Australian Broker 11.21

OCTOBER 2014 ISSUE 11.21

$4.95 POST APPROVED PP255003/06906

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

+ ANALYSIS STATE OF THE MARKET

Findings from QBE’s new national housing survey P10

+ ANALYSIS FOREIGN FURORE Are concerns over foreign buyers trumped up?

P14

+ COALFACE SAME INDUSTRY, NEW CHAPTER

Siobhan Hayden:

A NEW DAY FOR THE MFAA The MFAA’s new CEO discusses how her career to date has prepared her for the high-profile role

W

hen long-time MFAA chief Phil Naylor announced in May that he would be leaving his post after 12 years at the helm of the association, conjecture swirled around who would replace him.

Members hypothesised whether the MFAA would seek out someone with banking experience, aggregation experience or industry experience. When the association announced that former Finware partner Siobhan Hayden would be the new chief executive, it marked a new era for the MFAA. But Hayden says it’s a role her experience has prepared her well for.

FULL STORY PAGE 16

Aaron Christie-David makes the jump to broking P20

+ BUSINESS

INTELLIGENCE

BURN HARD WITHOUT BURNING OUT

How to keep yourself from overworking P22

+ CAUGHT ON CAMERA VOW’S VIETNAM CONFERENCE P29

NEWS 2

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NUMBER CRUNCHING

HOME LOAN BREAKDOWN – SEPTEMBER INVESTORS

40.3%

HOW FHBS WANT TO FUND THEIR FIRST PROPERTY

FIRST HOME BUYERS

49%

8.4%

SAVE THE DEPOSIT AMOUNT

27% DID YOU KNOW?

FAST FACT

186,000

16.3%

The average number of new houses the HIA says will need to be constructed every year to meet demand

Commercial finance lending dropped 16.3% in August, after rising 3.4% in July – down from $47.9bn to $40.1bn

OTHER

15.3%

REFINANCERS

36%

Source: HIA

Source: AFG

FOR MY EMPLOYER TO SALARY SACRIFICE 9.5% INSTEAD OF SUPERANNUATION

22% BORROW THE FULL PURCHASE PRICE WITHOUT A DEPOSIT

20% DRAW ON MY EXISTING SUPER BALANCE

8% NEGOTIATE AN EARLY INHERITANCE FROM PARENTS

Source: ABS

Source: Mozo

WHAT THEY SAID...

STEVE DEGETTO

KIM CANNON

“We know that the next three “Online lending is an increasing months is when brokers have threat to brokers when you one of their busiest times of the consider the trajectory of other year, and we want to give them fields that follow a brokerage a compelling offer to present to model of service” P8 their customers” P4

AARON CHRISTIE-DAVID

HARLEY DALE

“The industry has welcomed me with open arms as a marketer, and it has been fantastic to get the opportunity to be a broker” P20

“The commercial construction sector finally appears to be following the lead of new residential construction” P24

NEWS 4

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Broker push drives BOQ result ■ Bank of Queensland has posted a record statutory profit result

Steven Degetto

SUNCORP OFFERS COMMISSION BONUS ■ Suncorp Bank has trimmed its

variable rate, waived annual fees and increased upfront commission to support brokers during their busiest time of the year.

The non-major has announced a discounted rate of 4.69% on standard variable loans in its Home Package Plus product. The lender has also waived the annual Home Package Plus fee (currently $375 p.a.) for new lending.

Suncorp Bank’s head of intermediaries, Steven Degetto, said the move was aimed at demonstrating its commitment to being a genuine alternative for brokers.

“Establishing strong relationships with our broker partners and achieving financial solutions for our customers has always been a priority for us as we continue to look for new ways to deliver a competitive product with exceptional service,” he said.

Suncorp is also giving brokers an upfront commission bonus of 0.15%, taking the total upfront commission to 0.80%. This is effective for applications received from 1 October 2014 to 12 December 2014 and settled by 12 March 2015.

“We know that the next three months is when brokers have one of their busiest times of the year, and we want to give them a compelling offer to present to their customers,” Degetto said.

for the year ending 31 August 2014. The financial year also saw the non-major increase its home lending, despite fierce competition from the major banks.

The lender recorded a statutory profit after tax of $260.5m, a massive increase of 40% on last year. The results also saw housing lending increase 1% over the year, clocking in at $26.3bn.

Jon Sutton, acting chief executive of BOQ, said the bank’s retail position was affected by teething issues in some markets – BOQ recently returned to the broker channel – but he is still pleased with its approach to growth.

“In a low retail credit growth environment, we’ve maintained our disciplined approach to growth. We’re not prepared to join the race to the bottom on pricing,” he said. “Our retail growth has also been impacted by our overweight position in Queensland, which is growing at around half the rate of the broader system.”

Since returning to the broker market about 18 months ago, BOQ now has 1,300 accredited brokers on its side. National mortgage franchise Loan Market yesterday announced the addition of BOQ to its lending panel, and Jamin Smith, head of media and corporate communication at BOQ, told Australian Broker that this year’s results had proven how important the expansion into the broker market was to the lender’s business.

“Over 40% of mortgage lending originates from brokers, so brokers are hugely important to us at Bank of Queensland. Our accredited broker partners accounted for 14% of our growth in housing lending this year.”

RBA should be careful about rate trigger ■ A recent Reserve Bank survey of economists

and industry figures found that all respondents were forecasting a rate rise next year, with many betting on a gradual rise over the next three years, until it reached a “new normal” of about 4%.

However, John Kolenda, managing director of 1300HomeLoan, said it may be some time before we see the cash rate hit a new normal.

“There are some economists forecasting the cash rate to head north to 4% within the next few years, but we would need to see some significant improvement in the economy before the RBA returns the official rate to that sort of level.”

Despite concerns over rising house prices, Kolenda said if the RBA prematurely lifted the cash rate it could have a detrimental impact on the economy.

“It would be a serious mistake by the RBA to lift rates in response to house price rises, which are mainly occurring in the Sydney/Melbourne property market. There are already early signs of prices easing in those markets,” he said.

BY THE NUMBERS

$430 New figures show the national median weekly rental rate is $430 for houses and $420 for units Source: RP Data

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Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass 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

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6

Mutual introduces new fixed rates ■ Teachers Mutual Bank has expanded its home loan offering with the introduction

of four- and five-year fixed interest terms.

The four-year fixed term offers 4.88% p.a. (comparison rate 5.48%), and the five-year term has been set at 4.95% p.a. (comparison rate 5.45%). Both also offer a 100% mortgage offset facility.

Mark Middleton, national manager of third party distribution at Teachers Mutual Bank, said the five-year term could provide stability should interest rates begin to rise.

“Despite a long period of interest rate stability, the future remains unpredictable.

Our fixed interest home loans can now protect against rate changes for up to five years, providing security and peace of mind,” he said.

“As a mutual bank we are committed to providing competitive interest rates on all of our products, and our four- and five-year fixed home loans are no exception.”

In addition to adding these longer terms, Teachers Mutual Bank also cut its one-year fixed interest rate by 26 basis points, bringing it down to 4.58% p.a. (comparison rate 5.67%).

Chan & Naylor announces broker venture

WORLD NEWS

■ National accounting and

UNITED STATES OF AMERICA

BANK EMPLOYEE ASKS FOR A RAISE … FOR EVERYONE Wells Fargo employee Tyrel Oates recently wrote an email to company CEO John Stumpf asking for a $10,000 raise – not only for himself but for each of the bank’s 263,500 employees, according to a MarketWatch report. Oates copied in about 200,000 Wells employees on the email.

Oates pointed out that Wells, the nation’s largest mortgage originator, had seen record profits, including $5.7bn in the second quarter alone, and that Stumpf’s $19.3m annual salary package was “more than most of the employees will see in our lifetimes”.

When news of Oates’ email hit the media, Wells Fargo responded with a prepared statement.

“We provide market competitive compensation that combines base pay with a broad array of benefits and career-development opportunities for team members,” the bank said.

Oates’ current compensation is $15 per hour, according to MarketWatch. His pay was $13 per hour when he started at the bank nearly seven years ago. During the same period, Stumpf’s annual compensation has increased by 40%.

FAST FACT

13% Proportion of Australians at risk of credit default, according to reporting agency Veda Source: Veda

wealth advisory group Chan & Naylor have announced a joint venture agreement with mortgage originator Origin Finance to provide broking services to Chan & Naylor clients nationwide.

