MAY 2018 ISSUE 15.08
A question of competition The fee-for-service debate takes another turn /16
Lead generation on social media Does Facebook live up to the hype when it comes to lead gen? /18
CAMERON POOLMAN NOAH BRESLOW Boosting business for Australia’s SMEs, OnDeck’s founder and CEO talk market growth and business capital /14
From broker to business operator The key skills brokers need to excel in the field /20
ALSO IN THIS ISSUE … Movers and shakers The latest appointment news from across the industry /22 Big deal How one broker helped an entrepreneur achieve his financial goals /24 Hotseat GM of Resolve Finance on customer advocacy and leadership skills /30
NEWS
IN THIS SECTION
Lenders AMP issues “unreserved apology” /04
Aggregators New service to boost asset finance /06
Technology Digital property platform reaches 1m transactions /10
Market Brokers fuel rise in white label demand /12
Regulators Brokers split on possible regulation change /08
www.brokernews.com.au MAY 2O18 EDITORIAL
SALES & MARKETING
News Editor Rebecca Pike
Sales Manager Simon Kerslake
Journalist Nicola Middlemiss Production Editor Roslyn Meredith
DATES TO WATCH
Upcoming can’t-miss events
ART & PRODUCTION Designer Martin Cosme Production Manager Alicia Chin
9 - 2 3 M AY
1 0 M AY
Auscap Annual Roadshow
Perth Australian Women’s Leadership Symposium
Running throughout May, Auscap Asset Management will visit Perth, Adelaide, Brisbane, Sydney and Melbourne, with portfolio managers Tim Carleton and Matthew Parker scheduled to address the audience. Each event lasts two hours, inclusive of refreshments and networking
Organised by Women and Leadership Australia, this event’s discussion topics will include: how to invest in your personal brand; the trust economy; navigating CEO appointments; prioritising what’s important to you; and finding your next opportunity
1 1 M AY MPA Roundtable The latest in the MPA roundtable series, this discussion will gather the leading aggregators for an hour-long debate hosted by MPA editor Otiena Ellwand. The roundtable event takes place from 12 noon and is available for streaming via mpamagazine.com.au
Traffic Coordinator Freya Demegilio
Marketing and Communications Manager Michelle Lam
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
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1 5 M AY CAFBA Professional Development Day The last in the five-date nationwide series of PD days organised by the Commercial and Asset Finance Brokers Association of Australia takes place in Sydney and will feature Reid Raykovic, executive director of the CLFP Foundation, who is working with CAFBA on a new commercial certification
1 5 – 1 6 M AY
1 7 M AY
CFO Forum
MFAA Changing Gears National Roadshow
RBA Deputy Governor Guy Debelle is scheduled to deliver a speech at the CFO Forum, taking place at Swissotel, Sydney. He will be joined by Productivity Commission chairman Peter Harris and Jennifer Westacott, chief executive of the Business Council of Australia
The MFAA hits the road this month with the Changing Gears National Roadshow, stopping in Melbourne on 10 May, Sydney on 17 May, Adelaide on 31 May and Brisbane on 7 June. Each event will be followed by the MFAA awards recognising the best and brightest talent from across the industry
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6 JUNE
13 JUNE
13 – 21 JUNE
Broker Business Exchange
FBAA Mental Health Roadshow
Pepper’s National Insights Roadshow
Taking place at the Westin Sydney, BBX is Australia’s leading independent national broker event, featuring an agenda of insightful conversation and debate, as well as observations from leading industry personalities
Highlighting the importance of supporting mental health and aiming to tackle the stigma around mental health conditions, the FBAA kicks off a three-date mental health roadshow in Bunbury, WA, before moving to Perth on 14 June and Adelaide on 20 June
In its fourth year, the Insights Roadshow forms a significant part of Pepper’s education offering to the third party channel. The roadshow starts in Melbourne on 13 June before moving to Adelaide (14 June), Perth (19 June), Sydney (20 June) and Brisbane (21 June)
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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.
NEWS
LENDERS SMALL BUSINESS LENDING TO HIT $2BN online small business lending market in Australia is growing at a faster rate than the US market did at a similar stage of development, the CEO of OnDeck Global has said. Speaking at the AltFi Australasian Summit in Sydney, Noah Breslow said the market had the potential to reach more than $2bn in annual originations by 2020. Brokers have historically driven around 89% of all OnDeck SME loans, and the lender is looking to increase that share over the coming 18 months. (For more, turn to page 14) THE
MARKET OPTIMISM SURVEY: 1,000 AUSTRALIANS REACT TO PRICE GROWTH Source: Lendi.com
18- to 34-year-olds
35- to 54-year-olds
55 years and over
100% 90% 80%
67%
70%
59%
60% 50% 40%
48%
44%
52%
53% 46%
38%
28%
30% 20% 10%
LA TROBE FINANCIAL TOPS SQM REVIEW La Trobe Financial has NON-BANK topped the SQM Research review of the Australian Mortgage Trust Sector with two of the highest-rated funds. Its 12-month term investment offering received 4.25 stars (Superior), and its peer-to-peer Select Investment Account came second with 4.0 stars (Superior). In assigning ratings, SQM Research takes into account a number of key operational and risk return factors, including management, corporate governance, process, fees and returns.
“I am not Santa Claus and there won’t be a Christmas in May, and the Grinch won’t be making an appearance either” Scott Morrison Treasurer, MP
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0% Optimistic on property ownership
Would consider ‘rentvesting’
Can afford to buy in the area they grew up in
AMP ISSUES ‘UNRESERVED APOLOGY’ Sweeping changes across the bank include replacement of its group general counsel and “devastated” CEO, in addition to the introduction of a board committee lender AMP has issued an “unreserved apology” in response to revelations that it misled ASIC. According to the findings in the latest round of public hearings of the royal commission, the bank changed independent expert reports before passing them to ASIC. Additionally, the bank failed to provide a service that customers were paying for. CEO Craig Meller, who was scheduled to retire from the organisation at the end of 2018, has stepped down with immediate effect, saying he is “devastated”. His interim replacement, Mike Wilkins, currently serves as a non-executive director on the AMP board. Announcing his resignation, Meller said, “I am honoured to have been the CEO of AMP. I am TROUBLED
personally devastated by the issues which have been raised publicly this week, particularly by the impact they have had on our customers, employees, planners and shareholders. This is not the AMP I know, and these are not the actions our customers should expect from the company. “I do not condone them or the misleading statements made to ASIC. However, as they occurred during my tenure as CEO, I believe that stepping down as CEO is an appropriate measure to begin the work that needs to be done to restore public and regulatory trust in AMP.” AMP’s 11-point action plan for reform includes an immediate and comprehensive review of its regulatory reporting and governance processes, to be overseen by a retired
judge or equivalent independent expert. A board committee has been established to review the issues related to the advice business raised by the royal commission, chaired by Wilkins in cooperation with law firm King & Wood Mallesons. Group general counsel Brian Salter has agreed to take leave while the review is undertaken. David Cullen, AMP general counsel, governance, has been appointed as acting group general counsel. AMP chairman Catherine Brenner said: “AMP apologises unreservedly for the misconduct and failures in regulatory disclosures in our advice business. The board is determined that we will meet these challenges head-on, accelerating changes in both culture and performance at AMP. “We have been driving muchneeded change and improvement in our advice business, which has undergone significant leadership and governance renewal over the past year, but we know we have much more to do to.”
