Australian Broker 16.01 by Key Media

JANUARY 2019 ISSUE 16.01

The end of easy money Analysing the impact of ASIC’s new credit card rules /16

A big deal Shelley Beggs recalls how she brokered three loans for one client /20

BRENDAN O’DONNELL The managing director of Liberty Network Services talks skills, challenges and opportunities for the year ahead /14

Movers and shakers The latest appointments from across the industry /25

ALSO IN THIS ISSUE… In the news FSU’s Julia Angrisano on her vision for a better banking industry /22 Housing market data The latest stats from the capital territory /26 In the hot seat ING’s Glenn Gibson reflects on his first months with the bank /30

NEWS

IN THIS SECTION

Lenders New year, new rates as lenders review funding costs /04

Aggregators Loan Market adds personal and asset finance to panel /06

Technology Experian calls for open banking awareness campaign /10

Regulators Royal commission fallout starts to fade /12

Market Solid price growth needs lending stability /08

www.brokernews.com.au JANUARY 2O19 EDITORIAL Editor Melanie Mingas News Editor Rebecca Pike Production Editor Roslyn Meredith

DATES TO WATCH

Upcoming can’t-miss events

30 JANUARY

1 FEBRUARY

19 FEBRUARY

MPA Major Banks Roundtable

Royal commission final report

FBAA Gold Coast conference

The first MPA roundtable of the year will see senior representatives from Australia’s major banks gather to discuss the trends and topics driving lending. The hourlong debate will be streamed live online from noon and is available to watch on mpamagazine.com.au.

Commissioner Hayne is due to deliver his final report to Treasurer Josh Frydenberg by 1 February. The report follows seven rounds of hearings, during which 134 witnesses were called upon to provide evidence of misconduct in the banking, superannuation and financial services industry.

The first professional development summit of the year will be held at Quality Hotel Mermaid Waters. There will be industry updates from the FBAA, and Darren Loades from Insurance Advisernet will provide insights and advice on buying or renewing PI insurance. Delegates can register online.

SALES & MARKETING Sales Manager Simon Kerslake Marketing Manager Danica Mendoza

CORPORATE

ART & PRODUCTION

Chief Executive Officer Mike Shipley

Designer Martin Cosme

Chief Operating Officer George Walmsley

Production Manager Alicia Chin Traffic Coordinator Freya Demegilio

Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

EDITORIAL ENQUIRIES

Melanie Mingas +61 2 8437 4720 Melanie.Mingas@keymedia.com

SUBSCRIPTION ENQUIRIES

19 FEBRUARY

20 - 22 FEBRUARY

22 FEBRUARY

MFAA Perth PD breakfast

SMSF Association National Conference

Mental health in the workplace

Kicking off MFAA’s professional development agenda for 2019, this one-day event will hear from CEO Mike Felton and GRACosway managing partner Richard King, who will discuss the royal commission’s final report. The session will also feature WA’s community heroes and introduce new initiatives for the year ahead.

Delegates at this event can enhance their technical knowledge of the SMSF sector and also source advice and support. Taking place in Melbourne, the conference includes a leadership breakfast, workshops and networking, and on 19 February there will be an exclusive specialist-only session for association members.

Leaders from all industries and sectors are invited to attend this one-day training course designed to provide participants with the knowledge and skills to build confidence when tackling the rising issue of mental health in the workplace. Organised by Informa, the event will take place in Melbourne.

tel: +61 2 8311 5831 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

4 – 5 M A R C H

2 M AY – 6 J U N E

5 JUNE

Responsible Lending and Borrowing Summit

MFAA National Roadshow and State Excellence Awards

Broker Business Exchange

Informa’s third responsible lending summit will welcome ABA director Christine Cupitt, Ombudsman Philip Field and ANZ customer advocate Jo McKinstray to an open forum reflecting on the lessons learned from the royal commission and exploring opportunities to improve the industry for the future.

The association’s annual roadshow and awards kicks off in Sydney before taking in Adelaide, Perth, Brisbane and Melbourne, concluding with the national awards in Melbourne on 25 July. The roadshow will feature workshop and conference sessions, and offer networking opportunities. Nominations for the awards are now open.

www.brokernews.com.au

BBX returns to the Westin Sydney for another day of high-level education, conversation and networking. The day will comprise conference and workshop sessions, which will run alongside an exhibition hall featuring the industry’s leading names, from lenders to business support services.

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.

www.brokernews.com.au

NEWS

LENDERS THE ROCK CUSTOMERS RECEIVE MYSTATE PERKS of The Rock can now take advantage of the “millions” MyState Bank has invested in modern banking solutions, including the bank’s app and features such as Apple Pay, Garmin Pay and Google Pay. Customers with loans from The Rock will now benefit from a “simpler redraw” facility. MyState’s Huw Bough said, “I think MyState’s in a fantastic position at the moment. We have got great products and services, and I think customers are embracing our proposition.” CUSTOMERS

NEO-BANK ‘HYPE’ QUELLED BY MUTUALS CEO Peter Lock HERITAGE BANK has said the mutual sector is leading in the area of customer-focused solutions, despite the neo-bank “hype” that exists. While reports claim people now favour neo and digital banks over the majors, Lock maintains mutuals provide the true alternative. “Unlike many neo banks, mutuals aren’t owned by big investors looking to make a profit. If you’re turning to them to escape the profit-maximisation excesses of the big banks, then you should think again,” he said.

“The removal of the restriction on interestonly lending is essential to addressing the concerning decline in credit growth for new housing” Tim Reardon Principal economist, HIA

www.brokernews.com.au

SNAPSHOT OF OWNER-OCCUPIER P&I LOAN RATES* (7–14 JAN 2019) Basic variable

Standard variable

Source: Canstar

1 year fixed

2 years fixed

3 years fixed

4 years fixed

5 years fixed

Average

4.17%

4.43%

4.02%

3.97%

4.04%

4.43%

4.48%

Minimum

3.54%

3.44%

3.49%

3.64%

3.69%

3.99%

Maximum

5.59%

5.93%

5.14%

4.95%

5.05%

4.85%

5.04%

Decreases

Increases

-0.14%

-0.21%

-0.36%

4.18%

4.43%

4.02%

3.97%

4.04%

4.43%

4.48%

Average decrease

Average increase

Old average

*Based on owner-occupier loans available for $400,000, 80% LVR and P&I repayments

NEW YEAR, NEW RATES AS LENDERS REVIEW FUNDING COSTS Increased costs and “intense competition” prompt rate increases by one bank, while a second-tier lender slashes rates for low-LVR loans first rate increases of the new year came into effect on 11 January when the Bank of Queensland increased rates by 18bps, citing increased funding costs and “intense competition”. The bank’s Economy Owner Occupier Principal and Interest rate was increased by 11bps, and a number of other loan and lines-of-credit rates were increased by 18bps. While the changes affect several products, there is no change to BOQ’s Clear Path Owner Occupier Principal and Interest rates. Lyn McGrath, group executive, retail banking, said, “While decisions like these are never easy, offsetting the impact of these costs ensures we balance the needs of THE

our borrowers, depositors and shareholders.” Elsewhere, Virgin Money increased its variable rates for all existing P&I and interest-only home loans by 20bps. The group said the majority of standard variable rates for new home loan applications would remain unchanged, with only a few set to increase. Virgin Money also announced a reduction of between 5bps and 10bps to its fixed rates for twoand three-year owner-occupier P&I loans over $300,000 with an LVR of 90% and under; and its two- and three-year fixed rates for investment interest-only loans with an LVR of 90% and under. Virgin Money’s GM of lending,

cards and deposits, Johnny Lockwood, said, “We have absorbed higher funding costs for the last 12 months in order to delay the impact for our home loan customers. “Unfortunately, costs … are likely to remain elevated into the foreseeable future.” Meanwhile, Bankwest reduced owner-occupier rates on its Complete Variable, Premium Select and Complete Fixed Home Loans as of 8 January for new borrowers with deposits of more than 20%. Further, it has introduced a new pricing tier for borrowers with a deposit of up to 10%. Bankwest also removed reverse mortgages from its product suite from 1 January. Other banks that decreased interest rates at the start of 2019 are IMB (43bps) and P&N Bank (36bps for owneroccupiers and 49bps for investors), both of which still offer reverse mortgages.

