Australian Broker 11.15

AUGUST 2014 ISSUE 11.15

$4.95 POST APPROVED PP255003/06906

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

+ ANALYSIS FINANCIAL SERVICES SHAKEUP What the Senate Inquiry will mean for mortgages P12

+ BEST PRACTICE A DATABASE THAT DELIVERS Follow up marketing that gets results P18

+ BUSINESS

INTELLIGENCE

WAR AT WORK

Managing conflict in your office P19

+ MARKET TALK SMART MONEY ON RENTING?

Steve Kane:

A FRESH APPROACH NAB’s head of broker distribution discusses why the bank said goodbye to Homeside

T

he Homeside brand has been a source of broker contention for some time. Brokers complained that the NAB broker-exclusive brand was a source of confusion for clients. Fortunately for the third-party channel, NAB’s head of broker distribution, Steve Kane, agrees. When he recently announced the bank would shed the Homeside branding to bring its broker products under the NAB brand, he received near-universal praise from the industry.

FULL STORY PAGE 16

The RBA has claimed renters could be better off P20

+ OPINION HELPING CLIENTS’ DEBT DISTRESS Merri Mansfield on helping clients before it’s too late P22

+ FORUM AN INDEPENDENT LOT Brokers defend their independence P27

NEWS 2

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NUMBER CRUNCHING DID YOU KNOW?

HAPPY BANKING? Bank customer satisfaction for June

8%*

ANZ

*Consumer confidence rebounded 8% from 8 July to 22 July

79.1%

A SHARE OF THE PIE Major vs non-major market share MAJOR

80

NON-MAJOR

76%

74.6%

73%

75.1%

74.5% 74.8%

Source: ANZ

COMMONWEALTH BANK

60 82.1

%

NAB 80.4

%

WESTPAC

FAST FACT

16.7*

*Year-on-year increase for Melbourne house prices in the second quarter

79.9

%

Source: Roy Morgan

40 24%

27%

25.4%

24.9%

25.5%

25.2%

20 JAN

FEB

MAR

APR

MAY

JUN Source: AFG

Source: REIV

WHAT THEY SAID...

KEVIN CONLON

JOHN KOLENDA

TANYA SALE

“At the time of the Global “Whichever way the RBA goes, “The big banks don’t fork out Financial Crisis … I warned home loan customers have millions of dollars for nothing. the government that reverse had the benefit of historically They offer various incentives mortgage providers would not low rates” P8 to encourage the distribution survive without short-term of their product” P12 government intervention” P6

SHANE OLIVER

“There’s no doubt that the budget … has negatively impacted confidence” P26

NEWS 4

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Mortgage demand eases ■ Mortgage demand has eased, though growth in the sector

Mark Bouris

YBR SNAPS UP RESI ■ Yellow Brick Road had tipped to

the market for months that it was circling a mortgage manager for acquisition. Its mooted play finally came to fruition when the company recently acquired 100% of Resi Mortgage Corporation.

Resi managing director Peter James said the acquisition was “an important strategic move” for Resi.

“Both companies share a common vision to provide a genuine diversified ‘non-bank’ alternative for the benefit of the Australian borrowing public. YBR’s capability in relation to product development, marketing and wealth management services will enhance the capacity to achieve this very important goal,” James said.

James said the Resi business would remain a separate brand and maintain its current management structure, with Angelo Malizis remaining as CEO. “The YBR Group intends to build on the Resi brand strength and has a number of properties, products and platforms which they plan to introduce to Resi franchisees for the benefit of their customers.”

YBR executive chairman Mark Bouris hailed the buy as “another milestone in our strategy to become a leader in the non-bank segment”.

He said the acquisition would give YBR enhanced scale and significant growth opportunities.

remains solid.

New data from Veda shows mortgage enquiries were strong in the June quarter, up 6.1% from the same quarter last year. But demand eased somewhat after the March quarter saw an 11% increase on the previous corresponding period.

Veda said the figures were a good lead indicator of future home buyer demand and housing turnover.

“The growth in the stock of housing credit has continued to slowly pick up since early 2013, consistent with the earlier strength seen in mortgage enquiries,” Veda general manager of consumer risk, Angus Luffman, said. “While it remains healthy in the main eastern seaboard states, with the rate of growth in mortgage applications now slowing, there are continuing indications the pace of growth in the housing market is set to cool in the months ahead.”

YOUNG AUSSIES STILL SEE VALUE IN HOME OWNERSHIP

EDITOR Adam Smith PUBLISHER Simon Kerslake COPY & FEATURES JOURNALIST Calida Smylie PRODUCTION EDITORS Roslyn Meredith, Moira Daniels ART & PRODUCTION DESIGN MANAGER Daniel Williams DESIGNERS Kim Tomacruz, Kat Vargas, Loiza Caguiat SALES & MARKETING SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak MARKETING EXECUTIVE Alex Carr TRAFFIC MANAGER Maria Katsiotis CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR Justin Kennedy

■ A new survey of 500 South Australians aged 18-40 has found that 62%

consider home ownership to be of great importance. The survey, conducted

by South Australian lender HomeStart, also revealed 57% of respondents indicated that owning a home was part of a secure financial future.

“It is very encouraging that so many young people still want to own their own home,” HomeStart CEO John Oliver said.

In spite of respondents’ conviction that home ownership was important, 42% said they felt it was nearly impossible to own their own home. The top three challenges respondents identified as barriers to home ownership were the rising cost of living, current personal income levels and the difficulty of saving a deposit. Respondents also named employment status, finding a house within a given price range and competition from investors as challenges.

DID YOU KNOW?

2.8%* *Westpac has forecast GDP to grow at a below-trend 2.8% annualised pace for the second half of the year Source: Westpac

Growth likely to remain sluggish: Westpac ■ The pace of economic growth is likely to

remain below trend for the rest of the year, a major bank has claimed.

The Westpac Melbourne Institute Leading Index – which tracks the likely pace of economic growth three to nine months into the future fell in June to -0.73% from – 0.65% in May. The index has grown below trend since February.

Westpac chief economist Bill Evans said the result meant that the Australian economy could be expected to grow below trend for the remainder of the year, with limited momentum into 2015.

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 Auckland, Toronto, Denver, Manila 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 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

WORLD NEWS UNITED STATES OF AMERICA

Reverse mortgage lobby pleads for government help

AMERICA PUTS BIG BANKS ON NOTICE

■ Equity Release OZ has pointed to the interim

The US Department of Justice (DOJ) has put big banks on notice that failure to admit misconduct and pay stiff penalties over shoddy mortgage-bond sales would result in litigation by the government.

Speaking before a financial policy group in Washington, Associate Attorney General Tony West took a veiled swipe at Bank of America, which is currently in tense negotiations with the DOJ. “Resolving these cases will require more than simply seeking a meeting with the attorney general,” said West, referring to Bank of America CEO Brian Moynihan’s rejected bid to sit down with Attorney General Eric Holder. “If an institution is unwilling to admit its wrongful conduct in a statement of facts; or balks at paying a substantial penalty that reflects that conduct; or refuses to do right by those affected, then we will not shrink from litigating as long as we must to fulfil our law enforcement mandate.”

CANADA

Kevin Conlon

CANADIAN BROKERS TAKE AIM AT VALUATIONS

It isn’t just Aussie brokers who are frustrated by valuations. Brokers at Australian Broker’s sister publication Canadian Mortgage Professional have vented their anger over what they believe to be outdated and inaccurate appraisals and have called for a reform that will take into account other valuations when deciding the value of a home.

“Appraisals aren’t coming in at the proper value; they’re not coming in at purchase price,” Anthony Ambrosio, of CSI Mortgages, told MortgageBrokerNews.ca in mid-June. “The appraisers look at market data that is old – they’re always looking backward and not forward.”

According to Ambrosio, homes he is having appraised now are being valued at winter prices, when the market was slower and prices were lower.

report released by the Financial System Inquiry, saying that the report addressed equity release only briefly. Equity OZ chief executive Kevin Conlon said the report poses the “limited” question of what current regulations might impede the development of equity release products. But Conlon said the market needs much more than the removal of regulations.

“At the time of the Global Financial Crisis and as chief executive of the peak industry body, I warned the government that reverse mortgage providers would not survive without short-term government intervention,” Conlon said.

Conlon said the market had now contracted “from a large and diverse group” to just five lenders. He urged the FSI to better address the reverse mortgage market in its second round of industry consultations, and claimed government and regulators played an important role in encouraging providers such as superannuation companies to enter the equity release market.

FOS looks to clean up its act ■ The Financial Ombudsman Service is looking to streamline its

BY THE NUMBERS

14%* *Consumer sentiment is now 14% below its most recent high in November 2013 Source: Westpac

processes after an independent review expressed concern about backlogs in the EDRs disputes process.

In March this year, CameronRalph Navigator released a comprehensive review of FOS’ operations, showing concern for the EDR scheme’s speed in dealing with disputes.

“We think that these issues with timeliness and FOS process are limiting stakeholder ability to reasonably evaluate other aspects of FOS’s performance. From our discussions, we see that there is a level of frustration that is colouring stakeholder relationships with FOS. Despite FOS’s external engagement being widely seen as more professional and systematic, FOS is still perceived by some stakeholders as somewhat bureaucratic, defensive and unresponsive,” the review said.

FOS has now proposed changes to streamline its processes and clear disputes more quickly.

In proposed changes to its terms of reference, the EDR has unveiled plans to create a new class of decision-makers, known as adjudicators.

Adjudicators will manage smaller, less complex disputes. It will also streamline the process for lodging disputes, and reduce the timeframes for objections to its decisions.

NEWS

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8

THINK TANK CALLS FOR DEATH OF ASIC, ACCC ■ The Monash Business Policy Forum recently

released proposals to overhaul Australia’s “rustic” regulators. The plan would reduce the number of key regulators in Australia to five, eliminating the ACCC and ASIC and replacing them with new, completely redesigned regulatory bodies.

The five proposed regulators would be the Reserve Bank, and new bodies governing national markets, competition, consumer protection and essential services. The paper was prepared by former ACCC commissioner Stephen King, former CBA head of group strategy Rod Maddock and former ACCC commissioner Joe Dimasi.

“Australia’s microeconomic reform since the 1980s has been about changing regulatory structures rather than deregulation. These structures have not developed in a systematic and optimal way. It is important to rationalise these rustic regulatory structures to ensure Australia’s ongoing growth and prosperity,” the paper said.

