Australian Broker 13.20 by Key Media

NEWS NAB overhauls NAB Broker Relaunches major back into broker market P8

BUSINESS STRATEGY Do more likes mean more business? What to focus on when it comes to social media P12

INDUSTRY SPOTLIGHT Brokers’ big deals And why they’re finalists in this year’s AMAs P14

OCTOBER 2016 ISSUE 13.20

CONSUMER INSIGHTS Retirement savings gap still evident

But gradually closing, says Roy Morgan P18

BUSINESS PROFILE Chifley Securities

Private lending in the commercial market P20

JACI SMITH My Local Broker’s chief executive on the aggregator’s purpose-built CRM software, Chief – and her plans to grow the brand beyond mortgages P10

MARKET TALK Investors unperturbed by market noise

The majority still think it’s a good time to invest P26

BORROWER SNAPSHOT 2

NEWS

ASSOCIATIONS

REGULATION

LENDERS

MFAA defends trimmed national conferences P4

Big four in court

NAB overhauls broker offering

BROKERNEWS.COM.AU

ONCE A PARENT, ALWAYS A PARENT

EDITORIAL

Help from the ‘bank of mum and dad’

Editor Madelin Tomelty

$90,000

60%

News Editor Phil McCarroll

$83,397 $80,000

Journalist Maya Breen

50%

Production Editor Roslyn Meredith

ART & PRODUCTION

$60,000

40%

$50,000 30% $40,000 20%

Average value of help

% first home buyers seeking help

$70,000

$30,000 $20,000

10% $10,000 $0 Mar 2010 Jun 2010 Sep 2010 Dec 2010 Mar 2011 Jun 2011 Sep 2011 Dec 2011 Mar 2012 Jun 2012 Sep 2012 Dec 2012 Mar 2013 Jun 2013 Sep 2013 Dec 2013 Mar 2014 Jun 2014 Sep 2014 Dec 2014 Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016 Jun 2016

% first home buyers seeking ‘bank of mum and dad’ help (LHS)

Average amount (RHS)

financial assistance sitting at $83,000. “The trend since 2010 is pretty stark,” wrote North. “Those without access to family money are at a significant disadvantage.” More than 40% of first home buyers receive direct assistance with putting up a house deposit, while around 20% get some help with meeting ongoing mortgage repayments. “This inter-generational shift of wealth is enabled by the accumulated value gained by older households as they ride the property price boom,” North wrote. “Some will refinance to

Design Manager Daniel Williams Designer Martin Cosme Traffic Coordinator Freya Demegilio

SALES & MARKETING Sales Manager Simon Kerslake Account Manager Rajan Khatak Marketing and Communications Manager Lisa Narroway

CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

EDITORIAL ENQUIRIES

Madelin Tomelty +61 2 8437 4792 Madelin.Tomelty@keymedia.com.au

SUBSCRIPTION ENQUIRIES

tel: +61 2 8O11 4992 fax: +61 2 9439 4599 subscriptions@keymedia.com.au

ADVERTISING ENQUIRIES

Source: Digital Finance Analytics

FIRST HOME BUYERS RELYING ON MUM AND DAD Digital Finance Analytics (DFA) has published new data on the property market buyer segments, revealing that more than half of all first-time buyers are turning to their parents for financial assistance to break into the property market. Although first home buyers are still relatively active in the market, they’re struggling with high house prices and tighter lending criteria, according to DFA’s Martin North. More than half of first-time buyers are now seeking help from “the proverbial Bank of Mum and Dad”, with the average value of

draw capital out for their kids. Sometimes this is used to help these first time buyers to purchase an investment property.” DFA’s data also indicates that as many first-time buyers are being driven to purchase property by the expectation of future capital growth as those looking for a place to live. This reinforces DFA’s data from July showing that borrowers across the board are incentivised by capital growth more than a basic need for shelter. They are also aware of the tax advantages, and the relative costs of renting, according to North.

Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak +61 2 8437 4772 rajan.khatak@keymedia.com.au Key Media Pty Ltd Regional head office, Level 1O, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, London, Toronto, Manila, Singapore This magazine is printed on paper produced from 1OO% sustainable forestry, grown and managed specifically for the paper pulp industry 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.

ASSOCIATION HAPPENINGS 4

DATES TO WATCH

MFAA DEFENDS TRIMMED NATIONAL CONFERENCES The MFAA has announced its 2017 event offering, unveiling the rebranded and trimmed MFAA Business Builders conference, a one-day state-based event held in every capital city outside of Hobart and Darwin. MFAA head of marketing Stephen Hale told Australian Broker the decision was based on feedback from this year’s events, and that the shorter national conferences for 2017 would better resonate with brokers. “It’s purely based on broker feedback. They liked the idea of what we did with Broker 2020, but the day went too long,” Hale said. “Based on the feedback we got from the people who attended, we decided to pull the event back and have a more concise day.” Hale said marketing would be a cornerstone of the 2017 conferences and that the MFAA was committed to delivering practical advice to its members. “A lot of people put on days where they have guest marketing speakers, and anybody can really do that.

A lot of brokers say to us that those sorts of things sound good, but it’s not really practical when it comes to their business,” he said. Hale said the conferences would have a heavy focus on how brokers can build and stabilise their revenue streams while keeping operating costs down, including advice on how to better use social media and other digital tools to generate leads and interact with consumers. Along with shortening the runtime for each day, the MFAA has also reduced attendance costs. The Business Builder conferences will now cost brokers $99 compared to $250 this year, while the awards ceremonies are also down from $250 to $165. In an effort to make other services more convenient for brokers, the MFAA has also announced that it will soon roll out the online delivery of both live and recorded professional development days for regional brokers.

WHAT THEY SAID...

James McCracken “Social media is a long-term game and the posts you’re putting up today might be the start of building trust and engagement with someone who might wish to buy from you six months down the road” P12

A rundown of the next fortnight’s events

OCTOBER

12 What: MFAA webinar: Lifting the veil of the ATO Where: At your computer Details: The webinar will provide brokers with practical tools to assist them in better dealing with businesses and individuals who may have taxation debt

OCTOBER

Dominic Lambrinos “[Our goal] is to be the largest or the most accepted marketplace for private lending in Australia by the end of 2017” P20

Ben Kingsley “Most investors understand that negative gearing is only a short-term cash flow position, not a property investment strategy. And only a very small minority are attracted to real estate for these tax concessions” P27

18 What: MFAA webinar: How to acquire good quality clients Where: At your computer Details: In this webinar, Nick Psaila will show brokers his technique that uses a basic three-step formula to attract, engage and convert leads online and offline with minimal set-up

OCTOBER

25 What: MFAA webinar: Getting more when selling your business Where: At your computer Details: This presentation will give an insight into why brokers’ mortgage broking businesses can be valued for more than just the multiple of trail income

REGULATORY ROUNDUP 6

MORE FOREIGNERS FINED FOR ILLEGALLY HOLDING AUSSIE PROPERTY

BIG FOUR IN COURT The CEOs of Australia’s four biggest lenders spent last week being grilled by a parliamentary committee for the first time amid disquiet over practices such as giving poor financial advice to customers and failing to pass on central bank interest rate cuts in full. The bank chiefs were asked questions about their record profits, executive pay and the fees they charge customers. Among the top items scrutinised by the House of Representatives Standing Committee on Economics was misleading financial advice given to clients, particularly by a unit of the Commonwealth Bank, which has paid more than $62m in compensation to customers since 2010. This includes $7.7m through a system set up in July 2014 after a Senate inquiry concluded there was systemic misconduct in its financial advice division and called for a royal commission to be held. ANZ, NAB and Westpac were also sued earlier this year by ASIC over alleged manipulation of the nation’s benchmark swap rate. “Australian banks are amongst the most profitable in the world,” said Brian Johnson, a Sydney-based bank analyst at CLSA. “But unusually, because it’s such a self-reinforcing oligopoly, they’ve enjoyed tremendous pricing power in the housing market. So any time anything’s been bad, they’ve simply priced up home loans – and that necessarily causes some political backlash.” NAB has also paid out $6.5m in compensation to financial advice customers, and last month Westpac said it had refunded $20m to credit card holders after not clearly disclosing foreign transaction fees and a further $9.2m after failing to waive fees on some savings accounts.

