealing even to brokers who already obtained their Diploma. For brokers looking to diversify, Eldridge said the RTO will offer a Diploma of
IT’S BEEN FRUSTRATING FOR US SEEING THE BEHAVIOUR OF SOME RTOS WHO SEEM TO BE ONLY INTERESTED IN GETTING AS MANY ‘BUMS ON SEATS’ AS THEY CAN
Financial Planning delivered in a classroom over a six-month period. “In a way it takes much of the risk out of diversifying because you get to do the education and try it all without having spent anything up front. You also get the tax benefits because even though ‘Tony’ or ‘Kev’ in Canberra has paid for their Diploma, the broker can still claim self-education expenses in the year incurred. Hopefully, by the time you come to pay for it out of your PAYG, the increase in income to you more than offsets the extra bit coming out in tax,” he said. With increased cost no longer an object, Eldridge said he hopes more brokers will see the appeal of continuing their education. “If we can now take money off the table, there is no upfront study cost, then it means brokers can attend the program they really want to attend. Why wouldn’t you want to go to a program where you learn how to increase your revenue?”
WORKSHOP 18
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5STEPS
to putting together a specialist deal Pepper’s Mario Rehayem shares his strategy for effectively positioning a specialist product to clients in need
P
epper director of sales and distribution Mario Rehayem believes many brokers are letting specialist lending opportunities pass them by. “You’d be surprised at how often brokers say ‘I don’t do that type of business’ or ‘I don’t see those types of clients’,” he says. But Rehayem argues that it’s part of a broker’s duty of care to offer solutions for all types of clients. “At the end of the day, what we’re about is giving clients a second chance. Pepper is not part of this scheme where we’re looking for deals that are bottom of the barrel. You can give those to someone else. Pepper is about offering legitimate second chances.” But many brokers, Rehayem says, may feel they don’t know how to properly position a specialist loan to their clients. On a recent Pepper ‘Better Business’ broker road show, Rehayem shared his top five tips for positioning specialist deals.
1
GET THE CLIENT INTO ACCEPTANCE MODE
Rehayem explains that clients come into a broker’s office expecting a certain outcome. When that outcome does not come to fruition, it can cause hurt and confusion. This is only exacerbated when brokers don’t properly explain the situation. “What’s generally happened is you’ve put the client through the application steps with one of the major lenders, and for some reason the deal’s come back declined. The worst thing you could do is go up to the client and simply tell them that all the time they spent with you doing the preliminary fact find has gone to waste because you can’t place the loan anywhere. You’re actually telling someone they’re not good enough,” he says. Rehayem contends that brokers cannot assume that clients don’t want to hear other options. But another common mistake, he says, is quickly jumping into pushing a specialist option without first taking the time to explain the reasons.
“The client needs to understand why they’re no longer eligible for the loan you originally offered them,” he says. While it may be a shock to the system to offer a client a 4.99% loan and then come back to them with a 6.99% rate once the original application has been knocked back, Rehayem argues that it’s crucial to help the client understand the reasons behind the change. “You need to make sure the client knows why they’ve been declined. Once they have acknowledged the reasons, the first thing they will do is ask, ‘What happens now?’ Once they acknowledge why what you pitched to them originally is no longer available, then you can move on.”
2
OFFER THE CLIENT AN ALTERNATIVE
After acknowledging the reasons that the standard plain vanilla major bank loan is off the table, Rehayem says clients will want to know what can be done for them. “Stop assuming that customers don’t want to know what their options are. As a mortgage broker, you have a responsibility to ensure you offer the product that is best suited to the client,” Rehayem says. Rehayem argues that many clients will be pleased to know that their broker can
SPECIALISTS REAPPEARING Specialist lender Bluestone stopped writing mortgages during the GFC, but as early as 2010 began touting the possibility of a market return. This became a reality in June of this year, when AFG announced Bluestone had rejoined its panel of lenders. We believe that specialist lending is an option that is under utilised by brokers and we are very pleased to see Bluestone return to the market with the intention of reinvigorating the sector,” AFG general manager of sales and operations Mark Hewitt says.
WORKSHOP 19
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still offer them options to fulfil their original goals. “You have to assume that the original need of the client is still there,” he says.
3
OFFER THE CLIENT THE REPAYMENT
Not all borrowers are mathematicians, Rehayem points out. Quoting them a rate that may be 200bps higher than they originally anticipated can be intimidating. But if brokers break down for the client what their repayment will actually look like, it takes much of the stress out of a specialist product. “When you discuss the repayment, the repayment should coincide with their pay cycle. Everyone knows exactly how much goes into their account when they get paid. So, if you have a client who gets paid $1,200 a week and their repayment is $500 a week, they know they can afford that. You’ve already done the serviceability, but this just takes the guesswork out of it for the client.”
