AB 15.14 by Key Media

JULY 2018 ISSUE 15.14

The new face of specialist lending How to handle expectations when prime borrowers become specialist /16

Attitude is everything Owen Joyce on why the industry needs to change its approach /22

DAMIEN SIMONFI The CEO of DJ Partners and Capital Bridging Finance shares the secret to negotiating debt /14

In the hot seat MFAA non-executive director Melissa Gielnik talks awards and outlooks /30

ALSO IN THIS ISSUE â&#x20AC;Ś Big deal A broker saves the day after clientâ&#x20AC;&#x2122;s impulsive auction purchase /20 Forum The latest reactions from brokernews.com.au /24 Caught on camera On the road with the Pepper Money Roadshow /25

NEWS

IN THIS SECTION

Lenders Mortgage support for drought-stricken farmers /04

Associations AFL star named ambassador for broker’s youth work /06

Technology Fintech leaders sign new code of practice /10

Regulators Big banks weather stress test with a twist /12

Market Housing loan decline moves into eighth month /08

www.brokernews.com.au JULY 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

15 AUGUST

16 AUGUST

22 AUGUST

National Finance Brokers Day

MFAA Tasmania PD day

Breakfast with the Economists

Founded and organised by Dino Pacella, BDM and creator of Ubervation, NFBD is now in its third year and will be held in Sydney with the support of such high-profile industry speakers as Yellow Brick Road founder Mark Bouris and HashChing COO Siobhan Hayden

This one-day event at Hotel Grand Chancellor provides 3.5 CPD hours for all attending brokers and will feature sessions on CCR and LMI, delivered by Amy McLellan, product manager, originations, at Equifax, and Joanne Fitzroy-Kelly, corporate relationship manager at Genworth Financial, Victoria.

Taking place in Melbourne and Sydney (24 August), this breakfast event is supported by S&P Global Ratings and Westpac. Chaired by Stephen Koukoulas, its confirmed speakers are Beth Ann Bovino, S&P Global Ratings; Bill Evans, Westpac; Michael Blythe, CBA; Sally Auld, JP Morgan; and Su-Lin Ong, RBC

Production Manager Alicia Chin 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

EDITORIAL ENQUIRIES

Rebecca Pike +61 2 8437 4784 Rebecca.Pike@keymedia.com

SUBSCRIPTION ENQUIRIES

23 AUGUST

10 – 11 SEPTEMBER

Business Banking Summit

Finance Innovation and Tech Fest

Returning to Sydney, the eighth Business Banking Summit will examine trends driving the virtual marketplace, the evolution of payments and funding, and how to apply the human touch to business funding. Content is positioned for those working directly in banks as well as in customer experience management, broking and tech

Featuring a line-up of speakers from Macquarie Bank, Etihad Airways and Redbull, this event examines the disruptive power of tech on finance, in association with ACCA. Sessions will cover high-performance finance teams, automation, AI applications, and creating a culture of innovation

13 SEPTEMBER R U OK? Day In response to a sharp rise in the number of brokers reporting mental health illnesses, this year’s national suicide prevention day is endorsed by the FBAA. In the next issue of Australian Broker, FBAA chief executive Peter White will write about the importance of asking the simple question, “Are you OK?”

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

ADVERTISING ENQUIRIES

Simon Kerslake +61 2 8437 4786 simon.kerslake@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, Bengaluru

30 SEPTEMBER Royal commission interim report due Commissioner Hayne is due to deliver his interim report no later than 30 September following four rounds of public hearings that have focused on farming finance, SME lending, financial advice and consumer lending. Almost 7,000 submissions have been received by the commission, and the final report is due by 1 February 2019

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19 OCTOBER

16 NOVEMBER

Australian Mortgage Awards

FBAA 0218 National Industry Conference

The leading independent awards event for the mortgage industry returns for another action-packed night in October. Highlighting the outstanding achievement of Australia’s leading mortgage brokers, lenders, aggregators and advisers, this year’s event is hosted by Lawrence Mooney, with entertainment by Furnace and the Fundamentals and Linden Furnell

The FBAA’s annual conference and awards will be held at Sea World on the Gold Coast. Under the theme ‘Evolution’, the conference will support brokers in navigating recent industry changes, while the evening’s Awards of Supremacy will see 500 guests gather to recognise leading industry figures

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 TOOLKIT’S RUNAWAY SUCCESS new broker toolkit has been downloaded more than 2,500 times since its launch during the lender’s annual roadshow in July. The toolkit was created in response to feedback from brokers that there was a strong need for content and practical tools specifically targeting the non-conforming market. The kit contains a set of how-to guides, tools and templates, all created to help brokers set up high-impact alternative marketing activities.

t MINING RECOVERY CONTINUES Source: ABS, CommSec

$26 Commercial loans to mining, rolling annual total, $bn

PEPPER MONEY’S

$22

$18

$14

$10

HERITAGE ANNOUNCES FAST-TRACK APPROVALS has launched Fast Track, which provides 24-hour approvals for home loan applications submitted with correct documentation. CEO Peter Lock said the bank had been trialling the concept over recent months and had successfully approved more than 10% of applications submitted by brokers within a 24-hour period; the fastest took just 90 minutes. “If brokers provide us with the right documentation, we’ll give them an approval within 24 hours,” said Lock.

$6 Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

HERITAGE BANK

“Loan repayments average just above 40% of after-tax earnings. This level is too high for comfort”

Steve Mickenbecker Group executive financial services, Canstar

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LENDERS OFFER MORTGAGE SUPPORT TO DROUGHT-STRICKEN FARMERS Two of the big four banks have announced support packages and hardship services for customers affected by drought and ANZ have both unveiled drought support and hardship packages for customers affected by drought. NAB announced its package for customers across NSW and Queensland on 10 July, allowing eligible customers to benefit from waived home and personal loan application fees, as well as suspensions to loan repayments. Others could see their loan terms and interest-only periods extended and associated restructure fees cut. NAB’s package also includes options for credit card and personal loan relief, fee-free early access to term deposits, and counselling. Customer executive regional and agriculture, Julie Rynski, said, “As Australia’s largest agribusiness NAB

bank, we are acutely aware of the challenges and unpredictability of life on the land and the impact of drought on NAB customers, employees and the wider community. Anyone who needs assistance or advice should contact their local banker so we can discuss their circumstances and determine the best way to help.” ANZ has also unveiled relief plans, including the suspension of loan repayments and access to hardship support services, which are valid until 31 July 2019. ANZ’s support package includes the suspension of credit card, home and business loan repayments for up to three months, assessed on a case-by-case basis; an interest rate freeze for distressed customers; and

rate relief in cases of extreme distress. Further, the bank will waive fees associated with restructuring business loans and provide fee-free early access to term deposits. ANZ will also provide a financial assistance package for farmers choosing to relocate, and increase funding for rural counselling in towns hardest hit by drought. Commenting on the support package, ANZ state director of agribusiness Ben Barrett said, “While customers in NSW and Queensland are doing it particularly tough at the moment, we know there are farmers across the country adversely impacted by drought. “We hope these measures help provide some certainty over the next 12 months, and we encourage all customers to contact us in times of difficulty so we can provide support to help ease the financial burden.” The developments follow the latest royal commission hearings, in which farmers across Australia spoke of their experiences with struggling under the burden of bank debt.