NEWS
A G G R E G AT O R S AFG CONFIRMS THINKTANK INVESTMENT Finance Group has entered a binding agreement to make a strategic investment in Think Tank Group Pty Ltd (Thinktank). From the investment of 30.4% for $10.9m in cash consideration, AFG will begin distributing a white label commercial property product through its network of brokers. Thinktank operates primarily as a small-ticket commercial property lender and has a loan book in excess of $750m, establishing it as a viable and competitive non-major commercial property lender. AUSTRALIAN
BROKERS URGED TO UTILISE DATA Harry Anderson, director, Money Resources Group and Brent Starrenburg, head of Connective Asset Finance
AGGREGATION SERVICE TO HELP BROKERS IN ASSET FINANCE Connective Asset Finance identifies marketplace demand for a dedicated aggregation service for brokers who specialise in asset finance Asset Finance (CAF) has announced a strategic partnership with asset finance aggregator Money Resources Group (MRG). CAF is backed by Connective Group, which has more than 15 years’ experience in aggregation, 12 of which focused on the asset finance space. CAF has identified a need in the marketplace to provide a dedicated aggregation service for brokers specialising in asset finance. While Connective will continue to offer member brokers asset and SME finance products and support, CAF was formed to exclusively cater to the unique requirements of asset finance specialists. Brent Starrenburg, head of Connective Asset Finance, said, CONNECTIVE
“We recognised the asset finance sector is evolving quickly and becoming increasingly complex, particularly in the areas of compliance and regulation. “In forming CAF we are building on many years supporting asset finance brokers while leveraging our experience in delivering best-in-class aggregation to deliver a bespoke service for asset finance specialists. “MRG is a market leader in the asset finance sector and we are excited and proud to partner with them. We are confident MRG brokers will benefit from the resources and support we bring to bear, while retaining a freedom to run their business as they see fit,” he added.
of Choice Aggregation Services Stephen Moore has highlighted the importance of quality customer data to support brokers in building successful businesses with great customer service. He said, “Not only do brokers [acquire] hard data but also soft data, including things like clients’ aspirations, their family situation, what is important to them, and so on. This combination of hard and soft client data is invaluable. It is the new black.” CEO
MRG director Harry Anderson said the partnership had prevented them from being left behind. He said, “As our industry matures, and with increased regulation on the way, choosing the right business partners has never been more important. This move is about supporting the 20 member firms of our group. “MRG was at risk of being left behind from a technology perspective, and partnering with Connective has given us the opportunity to work with cuttingedge technology that will see our members well positioned both now and in the future. “We are impressed with Connective’s transparent approach to plant and equipment finance, and we believe their substantial infrastructure will make significant improvements to our industry. The professionalism of our brokers will undoubtedly advance as they access Connective’s suite of services, most notably in the areas of compliance and marketing.”
“We expect to have more than 1,600 brokers by the end of 2018 and a $32bn loan book” Simon Bednar GM of sales, Finsure
VVECONOMIC $40,614,829,064 KEY INDICATORS, AUSTRALIA Source: Knight Frank Research, ABS, RBA, Rawlinsons
Population annual change
Gross domestic product, annual change
Unemployment rate
Cash rate target
Housing finance, annual change, by value (excluding refinancing)
Household savings ratio; net savings as % of household net disposable income
Construction costs, annual change
8% 6% 4% 2% 0% -2% Jun-15 Jun-16 Jun-17 Dec-15 Dec-16 Dec-17 Feb-16 Feb-17 Feb-18 Apr-16 Apr-17 Apr-18 Feb-16 Feb-17 Feb-18 Dec-15 Dec-16 Dec-17 Dec-15 Dec-16 Dec-17
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NEWS
R E G U L AT O R S CAP INCREASE TRIGGERS PI WARNING are being warned to make sure they hold the right professional indemnity (PI) cover after ASIC increased the maximum claim that can be awarded to $323,500 from $309,000 under the External Dispute Resolution facility. The FBAA is concerned that many brokers will not know about the increase, which began at the start of the year, and has advised them to take care, particularly with the current publicity around the finance broking sector. BROKERS
FORMER BROKER APPEARS IN COURT an investigation by ASIC, Peter Lachlan McDonald has appeared in Perth Magistrates Court charged with seven counts of giving false information and one charge of fraud. McDonald previously worked at Get Approved Finance but was permanently banned in 2015, and several others from the firm have since received bans. ASIC alleged that, between January 2013 and April 2013, McDonald provided incorrect information to ANZ-owned lender Esanda while brokering four motor vehicle finance contracts. FOLLOWING
“I have never seen such craziness around our sector, and this is leading to reactionary comments rather than considered approaches” Peter White Executive director, FBAA
BROKERS SPLIT ON POSSIBLE REGULATION CHANGE A survey has revealed just how many mortgage brokers are concerned about public perceptions of their role in the industry than 65% of brokers surveyed by MyState Bank said they were seriously or moderately concerned about the effect of the royal commission. Seventeen percent said the focus on brokers was ‘unfortunate’ but also ‘self-inflicted as there were rogue mortgage brokers in the past that damaged the industry’s reputation’. The broking community was split in its attitudes to ASIC recently shining the spotlight on lending standards. Thirty-seven percent of broker respondents were in support of greater industry scrutiny by the regulator. Meanwhile, 28% said it was a ‘political exercise designed to benefit non-broker interests’, and 35% said they were in two minds as to whether broker reputations would be tarnished. MORE
As a result of both the royal commission and a recent draft Productivity Commission report, talk has surrounded the possibility of replacing broker commissions with a fee-for-service model, and 23% thought this outcome was a ‘strong possibility’. However, 42% of respondents said it was unlikely or would not happen, with 33% ‘evenly balanced’. MyState Limited group executive broker distribution Huw Bough said the survey results showed that, while brokers had some real concerns, they were also passionate about their industry, open about problems and supportive of improving standards. He added: “The Royal Commission has attracted a lot of attention recently, but it must also be acknowledged that well before
the commission began representatives of Australia’s mortgage broking industry prepared a landmark reform package to improve customer outcomes and confidence in mortgage broking.” The reform package, which was the result of engagement between industry bodies, lenders, brokers, aggregators and consumer groups in the Combined Industry Forum, agreed on six principles to ensure improved standards of conduct and culture while preserving competition in mortgage broking. These cover clawbacks, remuneration – including changes to upfront and trail commissions – and soft-dollar benefits, specifically linked to tiered servicing, conferences and professional development days. Additionally, the reforms called for ASIC and consumers to be given clearer information on where loans were written and commissions paid to increase transparency and accountability across the industry.
VV$40,614,829,064 BROKERS ON THE FEES-FOR-SERVICE DEBATE Source: MyState Bank
When brokers are asked about the possible introduction -40% of a fee for service model
23%
33%
think it a ‘strong possibility’
consider themselves ‘evenly balanced’
42%
2%
say it is unlikely or will not happen
did not respond
For more on the fees-for-service debate, turn to page 16
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NEWS
TECHNOLOGY
ACORNS AUSTRALIA ANNOUNCES REBRAND Australia, the smallchange investment app, has announced a rebrand, inclusive of a name change. Now known as Raiz Invest, the company has prompted users to update their Australian app to see the new logo, colour scheme and name. Acorns, which launched in the US in 2012, arrived in Australia in 2016, and almost 500,000 users have signed up since. The rebrand has triggered speculation that the start-up is preparing for an IPO. ACORNS
DIGITAL PROPERTY PLATFORM REACHES ONE MILLION TRANSACTIONS PEXA, which aims to provide a completely paperless mortgage process nationwide, saw more than half of its transactions occur in the last 10 months exchange platform Property Exchange Australia (PEXA) has completed more than one million property transactions. PEXA, which aims to provide a completely paperless mortgage process nationwide, saw more than half of these transactions occur in the last 10 months. Ninety-eight percent of Australia’s mortgage lending market and over half of all legal and conveyancing firms nationwide are on the platform. CEO Marcus Price said, “We have invested time into building strong relationships with the industry and collaborated closely with financial institutions, peak bodies and practitioners to establish a solid pathway to digitisation. DIGITAL
“Throughout our journey, we’ve been privileged to work with outstanding banking and practitioner teams, who have been crucial to the industry’s reform. The platform promotes strong partnerships between lawyers, conveyancers and financial institutions, and we highly value their contributions as we continue to build on this safe, reliable and efficient system. We are committed to supporting the network as we transition together towards a 100% digital conveyancing process.” Back in December Western Australia was the third state to switch to the PEXA program to introduce paperless processing for all loan refinances within the state. In the existing paper-based
process, approximately one in four property settlements are delayed, risking financial cost and stress for buyers and sellers. PEXA, backed by the big four banks and four state governments, is working to digitise the industry. Since it began in 2010, PEXA has worked to establish a national industry climate, including collaboration with more than 140 banks and financial institutions, commitment from state governments, the creation of a robust regulatory framework, and backing from the practitioner community. As a participant in the very first PEXA transaction back in 2013, Paul Major, business services manager at Land Victoria, said, “PEXA offers a transparent way for people to see and share an entire transaction, creating an environment where you can work collaboratively. From the time the settlement is completed, sellers have been able to access proceeds in 30 minutes and buyers have had their names on titles in half that time.”