MARKETING UPDATE

PEPPER MONEY TALKS OPPORTUNITY IN 2019 Mortgage brokers will play an important role in helping their customers to navigate the lending industry in 2019. And it will be the broker who can offer their customers options and genuine alternatives, matched to their circumstances, who will reap the benefits

year we saw a shifting landscape in the lending industry for both brokers and borrowers. Credit criteria changes, increased expense verification measures and the shadow of the Banking Royal Commission all contributed to headwinds faced by the industry. As we look to the year ahead, we are expecting 2019 will follow along the same path and borrowers will need to seek out a genuine alternative to the banks. And we believe borrowers will turn to brokers more than ever for that solution. For that reason, I believe 2019 will be the year of the broker. With the final Banking Royal Commission report coming in February, we will see changing lending appetites and more customers seeking alternative solutions to the major banks. While one may see this as a potentially turbulent time ahead, in fact it also represents a year of opportunity for those who seek it out. Unfortunately, more Australians who can afford to get a loan and would typically get approved will find themselves being declined by the big banks as credit policies tighten and Comprehensive Credit Reporting is fully rolled out. However, there are still ample opportunities for customers to succeed in getting the loans they deserve. And that’s where a good mortgage broker comes in. The valuable guidance an experienced and diversified broker can provide is vital and will ensure borrowers get the best outcome from an array of credible and reliable lenders, like Pepper Money. A good broker (and lender) should keep abreast of what’s happening and ensure they remain focused on the most

decision so that brokers can provide a customer with an alternative solution in less than two minutes.

LAST

Make an investment in your education The key to a broker’s success is to keep adapting and keep learning. Brokers need to make sure to take up as many training opportunities as possible, be it PD days, conferences or utilising tools provided by their aggregators or lenders. Pepper recently released the Alternative Lending Marketing Toolkit to assist brokers with lead generation through social media and referral marketing channels. The toolkit is available to Pepper-accredited brokers on the Pepper Broker Portal.

Lastly, pay close attention to compliance Brokers must remember their obligations under Australia’s responsible lending laws. A broker should collect as many supporting documents as possible from a borrower to ensure their ability to repay the loan, regardless of what the lender’s criteria or minimum requirement is. Conversations with the customer and decisions taken should be documented and kept on file.

Aaron Milburn, director of sales and distribution, Pepper Money

valuable asset they have, the customer. Remaining focused and offering genuine alternatives will ensure better financial outcomes for the average Australian. How can brokers navigate this new environment? Understand the importance of customer service With the changing lending landscape chances are many customers have never needed to consider an alternative lender in the past. That’s where

Pepper’s 5 Step Process can come in handy. Brokers can use this as a guide on how to successfully offer an alternative lending solution, as well as get some tips for navigating the emotional aspect of the customer’s lending experience. Work smarter, not harder There is an array of tools available for brokers that simplify the typically onerous loan process. For example, Pepper Money’s Pepper Product Selector was built around returning a quick

To learn more about solutions for your clients from Pepper Money, find your local BDM online at pepper.com.au/ broker/contact/bdm. Alternatively, you can submit a scenario via the Pepper Product Selector for an on-the-spot indicative offer. Or email scenarios@pepper.com.au and one of our experienced team will be in touch.

www.brokernews.com.au

NEWS

A G G R E G AT O R S ‘DAMNING EVIDENCE’ OF SYNCHRONISED RATES CEO David Bailey has praised the ACCC’s latest report, saying it provides “damning evidence” that rate increases at the majors are often synchronised. His comments underscore why a viable mortgage broking market is crucial for retaining competitive pressure. He said, “If Australia’s competition watchdog has concluded that the pricing of mortgages is opaque, how are consumers expected to navigate the variety of home loans without the assistance of their local broker?” AFG

LOAN MARKET GROUP ADDS PERSONAL AND ASSET FINANCE LENDER TO PANEL New addition makes aggregator’s panel one of the largest in Australia, with more than 60 lenders

LOAN MARKET has expanded its lender panel to include personal and asset finance peer-to-peer lender RateSetter, taking its total number of lenders to more than 60. It is one of the largest panels in Australia. Rates on personal and automotive loan products start from 7.49% and 5.90% respectively. The addition reflects the group’s commitment to being the industry’s “trusted adviser”, it said. It aims to be a single specialist broker to which customers can entrust their portfolio of real estate, personal and asset finance needs, alongside their personal wealth, insurance and superannuation goals. Using a risk-based pricing model, RateSetter delivers a

www.brokernews.com.au

personalised rate to borrowers in less than two minutes and aims to provide a simple, transparent and rewarding experience for brokers and customers. Loan Market COO Stephen Scahill said, “Loan Market continually reviews its awardwinning lender panel to ensure customers have information and access to the widest and best range of products. Every one of our brokers is a trusted adviser for their clients; they create lifelong relationships by offering a wide range of specialised finance solutions. RateSetter enhances our brokers’ abilities through their unique service offering.” Daniel Foggo, CEO of RateSetter, said brokers would

appreciate how its lending platform had been optimised for an efficient and easy-to-follow loan application process. “Our low-rate personal and automotive loans help brokers expand their service offering to customers, enhancing the relationships they have with their customers and growing their business at the same time,” Foggo said. “Our mission is to give all Australian borrowers a bettervalue alternative to traditional lenders by offering simple, flexible products at highly competitive rates that are tailored to customers wanting to consolidate high-interest debt, complete some home improvements, purchase a new car or access funds to cover expenses like a holiday, wedding or medical procedure. RateSetter was added to Mortgage Choice’s panel in June 2018 as part of its focus on growing broker partnerships.

NEO LENDER JOINS PLATFORM FINANCE PANEL has added neo-bank Wisr to its lender panel, which is the largest asset finance panel in Australia. The appointment follows a period of growth in Wisr’s personal loan business through the broker channel. It recorded a 46% quarter-on-quarter growth in broker channel settlements at the end of September 2018. The addition means that more than half of all brokers in the country can now offer finance through Wisr. PLATFORM FINANCE

“While the market is a little softer, do your spring cleaning, make sure your processes are solid, and then formulate a plan for the future” Sam Boer CEO, Smartline

www.brokernews.com.au

NEWS

MARKET LEGAL WARNING FOR SME FINANCE BROKERS owners seeking finance are increasingly likely to break the law, according to insolvency firm Jirsch Sutherland. Business decisions by owners faced with a credit squeeze, such as arranging ATO repayments, using other creditors by stretching out terms, selling surplus business assets, reducing overheads and streamlining staff, could lead many to trade while insolvent. Partner Ginette Muller said, “If you are a director and you take any of these actions, you may be about to commit an offence.” SME

HOUSES SELLING IN JUST SIX DAYS IN TASMANIA locations in Tasmania have made a list of the top 10 fastest-selling suburbs in Australia, according to CoreLogic and RiskWise Property Research. The fastest-selling two locations, Lutana and Mornington, saw houses sell after an average of six days on the market. The national average is 43 days. Three more Tasmanian suburbs and one in WA took a mere seven days to sell. Castle Cove in NSW achieved an average of eight days. EIGHT

“The overall strength of the Australian economy bodes well for commercial real estate markets throughout 2019” Ben Schubert Partner and joint head of institutional sales, Knight Frank

SOLID HOME PRICE GROWTH NEEDS LENDING STABILITY Research body head says banks must stop “playing God with borrowers’ financial futures” head of research, Simon Pressley, says that if banks were to return to “more reasonable lending standards” five capital cities would be on track for solid property price growth in 2019. Hobart would lead the way, followed by Perth, Brisbane, Adelaide and Canberra, and major regional areas would also be on track to experience growth. A combination of market and economic factors mean some locations could see double-digit growth, and that number could increase further if banks stopped “playing God with borrowers’ financial futures”. The research looked at three possible scenarios: no change to PROPERTYOLOGY’S

credit conditions; a return to “sensible” credit policy in the first quarter; and a return to sensible policy in the second quarter. No change in policy could see Sydney and Melbourne prices drop 10% and 8% respectively, whereas a change of policy in the first quarter could reduce the figure to zero in Melbourne. In Brisbane, where a price increase of up to 3% is expected, a rise of 6% would be achievable if policy were to change in Q1. However, a change in policy in Q2 would see this figure capped at 4%. Hobart could reach double digits, with a possible 10% increase should policy change, compared to the 4–7% rise expected currently.

Pressley said, “Hobart is a no-brainer. The Tasmanian economy is a remarkable success story that has now spread right across the state. Launceston has the potential to be Australia’s property premier in 2019, while Burnie and Devonport also will perform strongly.” Pressley also said Perth could become Australia’s bestperforming capital in two to three years. “Don’t be fooled by the 2018 price fall of 2% in Perth, because a large proportion of its former oversupply has been absorbed, vacancy rates have reduced from 6.9% to 3.3% over the last two years, and expectations for new job creation is now high,” he said. “There is a long list of bigpicture, positive stuff, which collectively paints a very bright future. Believe the doom and gloom if you wish, but I’m telling you that there will be locations that experience a property boom over the next few years.”