The penalty for an illegal real estate purchase by a foreign citizen is $135,000 or 3 years imprisonment, or up to $675,000 for companies

The total purchase price of Australian real estate divested is

$92m

2,200

matters have been referred to the ATO for investigation since May 2015

The Coalition Government has forced foreign nationals to divest 46 properties since 2013

179

400

cases are still under active investigation

Eastwood Securities

penalty notices have been issued, totalling $900,000+

Source: AU Treasury

LENDER UPDATE 8

WHO OWNS WHAT…

Home loan market share, August 2016 30% 25% 20% NAB LAUNCHES NEW BROKER OFFERING NAB has revealed an overhaul of its broker offering that places a strong emphasis on customer service and reducing channel conflict. The bank’s rebrand sees the abolition of the NAB Broker brand, which will now be consolidated with the larger NAB brand. The updated broker offering now means NAB borrowers introduced through the broker channel will have the same access to NAB services and products as any other customer. The bank has also launched four more home loan products: NAB Choice Package, NAB FlexiPlus Mortgage, NAB Tailored Home Loan and NAB Base Variable Rate Home Loan, as well as 10-year interest-only periods for investment loans. The same upfront and trail commission as NAB Broker is offered on the expanded suite of home loan products for the life of the customer – as opposed to the loan – while brokers also have access to a wider range of credit card offerings. Steve Kane, NAB Broker general manager, said the rebrand was a significant step for the bank and signified the final step in an ongoing process to strengthen the connection between NAB and the broker network. “This is the final stage of that journey, which is really about using the full power of the NAB brand, all the process and services of NAB and all the channels of NAB to support brokers. This is really as much a statement about launching NAB back into the broker market,” he said. “A significant number of brokers are now looking at the whole life cycle of the customer, and part of this rebrand is talking about the broker as a trusted adviser, and we’re talking about broking for life.” Kane said a new initiative, in which select NAB branches would have staff dedicated solely to broker-introduced customers, would hopefully achieve this goal and reduce channel conflict. Under the initiative, brokers can refer their clients to an NAB branch, where dedicated broker channel staff will ensure their accounts and other facilities are set up properly. These staff are not on a sales incentive program, meaning brokers won’t have to fear losing their clients.

15% 10% 5% 0% Owner-occupied Westpac Banking Corporation National Australia Bank Limited Suncorp-Metway Limited Bendigo and Adelaide Bank Limited

Investment HSBC Bank Australia Limited Bank of Queensland Limited Members Equity Bank Limited ING Bank (Australia) Limited Commonwealth Bank of Australia Macquarie Bank Limited Australia and New Zealand Banking Group Limited Source: DFA/RBA

ING DIRECT LAUNCHES HOME AND CONTENTS INSURANCE ING DIRECT customers who have come through the bank’s broker channel will be the first to be offered ING DIRECT’s newest product offering. The non-major bank has announced that it will now be offering home, contents, and home and contents packages to broker-originated customers through a partnership with Auto & General Insurance. Customers will also have a variety of optional cover available, including landlord, flood, accidental damage and personal valuables. In early 2017 the offering will be expanded to direct home loan customers and as a standalone product for existing and new customers. John Arnott, executive director of customers at ING DIRECT, said the launch of insurance was about making the home loan journey as smooth and simple as possible for customers. “We’ve been helping Australians into their homes for two decades with our home loans, and now we’re helping them to protect their homes and providing peace of mind. “Buying a home is both an exciting and incredibly busy time, and we want to make the process as simple and efficient as possible for our customers so they can focus on the excitement of settling into their new home. It’s about understanding their

broader needs at this time and making sure we can meet them – effectively offering a one-stop shop.” The lender’s insurance proposition will be fully digital, with an insurance estimate automatically generated and emailed to the customer upon formal approval of their home loan application. The customer will be invited to view the details of the estimate and provide additional information for a full quote, with the option to purchase the insurance instantly online. Commenting on the partnership with Auto & General, Arnott said the companies’ values were well aligned. “We have a shared ‘customer-first’ focus; clear through our digital approach, which is all about making sure we’re providing the right offer to our customers at the right time to make their home-buying journey as smooth as possible, and clear through how we manage claims. We’re very happy to be working with Auto & General to bring insurance to our customers.” Ninety-nine per cent of ING DIRECT’s home loan customers are referred through mortgage brokers, and the bank has a mortgage portfolio of more than $40bn.

COVER STORY LEAVE IT TO CHIEF

My Local Broker is a new player in the mortgage aggregation space, but chief executive Jaci Smith believes an industry shake-up is long overdue. With the aggregator’s purpose-built Chief CRM software, and plans to expand the My Local brand, it might just be time for brokers to sit up and pay attention to the new kid on the block…

WHEN RESPONSIBLE lending disclosure obligations were introduced as a result of the National Consumer Credit and Protection Act (NCCP), My Local Broker chief executive Jaci Smith experienced first-hand the added arduousness that came with providing a client with an assessment. Suddenly, mortgage and finance brokers were obligated to provide more documentation to their clients than ever before, slowing down the already-convoluted process of securing a loan for a borrower. Smith wanted to remedy this inefficiency, and the first incarnation of My Local Broker was introduced in 2012 as a broker directory site. But Smith suspected it still wasn’t good enough – it wasn’t “future-proof ”, she said. Four years later and that initial broker offering

she says. And the rest is history. Introducing Chief, Smith’s brainchild and the unique CRM software purpose-built for My Local Broker. Hi, Chief So what is so special about Chief? According to Smith, a lot. Currently, brokers have to endure a lot of back and forth with the customer over documents and signatures. “The need to collect a whole lot of information to be able to provide a client with an assessment – that’s been a pretty big bugbear,” says Smith. By contrast, Chief bypasses a lot of the platform restrictions of current CRMs in the aggregation space, and allows brokers to have full technological integration of data, preventing the dreaded cycle

“The question I’ve asked is, is your aggregator going to be able to adequately support you in the future? And technology is definitely at the forefront of that” has pivoted into a fully-fledged retail and aggregation business, with a technology push that is unrivalled in the aggregator market. “When I launched the first version we were collecting some information but … it didn’t enable [brokers] to collect a full fact-find, which is obviously what they want – to be able to provide quicker information back to clients in terms of suitable loan products,” Smith tells Australian Broker. Smith went on to trial a number of existing CRM software platforms, but she couldn’t find one that ticked all the boxes. “… So that’s why I went out and raised some money to do it myself,”

of document exchanging. Brokers and customers can collaborate and complete a file online through NextGen.Net’s ApplyOnline system, with all correspondence and documentation stored in one place. “At the moment, the way that they collaborate on a file is: I’ll send you an email with my payslip and tomorrow I’ll send you one with my mortgage statements; and the broker, for NCCP, has to keep a record of all these interactions they have with clients that are held in a mirage of different places. Whereas with the way they interact with Chief and My Local Broker, it’s all kept in one place and it’s a full history of every form of interaction that they