4
PEPPER SPICES UP MARKET Earlier this year Pepper made a raft of changes to its policies which it says would make it easier for brokers to do business. Among the changes were: • Policy changes including the introduction of a Pepper accountant’s letter for verification of self-employed income (endorsed by Gadens partner Jon Denovan) and higher allowances for fee capitalisation • Reduced mortgage risk fees on lower LVRs • Pepper Flexi Advantage (full doc) now available from 6.99%, with a reduced mortgage risk fee (MRF) from 0.75% • Pepper self-employed advantage (alt doc) now available from 7.09%, with a reduced MRF from 0.75% • Pepper Easy (near-prime) now available at higher loan-to-value ratio (LVR) tiers – up to 90% (full doc) and up to 85% (alt doc)
GIVE THE LONG-TERM OBJECTIVE
Rehayem is very open about the fact that specialist loans are not meant to be longterm solutions. Rather, they are a way for borrowers to rebuild after major life events or career transitions. It’s important, he says, that borrowers know this. “They should know that this is not a life sentence. You’re going to bring them in and you’ll be taking them out.” This also means that the client’s relationship with the broker is deepened, Rehayem says. Brokers who take borrowers through specialist solutions tend to gain a client for life, and have the opportunity to refinance the borrower into a traditional loan in a few years’ time. “You can give them the whole picture from start to finish, and tell them that as long as they make the repayments, on this particular date you will reassess and talk about the strategy going forward.”
“AT THE END OF THE DAY, WHAT WE’RE ABOUT IS GIVING CLIENTS A SECOND CHANCE” – MARIO REHAYEM
5
PROCEED TO THE APPLICATION
This step, Rehayem contends, is where brokers may become confused. Many brokers may believe that the process for writing a specialist loan is more complicated, but Rehayem claims there’s little difference from standard loan applications. “If you have a look at a Pepper application it’s probably no different from other applications. We use NextGen.Net ApplyOnline, so we use the same generic, standard application everyone else uses. We just ask a couple of extra questions. One is, why is this deal coming to Pepper? There must be a reason. The others are, has the customer got the capacity to repay, and is there a benefit to the client? Those are the only three questions we ask above and beyond what a bank would ask.”
MARKET TALK 20
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In too deep? Mining towns seem like a surefire property investment, but what happens when the boom goes bust? Aidan Devine investigates
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rospective Mount Isa investor Dale Collins was checking a well-defined crack in the walls of an old miner’s cottage when the real estate agent spoke of domination. They were in the house’s kitchen, a closed off room with dusty brown walls and vinyl flooring, and Collins had just remarked that the setup reminded him of the inside of a 1970s caravan. The agent, draped in a black suit and tie in the outback heat, didn’t take kindly to the comment and decided he’d set Collins in his place. “He told me it didn’t matter,” says Collins. “He said the kitchen didn’t need to be pretty because the house would get high rents anyway. He said once people came into Mount Isa they had to submit to their landlords. There was such a need for rental accommodation they’d rent anything and pay a high price for it.” While the agent failed to persuade Collins, he touched on a growing theory among Australian investors. This line of thinking proposes the best way to ensure a stream of high rental income and own a property that will quickly double in value is to invest in a mining town such as Mount Isa. The theory isn’t backed up simply by hearsay. The facts speak for themselves. Of the 50 best performing markets across the country last year, 10 were in mining towns. Look further back and their case is even stronger. The fastest growing market in Australia over the past 10 years was a mining town – Wandoan in Queensland’s coal rich Darling Downs region – and most of the markets that follow close behind are also mining areas.
WHEN THE RESOURCES DRY UP
Astonishing as these increases have been, mining towns have had no shortage of bad press. The list of things that could seemingly go wrong with a mining town investment is long. Mines close, workers get retrenched, developers build too much rental accommodation – any and all of which could happen at one time.
NSW’s Broken Hill is a perfect example of such fears coming to life. Over the first half of the 20th century, the desert community was not just the third largest settlement in the state but one of Australia’s biggest cities. By the 1970s a lot of the mines that had nurtured the city’s growth began to close and this sent the local employment market into free fall. The population, which at that stage had been 30,000, quickly dwindled to 10,000. Property prices plummeted. What had once been a boisterous real estate market had a hole blown from under it and investors had no escape. In the 40 years since, the population has slowly increased to about 17,000 and mining activity continues, but the city has never returned to its prior heights. For some investors, like Dale Collins, such risks have proved too great. “I was interested in Mount Isa but, to be honest, with my budget I wouldn’t have got the right property for that kind of market. I thought I could sniff out a good deal on an older property and renovate it, but it’s hard and I’ve learnt you can’t half-chance it. You have to spend a lot of money in a mining town.” For other investors, like Australian Broker sister publication, Your Investment Property Investor of the Year 2013 winners Kate and Matt Moloney, such risks are part and parcel of the mining town deal. The young couple continue to invest in big projects in Queensland’s Mackay region – particularly Moranbah – which they believe offers great opportunities. “There is a severe shortage of all types of rental accommodation in Mackay, so it’s helped us to organise some great deals,” says Kate, who adds that thanks largely to mining town investments, she and Matt have built a portfolio of roughly $8m in just a few years. Kate is quick to admit, however, that she and her husband plan to start diversifying away from mining towns. It’s a viewpoint that hardly reassures new investors. What else can they conclude when even the best investors have doubts about mining towns?