The new business will be known as Chan & Naylor Finance and will reflect the company’s commitment to providing complete advice to its client base. It will consolidate the various state-based finance Ken Raiss businesses operated under the Chan & Naylor brand under one new umbrella, so as to better meet the requirements of all new and existing clients nationally.

“Ultimately our mortgage business can be comparable in scale to our accounting practice – not least because our clients will appreciate the end-to-end solutions we will provide them in assisting them manage their investments,” said Ken Raiss, managing director of Chan & Naylor.

Under the agreement, Origin Finance will place and manage brokers within Chan & Naylor offices nationally.

“Initially we anticipate staffing Chan & Naylor Finance with existing Chan & Naylor personnel and Origin brokers. However, we will look to recruit some experienced brokers, especially those with banking or credit backgrounds, to expand into new locations and grow the existing locations,” Origin Finance’s chief executive Doug Daniell said.

THEY’VE FOUND THE HOME TO MAKE THEM HAPPY. AND YOU’VE FOUND THE HOME LOAN TO KEEP THEM SMILING.

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COMPARISON RATE

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FOR MORE INFORMATION CALL YOUR LOCAL BDM OR VISIT MEBANK.COM.AU/BROKER *Interest rate is current as at 17/10/14 and is subject to change. #Comparison Rate based on a loan of $150,000 for a term of 25 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges.

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Members Equity Bank Limited ABN 56 070 887 679 Australian Credit Licence Number 229500.

NEWS

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8

Investor demand drives aggregator’s record month ■ The overall number of home loans processed by

Kim Cannon

mortgage broking group AFG reached a record high of $4.3bn across the country in September. This represented a 3.5% increase on the previous record number processed in May. Echoing concerns of the Reserve Bank about surging investor demand, demand for investor lending drove AFG’s growth in September. These loans accounted for 40.3% of total loans processed, which was also a record for the group. The previous all-time-high proportion of investment loans was 40%, also recorded in May. Investment mortgages comprised 49.7% of new home loans processed last month in NSW, 37.2% in Vic, 36.4% in SA, 34.9% in Qld, and 32.2% in WA. Mark Hewitt, AFG general manager of sales and operations, said the market could expect to see investor demand remain solid throughout the spring selling season.

“With countries like Canada making it more difficult for overseas residents to invest in property, very strong demand from investors can be expected this spring.

The concern, however, is for first home buyers. Historically, this segment has comprised around 15% of all the loans we process, but in recent months this figure has fallen into single digits.”

CANNON: BROKERS MUST COMPETE AGAINST ONLINE SHIFT

FHBs want to access super for home purchases

■ Firstmac CEO Kim Cannon has said he anticipates a

greater consumer shift towards online lending in the future, and brokers will have to adapt.

“In the past year or so, banks, credit unions and building societies have closed 130 branches around Australia, while Loans.com.au’s application rate has increased 187% and loan amounts have doubled,” he said.

Cannon said the trend could prove a threat to the broker industry.

“Online lending is an increasing threat to brokers when you consider the trajectory of other fields that follow a brokerage model of service. Look at travel agents. There used to be a travel agent on every corner, but now they are few and far between, and mostly used for particularly complicated travel arrangements.”

Cannon said brokers would have to adapt and innovate if they wanted to co-exist in this increasingly online and DIY culture.

“That is where brokers will be able to demonstrate their worth for clients, on complicated loan arrangements that require expertise and industry knowledge. It’s not enough to just talk to clients and help them fill out forms; online lenders do that too,” he said.

DID YOU KNOW?

7.9%

Job advertisements rose 0.9% in September and are now 7.9% higher than the same time last year Source: ANZ

■ Almost a quarter of first home buyers are prepared to

borrow the full purchase price without saving a deposit, while more than a quarter want their employers to offer salary sacrifice to help them meet their property goals.

According to research by Mozo.com.au, 22% of first home buyers said they would be prepared to borrow the full amount, including the deposit, from the bank. Twenty-seven percent said they would prefer their employers to salary sacrifice 9.5% instead of superannuation. One fifth (20%) said they would like early access to their existing superannuation balance to put together a deposit, and 49% said they would be prepared to save diligently for a deposit.

Mozo director Kirsty Lamont said it was interesting to see which option first home buyers would choose when facing increasing property prices.

“It’s clear Gen Y feel it’s unattainable to enter the property market by saving alone, and want the government to seriously consider superannuation as the solution,” she said.

ANALYSIS

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10

State of the market Findings from QBE’s Australian Housing Outlook 2014–2017

A

ustralia’s property market has been the hot topic of discussion this year, as record low interest rates cause the housing market to simmer away.

According to QBE’s annual Australian Housing Outlook report, prepared by BIS Shrapnel, low interest rates have driven sizeable median house price growth in most capital cities. Melbourne has led the way in price growth (+20%), closely followed by Sydney (+17%), while strengthening price performance has also been seen in Brisbane (+6%), Adelaide (+5%), Canberra (+6%) and Hobart (+9%).

The only cities that have experienced subdued price growth are Perth (+2%) and Darwin (+1%), where resource investment in these states appears to have peaked, slowing economic growth and impacting on house prices.

Soaring house prices over the past year have sparked an industry-wide debate over whether housing bubbles are beginning to emerge in some of Australia’s heated property markets.

The Reserve Bank has even expressed concern about the high price of Australian real estate.

“Housing prices were continuing to increase in the larger cities, and members considered that the risks associated with this trend warranted ongoing close observation,” the central bank said in the minutes of its September board meeting.

RISE OF THE INVESTORS

The rise in property investment has driven growth in many of Australia’s housing markets over the past 12 months.

According to the QBE report, the value of residential investment has been rising steadily, from just under 40% of total residential finance in the year to June 2011, to 45.2% in the year to June 2014.

NSW has been the hottest spot for property investors, recording the strongest rise (+43%) over 2013/14, to the tune of $49bn. This has ended a decade-long period of subdued demand for residential investment finance in the state since 2003/4, according to the report.

Investment in both Vic and the NT climbed above previous record levels over the year, while WA remained on par with its pre-GFC levels. Even though investment in residential property also rose in Qld and SA, it remains below pre-GFC levels.

The only states that haven’t been buoyed by the rise of investors over the past year are Tas, where investment activity has remained flat, and the ACT, which has experienced a decline of 6%.

The surge in residential property investment has been put under the microscope recently, because of fears that it will push prices up and push first home buyers out. In its latest half-yearly Financial Stability Review, the Reserve Bank expressed concern over the “unbalance” in the market caused by rising investor demand, with noticeably faster growth in investor lending than in lending to owner-occupiers. The central bank said: “…a broader risk remains that additional speculative demand can amplify the property price cycle and increase the potential for prices to fall later, with associated effects on household wealth and spending”.

However, Robert Mellor, BIS Shrapnel’s managing director and author of the QBE report, says there is nothing to worry about; it is all part of the property market cycle.

“Cycles in the property market vary; there is no traditional clear pattern.

Investors and first home buyers tend to buy the same properties, so it is normal to witness different cycles where those two markets take over each other. If investors weren’t buying up property in this market, then first home buyers would be.”

WHERE HAVE ALL THE FIRST HOME BUYERS GONE?

It is no secret that first home buying activity is shrinking in the current property market. The latest housing finance data released by the ABS revealed that first home buyers made up just 11.8% of all owner-occupier housing finance commitments over the year to August – a new record low.

ANALYSIS

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11

SHARE OF LOANS TO RESIDENTIAL PURCHASERS BY PURCHASER TYPE % Share of total residential loan value 50

40

30

20

10

DID YOU KNOW?

Dec-13 Jun-14

Jun-13

Dec-12

Jun-12

Dec-11

Jun-11

Dec-10

Jun-10

Dec-09

Jun-09

Dec-08

Jun-08

Dec-07

Jun-07

Dec-06

Jun-06

Dec-05

Jun-05

Dec-04

Jun-04

Dec-03

Jun-03

0

Year ended month First home buyers

Non-first home buyers

Investors

Source: BIS Shrapnel

KEY ECONOMIC INDICATORS

11.8% First home buyers made up just 11.8% of all owner-occupier housing finance commitments over the year to August 2014 Source: ABS

% 7

Forecast

6 5 4 3 2 1 0 -1 2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Year to June GDP growth

CPI growth

Employment growth

Unemployment rate Source: ABS

ANALYSIS

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12

According to QBE’s report, first home buyer demand has continued to decline after showing signs of steadying in the first half of 2014.

