Australian Broker 16.04

MARCH 2019 ISSUE 16.04

Lessons from Canada How and why Canada’s best interest duty failed /16

A second look at commercial The basics of tapping the $658bn commercial lending sector /20

JOHN KOLENDA Finsure co-founder and MD John Kolenda reveals how the group is turning data into a performance driver /14

Leading by example The MFAA’s new board reveal their plans for the year /24

ALSO IN THIS ISSUE… Opinion Solving the SME credit squeeze /30 Caught on camera ALI Group celebrates 15 years in Perth /32 In the hot seat uno Home Loans adviser Tian Liu on his dream job /34

NEWS

IN THIS SECTION

Lenders Majors pledge support for flood relief /04

Associations Association welcomes Labor U-turn /06

Market Chinese investors step away from Australian property /08

Technology Partnership creates digital loan solution /10

Regulators Calls for greater regulation of SMSF lending /12

www.brokernews.com.au MARCH 2O19 EDITORIAL Editor Melanie Mingas News Editors Rebecca Pike Madison Utley

DATES TO WATCH

Production Editor Roslyn Meredith

Upcoming can’t-miss events

ART & PRODUCTION

9 MARCH National Property and Economic Market Update Advising on how to invest in uncertain times, this annual event returns to Brisbane on 9 March, followed by Sydney on 23 March and Melbourne on 13 April.

Produced by Metropole Properties, sessions will be presented by Michael Yardney and Ken Raiss, and economist Andrew Wilson.

19 MARCH

2 1 M A R C H

Accidental Counsellor

Young Professionals of Finance

The MFAA’s Accidental Counsellor program officially launches on 19 March. The skillsbased course will teach brokers how to support customers, colleagues and others who are struggling. It will take place in Melbourne (19 March), Adelaide (26 March), Perth (27 March), Sydney (2 April) and Brisbane (3 April).

Taking place from 6pm in Central Sydney, this networking and development opportunity is geared towards young professionals in the finance industry.

Featuring guest speaker Roh Singh, founder and CEO of Populis, the event is supported by Young Professionals of CPA Australia, the MFAA and the Association of Financial Advisers.

Designer Martin Cosme Production Manager Alicia Chin Traffic Coordinator Freya Demegilio

SALES & MARKETING Sales Manager Simon Kerslake Marketing Manager Danica Mendoza

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

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

SUBSCRIPTION ENQUIRIES

2 APRIL

4 APRIL

5 APRIL

Federal budget

FBAA Brisbane Summit

The next federal budget will be delivered a month earlier than usual, after Prime Minister Scott Morrison announced last year that he would deliver the budget before calling the May election. The IMF has warned Australia that bigger surpluses will be needed to protect the country from overseas economic shocks.

One of 12 professional development opportunities around the country, the latest event in the FBAA’s PD series will see managing director Peter White give an update on the royal commission’s final report, while other presenters will explore the impact of physical and emotional energy on a business.

How to Gain Trust and Build Client Relationships Delivered by Chris Unwin, this day-long workshop returns to Sydney to teach skills in trust, client relationships and conversions. Designed specifically for the broker channel, the lessons will also be delivered in Adelaide on 27 March and Brisbane on 2 April.

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, Seoul

9 APRIL

2 M AY

5 JUNE

Success is a Mindset

MFAA National Roadshow and State Excellence Awards

Broker Business Exchange

With a focus on business transformation, motivational speaker Niik Stewart will teach delegates the skills used by high-earning sales people and world-class athletes alike, over the course of a two-hour evening seminar. The first session will be delivered in Brisbane on 9 April, followed by events in Sydney (10 April) and Melbourne (11 April).

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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.

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 that is set to feature 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

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NEWS

LENDERS NEW LOAN FOR TURBULENT TIMES has announced its new ‘Basic’ home loan for owner-occupiers, with a variable rate of 3.55% per annum and a loan-to-value ratio of up to 80%. The BOSBasic home loan offers a fee-free redraw facility and is available for purchases or “dollar for dollar” refinances. The bank’s head of third party distribution, Steve Sampson, said, “In these turbulent times we hope to bring some joy to the market.”

BANK OF SYDNEY

Sep-06 CREDIT GROWTH LIFTS BUSINESS Source: CommSec

Business credit – annual % change 5.5% 2-year high 5%

4.5%

4%

3.5%

LENDER MAKES CUT TO VARIABLE RATES is slicing interest BENDIGO BANK rates by as much as 0.20%, effective from 19 February, for new P&I and interest-only customers. The non-major’s fixed rates remain stable, and existing customers will not be affected. For a $400,000 loan over a 30-year loan term, this decrease cuts $47 from the monthly loan repayments and saves $16,992 over the life of the loan. Bendigo Bank is the eighth lender to cut variable rates this year.