GLOBAL TRENDS IN FINTECH Source: KPMG
10
In Q4 2017 global investment in fintech companies hit
The total number of venture transactions in fintech exceeded
$8.7bn across 307 deals
1,000 for the fourth year in a row
2017 records third-highest annual total for venture capital investment this decade at
Across mergers, acquisitions, financing and private equity buyouts, aggregate deal value remained more than robust, at roughly
$13bn
$31bn
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GOVERNMENT MUST ‘STAND UP TO BANKS’ Australia has urged the government to stand up to the nation’s banks and back open banking reforms for the benefit of consumers. Representing 220 fintechs, the organisation has said initial steps to reform should include the introduction of deposit and lending products over a 12-month time frame, with a formal role for the ACCC. Currently, reforms are due to be implemented over the next 18 months, following the introduction of legislation, which is scheduled for June. FINTECH
NEWS
MARKET
GEN X STRUGGLES WITH REPAYMENTS is struggling the most when it comes to paying back mortgages, according to market research agency Feedilicious. Almost 75% of Gen Xers (aged 35–44) who particated in the survey said they were not confident about making their monthly payments. Nearly a quarter were paying upwards of 30% of their total household income towards their home loan, and almost half thought finding the right mortgage was the most challenging aspect of taking out a loan. GENERATION X
BROKERS FUEL RISE IN WHITE LABEL DEMAND Research by wholesale funder Advantedge Financial Services sees rise in white label demand from broker channel, supported by recent NPS scores and their customers are choosing white label home loans, according to research by wholesale funder Advantedge Financial Services. In its half-yearly broker satisfaction survey, Advantedge achieved a consistently strong Net Promoter Score (NPS) of +45. Similarly, its customer satisfaction survey also highlighted a set of positive results. Following an enhanced focus on customer service, Advantedge received an overall end-customer NPS of +38, up from an already-high NPS of +23 in August 2017. In September 2017 Advantedge introduced digital verification of identity and digital document send-and-sign to further enhance
broker efficiency and customer experience. The mobile identification apps IDyou and ZipID collect customer identification documents, while the digital send-and-sign capability has significantly improved turnaround times. According to the broker satisfaction survey, brokers who have used these digital enhancements are highly satisfied, giving them a rating of eight out of 10. Broker feedback shows that they view the digital enhancements as easy to use, making the process faster and more efficient for their clients. Advantedge general manager Brett Halliwell said customer service and a hassle-free loan application process were the two main factors
BROKERS
MOODY’S ISSUES PROSPA RATINGS has assigned ratings to Prospa’s Australian small business loan asset-backed securities (ABS) trust. It is the first rated ABS issuance backed by unsecured small business loans in the Australasian market, and one of only a few globally to be rated by a big-three credit agency. A total of $83.25m in debt securities were rated as follows: $64.8m Class A Notes assigned A3; $14.6m Class B Notes assigned Ba2; and $3.7m Class C Notes assigned B3.
IS THE US HEADING FOR RECESSION?
MOODY’S
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contributing to Advantedge’s strong NPS. He said: “While competitive rates and quality of product were also high on the list of factors influencing customer advocacy, the results show yet again that quality service that enables an easier loan experience comes front and centre for brokers and their customers. “Thanks to digital signing, our partners at MSA National are seeing 18% of documents now being signed and returned within three hours and 60% signed and returned within three days. Put into context, that’s the same time it usually takes for paper documents to be received by the customer by express post. This digital innovation is shaving five to seven days off the settlement process and leading to increased conversion. “We’re extremely proud to have achieved such strong results, but there is always room to do more. We will continue to enhance our products and services to deliver the straightforward, stress-free experience our brokers and customers are looking for.”
Source: Macrobond, Saxo Bank Research & Strategy
Index
US Consumer Confidence Index vs recession 150 140 130 120 110 100 90 80 70 60 50 40 30 20
131
Historically, such levels of consumer confidence have been followed by recession and a lost decade 1970
1975
1980
US Consumer Confidence Index
1985
1990
1995
2000
2005
2010
2015
ARREARS IN DECLINE Source: RMBS Arrears Statistics: Australia
1.30%
January 2018
1.16%
February 2018
In focus Arrears declining in resource-oriented states: Queensland
1.53%
from 1.65% – YoY decline
Western Australia
2.27%
from 2.32% – YoY decline
HOME LOAN ARREARS IN DECLINE loan arrears fell across Australia during February, following a rise in January. The Standard & Poor’s Performance Index for Australian prime mortgages decreased to 1.16% from 1.30%, according to a report by S&P Ratings. The report titled RMBS Arrears Statistics: Australia said arrears were a lagging indicator, meaning these improvements partly reflected stronger jobs growth nationwide (see graph above). Improving conditions in the broader economy are helping to stem the flow of new loans moving into arrears. However, loans in arrears in the most severe arrears category are not improving. The report read: “How well borrowers can manage the pressures of rising interest rates, given wage growth constraints, depends on a few key factors. The most important factors are their loan-to-value (LTV) position and refinancing prospects.” HOME
FE AT URES
SPECIAL REPORT
THE KINGS OF CAPITAL Innovating access to finance for SMEs, OnDeck is turning to its broker network to help deliver a projected $2bn in business capital by 2020. Australian Broker crunches the numbers
SME LENDING TRENDS
66%
of SMEs have used personal credit cards to ease cash flow
40%
of Australian SMEs borrow to fund equipment purchases
89%
of OnDeck loans are generated through brokers
25%
of SMEs plan to seek additional financing over the next 12 months
33%
of SMEs would borrow from an online lender
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and medium-sized enterprises are the backbone of the Australian economy. Defined as businesses with annual turnover in the range of $100,000 to $50m, their contribution to GDP stands at 57% and they are responsible for the employment of more than two thirds of the nation’s workforce. Naturally, the owners and directors of SMEs are ambitious people who want their businesses to thrive. Data published last year by Canstar confirms that one in 10 SMEs are actively engaged in a growth strategy, and 45% aim to expand operations within three years. However, in order to thrive, SMEs need capital, and, as confirmed by Scottish Pacific’s SME Growth Index, the availability of credit is a primary hindrance to growth for 64% of these businesses. Since the first sentiment index was published in 2014, the number of SMEs funding growth via their main relationship bank has decreased by 11 percentage points, while the popularity of non-bank lenders has more than doubled. The figures confirm a clear trend: a major source of Australian employment and economic growth is being squeezed by a lack of credit. “It’s incredibly important to be able to access money in order to grow a business, whether that is to refurbish a store, buy inventory or just do something that you can’t normally do through traditional finance,” says Cameron Poolman, CEO of specialist online SME lender OnDeck. SMALL
“Yet small businesses in Australia find it really hard to access capital,” he says. The terms and conditions of traditional credit only compound the problem, with many SME owners required to borrow against their homes in order to support the businesses that fund their mortgages. It’s a catch 22 of the highest order. Drawing on its own research, OnDeck reports that one in five SMEs are unable to take on new business due to cash flow restrictions, and 90% say improved
$8bn worth of finance. Australian operations launched in 2015 and lending volumes have doubled every year since. Not content with simply filling the gap left by traditional banks, the lender is innovating in the alternative finance space by offering an online application and approval process for loans, with funds secured within one business day. With a focus on supporting cash flow businesses that make at least three deposits a month, OnDeck services short-term requirements of $10,000 to $250,000, offering loan terms from six to 24 months. “We don’t propose that we can do everything. What we do propose is to be fantastic at servicing our small business customers with unsecured loans, and we will continue to focus on that segment. Our mission is to deliver the finance that can
“Australia is learning from the experiences of other markets around the world, and it is evolving faster as a result” cash flow could increase revenue by as much as 11.7%. Despite this, only 9% of SMEs used alternative sources of funding in 2017. Historically, 63% of small businesses have been heavily reliant on traditional bank loans, while others have turned to credit unions, friends and family. But with 25% of surveyed SMEs planning to seek additional financing over the next 12 months, there is a strong call for their options to expand. Bringing a fresh approach to the space, OnDeck has been lending to SMEs in the US since 2007 and globally has supported 80,000 businesses through the delivery of
make small businesses successful,” Poolman says. Funding the future Last month, OnDeck predicted that demand for finance in the Australian SME sector could reach $2bn in value by 2020. Global CEO Noah Breslow says, “There is a huge amount of potential energy in this market. As the awareness and adoption of alternative lending both increase in Australia, there is no reason to think that this couldn’t be a market that is five, 10 or even 20 times the size it is today, in just a couple of years.” The predictions are based on trends in the US market, where
In partnership with
Cameron Poolman, CEO, OnDeck Australia, and Noah Breslow, global CEO, OnDeck
OnDeck witnessed a four-step market-growth cycle play out over 12 years. Starting with awareness of online lending and moving to market maturity via phases of scepticism and scaling, he says the Australian market is currently working through the same phases, but on a five- to six-year timeline. Needless to say, such rapid development is mutually beneficial. OnDeck’s average borrower has been in business for eight years and has previously approached a mainstream lender for funding, only to be declined or suffer a bad customer service experience. While these factors, hand in hand with awareness, are a
significant driver of OnDeck’s recent business growth, repeat custom also plays a part. Similarly to how online shopping has transformed the retail sector, once a business owner has experienced online lending it transforms their entire approach to operations. “Bad experiences with a bank loom large, preventing businesses from even applying for finance, because they perceive the transaction cost as being too high,” Breslow says. “Once they know how quick and easy it is to obtain finance, they seek out growth projects more often. “Australia is learning from the experiences of other markets
around the world, and it is evolving faster as a result. Ultimately, that is a good thing for the players in the market as well as the SME owners themselves.” As these trends echo throughout the Australian SME space, OnDeck’s growth strategy will continue to focus on awareness of alternative finance options, which currently stands at 30% in Australia compared to 70% in the US. Supporting this, Australian borrowers will soon be able to benefit from the introduction of a new line-of-credit facility, providing an alternative to the term-loan product for flexible working capital.