have with the customer,” Smith says. Smith and the My Local Broker team have just finished a nationwide roadshow to show off the new CRM, and the response, says Smith, has been “humbling”. “… [I]t was all about showing the software off, and also talking about the offering in full, so that we could create some confidence about what we’re doing to effectively onboard these guys.” Compliance is crucial Smith’s confidence in Chief is palpable, and she has no reservations about making statements such as “Chief is by far the most compliant broker CRM in the market”. She challenges her competitors to “come and have a look at it”, and explains that the system has been built around compliance. “We’ve actually built Chief out to follow the compliance steps. So a broker, in order to actually provide an assessment to clients, actually has to complete the fact find, actually generate a credit guide and a privacy policy, and [Chief] locks them out if they don’t. It won’t enable them to submit it to ApplyOnline unless they have all those documents,” Smith explains. But is Chief enough to lure comfortable – or perhaps complacent – brokers away from the hold of their current aggregators? After all, the comfort of what people know tends to have a stronger pull than the curiosity of something new. Smith responds by telling Australian Broker that since the roadshow My Local Broker has conducted a series of one-on-ones with brokers, and currently they are talking to approximately 60 brokers keen to onboard with the aggregator, including brokers who will be leaving their current aggregators to experience the My Local Broker offering. “Brokers that are currently enjoying a flat-fee model – they’re actually coming to us. It’s going to cost them more money to be here, but they appreciate the fact that they get service here, and they get a lot of technological integration that they don’t get at their current aggregator due to their platform restricts,” Smith says. “Things like VEDA seeker files, integration of RP Pro; there’s a number of integrations – e-signatures – that we’ve integrated that are obviously all pluses, but they’re more than happy to pay for that.” “The question I’ve asked is, is your aggregator going to be able to adequately support you in the future? And technology is definitely at the forefront of that … our lead generation through My Local Broker is going in leaps and bounds, and we’ve generated almost 900 leads in the last six weeks that we’re appointment-setting for brokers that are coming on board at the moment,” Smith says. Time is money Given the focus on efficiency and time-saving that Chief proposes to have, Australian Broker pressed Smith for details on exactly how much time brokers will save if they become a My Local Broker broker using the Chief CRM. “Internally we’ve tested it and had other brokers from other aggregator CRM platforms also provide tests with their existing platform plus Chief. So the average application is taking, on average, up to 10 hours from the time that the broker interviews, data inputs, collects all the required info, and submits it to ApplyOnline,” Smith says.

provides training on branding, website presence and referral partnerships with accountants and financial advisers in brokers’ local areas. Next month the aggregator will also be launching the My Local Broker Masterclass that will cover a range of topics, from how brokers can market themselves on social media to further educating around online, including Google indexing and SEO for brokers targeting their local areas, as well as risk and compliance workshops. Again, technology and digital are front and centre in the education side of My Local Broker’s offering. Smith reveals that the company is currently spending “around $20,000 a month on Google AdWords, and we’ve got two people who work in-house for us full-time who work on SEO and SEM.”

“I think other aggregators, in terms of them wanting to have their brokers diversify is all well and good, but in terms of what they deliver I don’t believe that just offering a product to a broker allows them to fully get the benefit of diversification” “With Chief we can get that done within six hours, but that’s including all client interaction.” She adds that this will only get better, and that in her own trials of the software, both as a customer and as a broker, within an hour the broker can already be providing loan scenarios to the client. But My Local Broker isn’t just about cutting-edge technology and forward-thinking.

Smith tells Australian Broker that the business also has a strong training and mentorship arm. Broker Draft, targeted at new-to-industry brokers, is valued at $25,000, and brokers have access to this. Brokers that are still completing their compulsory two years in the industry also have an in-house broker mentor in Glen Darcy, who

The next frontier Despite the fact that My Local Broker is in its infancy, only just edging its way out into the aggregator market, in 2017 the aggregator is not holding back. The idea of hitting the brakes and waiting for broker traction is not one that Smith has in mind. In fact she has no hesitation in doing the opposite – accelerating towards other business ventures – namely, the launch of My Local Conveyancer, My Local Financial Adviser and My Local Insurance Broker. Smith believes her company is taking the idea of facilitating broker diversification to a level that no other aggregator has yet reached. She says, “2017 is about the involvement of the My Local group and how we can really support brokers through that diversification method. I think other aggregators, in terms of them wanting to have their brokers diversify is all well and good, but in terms of what they deliver I don’t believe that just offering a product to a broker allows them to fully get the benefit of diversification.” She explains that My Local Broker is not just partnering with businesses but integrating these businesses’ logic into the Chief software, which allows brokers to access information and quotes on non-mortgage products in one platform, rather than having to log into an external interface. “… [T]raditionally it would be a name and a number and a whole new data collection, which is quite painful for the customer, so we’re sort of thinking, well, the customer has the ability for wanting all of these services, but they have to share their data with everybody individually. So why wouldn’t we just share it with permission?” The aggregator is already working with five partners, including SME lender Moula, and ALI for its mortgage protection insurance. Commercial, vehicle and equipment finance will all be within easy reach of brokers using Chief. “… [W]e are all about diversification, but we pick diversification partners based on their integration capabilities,” Smith explains. Smith has taken on a massive challenge with the plans for the My Local brand, but it’s a challenge she’s unwaveringly up for. If successful, the Chief CRM will save precious time and energy, making it a game changer for brokers and customers alike. The idea of the efficiency that comes with data sharing across separate industries is an alluring one, and if Smith has anything to do with it, it won’t be long until brokers nationwide are wooed.

BUSINESS STRATEGY DO MORE LIKES MEAN MORE CLIENTS?

The Successful Adviser James McCracken on where brokers should put their focus when it comes to social media

Time Do you have the time to invest in updating and managing your social media accounts? Willingness Are you willing to apply yourself consistently to build your tribe over the long term? Skill Could you manage your social media better than others? Or could someone deliver the result you want while freeing you up to do other business activities?

YOU KNOW how the banks educate the public to think the most important thing to consider when getting a home loan is the interest rate? Well, along these lines, it seems many people think the most important thing when posting on social media (namely Facebook) is for their posts to get liked. At the risk of being contentious, I fervently believe that isn’t necessarily so. Let me give you some context, though. I’m not saying likes are unimportant and that you shouldn’t aim to get them; it’s just that there isn’t always a correlation between more likes and getting more clients. What is important is to understand that social media is a long-term game and the posts you’re putting up today might be the start of building trust and engagement with someone who might wish to buy from you six months down the road. Or they may never buy from you at all, but they could become an advocate and a door opener. Or they could become a referral partner and you could create opportunities with and for each other in the future. While it might be hard to determine which category they fit into, one thing is for sure – if you aren’t posting, you’re not creating any opportunities for yourself or others in your network. While there are many factors that contribute to your success with your social media strategy, one of the most important is to maintain consistency in your interaction; and to be engaging but rarely, if ever, selling.

Posting a photo of a kitten playing with a ball of wool and buying a bunch of likes and then saying ‘Like me, it’s Friday’ may well result in likes for the post, but this won’t generate more trust, advocacy or sales. In fact, unintentionally, in some cases such posts can actively cause distrust. How? One of the factors that drives trust is competency. In other words, people want to know how good you are and that you can help them get their loans. If, for some reason, a post you make on social media causes a perception of incompetency, then it’s Game Over. At least it is for that potential client. So here’s something to consider. You could continually put up posts of inspirational quotes and get a bunch of likes, or you could put up some posts about finance/interest rates and probably get no likes – but that doesn’t mean the post is any less effective. People want to know you are good at what you do – and if they think otherwise for any reason, they’ll likely take their business down the street. So you might be thinking, “What’s the best option? Do I go for likes, not go for likes, or do I just hand over my social media to someone who knows better?” The answer to that is: it depends. You should start by considering your answer to this question: for what purpose are you using social media, and what exactly do you want to achieve? Based on your answer, you’ll have different options available, which you can either implement yourself or get someone to do it for you. There are three criteria to consider in making this choice.

When it comes to social media, you can certainly go it alone, or you can engage the likes of a professional but there are both pros and cons to doing this. I’ve seen a ‘social media specialist’ charge $12,000 to generate approximately 1,000 likes over six months for a finance and property company (that’s $12 per like) which produced exactly zero enquiries for the adviser. I’ve also seen brokers like Amie Tennant at Future Finance Group use social media really well by being engaging and personable. After trying to build an audience via her Facebook company page, she found it was easier to build engagement and responsiveness through her own page. These days, most of Amie’s posts are personable, though she drops in the occasional finance message which rarely gets as many likes but reminds her audience of what she does and, importantly, drives consistent enquiries to her. Quick tips • On social media, it generally takes time to establish trust. • You’re better off having a smaller network (or community of followers) that is more engaged and responsive than a big list of contacts who barely know you. • If you’re using a company page, try to make it personable where you can. In other words, don’t hide behind the brand without showing people who you are, as it will reduce the connection and relationship. Also, aim to celebrate client successes wherever you can. With that in mind, social media can be a great tool to build your audience and provide value for them – just don’t get into analysis paralysis around counting all the likes for your posts. There are more important things to focus on! James McCracken (www.thesuccessfuladviser.com) helps mortgage brokers generate more leads.