NEWS

A S S O C I AT I O N S FBAA WARNS AGAINST DIY LOANS executive director Peter White has called an article claiming anyone can become a broker in four days “recklessly laughable”. His comments were made in response to a newspaper article that encouraged readers to “broker your own loan”. White said the editorial could potentially lead people down a dangerous path, and added, “Making what is the biggest financial decision of a lifetime requires a lot more knowledge than a smartphone app.” FBAA

LENDING CONDITIONS EXTEND SALE TIMES Mhairi MacLeod

AFL STAR NAMED AMBASSADOR FOR BROKER’S YOUTH CAMPAIGN Alex Rance is new ambassador for financial literacy scheme designed to boost Australian teenagers’ mental health and wellbeing reading a pay cheque to understanding super and learning how credit cards and mortgages work, as many as 20% of 15-year-olds in Australia do not have basic financial literacy skills, according to OECD research published last year. AFL star Alex Rance is no stranger to the issue, having launched his own financial literacy scheme in Melbourne in 2016. Now he is lending his support to another initiative, spearheaded by one of Australia’s top brokers. Rance has been named official ambassador of the School Entrepreneurs program, a joint initiative established by Astute Ability Group and supported by the FROM

Real Estate Institute of Australia (REIA) says tighter lending has led to longer listing times and stagnant prices. CoreLogic data for June confirms that Sydney homes now take 12 days longer to sell, and auction clearance rates across the capitals have remained below 70% for more than 12 months. “Gone are the days of the boom market where estate agents were able to quickly sell properties with limited marketing,” said REIA president Malcolm Gunning. THE

MFAA. The program empowers high-school-aged students to run real start-up businesses as part of their commerce or economics classes, with brokers delivering the lessons on a volunteer basis. Led by Astute Ability Group founder and principal Mhairi MacLeod, the initiative is now in its third year and has supported dozens of young people in taking their first steps towards becoming financially literate adults. MacLeod, who has taken time out of her own business and family life to establish and build the program, said, “Alex will be an advocate for our program, and it’s a great alignment with his own work outside of AFL. He couldn’t

jump on board quick enough and thought the program was amazing. He is a big advocate of the link between mental health and financial wellbeing, so he is a great pick for us.” Brokers across Australia can get involved in School Entrepreneurs by donating their time to delivering six one-hour modules to high-school-aged children in their local communities. Each participating broker receives 12 CPD hours for their support of the project. In an interview with MacLeod, Rance said, “Having these life skills, especially around money management, can take away some of the anxiety around being an adult. When you think about mental health going forward, in five years’ time it’s going to be the largest health risk in Australia and probably throughout the world. So if you can minimise the anxiety and stress that is associated with finance, it’s going to make the world a far better place.”

“The boom in building activity experienced over recent years is still resulting in a record number of new homes being built” Tim Reardon Principal economist, Housing Industry Association

VV$40,614,829,064 CONSUMERS MORE OPTIMISTIC ABOUT THE ECONOMY Source: Westpac, Melbourne Institute, CommSec

Westpac-Melbourne Institute Consumer Confidence rating 108 4 1/2 year high

106 104 102

Optimistic

100 98 96

Pessimistic

94 92 90 Jan-14

www.brokernews.com.au

Jan-15

Jan-16

Jan-17

Jan-18

NEWS

MARKET

SERVICE AND PAY MODELS CHANGING MARKET decline in face-to-face service and significant remuneration model changes are the market’s biggest disruptors, according to a panel chaired by Deloitte following the release of its 2018 Mortgage Report. The cohort included representatives from HSBC, Liberty, Police Bank, BOQ, Westpac, ING, Suncorp, Smartline and CoreLogic. Smartline director Joe Sirriani said, “I think it is a generational thing. The younger generation is more comfortable with online, and they will dominate more in five years’ time.” A

HOUSING LOAN DECLINE MOVES INTO EIGHTH MONTH Volume and value of loans continue to decline, according to the latest data, but developers remain optimistic released by the ABS show the value and volume of new housing loans have continued to fall for the eighth consecutive month. In trend terms, the May 2018 figures show a 0.7% decline in the number of owner-occupier finance commitments compared to the month before. The number of owner-occupier finance commitments excluding refinancing also fell by 0.6% in trend terms. Decreases were recorded in all states and territories except Tasmania, where lending increased by 0.3%, while the largest decrease of 1.9% occurred in the ACT. However, the number of first home buyers as a proportion of total owner-occupier housing FIGURES

BUSINESS BOOST FOR SHORT-TERM LENDER lender Semper BUSINESS Capital has reported a 64% year-on-year increase in its short-term second-mortgage loans, driven by demand from SMEs. Specifically, the increase is attributed to a recent 4% reduction to the bridging loan rate for second mortgages, down to 11.99%. SMEs also used the facility to make capital purchases to optimise tax breaks before June 30 and pay down ATO debt following the introduction of new rules regarding tax debt and credit reporting bureaus.

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finance commitments remained unchanged in May, at 17.6%. The total value of housing commitments fell, with investment housing values down by 1.9%. According to Real Estate Institute of Australia (REIA) president Malcolm Gunning, the dollar amount approved for the purchase of dwellings by individuals for rent or resale is at the lowest level since February 2016. “The continued decline in housing finance confirms the feedback from the market that the APRA restrictions and the fallout from the royal commission have resulted in an extremely cautious approach by lenders,” Gunning said. “Loan applications are now being scrutinised for real costs of living,

including outgoings such as school fees and use of credit cards. At the same time an ultra-conservative approach is being taken by banks with their valuations, which means that funds available are below purchasers’ expectations. “We need to ensure that lending approaches reflect the market rather than set the market, which appears to be case at the moment.” Despite the figures and immediate outlook, one developer remains confident about the market. Sekisui House sales and marketing manager Paul Wainwright maintains trickle-down demand is still evident in the market. “Some segments have dwindled significantly, but others are growing; for example, we were not expecting to see as much interest from first home buyers,” he said. “While lending restrictions have certainly hampered some segments, others have picked up beyond our initial expectations. Current market conditions are resulting in greater choice for buyers.”

FY18 IN REVIEW: AVERAGE RATE CHANGES Source: RateCity

Owner-occupiers

Investors

P&I loan average rates down from

4.38% to 4.28%

4.76% to 4.72%

Interest-only average rates up from

4.51% to 4.71%

4.90% to 5.02%

Fixed rate home loans For owner-occupiers, average fixed interest rates at end of financial year:

For investors, average fixed interest rates at end of financial year:

4.20% for one year (-2 points)

4.49% for one year (+2 points)

4.24% for three years (+3 points)

4.52% for three years (+3 points)

4.66% for five years (+3 points)

4.94% for five years (+5 points)

HOUSING COMMITMENTS: VOLUME AND VALUE Source: ABS

Number of dwelling commitments 58,000

No. of units

56,400

54,800

53,200

51,600

50,000 May 2017

Aug 2017 Trend

Nov 2017

Feb 2018

May 2018

Seasonally adjusted

Value of dwelling commitments $34,000

$33,400

$32,800

$32,200

$31,600

$31,000 May 2017

Aug 2017 Trend

Nov 2017

Feb 2018

May 2018

Seasonally adjusted

LENDERS ‘FIGHTING HARDER’ FOR P&I LOANS variable rates changed significantly last financial year, while fixed rates barely moved, according to ratecity.com.au. The average borrower with a variable P&I loan ended the year paying up to 10bps less. However, borrowers with variable interest-only loans now pay up to 20bps more. RateCity’s Nick Bendel said, “Even though lenders are less willing to do business with your interest-only clients, they are actually fighting harder for principal-and-interest clients. Our forecast … is that both fixed and variable rates will continue to drift upwards in FY19.” AVERAGE

NEWS

TECHNOLOGY

GETCAPITAL RECEIVES MAJOR BACKING can now fund up to $50m in loans after receiving a new funding facility through NAB. The new funds follow unprecedented growth for GetCapital, which recently exceeded $250m worth of total loans written. The company hopes this will help it reach its goal of $1bn in funded loans by 2020. CEO Jamie Osborn said, “NAB was a natural choice. They have demonstrated a strong understanding of our business model and the solutions we provide.” GETCAPITAL

FINTECH LEADERS SIGN NEW CODE OF PRACTICE Signed by Capify, GetCapital, Moula, OnDeck, Prospa and Spotcap, the new fintech code simplifies best practice regulations group of six fintech lenders have signed a code outlining best practice principles that will standardise transparency and disclosure in relation to unsecured small business loans. Key elements of the code include the introduction of a pricing comparison tool to allow customers to compare the cost of unsecured loans from the signatories; an easy-to-understand loan summary; and a glossary of simplified terms. The code was created and signed by Capify, GetCapital, Moula, OnDeck, Prospa and Spotcap. With lenders already answering to ASIC, the ACCC, APRA, the courts, and the newly established AFCA, the code is designed to pull all obligations into a single document. A

It is hoped that this will make it easier for current market participants and new entrants to understand their obligations. The code was developed alongside the Australian Finance Industry Association, the Australian Small Business and Family Enterprise Ombudsman, SME advocate thebankdoctor.org, and industry association FinTech Australia. Prospa joint CEO Beau Bertoli said, “Prospa has worked closely with its industry peers to establish a practical code that outlines best practice principles of online lending to small businesses. The code is customer-centric, outlines what customers can expect from their loans and lenders, and prescribes the use of consistent and comparative

measures such as APRs and total loan costs across the industry. “The code will also be supported with an online tool facilitating apples-with-apples comparisons across products and lenders.” Ombudsman Kate Carnell said, “This is certainly a great starting point. I look forward to hearing from members of the roundtable held late last year and discussing how the broader fintech industry can move to adopt the code.” SME advocate Neil Slonim from thebankdoctor.org labelled the code a significant step forward. However, he said, “Further work needs to be done in areas like implementation of the pricing comparison tool. “An independent and suitably qualified Code Compliance Committee will be appointed to determine whether a lender is compliant. The CCC will also [ensure] ongoing compliance with and enforcement of the code.” The code, charter and disclosure tool will be fully functional no later than 31 December 2018.