But, as Mellor suggests, if it isn’t investors pushing them out, then where have they gone? The housing report investigates the correlation between first home buyer demand and the incentives available to first home buyers, suggesting that changing incentives may be behind the decline.

Over the last three years there have been progressive changes to first home buyer incentives to favour new homes over existing homes.

The objective has been to try to shift demand into the market for new

$

homes, in order to add to supply in the long term.

However, there has been an impact on the market in the short term, as incentives for the purchase of established dwellings have been progressively removed – and this may explain the lack of first home buyer demand in the property market.

As a result of changing incentives, future first home buyer demand has been brought forward to take advantage of the grants before they expire, leaving a vacuum of first home buyers in the established market immediately afterwards. At the same time, there has also been a delay in the next round of first home buyers, who now have to accumulate a larger

deposit to compensate for the lack of financial assistance.

The report calculated that the biggest losses in incentives for established homes have been in NSW (total reduction of $25,000), the NT (reduction of $21,700), and Qld (reduction of $13,700). It also showed that these states have experienced the sharpest declines in loans to first home buyers from their previous peaks.

SPOTLIGHT ON SYDNEY AND MELBOURNE

These two cities are widely regarded as the troublemakers. While house price growth and housing affordability were generally more benign across the other capital cities

INTEREST RATES AND INFLATION

FAST FACT

$25,000

%

10

Forecast

Total reduction in first home buyer incentives in NSW Source: BIS Shrapnel

5

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

0 As at June Cash rate

Standard variable rate

Three-year fixed rate

FORECAST HOUSING GROWTH, 2014–2017

ANNUAL HOUSING GROWTH BY CITY

17%

19.6%

9%

BRISBANE SYDNEY

MELBOURNE

17%

SYDNEY

6.4%

ADELAIDE

9.4%

HOBART

5.3%

HOBART

5.9%

CANBERRA

4.9%

MELBOURNE

5.6%

BRISBANE

2.3%

DARWIN

4.5%

ADELAIDE

0.9%

CANBERRA

1.9%

PERTH

-1.9%

PERTH

1.4%

DARWIN

Source: BIS Shrapnel

Source: ABS

Source: REIA

ANALYSIS

brokernews.com.au

over 2013/14, house prices surged and affordability deteriorated in Sydney and Melbourne.

According to the QBE report, the strong house price growth in both cities more than offset the impact of the 25 basis point reduction in interest rates over the year.

The increase in Sydney’s dwelling deficiency since the mid-2000s and the easing of interest rate policy since the end of 2011 were the catalysts for the upturn in the Sydney residential market. While the first leg of the upturn emerged in inner Sydney over 2012/13, price growth became more broad-based over 2013/14. Over the past year, inner Sydney recorded the lowest rate of growth (+10.2%), with stronger growth now coming through in the middle-ring (+17.3%) and outer-ring suburbs (+15.6%).

In Melbourne, after strengthening price growth of 4.8% in 2012/13, the city’s median house price growth was a substantial 19.6% in 2013/14.

However, it is likely that this figure overstates the strength of that market, as the median is also a function of the composition of sales

13

that take place, and the period saw a disproportionately higher volume of sales occur in the high-value inner and middle suburbs.

Over the past year, price growth has been strongest in Melbourne’s inner suburbs (+12.1%) and middle suburbs (+15.8%), while a more moderate increase has occurred in Melbourne’s outer suburbs (+10.4%).

Over the coming year, however, the Housing Outlook forecasts 13% price growth for Sydney and only 3% growth for Melbourne over the same period – well below the growth previously experienced.

By the end of the report’s forecast period in 2017, Sydney’s median house price is predicted to be unchanged from June 2014 levels, while Melbourne’s would have experienced a 4% decline.

WHAT NOW?

Just as the Reserve Bank has commenced discussions with APRA about the use of macroprudential tools to rein in the property market without raising the cash rate, the QBE report suggests the housing market may be beginning to cool.

Over the next 12 months, it predicts further momentum in price growth – although at a slower rate – thanks to a boost in housing construction and interest rates forecast to remain at stimulatory levels in the near future. But beyond the next 12 months, the combination of further price growth, an easing of the housing supply shortage, and the eventual tightening of interest rate policy will cause price growth to cool in the residential market across most cities in 2015/16.

Median house price growth over the next three years is forecast to be strongest in Brisbane (+17%), where a supply deficiency is likely to remain in place for much of that period.

Slower price growth is forecast for Sydney (+9%), Melbourne (+5%), Adelaide (+6%) and Hobart (+5%).

The weakest price performance is forecast for Perth (-2%), Canberra (+1%) and Darwin (+2%). Perth and Darwin will be impacted by the decline in resource sector investment, while Canberra is expected to be affected by a combination of cuts to public sector employment, and a sizeable oversupply.

ANALYSIS 14

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Foreign buyer furore Foreign investment in the Australian market has some pundits worried, but are the issues overblown?

I

t’s tough to deny that foreign investment in the Australian housing market is ramping up.

The latest figures show foreign investors accounted for one in six new properties nationally for the September quarter of this year. The NAB Residential Property Index showed a significant pick-up in foreign buying activity in new property markets across the country.

NAB group chief economist Alan Oster said, “Foreign buyers accounted for 16.8% of total demand for new property in Q3, or about one in six of all buyers, with this share tipped to rise to 17.3% over the next year.

Foreign buyers were more active in all states, but especially in Victoria where they accounted for an estimated 24.8% of total demand, or one in four all new property sales.”

Foreign buyers were less active in the established property market over Q3, with their share of total national demand rising to 8.2% (7.2% in Q2).

Foreign buyer demand for established property increased in all states except NSW. Victoria again led the way, with foreigners accounting for a record high 11.5% of established property demand.

Meanwhile, local investment in new property fell to 27% of national demand over Q3 (32.5% in Q2), accounting for a smaller share of demand in all states.

Their share in established dwellings remained broadly unchanged over the

quarter at 25%, being most active in the Queensland, NSW and Victoria established property markets.

FOREIGN BUYERS BUOYING CONFIDENCE

And the importance of foreign investment in Australian property should not be underestimated, according to the Property Council of Australia. According to the group, it’s foreign investment that’s buoying overall confidence in the market.

The latest ANZ/Property Council Survey shows that foreign investment in the Victorian property industry has driven business sentiment higher in the December 2014 quarter.

Property Council Victorian executive director Jennifer Cunich said Victorian sentiment had steadily risen eight points over the past 12 months as a result of improving industry confidence.

“Foreign property investors are helping lift industry buoyancy by playing an active part in the local market,” she said.

Cunich said 37%, 33% and 30% of responders in the residential, commercial and retail sectors reported between 10% and 50% of their sales were to foreign buyers during the quarter respectively.

“The importance of foreign investment in driving residential, retail and office capital growth expectations should not be underestimated. The

DID YOU KNOW?

69% 69% of property lawyers and conveyancers in New South Wales do not believe Chinese buyers are pushing up prices Source: InfoTrack

recent influx is boosting construction activity, job creation and government tax revenue.”

Foreign investment has been under close observation of late, as many of Australia’s property markets – particularly Melbourne and Sydney – boom. However, Cunich said the speculation around foreign investors snapping up property and pushing up prices may be hyped up.

“Equally, the dominance of foreign buyers in the Victorian market shouldn’t be unnecessarily exaggerated; 33%, 40% and 46% of residential, commercial and retail responders reported zero sales to foreign buyers during the quarter respectively.”

Cunich said Australia needs to further support the growth of the property industry, which is one of Victoria’s largest employers and contributors to Gross State Product.

“To ensure Victoria continues to receive strong foreign investment flows in the property industry, both sides of politics should commit to making the state’s existing tax thresholds more competitive.”

A CALL FOR TIGHTER REGULATION

But not everyone is convinced that foreign investment yields only positive benefits. Simon Smith, a Hong-Kong based research senior for Savills – a leading global real estate service provider – told the Australian Financial Review that the recent relaxation of restrictions may cause an influx of more foreign investment and is “something to watch”.

Foreign investment is certainly

15

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THE CRUX OF THE WHOLE FOREIGN INVESTMENT ISSUE IS THAT NON-RESIDENT PURCHASES OF PRE-EXISTING DWELLINGS ARE EFFECTIVELY UNREGULATED - L EITH VAN ONSELEN something Liberal MP and chair of the parliamentary inquiry into foreign investment in Australian real estate, Kelly O’Dwyer, has her eye on. She recently accused the Foreign Investment Review Board (FIRB) of failing to do their job by not prosecuting foreign investors who bend the rules.