MARKET TALK 21
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Mining towns are not so risky if you know how to play the game, says Next Hot Spot director Andrew Peterson, but he adds this is part of the problem. Peterson believes understanding the reality of mining towns is to understand the reality of property investing itself. “There’s a clear difference between investing and speculating,” he says. “A speculator is looking for money to make now. Speculators take risks. Investors are in it for the long haul. If you think about it that way, there really is no way to ‘invest’ in a mining town. You can make money if you’re a professional developer, but, if you’re just a mum and dad investor looking for something to support your retirement, a mining town probably won’t work.” Another problem with mining towns, according to Peterson, is they are usually far from ideal places to live. People are reluctant to settle in them permanently and the local property market suffers as a result. “Most mining workers are very reluctant to spend their money in the mining town they work in. They’d much rather sit on their money and spend it somewhere else. That actually means it is not the mining towns that benefit, it’s the areas like Perth or Gladstone where the workers fly back to.” Peterson believes it’s worth making a distinction between ‘source’ areas and ‘catchment’ areas. The source areas are right next to the mines – the one trick pony towns that only exist because of mining. The catchment areas are the places that already have good infrastructure and offer a good lifestyle component, but have the added benefit of receiving a boost from the resources sector in some way – either being close to a major mining area or being a transport hub for one. The catchment areas are the places that cashedup mining workers will want to live in permanently, according to Peterson. They are unlikely to have the same incredible rate of rental and capital growth over the short term, but looking ahead to the next 20 years, they will be the areas that end up with the strongest property markets.
GLOBAL RESOURCE MARKETS
If Peterson is right and it’s the catchment areas that will benefit the most from the resources boom over the long term – Perth, Toowoomba, Gladstone, Rockhampton, Brisbane – the next, and obvious, question is whether the resources boom is something sane investors would want to hedge their bets on in the first place. According to leading economist, Shane Oliver from APM, there is still no definitive answer. Owing to the unpredictable nature of the international market and its effect on the demand for resources, Oliver says there will always be an element of uncertainty in the resources market. However, he sees the key being Asia. “A truly nightmare scenario you tend to see on blogs written in the US and Europe is that China would stop growing. I don’t see that happening and expect China to continue to see good economic growth, so I think the real worst case scenario would come about if there was no pick up in global growth this year. In reality, I think a lot of the worries about Europe will probably start to recede and I see growth in the US economy picking up a notch. Among this, China growth will probably stablise at around 7% this year.” China’s influence on Australia may seem obvious, but Oliver says the Asian giant’s importance cannot be underestimated. “China is our biggest export
NOT SO BROKEN AFTER ALL Despite its
POPULATION HAVING DWINDLED since the peak of its mining heyday, Broken Hill sees a
9.5% rental yield on houses.
THE MEDIAN HOUSE PRICE IS ONLY
SOLD $119,000
...and the average weekly rent is
$21 7
PROPERTY IN MINING TOWNS
Source: Your Investment Property
market. It accounts for 5% of our exports, and that’s up from about 1% a few years ago,” he says.
THE SOON TO ARRIVE ‘MINING PEAK’
FAST FACT
5%
The proportion of Australian exports which are bought by China Source: AMP
While it is difficult to predict when the resources boom might start to falter, a far easier event to forecast is when Australia’s mining project pipeline will peak. According to the QBE LMI Housing Outlook 2012-2015 report, this is likely to occur by late 2014. In between then, the report forecasts mining-related investment to continue to grow, despite some recent falls in commodity prices. In fact, the report says commodity prices should have little impact on mining activity over the next two years. This is largely due to many projects being past the stage to “turn back” – mining companies have pumped so much of their capital into these projects that cancelling or scaling back production in the short-term would be near impossible. A report by Deloitte Access Economics is not as optimistic. Its January Business Outlook report forecasts late 2013 as being the peak point for mega-mining construction projects, but the report also warns a little perspective is required. Resource related construction will start to wane, it says, but will still remain huge relative to times past. BIS Shrapnel senior residential manager Angie Zigomanis agrees. “From a domestic perspective, there is still a lot of mining investment activity in the pipeline. If you’re a mining company and you spend $4bn of a $10bn project, you’re going to finish it. The next couple of years of spending are pretty much locked in,” he says. Zigomanis says a lot of the projects currently underway are two, three and four year projects and, while they are still being built, Australia’s resourceaffected states – Queensland, WA and Northern Territory – will benefit strongly. “The question mark is beyond that period,” he adds. “If there is a slowdown or a fall-off from reducing mining investment, there might also be other parts of the economy picking up some of that fall-off so the property market might only start to be affected by 2015 or after.” Looking at a more regional level, the January Business Outlook report notes that as resourcerelated building work peaks and passes, the economies of resource-rich Queensland, WA and Northern Territory will still be well supported by the mining sector. “Despite cost cutting from miners, these states still look set for a solid short term growth outlook,” it says, adding a lot will depend on the strength of the Australian dollar.