Sep 2012 PROPORTION OF TOTAL PROPERTY RESALES AT A LOSS OVER TIME Source: CoreLogic

25%

Sydney

Melbourne

Brisbane

Adelaide

20% 15% 10% 5% 0% Sept 2003

www.brokernews.com.au

Sept 2006

Sept 2009

Sept 2012

Sept 2015

Sept 2018

HOMEOWNERS’ OUTLOOK ON FALLING VALUES Source: ME

Responses based on when property purchased % worried about property value falling

% regret what they paid for property

% worried about losing money on a property

% worried about owing more than property is worth

100%

90%

80%

68%

49% 35%

48%

40%

62%

66% 57% 46%

50%

60%

70%

27%

30%

20%

15%

10%

0% Last 12 months

12–36 months ago

Longer than 36 months ago

HOME VALUE DECLINE WORRIES OWNERS who purchased their properties between 2015 and 2018 are the most worried by the recent decline in home values. The findings, from a survey conducted by ME (see graph above), also confirm that 49% say falling prices make them feel less wealthy, while 73% will be more careful with money in the future. ME head of home loans Andrew Bartolo said, “Those looking to borrow should ensure they have a strong savings history, a deposit over 20%, and can demonstrate they can keep their levels of expenditure to low levels long-term.” HOMEOWNERS

www.brokernews.com.au

NEWS

TECHNOLOGY

DEMAND RISING FOR DIGITAL BANKS than 2.1 million customers want to switch banks within the next six months, according to research by Nielsen. Further, 67% are customers of the big four banks and 16% of them specifically want to switch to a digital bank like ING, ME or UBank. Nielsen head of financial services and insurance Jo Brockhurst said, “The trend towards digital banks is paving the way for neo banks to gain market share … their customer base has rapidly expanded.” MORE

EXPERIAN CALLS FOR OPEN BANKING AWARENESS CAMPAIGN Consumers could save money on everything from loans to grocery shopping, but low awareness of benefits of open banking will hinder impact banking will allow all Australians to better compare and switch products and providers across banking, energy and telecommunications. However, Experian is calling for greater customer education as the system is implemented. Poli Konstantinidis, Experian’s executive GM of credit services and decision analytics A&NZ, said, “It’s imperative that we address the importance of consumer education for open banking to succeed. We are asking consumers to give organisations access to some of their most valuable data, so we need to provide them with a solid understanding of this new way of working and demonstrate tangible examples of how it will benefit them OPEN

in order to build trust in the system.” Open banking comes into effect on 1 July 2019, allowing individuals and small businesses, as well as authorised accredited third parties, to access their data. As a result, people’s circumstances will be more accurately taken into account when engaging with providers, for instance when looking to refinance a loan. It is also thought that better access to data will support more efficient processes for businesses, with savings flowing through to consumers. Improved competition and data-driven innovation are expected to support economic growth and create new high-value jobs. “Consumers are probably unaware that open banking can deliver a much more streamlined and

improved loan or mortgage application process,” Konstantinidis said. “They also probably don’t realise that it could help them save money on their weekly shop as retailers analyse transactional data and lower their prices on certain products, or create personalised offers as a result. “Consumer awareness campaigns are the answer, and I believe these should be implemented soon – not a few months before the July start date as is believed to be the case.” The reform implements commitments made by the government after its review into open banking in Australia and the Productivity Commission’s Data Availability and Use Inquiry. The reforms will be overseen by the ACCC and the Office of the Australian Information Commissioner, and a new Data Standards Body will develop transfer and security standards. High levels of privacy protection and information security will be a core feature of the system.

OPEN BANKING: A TIMELINE Source: Deloitte

11 SEPTEMBER Draft CDR Rules Framework released by ACCC for consultation with the public

AUGUST 2018 Draft Consumer Data Right (CDR) Bill released for comment by Treasury

www.brokernews.com.au

SEPTEMBER 2018 Banks commence comprehensive credit reporting, despite legislation not yet being passed

1 JULY 2019 All majors required to share data on credit and debit card, deposit and transaction accounts

1 FEBRUARY 2020 All majors required to share data on mortgage accounts

1 JULY 2020 All major banks to share data on all products recommended by Farrell Review

1 JULY 2021 All remaining banks required to implement open banking

MAJOR BANK BACKS FINTECH bank ANZ has bought a minority stake in online home loan platform Lendi, which utilises a network of salaried, rather than commission-remunerated, brokers. Reports claim the bank paid $40m for its share, although, consistent with other investors, it will not be represented on the fintech’s board. Founded in 2013, Lendi’s other investors include Pepper Money and Macquarie Group. In 2017, Lendi announced a joint venture partnership with Domain to connect its visitors with lenders. MAJOR

SYDNEY 2 MAY | ADELAIDE 9 MAY | PERTH 16 MAY | BRISBANE 30 MAY | MELBOURNE 6 JUNE

Enter Now!

If you or your business has demonstrated exceptional customer service, professionalism, ethics, growth and innovation in 2018, then enter the MFAA Excellence Awards for the chance to be recognised.

INDIVIDUAL AWARDS / BUSINESS AWARDS / LENDER AWARDS 22 AWARDS TO ENTER OR VOTE FOR Entries in the MFAA Excellence Awards are judged equally based on excellence and professionalism across all areas of business. They provide an unparalleled opportunity for brokers and businesses of all sizes and experience to be recognised for the quality of their work. According to past winners and finalists, MFAA Excellence Award recognition can… • Win new clients • Secure new referral partners • Elevate the profile and status of your brand in the eyes of your peers

• Improve loyalty with existing customers • Increase team morale • Lift your professional profile and build your reputation

NEW IN 2019! Nominate a deserving broker, business, BDM or loan administrator for a MFAA Excellence Award. Your nominee will receive an email on your behalf that encourages them to enter.

TO ENTER, VOTE, NOMINATE OR FOR MORE INFORMATION, Visit: awards.mfaa.com.au

Entries close: Monday 25 February 2019 Terms and conditions: Visit awards.mfaa.com.au for full and up-to-date terms and conditions. Entry in MFAA Excellence Awards, and voting in Lender Awards, is open to MFAA members or nominated representatives only. The MFAA Excellence Awards are independently judged and are audited by Hall Chadwick. www.brokernews.com.au

NEWS

R E G U L AT O R S

INCREASED RED TAPE CAUSING ‘BRAND DECAY’ compliance requirements, audit team enquiries and red tape are distracting brokers from key business opportunities, according to marketing consultancy 101 Things. Director Karen Hall said the extra time now spent on applications meant “something has to give” – often branding and long-term business building. Hall reports that more brokers now fail to keep online and social activity up to date and miss mining opportunities in their database. “Your business can go into a downward spiral,” she said. NEW

ROYAL COMMISSION FALLOUT STARTS TO FADE For the first time since the royal commission started, consumer satisfaction with the banks is on the rise

the first time since the start of the royal commission, customer satisfaction with the banks has started to lift, according to research by Roy Morgan. Although a marginal increase, satisfaction rose to 78.1% over the last month, up from its seven-year low of 78% in October. Despite this figure being 3.1% below that of January 2018, it remains above the long-term average of 74.3% calculated since 2001 and well above the low of 58.7% in January 2001. However, despite the most recent results, dissatisfaction and indifference remain. Dissatisfaction with banks increased from 4.9% last January FOR

29 complaints received by the Australian Financial Complaints Authority in its first month of operation were directly related to mortgage brokers. The new dispute resolution board received 6,522 complaints over the month, 47% more than its three predecessors. However, MFAA CEO Mike Felton said, “It is pleasing to see complaints relating to mortgage brokers remain at remarkably low levels. Broker-related complaints represented less than half of one per cent of the overall figure”. APPROXIMATELY

www.brokernews.com.au

CUSTOMER SATISFACTION WITH BANKS Source: Roy Morgan Single Source (Australia)

Prior to start of royal commission (Jan 2018)

90% Proportion satisfied/dissatisfied

BROKER COMPLAINTS LESS THAN 0.5%

to 5.6% in November. Those who felt indifferent towards their banks also increased from 14% to 16.3% over the same period. This means that one in five customers are not fully satisfied; however, the figures are still below the 2001 level of 40.1% combined. Of the 10 largest consumer banks, only two saw an increase in satisfaction: ING at 88.8%, a rise of 3.6% from before the royal commission, and Bendigo Bank at 88.5%, a rise of 0.1%. Westpac saw the biggest decline, falling by 5.5% to 72.4%. Both NAB and Bankwest saw a drop of 4.5%, although Bankwest still has a higher-than-average satisfaction level of 79.9%, compared to NAB’s 74.6%.

ANZ dropped by 4.3% to 74.3%, and CBA, with the highest satisfaction of the big four, dropped by 3.4% to 76.7%. Industry communications director Norman Morris said, “It is important to note that, contrary to all the negative reporting on banks, the clear majority of customers are satisfied and less than 6% claim to be dissatisfied.” However, he added, “The scheduled release of the final royal commission report in February 2019 is likely to represent a major challenge to maintain satisfaction levels as it is anticipated that it will recap on a lot of problem areas and receive widespread publicity.” The findings come from Roy Morgan’s Customer SatisfactionConsumer Banking in Australia report published in November. It is based on face-to-face interviews with more than 50,000 consumers a year, including more than 4,000 bank customers per month. (See graph below for survey results.)