The evolution of lending Predominantly entrepreneurs and business owners themselves, brokers have played a significant role in OnDeck’s performance to date, and this is set to continue over the coming months and years. One of three origination channels, brokers have historically driven around 89% of all OnDeck loans as SME owners seek them out for advice and guidance on their borrowing options. Paradoxically, this demand for one-to-one interaction and guidance is at odds with the established perceptions of fintech-powered lending. In short, the SME operator’s demand for superior face-to-face service, coupled with the speed and agility of online lending, brings the market full circle. As a result, OnDeck is working to expand its already-large team of broker partners, and the expectation is that the broker channel will outpace both direct and strategic partnership originations in Australia by the end of this year. Supporting this target, OnDeck’s broker program offers accreditation, education and guidance. Not only is this critical to the lender’s success but is vital in terms of supporting brokers in diversifying from their current focus on residential lending. “As an industry, our job over the coming few years is to drive awareness of our online lending solutions for small businesses. We really want any small business considering a loan for any purpose to seriously look at online lenders as a viable alternative to a traditional bank, and through our broker channel this is already being achieved,” says Poolman. With new products coming to market, enhanced cooperation within the industry and growing awareness among customers, for Australia’s start-ups, SME operators and brokers, business certainly is booming. AB www.brokernews.com.au
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NE WS ANALYSIS
A QUESTION OF COMPETITION The debate around broker commissions took another turn last month when ASIC backed a flat-fee payment model. Yet brokers on the ground say fees will limit their ability to compete and will drastically reduce customer outcomes
payment models dominated headlines once again last month, with a number of big names fuelling the debate. Almost a year to the day since the publication of the Sedgwick report – and 12 months closer to the suggested implementation of its 21 recommendations – ASIC told the royal banking commission that only a flat payment model would tackle the “unacceptable risk of poor consumer outcomes”. The MFAA has previous told the Productivity Commission that customer fees would be “highly inappropriate” for the broker industry; however, the latest objections have highlighted fresh concerns, specifically for future borrowers, and they cascade throughout the finance industry. Counting in excess of 3,800 marketplace offerings, with rates varying from less than 0.5% to more than 1% for some products, John Kolenda, founder and MD of 1300HomeLoan, says fee-based payments would place undue financial burdens on households. Kolenda, who observes that consumers’ borrowing power for buying a home has already dropped by almost 10% in 12 months, says, “Charging consumers a fee to receive the expert advice of a broker to navigate the home finance maze is only going to make the major banks more powerful, and the home loan customer will be the loser.” Strengthening his position, he calculates that since the introduction of brokers to the mortgage space, lender margins have reduced by more than 2%, saving consumers more than $30bn a year. In the Netherlands, where brokers BROKER
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commonly charge the equivalent of $3,000–$4,800 per arrangement, domestic banks dominated the market before the GFC hit, and commentators say the lack of customer choice and access to advice was a primary driver. In fact, it is only because of the GFC
it’s the result of an accidental market outcome rather than a deliberate move to improve the customer experience. “A consumer dealing directly with a lender has limited negotiating power or knowledge of the interest rates and lending criteria offered by competitors.
“If banks were perceived as impartial in selling their products, brokers wouldn’t be writing more than 50% of all new loans” Bernard Desmond, mortgage and finance specialist that the country’s alternative and small lenders have been able to gain a foothold in the marketplace. The credit crunch prompted a sharp decline in the majors’ market reach, and by 2017 their share of new mortgages had fallen to its lowest rate ever, enhancing competition across the board. While the choice of lenders is stronger today,
A mortgage broker with access to a panel of lenders drives competition between lenders to the benefit of all consumers,” Kolenda says. Market dynamics While Australia’s major lenders retain the lion’s share of new mortgages, the emergence of small and alternative
lenders has provided a boost to competition dynamics. Both have witnessed a steady increase in business, across multiple products, with much of their growth driven through broker channels. Confirming their popularity, the latest AFG Competition Index highlights declines in market share for CBA, from 14.99% to 13.63%, and NAB, which has seen its share of new mortgages decline from 8.57% to 7.67%. In comparison, the non-majors’ market share is now at 35.97%. “Increased competition delivers value to the consumer. Many of the non-major lenders on our panel do not have a branch network. Without the competitive tension mortgage brokers bring to the market, prices would inevitably rise,” says AFG general manager of sales and operations Mark Hewitt in response to the figures. The introduction of fintech players to the lending space is accelerating the trends. From comparison tools to the likes of digital bank Xinja, they satisfy
COMMISSIONS PAID TO BROKERS Source: ASIC
Upfront commissions paid to broker sample, 2012 and 2015 $98bn in home loans generated:
In 2012
$729m in upfront commissions (0.74% of home loan value)
$175bn in home loans generated:
$1.42bn
In 2015
in upfront commissions (0.81% of home loan value)
Trail commissions paid to broker sample, 2012 and 2015 $380bn in outstanding home loan balances generated: In 2012
$733m in trail commissions (0.19% of outstanding home loan balances)
$545bn in outstanding home loan balances generated: In 2015
$984m in trail commissions (0.18% of outstanding home loan balances)
Bernard Desmond, mortgage and finance specialist
John Kolenda, founder and MD of 1300HomeLoan
new customer demands by achieving a level of agility the majors cannot. While some cut out the need for a broker, others simply facilitate a quicker, simpler and more convenient transaction, leaving plenty of room for brokers to facilitate – should they be able to provide that facilitation without a fee. “The main consideration should always be the consumer and their access to products and services from a broad range of lenders which can compete for consumer business,” says Kolenda. “The foundation of the broking industry is the customer comes first. Even the major banks have acknowledged that brokers are instructed by and act on behalf of the customer.”
“If the bank’s proprietary channel does not charge a fee and the online lenders do not charge a fee, you cannot make brokers charge a fee. If anything this will be bad for consumers as banks will have the upper hand to dictate their terms,” says mortgage and finance specialist Bernard Desmond. At a particular disadvantage would be first home buyers, he observes, who are reliant on brokers for the majority of purchases. Further, time-pressed business owners who are borrowing to keep their enterprises afloat would face added financial pressure when sourcing reliable advice, in addition to retirees in search of reverse mortgage products. While there is little doubt fee-forservice reforms would remove the question marks around perceptions of impartiality, it is likely that introducing such a mechanism in isolation would skew overall competition across the finance industry. Reversing the outcomes witnessed in the Netherlands, there would be huge implications for alternative lenders, as well as the all-important customer outcome. As Desmond concludes, “How can a customer be better off if you charge fees for something that is free right now? If banks were perceived as impartial in selling their products, brokers wouldn’t be writing more than 50% of all new loans.” AB
Improving customer outcomes Westpac chief executive Brian Hartzer also joined the debate last month, publicly suggesting brokers charge their clients directly for advice. Calling it “an option that could be considered”, he backed the fee-based model as a solution to the royal commission’s findings on the exploitation of remuneration loopholes. In addition to concerns on how that would influence competition between lenders, one broker says the consequences could be far more drastic, altering the entire playing field.