“Bluestone will stand behind you during this time, and we continue to support all efforts to help the sector retain its viability and strength” Royden D’Vaz National head of sales and marketing, Bluestone Mortgages

4

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3% Jan 2017

Apr 2017

Jul 2017

Oct 2017

Jan 2018 Apr 2018

MAJORS PLEDGE SUPPORT FOR FLOOD RELIEF Westpac and NAB have both pledged support through deferred payment options and donations following widespread natural disasters and National Australia Bank have both made a show of support for those affected by the flooding in North Queensland, offering extra assistance to their agribusiness customers.

In order to provide immediate help and support long-term recovery efforts, Westpac committed $50m towards flood relief in addition to its existing disaster and drought relief funds.

The new fund not only allows customers to defer repayments on existing loans and equipment financing for up to 12 months but also makes heavily reduced variable interest rate loans of up to $2m available to eligible customers on an interest-only WESTPAC GROUP

basis for up to three years.

Westpac national agribusiness manager Steve Hannan said, “For some farmers, the business impact of heavy stock losses across the region will not be known for up to six months, so it’s incredibly important that we alleviate any financial concerns now and give customers the confidence they need to start rebuilding their lives.”

The concessional loans to NAB customers are being made available at discounted rates to support repairs and restocking for up to five years. Asset financing for equipment replacement is also being offered at a reduced rate.

As Australia’s biggest business bank and biggest agribusiness

Jul 2018 Oct 2018 Jan 2019

bank, NAB has also pledged that it will continue to visit businesses and regional communities, as conditions permit, to assess requirements and provide support in the coming weeks.

“Regional businesses and agribusinesses are incredibly resilient, but government and banks must work together to help them through this,” said NAB chief customer officer Anthony Healy.

“Some of our customers have suffered significant loss and damage to their stock and farms, and we want our customers to know that we are there to help and want to help.”

Both banks are lending additional support to all those impacted by floods in the form of donations to various relief organisations. Westpac recently announced a combined $250,000 donation to the Salvation Army and Foundation for Rural Regional and Renewal, while NAB made a $100,000 donation to the Australian Red Cross.

We’re with you every step of the way.

Does your aggregator give you the support you deserve? Let’s be honest for a moment... every single one of us offer various commission models, CRM software access and marketing support services. We all provide professional development days, regular newsletters and annual conferences.

Make no mistake - these are important. But it’s not enough.

A truly supportive aggregator knows you, and knows your business. It offers continuous guidance from your BDM, not just when you’re first onboarded, but at all stages of your career.

It openly and honestly communicates with you, arming you with the knowledge to enhance your business. It helps you expand your horizons and gives you access to the strongest product offerings available in the market. It provides ongoing training, to keep you ahead of the competition, and proactive compliance support, so that you don’t overstep regulatory boundaries.

A truly supportive aggregator is defined by how much it cares for its brokers, and how much its brokers care for it.

Join the aggregator that’s with you every step of the way.

Contact Finsure today.

 1300 346 787 (1300 FINSURE)  www.finsure.com.au Australian Credit License Number 384704

Proud to feature on the AFR Fast 100 list for the 3rd year in a row. www.brokernews.com.au

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NEWS

A S S O C I AT I O N S FBAA CALLS OUT BANK FOR NOT BACKING BROKERS managing director Peter White has called out Bendigo Bank for supporting Commissioner Hayne’s broker remuneration recommendations.

“While the market was watching Bendigo Bank shares plunge 6.8% in value, [their MD] was supporting a fee-for-service model ... a ridiculous proposition that would return market dominance to the big banks. Brokers do not give advice; they provide credit assistance as described in legislation.”

FBAA

ASSOCIATION WELCOMES LABOR’S ROYAL COMMISSION U-TURN ON BROKER PAY The MFAA supports the protection of broker payments but is calling for more to be done to sustain broker and aggregator businesses implementation of a fixed-fee payment structure for brokers still won’t be enough to sustain aggregation or broker group services, according to the MFAA. In a statement released last month, Labor said it would still abolish trail commissions from lenders to mortgage brokers and aggregators on all new loans from July 2020, as well as banning volume-based commissions and soft-dollar payments.

However, the party announced it would impose a fixed-percentage upfront fee for brokers of 1.1%.

Upfront commission will only apply to the amount drawn down by the borrower, not the total loan amount.

THE

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Responding to the comments, MFAA CEO Mike Felton said, “The MFAA welcomes the announcement that under a Labor government upfront commissions will be retained at a level which ensures mortgage broker viability, protecting competition, choice and access to credit.”

However, Felton highlighted that Labor’s proposed 1.1% upfront payment would not be enough to sustain aggregation or broker group services, meaning lender payments would need to increase, while maintaining the 1.1% commission payment to brokers.