INDUSTRY SPOTLIGHT A BIG DEAL

With the Australian Mortgage Awards around the corner, there’s no better time to hear from some of this year’s finalists. Australian Broker asked six top Broker of the Year nominees to reveal their most memorable deals, and what they had to do to get them across the line DAVID KIMMORLEY – BALMAIN COMMERCIAL CANBERRA

Finalist: Broker of the Year – Commercial

The scenario A client wanted to buy a multimillion-dollar luxury interstate property at extremely short notice – there was only one week to do due diligence, exchange, value, document and book settlement, plus arrange funds transfers and settle. The client was getting it at a significant discount ($1m plus) as the vendor had had multiple loan issues, and a friend had agreed to buy it at a good price but couldn’t arrange funding.

The solution To make this deal work, I had to agree with the client on some collateral security to get the LVR to an acceptable level, and then negotiate with the lender. As it was under a tight timeframe, there were limited lenders available who could arrange approval, valuations, documents and settlement. A solid credit paper was prepared so that there would be few questions on financials to speed up the process. Thankfully, the lender agreed to fly to Canberra to meet the buyer prior to valuations being received, which saved a valuable day. There were multiple outgoing mortgagees and caveats to be addressed and the client deduced that there may be another buyer in the wings. Therefore late settlement was not an option. I arranged a consultant to fly to Sydney with critical documents on the day of settlement, rather than trust a same-day courier, just to be safe. The deal settled on the same day and the client was very happy. Since then, I’ve assisted the same client with more of their business, so getting this tough deal over the line enabled me to secure a long-term, loyal client. In commercial broking it is important to consider the overall transaction when designing a competitive, deliverable package. A ‘cheap’ deal is no good if your client loses their deposit. Having a knowledge base and good reference points to consult broadens your ability to deliver good-value solutions.

DANIEL O’BRIEN – PFS FINANCIAL SERVICES

Finalist: Broker of the Year – Commercial

The scenario The most challenging loan I’ve written this year was a $4.75m land subdivision loan. The client is a builder and this year alone I have settled $9.2m (23 loans) for him – he has complex financials spread across over a dozen companies and so definitely keeps me on my toes. For this particular land subdivision loan it was particularly challenging given that commercial development finance isn’t easy to secure, and even more so after the APRA changes that came into effect last year. It took a lot to get over the line.”

The solution One advantage my client had, though, which gave the bank additional comfort, was selling the blocks off with a build attached to them. So not only did my client have 100% debt cover (covered by presales), and good profit on the overall land project (25%); he then made a further 20–25% profit via the builds. Normally the banks want to see a minimum of around 20% profit for a deal of this nature. Being that my client showed 50%-plus profit, it understandably made the deal much more palatable for the lender, especially considering we were borrowing $4.75m at 80% of the land value and hard costs. The process of securing this client was a long one – I met him when I was a client of his two years earlier, and after he referred me several clients. Off the feedback of these clients he was then comfortable switching brokers, and consequently to date we have settled $21.3m (56 loans) for this one client, covering almost every type of finance imaginable: residential loans, car loans, boat loans, equipment finance, commercial loans, commercial development finance (for land subdivisions and multidwelling housing). I think this story highlights the beauty of the industry, and also the importance of patience and perseverance.

ANDREW MIRIAMS – INTUITIVE FINANCE

Finalist: Broker of the Year – Independent

The scenario The standout deal that comes to mind was completed over the past 12 months. The client is an experienced and astute investor that wanted to buy an apartment block of 12 units in Sydney on the one title. Although this is not uncommon, only really high net worth individuals can complete these kinds of deals, and what made it unique was that our client found the property only the weekend before it went to auction. This meant we only had five days to coordinate the deal and make it happen.

The solution On the following Monday I flew to Sydney to meet with the client and establish the deal. There I completed the application and notes and then that afternoon presented them to a bank for consideration. Two days later I again flew to Sydney to workshop the deal with the lender and ensure that we had approval in principle before the client went to auction, and to get further information from the client. Not only was the approval granted on Friday; the client successfully purchased the apartment block the following day for $5.6m and we settled it 42 days later. I think this was the most outstanding result I’ve had over the past year, and one we are very proud to have made happen. We were able to go above and beyond to work through this deal, with the multiple trips to Sydney, speaking with the decision-makers, negotiating on what was acceptable and then agreeing to approval terms to ensure the outcome. This client has subsequently referred me three new clients, which validates the success of the story and the fact that we got this deal done because we went the extra mile.

INDUSTRY SPOTLIGHT STUART STYLES – ARTHURMAC & CO

GIULIO AVIAN FUNDSNATIONAL

Finalist: Broker of the Year – Non-Conforming

The scenario

A couple recently approached me to refinance their home and pay out a credit card debt. They were both PAYG employed and their situation seemed like it was one you would see in any broker’s office on any given day. It wasn’t until we dug a bit deeper that we found that there was not only a Part IX Debt Agreement on both of the parties’ VEDA files from years earlier, but that also a judgment had been recorded on both their credit files for the outstanding credit card balance to the tune of approximately $35,000. A debt collection agency was pursuing them relentlessly, and the clients were unsophisticated and did not react to the agency’s demands quickly enough, so they had also been petitioned to appoint a trustee in bankruptcy for the debt and had incurred a further $6,019 in petition filing fees. The couple’s story of how their debt had escalated eventually came out. Their relationship had broken down the previous year and they spent some time apart, during which time the credit card was used for both of their living expenses. When they finally reconciled they thought that they could manage to pay the debt off, but this put pressure on their other financial arrangements, which in turn caused them to have a caveat lodged on their title through non-payment of their water rates and council rates. Although they had been petitioned for bankruptcy, a trustee was yet to be appointed.

The solution We managed to negotiate with the debt collection agency to buy some time to refinance the client’s debts into their mortgage, and were given a deadline to settle by. This was an arduous process as the creditor was at first reluctant and, of course, the fees generated by the trustee – given there were ample assets – would have been lucrative to say the least! A non-conforming lender was able to view the application favourably in light of the petition as the trustee was yet to be appointed and thus they were not technically in bankruptcy. In addition and funnily enough, their mortgage repayment history was actually quite good. In the end we managed to settle on time and also gained a slight reduction in the size of the other debts and some fees through some negotiation with the creditors.

Sarah and Mohammed had four children under the age of 11. When they first came to see us, they had eight separate credit card debts – byproducts of a failed business – that needed to be consolidated and reduced. These debts, totalling around $100,000, were becoming unbearable to manage and were causing the family considerable pressure and stress. An ANZ mortgage of $410,000 and a car loan of approximately $28,000 also needed to be consolidated, but after eight months of speaking with different brokers, these clients had not achieved any success with refinancing/ consolidation and were losing hope.”

The solution We undertook the following steps to try and find a solution to the clients’ problem: engaged Choice Debt Solutions to negotiate all unsecured credit card facilities; consolidated 10 separate credit card facilities into one easily manageable payment at an interest rate of 5.12% per annum; and reduced average monthly repayments from $3,920 to $2,766, saving the clients $1,155 per month. Their loan repayments were reduced by almost $14,000 per year, and the total combined savings within the first 12 months were almost $37,000 – making this a life-changing transaction for this young family. Choice Debt Solutions were also able to reduce the couple’s credit card debt by $23,000 without affecting their credit rating, and the couple was almost able to raise around $17,000 to repay a family member who had loaned them money to prop up their failing business. Needless to say, this result far exceeded the clients’ expectations. Our approach was non-judgmental, and we showed them that we understood and appreciated the stress involved in managing high debt levels while also raising four young children. We provided extra reassurance and support to Sarah, as Mohammed was working two jobs and over 60–70 hours a week to cover all of their debt facilities, and earned the couple’s trust by efficiently and expertly completing their file. We gave them confidence that, once consolidation occurred, they would be able to move forward financially, and they’ve certainly been able to do this now.