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OPINION
TO FACEBOOK OR NOT TO FACEBOOK Founder of The Successful Adviser James McCracken explores whether Facebook lives up to the hype as a lead generation platform for brokers
now, you could be forgiven for thinking that broking has turned into a competition as to who can best use Facebook to drive more leads into their business. But before you, too, go and spend your time, energy and money on this, it’s worth exploring whether having a paid lead generation funnel on Facebook is really all it’s cracked up to be. Though we hear stories of people who create lead generation systems on autopilot, generally these are misleading and inaccurate. Whether it is a broker who reports that they “tried traditional marketing, spent thousands, but nothing worked until they finally cracked the code”, or a business whose focus is on selling online lead gen solutions, most times the tangible results fall short of the mark. In particular, a great result isn’t about the number of new leads or how to get a lower cost per click. These are mostly irrelevant. The key metric should be how much does it cost me to actually get a new client – otherwise known as the cost per conversion – and how much more money do I have in my bank account now compared to what I had before running the campaign. So, before thinking Facebook is your salvation, let’s dig in and look at things a bit more, because there are several key questions to ask. What is your cost per conversion? It can easily go well into hundreds of dollars per
new client, so you need to compare the real cost of client acquisition to other lead gen sources. While you may only be paying $15 per ‘lead’, poor-quality data or an uncommitted prospect can severely impact your conversion rate. I have spoken to brokers who got as many as
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The brokers who tend to get the best results from Facebook ads have a niche audience to whom their message and offer is more relevant and targeted. Copy-and-paste campaigns Many suppliers run the same campaign for a lot of businesses. If you do contact them, ask if they can generate more leads for you on Facebook, and if they give you an immediate yes before seeking to understand more about you and your business, that should be a point of concern. The best marketers and suppliers are actually cautious about who they work with, and they don’t make a promise that they can’t deliver on. Marketing is an art, requiring a bespoke strategy – spray and pray does not deliver results. Are you great at selling? The sales skills required to convert a cold Facebook lead are very different from those needed to convert inbound referrals into clients, and let’s face it, if we only ever got inbound referrals, that’s all we would want. If your sales skills aren’t acutely refined, chances are your conversion rate will be worse off for it. Next, it’s critical to look at your competition: what are the top brokers doing? By choice, most top brokers don’t invest heavily in Facebook ads. Instead, they choose to invest in relationships with clients, drive inbound referral business through strategic partners, and maybe, if they want a top-up, then they might run a campaign for a while. For newer brokers, I recommend getting clarity on your own value proposition and delivery process before diving into paid
A great result isn’t about the number of new leads or how to get a lower cost per click. These are mostly irrelevant
James McCracken Founder, The Successful Adviser
110 Facebook ‘leads’ from a lead gen company but had zero conversions. Who is your target audience and what is your compelling offer? Articulating the offer the right way gets flippantly thrown into the ‘just write some good copy’ basket, but good copy is immensely harder to produce than most give it credit for and can easily make or break a campaign. Is your business actually suited to Facebook advertising? For many residential brokers, creating a compelling point of difference isn’t easy. Sure, you might run an ad saying “If your home loan interest rate doesn’t start with a three, you’re probably paying too much”, but invariably you’ll attract rate shoppers, much the same as you get on other lead gen sites.
advertising, otherwise it could cost a small fortune to learn the hard way. For established brokers, there is often far more gold to be found offline than online. Building a business on the foundations of a great customer experience and excellent processes will outperform a Facebook campaign every day of the week. One is short-term and tactical, the other is strategic and long-term. In summary, it’s not that Facebook can’t be great, because it can be. But you need to ask yourself if it is the right platform for your business, and you need to be aware that there are a lot of moving parts and it is harder than most people want you to believe to get consistent, high-quality results. AB
WHITE LABEL UPDATE
WHITE LABEL LENDING: CUSTOMER SERVICE REIGNS Customer service continues to be a key motivator for brokers using white label loans, according to Advantedge general manager Brett Halliwell lending has been on a strong growth trajectory for a number of years, with broker and customer take-up continuing to increase year-on-year. According to Mortgage and Finance Association of Australia (MFAA) data released in November 2017, the value of new loans written by Australian brokers using white label products grew by 9% from October 2016 to March 2017. This solid growth was the highest of the eight categories of lending monitored by the MFAA. And while the great product features and highly competitive rates offered by white label providers continue to be a drawcard, research by Advantedge shows that customer service is the key driver of this trend. According to Advantedge’s latest broker satisfaction survey, brokers are attracted to white label’s service levels, particularly in relation to responsiveness, turnaround times, and ease of transacting. Advantedge’s Net Promoter Score of +45 shows that Advantedge is leading the way in all three of these areas. The customer satisfaction survey also produced similar results, with customer service topping the list when it comes to the factors influencing customer advocacy, followed by price and product. Advantedge’s customer Net Promoter Score has increased from +23 to +38, which demonstrates that its white label home loans are providing a great customer experience. WHITE LABEL
While other lenders have had to adapt their business to the broker channel, Advantedge is built for brokers. With no branch network, and by harnessing the brands of aggregators, Advantedge is able to focus on supporting brokers in delivering the highest level of customer service. Personal service Direct access to credit managers and a dedicated Scenarios Team ensures brokers are well informed of the required information and documents to help them meet the unique financial needs of their customers. Advantedge regularly receives positive feedback on the benefits of having a team of ‘real people’ who brokers can work with. Quality submission checklist Advantedge understands that brokers’ time is precious and therefore provides brokers with a loan submission checklist to help them make sure they collect all the required information from the customer so they can submit highquality applications from the outset. As a testament to this, in March 2018 the number of applications receiving unconditional approval in less than five business days increased by 6% compared to the same time in the previous year. Digital enablers Advantedge is continually investing in innovative technologies that support the business success of brokers and create a more seamless
Brett Halliwell, general manager, Advantedge
client experience. In September 2017, Advantedge launched digital send-and-sign capability for home loan documents in partnership with MSA National and DocuSign. This ability makes submitting a home loan application faster and simpler. We have also introduced two new customer identification apps – IDyou and ZipID – that allow brokers to conveniently collect customer identification documents, speeding up the settlement process for their customers.
Brokers are clearly embracing these new tools, and customers are also benefiting from a significant reduction in turnaround times, with 60% of documents now being signed and returned within just three days and 83% of documents being signed and returned within one week, according to MSA National. Advantedge will continue to enhance its products and service offering to deliver the straightforward, stress-free experience our brokers and their customers are looking for.
Mortgage broker Louis Velasquez of Lucky Money in southwest Sydney discusses his experience writing Advantedge’s ChoiceLend product has been writing white label loans since he first started out as a broker three and a half years ago. He uses Advantedge’s ChoiceLend product for three key reasons – fast turnaround times that create a fluid client experience; highly competitive rates; and the fact that the LOUIS VELASQUEZ
product highlights the value of using a broker. He has established strong relationships with Advantedge’s credit managers and Scenarios Team, who he often calls two or three times a day. “Being able to call a credit team to discuss a customer’s application is fantastic. I also appreciate
that the lending criteria is very straightforward, so if a loan is declined, it’s obvious why, and I can go back to the client and explain it to them,” he says. “Using white label loans allows me to provide additional services which really make the customer feel like a valued, premium client.”
Embracing digital Velasquez also sings the praises of new digital tools, particularly DocuSign. “Before this technology became available, customers would often sign paper documents in the wrong place or miss a signature. The accuracy of the tool means this is no longer an issue,” he says.
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FE AT URES
BUSINESS PROFILE
FROM BROKER TO BUSINESS OPERATOR
Choice Aggregation Services CEO Stephen Moore reveals the key factors that help brokers to excel as business operators in a changing marketplace
the broking industry faces a number of once-in-a-lifetime challenges, not to mention unprecedented scrutiny. Compound this with significant changes to lender habits, a new generation of tech-enabled players, and all the usual challenges that self-starters face, and it’s safe to say that times have definitely been easier. But the flip side of any challenge is opportunity, and with a renewed focus on customer outcomes, not to mention a suite of new tools to work with, there is plenty of opportunity to be found. “Successful business owners work on the business, not just in the business. They take the time to step back from the day-to-day and focus on planning, clarity in direction, and what’s required for long-term success,” says Choice Aggregation Services CEO Stephen Moore. While it’s often a case of easier said than done, Choice has long worked with brokers to help leverage opportunities. Choice’s proposition is built on the broker’s role as a business operator as well as an adviser, and, with each broker different from the next, Choice also takes time to understand the individual needs of its network members. From those who are new to the industry to the decade-plus veterans, every business faces times of transition and challenge as well as prosperity: hiring the first team member, channelling tailored support, expanding interstate, outsourcing back-office processes, or even streamlining. In response to these needs, Choice works closely with members to achieve their growth aspirations, pioneering such solutions as a peer-to-peer learning program; monthly technical CURRENTLY
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updates to help make sense of the latest regulatory developments; and its networking and discussion groups, the Top Group Summit and Top Group Advisory Group. Behind the scenes,
provides online education and training, social media and content support. Crucially, it provides the world’s largest CRM system; however, while handy, that isn’t a fast track to success. As Moore says, “One of the most important assets that any broker business has is the customer base, and the more details you have on that the more useful it becomes. “We can offer the largest system, but knowledge is the world’s best CRM.”