STRATEGIC DIGITAL PRIORITIES FOR FINANCIAL SERVICES COMPANIES IN 2018 Source: DBR Research, 2018 Retail Banking Trends and Predictions

Redesign/enchance digital experience for consumer

72% 51%

Enhance data analytics capabilities

32%

Find ways to reduce operating costs

31%

Automate core business processes

28%

Recruit or retain talent to meet changing needs Update/replace components of your legacy operating system

22%

Increase investment in innovation

22% 20%

Meet regulatory and compliance specifications Improve components of security & authentication Invest in and/or partner with alternative fintech providers

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11% 10%

Q What are your top three strategic priorities for 2018 as an organisation?

NEO-LENDER DOUBLES LOANS has more than doubled its personal loan originations in the second half of the financial year after a strong fourth quarter. Values in H2FY18 rose 136% on the previous six months, while the number of new Wisr customers climbed 118% during the same period. The result follows Wisr’s largest single-quarter loan growth, with a 66% increase in value and 40% in volume compared to the third quarter of the year. It is Wisr’s second successive quarter of record loan origination growth. WISR

NEWS

R E G U L AT O R S BROKER SENTENCED TO 21 MONTHS broker Peter Lachlan McDonald was sentenced to 21 months’ imprisonment after an investigation into his brokering of motor vehicle finance contracts while employed by Get Approved Finance. ASIC found that between January and April 2013, while brokering four contracts, McDonald provided ANZ-owned lender Esanda with information that falsely represented guarantors as applicants and insurance quotes as policies. The sentence was suspended for 12 months upon McDonald paying a $5,000 bond. PERTH

NAB STAFF BANNED FOR FRAUD former NAB employees have been permanently banned after providing false documents to support loan applications. Danny Merheb and Samar Merjan were banned on 29 June from engaging in credit activities and providing financial services. Merheb provided false payslips, letters of employment, bank statements and statutory declarations and Merjan provided false payslips and letters of employment in respect of personal loan and credit card applications. NAB raised the alarm, leading to ASIC’s investigation. TWO

“Two decades of regulation have required APRA to tackle all manner of issues, but a constant theme in our work has been building strength and resilience” Wayne Byres Chairman, APRA

BIG BANKS WEATHER STRESS TEST — WITH A TWIST Bank test scenario sees the inclusion of an “operational risk loss event” for the first time, echoing the royal commission into misconduct chairman Wayne Byers has confirmed that Australia’s major banks weathered a stress test of their resilience conducted by the prudential regulator in 2017. The stress test examined the hypothetic impact of a downturn in China and a collapse in demand for commodities, with a significant downturn in the regional housing market at the epicentre. In the scenario presented, sovereign and bank debt ratings were subsequently downgraded, leading to a temporary closure of offshore funding markets, a sell-off of the Australian dollar, and a widening of credit spreads. This caused Australian GDP to decline 4%, unemployment to double to APRA

11%, and house prices to decline by 35% nationally over three years. For the first time in its testing, the regulator added a twist: banks were asked to consider an “operational risk loss event involving misconduct and mis-selling in the origination of residential mortgages”. The additional operational risk, which mimics the approach of the ongoing royal commission, served as an amplifier of the stress, adding a further shock to bank balance sheets. Confirming the positive outcome, Byers said, “The Australian banking system is financially sound; our task is to keep it that way. It has been a long time since a serious economic

storm hit. Maintaining sound practices in good times and remaining ready for stormy weather are essential for a resilient banking sector.” However, despite the strong results, Byers maintains that the stress test was “not a pass or fail scenario”. He said, “The aim was not to set capital levels, and consistent with past practice it was not run as a pass or fail exercise. Rather, APRA utilises stress tests to examine the resilience of the largest banks, individually and collectively, and to explore the potential impacts of grim and challenging periods of stormy economic weather.” Byers said the scenario for the stress test was designed to be “severe but plausible”, and to target the key risks facing the industry. “It’s not wise to assume good times will last forever. It might be sunny today, but financial storm clouds and strong winds will arrive at some point.”

AT A GLANCE: THE BIG BANKS’ STRESS TEST Source: APRA major bank stress test, 2017

Proportion of cumulative credit losses 50% Share of initial exposure

Share of cumulative losses

40% 30% 20% 10% 0%

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Residential mortgages

Corporate

SME corporate

Commercial property

Unsecured personal

Other

FE AT URES

SPECIAL REPORT

THE NEGOTIATORS

When debts turn bad, the instinct is to hide. However, as Damien Simonfi, CEO of DJ Partners and Capital Bridging Finance, reveals, brokers can now help their customers face the problem head-on

from the Australian Bureau of Agricultural and Resource Economics confirm that agriculture was the largest contributor to GDP growth between 2016 and 2017, contributing 0.5% of the 1.9% increase in Australia’s GDP. Further, gross production values reached a record $62.8bn over the same period, and agricultural exports accounted for more than 13% of the country’s total export revenue. However, despite strength in the industry, cash flow requirements mean that those who own agriculture businesses often find themselves needing financial assistance. Each year around 30% of businesses in agriculture, forestry and fishing seek debt or equity finance, with demand second only to SMEs in the mining sector. Data from the Australian Banking Association cites the main reasons for this as business survival (44.4%), maintenance of shortterm cash flow or liquidity (42.3%), the replacement of equipment or machinery (35.7%), and operational expansion (24.9%). Cash can’t solve all problems though. Agriculture businesses operate under the continued threat of adverse and extreme weather, unforeseen natural disasters and variations in commodity prices. When these hit, things can go badly wrong, and a growing number of agriculture business owners have found themselves out of favour with the banks as a result. This very issue took centre stage during round four hearings of the royal commission, which saw major lenders hauled before Commissioner Hayne last month FIGURES

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to answer questions about their conduct when dealing with farm loans and agri-clients. From claims of farmers being “effectively gagged” to being put out of business altogether by heavy-handed bank tactics, the farm finance round specifically focused on issues relating to support, non-monetary defaults through revaluation, and changes to lending conditions. For one CEO and former banker, the hearings brought few surprises. Damien Simonfi, CEO of DJ Partners and Capital Bridging Finance, grew up on a dairy farm and has first-hand understanding of the pride that underpins financial solvency in farming communities. “Like many of us who have debts, farmers also don’t like to talk about their financial issues. One thing I can tell you is that if you don’t talk to your family, friends, business partners, accountant or lawyer about financial issues, they are going to find out anyway,” Simonfi says. “There is a stigma attached to having financial issues, which as a society we need to rid ourselves of – if you have a broken car you go to a mechanic; it’s no different,” he continues. Agriculture businesses aren’t the only ones who turn to DJ Partners when overburdened with debt. With a success rate of 84.6%, DJ Partners has represented agriculture portfolios worth more than $2.2bn and also operates with corporate clients who have typical debts in excess of $10m, as well as high-net-worth individuals. According to Simonfi, there’s a fine line between financial hardship and unaffordability. For example,

a person earning $300,000 a year in mining who now has to work as a barista for $50,000 will be classed as experiencing affordability issues. A person who has a shortterm problem, such as job loss, but who can bounce back within six to 12 months is experiencing financial hardship. He adds, “We want to keep people in the bank’s good books by negotiating as early as possible, restructuring and making a real coordinated and targeted strategy to manage debt long

successful outcome’. “I was mortified and quite disgusted by that approach. I had an epiphany and realised I could actually help more people with their financial problems by acting for them than I could by acting at an executive level within an institution where, by the time an issue reached me, it would be too late.” While the royal commission has provided a business boost for DJ Partners, it also highlights the lack of places a distressed borrower can turn to when faced with mounting debt and dwindling options. “I have seen first-hand what banks can do to borrowers,” says Simonfi. “There is no compassion and they can do irreparable damage, but I have also seen the opposite where banks have exercised discretion and worked with our clients for successful outcomes. The royal commission has generated enquiries for us because there is nobody, that we are aware of, who specialises in negotiating

“There is a stigma attached to having financial issues, which as a society we need to rid ourselves of ” Damien Simonfi, CEO of DJ Partners and Capital Bridging Finance term, with all lenders on the same page and in agreement, working with a professional strategy consulting firm to achieve a successful outcome.” To do that, Simonfi thinks like a banker. Drawing on years of frontline experience with the big four, subprime lenders and within the bridging finance sector, he and the DJ Partners team hold combined experience exceeding 124 years. Recalling how the company was established in 2011, he says, “I was working in asset management for a large financial institution, and somebody rang a bell to signal a new receiver had just been appointed. I asked why they were ringing a bell and the colleague responded with, ‘Well, it’s another

bank debts and restructuring outside insolvency.” Power of persuasion For those who face their debts head-on and take an active role in debt management, support and advice exist throughout the marketplace, but both borrowers and brokers remain largely unaware of this. For brokers, there are several reasons a client may require the services of DJ Partners. From refinancing to capital bridging, the firm negotiates with banks and other lending institutions to create workable terms and repayment schedules that are realistic for every party, while avoiding bankruptcy and loss of assets.