KEVIN AGENT – THE AUSTRALIAN LENDING AND INVESTMENT CENTRE

Finalist: Broker of the Year – Independent

The scenario A couple had a large home loan debt of $800k on a family residence valued at $1.3m, and a small investment property loan. They wanted to purchase a new home for $2m–2.5m or spend $500,000 on renovating their existing home. With either strategy, they would be left carrying a significant amount of home loan debt and the clients were very conscious of this. If they purchased a new property, they would sell their existing home, resulting in the burden of a home loan of $1.7m, or $1.3m if the clients did the renovations on the existing house, which wouldn’t give them their long-term desired family home. The husband was on a good income of $400k.

The solution I met with the clients and a financial planner to discuss their position. The clients decided they were prepared to purchase a new property but didn’t need to be in it for five years given the age of their children, so we could initially purchase as an investment and work on a five-year strategy to move into the property longer term. Then they could either sell the existing property or change it to an investment, and by the time they moved into the new house their debt levels would have decreased. This gave the clients much better cash flow than carrying $1.7m of pure home loan debt from the outset. The couple purchased a property for $2.3m and rented it for $1,500 per week. Our five-year plan then changed to 12 months thanks to the growth in Melbourne property prices in 2015/16. The client sold their original house for $1.9m ($600k more than initially expected), and the new property was valued at $2.7m ($400k more than the purchase price). This effectively created added equity of $1m in 12 months. As a result of this deal I established an ongoing relationship for ‘life’ with ALIC as the lender, and two very happy clients who ended up with their dream home as well as a lower home loan debt. I also now have a good relationship with their financial planner, who had diversified the clients’ risk through investment strategies and risk protection. By taking a long-term approach to this type of client, I was able to look across the clients’ needs and challenge goals, rather than just meet the transaction requirements of what was initially just a large home loan.

CONSUMER INSIGHTS RETIREMENT SAVINGS IMPROVE

A report by Roy Morgan Research has shown that although women’s retirement savings are still well behind men’s, the gap is closing

ACCORDING TO recent research conducted by Roy Morgan, there are 2.9 million Australians in the pre-retiree group (aged 50 to 64 and working). Of these, 1.4 million people are women, and their retirement savings are well behind those of their male counterparts. However, the State of the Nation 25: Spotlight on Finance Risk report has revealed that this gender gap is gradually closing. In 2008 a female’s retirement savings amounted to 57.7% of the male average, while in 2016 that figure has increased to 63%. Since 2008 the average net wealth of pre-retired women has

gone from $183k to $232k, an increase of 26.8%. For men in the pre-retired group, the growth in average net wealth went from $317k to $368k, an increase of 16.1%. “Over recent years a great deal of publicity has been given to the issue of the inequality in superannuation for women compared to men. Although progress is slow, there are now signs that the gap in retirement funding is gradually closing. This has been partly as a result of increased awareness and effort to improve the retirement funding for women and their increased

participation in the workforce,” said Norman Morris, industry communications director at Roy Morgan Research. “Since 2008 the proportion of women employed has increased by 2.1% points, whereas male participation is down by 2.8% points. Given the compulsory nature of superannuation contributions, employment levels obviously play a major role in the level of retirement funding.” However, despite the more rapid growth in average net wealth for women in this group over the last eight years, their average balance is still less than two thirds (63%) of their male counterparts. The report also shows that while there has been reasonable growth in average retirement funds for both sexes, the current levels of $368k for men and $232k for women appear low for a ‘self-funded’ retirement given the fact that many in this group are close to retirement, with little time to make up for any shortfall. These figures take into account a significant amount of debt – an average of $102k for men and $86k for women – which pre-retirees may potentially retire with and which would obviously undermine their retirement funding capabilities. And while the main public focus on the adequacy of retirement funding is generally on superannuation, for both sexes in the pre-retirement group, this accounts for only around half of average gross wealth: 54% for men and 53% for women. “With the number of pre-retirees being close to three million, they are the next wave coming through that will put pressure on government to cope with retirement funding and rule changes. With an average age of 57 in the pre-retirement group, there is limited working life remaining for many in which to make up for any shortfall. “This segment is likely to be more engaged regarding superannuation than most. Their proximity to retirement means that they will be paying close attention to any superannuation changes and particularly the current high-profile uncertainty that will possibly reduce confidence in the system and has the potential to divert funds into areas outside of superannuation and encourage postponing retirement.” The report’s data is from Roy Morgan’s Single Source survey of more than 500,000 interviewees over the last decade. Over the last 12 months alone, the survey interviewed over 8,000 pre-retirees, enabling an in-depth understanding of their financial behaviour and trends.

THE GOLDEN YEARS?

46% of men

56%

and

of women

don’t think they will have enough to retire on and live to their desired standard

Less than 1 in 10 people over the age of 50 expect to retire before 60

1 in 5 people expect to have less than

$100,000

Consequently,

in savings when they retire

almost 1 in 5 plan to keep working into their 70s

1 in 5

young Australians expect to retire before 60

Source: MLC

PRE-RETIREES’ PIGGY BANKS

Financial position* of pre-retirees – males vs females 2016 $500k

$400k

$470k Other investments $214k (46%)

Dollar balance

$300k

$318k Other investments $149k (47%)

$200k

$100k

$368k

Superannuation $256k (54%)

Superannuation $169k (53%)

Average gross wealth* Male

$232k

$102k

Average debt

$86k

Average net wealth

Female

* Excludes value of owner-occupied home. Net wealth equals gross wealth minus debt. Base: Australians 50–64 and working. 12 months to June 2016 (n = 8,140)

Source: Roy Morgan Research

BUSINESS PROFILE CHIFLEY SECURITIES Non-bank Chifley Securities’ Dominic Lambrinos tells Australian Broker why private lending is gaining traction in the commercial market, and how Chifley’s business model benefits borrowers, investors and brokers

WHERE DO you go when the banks say no? According to Dominic Lambrinos, you go to Chifley Securities. The Sydney-based non-bank is not your typical commercial lender, and that is precisely the idea. A private lending marketplace, Chifley’s portfolio is made up of large investments from a handful of high net worth individuals, and the lending solutions it offers are rapidly becoming the go-to for commercial developers. In the past 12 months, Chifley Securities has lent $638m in commercial loans – impressive for a lender that is less than two years old. “The philosophy behind Chifley is to use our background in private lending and to develop a place in the financial marketplace … which brings private lending more into the norm … where we could provide brokers with an alternative source of finance when banks said no,” Lambrinos tells Australian Broker. “… The banks have struggled with APRA or the international Basel rules and they’re not lending as much. So … people aren’t going from bank to bank with commercial loans like they used to, and current clients of banks aren’t being serviced or acknowledged for their tenure…” Lambrinos adds that the banks that won’t lend to particular commercial clientele are also happy to send them in Chifley’s direction. As they see it, Lambrinos says, better they lose a client to a private lender than to a direct bank competitor. “We created this marketplace shortly after the time when the banks were restricting the number of loans they were doing for people,” says Lambrinos. “So that brings us into mainstream lending, and more than we’ve ever been in the past. “These people were going to banks; they’ve come and experienced the way we do business, and we’re different … we’re easier to deal with than banks,” he explains. The ease of use Lambrinos is referring to is Chifley’s borrower assessment criteria. “We are strictly an asset lender,” Lambrinos says, meaning that Chifley assesses borrowers based on their assets alone, not their serviceability. This naturally means Chifley is not as ‘strict’ as the banks and will lend based on the company’s asset wealth. “Being an asset-only lender we don’t look at the serviceability, and if we do it’s very rare. We look at the assets that the person owns and [ask,] does that make sense with the loan they’re taking out and the asset we’re lending against?” Show me the money In the 12 months to date, Chifley Securities has experienced a 35% increase in lending volume compared to the prior nine months. Clearly, there’s no denying there is demand for untraditional non-bank lenders like Chifley Securities in the commercial market, and that demand appears to be on the up. Lambrinos believes that once new commercial clients get a taste of Chifley Securities, their repeat business is pretty much a given. “People who come to us and experience us,