diligent focus on supporting brokers in leveraging digital platforms to deliver operational efficiencies and outstanding customer experiences. Further aiding efficiency, the
“It is important to stay focused on what counts the most, and that is providing great advice and great experiences to customers” Stephen Moore, Choice Choice fights the broker’s corner, with Moore present on the Combined Industry Forum and other bodies. With technology playing an ever larger role, Choice has placed
end-to-end business and client management tool Podium is designed for brokers to streamline compliance tasks. Inclusive of an NCCP function, it gives access to a marketing hub, which
The real world Get Smart Financial Solutions was founded by Rachael Bland in 2012 after more than 15 years working in the finance sector. Taking the leap to satisfy her professional ambitions, as well as continue to provide for her children, Bland’s initial strategy focused on her local area – and it paid dividends. In her second year she gained platinum status with the aggregator, a rare achievement for a newcomer. Today, the business settles around $70m per annum, and Bland is the sole broker, working with a team of eight part-time staff. Recently, she has
THE PROPERTY MARKET, THEN AND NOW Source: 2017 Whitepaper published by Choice Aggregation
Average weekly income
Broker market share
About $30,000 pa
1997
2015
$433.90
52% 2013
2007
$867.10
44%
2017
2017
54%
$1,106.20
About $45,000 pa
About $60,000 pa
Standard variable interest rate
First home buyer lending
2007 1997
7.20%
8.05% 2017
5.25%
1997
16%
2007
10%
2017
7%
THE KEY TO SUCCESS
Stephen Moore, CEO, Choice Aggregation Services
supported two team members in their transition to qualified loan writers, and is now looking forward to the resulting business growth. She says, “The transition from broker to business operator occurs not only through the challenges you face day-to-day but also the support received from BDMs, lenders, and of course your aggregator. “Choice’s support has been unparalleled; they have been like a family to me, and have been very much instrumental to the growth of my business.” Choice welcomed more than 400 brokers to its network in the 12 months to October 2017, reaching more than 1,600 members. With more than 20% of brokers on the books for 10 years or more, success stories are commonplace. Will Unkles is principal at 40 Forty Finance, founded in Melbourne three years ago. In FY17 the business settled just under $20m and is on track to hit $40m this financial year, with a subsequent target of $60m in FY19. While his previous job as a consultant helped pave the way for 40 Forty Finance, like all good business operators Unkles knew where support would be required. His initial approach was to build strong connections with each lender’s BDM,
cementing the notion that broking is a relationship-based business. Further, he called on personal networks in his local area, with a focus on first home buyers. Having identified his customers, Unkles developed a strong online communications strategy and offline he sponsored a local sporting club and held free-to-attend
customer first and designing a business process around target outcomes. It’s also about maintaining quality without compromise, and that is entirely dependent on long-term perspective: one eye on the present and one eye on the future, as Moore advises. However, when it comes to being a business operator the most successful
“Choice’s support has been unparalleled ... [they] have been very much instrumental to the growth of my business” Rachael Bland, Get Smart Financial Solutions workshops to educate 18- to 30-yearolds on financial management. Now ready to scale up the business and recruit a third team member, he’s turning to his aggregator for support. “I think in a sense a lot of brokers do take the role of an aggregator for granted. The software we receive via Choice is really the foundation of my business, and there is no way I’d be able to run my business as efficiently and successfully without it,” he says. Professional focus Professionalism is about putting the
enterprises are aligned with their customers’ needs and are agile and intelligent enough to know what support they need and at what stage. “In a changing landscape like ours it’s even more critical to be aligned to the right aggregator, and the right aggregator will be very proactive in helping you navigate the changing landscape,” Moore says. “My message to all brokers is that it is important to stay focused on what counts the most, and that is providing great advice and great experiences to customers.” AB
“The best brokers are entrepreneurs. They are driven individuals who actively seek out opportunities and adapt to changing circumstances – that is particularly relevant in today’s environment. “Our top brokers share a track record of going through significant change and not only coping through that change but going on to prosper even more on the back of it. However, the best brokers also recognise that they can get better business outcomes by continuing to learn. “We have found that the best way to do that is through peers. So rather than being taught a theory it’s far more valuable to listen and learn live from other successful brokers. A big part of what we do is bringing brokers together to do this, because in a market that is as dynamic as ours you have to continue to adapt and learn, and that’s a really strong trait we see in successful brokers. “In terms of a broker’s own business, I’ll state the obvious: good people want to work for good people. You must understand the individual circumstances of team members, support them when things are good and, when things are tough, acknowledge performance, give praise where it’s due and don’t shy away from difficult conversations. Those leadership traits are critical in any business and certainly in successful broker businesses.” – Stephen Moore
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PEOPLE
MOVERS AND SHAKERS
PROSPA CONFIRMS MAJOR SHAKE-UP
Gail Pemberton AO and Fiona Trafford-Walker join as independent non-executive directors, and non-executive director Greg Ruddock has been appointed chairman of the board
GRAHAM HODGES ANNOUNCES RETIREMENT will retire this month after a 27-year career at ANZ. He has held the position of deputy CEO since May 2009. Hodges has held a range of senior executive roles since joining ANZ in 1991, including CEO of ANZ New Zealand, group MD corporate banking and chief economist. CEO Shayne Elliott said: “Graham … can be proud of the positive impact he has had not only on our relationships with our customers and key stakeholders, but also for the way he has mentored our next generation of leaders.” GRAHAM HODGES
Fiona Trafford Walker
lender Prospa, which provides loans to small businesses, has confirmed a string of major appointments to its board. Gail Pemberton AO and Fiona Trafford-Walker have filled positions as independent nonexecutive directors, and current non-executive director Greg Ruddock has been appointed chairman, having recently stepped down from the board of Eclipx Group to focus on Prospa. They join existing non-executive directors Avi Eyal from Entrée Capital, James Cameron from AirTree Ventures, and executive directors and co-founders Greg Moshal and Beau Bertoli. Trafford-Walker has served as an independent non-executive director of Link Administration Holdings and is an investment director at Frontier Advisors. She was the inaugural managing ONLINE
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Gail Pemberton
director at Frontier Advisors and played a critical role in growing the firm. “Small and medium businesses are very important parts of our economic and social fabric, said Trafford-Walker. “They create jobs, they innovate and they provide many of the goods and services that we all need and enjoy. Prospa has done a great job recognising the need for these businesses to have access to fast finance with a simple and easy application process. “I joined the Prospa board because I believe in what the company has accomplished so far and because I think that there is much more to achieve.” Pemberton, who has more than 35 years’ experience in banking and wealth management, is a specialist in technology and operations. She is the former COO of BNP Paribas UK and has
Greg Ruddock
also held the roles of CEO and managing director at BNP Paribas Australia and New Zealand, and group CIO and financial services group COO at Macquarie Bank. Ruddock, who was appointed director of Prospa in 2015, has more than 30 years’ experience in private equity and operations management and specialises in investment strategy, business development and mergers and acquisitions. Commenting on Ruddock’s appointment, Prospa joint CEO Beau Bertoli said: “Greg Ruddock has been instrumental in shaping the direction of the company, helping us grow into a market leader today. His appointment to the chairman role underpins our ambitious growth strategy as we continue to empower a new generation of small businesses with innovative finance solutions.” AB
SUNCORP GROUP NAMES NEW CHAIRMAN Group has announced that its board chairman will retire later this year. Ziggy Switkowski has been a board member since 2005 and served as chairman for almost seven years. He will retire after the AGM on 20 September. The board has chosen Christine McLoughlin to take over. She has worked in financial services for more than 20 years and joined the Suncorp board in February 2015. She is currently chairman of the Suncorp Remuneration Committee and a member of the Risk Committee. SUNCORP
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PEOPLE
Have an interesting deal? Had a particularly difficult or interesting deal? Why not share it with us? Email:
rebecca.pike@keymedia.com
A BIG DEAL
Broker and Hype Financial MD Luke Cieslak is accustomed to thinking outside the box. But when an entrepreneur and his wife approached him to assist with a renegotiation, he had no idea it would turn into a near-$2m deal
THE FACTS
Loan size and term $1,835m for 30 years
Client Couple in their early 50s
Goal Refinance to purchase investment property
Location Inner-city Melbourne