80% 70% 60% 50%

(Average, 74.3%)

Satisfied

78.1% Jan ’18, 81.2%

58.7%

40% 30% 20% 10% 0%

21.9% 18.2%

(Average, 16.1%) (Average, 8.7%)

Neither satisfied/dissatisfied Dissatisfied

Jan ’18, 14.0% 16.3% Jan ’18, 4.9%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 6-month moving average

5.6%

www.brokernews.com.au

FE AT URES

SPECIAL REPORT

EMBRACING THE UNKNOWN Brendan O’Donnell, managing director of Liberty Network Services, advises brokers how to navigate uncertainty and hone their skill sets for the year ahead

2018 PERFORMANCE HIGHLIGHTS

+65% motor lending settlements

+24% commercial lending settlements

+16% SMSF lending settlements

+38% credit insurance settlements

www.brokernews.com.au

Liberty Network Services, 2018 was a year that defied the odds. While a slowdown in loan approvals across the major and second-tier banks caused credit to crunch, specialist and non-bank lenders like Liberty Financial posted some impressive results. In the 12 months to December, 146 Liberty advisers facilitated double-digit growth across motor, commercial, SMSF and credit insurance settlements (see boxout), thanks to a fresh approach to troubled times and a commitment to diversification. “Our advisers are passionate about helping more customers ‘get financial’, and Liberty provides the breadth and depth of products and solutions to enable this,” says managing director Brendan O’Donnell. “Being a Liberty adviser provides opportunity to focus beyond mortgages and offer a broader range of products, solutions and services to help customers, as highlighted in the year-on-year growth figures.” The impressive milestones were achieved against a backdrop of unprecedented challenges. However, the year ahead will see the company’s focus turn to the opportunities that naturally arise from such events. O’Donnell shares his advice on how brokers can succeed in a changing – and challenging – environment. “Now more than ever, brokers need to demonstrate and reinforce the exceptional service they provide customers,” he says. “Every survey commissioned in our industry over the past 10 years clearly shows that brokers provide superior service to that of traditional bank FOR

branches. Brokers cannot afford to be complacent, and they need to ensure that every customer they help walks away with an exceptional experience.” In practical terms, O’Donnell says this demands that time is invested in listening and understanding customer objectives. Brokers must remain proactive and professional, and ensure their work results in good customer outcomes. To achieve these results, there are several key skills that the coming 12 months will demand, with respect to compliance, management and communication.

a coach to keep them honest with themselves,” he says. Finally, effective communication remains paramount. In the most basic form, this means brokers must focus on listening and capturing their customers’ objectives, while also learning to leverage multiple channels of communication simultaneously, both digital and analogue. “Brokers should avoid being prisoners of their own experience and embrace the rapidly changing world we live in. Embrace new technologies and ways of doing things,” he says. The digital broker It isn’t the first time O’Donnell has imparted such advice. Technology is a core principle of Liberty Network Services. Since inception the aggregator has been a force for innovation in the fintech space, not least through its award-winning, end-to-end broker platform Spark.

“Brokers should avoid being prisoners of their own experience and embrace the rapidly changing world we live in” Brendan O’Donnell, MD, Liberty Network Services “Brokers should refresh their knowledge on NCCP, ensuring they fully understand their responsible lending obligations,” O’Donnell explains. “They must also understand and embrace the Combined Industry Forum changes that came into effect this January.” When it comes to management, planning remains of the essence. O’Donnell reminds brokers that, first and foremost, they have entrepreneurial obligations to fulfil in order to keep their business afloat. “Time management remains a key challenge for most entrepreneurs and small business operators. Plan more and stick to the plan. To do this it’s important brokers have

The launch of Spark made Liberty one of the first to move away from traditional, web-based platforms – a move that has since inspired many to follow. Introduced to the market in 2012, Spark has supported better customer and broker outcomes, as well as diversification and modernisation of the broker channel. In 2018 a new feature was added called ‘MAY’, or ‘more about you’. Designed to enable customers to self-serve, it narrows the gap between adviser and client, allowing information to be gathered efficiently, while reducing time burdens on all parties. “Our mobile platform Spark is cutting-edge and a fintech solution

In partnership with

Brendan O’Donnell, managing director, Liberty Network Services

that enables advisers to engage with customers and prospects in a seamless and efficient way. Our agile approach is paying dividends as our data scientists, developers and product owners work closely with advisers to ensure good customer outcomes,” says O’Donnell. The innovations don’t end there. Urging brokers to embrace “all things digital”, O’Donnell has been a vocal advocate of online and mobile marketing for many years, and today the Liberty digital marketing store has more than 150 customisable tools to support its advisers. The aggregator also contributes dollar-for-dollar support for local marketing actions and supports

its network with lead generation from social and digital platforms, allocating more than 5,000 leads in the first six months of the current financial year. The efforts are coordinated by an in-house marketing team and supported by the customer appreciation program (CAP), which commences with a customer survey, followed by a gift after every settlement. It’s not just the brokers who are happy; more than 300 positive testimonials have been generated over the last six months alone. “While we have exceptional technology and constantly seek ways to work smarter, digitise and

streamline processes for advisers, we recognise that nothing replaces local face-to-face support, coaching and mentorship. We pride ourselves on ensuring that we have no more than 25 advisers per network sales manager,” O’Donnell says. Pillars of success According to O’Donnell, the key to the network’s success is the unique value proposition it offers, as detailed in a growing list of key pillars that define the direction of the business. At the core, this list comprises economics, technology, diversification, marketing and high-touch processes. Last year saw

the addition of agility, placing emphasis on proactive support and quick response times. This is facilitated by operational and productivity data that is captured and analysed in Spark to highlight how and where adviser efforts are being spent and the returns they are generating. The seventh pillar is compliance. An essential part of company culture since the beginning, this year it has been formally recognised as a pillar. Topical to say the least, in practical terms it encompasses just as much of what has happened over recent years as the unknowns that lie ahead. “Integral to our culture is ensuring good customer outcomes at all times. We are fortunate with our agile approach and progressive technology that we are able to adapt to any new requirements emerging from regulatory or industry bodies,” O’Donnell explains. “We have implemented CIF recommended changes across our credit guides, customer engagement processes and registers, and we are well positioned to meet any further requirements that may emerge from regulators following the royal commission.” As the industry prepares to weather its next potential storm, the focus for Liberty Network Services will remain on providing the solutions – and service – that others cannot. Reflecting on figures from the last year, as many as one in five settled loans fall into Liberty’s custom category, and as many more borrowers struggle to secure finance, that number looks likely to grow. However, for O’Donnell, a slowdown in mainstream credit is only the start of what’s to come, and brokers must position themselves now to fully capitalise on the opportunities that will emerge. “With a softening property market and more volatile markets globally and locally,” he says, “brokers need to proactively help their customers navigate these uncertain times.” AB www.brokernews.com.au

FE AT URES

NE WS ANALYSIS

THE END OF EASY MONEY As lending criteria continue to tighten, a new set of rules around credit cards could see thousands of consumers forced to consolidate their debts in order to secure a mortgage. Australian Broker reports July 2018, ASIC published a review of Australia’s credit card debt, based on data gathered between 2012 and 2017. The findings showed that Australians owed $45bn on 21.3 million credit cards, with interest owed on $31.7bn of that sum. While many see balance transfers as a way to manage such debt, further figures from ASIC show that more than 30% of consumers actually increase their debt by 10% or more after transferring a balance. Almost 550,000 credit card accounts were in arrears at the time the data was collated, with an additional 930,000 considered “persistent debt” and 435,000 account holders only making “small” repayments. Further, 18.5% of consumers were “overwhelmed” by the amount they owed. Many cardholders start the new year with a new financial hangover: RBA figures for December 2018 estimate that Australians spent $29.7bn on credit cards in the run-up to Christmas. It is the highest December spend on record. As a proportion of total household debt, credit cards are the least of a consumer’s problems, but that doesn’t mean they are without their pitfalls – if interest rates were to rise, the current situation would push many into hardship overnight. Recognising the potential time bomb on Australia’s hands, ASIC has introduced a series of reforms. Credit providers are now required to ensure that consumers can repay their full limit within three years before providing a new credit IN

www.brokernews.com.au

card contract or increasing the limit on existing contracts. The period was prescribed to “strike an appropriate balance between preventing consumers from being in unsuitable credit

1 January 2019, with extensions to 1 July for some providers. In a statement, ASIC explained, “We have acknowledged the challenges faced by credit providers in implementing the

“For brokers, it’s even more important now to assess a client’s full financial position and potentially consider putting them through a consolidation” Stuart Stoyan, founder, MoneyPlace card contracts and ensuring that consumers continue to have reasonable access to credit through credit cards”. Credit providers were expected to start phasing in the changes from

changes in the time frame provided, but retained the 1 January commencement date in line with Parliament’s intention. ASIC has provided short-term relief to some lenders that … had

difficulties [meeting] the time frame provided. “There are some flow-on effects for responsible lending calculations relating to other credit products. As there are additional systems changes that need to be implemented, ASIC expects credit providers will finalise these changes by July 1, 2019.” ASIC’s move drastically changes the credit landscape, reducing the limits available to a consumer and forcing the closure and reduction of outstanding and unused balances. Potentially, large credit card debts and limits could jeopardise other loan applications, including mortgages. “The impact is actually pretty significant, and it’s based on disposable income. To give a specific example, if you have $500 surplus right now, you would potentially qualify for a $20,000