Damien Simonfi, CEO of DJ Partners and Capital Bridging Finance

“We have never not been able to improve a borrower’s situation; that said, the earlier we get involved the easier it is for us to complete our work,” Simonfi says. The DJ Partners team – recruited from institutional and commercial banking, the Ombudsman’s office and the wider financial industry – work closely with brokers to get their clients fighting fit, financially speaking. “We have restructured countless deals. We have had clients with debts exceeding $30m and value of property at approximately $10m. We have had banks hand over hundreds of thousands of dollars to the client in order for them

to cooperate and allow a sale to go through. We have had debts reduced to 30% of the total balance in order for the borrower to leave. On 300% LVR a bank can be haemorrhaging around $200,000 a month, so these are exceptional outcomes, exceeding client expectations,” Simonfi says. Other clients, whether referred by lawyers or accountants or picked up through direct enquiries, are later paired with brokers to secure the finance they need to move forward with their lives after debt negotiation. More than 90% of the firm’s business originates from brokers, who receive a referral fee for each

client they engage. A strategybuilding and negotiating process takes place, and the borrower is then returned to the broker’s books for finance. Simonfi explains, “Our solutions don’t put the bank at further risk; in fact we derisk the bank’s profile. Our solutions create a platform for the borrower to refinance, sell, repatriate or a combination of all of the above, as opposed to just giving a situation time.” With responsible lending measures, enhanced credit reporting and open banking all scheduled for introduction over the coming months, Australia’s financial landscape is in for some

drastic changes. However, as long as debt – the good, the bad and the ugly – remains central to daily life and business, DJ Partners will continue to fight the corner of the cash-strapped consumer. “By looking at a bank’s credit policy, credit risk appetite and discretionary powers, we understand what they can and can’t do. It’s about knowing what the bank’s restrictions are and how to work in their guidelines with a little discretion, a little negotiation, and the understanding that banks have the power to make decisions favourably, but they won’t unless a robust credit risk strategy is presented,” says Simonfi. AB www.brokernews.com.au

FE AT URES

BUSINESS PROFILE

THE NEW FACE OF SPECIALIST LENDING Macroprudential changes have pushed thousands of formerly prime borrowers into the specialist lending bracket. However, contrary to belief, specialist clients do not require brokers to have specialist skills. Australian Broker finds out more

months have seen a rapid withdrawal of major banks from multiple segments of the lending market, leading to huge numbers of formerly prime borrowers being reclassified as specialist. The trend has implications for borrowers and brokers; the former find themselves rejected for finance they could have easily obtained a year ago, and the latter have to pick up the pieces when expectations cannot be met. Anecdotal data from Canstar confirms the trend has been emerging since 2015 when investors first fell out of favour with the mainstream banks. As a result, brokers continue to be challenged to find alternative funding sources for their customers. Helping to close the funding gap, specialist lending is increasingly sought as a solution for those who don’t fit the banks’ vanilla borrower profiles, and represents a growing market segment on multiple fronts. For lenders, growth is driven by sharp rises in self-employed and multiple-income borrowers, as well as those who no longer fit the major banks’ narrowing criteria. For brokers, it is driven by the need to find competitive solutions for every client. Specialist lending encompasses those deals that don’t meet mainstream bank criteria – a broad and growing category. It can also include complex prime, shared ownership, buy-to-let, secured loans and other products. The reclassification of prime borrowers means that specialist lending now comes with far fewer RECENT

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risks than previously and brokers have a significant opportunity in the segment to embrace new, specialist clients. “Some brokers still consider

environment,” says La Trobe Financial chief lending officer Cory Bannister. “Another misconception is that specialist lending must relate to

“Some brokers still consider specialist lending as a challenge simply because they may hold a belief that specialist lending equates to higher risk” Cory Bannister, chief lending officer, La Trobe Financial specialist lending as a challenge simply because they may hold a belief that specialist lending equates to higher risk. This is not always the case, particularly in the current

some form of credit impairment. This is not the case either. Specialist lenders cater for niches within the mortgage market where a sector of consumers is left underserved

by market gaps. For example, the major lenders withdrawing products like interest-only loans or SMSFs, changing policies, and regulatory assessment directives, to name a few, across different asset and borrower types, cause these market niches to either grow or shrink at different points in the economic cycle. Some restrictions may even be unrelated to credit issues or the quality of the borrower,” Bannister says. Since its establishment in 1952, La Trobe Financial’s focus has been to serve customers who are underserved by major lenders. Today, the non-bank offers full-doc and lite-doc products for residential and commercial clients, along with development finance and other products, offered at competitive rates. Pepper Money has invested heavily over the years in demystifying and simplifying alternative lending for brokers and consumers through a range of broker tools, a dedicated scenarios team, a local BDM presence, and a retail brand presence for consumers. The reasons are clear: the lender’s own research reveals that 70% of brokers expect to write more non-conforming loans in the coming year, while 66% predict a decline in the number of prime loans written. “Alternative lenders exist to provide solutions that meet the needs of clients who fall outside of traditional lending criteria,” says Aaron Milburn, director of sales and distribution at Pepper Money.

HIGHLIGHTS OF LA TROBE FINANCIAL’S SPECIALIST LENDING POLICY

ALTERNATIVE SOLUTIONS Full-Doc and Lite-Doc® products are offered across both residential and commercial property, in addition to Development Finance

CREDIT FOR A VARIETY OF PURPOSES From residential to debt consolidation, equity release and construction – all at competitive interest rates

STRENGTH IN NUMBERS a Trobe Financial operates Australia’s L single-largest retail investor credit fund with more than $2.5bn worth of funds under management

MULTIPLE-BORROWER TYPES I ncorporating individuals, corporates and trusts, including SMSFs

Cory Bannister, chief lending officer, La Trobe Financial

“Many brokers incorrectly believe that positioning an alternative loan with a client is challenging.” In fact, the broker’s loan assessment remains the same; the borrower information required, whether for a traditional lender or alternative lender, is predominantly

Aaron Milburn, director of sales and distribution, Pepper Money

Practice makes perfect There are many ways a broker can boost their confidence when dealing with specialist clients, from building familiarity around application processes to tapping in-house support from the lenders themselves. “It is a common misconception

“Borrowers should never be in a position where they don’t understand their finance options, regardless of their circumstances” Aaron Milburn, director of sales and distribution, Pepper Money standard across the industry. What is different is the broker’s conversation with the client. “A broker has to familiarise themselves with a product that they don’t know, which can be time-consuming. Similarly, managing the customer’s expectations can be difficult. The customer may expect to obtain a loan from a household brand name at an interest rate similar to what they’ve seen advertised,” Milburn says.

that specialist lending is more complicated – especially among brokers who may not have written a custom loan before,” says Liberty Financial national sales manager John Mohnacheff. “The difference isn’t in the assessment or writing of the loan, but rather coming up with the right solution for each customer’s individual circumstances, and we see this as an opportunity. For more than 20 years we’ve been able to offer borrowers lending solutions that

John Mohnacheff, national sales manager, Liberty

HIGHLIGHTS OF LIBERTY’S SPECIALIST LENDING POLICY

WIDE APPEAL iberty loans are designed so they appeal to a wider L range of borrowers. This means customers who have a low deposit, imperfect credit or are self-employed still have loan options

DIFFERENT LOAN PURPOSES iberty provides a range of low-doc and specialty L loans that span residential, motor, commercial and even SMSF lending

CUSTOMER SERVICE J ohn Mohnacheff, national sales manager at Liberty Financial, says, “Every time you get a customer that doesn’t fit the box, think: ‘Could this be a deal for Liberty?’ We want customers to have delightful experiences, and being able to help more Australians get finance is one of the best ways brokers can ensure this happens.”