Lender Macquarie
Aggregator Connective
the right balance between maximum tax effectiveness, competitive pricing and one single low package fee. However, there were more challenges around the corner. I needed the financial statements and tax returns for several business structures, including the corporate trustee companies. Along with my mentor, Therese O’Neill of Alphabroker Mentoring, I reconciled the information, consolidating the financial picture, accounting for intercompany transfers, working out financial addbacks and demonstrating serviceability. Adding further pressure, the investment property auction date was drawing ever closer. It wasn’t until two days before auction that we received the unconditional finance approval. The clients were over the moon. Pricing across all three facilities averaged less than 4% pa and achieved double the savings we had originally projected. We also secured a number of perks, waiving ATM fees and international credit card transaction fees, and securing a free, fully functional 100% offset account. THE TAKEAWAY
THE SCENARIO
Entrepreneurs and business owners are often underestimated and overlooked by banks, yet their financial contributions – not to mention the innovations they spearhead – are vital to a country’s economy. My client, Michael, is an entrepreneur and leader in his field who operates a highly successful business in Melbourne. He runs two busy practices, has developed a number of health-related apps, and counts many of Melbourne’s elite athletes and sporting stars among his clients. Self-employed for 30 years and a loyal and long-standing customer of a major bank, he contacted his lender to renegotiate a 4.55% pa home loan rate – the first step to securing finance for a new investment property he wanted to purchase with his wife, who works as a teacher. A week after lodging the enquiry, Michael was still waiting for a response, and growing frustrated with the treatment he was receiving he enlisted the help of a broker. While the initial conversation focused on his renegotiation, it transpired that he also had a line-of-credit facility, a couple of business loans, and numerous business and savings accounts. The couple were paying between 5% and 6% pa in interest, plus fees, all secured against their inner-city Melbourne family home, in which they held significant equity. I felt confident that I could structure these facilities better, acquire the funds for the investment property, and help them save significantly on both interest and fees. 24
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THE SOLUTION
To execute the strategy, the key was to refinance the client’s business loans at home loan rates and cash out the funds required for the investment property through equity release, without having to
There were a number of things I learnt from this deal. Firstly, it’s critical to work closely with your BDM and senior credit team, and my mentor was invaluable as we worked through 300 pages of financial information – a job that would have taken
Michael initially wanted to talk about a $250,000 loan, but after digging a little deeper the deal snowballed to $1.835m
Luke Cieslak MD and broker, Hype Financial
use their property as security. The solution was relatively simple – one single security and one single package facility that incorporated three loan splits: one personal P&I home loan facility; one P&I investment facility to refinance both existing business loans; and one interestonly, 100%-offset cash-out investment facility to help secure the new investment property purchase. I workshopped the deal with Macquarie Bank BDM Dom Cuzzupi, who in turn worked with the bank’s senior credit team, and it was a fantastic team effort to make the deal run smoothly. The client loved the strategy, especially as our calculations showed that we could save them between $10,000 and $15,000 over two years. In consultation with my client’s accountant and Dom and the team from Macquarie, the proposed solution provided
me weeks to complete alone. Also, my administration and loan manager, Ali, played a vital role in making this deal happen; I’m very thankful she is on the team. Macquarie’s commitment to digital banking helped expedite the process. Not only are its internet banking and APP technologies first-class, but it uses DocuSign and delivers documents electronically. All these things helped us meet a very tight auction deadline. However, the key takeaway is not to take anything at face value. Michael initially wanted to talk about a $250,000 loan, but after digging a little deeper the deal snowballed to $1.835m. Cases like this demonstrate that, with the right expertise and support, brokers can provide enormous value for their clients and far superior service to what most major banks can offer. AB
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DATA
VICTORIA
SA SPOTLIGHT
Sharp declines in the inner city contrast with growth in Melbourne's outer regions Cameron Kusher, research analyst at CoreLogic, reports that in the three months to February 2018, dwelling prices fell sharply in Melbourne's priciest suburbs. The inner-south, inner-east and inner pockets of the city showed price decreases of more than 1% over the quarter, and suburbs that did not record value drops saw lower growth rates. Meanwhile, the Mornington Peninsula recorded the most significant market growth of 1.8% over the same period. In addition, the western and northwestern areas of Melbourne reported high levels of growth, at 13.3% and 12.8% respectively. Affordable markets have witnessed more growth in the 12 months to February 2018 than they have in five years. Melbourne’s continued market stability is also reflected in its dominance of CoreLogic’s Top Performing Suburbs Report for February 2018, in which the city took 39 of the top 50 slots.
Area
Type Median value
Quarterly
12-month
growth
growth
Melbourne
H
$752,000
5.9%
13.2%
Vic country
H
$353,000
5.4%
6.3%
Melbourne
U
$542,000
3.2%
6.2%
Vic country
U
$280,000
0.4%
4.0%
QUEENSLAND
Population growth improves market conditions in the state The level of migration into Queensland of both overseas and interstate buyers is one of multiple factors spurring growth in this market. The southeast has been experiencing the biggest boost. CoreLogic indicates that the net number of migrants entering Queensland from other states has actually exceeded that of Victoria for the first time in nearly five years. That’s likely because so many areas of Queensland show promise. Apart from the Gold Coast and Brisbane City, Propertyology highlights Cairns, which has several major projects in the works, including port expansion, a new university, many luxury hotels and a convention centre. “Growth in the construction sector, education, tourism and agriculture will now start to drive housing demand in a market where supply is extremely tight,” says Simon Pressley, managing director of Propertyology. Townsville, Mackay and Beaudesert have also benefited from growth in their job markets. Area
Type Median value
Quarterly
12-month
growth
growth
A MARKET IN EQUILIBRIUM Things are looking good for Adelaide as new infrastructure projects and developments boost the economy and activity in the housing market activity and balanced supply and demand are two of the factors brightening South Australia’s prospects. “The ‘mum and dad’ developers are very active and are buying properties that can easily be split into two or buying development sites where they can build up to three or four dwellings,” says Peter Koulizos, coordinator of the Property and Share Investment course at TAFE SA. “This has resulted in potential development sites selling for much more than their intrinsic value, as many of these sites are being sold at auction, and people are bidding with their hearts and not their heads. The Adelaide apartment market is playing catch-up, and currently supply is meeting demand.” This supply-and-demand balance keeps Adelaide from suffering the oversupply issues of other capital cities. Despite problems with brain drain and residents migrating out of state, ongoing projects in Adelaide are upping its stock. “There are many cranes in the sky, which is a good economic sign for South Australia. A number of new CBD hotels have already started construction, with more in the pipeline,” Koulizos says. “The CBD is actually a hive of activity with the extension of light rail through the city and the construction of large institutional buildings.” Ultimately, economic development is what will push Adelaide to greater heights, and Koulizos believes the city is taking the right steps in that direction. “The future is looking bright for South Australia, with a burgeoning biomedical precinct and a growing defence industry. The next 10 years should see the South Australian economy perform better than in the previous 10 years,” he says. Adelaide’s rising prices are an excellent herald of things to come if the economy continues to follow this pattern. AB DEVELOPER
H
$542,500
2.4%
3.1%
Median price (houses)
Qld country
H
$436,000
0.2%
1.4%
$632,869
Brisbane
U
$410,000
-1.2%
-1.7%
Qld country
U
$385,000
-1.3%
3.3%
www.brokernews.com.au
Adelaide mortgage market remains active The Adelaide property market is a fairly stable one, which doesn’t experience the same growth and contraction trends seen in other markets. The level of listed properties has been at almost record-low levels for some time now, which has kept prices buoyant. In the construction space, the continued growth in supply in the northern suburbs has seen some valuations come in under the asking price, which is providing some pressure in the higher-LVR brackets. However, the Adelaide mortgage market has remained active. Interest-only restrictions and lenders' tightening credit policies haven’t had the level of impact (yet) that has been experienced in the east coast cities. There appears to be increased activity in rework as some of these policies have been implemented but the level of approval volumes is still strong. The Adelaide market has a higher percentage of fixed rate lending, so, as some of this starts to mature, policy and pricing changes will possibly have more of an impact.