TOOLBOX
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22
All aboard: Onboarding new staff If you’re looking to hire a new employee in your brokerage, the way you bring them onboard could be as important as who you hire
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rokers looking to hire new staff may spend a lot of time finding someone who’s the right fit for their organisation. But how much time is being devoted to making certain the right person is brought onboard in the right fashion? When bringing a new employee into your broking business, the way you integrate them could mean the difference between their success or failure. A quick, smooth and effective onboarding process is crucial to retention and high performance from staff, according to a management expert. Within the first 30 days of employment, an employee will decide if they feel welcome. Staff turnover occurs in the first 45 days of employment 22% of the time, and 90% of new employees make their decision in regards to staying at a company within the first six months. High turn-over rates riddle Fortune 500 companies, with an estimated half of all senior hires failing within 18 months. Fifty per cent of hourly workers will also leave their jobs in the first three months of employment, according to Talya Bauer, Cameron professor of management at Portland State University. “Losing an employee who is a poor fit or not performing well may be fine, but losing employees because they are confused, feel alienated or lack confidence indicates inadequate onboarding,” Bauer said. Recruiting remains a high-cost venture, so organisations must establish effective onboarding procedures to help integrate new employees into the organisations.
LOSING EMPLOYEES BECAUSE THEY ARE CONFUSED, FEEL ALIENATED OR LACK CONFIDENCE INDICATES INADEQUATE ONBOARDING - T ALYA BAUER
Bauer recommends written, step-by-step onboarding programs, which outline specific timelines that include what the employee’s duties are and what assistance they should expect. This helps foster an understanding of how interactions function within an organisation’s culture. A mistake often made by organisations and new employees is to underestimate how long onboarding will take. “After 90 days in the job people think they are set and ready to go, but research shows organisations that check-in early have a chance to
ORGANISATIONAL BEST PRACTICES FOR ONBOARDING Bauer shares some tips for successfully onboarding new employees Implement basics prior to the first day on the job Make the first day on the job special Design and implement formal orientation programs Create and use written onboarding plans Be participatory in nature
25% THE PROPORTION OF THE WORKFORCE EACH YEAR THAT UNDERGOES A CAREER TRANSITION
Consistently implement onboarding Monitor progress over time Utilise technology to facilitate the process Recognise onboarding takes place over time – use milestones – 30, 60, 90, 120 days on the job up to one year post-organisational entry Engage key stakeholders in planning – include key stakeholder meetings
Source: MIT
Be clear in terms of the who, what, when, where of onboarding
identify potential problems,” said Bauer. He recommends using monthly milestones for the first year of employment to help gauge the employee’s progress. “I think the industry has been very focused on metrics to do with costs to hire [and] speed of hiring,” Kimberly Hubble, global leader for Hudson RPO, previously told Australian Broker sister magazine HC. Hubble views onboarding as a critical instrument of HR, and suggests an interview after the probation period to generate a feedback loop and ensure every onboarding case is an improvement on the last. “The onboarding process is critical and doing that interview at the end gives a real indication,” Hubble explained. While the specifics will vary from workplace to workplace, the benefits remain the same. A wellstructured onboarding process will foster good social integration, knowledge of organisational culture, commitment, higher performance and lower turnover.
THE COALFACE brokernews.com.au
23
Peace, love and a good wave A surf trip brought Patrick Chidambaram to Australia, and mortgage broking made him stay
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ou could be forgiven for thinking Wooloomooloo broker, Patrick Chidambaram, is a bit of a hippy – in fact, he reckons it would be his career of choice if he weren’t busy helping clients with their home loans. But in between surfing sessions and time spent with his two grommets, Isabella and Fredrick (pictured), Chidambaram does manage to get some work done and, below, the former Silicon Valley commercial real estate professional tells us about why he loves his job, what he would change about the world if he could – and why first impressions aren’t always spot on.
AB: How did you get into mortgage broking?
PC: I was on a surf trip visiting Australia and having a beer with a buddy of mine who was in the industry. He introduced me to an industry player that day who offered me a job.
area?
Where are you based and what’s unique about your
I used to work in the city [Sydney] and share an office with some financial planners. Then I had kids and decided to move my office home to the Northern Beaches so I could watch them grow up. I consider myself very privileged to have this opportunity. My business has taken a hit, as I don’t
spend as much time working, but I think I have my priorities right.
What are your hobbies outside of work?
Surfing, mountain biking, kiting and gardening take up most of my free time.
What do you think are some of the major issues facing brokers in today’s environment?
The same issue that we always seem to be facing: how do we keep the pipeline of work flowing?
What’s unique about your business?
I am an American who brings a different perspective to the table.
If you weren’t a broker, what would you be?
A hippy.
What do you love about your job?
The flexibility to have a work life balance, the ability to help people make their dreams a reality – and the trailing income.
What would you change about the world if you could?
Religious fanatics, global warming and wind speed.
Is there anything else about yourself that you think others should know? People may think I am a good bloke, but underneath it all I am just a dickhead like the rest of them.