The current regulation states that foreign investors can only invest in new dwellings, which would stimulate more housing supply.

Instead, many foreign investors are investing in established dwellings – without permission or prosecution – putting upwards pressure on property prices.

Now, she is calling for foreign investors to face tougher penalties.

O’Dwyer told Fairfax Media that the inquiry was considering beefing up penalties for foreigners who flout real estate laws, to make them proportional to the value of the property purchased.

“The largest penalty fee that can be imposed is about $85,000. We have been told by many witnesses that that is simply seen as the cost of doing business,” she told Fairfax.

The inquiry has delayed handing down its recommendations on foreign investment in real estate. It is now expected to be released in late November.

Meanwhile, a new survey by InfoTrack reveals that property lawyers and conveyancers in New South Wales – which is a hot spot for Chinese investment – are not convinced Chinese buyers are pushing up house prices. According to the survey, 69% of respondents claimed Chinese buyers have had no impact on their region.

Leith van Onselen, economist and writer for Macro Business, said the core of the issue isn’t necessarily the amount of foreign investment, but where they are investing.

“The crux of the whole foreign investment issue is that non-resident purchases of pre-existing dwellings are effectively unregulated. Fix the regime governing pre-existing housing – by ensuring accurate data collection and enforcement – and the perceived problem of foreign investment in Australian property will be solved.”

FAST FACT

16.8% Proportion of new property purchased by foreign buyers in Q3 of 2014 Source: NAB

TECHONOLOGY UPDATE

Pepper on track to better 1-day turnaround

MARIO REHAYEM

TONY CARN

Pepper is on a roll. The specialist lender has successfully transitioned into prime mortgage products, strong growth is being reported off the back of the move and last month it hired its landmark 1000th employee.

Now the non-bank is implementing an innovative new tool to enhance its electronic lodgement system.

Director, Sales and Distribution, Mario Rehayem, predicts the result will be a radical reduction in turnaround times.

The electronic lodgment tool, to which Rehayem refers, is NextGen. Net’s ‘Supporting Documents’ service, which according to feedback from other lenders is fast acquiring a reputation as a “game changer”.

‘Supporting Docs’ is a groundbreaking module in the ApplyOnline system that clearly identifies supporting document requirements at the Point of Sale and validates them against lender policy requirements; and in so doing, reduces rework levels and lifts straight-through processing.

“If we can turn an application around in one day, which is what we’re doing now, imagine what we’ll be able to do with this new addition to the system,” Rehayem exclaims.

Pepper is switching on the Supporting Docs module this month.

“At the end of the day, for us it’s all about the brokers’ experience,” says Rehayem. “95 percent of our originations are through the broker market.

“When we receive an application from our advocates, the people who use us most, we can turn an application around the same day, which is a market leading turnaround.

“Our advocates know what we require. Supporting Docs will allow a first time user to know upfront exactly what we want and when we want it; and therefore operate in the same way as an experienced advocate.

“That’s every lender’s dream!”

Pepper and NextGen.Net have been

a success story for over eight years.

Pepper was the first specialist lender to offer ApplyOnline to brokers.

Rehayem explains that at the foundation of their relationship is “transparency and simplicity”.

“Their system marries up to what we believe in,” he says. “Transparency and simplicity is at our core; so ApplyOnline matches what we want to deliver to the market.”

Central to it’s achievements is the fact that “Pepper is on top of the technology game”, maintains NextGen. Net Sales Director, Tony Carn.

“It is often assumed that a specialist loan is more complex than a prime loan. The fact is, they’re not and Pepper is renowned for making the process very simple. They have a great offering and they use technology well to make it an easy, simple and transparent process.”

Pepper uses ApplyOnline to process loans all the way to settlement.

Currently, the only thing that takes time in delivering superior turnaround times is verifying and indexing the supporting documents.

“Implementing our Supporting Docs service is going to make it an automated process for Pepper, which will make really impressive turnaround times even more impressive,” says Carn.

Pepper has invested in training to ensure brokers are ‘Supporting Docs savvy’ and get the most out of the module.

“We won’t just drop it on their laps and expect them to know what to do,” says Rehayem.

“Investing in Supporting Docs comes with some responsibility. That responsibility means training our brokers to use it and reap the benefits.”

Listing the many lenders now using the ApplyOnline Supporting Documents service, Rehayem refers to it as “the new norm”.

“Anyone who doesn’t have it will soon be the odd one out,” he declares.

NEWS 16

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CONTINUED FROM PAGE 1

I HAVE A BIG, STRONG BELIEF THAT THERE IS ONE BOSS AND THAT BOSS IS THE CUSTOMER AND IF THE CUSTOMER DOESN’T BUY FROM US, I DON’T HAVE A JOB AND NOR DOES THE MFAA TEAM

SIOBHAN H HAYDEN: A new day for the MFAA The MFAA’s new CEO discusses how her career to date has prepared her for the high-profile role

ayden said her varied career background will stand her in good stead as she takes the reins of the industry’s peak body.

“It feels almost like an apprenticeship, everything I have done to date, to take on this role. Initially in human resources – so, very strong people focused to start with; in logistics – so, blue collar and male dominated; then I moved to Ireland and worked at Guinness which is good from the drinking perspective for this industry, and then when I came back I worked at Woolworths and the first part of that role was to go around the country and talk to people within the supply chain network and find out what their requirements were from us as a business. Finishing with Woolworths, I ended up as a project manager, designing, building and commissioning a very large warehouse for the

distribution network. Then to Finware, where in the last eight years I had been working predominantly with customers in that channel, an independent supplier of technical solutions to brokers in the market and it’s really allowed me – it’s been actually a pleasure – to go into hundreds of broker businesses in Australia and New Zealand,” she said.

While Hayden hasn’t directly operated as a mortgage broker, she said providing solutions to brokers’ businesses has given her a deep understanding of the industry.

“Probably the best compliment I could say I get is when people say to me ‘how long have you been a broker for?’ and I’ve never been a broker. So that’s a big take out for me and I think I genuinely do understand what the industry is about,” she said.

And that understanding has led her to love the industry, she said. Hayden said she is passionate about the work brokers

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do and the challenges they face.

“I am really passionate about small business, having been working in my own business with my husband – a family business – for eight years. I think that it’s challenging, your job is never done, it’s never completed so you go home every night thinking ‘I’ve got to do that, I’ve got to do that’ – so that’s a dynamic part of this industry. It’s small which I quite like as well and at this stage in the industry, I believe we are at a mature stage of the business; we are no longer in a growth stage so you are seeing more consolidation, business processes being refined and people trying to get more bang for their buck,” she said.

BLAZING A NEW TRAIL

Much will likely be made about the fact that Hayden is the association’s first female CEO. Moreover, she serves as the first female CEO in what has

traditionally been a male-dominated industry. Gender is not an issue, however, that Hayden thinks about in the role.

“I’ve done martial arts since I was eight and a great component of martial arts is everyone wears a gi (the uniform) and the reason for that is that everyone is equal. There’s no rich, there’s no poor, there’s no black, there’s no white and there’s no male and there’s no female.

Everyone gets in, everyone learns to train together. I’ve been selected for this opportunity based on my credentials and my experience and it was a very rigorous process I have to say, which I enjoyed, but I’ve been selected based on that so it’s about me feeling great about the preparation I’ve put in and the opportunity that has come up and Phil resigned at the right time!” she said.

MFAA members may also point to the heavy lobbying required of the role.

Though Hayden conceded that her lobbying experience with Canberra may be limited, she argued that previous roles have prepared her to take on the task.

“A lobbyist is really someone who helps influence the decision of someone important – say, an official or politician.

In my capacity at Woolworths in my last role as a project manager, I was responsible for lobbying the Victorian government to source $10m to build on their side of the state as opposed to in New South Wales. Following the Victorian government engagement, I then had to work closely with Wodonga Council for over two-and-a-half years in that build process and obviously provide them with lots of updates and progression. But most challenging was the union environment, so the Transport Workers Union in building a half-akilometre sized facility and 300 odd CFMEU members. So, that to me is harder. I don’t espouse that I am as seasoned as Phil in relation to lobbying but I’m very confident in my ability to negotiate and influence decisions that need to be made.”

As to her reception by the industry, Hayden said it will all depend upon how effective the association is at engaging its membership. This engagement, she said, will be her top priority in the role.