John Rolfe Head, Elders Home Loans
SUBURB TO WATCH: GLANDORE
Brisbane
26
BROKER PERSPECTIVE
Median price (units) $339,387
Source: CoreLogic
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
12.5%
20.7%
29.4%
3.2%
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
3.4%
12.3%
16.9%
4.4%
AUSTRALIAN CAPITAL TERRITORY
Unit construction rises as high price of land impacts affordability of houses OPPORTUNITIES AND KEY INFRASTRUCTURE
The SA government has launched a 30-year plan for Adelaide’s development
$4m investment has been confirmed for the future extended AdeLINK tram network
70 new businesses have opened in five years, creating 800 new jobs
Units in Glandore have a median price of less than $350,000
HIGHEST-YIELD SUBURBS IN SOUTH AUSTRALIA Suburb
Type
Median price
12-month growth
Gross rental yield
Peterborough
H
$80,000
-6%
11%
Whyalla Stuart
U
$68,000
-32%
10%
Whyalla Norrie
U
$81,000
-19%
10%
Solomontown
H
$113,750
-19%
10%
Port Pirie West
H
$110,000
0%
9%
The ABS reports that approvals for new dwellings in this state fell by approximately 80% in the three months to January 2018. According to Housing Industry Association senior economist Shane Garrett, this is a huge drop for the ACT; however, the decline may reflect the approval of several major apartment projects in Braddon, Greenway, Turner and Farrer in August 2017. Unit construction is on the rise, especially since high land prices have reduced the affordability of detached housing. Nonetheless, asbestos removal schemes are helping land sales, especially in the inner north, inner south and Woden Valley, Herron Todd White’s Month in Review reports. These sales can be attributed at least in part to changes in the Territory Plan that have permitted dual-occupancy residences and units slated for professionals and investors. Area
Type Median value
Quarterly
12-month
growth
growth
Canberra
H
$695,000
3.7%
8.7%
Canberra
U
$450,000
2.3%
0.0%
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27
DATA
NEW SOUTH WALES
H
$460,000
2.2%
6.5%
Sydney
U
$717,750
1.8%
3.6%
NSW country
U
$383,000
-3.0%
5.5%
MEDIAN HOUSE AND UNIT PRICES
Retirees looking to downsize are shifting demand towards high-density living
$1,000,000
Area
Type Median value
Quarterly
12-month
growth
growth
Perth
H
$510,000
1.0%
-1.9%
WA country
H
$352,000
4.5%
-2.8%
Perth
U
$401,000
1.5%
-3.6%
WA country
U
$257,500
5.1%
-1.8%
28
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PERTH Total auctions
42
Cleared
10
Uncleared
15
Clearance rate
WESTERN AUSTRALIA
$600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0
$550,000
$700,000
$761,000
$800,000
40%
Houses
$735,000
$900,000
$935,000
A high number of buyers in Perth are looking to downsize as they reach retirement age, which is helping the government limit urban sprawl. “This population shift will have major implications for the Perth real estate market and, in particular, result in a growing demand for higher-density homes,” says Shane Kempton, COO of Professionals Real Estate Group in WA and the NT. In the outer rings of the city, apartments are being developed in suburbs like Rockingham and Midland. In fact, more than 100 such properties were approved for construction in Joondalup alone during the latter half of 2017. “This downsizing trend is set to accelerate as the population of Perth continues to grow and the government seeks to encourage higher-density living to limit urban sprawl,” Kempton says. "The pressure to encourage higher-density living in Perth has been highlighted by recent population projections by Infrastructure Australia, who predicted that the population of Perth could surge to 4.4 million people by 2046.”
59.7%
Sydney Melbourne Brisbane Adelaide
Perth
Hobart
Darwin
Units
$428,500
NSW country
Clearance rate
$650,000
6.5%
25
$350,000
2.8%
Uncleared
$480,000
$980,000
37
$347,500
growth
H
Cleared
$467,000
growth
Sydney
93
$385,000
12-month
Total auctions
$495,000
Quarterly
ADELAIDE
$325,000
Type Median value
The weighted average preliminary clearance rate rose across a higher volume of auctions this week, with 1,813 homes taken to market returning a 65.3% success rate. The higher activity this week follows the Easter period slowdown, which saw only 670 auctions held across the capitals and a 64.8% final auction clearance rate. Across Australia’s two largest cities, Melbourne recorded an increase in both auction volumes and clearance rates week-on-week, with 69.6% of the 720 homes selling at auction this week, an increase on the previous week’s 65.5% final clearance rate when a much lower 152 auctions were held. In Sydney, 775 auctions were held this week, returning a 67.1% preliminary clearance rate, down on 67.9% the week before, when 394 auctions were held across the city.
$460,000
Area
WEEK ENDING 8 APRIL 2018
$370,000
Formerly the strongest property market in Australia, across all metrics demand is down in Sydney, declining 22% for apartments, about 4% for houses, and 9% for rentals. “I think we’ve hit a cap in terms of what people are prepared to pay,” says Nerida Conisbee, chief economist at REA Group. Even with these setbacks, Sydney looks set to power through on the strength of its economy, which is primarily due to a low unemployment rate of 4.8% (compared to a national average of 5.5%), population growth and infrastructure projects. “While APRA’s 2014 and 2017 lending restrictions pulled back the proportion of investors in the market, the Sydney market is now stabilising and waiting for the catalyst for its next growth phase,” says Rich Harvey, CEO of propertybuyer. With the elimination of the 10% cap on the growth of ADI loans to investors as a potential response to Sydney’s fall, Sydney could recover sooner rather than later.
CAPITAL CITY AUCTION CLEARANCE RATES
$520,000
Sydney's soft landing begins as demand from homebuyers and tenants declines
Canberra
CAPITAL CITY HOME VALUE CHANGES Capital city
Weekly change
Monthly change
Year-to-date change
12-month change
0.0%
-0.4%
-1.8%
-2.1%
Melbourne
-0.2%
-0.2%
-0.5%
5.4%
Brisbane
-0.1%
0.1%
0.0%
1.5%
Adelaide
0.1%
-0.1%
-0.3%
1.8%
Perth
0.2%
0.2%
-0.3%
-2.5%
Combined 5 capitals
-0.1%
-0.2%
-1.0%
0.7%
Sydney
*The monthly change is the change over the past 28 days
BRISBANE CANBERRA Total auctions
88
Cleared
48
Uncleared
33
Clearance rate
Total auctions
91
Cleared
20
Uncleared
29
Clearance rate
40.8%
59.3%
SYDNEY Total auctions
775
Cleared
372
Uncleared
182
Clearance rate
67.1%
TASMANIA
MELBOURNE Total auctions
720
Total auctions
4
Cleared
419
Cleared
1
Uncleared
183
Uncleared
2
Clearance rate
Clearance rate
69.6%
TASMANIA
Area
Uneven growth patterns for eco-trailblazer According to LG Electronics, more than 70% of Hobart’s energy comes from renewable sources, so the city has been acting as an eco-trailblazer for the other capitals. “The economy [in Hobart] has changed from a primarily government/ agriculture economy to a more mixed economy, so that’s very positive for housing demand,” says Nerida Conisbee, chief economist at REA Group. Recent growth has been mainly concentrated in Hobart, while the rest of Tasmania hasn’t shown comparable growth. “We’re not seeing demand flow through anywhere else in Tasmania at this stage – Launceston might be getting a little bit of a pick-up, but the centre of action continues to be Hobart,” Conisbee says. She adds that there's “a big rental crisis in Hobart at the moment, and they need more development. They also need more investors in that market to provide more rental housing".
33.3%
Type
Median value
Quarterly growth
12-month growth
Hobart
H
$421,125
6.6%
7.2%
TAS country
H
$277,250
0.8%
2.9%
Hobart
U
$316,250
2.0%
3.7%
TAS country
U
$235,000
0.4%
6.2%
All data sourced from CoreLogic.com.au
www.brokernews.com.au
29
PEOPLE
Aggregator Specialist
IN THE HOT SEAT GM of operations at Resolve Finance and long-time Richmond Tigers supporter Glenn Haslam talks leadership skills, customer advocacy, and how brokers can deliver on what the banks cannot
What do you wish you’d known when you started out in the industry? Back in the early 2000s, I was working with the ANZ branch A network to grow home loan sales. I worked alongside my then colleague – and current MD at Resolve Finance – Don Crellin, who was leading the ANZ broker team at the time. What I naively believed was that I had a chance in competing against the growth that the broker team and industry were about to deliver. The reality back then – and even more so today – is that the broker industry can deliver what no bank can ever do, and that is true customer advocacy. While I had the opportunity to lead the broker team, it took some time to find myself very happily back in the broker world at Resolve Finance, where I can play my role in driving customer advocacy and excellence in our part of the broking and franchising industry.
Q
What does leadership mean to you? Great leaders are authentic and inspire people to be their best. A The very best ones work on their leadership skills each and every day. They are always the first to say hello or offer a timely, encouraging word. It’s not just about charm or charisma (although they are beneficial qualities if you have them) but a relentless focus on improving, doing what’s right and taking your team on the journey forward. Defining great leadership isn’t really that easy – I hear catchwords like honesty, passion, integrity, and so on. Unfortunately, the certainty is that we all recognise bad leadership quickly, and sadly it is often most memorable. When you’re lucky enough to experience or be in the presence of great leadership, value it and learn from it – it’s really not that common.
Q
What’s your favourite way to relax? I’m not really sure it’s truly relaxing, but as a long-suffering A Richmond Tigers supporter, there is nothing better than watching them in action – or, better still, a replay of the 2017 finals series. That is, until the 2018 finals come along, of course!
Q
If you had the CEO of the MFAA over for dinner, what would you serve? I think, given my industry experience and charm, Mike would A probably invite me over for dinner first to discuss the challenging industry landscape we’re in. I’d leave what to serve up to him, but seafood and a few beers would leave me smiling. AB
Q
30
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