OUTSTANDING BALANCES ON CREDIT CARD ACCOUNTS, 2012-17 Source: AISC

Balance $46bn

$45bn

$44bn

$43bn

$42bn

$41bn

Jul 2012

Jan 2013

Jul 2013

Jan 2014

Jul 2014

Jan 2015

Jul 2015

Jan 2016

Jul 2016

Jan 2017

Jul 2017

limit. Under the new rules that has reduced to $13,000,” MoneyPlace founder Stuart Stoyan explains. “If someone is in the position where they have been using balance transfers every six to 12 months and thinking they can do the same in future, they will be caught unaware.” However, the changes aren’t without reason, and the most pressing objective is to wean Australia off the plastic. “ASIC is saying that credit cards should be used for short-term debt. If you’re going to have mediumterm debt, that should be put on a personal loan,” Stoyan says. “The intention is to change attitudes towards credit. Changes are coming, and this is an opportunity for brokers to have conversations with clients around what they are doing with mediumterm debt.” Devil in the detail For brokers, the new rules will increase the need to ensure clients are financially fit, especially given the tightening of criteria around living expenses. “People are going to need to clean up their existing credit cards and loans before applying for a mortgage, or risk being declined or getting a mortgage for a lower amount,” Stoyan explains. “For brokers, it’s even more important now to assess a client’s full financial position and potentially consider putting them through a consolidation.” SocietyOne CEO Mark Jones reports that around half the lender’s business comes from credit card debt consolidation, and

he predicts a spike in demand as a direct result of these reforms. “One outcome we are heading towards is using credit cards for transactions, and personal loans for when you want to revolve your balance. Lenders like us are well positioned to benefit from that,” he says. Fintech and peer-to-peer lenders aren’t the only ones who could see an increase in business; brokers, too, are likely to see more people seeking their services as lending rules and restrictions become increasingly complex. “Brokers will need to look at a client’s credit card debt and say, you don’t qualify like this, but if you get a personal loan or a P2P

fully utilise personal loans for the benefit of their clients. “The value-added services that we have seen brokers provide in the mortgage space for the better part of two decades, we actually expect to see a lot of that happening now in the personal loan space,” he says. However, the devil is in the detail. For those with a home loan and credit card from the same major lender, White says, the widely utilised ‘all monies’ clause means the bank could force homeowners to sell if they couldn’t clear their credit card debt by other means. “That’s the way the legislation is written, and that is how we are looking to the future. It’s the nasty

“There is legislation in place that, regardless of how philosophical we can be today, this is the reality of the law” Peter White, managing director, FBAA loan, between that over a sevenyear period, get rid of the credit card and you will then get a mortgage,” says FBAA managing director Peter White. “It very much has to be tailored to the customer’s circumstances and needs, but it’s going to need a professional set of eyes to look over the full circumstances and get that result. That’s where brokers have a huge advantage over anyone else in the marketplace as this piece of legislation plays out.” Stoyan agrees and advises brokers to be clued up on how to

end of the stick, but it is technically possible,” he explains. “This is the reality of where the future lies. In three or four years’ time, if someone is miles behind on repaying a $50,000 limit, the bank has the right to sell your home to clear your debts. “Brokers need to help solve these problems for their clients. Going forward, rate hikes, squeezes on repayments, if something gives, there is legislation in place that, regardless of how philosophical we can be today, this is the reality of the law.”

AT A GLANCE Source: ASIC, 2012–17

$45bn owed

21.3 million credit cards in circulation

$31.7bn outstanding debt accruing interest

550,000 credit card accounts in arrears

930,000 credit card accounts in “persistent debt”

435,000 account holders only make “small” repayments

18.5% of consumers are “overwhelmed” by the amount they owe

www.brokernews.com.au

FE AT URES

In response, ASIC maintains that “houses are not repossessed by banks solely for the purpose of clearing credit card debt”. In a statement to Australian Broker, the regulator clarified, “If the default is more serious and reoccurring, it is possible that a person could receive a court order for bankruptcy, wages or even assets to be used to pay the debt.” In isolation, the reforms promote a more restrained approach to easy credit – and the figures show that attitudes towards credit certainly need to change. They also force those who may be sleepwalking through high-interest repayments to assess their situation. Stoyan says, “We are seeing that major banks have done a really good job of riding inertia in customers across the board, from transaction accounts to credit cards and personal loans that aren’t appropriate. “What we are seeing in the last year is a bit of a watershed moment; more customers are aware of online personal loan providers and the lower interest

Peter White, managing director, FBAA

June 2020; and they aren’t the only ones who believe it is a case of sooner rather than later. White says, “Unquestionably, this is about when interest rates go

“Changes are coming, and this is an opportunity for brokers to have conversations with clients around what they are doing with mediumterm debt” Stuart Stoyan, founder, MoneyPlace rates they offer, and more are willing to give it a try,” he adds. However, looking at the wider picture, the new rules could be the clearest indication yet that Australians are being prepped for a rise in interest rates. A recent survey by the Australian Financial Review claims that economists are expecting rates to reach 1.75% by 18

www.brokernews.com.au

up and the impact [that will have] on hardship. When rates go up and repayments go up, the stress applies somewhere.” Old habits die hard, and how the coming months will play out is anybody’s guess. But if the phaseout of plastic bags provides any indication of what is to come, the move away from plastic money will be anything but painless. AB

Stuart Stoyan, founder, MoneyPlace

KEY DATES FOR ASIC’S REFORMS

1 JULY 2018 • Ban on invitations to increase credit card limits

1 JANUARY 2019 • Credit card limit assessments change for new accounts

1 JULY 2019 • Credit licensees required to ensure borrowers can repay existing credit cards at a rate that will enable them to clear the balance within three years • Reforms applied to existing card accounts

• Online card cancellations now available • Ban on backdated interest charges

JULY 2020–21 • Follow-up review

OPINION

AI SOLUTIONS FOR SME LENDING The use of AI technology in the lending market could unlock funding opportunities for thousands of Australian SMEs that have previously been turned away by banks or other lenders. Daniel Katz, VP of business operations at Lending Express, explains

lending is booming in Australia, indicating huge potential for alternative online lenders. Figures from OnDeck show that online SME lending is reporting higher growth rates than those seen in the US at a comparable stage. Research shows that, by 2020, annual originations could exceed $2bn. However, there remain massive opportunities that Australian lenders and brokers alike are not taking advantage of. In the SME space there is no one-size-fits-all approach. Even though more than 80% of businesses apply for loans ranging from $5,000 to $100,000, there are those that apply for amounts at the extreme ends of the spectrum. For example, more-established SMEs often desire loans of at least $200,000. At the opposite end of the scale are those SMEs looking for small loans of less than $6,000. Although solutions do exist for some companies needing large loans, there are few broadly accessible, attractive solutions for low-risk businesses requiring large sums. Such low-risk companies deserve attractive rates from online lenders. They do have the option of a bank loan, but a long, drawn-out application process – not to mention the current lending environment – often deters them from committing. The current lending market in Australia caters mostly for the midstream loan amounts, all but ignoring those seeking loans at the end of the spectrum. The US lending market offers solutions for both large and small loan applications, and Australia could also benefit from tapping this potential. For instance, the US offers large loans to low-risk SMEs at very attractive rates in the form of government-backed SBA

(Small Business Administration) loans, but unfortunately such a thing does not yet exist in Australia. Further, in the US, SMEs can apply for a line of credit through lenders such as Fundbox and Kabbage, which both offer flexible access to small amounts of capital – as little as $2,000. This small-credit option does not currently exist in Australia, so alternative lenders could benefit from offering similar products to SMEs. In the US, 58% of viable SMEs don’t have access to funding. Many of these SMEs are disqualified for something as simple as a minor mistake on their

SME

are able to judge the SME based on its overall health and not just on credit-score factors. Furthermore, by automatically reviewing each application, this technology avoids simple errors and gives viable applicants the opportunity to be approved. AI for brokers Brokers should also be turning to AI solutions to better profile and evaluate potential borrowers, which will help increase approval rates and reach a much wider target market. AI can help brokers stay competitive while better serving their customers. Alternative lenders have managed to grab a large share of the retail bank market simply by using algorithms and AI to make small business loans faster, easier and more convenient, and also by optimising their customer service experience through the use of chatbots.  Major financial institutions and brokerages are already implementing AI in the SME lending space. It is estimated that 61% of financial services firms will be using AI by the end of 2018 and the global algorithmic trading market is expected to grow to US$18.16bn by 2025 from US$8.79bn in 2016, indicating that more financial institutions are literally buying into the idea of brokers using AI. In 2017, Morgan Stanley announced it would provide 16,000 of its financial advisers with machine learning algorithms that would identify and make recommendations about potential

The US lending market offers solutions for both large and small loan applications, and Australia could also benefit from tapping this potential