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don’t fit traditional loan requirements. Over these two decades, we have honed the process to make it as simple as possible for our brokers and customers.” Specifically, this approach encompasses personalisation of the customer’s loan experience, backed with extensive product education for the broker through Liberty’s BDM network and calendar of PD days. As a result, Liberty has loaned $25bn to 270,000 customers since 1997, and today the lender’s suite of solutions includes home, car, business and personal loans for those who don’t tick the traditional boxes. “Essentially, there is not much difference between how you approach offering a custom loan versus a traditional loan,” Mohnacheff says. “The same information is required in terms of assessing the borrower’s needs, objectives and financial situation, and then verifying that information. The key difference is that this is a more personalised approach. Rather than making the customer’s circumstances fit the loan product, we can tweak the loan product to match the customer.” At La Trobe Financial, products, policies and processes are engineered with the broker experience in mind; for example, all products are available to all brokers without requiring separate accreditation, and application forms are standardised for all products, including residential, commercial, SMSF, and construction and development products. Further, the lender employs more than 38 BDMs and 86 credit underwriters, the largest underwriting team of any non-bank. “Our underwriters are on every loan submission. We piloted this back in 1994 and have been 18

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consistently recognised for this service. Brokers tell us they feel listened to and supported through the entire process, giving them the confidence to continue in the specialist space,” Bannister says. Lenders also offer tools that can be utilised. In July, Pepper Money introduced its Customer Conversion Toolkit featuring the Pepper Product Selector (PPS), a market-first indicative-offer tool that takes the guesswork out of finding the most appropriate Pepper product for clients with difficult scenarios, in as little as two minutes. “Borrowers should never be in a position where they don’t understand their finance options, regardless of their circumstances,” says Milburn. “Our PPS gives brokers the confidence to offer their client a genuine viable alternative solution, instead of saying no.” Managing expectations The majority of specialist applicants have received a rejection from a major bank, while others go directly to a specialist lender based on

in their customer’s eyes, and presenting a borrower’s full picture to their would-be lender from the start also helps. Mohnacheff says, “As with any

“Rather than making the customer’s circumstances fit the loan product, we can tweak the loan product to match the customer” John Mohnacheff, national sales manager, Liberty previous experience and advice. Managing client expectations throughout this time can be a delicate and challenging process, especially if the client has just received their first rejection. On the part of the broker, a combination of strategic direction and empathy can go a long way

broking service, brokers should understand the customer’s situation and what the customer wants to achieve, and present those details to the lender as best they can. “A specialist loan is still assessed based on the creditworthiness of the applicant, just like any other loan application. There may be different

verification requirements depending on the customer’s circumstances, but we communicate those clearly and up front, which means the process is much the same as for any other customer.” While a specialist customer’s lending journey may well begin with a rejection from a mainstream institution, which is a far from ideal start to their overall lending experience, this does provide the broker – and specialist lender – with a chance to shine. “When a client doesn’t fit traditional lending criteria, a broker must help the customer accept the reality of their situation,” Milburn says. “This can often be a highly emotional time, and the challenge is to get the client to acknowledge the reasons why they are not eligible for a traditional loan. Creating a positive environment in order for them to

HIGHLIGHTS OF PEPPER MONEY’S SPECIALIST LENDING POLICY

UNLIMITED DEBT CONSOLIDATION R educes total liabilities and helps borrowers gain better control of their finances

UNLIMITED CREDIT IMPAIRMENT I mpairments linked to a life event that’s occurred as recently as in the last 12 months are acceptable

SIX-MONTH ABN accept the circumstances, understand there is an alternative option and move forward is important.” Pepper Money’s most common client profiles fall into two categories: self-employed applicants with regular financial needs, and those who have experienced a disruptive life event, such as divorce, illness or redundancy, which has impacted their credit servicing. According to Milburn, both types of client have the potential to become their broker’s biggest advocate, and understanding the client’s profile and circumstances is crucial to successfully handling their expectations. “With guidance and support from their broker on the alternative options available, these clients tend to remain loyal and readily refer potential clients,” Milburn adds. Clients also appreciate having the full facts to hand from the start of

the application process. Sharing five steps to follow with applicants, Bannister advises brokers to listen while keeping an open mind, and ask for “the whole truth and nothing but the truth”. Further, he advises conducting “reasonableness tests” on stated income and expenses; educating clients on their current and future options; and speaking to a specialist lender early in the process. “With some exceptions for aged-care loans or reverse mortgages, brokers will soon realise there is no material difference between selling a mainstream or vanilla loan and selling a specialist loan,” Bannister says. “The key is to understand the borrower’s situation and to be able to communicate that clearly to the lender. The more information we have up front, the quicker and easier we can provide a solution.” AB

A pplications from self-employed borrowers with an ABN registered only six months ago are acceptable

ALTERNATIVE INCOME DOCUMENTATION P epper Money accepts an accountant’s letter and/or six months’ business banking statements as income verification

INCOME FROM VARIOUS SOURCES G overnment payments including family tax A&B, casual employment and child support are also counted

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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

THE TAKEAWAY

As a broker, Adrian Lee knows that big deals don’t happen to those who walk away. So when a client made an impulsive auction purchase, he leveraged his firm’s holistic services portfolio to get it over the line

THE FACTS

Loan size and term $7m peak debt, $1.5m residual; 30-year term

Client

Goal

Location

Lender

Aggregator

Male in his late 40s; director of global investment bank

To purchase a new family home

Sydney, NSW

Homeloans

Finsure Finance and Insurance

package meant that serviceability was not evident. Lenders were also uncomfortable about counting his incentives as part of his income, so he was effectively unable to access

THE SCENARIO

We’ve all done it – inspired in the moment and willing to take a chance, we jump on an opportunity that’s too good to miss. As brokers we all know that, when you see a good deal, walking away isn’t an option. This is what happened to one of our new clients at Catalyst Advisers – a bank director in his late 40s who was successful at a weekend auction, exchanged contracts and paid the required 10% deposit. But the catch was that for the remaining 90% he had no pre-approval in place. As an existing owner he already had a $6.5m property in Sydney, geared at 50% LVR, and wanted to unlock some of this equity to complete the new purchase. Taking advantage of the current buyers’ market in the city, his plan was to rent out the second property and sell when market conditions improved. The peak debt requirement was $7m, which is higher than the maximum loan limit for banks offering bridging facilities. The client was a high earner, with a base salary in addition to short- and long-term incentives. However, for the previous three financial years he had been working from his bank’s head office in Asia and had next to no income showing on his Australian income tax returns. Therefore, despite his overall remuneration package, the way lenders viewed the bonus components of his 20

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The client didn’t want to walk away from an opportune deal, and as brokers neither did we. However, the outcome could have been very different if we did not have the approach and business set-up that we do at Catalyst Advisers. Without the in-house wealth management and debt capital verticals, this client would have been stuck between a rock and a hard place, with two less-than-ideal outcomes. On the one hand he may not have been able to settle on the property purchase, and, on the other, he would have come unstuck with the interest rates. Such a loan would also have been subject to double-digit rates and exorbitant establishment costs via an external private funder. By bringing a holistic approach to how this deal was brokered, we were able to avoid both these outcomes. The debt capital and advisory team at Catalyst Advisers were able to connect the client with sophisticated family office capital and manage an extremely technical legal due diligence and documentation process. This scenario highlights the benefits brokers can provide clients when they incorporate the wider services and

Without the in-house wealth management and debt capital verticals, this client would have been stuck between a rock and a hard place, with two less-than-ideal outcomes the funds required to complete his opportune Saturday morning purchase. THE SOLUTION

Adrian Lee Managing director at Catalyst Advisers

There was only one clear solution. I arranged a capitalising private loan facility secured over listed equities, with gearing covenants similar to that of a bank margin facility. Its purpose was to allow the client to settle on the new property purchase while the existing property was being marketed and sold. Once the existing property had been sold, a portion of the net proceeds could be used to reduce the private loan facility. Then, through a facility with Homeloans, we were able to provide take-out finance in the form of a traditional home loan to clear the balance of the private loan facility.