BROKERS REPLY Broker reaction on the call to axe ASIC and the ACCC was mixed

REGIONAL BROKER “How can a former CBA head of strategy be involved in this? Their track record is speaking for itself. Was he in this role when the financial advice scandal was evolving?”

MCC “No problem with this as long as transparency and independent decision-making is able to be maintained without due influence from the relevant industry lobby groups”

JIM “Set up a new body to prosecute and jail as vigorously as ASIC [does] the brokers all those rotten GPs rorting millions $$$ from Medicare with impunity! No one in the government has the balls to touch the medicos, only the poor brokers!”

Could the RBA cut rates again?

■ While most economists are

predicting the next rate move the RBA makes will be upward, one industry figure has claimed interest rates may not yet have found their floor.

1300HomeLoan managing director John Kolenda has said flat demand for home loans, a rise in unemployment and concern about the government’s ability to push through its budget measures could see the RBA cut rates.

“The direction of the RBA’s next move has been sitting at 50/50 for some time but more John Kolenda recent factors such as the government’s difficulty in getting some of its tough budget measures through the new Senate are changing the game,” Kolenda said.

Kolenda said it was more likely that the RBA would remain on the sidelines as the Australian dollar stayed high and consumer confidence and spending remained sluggish.

“Whichever way the RBA goes, home loan customers have had the benefit of historically low rates, and we should stay in a low-rate climate for at least the next six to 12 months,” he said.

Aussie consumers feeling anxious ■ Consumers are at their most

anxious in more than a year, according to a new survey.

The NAB quarterly Australian consumer anxiety index climbed to 64.5 points in the June quarter, up from 61.7 points in the March quarter. The result was the highest since the survey began in the first quarter of 2013.

The federal budget was the main driver of growing anxiety, NAB said. Around 38% of consumer rated their anxiety over government policy “high”.

Cost of living remains the single biggest concern for Australian consumers. Consumer anxiety relating to the ability to fund retirement, health and job security also rose.

Consumer anxiety was highest in Victoria, but saw the biggest rise in WA as the state transitions away from the resources boom. Anxiety was up most in regional cities, highest in rural towns and lowest in capital cities.

ANALYSIS

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10

Hiring Gen Y: Keeping up with generational changes New research shows Gen Y are set to dominate the workforce. How should your business adapt?

N

ew research has shown that Gen Y is set to dominate the workforce in the near future, and businesses will need to adapt to this growing cohort if they are to survive. Businesses need to not only recognise, but embrace generational changes, particularly as they begin to bring Gen Ys on staff.

Generation Y is 5.15 million people strong in Australia, and by 2025 they are set to dominate the labour market – predicted to make up 31% of the workforce, according to statistics published this year by McCrindle.

WORK/LIFE BALANCE IS THE KEY

If these millennials are going to be making up the majority of your staff, then what exactly is Gen Y looking for when it comes to the workforce? According to research conducted

by Hays, the key to their heart – and employment satisfaction – is a good work/life balance.

“This group are very focused on attaining a work/life balance, which includes a desire for flexible hours and the possibility of working from home. That’s not to say they are unrealistic though, as they are fully aware of the importance of job security, loyalty and financial compensation… They are also interested in some form of international opportunity, and rate interesting work before

GEN Y’S FIVE MOST IMPORTANT FACTORS IN A WORKING ENVIRONMENT:

64%

Interesting work

50%

Flexible hours

37%

Flexible benefits

33%

Social life around work

33%

Modern/pleasant offices or working space

personal wealth,” Nick Deligiannis, managing director of Hays in Australia and New Zealand, says.

Flexibility is seen as the most important incentive an employer can offer to foster a good work/life balance. Gen Y rate flexible hours as one of the top three benefits to look for when job-hunting; with the flexibility to work from home also a top priority.

It isn’t all take and no give, though. Gen Y tend to have a strong entrepreneurial streak, with the survey reporting that 70% of Gen Y Aussies already have or are interested in having their own business. They are also motivated by ongoing professional development, with more than half of those surveyed wanting to participate in further study to help progress their careers – and your business.

MENTORS NOT BOSSES

Source: Hays

When it comes to management, employers should start investing in their soft-skills. For Gen Y, the most important characteristic of a manager is to be supportive – this is ranked even higher than being an expert in their field, according to the research performed by Hays. Gen Y want a coach or a mentor, not a boss. This ties back to achieving that work/ life balance – if they are going to be at work five days a week, they are interested in building relationships and friendships with their superiors.

This has created the need for a fundamental shift in company culture – out with the traditional authoritarian management styles and in with a more collaborative style of management.

Developing a more informal and relaxed culture with a focus on coaching rather than dictating is important to Gen Y, and will be important for them – and your business – to progress.

GEN Y’S FOUR MOST IMPORTANT QUALITIES IN A TOP LEADER:

43%

Supportive

42%

Knowledgeable

39%

Able to motivate others

37%

Fair Source: Hays

INNOVATION, INNOVATION, INNOVATION

Gen Y don’t know of a life without the internet. They are the founders of the social media movement, and the way they use social

ANALYSIS

brokernews.com.au

media extends well beyond connecting with friends and family. Social media has become a way of life and is going to be a change brought about by Gen Y which is going to define your business. It is critical that a business learns how to use it effectively if they are going to innovate and adapt.

Leah Busby, the owner and director of Blackfish Finance, knows this all too well.

She is an active user, and a champion of embracing social media as a powerful marketing tool for your business.

“It is so important to keep up with these generational changes, as these are the people that you are going to be working with, whether as a colleague or a client, for the next 50 years. You have to learn to reach them and interact with them on a medium that they use and they pay attention to,” she said.

Busby has been using social media for over five years now, and says it is a great way to inject personality into your business.

“There is Blackfish Finance the corporation and I am the director of Blackfish Finance, but then there is Leah Busby, the person.

Social media can help you have a personality, rather than just be another business.

Especially in this industry, people don’t care about a home loan, they care about buying a house. A business name doesn’t mean anything to them. It is a personal experience and they want someone that they can relate to and that they can trust.” Busby said.

The secret to using social media effectively

11

THAT’S THE BEAUTY OF THE NEXT GENERATION – THEY DON’T CARE ABOUT FORMALITIES AS LONG AS YOU ARE PROFESSIONAL, PASSIONATE AND HONEST – LEAH BUSBY is knowing how to use each medium, and how they all interact with each other.

“Anything posted on Facebook, Instagram or Twitter has to be quick, punchy and interesting – something that will instantly engage your audience. I love posting happy news, for example, a picture of a client with a ‘sold’ sign. I can then tag my client so their friends can see that they have bought property with the help of Blackfish Finance, and then it becomes a really good referral source.

“LinkedIn then represents the more professional side of social media, but each medium definitely interacts with and complements each other. For example, if someone wanted to Google me, they would see my happy clients and how I engage with them on Facebook, but then they could see my

professional experience, education and any industry awards I have won on my LinkedIn account.”

Busby’s advice for other brokers who haven’t yet embraced social media is “start today”.

“Don’t be worried about doing something wrong. That’s the beauty of the next generation – they don’t care about formalities as long as you are professional, passionate and honest. If you are unsure, my advice would be to start by following other companies to see what they are doing on the various platforms and what is getting lots of hits.

“You have to be diligent though and address anything that is posted on your page. You can’t just set up an account and leave it. You have to be interactive and present. Putting yourself out there can be confronting, but the benefits to your business are worth it.”

FAST FACTS ON GEN Y: Refers to people born between 1980 and the early 1990s Also referred to as millennials, internet generation, iGen and echo boomers They are tech-savvy, confident, educated and team-oriented Source: McCrindle

ANALYSIS 12

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STILL AHEAD + BEST PRACTICE A DATABASE THAT DELIVERS Follow up marketing that gets results P18

+ BUSINESS

INTELLIGENCE

WAR AT WORK

Managing conflict in your office P19

+ MARKET TALK SMART MONEY ON RENTING?

The RBA has claimed renters could be better off P20

+ OPINION HELPING CLIENTS’ DEBT DISTRESS Merri Mansfield on helping clients before it’s too late P22

+ FORUM AN INDEPENDENT LOT Brokers defend their independence P27

FSI FYI: What the Financial System Inquiry’s report means for you The Murray Inquiry has released its interim report, and it has implications for mortgage brokers

W

hen the Coalition swept into power at the Federal Election last year, they promised a full “son of Wallis” style financial services inquiry. True to their word, they launched the Financial System Inquiry, chaired by former Commonwealth Bank head David Murray. The task of the inquiry was to review the framework of the Australian financial system established by the Wallis Inquiry and see how well adapted it is to current conditions in light of the lessons learned from the GFC. In mid-July, the Murray Inquiry handed in its interim report, and laid out a number of observations, suggestions and questions to

address as the Inquiry heads toward its conclusion.

COMPETITION

One of the main objectives of a new, broadranging financial services inquiry was ostensibly to address the problem of a lack of banking competition in Australia. The Murray Inquiry looked at the issue of competition, and declared the competitive banking landscape in Australia fundamentally healthy.

The report claimed that most areas of the Australian financial system are operating effectively. While the inquiry said the number of players in the financial services

13

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ENSURING CONSUMERS ARE OFFERED COMPLETE TRANSPARENCY IS A KEY ISSUE AND WE LOOK FORWARD TO ENGAGING FURTHER ON THAT MATTER - S TUART GRIMSHAW, BANK OF QUEENSLAND

sector has contracted since the Wallis Inquiry, it claimed the industry was still competitive.

“On balance, the Inquiry considers that the banking sector is competitive. The net interest margins of the major banks are around historic lows, and their average return on equity is comparable to those achieved by other large Australian companies,” the report said.

But the report did note that the level of competition varied across individual banking markets, and that large banks had a funding advantage over smaller players.

The report also noted that the

securitisation market was “dislocated” by the GFC. “Since then, the market has started to recover, although not back to pre-GFC levels,” the report said.

The Inquiry is now calling for submissions about the “costs, benefits and trade-offs” associated with the government providing direct support to the RMBS market.

But the idea that banking competition is healthy may not sit well with regional and non-major banks. A recent AFG survey found that non-majors are struggling to compete, with their market share stalled at 25.2%.

Following the release of the report, several regional bank heads called on the Inquiry to offer some concrete solutions to level the competitive playing field in Australia.