FINANCIAL SERVICES 24
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Former Trio directors admit fault
A
PRA has announced that five former Trio directors have provided enforceable undertakings to the
regulator. All five former directors – Cameron Anderson, Michael Anderson, Terrence Hallinan, Lorenzo Macolino and John Harte – have acknowledged APRA’s concerns that they failed to carry out their duties properly as a director of a superannuation trustee.
CAMERON ANDERSON
Cameron Anderson was an executive director of Trio from November 2003 to November 2005. He was a member of Trio’s Investment Committee from January 2004 to November 2005. Anderson has undertaken not to act as a trustee or as a responsible officer of a body corporate that is a trustee, investment manager or custodian of an APRA-regulated superannuation entity for a period of 12 years.
TERRENCE HALLINAN AND LORENZO MACOLINO
Terrence Hallinan and Lorenzo Macolino were non-executive directors of Trio from November 2003 to December 2004. They have each undertaken not to operate in the superannuation industry for a period of eight years.
MICHAEL ANDERSON
Michael Anderson was a non-executive director
Insurers to face tough new environment
A TOTAL OF 11 FORMER TRIO DIRECTORS HAVE NOW EACH PROVIDED AN ENFORCEABLE UNDERTAKING TO APRA
of Trio from March 2005 to October 2005. Anderson will not operate in the super industry for a period of four years.
JOHN HARTE
John Harte was a non-executive director of Trio and the chair of Trio’s Investment Committee from January 2006 to May 2008. Harte has undertaken not to operate in the super industry for a period of four years. The former directors have expressed regret at the consequences of the matters that are the subject of APRA's concerns and the losses caused to members of the superannuation entities from the failure of the investments in the related parties. A total of 11 former Trio directors have now each provided an enforceable undertaking to APRA, which effectively removes these individuals from operating in the superannuation industry for a specified period of time. All EUs have been for four years or longer, with Rex Phillpott agreeing to 15 years, and John Godfrey having no expiry date.
1. MACROECONOMIC TRENDS: how to deal with on-going slower growth 2. REGULATION: a broad set of new regulations are emerging as a major source of risk
FAST FACT
$50bn The amount of SMSF funds invested in property $50bn Source: MFAA
INSURANCE BROKER HANDED ASIC BAN
A
A
s insurers adjust to a new environment of lower asset returns and stricter regulation, macroeconomic trends and a slow growth rate top the industry’s risk agenda, according to new research. Global financial consultants Ernst & Young surveyed more than 65 insurance companies across the globe, who shared their insights and perspectives on the factors driving the industry over the next five years. The study identified the top 10 most important risks facing the industry, along with the opportunities insurers can capitalise on. The report, Business Pulse: Exploring the dual perspectives of the top risks and opportunities in 2013 and beyond, found the top 10 risks are:
SIC has permanently banned the managing director of troubled All Class Insurance Brokers, Leroy Bowmaker, from providing financial services. The regulator had various concerns regarding Bowmaker's conduct during his role as MD of All Class, and ultimately found he was not competent to provide financial services. Bowmaker was the managing director of All Class from 1 March, 2002, until it was placed into liquidation on 17 April, 2013. ASIC cancelled the company’s AFS and Australian credit licence on 6 May. At the time, documents obtained by Australian Broker sister publication, Insurance Business showed All Class owed around $1.9m but a summary of its assets and liabilities concludes only the plant and equipment are of value, stating they are worth $55,746. All Class had approximately 51 creditors, in the main consisting of major premium funders and insurers – however, this did not include the four staff who were owed a total of $44,871.49. The receivers PPB Advisory sold All Class’ client book to Consolidated Insurances, as first reported by Insurance Business in May. Bowmaker has a right to appeal ASIC’s decision to the Administrative Appeals Tribunal.
3. EUROZONE DEBT CRISIS: factoring in the global consequences of the crisis 4. REPUTATIONAL RISK: safeguarding your reputation 5. CORPORATE GOVERNANCE FAILURES: with regulatory change, stakeholders seek confidence in corporate governance 6. CYBER RISK AND DATA SECURITY: how to contain the growing threat 7. TALENT RECRUITING SKILLS: acquisition and retention of talent challenges insurers 8. IMPACT OF TAX AND ACCOUNTING CHANGES: recent actions are closely tied to regulation risk 9. OPERATIONAL RISK: quantification of risk on the organisation 10. AVAILABILITY AND COST OF CAPITAL: a continuing concern, along with how to attract investors EY experts said the list makes it clear the insurance sector needs to adjust to a new environment of lower returns on assets and stricter regulation. “In their search for growth and revenue, insurers need to optimise capital and asset liability strategies, remain cost competitive, while not losing sight of their customers’ needs. Adapting to evolving market and regulatory change will be a challenge that requires employing new technologies and building flexibility into all aspects of our business,” said Shaun Crawford, EY’s global insurance sector leader. EY Asia Pacific leader, Paul Clark, stressed there are also opportunities for insurers such as improved distribution and product development; promoting fair outcomes for customers; shifting sales to accommodate changing customer needs; more effective governance and growth in emerging markets. Other opportunities include re-optimising capital structures and redesigning asset liability strategies; the impact of global demographic changes, personalising insurance policies; the growth of data and analytical tools; and the rise of social media. “Today’s insurers are enabling advances in product development through new metrics and social media tools, promoting the advantages of insurance to a younger audience and better interacting with customers approaching retirement,” Clark added.