functions that people require when purchasing property. As a holistic financial servicing firm, we were able to incorporate mortgage broking, financial planning, investment management and debt capital advisory services and achieve the required outcome as a result. We weren’t the first to do this, and crucially, we won’t be the last either. I believe that, in future, fewer and fewer mortgage brokers will operate small, standalone businesses, because it makes sound business sense to become a function within a larger, more holistic financial services firm, incorporating finance, advice and accounting. This type of consolidation is already taking place in the accounting and financial planning industries as clients continue to choose larger firms that can service all of their financial requirements. AB

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OPINION

ATTITUDE IS EVERYTHING The industry is well versed in the challenges ahead, but some consumers don’t even realise the royal commission is happening. Owen Joyce, chief commercial officer at CashDeck, explains why brokers need to concentrate on customer attitude

many brokers, you’re probably finding it challenging helping your clients access credit these days. Over the last couple of months, CashDeck has spoken to countless brokers, attended many industry events and stalked the online comments. The frustration is palpable and the concern is clear: scenarios that were once easy are now difficult, everything is taking longer, and every case is completely uncertain. So here’s the thing. Unless you’re planning to leave the broking industry altogether, you’re going to need to find ways to improve the outlook for your business. As is the case in every business and every industry, there are things you can control and things you can’t, and in this case tighter lending criteria is here to stay, so there’s no point trying to turn the tide. One area where you can potentially make a difference is consumer attitude. Most of us in the industry know what’s going on, but most of those outside of it have no idea.

It seems ludicrous, but the other day I spoke to somebody who hadn’t even heard about the royal commission, let alone kept ahead of its developments. So it’s little surprise that many consumers have no idea about the stricter lending

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so until the time comes when they want to borrow. Only then will they realise that you can’t spend like a drunken sailor on shore leave and expect the bank to pat you on the back and open its coffers. So, if we know what lenders want, why don’t we, as an industry, educate consumers on what’s happening and help them prepare? As the old saying goes, “you can’t fatten the pig the day before market”. However, since consumers who are planning to borrow are often motivated and will take instruction on how to get into shape financially, maybe that’s the most obvious opportunity? Perhaps the new motto our industry needs to propagate is “Learn to live with a loan before you get a loan”. It’s simple, it makes sense, and it gets people thinking ahead of time. It sends a clear message that you can’t expect to get credit if you’re not prepared to demonstrate that you can tighten your belt to afford it. Give consumers tips, tools, advice and strategies on how to be ready for the lender and the process. If enough consumers have been educated on how to meet the conditions, then the new tougher lending criteria won’t pose such a problem after all. Some brokers are doing this already, and we should give credit where it is due. For those firms that have embraced this change, it has been part of their lead nurturing strategy and DNA for a long time. That isn’t to say they don’t still find the new conditions tougher; however, the practice of helping clients prepare in advance means these firms continue to have a steady stream of bank-ready clients who have their ducks in a row, so to speak. Lead nurturing must evolve and move beyond the basic database email blasts containing cash rate announcements. To make it work, there needs to be investment in doing it well and giving both current and potential clients the

The average person on the street is blissfully unaware of what is happening behind the scenes and will continue to be so until the time comes when they want to borrow

Owen Joyce Chief commercial officer, CashDeck

policies currently being implemented and what these mean for them personally, the wider lending landscape and, crucially, the brokers of these loans. The average person on the street is blissfully unaware of what is happening behind the scenes and will continue to be

tools, advice and information that will make them take heed. While it feels painful at the moment, in the long run we end up with a stronger industry and a significantly higher proportion of borrowers who can comfortably afford their mortgage repayments. AB

TECHNOLOGY UPDATE

AUSTRALIAN UNITY BANKING BUSINESS DELIVERS TO THE BROKER MARKET Unity Banking CEO Tim Barber has an announcement. The 177-year old health, wealth and lifestyle institution’s banking business has been “revitalised”. Over the past 12 months the nationwide mutual has been investing heavily in people, processes and technology in order to deliver a compelling banking products and services offering. “We’re re-launching into the market as Australian Unity Bank at a time when a trusted alternative such as we represent is sorely needed,” Barber says. “We’ve established a dedicated national third-party sales team headed by Dino Pesce. Dino’s been building a very impressive team of BDMs because we maintain that one of the key things that frequently gets overlooked in the broker market is good old-fashioned service and relationship building.” The enhancement of Australian Unity’s technology platform, which Barber deems paramount to the attainment of positive customer relations going forward, has been realised courtesy of NextGen.Net. Australian Unity has implemented the NextGen.Net ‘ApplyOnline’ platform to enable distribution of its home loan product and ensure its success. ApplyOnline – the state of the art technology solution for electronic lodgment – will ensure they can plug straight into the broker market and gain a quick adoption rate and be competitive. “ApplyOnline is the primary tool used by brokers,” says Barber. “We consulted with our brokers seeking their preference for an electronic lodgement platform and ApplyOnline was the clear front-runner. Of course we also looked at its capability and software before making an investment and were very happy with what we found.” NextGen.Net Customer Account Manager Adam Turriff notes that Australian Unity’s and NextGen.Net’s culture and aspirations are aligned. “We both prioritise efficiency and accuracy at all stages of the loan application process,” Turriff says; adding, “I’ve been impressed with Australian Unity’s approach. “They are measured and diligent to ensure they get things right upfront and make certain that they have the right framework and processes in place. “As business partners we’re a great fit. We engage in robust discussions where our expertise allows us to add value beyond AUSTRALIAN

Tim Barber

simply filling a customer requirement. Australian Unity recognise that we don’t always agree for the sake of it, which leads us jointly to the best possible solutions. “That says to me that Australian Unity wants to execute everything correctly and achieve the best outcome as opposed to seeking a quick fix or adopting a ‘band-aid approach’.” Australian Unity wants to provide best in class solutions for the broker channel to facilitate sales volumes and reduce operational costs in the home loan market, and it’s taken full advantage of ApplyOnline capabilities to achieve this. “I don’t pretend to be a technology expert,” laughs Barber. “But I have received excellent feedback about the ApplyOnline tool, ‘Supporting Documents’. It is certainly augmenting our efficiencies.” “Delivering a platform that will allow Australian Unity to compete through efficiencies and innovation will enable them to build and nurture long-lasting relationships,” says Turriff.

Dino Pesce

“Their corporate footprint is broadened with broker partners through the use of ApplyOnline, enabling greater reach and distribution of the home loan product. “ApplyOnline tools such as the Supporting Documents service really add to the offering. The process becomes more efficient, double handling is removed, and brokers are enabled to provide the best outcomes for the consumer.” In conclusion Barber stresses that Australian Unity’s strategic objective is to grow multi-distribution channels. “We see opportunities in all channels,” he says. “We want to build our third-party channel, and we also have an opportunity with existing customers of Australian Unity group who may want to buy banking products and services from us. “Our enhanced digital capability to service the broker market, along with our focus on traditional relationship banking – which includes bringing banking products to customers of the entire Australian Unity group – means we come to market with a compelling offering under a new brand.”

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Get involved in the discussion Share your thoughts at

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FROM THE FORUM

Top comments from trending stories on brokernews.com.au

NAB BRANCH MANAGER BANNED

MAJOR REMOVES SMSF PRODUCTS

Former NAB branch manager Rabih Awad has been banned from engaging in credit activities for seven years after the lender found that some home loans had not been established in accordance with policies. The ban is the result of an ongoing ASIC investigation, which last week saw two further NAB employees banned from engaging in credit activities and providing financial services. ASIC found that Awad had provided NAB with false payslips and letters of employment and entered false referee contact details for multiple applications. Some of the false documentation submitted by Awad was provided by a real estate agent previously registered as an NAB Introducer.

Westpac has removed its self-managed super fund loans from sale in order to streamline its product offering. The move was announced in a letter to brokers, which stated that, from 31 July, applications for new consumer or business lending would no longer be accepted for SMSFs. As part of this, the Westpac SMSF Investment Property Loan will be removed from sale and business lending to an SMSF for buying residential investment and commercial properties will no longer be permitted. The major lender has confirmed that it will continue to service customers’ existing SMSF loans. This includes splitting loans, switching loan products and extending loan terms.