“You get a lot of business acumen [at Chifley]. You get people who understand numbers, so we can do a deal very quickly and work out how to make it work, or say no pretty quickly, so the experience is really important” they’ve come back to us for more business and more quotes,” he says. The fact that these borrowers can expect to pay a steep 10–12% in prepaid interest compared to the average 5–6% offered by the banks is by no means a deterrent. “The reason for that is because when you’re a home loan buyer, your interest rate is the most important factor,” Lambrinos says. “[But] people in business have got a [commercial] transaction, so for them it’s important to do that transaction because they’ll make X million dollars out of it … You’re better off paying more interest and making the money.” The wealthy eight Chif ley Securities has only eight investors, and three of these are billionaires. The lender’s minimum investment amount is $50m, and its total pool of funds is valued at around $1.375bn.

“These high-net individuals want to have a good return on their money; they don’t want 1%,” says Lambrinos. At Chifley, he explains, they can get a return of 10–12% instead. Needless to say, they’re laughing all the way to the … non-bank. “So, with getting all these investors in place and offering a good return, we’re providing the investors with access to transactions or investments they would never find themselves,” Lambrinos says. “Investors are seeing this as a fairly conservative investment and a good return.” A unique approach While most non-banks and private lenders pool their investors’ funds, for Chif ley this only occurs on the rare occasion that a loan exceeds $50m. In general, Lambrinos says, the rule is “One loan, one investor”. “That allows us to provide a more personalised service … to be able to put into

BUSINESS PROFILE

the mix the kind of assets we lend against to be more f lexible than, say, a pooled fund, which is a list of assets that are the lowest denominator of everyone in the fund. So we’ve created this. That’s what we came into the market with and that’s been one of the reasons for our success.” With the lender’s impressive loan volumes and accelerated growth, it would be easy to imagine throngs of people working behind the scenes to make Chif ley’s rapid success possible. And yet in its Sydney CBD office there are fewer than 20 staff members, and Lambrinos believes this is a big drawcard for borrowers who, with such large transitions on the table, tend to value privacy, discretion and personalised service. In addition, Chif ley’s directors get involved at every level, which is appealing to its borrowers. “Our strength is the fact that the directors work on transactions, so if there’s a difficult transaction we roll up our sleeves and we’re out there working. We want to do that; we love doing that. We’re trying to engineer and

facilitate and make [a loan] which is struggling to get off the ground work, and do good things. Lambrinos adds that while the staff quota will likely be capped at 20 people in Sydney, the lender is currently looking at expanding across the Tasman, but that is as far as the non-bank’s office footprint will go. And there are more upsides to having such an intimate corporate culture – the non-bank has a reputation for going from loan application to settlement in record time. In fact, settling large commercial deals in two to three weeks is the norm at Chifley. “There’s not many people between the application and the acceptance, so a broker comes in and it’s decided there. And then there’s a few phone calls, and then the budget due diligence is done, and it’s done. Plus we are fully paperless. It saves a lot of time and allows people to work [remotely]. “It’s not just lending,” Lambrinos adds. “You get a lot of business acumen [at Chifley]. You get people who understand numbers, so we

can do a deal very quickly and work out how to make it work, or say no pretty quickly, so the experience is really important.” Looking ahead Chifley Securities’ aspirations are not humble, but when you’re a company trailblazing the new era of private marketplace lending, why should they be? “[Our goal] is to be the largest or the most accepted marketplace for private lending in Australia by the end of 2017,” reveals Lambrinos. “To get enough knowledge out in the marketplace so people say, ‘Oh I’ve heard of Chifley, they do this’, and to get that in the broker network – that’s what we wanted to start on day one; that was our goal.” To achieve this feat – to inform commercial brokers of the lending solutions Chifley Securities provides as an alternative to the banks – Lambrinos explains that the non-bank is also actively involved in training and education. “Chifley Securities is involved in a number

CHIFLEY EDUCATES BROKERS

KEY STATS

Commercial Property Financing 2

Chifley started up in November 2014

Currently accredited with Finsure

Business Cash Flow Finance Chifley runs a one-day FBAA-approved education program covering four courses 3

Approximately 3,400 brokers are accredited with Chifley Securities

How to Understand Financial Statements 4

Asset Finance

There are 19 staff members

Funding available has recently increased to $1.375bn

of programs developing education around this particular topic [of private lending]. … We’ve written the courses for showing brokers how to do commercial loans, construction loans, how to do asset loans like leases and how to do cash flow loans for businesses, and even how to understand financial statements. So we’re giving them a lot of that business know-how to move them from being [in] that mentality [of] ‘how to sell a rate’ to ‘[how to] sell the opportunity’.” In addition, Lambrinos explains, Chifley is actively working with its aggregator partner Finsure through its PD days, conferences and seminars, and has plans to expand this broker involvement to two other aggregators in the near future. He suggests that this is the hardest part – getting the word out to the third party – because once brokers are aware of and try this commercial lending alternative, they will be well and truly sold. “It’s an education,” says Lambrinos. “If you

can develop a broker’s skills they’ll make more money and we’ve got a new customer.” Lambrinos also reveals to Australian Broker that Chifley is in the midst of a website overhaul, which on its completion will not just be a digital brochure but a tool that brokers will want to use for their businesses. Moves like this reflect the non-bank’s attention to detail in all that it does, as well as its dedication to creating a positive experience for every party involved in the loan transaction, from conception to completion. As Lambrinos says, systemisation is important but so is the experience. On a personal level, the experience of bringing a new residential development to fruition is incredibly rewarding, and Lambrinos has plenty of stories to prove it. “[So a client couldn’t] get a loan with a bank, and this [development] wasn’t going to get built and 70 families weren’t going to get houses. So we just popped up $29m and we did it. It’s a good thing.”

FY16 lending volume is $638m

Borrowers pay 10–12% interest

Minimum investment amount is $50m

Minimum loan size is $2m

Average loan size is $12m

Investors earn 10–12%

TECH FOCUS SOCIETYONE APPROACHES $200M IN LENDING Marketplace lending company SocietyOne has released the details of its rapid four-year growth, with evidence that it is likely to continue accelerating

SOCIETYONE HITS THE ACCELERATOR

MARKETPLACE LENDING A BETTER OPTION FOR CONSUMERS?