“ME Bank is looking to the FSI inquiry to put forward some concrete proposals to level the playing field. The Report has stopped short of making recommendations, but has raised appropriate policy options,” ME Bank CEO Jamie McPhee said.

According to some of Australia’s leading regional banks, one of the main concerns relates to the capital treatment of housing loans in the market.

The FSI observed that larger banks tend to have a cost advantage for mortgage lending due to their capacity to adopt an internal ratings-based (IRB) approach, opposed to a standardised approach. The report quotes an APRA submission which notes, “In early 2014,

the average risk weight for housing lending under the IRB approach was 18%, as compared to 39% under the standardised approach.”

This is seen to be a competitive disadvantage as loans are risk-weighted based on who holds them, rather than what type of loan it is. Similar loans should be compared with similar loans, and risk weighted the same regardless of what type of institution holds them.

Regional banks are hoping that this observation will inspire some action according to John Nesbitt, CEO of Suncorp Bank.

“The FSI Panel has stated clearly that the capital regime as it applies to housing loans is not competitively neutral… This provides the sort of impetus needed to help motivate regulatory change,” Nesbitt said.

Deloitte also felt the Inquiry’s interim report fell short of addressing the competition issue. The company’s response to the Murray Inquiry interim report noted that the report failed to address future trends in competition and their implications on the current marketplace.

“While the current state of competition in the industry is important, the Interim Report would have benefited from a lengthier discussion of future trends. Although the report acknowledges that government policy ‘should take into account how potential future trends in markets may affect the level of competition over time’, it limits its analysis to

ANALYSIS 14

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COMPETITION HEALTHY? The Murray Inquiry has claimed banking competition is essentially healthy, but do the numbers tell a different story?

BANK MARKET SHARE FOR JULY CBA & BANKWEST 24.8% WESTPAC & ST.GEORGE GROUP 22.3% ANZ 16% NAB & HOMESIDE 10.6% SUNCORP 5.6% ING 5.1% MACQUARIE 5.1% AFG 4.4% CITIBANK 1.7% AMP 1.1% ALL OTHER NON-MAJORS 3.3%

05 0

5

10 10

15 15

20 20

25 25

Source: AFG

Tanya Sale

a brief summary of the potential impact of technology on competition, noting the need for technical neutrality,” Deloitte said.

As new business models and technologies disrupt the competitive landscape in the financial services sector, Deloitte said the Inquiry should have looked into how well the existing regulatory framework will accommodate new entrants, particularly those from non-financial services sectors, such as the mooted moves of Coles and Woolworths into financial services offerings.

“How will it continue to achieve the principles of encouraging market access, ensuring appropriate prudential standards are in place, and developing a consistent regulatory approach to functionally similar activities?” Deloitte asked.

Bank of Queensland chief executive Stuart Grimshaw pointed to another issue raised by the Inquiry’s report, and said it was one he hoped would be addressed further.

“The FSI Panel has put the too-big-to-fail issue on the table for further discussion.

While a critical issue to resolve, it is difficult to find a solution that both reduces the funding cost gap and yet minimises unintended consequences. The Panel has also raised the important issue of increasing ownership of mortgage brokers by large banks. Ensuring consumers are offered complete transparency is a key issue and we look forward to engaging further on that matter,” Grimshaw said.

BROKERS, BANKS AND THE ISSUE OF OWNERSHIP Murray Lees

This issue – ownership of mortgage broking

businesses by banks – is one that the Inquiry raised, and which has ignited debate in the industry. The Inquiry posed the question of whether “vertical integration may have the potential to distort the way in which mortgage brokers direct borrowers to lenders”. Tanya Sale, CEO of Outsource Financial – an independently owned and operated aggregator – said she believes one of the biggest issues the industry faces with the growing number of bank-owned aggregators is to do with competition.

“Broking evolved for a reason. It evolved to give the consumer a level playing field in relation to providing them a choice – and not just with the main four [banks]. Over 50% of mortgages in Australia are done through a mortgage broker and this [vertical integration] muddies the waters in relation to

THE INQUIRY’S INTERIM REPORT CONTAINS:

28 observations 136 policy options 102 requests for information Source: Deloitte

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15

GIVEN THAT MORTGAGE BROKERS ARE FIERCELY INDEPENDENT, THEY WILL DRIVE THE SHAPE OF AGGREGATION IN THE FUTURE - M URRAY LEES, CONNECTIVE

independence, choice and competition.”

Some in the industry would argue that it is the independence of the broker that matters – not the aggregator. However, Sale believes that competition is still under threat regardless.

“The big banks don’t fork out millions of dollars for nothing. They offer various incentives to encourage the distribution of their product,” she said.

But not all industry figures agree. The Advantedge Group with aggregators PLAN, Choice and FAST is owned by NAB, and the heads of the group’s individual aggregators argue that bank ownership has delivered benefits to brokers without detracting from their individual independence.

Choice CEO Stephen Moore said the capital provided by bank ownership has allowed the aggregator to deliver more to its members than it otherwise would have been able to.

“First and foremost the level of investment that we have been able to make in Choice would not have been possible under private ownership; the investment, the level of staffing, the investment in our retail brands, would not have been possible without NAB’s ownership,” Moore said.

PLAN chief executive Phil Quin-Conroy agreed, and said NAB ownership has opened new opportunities for the aggregator.

“When you get a strong parent investing in the business, giving unprecedented access to different suppliers – global best practices in the technology space for example that might not have been accessible previously – and the ability to roll out additional services, you see there are plenty of positives,” he said.

Moreover, Quin-Conroy argued that bank ownership has not meant a greater volume of loans going through the aggregator’s parent bank.

“Many had a view that a panel would contract under large institutional ownership, but it has been the exact opposite, the number of panel lenders on our panel has actually expanded,” he said.

And Connective principal Murray Lees said brokers are an independent lot by nature, and will remain so regardless of aggregator ownership structures. In this regard, Lees argued that brokers will dictate such issues to their aggregators rather than vice versa.

“Given that mortgage brokers are fiercely independent, they will drive the shape of aggregation in the future. We will all have our theories about it, but they will vote with their feet. If we get it right, they will come to us. If we don’t, somebody else will come in with a better model or a different model that suits the broker. So I think the market will always sort itself out. It will not stay static, so there will always be change,” Lees said.

TECHNOLOGY UPDATE

Liberty launches market leading IT

JOHN MOHNACHEFF

GREG PHILLIPS

Liberty Financial’s reputation for rolling out state-of-the-art technology endures.

For many years Liberty’s patented online and offline application, and approval system, LoanNet, set them ahead of their peers.

“Liberty has always been very invested in IT. We were one of the first lenders in Australia to introduce electronic lodgement.

It was B2B, broker to Liberty,” says Liberty National sales manager, John Mohnacheff.

“But as more and more aggregators shifted to high level sophisticated systems, we knew it was time for us to do the same.

“That’s why we implemented the NextGen.Net ApplyOnline+ upgrade.”

An evolving market and lenders recognising that the most effective and efficient way to transmit data is via the electronic medium, has dramatically altered expectations and shifted industry goal posts.

“Everyone now realises that the less humans get involved in the process, the better,” laughs Mohnacheff.

“NextGen.Net created a universal portal between lenders and brokers.

It’s the way of the future.”

Liberty has a long and proud history with the broking industry, built on service and innovation and technology.

Mohnacheff says the ApplyOnline+ launch received a hearty applause and is consistently getting the thumbs up.

In his words: “The consensus from brokers has been, ‘well done, you’ve just made our lives a lot easier’.”

Liberty’s upgrade to ApplyOnline+ has given the non-bank lender extra assessment metrics and more functionality.

ApplyOnline+ features include dynamic supporting checklists, lender policy upfront and lender assessment metrics. The assessment and servicing metrics used by Liberty allow the broker to identify if a deal is a deal at point of sale (POS) and if there are any issues with the loan data.

NextGen.Net sales executive,

Greg Phillips, says: “NextGen.Net has an inherent alignment of values with Liberty because like us they have a focus on innovation. They are looking to reduce reworks, improve customer and broker experience, and make their operation as process-efficient as possible.”

Liberty has also implemented the ApplyOnline Supporting Documents service. This groundbreaking service empowers brokers by clearly identifying supporting document requirements at POS and validating them against lender policy requirements.

ApplyOnline+ users can upload supporting documents to their ApplyOnline application and submit to lenders as one document parcel.

This has been acknowledged as an evolutionary step in loan processing efficiencies.

“The Supporting Documents service allows lenders to clearly define what they need at POS from a checklist perspective. It also enables brokers to attach and upload supporting documents at POS. So from the perspective of brokers, they are in control and highly empowered in that process,” explains Phillips.

He chuckles: “You may recall in the dim dark past, brokers would fax or email information to lenders and cross their fingers that it would get there.

“With this application brokers can see what is needed upfront. So for instance, Liberty’s checklist tells brokers exactly what is required and all they have to do is drag and drop that information into ApplyOnline.

They can see that it’s been attached and catalogued. Cataloguing (indexing) means Liberty can identify the documents at their end and which applicant it pertains to,” says Phillips.

The end result is a vastly improved broker and customer experience, adds Mohnacheff.

“The more that can be done electronically, the better. That’s what drives Liberty. Keep on innovating NextGen.Net,” he exclaims.

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CONTINUED FROM PAGE 1

Steve Kane: K A FRESH APPROACH NAB’s head of broker distribution discusses why the bank said goodbye to Homeside

ane said the decision to rebrand the bank’s broker offering came as a result of looking at the interview process brokers go through with their customers, and how Homeside fits into the equation.

“When they’re sitting with the customer and they’re recommending a Homeside product, they then have to explain who Homeside is. And, yes, it’s powered by NAB as all the information says on the brochure and the documentation; however, they still have to explain who Homeside is, and if it’s NAB why isn’t it called NAB?

It puts another step in the process in terms of the conversation between the broker and their customer, and it really doesn’t add any value,” he said.

While he said the bank’s previous strategy was to have a differentiated brand in the marketplace for third-party distribution, he said this failed to leverage off the power of the bank’s brand.

“The second leg of the reason why we’re doing it is we have an iconic brand in NAB. It is a household brand, everyone knows who it is and there is no need for brokers to explain what’s going on with the brand,

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who it is, who they’re dealing with. It’s very clear. It also then benefits us because we get the halo effect of a very, very strong iconic brand in the market place,” Kane said.