This just gets worse! Good to see the focus taken off brokers and proves that there are more shonky dealings within branch land than first thought. I have to say that this sort of publicity is not doing this industry any favours. Anon on 11/7/2018 at 11:57AM

This has been going on for years. I had an NAB customer come and see me, PAYG vanilla deal with regular base wage, no overtime, no commitments, single guy. Failed servicing by $320 per month. Went to the local NAB branch and guess what? He purchased the house! NAB retail use the same calculator as the broker channel I’m told – yeah right. Anon on 11/7/2018 at 12:06PM

This is just the start. If there were 2,300 loans that may be false, how many more managers were involved? It’s interesting to note these people were just banned, when this is criminal activity. It shows to me that brokers are more reliable than bank staff. Country Broker on 11/7/2018 at 17:05PM

My good government schooling provided me with a better understanding of the English language than the private school spin doctors at the bank. “Streamlining” in terms of products is where you have a couple or multiple products doing the same thing and you consolidate into one or a couple. What Westpac has done is “remove” a product. Streamlining implies life will be easier, but having no product makes it harder for consumers. Why don’t they tell the truth that they have pulled out because the product is hardly used (compared to other products); the staff are not skilled enough to manage, approve or advise, and it doesn’t have the same level of profitability. They are not willing to commit the resources, and also see the product as a higher risk of future liability when things either don’t settle on time or an investment goes bad. The product is also a conflict of interest for their other profit centres, taking money away from their financial planning and investment products. This product is such a small part of their book they just don’t want to provide an offering. Too bad for the small business person looking for a way to secure their future and premises. Just another way the banks are letting us all down and telling us that it’s all rainbows and sunshine.

NAB should be penalised for failing to audit his and many other branch-originated loans. Most of us have experienced the clients who fail dismally to meet lender requirements, only to be miraculously accepted at branch level. My question is why are the real estate salesperson and borrowers not being punished? The public and referrers need to be fully aware that they too will be punished for their role in fraudulently obtaining loans.

Matt Broker on 18/07/2018 at 9:16AM

Ken on 12/7/2018 at 09:56AM

Jane on 18/07/2018 at 2:35PM

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I totally agree with you, Matt. The lenders no longer have the knowledge or understanding of some products, and they announce it as if it is a good thing for consumers. Brokers need to be continually educated, and it is about time the banks held up their end and educated themselves.

CAUGHT ON CAMERA Pepper Money’s Insights Roadshow visited Melbourne, Adelaide, Perth, Brisbane and Sydney (pictured) between 13 and 21 June, welcoming hundreds of brokers to each day-long event. Attendees at the shows received an introduction to Pepper Money’s new broker toolkit, which is designed to help brokers market to alternative-lending customers. Additionally, they heard live discussions on how Australia can leverage and embrace comprehensive credit reporting, and key predictions for the rest of 2018. Mario Rehayem, Pepper Money’s CEO for Australia, said: “Our roadshows are all about investing back into the broker market. People often question the return we get from these events, but it’s all about the input in the broker’s business, and that’s how we like to operate.”

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DATA

VICTORIA

ACT SPOTLIGHT

Regional areas driving demand but corrections expected in coming year Buyer interest is growing in regional pockets near the city and suburbs on the fringe of Melbourne. “I expect to see continued demand for land estates, which is where a lot of the new arrivals from interstate and overseas are moving,” says OpenCorp director Matthew Lewison. However, these buyers should take into consideration the time gap between owning and actually living in a dwelling, with properties selling 12 months before the land title is provided. Once construction projects are completed, the market could then be flooded. “Beware that once supply does catch up again, which it will over the next 12 months, these regional markets are likely to be the first to experience a correction,” Lewison says. In the meantime, second-tier middle-ring suburbs could be the dark horse as a result of initiatives to improve amenities. Premium suburbs in the inner city are also expected to record moderate levels of growth. Area

Type Median value

Quarterly

12-month

growth

Melbourne

$722,000

-5.6%

13.0%

Vic country

$355,000

0.6%

7.1%

Melbourne

$527,500

-2.3%

6.0%

Vic country

$270,000

-3.6%

4.9%

QUEENSLAND

Tightening rental market provides opportunities for investors Things are getting cramped in the Sunshine State, especially in the regional markets, and this follows a trend observed in the last quarter of 2017. According to the Real Estate Institute of Queensland (REIQ), most pockets of the state boast healthy rental markets, including Greater Brisbane, Ipswich, the Sunshine Coast and the Gold Coast. “Some markets remain uncomfortably tight, and we would like to see more investors. Ipswich is really a growth corridor, and we’re seeing buyers and renters flocking to this part of the southeast corner,” says REIQ CEO Antonia Mercorella. The Commonwealth Games Athletes Village is to be converted into a mixed-use precinct with over 1,000 apartments. “Our hope is that these units will find investor buyers, and this could contribute to easing the tight rental conditions in this beautiful part of the world,” Mercorella says. Area

Type Median value

Quarterly

12-month

growth

THE CATCH-UP CAPITAL Canberra is closing in on the population growth witnessed in other major cities, but the capital isn’t reaping the rewards in a uniform way is a small city in comparison to juggernauts like Sydney and Melbourne, but that doesn’t mean it’s a small player in the property space. It’s been playing catch-up in recent years, spurred by a strong job market. “Whilst Canberra’s population is relatively small, it’s growing at a rate of 1.8% – second only to Melbourne’s pace of population growth,” says Kate Forbes, national director of property strategy at Metropole Property Strategists. “Combined with strong incomes and employment, population growth has been supportive of the recent capital growth Canberra has experienced.” The property market has benefited significantly as a result of these economic and population boosts. However, the market isn’t reaping the rewards in a uniform way, as “the growth has been quite polarised, with houses significantly outperforming units”, Forbes says. She believes increased land taxes have played a role in the current state of the market. “High land tax rates have dampened investor enthusiasm for ACT property as they eat into cash flows despite the rising rents. Investors already in the market there are seeking compensation for the higher land taxes,” Forbes says. However, buyers need to look at a property’s growth potential rather than its price tag, she adds. “Seek areas where the residents can afford to keep pushing the prices up, rather than areas where the property is affordable. Buy in the best possible location you can afford, as this is what will underpin your capital growth.” The limited demand for apartments could also be the result of the large supply of stock. “Seventy-eight per cent of new dwelling approvals in Canberra over the last three years were for attached dwellings (apartments and townhouses),” reports Simon Pressley, managing director of Propertyology. AB CANBERRA

$526,000

-2.8%

2.5%

Median price (houses)

QLD country

$435,000

-1.1%

1.9%

$604,027

Brisbane

$398,000

-3.2%

-1.8%

QLD country

$385,750

-2.3%

2.6%

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Strong activity in the Canberra housing market as capital growth gives homeowners a leg-up on the property ladder The Canberra housing market remains buoyant, and we have noticed more activity in the past six months compared to the same period last year. Agents are reporting strong interest in freestanding houses, with a trend of 40 to 50 interested groups in one open-home session; recently we saw 70 groups attend at a modest, entry-level property. There appears to be a significant trend of people taking advantage of recent capital growth, and, as reflected in the 20% of our loans approved in the last six months, they are upgrading to new homes. We also have a strong contingent of clients refinancing to tap the substantial equity in their property and reinvest it through renovations, extensions and upgrades.  Further, we see that purchasers who entered the market as recently as two or three years ago – taking advantage of guarantors for equity – are now able to release these guarantors from their loan facilities due to the significant capital gains. I see the Canberra market remaining strong, and, while unit prices may flatten slightly due to supply volume, I expect demand for property to stay strong.

Gerard Heffernan Director, Heffernan Lending Solutions

SUBURB TO WATCH: CONDOR

Brisbane

BROKER PERSPECTIVE

Median price (units) $412,279

Source: CoreLogic

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

3.9%

13.1%

16.9%

4.7%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

5.9%

6.0%

9.4%

5.1%

NEW SOUTH WALES

First home buyers are making their mark, but steady interest rates are vital

OPPORTUNITIES AND KEY INFRASTRUCTURE

Population

Dwelling approvals

Infrastructure

Housing

1.8% population growth rate, second only to Melbourne

78% of new approvals since 2015 were for attached dwellings

$54m to be spent on road upgrades in 2018 budget

$608m government investment in public housing renewal program

HIGHEST-YIELD SUBURBS IN AUSTRALIAN CAPITAL TERRITORY Suburb

NSW as a whole could spend the next few years moving towards a first home buyers’ market. “The lower end of the market is quickly becoming the most active, with first home buyers starting to push into the market,” Lewison says. “This may lead to price growth at the lower end as there is more competition.” The tide is also turning in the rental market, and vacancy rates are rising, to the delight of tenants, according to the Real Estate Institute of NSW (REINSW) Vacancy Rate Survey for April 2018. “There appears to be a saturation of supply, and agents are noting that previously high rents are becoming increasingly difficult to obtain,” says REINSW president Leanne Pilkington. The demand-supply balance is kept in play by the high population in Sydney, but in this climate it is all the more important that interest rates remain steady.