“We do not believe that the case for the removal of trail commissions has been made, and will continue to argue for trail to

be retained; however, given that the Productivity Commission, the royal commission, the government and now the opposition have called for trail to be removed, our priority has to be protecting the viability of the mortgage broking industry.”

Labor has also pledged to establish a “groundbreaking” victim compensation package.

The party’s statement continued: “We must ensure that these victims aren’t left behind as we clean up the sector after a decade of misconduct.

Under Labor’s plan, more victims will have the opportunity to pursue a just outcome, and all consumers will benefit from quadrupled AFCA compensation caps going forward.”

The developments follow extensive campaigns by the broking industry’s associations, as well as aggregators, second-tier and non-bank lenders, and brokers themselves. In the weeks since 4 February, the MFAA’s online petition has generated more than 68,000 signatures.

COBA WELCOMES SECTOR REFORM Customer Owned Banking Association has welcomed amendments under the Treasury Laws Amendment (Mutual Reforms) Bill 2019. It said the sector was now “a step closer” to being more competitive.

COBA CEO Michael Lawrence said, “MPs on both sides of the aisle need to continue their work to help deliver a more competitive banking sector by ensuring quick passage of this Bill through Parliament.”

THE

“Fees could also prove to be a disincentive for refinancing and switching to a better financial product if the interest savings don’t offset the switching costs” Susan Mitchell CEO, Mortgage Choice

www.brokernews.com.au

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NEWS

MARKET NEW LENDING AND CREDIT CARDS DOWN household and business lending statistics show the total value of new lending to households dropped 19.8% from December 2017 to December 2018 (see graphs below) in seasonally adjusted terms and excluding refinancing. Further, the Reserve Bank’s credit card statistics show the number of active credit card accounts dropped to 15.91 million in December 2018, the lowest number of credit card accounts since February 2015. Credit card limits also fell 0.71% year-on-year.

ABS

MORTGAGE ARREARS REACH RECORD HIGH loan arrears climbed to a record high in December, up 0.75% according to Standard & Poor’s Performance Index. While five years ago only 39% of prime mortgage arrears were more than 90 days overdue, that figure is now 55%. The Northern Territory exhibited the largest hike, and Western Australia was not far behind. In WA more than 60% of all loans in arrears are overdue by more than 90 days, an increase of 19% since 2014.

HOME

“Negative gearing is a lose-lose policy; if you own your home it will be worth less, if you rent it will cost you more” Josh Frydenberg Treasurer

CHINESE INVESTORS STEP AWAY FROM AUSTRALIAN PROPERTY Chinese real estate investment declined 17% due to foreign stamp duty taxes in Australia and capital controls in China exchange rate may be in their favour, but Australia’s Chinese property investors have been notably spooked by political and financial policies, as well as the behaviour of Australia’s banks, leading to a sharp decline in property investments.

Chinese investment in Australian real estate dropped 17% between 2017 and 2018 to a total value of $12.7bn, according to a new report from the Foreign Investment Review Board (FIRB). During the previous period the figure stood at $15.3bn.

The sharp fall came in response to several concurrent factors, according to Carrie Law, CEO and director of Juwai.com.

“Chinese buying in 2017–18 was THE

most impacted by three factors: the unexpected cancellation of promised mortgage loans by Australian banks, higher foreign stamp duty taxes, and capital controls that made it more difficult to move money from China,” said Law. “The FIRB data is already nine months old … Our data suggests the fall in Chinese demand is over, and we expect Chinese buying to be flat in 2019.”

Executive chairman and CEO of N1 Holdings Ren Hor Wong believes the general perception that Australia does not welcome foreign investments may also be a key factor.

The drop in interest has been felt in both residential and commercial real estate investments and,

according to Wong, Asian investors are taking their business elsewhere in the face of the policy- and politically driven risks they perceive to exist in Australia.

“Foreigners are diverting interests to other countries, including emerging economies like Sri Lanka,” he explains.

However, even with the 17% decrease, one in every four dollars generated by foreign real estate deals in Australia still originated in China, and Law says several urban and regional hotspots remain buoyant investment destinations.

Melbourne, Sydney, Brisbane, Adelaide and Canberra lead in the cities, while the most popular regional destinations include the Gold Coast, Newcastle, the Sunshine Coast, Cairns, Wollongong and Geelong.

“The Chinese buyer who set a record by paying $4.5m for a second-hand apartment in downtown Brisbane is just one of many examples that show Chinese buyers are still important,” Law said.