ONE YEAR ON 26
ONE YEAR ON
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Emotional brokers and pride-driven valuers
What a difference a year makes … or not. Australian Broker reflects on the punditry, news and Brokers and valuers are often at odds, but they may influential trends that made headlines 12 months ago Australian Broker Issue 9.14 both need to reassess the relationship
Sony Bank faces tough sell without brokers The announcement last year that global corporate giant Sony was looking to enter the Australian mortgage market may have raised a few eyebrows. The company had seen some serious success in Japan as one of the first online-only banks in the country. Sony Bank planned to use its Japanese deposits to fund Australian mortgages, but industry pundits were sceptical the venture would pose a real threat, or gain much traction without broker use.
What’s happened since? Sony who? The mooted Sony Bank expansion into Australia has yet to become a reality. After opening a Sydney office to gauge the feasibility of entering the Aussie market, the company decided to put the plan on hold for the time being. It looks like brokers can rest easy that the much-hyped online threat remains – for now – just hype.
Big Four customers increasingly dissatisfied
The Australian majors had a bad run when it came to customer satisfaction. Initially copping ire for out-of-cycle rate rises, the banks continued to be the target of consumer rage when they failed to pass on full cuts from the RBA. The Big Four saw satisfaction continue to slide last year, with ANZ in May plumbing its lowest depths since August 2009.
What’s happened since? The banks have managed to reverse their fortunes, with a recent Roy Morgan report putting customer satisfaction with the majors at a 17-year high. The research group said the improvement was largely due to an increase in the satisfaction level of the big four’s home loan customers as a result of five decreases in the cash rate by the RBA in the past year. Though the majors still held back some of the cash rate moves, rates evidently dropped enough to pacify angry consumers.
T
he tension that often exists between brokers and property valuers comes down to several key issues, according to The Selector Group’s Matthew Zappia and Smartmove’s David Brell: Namely, valuers’ pride and brokers being overly emotional. Zappia tells Broker TV that mounting pressure from banks on valuers for consistency, as well as valuers’ ‘proud nature’, contribute to many of the problems valuers have with brokers. “I think … valuers are very pride-driven people, so if they’re using comparables from, say, a buyers’ agent like myself or a sales agent on the road who’s giving them some data to go off; I think they find it a little hard to take on that information. And obviously the banks want to see a valuer that is very consistent in the market, otherwise they won’t use those valuers again.” On the other hand, Brell warns that brokers have a tendency to take on their clients’ emotions – something which valuers struggle to deal with. “Mortgage brokers take on the emotion from the client so we deal with a relationship which is the hardest piece behind looking after the mortgage. We take on those demands. It’s something that we have to manage and manage well, so a lot of the negativity could be on the back of those emotions.” However, Brell says there’s no point in brokers battling valuers. “At the end of the day, valuers are professionals. They’ve gone to university, they have a huge task at hand and there’s a lot more that goes behind a valuation than just a figure. And it’s a matter of weighing up the emotions of the broker versus the professionalism of the valuer. So I don’t believe there should be any negative feelings towards the valuers – it’s just a matter of working with them as professionals. Just get it right up front, talk to the client, prepare them for the potential event of a lower-than-expected valuation.”
FORUM 27
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Do brokers need an office?
A debate has sprung up over the role of work-from-home brokers
Clients like you for you
In the “home office versus commercial office” debate, Casey offered some personal experience to argue that a home office could deliver some serious benefits. “We’ve worked from a home office for the last three years. Massive productivity gains, which has resulted in more clients and larger turnover with lower overheads. I see my kids in the morning, when they come home from school and always have time to take them to their sports and the like. My family is happy because I’m there when it matters. As for the client base it draws? At the end of the day people will deal with you for you. My client base is predominantly professional. Most are actually jealous because of my work arrangements. And if they don’t want to deal with me because I don’t have an office? Then they are not a client for me.” Casey on 9/07/2013 9:22AM
What do you think? Leave your comments at brokernews. com.au
T
he story of a Sydney-area broker who relished his work-from-home lifestyle sparked debate on the Australian Broker forums about whether a home office limits opportunities or hampers productivity. Far from slacking off, Coast Broker’s decision to work from home has sometimes meant pulling longer hours. “I work from home with a separate home office and have many clients come to see me. The only issue I find with having a home office is it can be too convenient and you can easily work longer hours because your office is just downstairs.” Wayne argued home office brokers would only draw a certain style of clients. “We run an office and our client base are professionals and
CRYING WOLF?