Daniel Katz VP of business operations, Lending Express

application and usually aren’t given an explanation for their rejection. Even though the alternative lending market is growing in Australia, more than 60% of SMEs still don’t have access to funding. This is usually due to the fact that banks and other lenders typically utilise old-fashioned binary parameters to assess potential borrowers. The tools to change this already exist. The use of AI technology in the lending market can unlock funding opportunities for thousands of Australian SMEs who have previously been turned away by banks or other lenders. By profiling each SME in depth and on an individual, customised basis, alternative lenders

brokerage opportunities. It is not enough, however, just to implement the technology – brokers need to learn how to use AI and algorithmic solutions.  Brokers should start implementing AI solutions now to make smarter approval decisions and offer better customer service. AI is already being adopted by major brokerage firms to identify, sort and manage clients, and is set to grow exponentially in the coming years. As firms increasingly adopt AI, this will also be good news for the 58% of business loan seekers who have been denied financing for being traditionally unviable brokerage clients, and will open up a new market share for lenders. AB www.brokernews.com.au

PEOPLE

Have an interesting deal? Had a particularly difficult or interesting deal? Why not share it with us? Email:

Melanie.Mingas@keymedia.com

A BIG DEAL

LoanBrix finance broker Shelley Beggs recalls how she arranged three loans for a couple who wanted to build a holiday home, upgrade their family home, and secure places for their children at the school of their choice THE FACTS

Loan size and term $543,000 for 30 years

Client Couple in their 40s with two children

Goal To upgrade their home

Location Southeast Melbourne

In April 2017 I emailed through a fixing stage invoice to CBA for a construction loan for my clients – a couple in their 40s with two children, who were building their dream holiday home on the east coast of Victoria. A few weeks later I received an email from the couple explaining that they had decided to sell their current home in the Dandenong Ranges and move southeast of Melbourne to be closer to the school of choice for their children the following year. They asked me to do some numbers to see what their budget was. I did the calculations and, just as I was about to send through the information, I received another call saying they had signed a contract to buy a property for $986,000 with a three-month settlement. It was winter in Melbourne and they were now under pressure to sell their home in the Dandenong Ranges – a far-from-ideal situation. I was asked to investigate bridging finance with CBA to alleviate the pressure of such a short time frame.

www.brokernews.com.au

THE TAKEAWAY

It was a huge relief for both me and the clients that everything ended well. While this deal appeared to be straightforward at first, there were many hurdles and curve balls along the way. Knowing what I know now, I would

At 8am on that day I received a panicked call from the conveyancer, claiming that CBA was not ready

THE SOLUTION

Aggregator Finsure

their own benchtops and had yet to finish the project. I explained to them that we needed the house completed as soon as possible for the final building valuation. Then it was time to crunch the numbers. The couple’s current mortgage with CBA was for $660,000, and we calculated that they needed a bridging loan of $950,000 to make this deal work. At this stage the client anticipated their home would sell for around $730,000. In early July they received an offer, but it was for $670,000 – quite a bit less than they had hoped for. However, they accepted and arranged settlement for one week after settlement of the new property. I suggested that we could avoid the

THE SCENARIO

The client’s existing loan was with CBA and our challenge was that we needed to use the holiday home as security in the application for the new loan. The final inspection had not yet been completed for the construction loan as the couple were supplying and installing

Lender CBA

Then at 8am that day I received a panicked call from the conveyancer, claiming that CBA was not ready. The file had been sent back to the assessor because the purchaser had placed a caveat on the client’s home. I called the conveyancer who confirmed the caveat on the title – something that is quite normal in Victoria. I was reassured that it would drop off at settlement, but when I called the assessor in South Australia he said he had never come across this before and there was no way he could sign it off without removing the caveat. I then had a BDM from the lender step in to confirm with the assessor that this was common, and, miraculously, settlement went through that same day. I then began work on the next settlement, sending through discharge to CBA. I was informed that a letter of variation needed to be signed by the clients as security was being substituted. Again, with the help of the BDM we had variation documents signed by the clients at their local branch, attached to the file, and checked for settlement. By this time the clients were very stressed and tiring of what they felt were endless requests, but I managed to keep their spirits up by explaining that bank processes needed to be followed and due diligence was required in such situations. At the last minute we managed to get settlement booked in for the same day.

Shelley Beggs Finance broker, LoanBrix

bridging loan by organising a same-day settlement, but they opted to keep the one-week gap to give them some breathing room and hopefully make their move less stressful. The loan was approved and I submitted the signed loan documents on a Sunday. The CBA system stated that the documents had been received and everything appeared to be on track for settlement the following Monday.

not recommend taking on a bridging facility for one week. It was a lot of work and didn’t reduce the overall stress levels for anybody involved in the deal. However, the deal went through and the family managed to achieve all their objectives – they built the holiday home, upgraded their primary residence, and their children enrolled in an excellent school. All in a (few) days’ work for a broker! AB

www.brokernews.com.au

FE AT URES

IN THE NE WS

MAKE BANKING GREAT AGAIN As the royal commission’s final report is released, the national secretary of the Finance Sector Union, Julia Angrisano, sets out her own vision for a reformed, functional and customer-first banking industry in Australia

Julia Angrisano, national secretary, Finance Sector Union

2018, voices from across the finance and banking industry called for top-down reform. Some of those voices were heard by Commissioner Hayne himself; others echoed throughout the media. One voice was that of Finance Sector Union (FSU) national secretary Julia Angrisano, who wants to see the implementation of higher levels of professionalism, an industry-wide professional and ethical framework, and an industryled professionalisation program. Ultimately, she has a vision “to make banking great again” – and brokers can play a pivotal role in achieving that. In a statement released in November, Angrisano said, “A process of professionalisation should not be limited to financial advisers. It should extend to other bank and finance sector workers, including lending specialists, mortgage brokers, business bankers and others.” Explaining the idea to Australian Broker, she says, “A professional and THROUGHOUT

www.brokernews.com.au

ethical framework is required across the whole sector. This framework needs to be developed in a way that supports and rewards all workers for delivering the best service to customers and the community. “Reform must go further than changes to retail banking. Brokers and aggregators are an important voice in how the industry needs to be reshaped with a more ethical customer focus.” To support this, Angrisano has also called for a new financial services code

to be established to centralise the obligations that currently exist under “a variety of laws, regulator advices and self-regulatory instruments, such as the Banking Code of Practice”. “A key defect in the current system is that there are simply too many organisations and regulations in play. A complicated regulatory system doesn’t deliver for customers,” she says. With 20 years’ industry experience, Angrisano sees the existing regulatory environment as “cumbersome and superfluous” for employees and so complicated that it also fails to meet the needs of customers. Since first being elected in 2016, she has repeatedly called for cultural and regulatory changes to be made throughout the finance industry, and under her leadership the FSU has made submissions to the Sedgwick Retail Banking Remuneration Review; the royal commission; the Treasury review into ASIC’s power to ban senior sector officials; and the Treasury’s consultation paper on the Banking Executive Accountability Regime, among others. “Regulation is important but it cannot continue to be done in a piecemeal fashion without understanding the ongoing impacts. A financial services code should also imbed an obligation to act ethically, with due skill and care, and ensure that financial products that are provided are fit for

purpose,” Angrisano says. What the coming weeks will bring is anybody’s guess – these measures could become central to the regulations that emerge as a result of Commissioner Hayne’s final report. But Angrisano believes it’s how the recommendations are executed that will be the real test. “Whether or not the investigations have been sufficient will only be seen firstly through Commissioner Hayne’s final report, and secondly, in how his recommendations are implemented,” she says. However, for Angrisano and the FSU, the commission has left many stones unturned. “From the moment the royal commission was announced we were sceptical that the terms of reference and the time and resources given would genuinely get to some of the institutional and system-wide problems that are endemic across the industry,” she says. While she commends Hayne’s work in highlighting “some of the bigger issues” that have previously been overlooked – including conflicts in remuneration, regulator obligations and the impact of culture – in other areas it leaves much to be desired. She says, “Should the terms of reference have been broader? Possibly. Should the Commissioner have been provided more time and resources from the outset? Yes.” AB

FSU’S VISION FOR A BETTER BANKING INDUSTRY

Higher levels of professionalism Supported by a new financial services code

Industry-wide professional and ethical framework Developed to support and reward customer-first outcomes

Industry-led professionalisation program Positioned to educate lending specialists, brokers, business bankers, etc

THE CHOICE IS YOURS

MAGAZINE The only independent magazine dedicated to mortgage industry news, opinion and analysis

WEBSITE Breaking news, in-depth profiles, features, online forum and Australian Broker TV

ENEWSLETTER Daily news service delivered straight to your inbox every morning

FOR MORE INFORMATION, PLEASE EMAIL EDITOR@BROKERNEWS.COM.AU www.brokernews.com.au