Accelerated funded loan growth

Comparison rates for 3-year unsecured fixed rate personal loan of $10,000

$m $160

$150

$140

4 months

$120

$100

$100 $80 $60 $40 $20

9.58% 17.21% 17.44%

$50

15.24%

14 months 23 months

(AA grade borrower)

6 months

17.18%

$10

$0 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16

SOCIETYONE chief executive Jason Yetton has announced that the fintech’s goal is to break through $200m in lending, and by the looks of the figures released it could be as soon as the end of 2016. The company’s latest financial update saw SocietyOne reach its $150m milestone in the first week of September, and Yetton has predicted that the market is opening up and will no longer be the sole domain of the big four banks and traditional lenders. “We are experiencing real momentum in both demand for personal loans from consumer borrowers and the amount of money that our investor funders are now willing to advance to support those customers,” he said. “Not surprisingly, it has taken us a while to get established, but following some encouraging signs in growth last year, 2016 is turning out to be a breakthrough year where we have started to loosen the stranglehold of the big four banks and traditional lenders on the $20bn personal loans market.” SocietyOne’s latest figures show the marketplace lender has advanced an additional $50m of lending just four months after reaching the $100m mark in April this year, taking its total value of lending to over $150m. The lender also revealed a substantial increase in the amount of funding available for lending, from $20m as at 30 June 2016 to $75m at the end of September – a new record for the company as well as the personal loans marketplace sector. “This shows that our investor funders are seeing the opportunities that now lie ahead from the opening up of this new and expanding fixed-income investment asset class,” Yetten said. In another particularly noteworthy figure, default rates across SocietyOne’s loan portfolio are standing at 1.17%, compared to a sector average of 2–3%, according to the fintech. Interest from borrowers and investor funders also continues to grow, thanks to new initiatives such as the company’s first national TV brand campaign, which was broadcast on Channel 7 during the Rio Olympic Games and is now being aired on pay television. “The positive response to the new brand campaign shows Australian borrowers are looking for a better deal for personal loans than the one they are getting from the big four banks,” Yetton said. “Our mission is to be the leading, most trusted, people-powered lending marketplace in Australia. Our proposition is simple and

Source: SocietyOne

compelling – if you are good with credit we want to reward you with a better lending rate. “Comparison rates for unsecured personal loans of $10,000 for three years for the big banks are 15% to more than 17% and many credit card lending rates are even higher. SocietyOne rewards customers for their good credit histories with lending rates from as low as 9.58%,” Yetton said. He added that SocietyOne was also in a position to help even more customers through the launch of its personal loans marketplace on its ClearMatch platform, which enables other lenders to participate in providing finance to borrowers. “The early signs are very encouraging, with more customers being provided with offers of finance and many of those choosing to achieve their financial dreams that way even if we are unable to help them do so for different reasons,” he explained. “This is an exciting stage in our development as we scale up to reach our targets of helping 100,000 Australians and take a 2–3% share of the $100bn consumer finance market over the next five years.” With SocietyOne’s growth accelerating, Yetton has also announced changes to the company’s leadership team, which will see the company’s

The comparison rates are true only for the examples given and may not include all fees and charges. Source: SocietyOne

co-founder, Greg Symons, taking on the role of COO with responsibility for all day-to-day operational, credit, customer service and technology activities. At the same time, fellow co-founder Matt Symons is to switch to a non-executive director’s role on the board of SocietyOne. His executive duties will be taken on by Jonathan Chan, who has been appointed to the new role of chief product and strategy officer. Chan, an experienced financial services and technology executive, has joined SocietyOne from Boston Consulting Group, where for the last five years he was a principal at its Sydney and, most recently, Kuala Lumpur offices. Prior to that, he worked for Westpac in its strategy unit for nearly six years. “The changes … are a reflection of the great strides that SocietyOne has taken since we started operating just over four years ago under the leadership of Greg and Matt,” Yetton said. “They pioneered marketplace lending in Australia with SocietyOne, and the explosive growth in the sector is, in part, testimony to their vision and advocacy. Both have been absolutely central to what we have achieved since then, and I’m delighted that they will continue to contribute to our ongoing success in the new roles that they will now take on.”

MARKET WRAP FINANCIAL SERVICES

BANK-OWNED SUPER ‘HURTS THE ECONOMY’ Not-for-profit superannuation funds have outstripped returns of ‘for profit’ bank-owned and retail funds by 2% over nearly two decades DATA COLLECTED over a 19-year period and analysed by Industry Super Australia (ISA) has shown that Australia’s retirement savings pool would have been $105bn higher if retail funds had matched industry super fund returns. According to ISA, an individual member with a starting balance of $20,000 could have been $36,000 better off as an industry super member. “Bank-owned and retail super funds are a drag on Australia’s retirement incomes and national savings,” said David Whiteley, chief executive of Industry Super Australia. “The habitual underperformance of bankowned retail funds hurts members and hurts the Australian economy.” The analysis involved measuring performance using detailed long-term data from expert agencies, including APRA and SuperRatings, and will form part of ISA’s submission to the Productivity Commission’s review of superannuation. The analysis identifies two key reasons for the outperformance of not-for-profit funds. The first is investment philosophy, which shows that industry super funds are committed to long-term investment in the real economy; more than $20bn is currently invested in Australian infrastructure, producing strong, stable returns. The second key reason put forward by ISA is fund structure and governance. APRA has previously identified the practice of bank-owned super funds paying above-market rates for services provided by related parties and not

passing on scale benefits to members. This new analysis of APRA data also underlines the importance of ensuring that the eight million Australians who do not actively select their own super funds are protected by a “safety net” of high-performing default super funds. “Compulsory super, along with Medicare, is part of Australia’s social ‘safety net’. The super system should act only in the interests of Australian workers. It should not be just another discretionary financial service. Reform of the

sector must be based on retaining a safety net of the best-performing super funds for the estimated eight million workers that do not choose their own fund,” Whiteley said. “National super savings are worth $2 trillion and super investment is now a major driver of economic activity. The evidence is also telling us that a super system run only to benefit members would also deepen our capital base, boost the economy and raise the living standards of retirees across the board.”

COMMUNICATION CRUCIAL FOR FINANCIAL ADVISERS

53%

92%

of financial advisers believe their clients understand their fees, but only 33% of investors actually do

of financial advisers say they have discussed fees with their clients, but only 67% of investors agree

When choosing a financial adviser, charging low fees was the second least important factor for investors, while being upfront and representing situations truthfully was the most important.

60%

80%

of investors who understand the fees they are charged referred a friend or family member to their adviser, while only 42% of those who do not understand the fees did the same

of advisers say they have asked clients for recommendations on how to improve their relationship; however, only 33% of investors say their adviser has done so Source: State Street Global Advisors’ SPDR ETF

MARKET TALK

INVESTORS UNPERTURBED BY MARKET NOISE PIPA has released its second annual survey showing that the majority of investors still believe now is a good time to invest in residential property

THE PROPERTY Investment Professionals of Australia (PIPA) second annual Property Investor Sentiment Survey has shown that despite talk of property price bubbles, tightening investor lending policies and roaring debate over the future of negative gearing, Australian property investors remain bullish about the long-term merits of residential real estate. The survey, which gathered insights from more than 1,000 property investors, has revealed that more than 70% of respondents think now is a good time to invest in property – a five-point increase on last year’s figure. While 32% of investors say that recent changes to lenders’ investment policies have affected their ability to secure finance, more than half (58%) said they were looking to buy a property in the next six to 12 months. According to the survey, nearly three quarters (72%) of investors are not concerned about the potential removal of negative gearing, and only 2% think that the currently available negative gearing concessions are the key attraction of real estate investment. Moreover, the survey shows that almost half (47%) of property investors are positively geared and a majority (63%) of investors who are currently negatively geared expect they will become positively geared within five years. Low interest rates have also been shown to have little effect on investors’ decisions to purchase, and only 13% agree they are the key reason why property is the most attractive investment choice right now. PIPA chair Ben Kingsley believes this indicates that property investors remain focused on the long-term benefits of property investment. “Similar to last year, most property investors are looking past short-term challenges, remaining focused on the longterm wealth benefits that are available from residential real estate, including the potential for capital growth and rental income. Importantly, most investors are not speculating on quick gains in a low interest rate environment.

“The survey also affirms that a lot of the discussion about negative gearing misses the mark. Most investors understand that negative gearing is only a short-term cash flow position, not a property investment strategy. And only a very small minority are attracted to real estate for these tax concessions,” Kingsley said. Brisbane remains the preferred investment destination for 50% of the survey respondents, and although this is down from 58% in 2015, it is far ahead of every other capital city (Melbourne 20%, Sydney 11%, Adelaide 9% and Perth 4%). “Property investors are becoming savvier. Many of them continue to look outside of our biggest property markets – Sydney and Melbourne – which are coming close to the peak of their cycles,” said Kingsley. “The two key reasons that Brisbane still attracts investors, in spite of concerns around oversupply, are affordability and the potential for attractive yields. Brisbane is investing in infrastructure to make the city more liveable and investors are clued on to this.” The survey also reveals that mortgage brokers remain by far the most important source of finance for property investors: 65% of investors secured their last investment loan through a broker, and 71% planned to secure their next investment loan through a broker. “In the complex borrowing environment we are now facing, brokers continue to play a key role as providers of finance to investors. They tend to better understand the investment lending landscape and offer great choice to investors,” Kingsley said. The survey also shows that a vast majority (80%) of investors would choose, or refinance with, a lender offering the option of an interest-only repayment period, as opposed to a lender that did not offer such a period; and 66% of investors indicated that they would choose, or refinance with, a lender if it offered the same interest rates for investors as owner-occupiers.