There were practical implications behind the rebrand, Kane suggested. As the entire banking group moves towards a new platform, it was important to align all NAB’s businesses. But the more philosophical driver behind the decision was a message to the bank’s broker network, he said.

“It very much is signalling our support for the third-party channel. With one-in-two Australian home purchases coming through the mortgage broking channel, any major Australian financial institution that wants to play in the mortgage market needs to be supportive of the mortgage broking channel. This is a testament that we’re prepared to put the flagship brand behind the third-party channel. We believe in the third-party channel. We believe in the support, the service and what they can deliver to the Australian community, and this was another way for us to show that,” Kane said.

WHAT THE REBRAND MEANS

In a practical sense, the rebrand means a change of name for Homeside, but not necessarily a change of structure.

“We’re really rebranding the two existing Homeside products which will be called NAB Broker products in the future.

They will still have available to them the NAB Red Star product that they currently access

through our Loan Writing Solutions business, and that will remain, but we will still offer a specific broker set of products as we do today,” Kane said.

This means certain things brokers have to come to expect from Homeside will still be in place under the NAB brand, he said.

“So things like our price-forrisk strategy around loan-tovalue ratio, our ramped trail mechanism, specific products for the broker channel, our servicing models through Homeside Mortgage Services all remain the same. So it’s the same quality service, the same differentiated product base, the same approach in terms of our priced-for-risk products and the same approach in terms of ramped trail and the way in which we reward the brokers. So we do have a definitive broker-only proposition.”

One definite change, however, was the bank’s re-introduction of year one trail. Along with the rebrand, NAB announced it would begin to pay 15bps of trail in year one for all loans settled after 1 October. Kane said the move was an acknowledgement of the value brokers provided to the bank.

“When we look at the value that’s created in terms of the broker channel in its relationship with the NAB group, a number of things are obvious. Of course we get loans through which increases the balance sheet and improves our position in the marketplace. We also get new-tobank customers. The third leg of that is we recognise the value that mortgage brokers bring in the ongoing relationship with the

customer, and that’s what trailing commission is about. The trailing commission in year one was to recognise that importance around the ongoing relationship the broker has with the customer in terms of making sure the customer is satisfied with what we do,” he said.

WE BELIEVE IN THE THIRD-PARTY CHANNEL. WE BELIEVE IN THE SUPPORT, THE SERVICE AND WHAT THEY CAN DELIVER TO THE AUSTRALIAN COMMUNITY MORE SATISFIED CUSTOMERS

In addition to working together to satisfy customers, Kane said NAB had been working hard to make sure its broker network was satisfied with the bank’s performance. NAB was recently named bank of the year in the MPA Brokers on Banks survey.

Kane said the lender had worked hard on its service proposition in order to reach this point.

“Over the last few years we’ve taken a very, very critical look at all our policies, our processes, our servicing model and our products and the relationships we have in terms of our sales teams on the ground. Everything has been critically assessed. We did a number of things. We’ve aligned in the back office processing with the credit decisioning and documentation. We’ve aligned those directly with the sales force that looks after the relationship

with that particular broker or aggregator. So that means there’s been a very clear path between the service proposition and the sales proposition in relation to management of the ongoing broker relationship. That has really refined our service proposition,” he said.

While good products and pricing are a good start for a lender, Kane said brokers looked for more out of banks.

“I’ve been a longstanding proponent that you need to have a competitive product and price in the market place and you need to have great relationships. We have a fantastic BDM workforce.

However, that service component must be consistently good,” he said.

And this consistency is what the bank has been striving for, Kane argued. He said the bank’s internal surveying had seen its broker satisfaction numbers hit an all-time high, and argued that this came down to working together as a group to put forward a good service proposition to the third-party channel.

“It is about consistency, because brokers are making commitments to their customers and they need to know that they’re going to be able to rely on the lender they’re choosing to provide that service, in particular around credit decisioning, and really around documentation and after sales.

We’ve spent a lot of time and put a lot of effort into those areas and we’ve really started to see the benefit of that. It’s not one thing.

It’s a group of things, but we’ve acted as one business in dealing with the mortgage broker partners we have.”

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Putting together a follow-up marketing system that works

HERE ARE 8 TIPS TO PROTECT YOUR NEWSLETTER FROM BECOMING A RESIDENT OF “DULLSVILLE”: Use exciting and compelling headlines – i.e.

“Nine Secrets to Make Your Home Renovation Pay For Itself!”

Make it look like you did it yourself. It shouldn’t look mass produced.

Write in a personal tone as if you were writing to a friend – not too formal or stuffy.

When applicable, end the article with a specific call to action – eg “call today!”

Business coach Doren Aldana on how to get the most out of your database

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t has been reported that over 80% of mortgage professionals fail within their first two years! That’s a staggering statistic. My hunch is, most of these mortgage professionals throw in the towel, not because they dislike the business, but because they can’t afford to eat. I know several cases where they exit the business with their families in total financial ruin.

And believe it or not, it gets worse. Of the remaining 20% who manage to survive in the business past the first two years, the average mortgage professional only makes CAN$45,000 (A$44,500) per year and only the top half (10%) make over CAN$85,000 per year. As you can see, the odds are clearly stacked against you.

So, what is it about the top 10% highest income earners that allows them to enjoy financial prosperity, while the other 90% struggle to eke out a meagre existence? Is the difference found in their education, intelligence, skills, timing, work habits, contacts or luck? Perhaps. What I can tell you with absolute certainty is this: After coaching hundreds of mortgage professionals since 2005, I’ve observed that the single most important success factor separating the top dogs from all the rest is effective marketing.

Unfortunately, most mortgage professional are entering the business completely clueless about how to market themselves in today’s hyper-competitive marketplace. Most are driving with their eyes closed – it’s no wonder so many crash and burn! But here’s the good news: If you avoid some deadly referral-marketing mistakes, you’re guaranteed to tip the scales of fortune in your favour.

DON’T NEGLECT YOUR DATABASE

One of the most costly mistakes I see mortgage professionals fall prey to is their tendency to myopically focus on acquiring new clients and in doing so, they neglect the only true asset they will ever have in their business: their database of clients and referral partners.

Think about it. What other market likes you, knows you, and trusts you more than your own happy clients and referral partners? Nobody! – they’re your raving fans. Yet how many of them get pushed to the side and neglected due to your “busy

Make it entertaining – eg quizzes, trivia, recipes, sudoku, interesting news, etc.

Include photos, cartoons and white space to please the eye of your reader.

schedule”? When was the last time they received a meaningful communication from you by email, phone or direct mail?

Every month that you ignore your database it could be costing you thousands of dollars.

Case in point: the National Association of Realtors in North America did a study and came up with some interesting statistics on the correlation between number of mailings and marketing results.

Here’s what they found: • Sending fewer than eight mailings a year yields minimal results.

• Eight to 12 mailings a year generated a 200% increase in results.

• Now here’s the kicker. Going from 12 to 18 mailings per year increased results by an additional 200%!

What does this mean? Simply put, if you’re not consistently staying in touch with your database, month after month, you’re leaving thousands of dollars on the table! In fact, studies show that it costs five to 10 times more to acquire a new customer through advertising than it does to market to your existing clients. Why pay five to 10 times more when you don’t have to?

With that said…

HERE ARE THE THREE MOST IMPORTANT KEYS TO A TOP-FLIGHT FOLLOW-UP MARKETING SYSTEM: 1. MONTHLY DIRECT MAIL NEWSLETTER.

If you want it to be read, send it by direct mail. If you don’t care if it’s read or responded to, send it by email. It’s as simple as that! Your newsletter should be going out to three different segments of your database: prospects, clients, and referral partners. The key to follow-up success is consistency.

Commit to regularly sending your monthly newsletter to these three groups every month until they die, buy, or tell you to stop.

Content is king when it comes to the success of your newsletter. If your newsletter is even remotely irrelevant, boring or dry it will quickly meet its fruitless fate in the recycle bins of the world.

Use blue handwriting font on the envelope and mail with a live stamp (not indicia).

For a complete cover-to-cover sample of an effective direct mail newsletter, go to: www.

Done4UClientLetter.com A true direct-response newsletter is not, nor will it ever be, “professional”. There should be no articles about technical items, written in technical jargon. If you do talk about something technical, translate it into layman terms, and when relevant add stories, humour or sentiment.

2. WEEKLY EMAIL TIPS.

If you’d like to supercharge your follow-up marketing results, send your contact list a weekly email tip in addition to the monthly mailing. To save you time, stress and hassle, we provide a Done4U Video Marketing service that allows you to send high-quality video tips to prospects, clients and real estate agents while you sleep. For more information, go to: www.

Done4UVideoMarketing.com

3. PHONE CALLS.

Once per year, mail out a postcard inviting your clients to call you for an ‘Annual Mortgage Review’. For best results, follow-up with a phone call. Your objective is simple: find out if their mortgage is still up to date and whether or not it makes sense to refinance, do a debt consolidation, finance a renovation, etc. This is also a perfect time to ask for referrals!

If implemented correctly, your follow-up marketing system can become your most profitable marketing weapon – feeding you a steady stream of repeat and referral business! Consider it like the superglue that keeps your clients and referral partners bonded to you for life.

Doren Aldana is considered by many to be Canada’s leading mortgage marketing coach and has won the “Best Industry Service Provider” award three years in a row at the 2012, 2013 and 2014 Canadian Mortgage Awards. He has been dedicated to helping mortgage professionals attract more clients with less effort, regardless of market conditions. For a free copy of Doren’s new CD titled, 21 Secrets of Superstar Mortgage Brokers, visit: www.superstarmortgagebroker.com

BUSINESS INTELLIGENCE 19

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War at work What to do when conflict turns your business into a battleground

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et’s be clear upfront: most managers – most humans in fact – dislike conflict. Indeed, perhaps a stronger word than ‘dislike’ needs to be used in this instance. Most managers fear conflict, due to several factors: • They have no skills in constructive conflict engagement • They fear that if they fail to deal with it well it will reflect badly on their career in general and current role in particular • They fear it will end badly for the participants who will then have difficulty working together • They see conflict as ‘bad’ – they have not been able to reframe it in their mind as ‘the grit in the oyster that produces the pearl’ This last point is particularly worth considering. Conflict in most cases is stressful and unpleasant; however, it can be productive if the outcome leads to positive change. An oft-cited Harvard Business Review article – ‘Productive Friction – A Key to Accelerating Business Innovation’ by John Seely Brown and John Hagel – talked about creative abrasion and productive friction. It notes that “creative sparks fly not when interactions between companies are seamless but when the activity at the seams is challenging stimulating and catalytic”.