“Look, at the end of the day, I have a big, strong belief that there is one boss and that boss is the customer and if the customer doesn’t buy from us, I don’t have a job and nor does the MFAA team. So, at the end of the day, if the members don’t feel engaged and they don’t find value in what we are offering, that’s not a good thing for us. So, at the end of the day, I’d like to consider that getting out there initially and finding out what our customers need from us as an industry body and what they need moving into the future for their business will help inform the strategy that I and the team will help roll out – that is most important to me.”

BEST PRACTICE 18

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GETTING THE BEST OUT OF NEW HIRES NGA.NET managing director Karen Evans on how to seamlessly bring new employees on board Proceed with a plan or strategy in place A common mistake managers make is to wait until problems arise, then deal with them accordingly. Many employers will teach the employee on a need-to-know basis. This is known as ‘onboarding on the go’. While this may seem like the easiest option, it means that an employee does not have comprehensive onboarding knowledge, and this leads to a disruptive introduction to the company. Instead, develop and implement a clear strategy and attempt to foresee any potential problems that may arise before the new hire starts.

Top tips for hiring help Brokers discuss their strategies for bringing new employees on board

A

s the busiest time of year for brokers is well underway, Australian Broker spoke to some brokerage owners to get their hot tips for hiring the best brokers for your business.

Jason Arnold, managing director of JAK Property Finance, has recently hired a new commercial broker and said a good tip is to build relationships with your existing networks – because you never know when they may want a change.

“When I wanted to hire an experienced commercial broker, I essentially targeted a strong commercial performer from within one of the major banks that I had direct experience with over a couple of years. Now I have been in touch with more potential candidates, of which two are within banks and two are current brokers within other firms. I make an effort to keep in touch over a coffee so I can monitor where they are at and discuss my business.”

When hiring new-to-industry brokers, Arnold says personality is a stand-out for him. He has also recently hired a new junior credit analyst.

“My new credit analyst is about two years out of university. I was asked if I could have a coffee and career chat with this person, who ended up holding a personality that I thought would match the business from both from a cultural aspect and in terms of potential skill set,” Arnold said.

However, he also says you have to ensure that you can see long-term potential when hiring any junior brokers, and have a solid career pathway mapped out for them if you are going to invest in training them.

“The idea for my junior credit analyst is to learn all aspects of the commercial and

residential business, with a three- to five-year goal to look at converting them into a commercial and residential mortgage broker.

Moving forward, a good balance of junior credit analysts becoming originators, combined with targeting key industry performers, is my key strategy.”

Aaron Christie-David, owner manager of a Mortgage Choice franchise in South Sydney, is a former Commonwealth Bank marketing manager who recently had a career change and set up shop as a mortgage broker. He says don’t be afraid to think outside of the box when it comes to taking new people on board.

“Historically, brokers have come from a lending background, but when I came through the induction program I met people from many other backgrounds, such as human resources or teaching. I think there is a real shift to become a broker from people who have sales and marketing or relationship management backgrounds.

“If you are customer focused and good with people, then you will do well in this business.

The industry has welcomed me with open arms as a marketer, and it has been fantastic to get the opportunity to be a broker.”

When hiring for his business, ChristieDavid says technical skills will come second.

“When I’m assessing potential employees, their personality is what is important for me.

I don’t hire someone just for their skill set, but for their personality and willingness to learn. If they can fit in with the workplace culture, and they are keen to hit the ground running, then they can learn and develop the skill set on the job. Even when I was hiring for marketing jobs at CBA, I would focus on personality and drive. I think this is important for any workplace.”

Talk to existing employees Ensure that you talk to existing employees regarding areas in which your onboarding system may be lacking.

Nobody knows what is needed better than an employee who has been through the system, whether it’s the newest graduate or a senior manager. It’s important to remember that onboarding is an end-to-end process.

Pay attention to details as well as the big picture Take the time to organise all aspects of the onboarding process prior to the new employee’s arrival, to ensure this is as streamlined as possible. It’s vital to focus on the things that may seem trivial. Does the employee know how to contact IT? Have they been formally introduced to their co-workers?

While this may sound pedantic, your employee will be much happier if you cover all bases.

Have everything ready to go on the first day Make sure that everything is ready for new employees when they start. Nothing is more disruptive for a new employee than stationery and paperwork arriving in dribs and drabs during their first few days. We recommend providing a ‘starter kit’ for employees, with everything they need, such as a computer log-in, stationery and paperwork. This then allows them to start personalising their workspace and getting up to speed as quickly as possible.

Use technology Employers should understand the value of technology during the onboarding process. This technology can range from internal communication, to automating contracts, documentation and payroll.

By integrating systems, information gathered from the recruitment phase can be transferred to other systems that are designed to handle the administrative aspects of onboarding.

This eliminates the administrative burden for you, and lets you focus on the more important aspects of your job.

Technology also allows you to report on the success of your recruitment and onboarding process, as well as respond to any issues that may arise in the future.

DEAL BREAKER 19

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Short-term commercial: Another arrow in the quiver Offering a range of solutions for tough scenarios can set brokers apart

B

rokers may not have many clients for whom short-term commercial lending is a solution, but for SMEs finding themselves in need of finance, the broker who can offer help will be a step above their peers.

“Diversifying into the ascending market of short-term lending is as opportunistic as it is lucrative – and particularly relevant in the SME space,” said Andrew Littleford, MD, Interim Finance.

Quantum Credit executive director John Broadway identified scenarios in which brokers’ clients might be in need of a short-term commercial solution.

“Typical short-term loan scenarios arise when funding need is temporary, settlement is urgent, and circumstances are unusual,” he said. According to Broadway, these scenarios can include: • Part of the property development and construction process (eg to fund pending completion of presales or to complete a project that has a cost overrun) • To release equity built up in a property over time, and that a bank won’t advance further on • To protect the company’s reputation

(eg by consolidating debts to prevent foreclosure by a lender, or to pay a creditor) • To optimise an opportunity at short notice (eg to buy stock offered at a special price) • To bridge (pending completion of accounts that a bank requires) Broadway said brokers looking to offer these solutions should be led by lenders specialising in the sector.

“Every commercial short-term loan is unique, and a tick-the-box approach cannot be followed. It is therefore generally best to let the lender show the way. The lender will guide the broker closely on what information is required and on what the sequencing of events will be. And there’s no risk of the broker being disintermediated – a professional lender has no need or want to do this,” he said.

The key skill brokers need is the ability to recognise when a short-term commercial solution is appropriate, and have one or two preferred short-term lenders on hand, Broadway said.

“This is the only way the broker will really be able to properly service their client.”

LOAN SCENARIO: SME MORTGAGE GROUP SME Mortgage Group is an established asset-based finance business specifically geared to the SME market (up to $150m turnover). “The sector demands flexible and tailored financial solutions. Clients are increasingly savvy and expect their broker to be able to select products that best fit their business and circumstance,” said Neil McKay, CEO of SME Mortgage Group.

“Diversifying into short-term lending provides a suite of solutions previously unavailable and has the net effect of broadening our portfolio, strengthening our offering, and providing a competitive advantage. This, of course, equates to a greater revenue stream.”

This is illustrated in a deal recently completed, as outlined below: Circumstance: A leading carpet retailer that supplies and installs residential and commercial flooring solutions Lender: Interim Finance Loan type: Caveat supported by registrable second mortgage Loan amount: $250,000 Loan term: 6 months Loan turnaround: 5 working days Outcome: Funds enabled critical stock purchases And relationships are paramount. “It was imperative that we partnered with an established organisation who is well regarded,” continued McKay. “We’ve built a good rapport with Interim Finance, and continue to actively work with the company based on their market understanding, product flexibility and competitive rates.”

The assurance that a short-term loan is compliant has also been crucial. This has been addressed through Interim Finance’s complete back-end support service to process/close loans quickly and compliantly, whereby brokers can elect to have the loan written and managed on their behalf at no cost. This has been popular with those who are time-poor/under-resourced, and seek the assurance that the loan is compliant with NCCP legislation. Commissions aren’t affected, and the client relationship is maintained.

THE COALFACE 20

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Mortgage marketer turned mortgage broker Former Commonwealth Bank marketing manager Aaron Christie-David has set up his own franchise brokerage

A

aron Christie-David is a mortgage marketing whiz turned mortgage broker. After working in marketing for Wizard Home Loans and Commonwealth Bank’s third-party and mobile banking channel, he decided he wanted to offer home loan products and services rather than market them.