Westpac CEO Gail Kelly recently claimed rate cuts by major lenders outside of the RBA cycle are unlikely in the near future. She cited increasing funding costs, as well as ‘very low’ credit demand. Brokers replied with a heavy dose of scepticism. Broker on 9/07/2013 9:27AM “Low demand, increased costs of funds, yet continued record profit results; what a
they come and see us. They simply won’t deal with homebased brokers. “So as a home-based broker you might get the mum and dad business but you won’t be getting the professional client base.” Coast Broker chimed in again to argue a home office could be every bit as professional. “While working from a home office I still have my share of professional clients as I service them no differently than a broker working out of a commercial office.” But OldBroker finally put the debate in context, pointing out every broker’s needs and skill sets are different. “This debate is like saying Steve Jobs shouldn’t be taken seriously because he wore black turtlenecks and jeans.”
truly unique business model our banks enjoy.” Casey on 9/07/2013 9:07AM “Increased funding costs and lower credit demand. It’s been some time since I did an economics unit so I might be wrong. But these would appear to be two opposing forces that in an open market would generally cause prices to recede due to lack of demand.”
PEOPLE 28
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Industry swimming star back on the blocks Swimming champ and NextGen.Net sales exec Greg Phillips talks about his hard work in and out of the pool
I
t’s 4.30am and Greg Phillips is on his way to his local pool. He’ll swim 5,000m, focusing on explosive speed and an anaerobic workout, before swapping his togs for a suit and tie and assuming his role as sales executive with NextGen.Net. The former international swimming champion is making a comeback; returning to the sport in which he was world ranked in the 100 metres butterfly, UK national champion 50m butterfly, USA national champion 4 x 100m freestyle, and currently the holder of three national titles in the 2013 Australian National Masters Championships. He talks to Australian Broker about his life as an elite swimmer, the correlation between swimming and his professional career and his comeback dream. AB: What qualities did you tap into as a swimmer that now serve you as a sales executive? GP: Passion, commitment, ambition and dedication. I try to leverage what I learned in swimming and translate it into my professional career. AB: And specifically regarding your job at NextGen. Net? GP: The confidence to work with more than 37 lenders and major broker groups. AB: You didn’t mention discipline. GP: Probably because it’s so ingrained in me. Getting up at crazy times and training twice a day becomes second nature. When I stopped swimming that discipline prepared me well for the world of finance and banking. Planning and preparation is everything in business as it is in sport. AB: When did you recognise you had the potential to be a great swimmer? GP: My mother was a swimming coach so I’d been in the pool since the age of two. Soccer was my main love but at 14, when I started dropping sprint times, I realised if I put my mind to it I could improve. It snowballed from there.
AB: What attributes does a sprint swimmer
require?
GP: In the 50m events it’s mainly explosive power. In the 100m you need to be able to back it up on the second half of the swim with an endurance component. AB: Do you know what motivates you? GP: I’ve been thinking about that a lot since I reentered the sport. My big drivers are the racing element and the need to compete.
Greg Phillips is the holder of three national titles in the 2013 Australian National Masters Championships.
AB: What is your long-term goal? GP: It’s massive. I’m trying to get back to where I was 10 years ago in terms of times and that’s despite being a lot older, doing half the amount of training and balancing it with my career. In terms of business goals, I’m passionate about championing NextGen.Net’s focus on driving processing efficiencies, reducing costs for lenders and improving turnaround times for brokers. AB: You won the 50 free, 100 free and 100 fly
in the National Masters in April 2013.
GP: Yes, and at that point I’d been back in the pool for only six months after 10 years off. So I thought if I could do that there must still be “some stuff left in the basement” (to quote Rocky Balboa), so I started swimming in open meets, along with former titleholders like (James) Magnussen. This works for me because I’ve found that when I’m with people who challenge me it forces me to step up. AB: In business as well as sport? GP: Yes. Our sales director, Tony Carn is a great mentor and he definitely keeps me on my toes. AB: Do the demands of training ever become
too much?
GP: Swimming is renowned for burning out teenagers. But because I was in a cauldron of high performance I was constantly motivated. These days I am privileged to be training with the Carlile Swim Team (National Squad) and I juggle 10 hours training with work and family commitments. AB: Are you married? GP: Yes and we have a child on the way. My wife also has a demanding career so she understands my goal. Part of what drives me is the desire for my son or daughter to know that Dad did this at 37, when he was way too old to be doing so.
brokernews.com.au
IN FOCUS
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ustralian First Mortgage recently celebrated its 10year anniversary with a function at Sydney’s Hilton. The event was the first of several AFM will hold around Australia to mark a decade in the industry. Photography by Simon Kerslake
CAUGHT ON CAMERA
INSIDER
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Social media sites to avoid if you’d like to be taken seriously The key to successfully using social media sites is to be selective. They’re not all suitable for your business.
W
ith so much emphasis being placed on getting brokers to engage with social networking sites, we thought perhaps it might be time for a clarification: Not every social networking site screams ‘professional’. Facebook, Instagram and Twitter? Yes. StarTrekDating.com? Not so much. Here are our top picks for social networking sites you should definitely not ‘like’ (or possibly create an alter-ego if you do).