“When people learn some conflict engagement skills and where the culture of a workplace makes room for a culture that allows robust engagement, then conflict can be an effective part of the business environment,” Dr Rosemary Howell, of The Dispute Group, suggests.

For instance, conflict regarding ideas within a team can be productive if the individuals involved are willing to work through opposing solutions together to come up with a solution. “Sometimes, the compromise that is reached through such a process can be better for the business than the initial ideas put forward,” Adrianna Loveday, general manager HR consulting at recruitment firm Randstad, says .

To provide another example, if two employees cannot come to a resolution within the organisation’s existing policies, these may be tweaked so that future grievances can be handled more effectively. Conflicts such as this, while initially negative, can lead to a positive outcome.

“Approaching conflicts as opportunities to improve policies, processes, procedures or plans as opposed to viewing them as ailments to be ignored will result in a more productive workforce and greater internal efficiency, improved morale and increased creativity,” Loveday says.

CONFLICT – IT’S EVERYWHERE!

Workplace conflicts reflect all the conflicts of life: relationships; business operations; and culture and values. Each kind of conflict plays out differently, and as with all disputes, the conflict is often not about what it seems to be about.

Loveday generally sees two forms of workplace conflict. The first is when an employee’s decisions, ideas or behaviours are in opposition to what is required as part of their role. These conflicts are generally easier to resolve, particularly when the organisation has a strong grievance resolution policy in place. Quite often the terms and conditions of the guidelines in place have not been effectively communicated to the employee, and once the employee is made aware of the issue they will quickly correct their behaviour.

The other type of conflict occurs when two people simply do not get along, ie a personality clash. “Personality clashes can be dangerous within organisations, largely because they can lead to reduced productivity and discontented teams,” Loveday says.

“These are also not only confined to the workplace but are also likely to overflow into an employee’s personal sphere and disrupt their general sense of well-being.”

However, it’s important to note that while personality clashes such as this are quite prominent, employers should be careful not to use this as an excuse to avoid addressing the real causes of conflict.

Conflicts about culture are far more challenging. “Very often these touch on behaviour which is unacceptable and not negotiable,” Howell says. “There needs to be consequences for this behaviour and often a public signal that this has happened. Failure to do this rewards bad behaviour and makes it plain that there is a gap between cultural aspiration and culture in practice. In the end, this creates a cynical and demoralised workplace.”

AVOID IT – IT WON’T GO AWAY

The human default is to avoid conflict, and in the workplace this can often result in temporary solutions being used to avoid dealing with the deeper issues.

Naturally, a problem untreated only grows larger. Unresolved conflict in the workplace

has been linked to miscommunication, increased stress, reduced co-operation and productivity, distrust among colleagues and lower levels of team problem solving and creativity. Conflict avoidance can also result in destructive office behaviours such a gossiping, venting to co-workers or misdirected frustration.

Another major ramification of ignoring conflict is that an external or legal party may be consulted if employees feel they cannot deal with the situation internally with senior management. This can lead to financial penalty, and the organisation’s employer branding can be negatively impacted.

SOME CONFLICT RESOLUTION TIPS

Having a structured grievance policy in place seems almost like a box-ticking exercise in many companies. How can conflict resolution be moved beyond box ticking towards having a culture where it’s OK for people to voice grievances?

Howell admits this is a constant struggle for businesses. The real issue is that businesses view conflict resolution as a risk management or an operational issue. It is actually a strategic issue, she notes, and is part of how a business defines itself. “It has the potential to be a force for good or for destruction depending on the focus it is given,” she says.

The first step should be to run a new employee through the policies relating to disciplinary and grievance procedures. Allow all staff access to these documents, through an intranet or other tool, so they can refer to the policies whenever they need to.

Secondly, ensure your workplace culture fosters open communication and collaboration. In order to establish a culture where employees feel they can be heard, ensure established avenues of communication are available so they always have somewhere to voice concerns.

By managing disputes quickly and effectively, employers can maintain good working relationships with their employees.

“Workers will likely be more co-operative and productive if they know their grievances will be taken seriously by senior management. A good dispute resolution process may help to avoid the costs of resolving a claim externally,” Loveday concludes.

MARKET TALK

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Smart money on renting?

The RBA has claimed renting could be better than buying, but are they looking at the big picture?

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he Reserve Bank recently ruffled some feathers in the housing industry when it claimed that Australians could be better off renting than buying their own home.

For a country where home ownership is valued as the pinnacle of adult achievement, an assertion like this was practically sacrilege.

The claim came in a new discussion paper, “Is Housing Overvalued?”

According to the paper, if house prices appreciate according to historical trends, buying would be about as costly as renting. But if house price growth slows to a pace below the historical average, the paper claimed the average home buyer would be better off renting.

“We find that assessments of house prices are sensitive to assumptions about expected capital gains. If real house prices were to continue to grow at the average rate of the past six decades, then buying a house now would be about as costly as renting. To put this another way, the expectations of future capital gains implied by current house prices are in line with historical norms. That allays some concerns about a housing bubble. If house price growth were to be slower than BROKERS RESPOND the historical average, as some forecasters predict, then the Brokers on the Australian Broker Online forums average home buyer would be chimed in on the renting vs buying debate financially better off renting,” the paper said.

While one might expect OLD BROKER lenders to vehemently refute “This subject comes up every 3-4 years and also has such a claim, CommSec chief been done to death by a lot of commentators. The economist Craig James told problem I find is this: In all my years of broking and Australian Broker the paper was also a little in financial planning I have never seen well-researched, and could anyone put the money they saved into some type of prove a good resource for growth fund or shares separately once the money becomes available. They just spent it. And also, what Australians tossing up whether happens the day you retire?” or not to purchase a home.

“I think it’s a very good paper.

I think it’s one where we’ve SEQ BROKER got a lot of rigour involved.

“If you enter into a mortgage, you will pay give or We’ve got data now in terms of take roughly the same repayment for 30 years, then it Australian house prices back to stops. If you rent then what happens to rentals is they 1955 on a consistent basis. double every 10 years or so. If you look at the benefit The Reserve Bank hasn’t of rentals in those respects then owning is some looked at prices just in terms short-term pain for long-term gain.” of the growth of home prices; it’s looked at it in terms of the cost of ownership, whether ROGER somebody should rent or “Sure, if you took the difference between a mortgage somebody should buy,” he said. payment and a rental payment and then invested that This trumps previous difference wisely, then financially you would probably studies looking into whether be better off, but how many of us have the discipline or not Australian housing is to do this?” overvalued, he said.

“Traditionally magazines like

The Economist have looked at the degree of home price growth and determined whether we’re overvalued or not. I think it’s a good rigorous discussion around the cost of ownership and whether you should be renting a property and it enables people who are involved in that discussion to be able to do some good research,” James said.

But the discussion paper hinges on house prices growing at a slower-than-average pace. The Reserve Bank’s assertion that renting could trump buying only holds true if house price growth stalls out. On this issue, James and Commonwealth Bank are a bit more optimistic than the Reserve Bank on the subject of home price growth, predicting a period of growing property prices and stable interest rates over the coming months.

“We’re probably a bit more bullish and a little bit more optimistic in terms of home price growth than the Reserve Bank. The Reserve Bank believes that over time we might only see something like 2.5% real growth of home prices, something in the order of 5-6%, but in places like Sydney at the moment home prices are growing at something like a 15% annual rate, and I think it’s going to take some time for that home price growth to come down,” he said.

There’s also the fact that current market conditions make home ownership extremely attractive, James said.

“We’ve also got to realise that we’ve got very, very low interest rates across Australia and that certainly makes home purchase very attractive at this point in time. I think that’s going to remain the case while interest rates are steady, and that’s probably going to be the case until much later this year or early next year,” he said.

And James foresees more robust property price growth than the Reserve Bank discussion paper assumes.

“I think in terms of home price growth, probably more like 6-7% growth nationally, and a little bit higher than that in places like Sydney. This means buying a home is probably a more attractive proposition than renting.”

Even the RBA noted the limitations of the study.

Specifically, it conceded that the paper focused only on whether households were financially better off buying or renting. But the decision to rent versus buy isn’t always a coldly calculated financial decision.

“The decision to buy rather than rent also reflects subjective factors that are difficult to measure such as security of tenure, freedom to renovate, access to finance, pride of ownership, the risk of capital losses and the flexibility of moving,” the paper said.

Regardless of the RBA’s claims, it’s doubtful that Australia’s love affair with property ownership will be cooled anytime soon.

MARKET TALK brokernews.com.au

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Record-breaking construction on the way An expanding population could translate into strong demand for new housing

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hanging lifestyle desires mean that apartments are leading the way in a record-breaking recovery in home building, which is set to last for another two years.

Industry analyst BIS Shrapnel’s latest report forecasts that residential building activity will reach a new high nationwide of 190,000 new builds over 2014/15 – and that many of those new homes will be in apartment blocks.

The Building in Australia 2014-2029 report gives pent-up demand from recent strong population growth, along with the lowest interest rates in 50 years, as the reason for this outlook.

BIS Shrapnel associate director Dr Kim Hawtrey said that Australia’s rapid population

growth rate of 1.7% per annum was translating into strong demand for new dwellings, which was expected to continue into 2015/16.

Home building had not kept pace with population growth for many years and this meant that there was a national dwelling stock deficiency of around 100,000 dwellings.

It would take the next five years to eliminate the unmet demand for housing, which meant he didn’t see the housing shortfall closing until 2018, Hawtrey said.

“In the next two years we’ll also see the recent emphasis on high-rise units continue.

Currently two high-rise apartments are being built for every five detached houses, which is double the historical

rate of one apartment for every five houses built.”

However, the residential recovery was now moving beyond high-rise apartments to include detached houses, and beyond the major cities to incorporate regional areas.

New South Wales (9% growth in housing starts forecast for 2014/15) and Queensland (3% growth forecast for 2014/15) were driving the growth.

This was thanks to strengthening local economies, underlying pressure from mounting stock deficiencies and investor demand.

Growth of 3% was expected for Victoria over 2014/15, but there has been over-building relative to demand. This meant there would be a slowdown due to oversupply in about 12 months.