“I worked in marketing for eight years across mortgage products and the third-party broker distribution channel. It was a great career but I never saw myself working in that field forever. I always loved working on home loan products and portfolios, but working in marketing for the third-party distribution channel and seeing what brokers were doing and the results they were achieving was what really what motivated me to go out there and start my own broking business.”

Christie-David recently launched his own Mortgage Choice franchise in South Sydney after purchasing the business and the loan book from a retiring broker. He decided to go

with a franchise model for the support he would get, being new to the broking side of mortgage lending.

“I have always wanted to run my own business, and I decided to go with the franchise model because of the head office support you get. I am new to lending, not new to the products, so having someone like Mortgage Choice supporting me is what has opened doors for me. They already have strong systems and processes in place, which is what was important for me as a new broker in the industry. Customers are also already familiar with the brand, so that helped when starting my own business.”

He hasn’t ditched his background in marketing, though. Christie-David believes the skill set he acquired in his former career has boosted his new career as a mortgage broker and business owner. This is a trend he thinks the industry may see more of, and could certainly benefit from.

“Marketing has definitely helped me launch my own business and career as a

mortgage broker. It opened my mind on how to leverage myself, my service and my brand, as well as distinguish what my value proposition is. It teaches you to define what you stand for.

“Historically, brokers have come from a lending background, but when I came through the induction program I met people from many other backgrounds, such as human resources or teaching. I think there is a real shift to become a broker from people who have sales and marketing or relationship management backgrounds.

“If you are customer focused and good with people, then you will do well in this business. The industry has welcomed me with open arms as a marketer, and it has been fantastic to get the opportunity to be a broker.”

At the moment, Christie-David is a one-man shop. Before he starts to invest in growth, he wants to spend time getting involved with his local community, generating his own leads and referral

THE COALFACE brokernews.com.au

sources and understanding all the systems and processes.

“My biggest focus at the moment has been getting out in the local area and meeting local businesses, families and individuals.

Recently, I was at Moore Park Super Centre with a pop-up stand trying to meet some of the local community to get an idea of their interpretation of our brand and our value proposition. It was interesting because a lot of people think brokers just sell home loans, but we don’t. We offer a service where we work with them to find the right loan for their needs, current and future.

I THINK THERE IS A REAL SHIFT TO BECOME A BROKER FROM PEOPLE WHO HAVE SALES AND MARKETING OR RELATIONSHIP MANAGEMENT BACKGROUNDS “Education has now become a crucial part of my value proposition and the service I offer to clients. I want to empower my clients through education. Over three weekends of operating the pop-up stand I was able to generate over 100 leads. Over the next 12 months I would like to build my loan book to the point where my clients are becoming my referrers. I would also like to get involved more in my local community and play an active part in that.

“I definitely want to take on an administration assistant within the next 12 months, but at the moment I need to know and understand how the whole process works, so I want to do it by myself for now. Then over the next few years I will start to take on brokers and increase my footprint. I would prefer to grow properly rather than quickly.”

21

BUSINESS INTELLIGENCE 22

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Burning the candle at both ends Dr Adam Fraser outlines a seven-step guide to sustaining high performance without letting your health suffer

AVERAGE WEEKLY WORKING HOURS

11%

56%

Less than 37.5 hours

37.5–40 hours

18% 40–45 hours

4%

50 hours or more

11% 45-50 hours

Source: Michael Page Salary & Employment Forecast, 2014/15

5

W

hen I worked with Olympic athletes, burnout was a frequent and very real challenge. Often you hear in the media that athletes get sick just before or at the Olympics. Why? Because they are always on the verge of overtraining or undertraining.

If you overtrain an athlete you simply push them too hard for too long. Their immune system starts to decline, they get sick, and their performance plummets.

Obviously this is a significant problem and one we put a lot of resources into solving.

What doesn’t work is pushing an athlete until they show signs of burnout and then giving them long periods off to recover. In contrast, our solution was to give them small, regular, consistent bursts of recovery.

This involved a shift in mindset. Instead of thinking about how to help them recover when they were feeling burnt out, we looked at how they recovered each day, each week and each month. Recovery became something they did perpetually rather than something they resorted to when exhausted.

HOW WE APPLY THIS TO THE BUSINESS WORLD

Over the last 10 years I have run countless programs with corporate executives to prevent burnout. Here are the critical components that have kept people free from burnout:

1

DECIDE IF YOU ARE SERIOUS ABOUT AVOIDING BURNOUT

Notice if you are using burnout as a status symbol.

Does exhaustion define you as a person? Unless you are stressed and exhausted do you feel guilty and think that you are a slacker not pulling your weight?

2

DEVELOP THE CAPACITY TO SAY NO

Your organisation and leaders will always try to get more and more out of you. Don’t expect them to manage your burnout. It sounds cynical, but it’s just the way the world works. You have to be responsible for this. Develop the capacity to have some boundaries, and ways to say no.

3

DO SOMETHING THAT RELAXES YOU EACH DAY

Like shutting down your computer, the brain needs the capacity to turn off and recover. Not only does this let the mind and body recover, but it also builds our capability to put the brakes on when we need it. Often people reflect on their holidays by saying, “It took me a week to unwind. I had a couple of good days and then started to worry about coming back to work”. We have lost the ability to go slow, and in some instances going slow seems to be punishment. Meditation, listening to a relaxation tape, yoga, and deep breathing while stretching before bed are all great ways to recharge your mind and body each day. Oh, watching TV doesn’t count.

4

EACH WEEK DO SOMETHING THAT GIVES YOU A SHOT OF VITALITY

This is taking the daily relaxation principle and turning it up to 11. We all have things in our life that fuel our soul, whether it is socialising with friends, going out for breakfast, walking on the beach, doing yoga, or being out in nature. It is something that not only relaxes you but also juices you.

EACH MONTH HAVE A DAY WITH NO RESPONSIBILITIES

Our lives are so scheduled that there is always something to do.

Psychologists report that children are experiencing anxiety in trying to keep up with a vast array of extracurricular activities. When was the last time you had a day when you woke up with nothing to do and no responsibilities?

Days like this are restorative and freeing.

Each month schedule a day that is responsibility-free. Our research shows that a day like this is ideally spent by yourself.

Busy couples with kids can get around this by taking turns with their partner and having the other person look after the kids.

6

EVERY QUARTER TAKE A LONG WEEKEND

Four times a year take a day off either side of the weekend and have a mini break, whether you go somewhere or simply stay at home. These regular mini holidays are great sanity breaks.

7

HAVE AN OFF SEASON

All sports people factor in an off season when they give their body and mind a complete break. No one can keep going all year.

Australians have amassed a concerning amount of holiday leave. Don’t become one of those people who never take a holiday. Aim to wipe out your annual leave each year.

DO IT TODAY

There you go: a seven-step process to eradicate burnout from your life. I have used this process with many executives and found that, no matter their external stress, it helps them dramatically reduce their chances of burnout. Go forth and recover.

Dr Adam Fraser is a human performance researcher and consultant who studies how organisations adopt a highperformance culture to thrive in this challenging and evolving business landscape. Visit dradamfraser.com

FINANCIAL SERVICES 24

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ASIC TO CRACK DOWN ON LIFE INSURANCE

FAST FACT Harley Dale

Construction growth hits nine-year high

C

onstruction growth surged to a new high in September, with home and apartment building leading the way.

According to the Australian Industry Group/Housing Industry Association (HIA) Performance of Construction Index, construction increased by 4.1 points to 59.1 in September, signalling the industry’s strongest pace of expansion in the nine years since the survey’s inception. The upturn in construction industry conditions reflected expanding activity across three of the four subsectors, but the growth was led by house building (61.7 points) and apartment building (60.5 points).

Harley Dale, HIA chief economist, said this was important news for the economy, especially with the uncertainty of the housing market and the RBA contemplating tightening housing lending standards.

“The latest [data] is among a string of indicators signalling that the strong performance of the new residential construction sector should continue throughout 2014/15. The commercial construction sector finally appears to be following the lead of new residential construction, which is another pleasing outcome,” he said.

“It will be important for the broader economy that evidence of strong performance in residential and improving performance in commercial construction presents itself throughout 2014 and into next year. The current elevated focus and uncertainty around the potential implementation of restrictive lending practices, and sweeping generalisations on this subject, are not helpful to that evidence emerging.”

IKEA WANTS TO INSURE YOUR FLAT-PACK HOME Perhaps it was only a matter of time before the flat-packing, self-assembly furniture innovator IKEA tried its hand at insurance.