PROPERTY PRICES REBOUND, MARKET HITS $6TRN According to new figures released by the ABS, Sydney property prices rose in the June quarter of 2016 after six months of falls. Prices rose in every capital city except for Perth and Darwin, and the strongest growth was recorded in Melbourne at 8%, followed by Canberra at 6%. Prices of established houses in Sydney rose 3.2%, and attached dwellings rose 2%. Established house prices in the eight capital cities rose 2.3%, and attached dwellings rose 1.4% in June quarter 2016, taking the total value of Australia’s 9.7 million residential dwellings up by $138.3bn to $6.0trn. The mean price of dwellings in Australia is now $623,000.

ABOUT INVESTORS

The PIPA survey indicates:

71%

of investors believe now is a good time to invest in property

58%

of investors are looking to purchase in the next 6 to 12 months

72%

of investors are not worried about possible changes to negative gearing

32%

of investors say changes to lenders’ policies have impacted on them

65%

of property investors secured finance for their last deal via a mortgage broker

89%

of investors believe people who recommend property investment should be regulated and licensed Source: PIPA

PEOPLE SUPPORTING NEW TALENT A multi-award-winning veteran broker has donated $10,000 in award money to a university to promote broking to soon-to-be graduates

HERE’S ONE broker who has the future talent of the industry front of mind and, better yet, acts on it. Coming up to his 40th year in the industry, Greg Wells recently generously donated $10,000 in prize money to a local university and its business students. The award-winning managing partner of NSW brokerage Wells Partners/ Mortgage Link passed the Commonwealth Bank cheque that came with his award straight on to Western Sydney University. The donation funded a number of awards presented in August to the top students in

university, Domenic Corigliano, who suggested donating the prize to his prior place of learning. “We thought it was a natural fit to support Western Sydney University and the local people,” says Wells, explaining that they now have three offices operating out of Liverpool, Parramatta and Oran Park. Wells explains that the donation was about supporting younger people whose studies complement the industry, while highlighting the option of a career in the third party channel, rather than the well-worn path of the banks.

“Educating younger university students is, I think, a terrific way of highlighting this potential opportunity as a great career in broking” economics, financial institutions and markets, and applied finance and property at the Parramatta campus, and more awards will be given out over the coming year. The awards are part of the Western Sydney University Donor Program, showcasing the hard work and academic achievements of the university’s top-performing students. Of the four directors in Wells’ broker group, it was the youngest and a top graduate of the

“I think there has been a lot of education put into broking – we’ve obviously looked to upskill and to be highly qualified. [The banks’] market share is dropping and the third party market share is growing, so we definitely have a big staffing issue to address as an industry – educating younger university students is, I think, a terrific way of highlighting this potential opportunity as a great career in broking.”

Wells has made a point of communicating to the students the many positives of being a broker, such as the diversity of the role and the stability it can offer – and its potential is only growing. “When I started in 2001 the market share for home loans was around 15% – today it’s 55%. Commercial was virtually zero and today it’s probably around 30–35%.” What a journey Wells’ own career, like that of many other brokers, began in banking. “I started my career in the ’70s in Liverpool stamping cheques; I finished my career in NAB as head of the district of Liverpool some 25 years later.” He then moved into commercial broking, founding Wells Partners in 2001, and was one of the first brokers to join aggregator FAST. Despite close to four decades in finance, Wells says he still has the same passion for the industry now that he had when he began his career as a 15-year-old. “I have always loved finance – you are creating people’s dreams; you are helping them achieve their goals in life; getting them a house... These are big-ticket items, so they need people that are confident and know what they’re doing to help and guide them down that path. “Controlling your own destiny and being able to bring people along on the journey and leading them to achieve their potential in life – it’s all about being flexible, ensuring you know your staff, what motivates them, and trying to put a platform down to create a role that suits their work-life balance … that’s very empowering so it’s certainly one of the great things that drive me,” Wells says. Nurturing the next generation In a bid to expose students to the rewards offered by the broker channel, in addition to his donation to Western Sydney University, Wells has also offered the award recipients the chance to undertake work experience. “They can come in, spend a couple of weeks with us to get a feel for the business and the operation and what type of opportunities are there,” he explains. The work experience will be offered next year and students can team up with an experienced broker for a few weeks, visit all of the company’s offices and sit in on discussions and interviews with clients. Wells says the idea is to give students the opportunity to gain a deeper understanding of what broking is all about. Rob Ryan, head of the Northern Region at FAST, says Wells’ generosity and commitment to the industry is admirable. “Finance broking continues to go from strength to strength, but new recruits are critical to the future success of the industry,” he says. “It’s outstanding to see one of the industry’s finest contributing so generously to the community – and to the future of this profession.” Wells’ enthusiasm and passion for the industry is what continues to drive him, and he hopes to pass on to the next generation of brokers the importance of having passion in your career. “As I say to my three boys, I was fortunate that I just found something that I loved that got me up every morning, and I’ve got a team of staff who are similar. If you’re not coming in and clutching the air when you get a loan approved or a settlement achieved, you should go and do something else – find what it is you love.”

CAUGHT ON CAMERA From 11 to 13 August, over 400 Loan Market brokers and staff attended the 2016 Let’s Go conference held in the Hunter Valley, NSW. Attendees witnessed inspiring talks by motivational speakers Daniel Flynn, Chris Helder and Vihn Giang, as well as Li Cunxin, author of the best-selling autobiography, Mao’s Last Dancer. The two-day event included peer-to-peer learning sessions; some sessions facilitated by the state directors; as well as an awards night recognising the network’s high achievers. The conference concluded with a barnyard bash-themed party complete with a mechanical bull and fireworks.

PEOPLE HOT SEAT

PARIS GALOMBIK Shore Financial young gun mortgage broker Paris Galombik on beating John Symond and how she’d spend $1m

Who or what inspired you to become a broker? To be honest, I didn’t really have much insight into the A industry. I was in a position where I was ready for a career change and by coincidence had been speaking with my friend, Theo Chambers, one of the directors of Shore Financial. He gave me a rundown of the industry and the basic principles of mortgage broking, and it sounded like something I could be good at. I decided to jump on board and the rest is history!

What is your most memorable client experience? My highlight deal was my biggest deal of the year, which A was for $4.2m. I was put in touch with the clients from a great referrer of mine. These clients are best friends with John Symond, so I was up against him from the beginning. Throughout the process, from organising the pre-approval to the settlement, the clients kept telling me they wanted to use me. However, they felt obligated to go with John. But as a result of my persistence, knowledge and the great rates that I was able to get for the clients, they gave me the go-ahead only four days before the settlement. I had to go from pre-approval to settlement within four days, and I made it!

What do you think is your point of difference as a broker? I pride myself on consistently following up A with my clients. This ongoing relationship ensures there’s no reason for them to speak to my competition, and it also helps keep me front of mind for referrals to both friends and family.

If you were the head of the MFAA or FBAA, what would be your first priority? If I was the head of the MFAA or A FBAA, my initial priority would be to remove non-compliant brokers from the industry. Also, I would like to run roundtables where newer people in the industry could meet successful brokers and learn about how they succeeded in their business. I think it is important for brokers in the industry to take a bit of everyone’s advice and then use this advice to pave their own way in the industry.

If you won $1m, how would you spend it? I’d take the whole Shore Financial A team on a ski trip to Aspen! But on a serious note, I’d put it towards property.

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