Meanwhile, Western Australia’s ride on the momentum from the mining boom was turning and the state was forecast to record a fall of 5% in housing starts in 2014/15.

Hawtrey said that it was investors and upgraders/ downsizers who were driving demand in the cycle.

“But the improved conditions are yet to either stimulate significant gains in alterations and additions activity, or gather up first home buyers, and these segments of the market remain a concern.”

Hawtrey added that natural cyclical factors would lead to a correction in the cycle during 2016/17 (-10%) and 2017/18 (-12%), with growth set to resume in 2018/19.

FORMER PROPERTY CHEERLEADER RAISES BUBBLE CONCERNS

FAST FACT:

190,000* *The number of new residential builds forecast for 2014/15 Source: BIS Shrapnel

The spectre of a housing bubble has again been raised, this time by a commentator who previously dismissed such concerns.

Economic commentator Christopher Joye, who famously debated economist Steve Keen in 2011, has argued in an article in The Australian Financial Review that Australia is in the midst of a housing bubble.

Joye took on Keen in February of 2011 in a televised debate on Business Today, arguing against the existence of a housing bubble. But Joye has now claimed that Australian housing is overvalued.

“When the Reserve Bank of Australia deploys its alternative assumption – which is the more modest annual house price growth rate since 2004 of about 4% in nominal terms – its model finds that Australian homes are 19% overvalued.

“This just happens to be the same result you get if you compare the house price-to-income ratio to its average since 1993. Other credible benchmarks on which to base future house price appreciation – including household

income growth, the returns consumers think they will get and the rate at which rents rise – similarly imply that housing is overvalued by between 20% and 30%,” Joye said.

Joye said the Reserve Bank of Australia has dismissed the idea of a housing bubble because credit growth is low. He argued that this was a misconception on the part of the Reserve Bank.

“This is muddle-headed for two reasons: first, housing credit growth is outpacing incomes, which is the key criterion; second, credit growth is only meaningful in respect of the light it sheds on changes in the level of household leverage and the probability of borrowers defaulting,” Joye said.

While house price growth has seen a slowdown, Joye argued that this was seasonal and that prices are not cooling.

“With banks promoting the cheapest mortgage rates ever, I suspect Australia’s nascent housing bubble will get bigger,” he said.

OPINION 22

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If your client is in mortgage or debt distress, get them to seek help early Credit specialist Merrilyn Mansfield on why quick action is best when your client is in credit trouble

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here are all kinds of circumstances that arise in life unexpectedly. Loss of employment, illness, divorce, separation and accidents can happen in an instant and create stress on people who have bills to pay and families to support.

There are many helpful services available to people when they hit hard times. There is help with debt negotiation, including setting up affordable payment plans, as well as avenues to deal with hardship that give people extra time to make payments while they get through the rough patch. There is also assistance with credit repair that aims to verify that any defaults or judgments that were placed on a credit report during the rough patch were put there correctly as these listings can have big consequences.

Often people are unaware of the amazing support services they can access when things get tough. It is also important to remember that these services are more useful to your client in the early stages of their mortgage or debt distress because once more serious legal action is launched there are less avenues to assist that are open to financial advocates. It is therefore so important to recognise a client in distress and advise them to seek help straight away. Burying your head in the sand will not help things get better.

DON’T DELAY IN SEEKING HELP

In fact, things can get a lot worse. For example, if a client is in financial distress and payments have slowed or dried up, a credit provider might escalate the matter to enforce the debt. This could lead to a court judgment or bankruptcy proceedings being instigated against your client.

Court judgments can often be sought on credit card debts where the payments have dropped off and quite suddenly the credit provider can call in the entire amount of the debt, payable almost immediately. In this instance, you may have been paying a fairly small monthly payment but

suddenly the credit provider accelerates the debt and demands you pay the entire balance.

After a court judgment is entered, if the debt remains unpaid, the credit provider or a debt collector who has purchased the debt, might begin bankruptcy proceedings. If your client has equity in their home or business but is cash flow poor because of a current financial or personal problem they are particularly vulnerable because once a bankruptcy notice has been issued by a creditor, a debtor has 21 days to pay or to reach an alternative arrangement. If no agreement can be reached, a creditor’s petition can be brought before the federal court.

This can be for a debt as low as $5,000 where there is only one creditor, so remember that your client does not have to be a serial offender to be made bankrupt, they need only struggle to pay one small debt and be completely up to date with all their other debts. If the creditor’s petition is successful in court a trustee will be appointed to manage the bankrupt’s estate.

BEWARE PRIVATE TRUSTEE’S FEES

It is at this point that things can escalate out of control, particularly if a private trustee is appointed. Private trustees are often large accounting firms employed by big companies to resolve disputes that make a business out of bankruptcy. Private trustees tend to apply the same large-fee approach to small personal bankruptcies as they do to the corporate world.

Private trustees charge their fees out at levels of seniority and communication between junior staff and their superiors means that costs can quickly escalate. Before long what was a $5,000 credit card debt can blow out in bankruptcy to a debt of $80,000-$90,000 when the trustee’s fees are added in – to annul the bankruptcy – and this will be deducted from any equity you have if you can’t pay the full amount by the court date.

As it is the creditors that approve

the trustee’s fees the bankrupt has no control over the amount that might accrue and be deducted from the sale of assets. And if your client’s primary asset is their home this process can quickly reduce a large portion of the equity in their most valuable asset to virtually nothing.

IF THE CLIENT DOES NOT TAKE CONTROL OF THEIR FINANCIAL SITUATION, SOMEONE ELSE WILL FAST FACT

21 days Amount of time a debtor has to pay or to reach an alternative arrangement once a bankruptcy notice has been issued by a creditor Source: Princeville Credit Advocates

UNABLE TO BORROW

Once a client finds themselves in these circumstances the options are limited. Basically the client needs to find the sum owed or surrender their assets to satisfy the debt. If your client cannot find the money, it will be impossible to find a lender to write a loan to finance payment of the debt.

No one will loan funds to a bankrupt in this sort of predicament.

If the client does not pay, the private trustee will likely take action against the bankrupt’s estate. In some circumstances this means that the debtor will be forced to vacate their home or other property in 28 days so the property can be sold to satisfy the debt. If the equity is sufficient, the sale of the property will result in the annulment of the bankruptcy. If not, a debt is still owed so your client will remain bankrupt.

RECOMMEND YOUR CLIENT GET HELP EARLY

Merrilyn Mansfield is a consumer advocate and the lead adjudicator and researcher for Princeville Credit Advocates, a Sydney and London based credit repair company. She is fascinated with consumer laws that relate to credit reporting and in advocating for a consumer’s right to a correct credit report. For more information, please visit www.wemend.com. au or email merri.m@ princeville.com.au.

As finance specialists it is therefore very important to look for the signs of mortgage or debt distress in your client base and refer your client to services that can assist them. Do not delay and have a frank and open discussion with your client about the downside of doing nothing. If the client does not take control of their financial situation, someone else will and this can have lasting and devastating results, both personally and professionally. All of this pain can be avoided by picking up the phone and calling someone who can help.

THE COALFACE 23

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Banner year for Brisbane broker Mortgage Choice broker Matt Cunliffe has come out of the gate strong this year, and has some big goals ahead

“I

’m a man of few words, unless I’m sitting in front of a client and I’ll chew their ear off for an hour and a half.”

This modest broker is Matt Cunliffe – the young gun who, at 28 years old, is the general manager of Mortgage Choice Brisbane and has written $100,267,000 of the $142,891,000 in total settled in his branch this year so far.

The success he has achieved this year – which includes his personal best of settling $64 million in February – comes down to client relationship management, he said.

“Sixty to 65% of my business is repeat business or client referrals, and of the remaining, about 25% would be from network based referrals from business partners. A lot of my role is to generate and maintain lead sources and relationships,” he said.

“We have a lot of touch points with clients not only throughout the application process, but all through the course of the loan. There are quite a lot throughout the course of the application process, and come settlement, we touch base at two weeks after, five weeks after, three months after, six months after and 12 months after,” Cunliffe said.

“We make sure there are a number of opportunities to touch base after settlement to continue the relationship with the client – to make sure they are continually happy with the product, to offer further products or discuss other options, whether it is financial planning or any commercial ventures they are looking at.”

Cunliffe’s newest challenge is tackling commercial lending. He has written all the commercial loans settled in his branch this year.

“It is something that I have become more and more serious about over the past two years. To be able to even go after the commercial side, I needed that steady residential stream that kept the income flowing through, but more and more enquiries were going down the path of commercial.”

To other brokers wanting to tackle commercial lending, he advises to take it slow.

“I wouldn’t say go two feet first. I

MATT CUNLIFFE

WE HAVE A LOT OF TOUCH POINTS WITH CLIENTS NOT ONLY THROUGHOUT THE APPLICATION PROCESS, BUT ALL THROUGH THE COURSE OF THE LOAN wouldn’t say forget residential and go straight into commercial. Residential gives a consistent and ongoing stream, whereas the commercial side can be a lot more drawn out and can take up to 18 months to get over the line. Don’t be afraid though, just be cautious.”

Cunliffe’s personal goal is to reach the golden $100 million mark for residential lending by the end of the year – which would be a 15% increase on the amount he settled last year, as well as trying to reach $120 million in commercial settlements.

FINANCIAL SERVICES 24

brokernews.com.au

Insurer correctly calls the World Cup

ROOM FOR OPTIMISM DESPITE FLAT BUSINESS CREDIT GROWTH

L

loyd’s of London correctly predicted that Germany would win the 2014 FIFA World Cup, based on the combined insurable value of the players in each team.

Germany clinched the trophy after beating Argentina 1-0 in the final in Brazil.

Lloyd’s last month released research with economic forecaster Cebr that ranked each team in the World Cup based on the collective insurable value of that country’s players. It correctly predicted Germany would take home the cup, based on its insurance value of US$1.084bn (A$1.154bn), making it the most expensive team.

However, not all cup predictions by Lloyd’s were on the money. It tipped Spain, England and Brazil to take the top-three spots in that order. Spain bowed out of the tournament in the group stages after beating Australia 3-0, and England also failed to progress to the second round following Costa Rica’s defeat of Italy. Brazil suffered a spectacular and humiliating drubbing at the hands of the German team, after scoring just one goal to Germany’s astounding seven in the semi-finals.