The Swedish company, which has seven stores in Australia, has begun piloting child and pregnancy insurance in a few select Swedish stores. It plans to extend the offering to include home insurance products within weeks, according to the Wall Street Journal. IKEA will take the offering abroad in due course.

IKEA Australia has stores in Perth, Adelaide, Richmond, Springvale, Tempe, Rhodes and Logan.

Could IKEA join Coles and Woolworths in tapping into Australia’s insurance market? Watch this space.

6.1% Unemployment rate for September, up 0.1% from August Source: ABS

a

As the mortgage broking industry increasingly looks to diversify, brokers should be cautious about an ASIC crackdown on life insurance advice.

The watchdog claims the industry needs to improve the quality of advice and ensure the interests of consumers are given priority, after an ASIC review has found that more than a third (37%) of the advice that consumers receive fails to comply with regulation governing a consumer’s best interests.

Peter Kell, ASIC’s deputy chairman, says quality life insurance advice needs to be more consistent across the board, given that it is an important product that consumers use to protect themselves.

“This is an unacceptable level of failure, and the life insurance industry is now on notice to lift standards and professionalism. Both insurers and advice firms need to work on delivering a consistently better service for consumers,” he says.

ASIC says commission and remuneration structures may be the catalyst. The review found that high upfront commissions are more strongly correlated with non-compliant advice, including in situations where the recommendation is to switch products.

Affordability is also an issue that came out of the review, which found cases in which clients were recommended insurance cover that was likely to be very difficult to afford given their financial circumstances.

ASIC has made a number of recommendations for insurers, AFS licensees, advisers and their professional associations, including a focus on how to ensure client interests are met as well as balance the issue of affordability versus cover.

FOREIGN INVESTMENT CONTROLS ‘COUNTERPRODUCTIVE’ Amid growing calls for new controls on foreign real estate investment in the heated property market, the Property Council of Australia has claimed that introducing new controls on foreign investment would be “counterproductive”.

Property Council national president and chief executive of DEXUS Property Group Darren Steinberg said there was “no factual basis” justifying intervention in the commercial property sector.

“We need to remember that the property and construction industries employ 1.3 million Australians, account for 1.5% of GDP, and contribute $34bn in real estate specific taxes. We don’t want to put this at risk.”

Recent research conducted by the RBA shows that foreigners have accounted for around a quarter of the value of commercial property purchases in Australia since 2008, up from one tenth in the previous 15 years.

Steinberg said gearing levels in commercial property were under control, and policymakers should look before they leap on the matter of foreign property investment controls.

“Average gearing for major AREITs, excluding Westfield, sits at around 29%, and the make-up of that debt is roughly 50:50 between the banks and debt capital markets. This is a far better position than in 2008 and one of the lowest in the sector’s history,” he said.

“There is no justification for new taxes or controls on this sector.”

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ONE YEAR ON 26

ONE YEAR ON What a difference a year makes… or not. Australian Broker reflects on the punditry, news and trends that made headlines 12 months ago Australian Broker Online, October 2013

Major franchise to take on 150 new brokers In the wake of what executive director James Symond called an “extremely strong” marketplace, Aussie Home Loans last year launched a national recruitment drive in an effort to swell its broker numbers. Symond said the franchise brokerage was looking to take on 150 to 200 new mortgage brokers over the next 12 months. The company also lodged its highest monthly home loan volume on record, at $1.6bn, in September last year. The result was up 23% on the same month the year before.

What’s happened since?

The company recently announced another aggressive recruitment drive. After growing their retail channel by 17% to 451 loan writers and their mobile broker channel by 14% to 438, executive chairman John Symond said the group would again look to recruit 200 additional brokers over the next year. Symond said the company would be “aggressively expanding” its mobile broker force, as well as looking for more franchisees for its storefronts.

Broker franchisees lining up for financial planning model Following the roll-out of its long-mooted move into financial planning, franchise brokerage Mortgage Choice said it was seeing strong interest from its broker network. Tania Milnes, general manager of Mortgage Choice Financial Planning, said more than a quarter of the company’s franchisees were looking to add the service to their business. Milnes said the company was looking to recruit more advisers in light of the demand.

What’s happened since?

In September of this year, Mortgage Choice officially launched its financial planning service to consumers with a national advertising campaign. CEO Michael Russell said the group had 33 financial advisers on board nationally, and that this number continued to swell. The company’s four-part advertising series – branded “Happy As” – retained a home loan focus while incorporating financial planning into the company’s messaging.

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Offering brokers diversification solutions

W

hen Finsure purchased a major stake in Spectrum Wealth Advisers earlier this year, adding 250 financial planners to its portfolio, managing director John Kolenda saw it as a chance to add value to the aggregator’s broker network. Kolenda told Australian Broker TV that the company had decided to buy a stake in the wealth advisory dealer group as a way to better ensure a mutual vision.

“Rather than partnering up with a third party, it’s never the same as it is if you’re part of a group that’s owned by the group and you have a common vision and values and you understand that the broker is the ultimate customer,” he said. “We felt if we could own part of a dealer group we could better engage with our brokers and look at coming in to add the value that we as a group want to provide to our brokers.”

Kolenda said the purchase would allow Finsure brokers to make seamless recommendations around insurance and other financial products. He explained some of the diversification opportunities open to the company’s brokers.

“Brokers are offered different sorts of opportunities, and it’s up to them as to whether or not they want to move into that space and in what manner they want to do so. Being able to provide your customers with a risk [product] to protect their mortgage is one of the solutions, and we’re seeing more and more brokers starting to engage in that. Some of the other ones that are low-hanging fruit but also provide a solution would be general insurance, which would be home and contents,” he said.

Kolenda said uptake of the program had been strong, pulling in up to $1m in risk and insurance policies per month.

“So far, with the uptake from brokers we’ve seen in the previous two quarters, there is definitely a lot more interest. It’s been important that we really do support them quite heavily early on in the piece, and then once they get the confidence they begin to see how big an opportunity [it is],” Kolenda said.

For the full interview, head to www.brokernews.com.au/tv

FORUM 27

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Consumers heading online?

The spectre of online home lending has again been raised as a potential threat to brokers

POSITIVES TO SCRAPPING NEGATIVE GEARING

Aussie Home Loans executive chairman John Symond recently argued that killing off negative gearing, as suggested by Bank of America Merrill Lynch economist Saul Eslake, could cause havoc for the housing market. Eslake took to the Australian Broker Online forums to clarify his position.

“John Symond has made an enormous contribution to the mortgage and housing markets, and I respect him greatly for that. But I respectfully disagree with what he says here. The RBA’s Financial Stability Review shows that, far from ‘negative gearing’ being largely the province of ‘mum and dad’ investors, some 60% of the debt owed by property investors is owed by the wealthiest 20% of households. He surely can’t have meant to say that ‘first time buyer activity is low because interest rates are so low’. That would imply that the way to help first homebuyers is to raise interest rates! ‘Negative gearing’ doesn’t do anything to boost the supply of housing because 93% of investors buy established properties, as opposed to 70–75% of owner-occupiers. ‘Negative gearing’ allows those investors to push up the price of the properties that owner-occupiers are trying to buy, with what amounts to a 49% subsidy from other taxpayers.

“I’m actually not advocating that ‘negative gearing’ be taken away from those who already have it (and who undertook their investments in good faith under the law as it now stands). What I am saying is that it should be henceforth denied to any new investments. That would be a much more effective way of dealing with the ‘unbalanced’ market that the RBA has identified than either raising interest rates or untried and possibly ineffective ‘macro-prudential’ measures, without hurting anyone who isn’t a cause of the ‘imbalance’.”

Saul Eslake on 9/10/2014 at 10:06AM

A

recent survey by Loans.com.au claimed that Australians were becoming increasingly comfortable with the idea of sourcing their home loans online. While the idea of online lending as a threat to brokers is nothing new, Firstmac managing director Kim Cannon said brokers needed to provide a point of difference to remain relevant.

Brett Mansfield said some of the growth in online lending sounded more impressive than the reality, and that online channels still failed to offer the same service as brokers.

“The percentage growth in online distribution is not surprising given it is coming off a low base. It is more a competitor to bank branches and still falls well short of what a professional mortgage broker provides clients.

Brokers do not need to be able to personally offer financial advice, however the option to refer to range of trusted advisers is a great option.”

Andrew Edwards questioned the data, given its source.

“And just what did you expect the managing director of the company behind this online lender to say?