Type

Median price

12-month growth

Gross rental yield

Lyons

$255,000

-34%

Area

Hawker

$296,500

-33%

Sydney

Greenway

$335,250

-4%

NSW country

Wright

$392,500

Bruce

$370,500

-10%

Quarterly

12-month

growth

$920,000

-10.7%

6.4%

$465,000

-0.9%

5.3%

Sydney

$709,000

-1.3%

2.9%

NSW country

$385,000

-0.6%

4.0%

Type Median value

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DATA

WESTERN AUSTRALIA

$340,000

-2.9%

-4.3%

Perth

$390,000

-2.5%

-2.9%

WA country

$265,000

1.9%

-7.1%

MEDIAN HOUSE AND UNIT PRICES

Affordability gives a boost to inner-city suburbs and apartment lifestyles

$1,000,000

Area

Type Median value

Quarterly

12-month

growth

Adelaide

$462,150

0.9%

3.4%

SA country

$310,000

5.1%

3.5%

Adelaide

$383,000

-0.5%

5.6%

SA country

$216,000

20.0%

0.5%

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PERTH Total auctions

Cleared

Uncleared

Clearance rate

SOUTH AUSTRALIA

30.8%

Houses

$600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0

$539,500

$700,000

$715,000

$800,000

$700,000

$900,000

$861,200

Adelaide may not have the strongest economy in the country, but it compensates by marrying affordability with convenience. According to CoreLogic, the capital city boasts several suburbs priced below $500,000 within 5km of the CBD. Apartments and townhouses are also popping up as alternatives to three- and four-bedroom houses. Middle-ring city councils such as Marion, Prospect, West Torrens and Salisbury are showing some the largest increases in pressure. Prospect’s success reflects the importance of amenities to a suburb. For instance, proximity to the beach is what sells prestige properties in Adelaide. According to Herron Todd White’s Month in Review for May 2018, premium apartments are also expected to be close to community services and facilities, in addition to having beautiful views. In North Adelaide’s prestige market, there has been an increase in apartment enquiries as a result of the Adelaide Oval development and the establishment of the Riverbank precinct.

58.3%

Sydney Melbourne Brisbane Adelaide

Perth

Hobart

Units

Darwin

$411,000

WA country

Clearance rate

$630,000

-1.9%

$287,500

-1.0%

Uncleared

$525,000

$510,000

$345,000

growth

Cleared

$465,000

growth

Perth

$410,000

12-month

Total auctions

$507,000

Quarterly

ADELAIDE

$326,750

Type Median value

The combined capital cities saw fewer homes taken to auction this week, with a total of 1,400 auctions held, down from the prior week when 1,671 auctions took place. The lower week-onweek activity returned a preliminary auction clearance rate of 55.9%, which is higher than the previous week’s 52.6% final clearance rate; although we expect that, as more results flow through, the final auction clearance rate could be lower relative to the previous week. The weighted average has remained within the mid-50% range for each of the last eight weeks, while one year ago 65–70% of homes were selling over the same period. Although the capital city weighted average is substantially lower than a year ago, auction results are holding stronger relative to the 2010–12 downturn in home values, when the capital city clearance rate held below 50% between mid-2011 and early 2012.

$455,000

Area

WEEK ENDING 8 JULY 2018

$375,000

With things heating up in Perth, buyers should not delay entering the market. “Perth’s market often goes through two to three years of correction, followed by two to three of growth,” says Matthew Lewison, director of OpenCorp. “When the market starts to move in Perth you want to be involved early as the upswing usually goes quickly.” It’s not just investors who need to get in there; owner-occupiers should, too, in order to address the issue of oversupply in the face of high vacancy rates. “The real activity needs to start happening in the established housing market with owner-occupier buyers,” Lewison says. The available options go beyond Perth, with other pockets starting to thrive as well, likely due to capital spillover. “With WA’s economy stabilising, some of the regional markets have improved more than Perth, including the lifestyle markets of Broome, Busselton, Karratha and Port Hedland,” says Propertyology MD Simon Pressley.

CAPITAL CITY AUCTION CLEARANCE RATES

$530,000

Heightened activity in Perth is a call to action for investors

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Weekly change

Monthly change

Year-to-date change

12-month change

Sydney

-0.1%

-0.5%

-2.8%

-4.7%

Melbourne

-0.1%

-0.4%

-1.9%

0.7%

Brisbane

0.0%

0.3%

1.0%

Adelaide

0.0%

0.2%

0.4%

1.0%

Perth

-0.1%

-0.6%

-1.1%

-2.1%

-0.1%

-0.4%

-1.9%

Combined 5 capitals

*The monthly change is the change over the past 28 days

BRISBANE CANBERRA Total auctions

Cleared

Uncleared

Clearance rate

Total auctions

Cleared

Uncleared

Clearance rate

42.4%

64.7%

SYDNEY Total auctions

544

Cleared

216

Uncleared

176

Clearance rate

55.1%

TASMANIA

MELBOURNE Total auctions

632

Total auctions

Cleared

306

Cleared

Uncleared

220

Uncleared

Clearance rate

58.2%

TASMANIA

Area

Tenants feel the squeeze in most profitable investment state Low levels of housing supply are helping to maintain high demand among renters and those looking for short-term accommodation, to the delight of investors. “Rents have increased significantly over the last 12 months. A combination of improved interstate migration and high demand for Airbnb accommodation has held vacancy rates at an all-time national low,” says Propertyology managing director Simon Pressley. CoreLogic data confirm that, in the 12 months to April 2018, rental rates increased 11.7% in Hobart – the biggest rise in a capital city and the market’s fastest rental growth rate for almost a decade. Other areas are catching up. For instance, Southeast Tasmania’s rents increased almost 50% during this period. It was also the only region to show a boost in rental yields, which makes it the most profitable pocket in the state for investors.

n.a.

Type

Median value

Quarterly growth

12-month growth

Hobart

$445,500

4.8%

8.9%

TAS country

$285,000

0.0%

6.9%

Hobart

$330,000

3.1%

5.0%

TAS country

$239,000

-0.2%

1.7%

All data sourced from CoreLogic.com.au

www.brokernews.com.au

PEOPLE

Aggregator AFG

IN THE HOT SEAT Melissa Gielnik, owner and MD of Smart Lending and non-executive director of the MFAA, reflects on her award-winning career and the business philosophy she implements to ensure her clients achieve their goals

Who or what inspired you to become a broker?  It actually runs in the family. My dad was a broker, and when A I returned to Australia after two years living abroad I started to work for him while looking for a ‘real job’. I was in my mid-20s and simply fell in love with broking, helping the clients, and the amazing relationships I was forming. Needless to say, I never ended up getting that real job.

What have been the highlights of your career to date?  In 2014, I became the first female in more than a decade to be A recognised as the MFAA Mortgage Broker of the Year in their National Excellence Awards. Since then I have played a role in the MFAA’s Women in Business initiative, where I was able to showcase my work-life balance and share my story. That experience was definitely a highlight, along with becoming a member of the board of directors, whereby I am able to represent the average broker, like myself, especially at such a crucial time in our industry. The industry, the MFAA and my aggregator, AFG, have all been amazing supports in my 16-year business journey, helping me to achieve all my goals. Further, I believe that where there is opportunity to give back it’s important that we dedicate time outside our business to building the industry via the younger brokers coming through, and any other channels that suit our skill sets.

What is your business philosophy and what inspired it? I’ve always said, “We walk in your shoes”. We – the entire Smart A Lending team – will only do for a client what we would do for ourselves if in their position. At all stages of our process, the client is at the forefront of our decision-making and service. It’s just part of my core values that I work and live by.

If you had the MFAA’s CEO over for dinner, what would you serve? I’ve been out to dinner many times with Mike, and I like him so A I wouldn’t cook. It’s not my style at all, and cooking isn’t really in my strengths column! So we would eat out somewhere low-key with a good vibe. AB

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