Aside from winners Germany, the three other teams to make the cup semi-finals were: Argentina, which Lloyd’s ranked at seventh, based on an insurable value of US$600.2m; Netherlands, given eighth place, based on an insurable value of US$472.1m; and Brazil, ranked fourth place, based on an insurable value of US$757.6m.

Insurable values might be useful to work out the World Cup winners, but the tournament results show money doesn’t always count in the world of sport. a

MORTGAGE FUND ENDORSED BY INVESTMENT RESEARCH PROVIDER

La Trobe Financial’s pooled mortgages investment option (PMO) – an investment option offering a diversified, Australia-wide pool of loans secured by mortgages – has been endorsed by Zenith Investment Partners.

Zenith Investment Partners, an investment research provider, has recognised the product with a ‘Recommended’ rating.

“Unlike some other funds in the sector, it has always been able to pay eligible redemptions and continues to hold its track record of not having ever returned a capital loss to investors, a feat which several prominent mortgage funds have been unable to replicate over the past three years,” Zenith analyst Dugald Higgins said.

La Trobe’s chief wealth management officer, Randall Williams, says its philosophy has always been about providing stability.

“The La Trobe Financial team was driven by the need for consistency and repeatability of performance. With equities markets experiencing such volatility, our investors are targeting capital stability and reliable income at a premium to cash,” he said.

The PMO does just that for investors, according to Higgins.

“The PMO is most suited to those seeking capital stability and an income return which should solidly exceed the cash rate through investment cycles,” he said.

DID YOU KNOW?

45%

*The proportion of Australians who say general finances are their biggest source of anxiety Source: NAB

Business credit demand has remained flat for the quarter, but an industry leader has claimed Australia’s overall business outlook is still positive.

The Veda Quarterly Business Credit Demand Index found that applications for business loans, trade credit and asset finance grew only 0.5% for the June quarter compared with the same period last year. While trade credit applications and business loans saw rises of 0.3% and 4.9%, respectively, they were offset by a sharp decline in asset finance. Asset finance applications fell 4.9% for the quarter.

In spite of the flat result, Veda general manager of commercial credit, Moses Samaha, said there was room for optimism.

“While overall conditions are flat, it’s important to put these results in the context of a boom in business credit demand in the June quarter 2013, where business loan demand grew almost 10% and asset finance by approximately 6%,” he said.

In light of this, Samaha said business outlook remained positive despite only a moderate rise.

UNEMPLOYMENT UP MORE THAN ANTICIPATED Unemployment has seen a larger-than-expected rise in June.

Figures from the Australian Bureau of Statistics (ABS) have revealed that the jobless rate rose to a seasonally adjusted 6% in June, compared to a downwardly revised 5.9% in May. In trend terms, unemployment stayed at a steady 5.9%.

An AAP survey of economists had tipped unemployment to rise, but expected the jobless rate to sit at 5.9%. The participation rate narrowly outperformed economists’ expectations, though.

Economists predicted the participation rate to remain static at 64.6%, but ABS figures show it crept up to 64.7%.

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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, August 2013

Enough says AFG in wake of ‘for sale’ claims

AFG last year finally had enough of industry rumours that the aggregator was on the auction block for a bank suitor. It went as far as offering a $10,000 bounty for the name of the person – or group of people – responsible for the claims. AFG general manager of sales and operations, Mark Hewitt, said the company wanted to know who was behind the rumours, as they created a “lack of stability which we want to refute”.

What’s happened since?

The rumours were just that: rumours. AFG has not been snapped up by any banks looking to own a broker distribution channel, and it doesn’t look likely to happen in the near future. This isn’t to say that aggregator acquisitions haven’t occurred in the intervening year. Vow Financial was recently acquired by Yellow Brick Road, though the aggregator’s branding, business operations and management structure are set to remain the same.

Lender raises commissions as it cuts rates

Liberty Financial last year caused a stir when it raised commissions on its prime home loans to what it said were “amongst the highest in the industry”. The lender increased its upfront commissions on prime home loans to 70bps. At the same time, it announced it would cut rates by 1% across its entire range of specialist mortgages.

What’s happened since?

Out-of-cycle rate cuts and commission hikes appear to be all the rage these days.

Lenders have announced a flurry of rate reductions as the RBA has remained sidelined since August last year. Most recently, NAB announced it would reintroduce year-one trail commission. ME Bank has also offered a commission bonus to brokers and Westpac announced volume-based commission incentives.

brokernews.com.au

What’s next for housing?

A

s the new financial year kicks off, consumer confidence remains in the doldrums. What flow-on effects will this have on the property market? AMP chief economist Shane Oliver has told Australian Broker TV that a great deal rests on the incoming budget measures.

“There’s no doubt that the budget – not so much the dollar values in the budget, but all the talk about welfare cutbacks, increasing retirement age, all those things – that’s affected confidence,” he said.

Oliver said business confidence has thus far “held up pretty well”, but that consumer confidence has taken a significant hit.

“There is a risk that could affect demand for housing over the next few months,” he said.

But Oliver argued that consumer confidence should begin to see a comeback as the budget takes on its final form.

“My feeling, though, is that if the budget is going to get through the Senate, the government will have to soften a lot of those measures. So a lot of the hit to confidence will gradually fade over the next few months,” Oliver said.

When it comes to interest rates, Oliver predicts unemployment numbers will keep the RBA in stasis.

“In the very short term, we’re still in an uncertain phase for the Australian economy. The mining investment boom is winding down, other sectors of the economy, like housing construction, have picked up.

But we’re still in an environment where I think unemployment will remain around the 6% level, probably over the remainder of this year. Probably next year unemployment will start to come off as the economy picks up pace. Against that backdrop, I think the Reserve Bank will leave interest rates on hold.

They feel that they’ve cut interest rates enough, and they’re down at record lows, but there’s still uncertainty about the economy so they’re not going to be jacking rates up any time soon. I think probably it will be another six months of rates being on hold, then maybe some time through next year – probably by the end of March – we’ll start seeing interest rates head up again.”

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

FORUM 27

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Brokers fierce about independence Brokers have stepped up to defend their independence as questions swirl over ‘vertical integration’

HOW FAR TO GO ON DISCLOSURE?

Some brokers on the Australian Broker Online forum argued that brokers should disclose who owns their aggregator. Tim H said disclosure is all well and good, but questioned how far it must go.

What do you think?

Leave your comments at brokernews. com.au

“Big question here is how far do we need to go with disclosure? Like Wozza and the vast majority of brokers I am not swayed by who owns my aggregator FAST or what incentives are offered whether they be from FastLend or other lenders. I provide my clients with a list of our panel lenders and how much commission they pay and the lenders clawback policy.

Do I need to put another column highlighting who owns each lender? Do I then need to include what share of ownership is owned by each organisation or individual for that matter (eg: my fellow broker down the road who tells me he has some bank shares etc).

Sounds ridiculous because that is where this discussion is going. The reality is that the vast majority of brokers are doing the right thing by their clients. Those that aren’t will be weeded out over time and like most other industries they will be replaced by someone else who is unethical and so it will go on. I’ve been a broker for 17 years and in the industry for 35 years.

Do the right thing by your clients and you will receive the rewards and experience longevity in this wonderful industry.”

Tim H on 16/07/2014 at 11:13AM

T

he predominant theme of late on the Australian Broker Online forums has been the independence of brokers, regardless of their aggregator’s ownership structure.

The interim report of the Financial System Inquiry recently re-ignited debate about broker independence and bank ownership of third-party distribution channels.

The inquiry posed the question of whether “vertical integration may have the potential to distort the way in which mortgage brokers direct borrowers to lenders.” Outsource Financial CEO Tanya Sale told Australian Broker that bank ownership of aggregators “muddies the waters” when it comes to broker independence, but brokers were divided on the issue. Wozza said lender inducements and bank ownership structures have yet to impact the way he does business.

“Been broking for eight years and I can’t recall any client that I have steered to any product because of incentives or additional commission.”

Steve McClure responded by saying brokers can never go wrong in offering full disclosure.

“Wozza, that’s perfect, and it’s the way of many fine brokers. But, it’s all about transparency and clear disclosure. If a client ends up with a NAB loan from a NAB owned aggregator, the client has to be aware of that (and at the moment they aren’t) so they can assess the broker’s advice. Therefore, with your suitable recommendations,

the client would be informed and well served. That doesn’t hurt anyone’s business.”

Brad Oliver echoed Wozza’s sentiments, and said good brokers aren’t swayed by incentives.

“Lender or aggregator incentives don’t come into it when I am assessing the best place for the client’s needs and I am sure most other reputable brokers share this philosophy. Look after the client’s interests first and they will come back again and even send you referrals.” methinks said bank ownership could undermine the broker value proposition.

“Consumers who use brokers are time poor and in need of someone to sift thru lenders and their offerings. Bank-owned aggregators don’t suit the model - ‘Hi I’m from A and we are owned by C’. Over time when consumers become aware of who owns what may very well erode the trust they place in the broker.

If brokering groups would switch to the independents, perhaps this needs to be done.”

And Peter E chimed in in agreement with Tanya Sale.

“I agree totally with Tanya. The banks should not be allowed to own aggregation models at all if the system is to remain fair. We don’t see NRMA offering a suite of other insurers products for sale over their counter do we?

Whether the independence is relating to the aggregator or broker, both are compromised when owned by a lender in its own right.”

AUSTRALIAN BROKER ONLINE POLL Does lender ownership of aggregators create a conflict of interest for brokers?

70% NO

7%

DEPENDS on the aggregator

23% YES

PEOPLE 28

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An angel in her community Simone Ryan looks to give back to families experiencing significant hardship

A

s the CEO of Moneybag Finance, Simone Ryan has made a career out of helping clients achieve some of their property and finance goals. Now, through her charity initiative – Moneybags Angels – she is able to extend her help to the wider community.

“The inspiration behind Moneybags Angels just comes from my desire to give back. I feel blessed to be in a wonderful position in my life to be able to give back to the community and to those people that may have experienced significant hardship in their lives. I feel it is my personal duty to do that.”

Ryan founded Moneybags Angels in 2013 and it aims to bring back some Christmas cheer to a family that may have lost theirs.

“I just wanted to instil some Christmas spirit into at least one family every year that has been going through a tough time – whether it be a significant loss or a serious medical condition or just going through some hardship. Christmas is a time for family and happiness and the purpose of Moneybags Angels is to make sure their Christmas is still special.”