PEOPLE

CAUGHT ON CAMERA The FBAA’s annual National Industry Conference returned to Sea World on the Gold Coast in November with the largest gathering in the event’s history. More than 900 brokers attended the ‘Evolution’ conference, which opened with a keynote address by assistant treasurer Stuart Robert. Other speakers included business coaches Peter Switzer, Tom Panos and Niik Stewart, as well as EQ consultant Chelsea Pottenger. The conference was followed by the Awards of Supremacy, held at Warner Bros. Movie World, where more than 400 brokers and finance professionals enjoyed a themed gala dinner and awards. FBAA executive director Peter White said, “The National Industry Conference was a huge success and by far the largest annual industry event in the nation. After a day of inspiring speakers, delegates partied in style at the gala dinner, which also recognised outstanding broker achievements.”

www.brokernews.com.au

MOVERS AND SHAKERS

BLUESTONE RESTRUCTURES EXECUTIVE TEAM New CFO, COO and managing director for New Zealand announced by non-bank lender as part of major reshuffle

Todd Lawler

has confirmed the appointment of former Pepper Money executive Todd Lawler as part of a leadership shake-up intended to secure the lender’s long-term success. Bringing more than 30 years’ experience to the role, Lawler most recently held the position of group treasurer and executive director at Pepper Money. In his new role as CFO of Bluestone, Lawler will work alongside Mark Donovan, who will remain with the company in the role of finance director. Bluestone CEO Campbell Smyth said, “We are absolutely delighted to welcome Todd to the team. His deep expertise in both the accounting and funding functions of the non-bank sector means he is uniquely qualified to steer the BLUESTONE

Tim Miller

financial operations of the business as it continues on its current growth trajectory.” Over his career Lawler spent 18 years as a chartered accountant and held multiple finance and executive roles at a US non-bank, where he specialised in nonconforming lending across the US, Europe, Central America and Australia. At Bluestone he will oversee the finance, treasury, credit, and legal, risk and compliance functions with a view to building the “high-quality financial infrastructure and lending program necessary to maintain strong growth”. Lawler said, “It is a truly exciting time to join Bluestone as the company is perfectly primed to take advantage of current market conditions. Its recent acquisition

HSBC NAMES NEW RETAIL, WEALTH HEAD has named Jessica Power as its new head of retail banking and wealth management, with a remit to build the bank’s presence in Australia for mortgages, accounts and credit cards. With more than 23 years’ experience, Power previously worked for Westpac and Citigroup. HSBC CEO Martin Tricaud said, “Over the past two years, we have deepened our commitment to this market. Under Jessica’s leadership, we have ambitions to grow our market share even further.” HSBC

Peter Wood

by Cerberus Capital Management means the business has the capital and capacity to be a key challenger in the non-bank sector and develop its offerings to meet the needs of even more Australian and New Zealand borrowers.” His appointment is part of a broader reshuffle of the executive team, which has seen former GM Tim Miller move into the role of COO, taking the reins of all operational departments, and previous COO Peter Wood become the managing director for New Zealand. Smyth said, “Within our new leadership set-up, we combine the specialist insight derived from decades of industry experience with the strategic acumen necessary to successfully navigate changing markets and secure the long-term success of our business.” AB

NEO BANK BOOSTS DIGITAL CHANNEL part of a recruitment drive that has seen its head count triple over the last year, Wisr has appointed Per Thoresson as its new head of digital. He joins from IBM IX, where he specialised in multiplatform solutions across financial services, healthcare and government. CEO Anthony Nantes said, “Almost 80,000 Australians have engaged with Wisr through our digital channels so far this financial year, and we continue to add new customers every month.” AS

www.brokernews.com.au

DATA

VICTORIA

ACT SPOTLIGHT

Melbourne pips Sydney as downturn tails off Melbourne’s property prices declined 4.7% over the 12 months to October 2018, compared to a 7.4% drop in Sydney. “It’s almost impossible to escape headlines declaring prices falling in housing markets in major Australian capital cities, but all indicators point to Melbourne as a prime investment location supported by strong population growth, stable political leadership and a high level of government investment in infrastructure,” says James Nihill, managing director at Patrick Leo. The city’s high-performing economy has enabled it to weather the current national property market storm, with median house prices increasing 5%. Moreover, the state’s remarkable population growth continues to pay off, leading Victoria to outrank NSW economically for the first time. “Melbourne is on the verge of overtaking Sydney as the nation’s largest city and remains a safe bet for investors in terms of securing tenants and both rental and capital growth,” Nihill concludes. Area

Type Median value

Quarterly

12-month

growth

Melbourne

$702,000

-7.3%

5.6%

Vic country

$350,000

-2.8%

6.3%

Melbourne

$520,000

-3.0%

3.1%

Vic country

$255,000

-5.6%

0.7%

NORTHERN TERRITORY

Overall performance continues to decline in Darwin Although buyer activity is up, Darwin’s overall performance is still on a consistent decline. However, it’s not all bad news. Palmerston, for instance, recorded a median house price of $450,000 in the September 2018 quarter, following 5.9% growth. Units experienced an upswing as well, with unit sales going up 14.3%. Alice Springs also saw a 30% boost in unit sales compared to 2017. “Darwin hasn't shown the signs of the recovery, at least not just yet. That being said, where there is pain for some there are gains for others. A soft market like this is perfect for first home buyers and investors,” says Quentin Kilian, CEO of the Real Estate Institute of NT. The city is also popular with retirees, who flock to its complexes for their resort facilities. These apartments have swimming pools, are safe and offer great views, while also being close to amenities, the CBD and Charles Darwin University. Area

Type Median value

Quarterly

12-month

growth

THE POWER DYNAMIC Driven by government policy and the performance of other capitals, and with an election on the horizon, Canberra’s real estate market could plateau in 2019 property performance is going strong, but it’s a market that calls for experienced hands. “Canberra’s a funny market. It’s very cyclical and controlled,” says Damien Lee, head of acquisitions at Caifu Property. “Who is in power at the time has either a positive or negative effect on prices – any changes in policy are directly correlated to jobs. That’s a big driver for real estate.” With the upcoming federal election and uncertainty in the political employment sector, timing is crucial when buying in Canberra. “It needs to be focused more on timing than it is on type of real estate, strategy or product,” Lee says. The current slump in Sydney and Melbourne may also begin to affect Canberra’s growth rate as it gets more expensive relative to other capital cities. “I don’t think Canberra has gotten quite expensive, but a lot of people who live there will consider how expensive it is compared to Sydney and Melbourne. Prices will start to plateau or just stick steady for a little while until Canberra figures itself out,” Lee explains. According to Herron Todd White’s Month in Review report for November 2018, the employment sector has been quite stable in Canberra, with both public and private sectors recording growth and boosting demand for commercial property as vacancy rates have dropped. Canberra also saw the elimination of stamp duty for commercial transfers under $1.5m in July 2018. This was put into effect in order to drum up interest in this market sector and is expected to spur demand from both owneroccupiers and investors. “With any market, you need to be aware of state legislation with regard to ownership, Airbnb and some of the potential changes that will take place with that,” says Nerida Conisbee, chief economist at REA Group. AB CANBERRA'S

$500,000

-2.5%

2.0%

Median price (houses)

NT country

$430,000

-3.4%

1.2%

$726,247

Darwin

$355,000

-2.1%

-16.6%

NT country

$315,000

-8.4%

0.5%

www.brokernews.com.au

Confidence will improve as buyers in Canberra get to grips with challenges in the lending market More new Canberra suburbs are being developed, such as Taylor in the Gungahlin area and Coombs in the Molonglo Valley, offering a high allocation of units, apartments and townhouses. Population growth in this city – underpinned by growth in the public and private sectors – is supporting demand. Over the past 12 months median house prices have risen 4%, but unit prices have fallen by 1.7%. Although I expect this trend will continue, it isn’t alarming and will likely plateau organically over the next year as Sydney and Melbourne correct. The majority of houses are being purchased by upgraders, but stock has become limited because those who would usually sell are choosing not to. This is influenced by challenges in the current lending market, as sellers become concerned about securing finance. We have certainly seen the finance process slowing, and this directly correlates with the tightening of lending criteria. However, I also believe that once everyone becomes more experienced in the new lending practices, the market will reflect more confidence and continue to grow again.

Gerard Heffernan Director, Heffernan Lending Solutions

SUBURB TO WATCH: PALMERSTON

Darwin

BROKER PERSPECTIVE

Median price (units) $446,787

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

6.2%

14.6%

28.9%

4.1%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

9.1%

29.8%

17.4%

5.4%

OPPORTUNITIES AND KEY INFRASTRUCTURE

NEW SOUTH WALES

Market weakens as low demand keeps prices on the slide Population

Leisure

Canberra’s population Casino Canberra’s could reach 589,000 $330m redevelopment people by 2041 has been blocked

Stamp duty

MICE tourism

The state eliminated duty on commercial transfers under $1.5m

A new city convention centre could cost $900m

HIGHEST-YIELD SUBURBS IN AUSTRALIAN CAPITAL TERRITORY

Sydney’s slide down the ranks has come fairly quickly and, along with Melbourne, it is now leading the charge in a nationwide downturn. According to CoreLogic’s Hedonic Home Value Index, the 12 months to October 2018 saw property values in Sydney plummet by 7.4%. Moreover, eight of the 10 weakest capital city subregions in the country for that period were located within the Sydney metro. Three subregions also logged price drops in the double digits. CoreLogic head of research Tim Lawless says the tight lending criteria are to blame. “[This] is acting as a drag on housing demand and impacting adversely on the performance of housing values across most areas of the country,” he says. Over the same period, vacancy rates also rose in the metro area to 2.9%. “There has been a slight slowing in those seeking rental accommodation in inner and middle Sydney,” says Leanne Pilkington, president of the Real Estate Institute of NSW.