Being a broker I know plenty of people who don’t like the online model and would prefer to actually eyeball someone and have someone there when needed. For all the pros to this set up there is a con also, so as a broker I am not concerned at all.

We too can do business with clients online and Firstmac misses the bigger picture. By not offering the lower rates to brokers they are making huge mistake. If you want to create an us versus them mentality, then don’t have your BDM call us and ask why we are not submitting deals any longer.”

In spite of disagreement as to the trustworthiness of the data, Richard Waddington argued that the message that brokers must provide exceptional service still rang true.

“Just clipping the ticket on the way through for offering access to 20 or 30 lenders is fast becoming commoditised. Brokers ‘must’ differentiate themselves form competitors and offer innovative cutting edge research and views on the direction of interest rates if they are to remain viable.”

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

PEOPLE 28

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MOVERS AND SHAKERS

MORTGAGE MANAGER BOOSTS CREDIT TEAM

Doing the industry proud Homeloans BDM Natalie Sheehan has competed at the highest level to represent Australia

H

omeloans BDM Natalie Sheehan has represented both the non-bank lender and Australia by competing in the ITU World Triathlon Grand Final in Edmonton, Canada, in September.

Sheehan wore the green and gold to compete against athletes from 73 countries across the globe. For Sheehan, it’s been a meteoric rise to the top.

“To represent Australia in triathlon has been the realisation of a dream after taking up the sport about five years ago,” she said.

“I had to pinch myself when I first put on the green and gold uniform. It really was an amazing opportunity and a huge buzz to be competing overseas against athletes from 73 countries.”

Sheehan, who joined Homeloans in June this year after amassing more than 20 years’ experience in banking and finance, achieved two personal bests in the swim and bike legs of her events.

To qualify for the national team, she competed in events throughout 2013 and 2014, eventually qualifying fifth in her age category in Australia for the Olympic distance event. Though Sheehan only began competing in the sport five years ago, she trained rigorously to reach her current level of competition.

“The training was intense leading up to the trip – about 14 hours a week in the pool and on the bike, plus physio, yoga and

deep-water running after I ruptured a disc in my back six weeks before the race,” she said. “The challenges of jet lag after a 26-hour journey and unpacking my bike in Canada only to realise I had left my pedals at home certainly made life interesting!”

I HAD TO PINCH MYSELF WHEN I FIRST PUT ON THE GREEN AND GOLD UNIFORM – N ATALIE SHEEHAN, HOMELOANS But Sheehan argued that all the hard work was well worth the feeling of pride in representing her country.

“At the end of the day, when you pull on an Australian tri suit with your name on it, you feel an incredible sense of responsibility to do your absolute best out on the course.”

Sheehan said her success has been a result of intense focus.

“Any endurance sport is about mental strength, focusing on the end goal, and just doing the work. It’s amazing what you’re capable of when you put your mind to it and stick to your game plan, whether that be during training or throughout the race itself.”

Australian First Mortgage has recruited Rob Maloney to the NSW credit team as a credit services officer. Maloney has a wealth of industry experience behind him, having spent the last 20 years at mortgage manager BMC Mortgage Corporation as national sales and credit manager.

“I am looking forward to further developing my own abilities as well as formulating cross-functional decisions with an understanding based on my many years of experience in the financial services sector,” Maloney said.

David White, managing director at AFM, said the increase in new business volumes had resulted in a few internal promotions and reshuffling of existing staff to sales positions, but it was important that AFM maintained its service levels.

“Looking after our broker channel with quick turnarounds on credit decisions is our priority, and with Rob’s wealth of experience we are confident our established service commitment will be maintained,” he said.

White also said AFM was looking to recruit additional business managers for its operations in Queensland, Victoria and NSW.

NEW BDM FOR ADELAIDE BANK Adelaide Bank has appointed a new BDM for Western Australia. Fons Caminiti, senior manager of broker distribution at Adelaide Bank, has announced that Philippa Bernacki has joined the ranks.

“Philippa will service her Western Australian brokers and partners with distinction and has more than 12 years’ experience in the banking and finance industry, including as a mobile lender and a brokerage franchise manager.

“Philippa is passionate about building strong relationships with her brokers and delivering the high-quality service they both expect and deserve from Adelaide Bank,” he said.

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IN FOCUS

V

ow Financial recently held its annual conference in Da Nang, Vietnam. The aggregator’s brokers stayed at the Hyatt Regency resort and were treated to a variety of social activities and business-building sessions.

CAUGHT ON CAMERA 29

INSIDER 30

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A smoking new opportunity Lenders in the United States could be looking at a windfall from an unlikely source

M

arijuana may be a new opportunity for lenders in the US as the demand for and legalisation of its recreational use continues to grow across the country. Many are entering this newly legalised business hoping to make a buck, and investment dollars are flowing to finance new ventures.

Following the paths of Colorado and Washington, many states are reconsidering their laws surrounding recreational marijuana. Oregon, Florida, Alaska, Hawaii, California, Maine and Washington, DC, are among those states looking to legalise the drug. Currently, 23 states and the District of Columbia have some form of medical cannabis-friendly legislation on their books.

But with marijuana still illegal under federal law, getting involved as a lender could be tricky, and there is no conventional lending source, said Glen Weinberg, COO at Denver-based Fairview Commercial Lending, a private hard money lender. He said the Federal Deposit Insurance Corporation had yet to set clear guidelines for banks to follow; instead the agency had only presented the

risk factors involved in lending to the industry.

“These banks see all these risks and think ‘no way’,” he added. “One would think with no banks involved we would be knocking the socks off this industry, but that’s not the case.”

WHETHER YOU HATE IT, LIKE IT, IT DOESN’T MATTER. IT IS HERE TO STAY – G LEN WEINBERG, FAIRVIEW COMMERCIAL LENDING

In Denver, demand for industrial space used by the industry to grow marijuana is so great that it has pushed prices too high, said Weinberg. And according to commercial real estate firm Cassidy Turley, the industrial vacancy and asking rental rates in Denver reached historical levels at the end of the second quarter of 2014.

Cassidy Turley reported that the industrial average vacancy rate had declined to 4.8%,

and asking rents had climbed to $5.65 per square foot, compared to a year earlier when the vacancy rate was 6.7% and asking rents $4.83. Currently, cannabis real estate vacancy rates in Colorado are around 2%, according to 420MLS, a marijuana real estate listing service.

Although landlords are reaping the benefits of above-market rents, it doesn’t necessarily mean the value of their properties is increasing, Weinberg said. After analysing current market rents, he came to a different assessment of the value of these properties – that they were worth much less.

“The industry is going to change, and these landlords aren’t going to be able to charge these high rents forever,” he added.

Weinberg said he believed the marijuana business would continue to experience growth, but unfortunately this would come with a number of risks until such time as it is not a controlled substance under federal government law.

“They are going to have to deal with this industry,” he said. “Whether you hate it, like it, it doesn’t matter. It is here to stay.”

DIRECTORY BANK

ANZ 13 13 14 www.anz.com.au Page 9 Bankwest 13 17 19 www.bankwest.com.au Page 5

FINANCE

Semper Capital Pty Ltd 1 800 SEMPER (1 800 736737) www.semper.com.au enquiries@semper.com.au Page 21

LENDER

Homeloans Ltd 13 38 39 www.homeloans.com.au Page 19 Liberty Financial 13 11 33 www.liberty.com.au Page 3

Macquarie 13 62 27 macquarie.com.au/mortgages Page 32

ME Bank (03) 9708 3994 mebank.com.au Page 7

Quantum Credit 1300 135 212 www.quantumcredit.com.au Page 2

MKM Capital 1300 762 151 www.mkmcapital.com.au Page 4

Pepper Homeloans 1800 737 737 www.pepperonline.com.au Page 13

TECHNOLOGY PROVIDER

NON-BANK LENDER

Australian First Mortgage 02 9643 4300 www.australianfm.com.au Page 17

SHORT-TERM LENDER

Eastwood Securities 08 8408 0800 eastwoodsecurities.com.au admin@eastwoodsecurities.com.au Page 6 Mango Credit 02 9555 7073 www.mangocredit.com.au Page 1

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

NextGen.Net 02 9929 5999 sales@nextgen.net www.nextgen.net Page 15

OTHER SERVICES

Deposit Power 1800 678 979 www.depositpower.com.au Page 8

MFAA 1300 554 817 www.mfaa.com.au Page 23 RP Data 1300 734 318 Page 27 Trailerhomes 0417 392 132 Page 26

DIRECTORY 31

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