She is encouraging the community to become involved by nominating a family that may need her charity’s help. Last year, a community member nominated a family that Ryan will never forget.

“Last year we were able to help a family of six children who had lost both their parents in the same year. The mother passed away after a battle with cancer and the father died a couple of months later after suffering a heart attack. The oldest of the six is only 19 years old and now he is left as the carer for his five younger siblings. I just cried when I heard about their story. I rang the lady who nominated them to get to know a bit more about the children – all their names, ages and interests – so we could buy some Christmas presents that would really resonate with them.”

All the gifts are bought with money that comes out of her company, Moneybag Finance.

Ryan said she hopes that Moneybags Angels challenges other businesses to do the same for their communities.

“Our mission is to get as many businesses to do this as possible.

Ideally we would like to see this expand across Queensland first throughout small businesses, and then hopefully we can see it happening in small businesses across the country. If more and more businesses can give back even to just one family each year, that would make the world of difference. I think that would be wonderful to see.”

At the moment, Moneybags Angels is relying on social media and their clients at Moneybag Finance to spread the word.

However, this year Ryan said she has plans to create more awareness and get the word out in the local media.

Moneybags Angels was not the first thing Simone has done to give back to her community, it is just the latest of her communitybased charity initiatives. Since 2011, Ryan has run a voluntary community internship program through Moneybag Finance where she trains both adults and students in office-based skills – computer, administration and communications skills.

“In this current climate, nobody is giving people an opportunity unless they have experience, and there are a lot of people out there that don’t have this experience or the opportunity to gain this experience. It isn’t due to personal fault, it is because of other personal and family reasons – for example, a woman might have to take time out of the workforce due to having a new family and will find it hard to get back in because she doesn’t have the recent experience. How is she meant to gain this experience if someone doesn’t give her a go?”

She also runs a business networking group called GEM, which stands for “Great Entrepreneurial Minds” for

IF MORE AND MORE BUSINESSES CAN GIVE BACK EVEN TO JUST ONE FAMILY EACH YEAR, THAT WOULD MAKE THE WORLD OF DIFFERENCE small-to-medium business owners in her community.

“It started because I felt small- to-medium business owners in the community were struggling to get out there and make real connections. I felt it would be great to give business owners a platform where they can really learn from and network with each other and make these real connections, as opposed to just a ‘meet and greet’ and then that’s the end of it.

Making long-term connections is going to benefit them, and their business.”

Ryan says her secret to finding time to run a business as well as various community-based programs is down to her exceptional organisation skills.

Her drive also comes from the feedback she receives from the people involved. When she receives a heartfelt thank-you letter from someone she has been able to help, it makes it all worthwhile.

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CAUGHT ON CAMERA

IN FOCUS

M

ortgage Choice recently held its National Conference in Adelaide. The franchise brokerage recognised its top performers, handing out its High Flyers award. Mortgage Choice recently announced its franchise network had grown to 405.

29

OPINION 30

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Do enforceable undertakings actually work?

When ASIC takes big institutions to task, it usually uses enforceable undertakings. Henry Davis York partner Lucinda McCann examines whether EUs are making a difference

E

nforceable Undertakings (EUs) are a well-established regulatory tool used by the Australian Securities and Investments Commission (ASIC), but recent government reviews have raised concerns about the effectiveness of their use.

EUs are a form of negotiated settlement which ASIC enters into with many individuals and organisations, including financial planners, dealer groups and mortgage brokers. They are often used by ASIC as alternatives to other regulatory actions, such as court proceedings.

Before entering into an EU, ASIC must first consider alternative enforcement action, the seriousness of the alleged breach and the regulated party’s compliance history. It must stand to reason that an EU will provide the most effective regulatory outcome and there are some circumstances where negotiated settlements can’t be accepted at all, such as criminal conduct cases.

ASIC tends to use EUs because they present a cooperative approach to regulation without directly involving the courts, and can arguably resolve matters more efficiently and cost effectively. However, there is a public perception that EUs are too heavily relied upon as an enforcement tool against large organisations and that the process lacks transparency.

Submissions to the Senate Economics References Committee investigation into ASIC’s performance raised concerns that EUs are often heavily negotiated in private between ASIC and the relevant organisations’ lawyers. Accordingly, the committee recognised there would be benefits in a more transparent process.

A number of submissions also highlighted ASIC’s reluctance to take on complex court cases or difficult targets. And when it does pursue enforcement action against large firms, the outcome is generally the imposition of less severe remedies, such as EUs. Ultimately, the committee’s view is that it would be of great public benefit for ASIC to increase its willingness to litigate complex matters involving large entities.

The senate inquiry gave rise to real questions about whether EUs allow a regulated party to negotiate an outcome with ASIC that may have few deterrent effects, particularly when contrasted with alternative courses of regulatory action, such as court, civil, administrative or infringement action.

While ASIC strongly defended its use of EUs at the senate inquiry, the commission’s chairman, Greg Medcraft, did call for tougher penalties to deter bad behaviour.

against Ludgates Chartered Accountants and Empower Invest Pty Ltd and Newcastle Palais Holdings Pty Ltd. In these examples, the lack of cooperation and disregard for reputation made the EUs a very ineffective tool for achieving the desired regulatory outcomes.

In its final report tabled in June, the senate committee clearly recognised some of these limitations and made several recommendations including a performance review of ASIC’s use of EUs.

THERE IS A PUBLIC PERCEPTION THAT EUS ARE TOO HEAVILY RELIED UPON AS AN ENFORCEMENT TOOL AGAINST LARGE ORGANISATIONS AND THAT THE PROCESS LACKS TRANSPARENCY

Critical to the efficacy of an EU is a regulated party that is cooperative and genuinely concerned about its reputation and the effect of its conduct on its clients and business.

Accordingly, EUs can be a very effective regulatory tool when ASIC is dealing with alleged breaches by reputable institutions, who view an EU, or the prospect of an EU, as a serious matter.

By contrast, EUs will be of limited effect and utility where they are used to deal with the behaviour of less reputable individuals or organisations less concerned with their public reputation.

Moreover, it can be difficult for ASIC to enforce the terms of an EU through the court, meaning enforcement can be problematic where a regulated party is not prepared to comply with the EU’s terms.

There are many examples where ASIC has been forced to undertake court action against individuals or organisations who have failed to comply with the terms of an EU. ASIC has previously launched action

The committee also recommended ASIC appoint an independent expert to supervise implementation of the terms of EUs and that the regulator consider ways to make the monitoring of EU compliance more transparent, such as the introduction of public progress reports.

Overall, EUs produce significant and positive compliance outcomes and deterrent effects for reputable financial institutions that genuinely seek to comply with their statutory and licence obligations.

However, when dealing with uncooperative individuals and organisations, EUs can have serious limitations. These limitations demonstrate a need for stricter recourse in responding to non-compliance.

Additionally, improving transparency will promote public confidence and shine a light on the individuals and entities proposing the EUs. These changes would improve the ability of EUs to appropriately deal with instances of non-compliance and allow EUs to continue to be an effective regulatory tool for ASIC.

INSIDER 32

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Bizarre workplace rules These offices have some odd guidelines for keeping employees in check

H

ow do you feel about bananas? If you’re a fan, you might not want to work at a certain Australian public relations and marketing office.

According to an anonymous staff member, the boss has banned the bright yellow fruit and new employees are made aware of the rule when they start at the company, The Sydney Morning Herald reported.

“She tends to dramatise the fruit’s offensiveness when they’re within proximity – she will fling open the office windows and any banana evidence has to be disposed of in a street bin outside our workplace,” said the employee.

“I think it’s a bizarre rule, I like bananas.

Never met someone so against a fruit before.”

The Herald also reported on Texco Construction’s “no tuna” rule, where workers are subjected to “low-odour food” and “clean desk” policies.

Co-owner Matt Barker said the company had a small kitchenette so “we make a bit of a song and dance if people heat up things that are particularly intrusive, like tuna or curry”.

“We have a lot of clients walking through our office and we don’t want to have horrid

smells or unsightly desks when that happens. We have high standards when it comes to office cleanliness.”

If that seems a little anal-retentive, it’s nowhere near as strict as former BHP Billiton CEO Marius Kloppers’ office rules, which included no pungent food in the office, no pot plants brought from home, no signage on workstation dividers, walls or doors apart from workstation identification and first aid or fire warden signage and a clean desk policy which permits few items, including one A5-sized photograph.

French ecology and energy minister Segolene Royal took extreme office rules even further, insisting that employees stood when she passed and that an usher would announce her presence so workers were able to get to their feet in time.

Employees were also banned from using the corridors near her rooms when she ate, to avoid “noise disturbance”, according to the list of rules which was leaked to the media.

When the website Reddit asked employees to share their most ridiculous office rules, there were some outrageous responses.

One office forced employees to wear safety googles while using a stapler, while an

upmarket cafe had no less than five different rules governing beard growth and maintenance.

“Beards had to be between a certain length or you had to shave it. No mutton chops. There were rules about moustache/ beard combos. If you wanted to grow a beard, you were not allowed back into work for two weeks until you grew it out to a ‘respectable length’,” the post said.

And in another workplace, saying, “Bless you” to sneezers was outlawed.

“Someone at work sneezed and another one said, ‘Bless you!’ A third party heard it and complained to HR about it. Guy who said, ‘Bless you!’ was given a warning and had to take a course in professionalism.”

DIRECTORY AGGREGATOR/WHOLESALE BROKER PLAN Australia 1300 78 78 14 www.planaustralia.com.au Page 31

BANK

ANZ 13 13 14 www.anz.com.au Page 7

FINANCE

Macquarie 13 62 27 macquarie.com.au/mortgages Outside Back Cover

Quantum Credit 1300 135 212 www.quantumcredit.com.au Page 17

MKM Capital 1300 762 151 www.mkmcapital.com.au Page 8

TECHNOLOGY PROVIDER

National Australia Bank www.nabbroker.com.au Front Cover

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

Pepper Homeloans 1800 737 737 www.pepperonline.com.au Page 11

LENDER

SHORT-TERM LENDER

AMP 1300 300 400 www.amp.com.au/distributor Page 9

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Interim Finance 1300 731 317 www.interimfinance.com.au Page 2

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Resimac 1300 764 447 www.resimac.com.au Page 5

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