Suburb

Type

Median price

12-month growth

Gross rental yield

Phillip

$328,000

-3%

-21%

Greenway

$375,000

City

$483,335

-5%

-16%

Bruce

$365,000

-1%

-2%

Barton

$479,900

-13%

Wright

$393,750

-2%

Sydney

Belconnen

$369,450

-4%

-8%

NSW country

Franklin

$380,000

Palmerston

$403,275

Quarterly

12-month

growth

$910,000

-7.1%

-1.5%

$465,000

-2.1%

4.4%

Sydney

$700,000

-2.8%

-1.4%

NSW country

$405,500

2.7%

0.0%

Area

Type Median value

www.brokernews.com.au

DATA

QUEENSLAND

12-month

growth

Brisbane

$546,500

1.2%

2.9%

Qld country

$430,000

0.0%

Brisbane

$400,000

-2.4%

-1.7%

Qld country

$381,000

-3.5%

0.9%

WESTERN AUSTRALIA

MEDIAN HOUSE AND UNIT PRICES

Perth is on the mend but far from recovered

$1,000,000

Type Median value

Quarterly

12-month

growth

Perth

$495,000

-2.8%

-0.4%

WA country

$330,000

1.5%

-2.9%

Perth

$390,000

0.0%

-2.5%

WA country

$205,000

-15.0%

-15.8%

www.brokernews.com.au

Total auctions

175

Cleared

Uncleared

Clearance rate

37.9%

PERTH Total auctions

Cleared

Uncleared

Clearance rate

30%

Houses

Sydney Melbourne Brisbane Adelaide

Perth

Hobart

$495,000

$447,000

$357,500

$380,000

$100,000

$513,750

$200,000

$305,000

$300,000

$480,000

$500,000 $400,000

$545,000

$600,000

$725,000

$700,000

$660,000

$800,000

$875,000

$900,000

Perth is definitely on the mend, but the road ahead will be bumpy. “It seems to be in recovery, but it’s not a straightforward recovery. It’s not going to be a fast one,” says Nerida Conisbee, chief economist at REA Group. “Premium suburbs are doing very well because a lot of them are seeing good price growth, and Perth is a safer market to invest in because [options] are more diverse.” This slow recovery is reflected in the city’s property prices, which are still at their lowest since June 2009, as per CoreLogic research analyst Cameron Kusher. In regional WA, values have also continued to drop; they fell 6.5% in the 12 months to October 2018, according to CoreLogic’s Hedonic Home Value Index, and many investors are facing losses. Buying in Perth may come down to good timing and patience over the next year or so as the state rides the correction period out.

Area

ADELAIDE

Darwin

Units

$410,000

Quarterly

$382,950

Type Median value

There were 2,406 homes taken to auction over the week, down from both the previous week (2,631) and the same week in 2017 (2,890). Preliminary results show a clearance rate of 43.8%, increasing from last week’s final clearance rate of 41%, the lowest rate recorded since October 2011. One year ago, a clearance rate of 60.7% was recorded. Melbourne hosted 1,179 auctions over the week, with a preliminary clearance rate of 46.9%, up from 43.8% across 1,283 auctions the previous week. Over the same week in 2017, the auction clearance rate was significantly higher, with 65.9% of the 1,630 auctions returning a successful result. There were 717 auctions held in Sydney this week, with preliminary results showing a 43.6% clearance rate, up from 41.3% across 870 auctions last week. Over the same week in 2017, 708 homes were taken to auction across the city, returning a clearance rate of 52.7%. Across the smaller auction markets, volumes were lower week-on-week, with preliminary auction clearance rates sitting at or below the 50% mark across all cities.

$535,000

Area

WEEK ENDING 16 DECEMBER 2018

$690,000

According to the Queensland Market Monitor, nearly 70 suburbs logged double-digit growth in this state in the year to June 2018. “It is a really strong result, and it’s a great market to be in at the moment. There are many more suburbs delivering strong single-digit growth,” reports Antonia Mercorella, CEO of the Real Estate Institute of Queensland. These findings also show that while the southeast pocket is the place to watch, it is not the only grower in the state – central and northern Queensland have been making their mark. “The top area delivering the strongest growth has been Blackwater. This is a result of the resurgence in coal prices and the low base starting point,” Mercorella says. Other suburbs that recorded more than 20% annual price growth were Minyama on the Sunshine Coast, Hollywell on the Gold Coast, Spring Mountain in Ipswich, Dundowran Beach on Fraser Coast, Boonah on the Scenic Rim and Idalia in Townsville.

CAPITAL CITY AUCTION CLEARANCE RATES

$340,000

Double-digit growth confirms strength across the state

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Weekly change

Monthly change

Year-to-date change

12-month change

Sydney

-0.3%

-1.6%

-8.0%

-8.2%

Melbourne

-0.5%

-1.6%

-6.5%

Brisbane

0.0%

-0.2%

0.2%

0.1%

Adelaide

0.2%

0.3%

1.3%

1.4%

-0.2%

-0.6%

-4.2%

-4.5%

-0.3%

-1.2%

-5.8%

-6.0%

Perth Combined 5 capitals

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

BRISBANE CANBERRA Total auctions

Cleared

Uncleared

Clearance rate

Total auctions

168

Cleared

Uncleared

Clearance rate

33.3%

46.2%

SYDNEY Total auctions

717

Cleared

226

Uncleared

292

Clearance rate

43.6%

TASMANIA

MELBOURNE Total auctions

1,179

Total auctions

Cleared

437

Cleared

Uncleared

495

Uncleared

Clearance rate

46.9%

TASMANIA

Area

Hobart prepares for another strong year Hobart is looking to sustain another year as a strong performer in the national property market and appears to be succeeding. “Tourism, education, agriculture and advanced manufacturing continue to go from strength to strength. The most recent ABS data shows Tasmania leading Australia in wage growth and being second to Victoria in retail trade,” says Simon Pressley, head of research at Propertyology. Interstate migration levels remain at a record high, and this has led to higher demand for homes. Available stock on the market is flying off the shelves, helped by low prices. “The popularity of Airbnb has added immense pressure to rental stock, such that Hobart’s vacancy rate has been at an all-time Australian capital city record low for about 18 months,” Pressley says. With a performance like this, it’s no wonder confidence in Tasmania’s prospects remains high.

N/A

Type

Median value

Quarterly growth

12-month growth

Hobart

$440,000

-2.5%

13.5%

TAS country

$286,500

-4.5%

7.4%

Hobart

$346,750

2.0%

11.0%

TAS country

$240,000

-0.8%

0.8%

All data sourced from CoreLogic.com.au

www.brokernews.com.au

PEOPLE

IN THE HOT SEAT Three months into his new role as ING’s head of third party distribution and direct mortgages, Glenn Gibson talks about his career goals and highlights, and the importance of the broker channel Who or what inspired you to become a broker? My career started in banking more than 25 years ago, when the A broker industry was just starting out. I was fascinated by how the bank was working with third party brokers to create choice and better value for customers. My career has always been motivated by delivering the best possible customer outcomes, so it made sense that I was keen to be involved in the broker industry.

What’s one of your recent career highlights?  Starting at ING – and I genuinely mean that. As an outsider A looking in, I had always perceived ING in an exceptionally positive light and knew it had a good reputation among brokers. Now being on the inside, I’m happy to say my expectations have been exceeded. The culture here is inspiring. Employees have the utmost respect for one another and have a healthy obsession for delivering the best outcome for the customer.

What’s the greatest challenge for brokers at this time? The unknown. There’s so much speculation about what will A happen over the next 12 months, but nobody really knows for sure. At ING more than 80% of all ING mortgage customers come through the broker channel. In these uncertain times, one thing is for sure: our broker community can take comfort in knowing we’re committed to supporting them in delivering the best value for customers.

What are your top survival tips for working in finance? Don’t wait for others to influence your decisions. Sure, take input A into consideration, but have the confidence to make your own mind up. Secondly, set your goal and stick to it. You might need to change how you go about achieving your goal, but don’t lose focus on what you ultimately want. And finally, ask for help. No one is an expert on everything, and there is always someone more experienced who you can turn to in times of doubt.

What do you want to achieve in your first year at ING? Within the next 12 months I want our broker community to look A back and say that ING was a stabilising influence during a turbulent year. I want them to say that ING was a supportive and dependable partner and that together we stay focused on achieving customer outcomes. AB