STARTREKDATING.COM
DOGSTER.COM
A social networking site … for your dog. Aside from building his/her own profile, your pet can read riveting articles ranging from Does Your Dog Have A Sixth Sense? to What Do I Do with My Dog During My Home Birth? And, in case the cat feels left out …
CATBOOK (ON FACEBOOK)
We weren’t joking – this is a real thing. Users are encouraged to ‘Set Phasers to stunning and if that doesn’t work, set them to stun!’. If your ideal woman is a Borg queen, or your ideal man has pointy eyebrows and never smiles, this could be the site for you.
This is actually a sub-site on Facebook, but with 115,000 ‘likes’, we felt it was worth an honourable mention. Headline articles include, ‘Fashion designer Karl Lagerfeld claims that he would marry his pet Cat if he could’ and ‘Clever Cat walks Dog on a Leash to owner’s front door’. Sort of like The Woman’s Weekly, but for felines.
MYFREEIMPLANTS.COM
MATCHADREAM.COM
As the name suggests, this networking site is all about helping users ‘invest in breasts’. The site describes itself as ‘providing a fun, safe, and debt free alternative to expensive breast augmentation loans’. Possibly one for our financial planning partners?
If a browse through the above sites has given you nightmares, you might want to make a quick stop at Match a Dream to find out what it all means. Or simply step away from the computer, which is probably what the author should be doing at this point …
HOW NOT TO SERVICE CLIENTS
O
ne of the worst complaints a borrower can throw at a mortgage broker is ‘poor customer service’. A quick browse through the badly-rated brokers on womo.com.au (a site that allows customers to rate businesses, including brokers, based on personal experience) comes up with plenty of feedback like the following, from an anonymous member: “I used this business to get a mortgage. NEVER AGAIN. The rate and mortgage package was okay BUT the service, attititude [sic] and customer serv8ice [sic] was the worst I have ever had. They do not turn up, promise to do things they don’t. Don’t return calls and expect you to bow and scrape to them.” While the majority of brokers bend over backwards for their clients, we thought it might be good to take a quick look at what not to do when it comes to customer service. Real life examples are one of the best ways to make a point – and these, from a variety of industries, are straight from the horse’s mouth.
LESSON ONE... Insulting your client.
“A few years ago, a friend [and I] were shopping. We decided to go into [a lingerie store] to browse. I was overweight at the time. I saw a really nice bra ... and I said to my friend, ‘They shouldn’t be so discriminatory. They should make this in our size.’ I then heard the manager say, ‘Maybe if you lost some weight we would have things that fit you’.”
LESSON THREE... Failing to show up on time.
“I paid about $20 extra to have a package delivered [to] arrive by Christmas. It went out on December 22nd and arrived on the 27th. I spoke with three different customer service representatives who said I couldn’t get any money back because there was unexpected bad weather. One actually told me they weren’t responsible for ‘acts of God’.”
*Source: www.dailyfinance.com
LESSON TWO... Showing absolutely no compassion. At all.
“When I was 18 years old, my mother died of lung cancer. She had clothes she had never even taken the tags off to wear. My father asked me to return the clothes ... I did not have the receipts. [The cashier] was very rude, asking me, ‘Why can’t you just get the receipts from your mom?’ I told her she had just died and she proceeded to look into my face and say, ‘Well, you don’t look too sad about it.’”
LESSON FOUR... Using inappropriate racial/ethnic/sexual slurs.
“One time I went to [a music store]. When I walked in there was a 16-year-old kid behind the counter wearing a hat that said, ‘F*** You.’ I asked him if they had any of the older Hootie and Blowfish CDs still in stock. He asked me if I was, ‘some sort of f*g or something.’ Needless to say, I was a bit shocked.”
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AGGREGATOR / WHOLESALE BROKER Choice Home Loans 1800 188 288 www.choicehomeloans.com.au Front cover PLAN Australia 1300 78 78 14 www.planaustralia.com.au Page 7
LEGAL SERVICES
Bransgroves Lawyers (02) 9221 9522 info@bransgroves.com.au www.bransgroves.com.au Page 6
LENDER
Quantum Credit 1300 135 212 www.quantumcredit.com.au Page 8
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TRAINING & EDUCATION Intellitrain Pty Ltd www.intellitrain.com.au 1300 735 082 Page 11
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OTHER SERVICES
Deposit Power 1800 678 979 www.depositpower.com.au Page 15
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Rent4Keeps 1300 76 30 20 www.rent4keeps.com.au Page 19
RP Data 1300 734 318 Page 23
SHORT TERM LENDER
Homeloans Ltd 13 38 39 www.homeloans.com.au Page 13 Liberty Financial 13 11 33 www.liberty.com.au Page 3
ME Bank (03) 9708 3994 mebank.com.au Page 9
Trailerhomes 0417 392 132 Page 26
Interim Finance 02 9982 2222 www.interimfinance.com.au Page 2 Mango Credit 02 9555 7073 www.mangocredit.com.au Page 1
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