TOTAL LENDING TO HOUSEHOLDS AND BUSINESSES, DEC 2018 Source: ABS

Lending to households, value of commitments Seasonally adjusted

Trend

Lending to businesses, value of commitments $m

Seasonally adjusted

Trend

40,000

37,000

37,000

34,000

34,000

31,000

31,000

28,000

28,000

25,000 2015

8

www.brokernews.com.au

2016

2017

2018

$m

40,000

25,000 2015

2016

2017

2018

MARKETING UPDATE

TOP 3 THINGS A NEW HOMEBUYER NEEDS TO KNOW Brokers play an important role in educating customers on how to go about buying their first home. If it’s handled well, the prospect of creating a customer for life becomes a reality. Aaron Milburn, Director of Sales and Distribution at Pepper Money, shares his tips for answering some of the most frequently asked questions by first home buyers nearly 20 years of lending we’ve come to understand that helping people succeed goes beyond providing a product that suits their situation. It’s about educating the borrower and guiding them through the home loan journey.

With the changing lending landscape, more Australians will be seeking the guidance of brokers. Ongoing education of consumers will become key, and a broker can find their point of difference as a trusted adviser to their customers. These are the top three things we believe a new homebuyer needs to know, in real-life terms that you can share with your clients: IN

Bigger deposit, better position While some lenders can offer low-deposit loans for less than 5% of the purchase price, saving around 20% can offer you big benefits: • Access to a wider pool of lenders and products • A need to borrow less money overall • It’s a clear sign to potential lenders that they’re good at managing money A genuine savings plan is a key step towards building the savings history that lenders look for. However, non-genuine savings, like inheritances, gifted deposits, bonuses, sale of shares and tax refunds, may also be considered.

If a client has saved less than 20%, there are lenders who can help, but deposits of that size may require Lenders Mortgage Insurance (LMI). This adds more fees and another layer of assessment of your suitability, because LMI providers are separate businesses and often have quite strict rules.

Know their credit rating Lenders use a credit rating to judge whether a person’s circumstances are suitable for a loan. Some non-bank lenders, like Pepper Money, will review the financial situation as a whole, which means their credit rating is not always the defining factor when applying for a loan. But it does matter.

Understanding what makes up and affects a credit rating is important for any homebuyer.

And it’s wise to do this before applying for a loan. Your clients can get hold of a copy of their personal credit file and review the credit rating, including any defaults listed against their name. There can be mistakes on the report – if they pick up on them they can request that it gets corrected.

You can easily get a free credit score online. Google it or check the Australian government’s ‘Money Smart’ website for quick links.

Work out what the bottom line looks like They probably know where they want to buy and how much they want to pay, but it’s also important to work out how much your client can reasonably borrow. They’ll need to take the various home loan fees into account, like stamp duty, legal fees or LMI. They should also think about their current situation, income and expenses, any dependants (kids or parents), and any lifestyle changes they can see coming up – like a job change or starting a family. They need to think about what’s coming in the near future, as well as where things are now.

Commenting on the importance of taking a human approach to lending, Pepper Money’s Director of Sales and

Aaron Milburn, Director of Sales and Distribution, Pepper Money

Distribution, Aaron Milburn, says “a customer-centric approach is what makes a business successful. Brokers and lenders alike can’t forget that they’re dealing with everyday Australians”.

Pepper works closely with brokers to help more Australians succeed. That’s why we’ve created tools like the Pepper Product Selector, the Alternative Lending Marketing Toolkit and the 5 Step Process to successfully position an alternative loan. Most recently we have launched an exciting new promotion of a $2,000 cashback for near prime clients – meaning customers get some extra help to cover the costs

associated with buying a house or paying down debt, while the broker gets the credit.

If you have a client you suspect may need a near prime solution, contact your Pepper Money BDM or our dedicated Scenarios Team on 1800 737 737 today.

Alternatively, run the scenario through the Pepper Product Selector Tool, which can give you an Indicative Offer within two minutes.

All applications lodged under this promotion must be received by 31 March 2019 and must settle by 31 May 2019. Other T&Cs apply.

www.brokernews.com.au

9

NEWS

TECHNOLOGY

BROKER BY ’BURB FEATURE ADDED has introduced a new section on its listings site that allows homebuyers to search for mortgage brokers in their suburbs.

It also offers an opportunity for brokers to list themselves as featured brokers and be suggested when a prospective buyer searches for property in their area. Sales director Adam Crocker said, “Given that 60% of home loans originate from a broker, we see brokers as an important component of the homebuying ecosystem.”

REALTY.COM.AU

PARTNERSHIP CREATES DIGITAL LOAN SOLUTION

“For example, a business owner can use the equity in their home to invest in their business at home loan prices. This could save them up to around 6% per year on standard business loans from the major banks, and they can apply and be approved the same day via our award-winning online platform.”

La Trobe Financial president and CEO Greg O’Neill said, “As a key shareholder in Tic:Toc, we’re excited to partner to develop and launch digital CO:Lab home loans and bring this unique digital approach to market for Australia’s business owners needing finance at such a very important time in the credit cycle.

“As one of Australia’s longest operating and leading non-bank credit specialists, we want to support innovation in our industry.

We are very proud to back Tic:Toc as they embrace smarter and more customer-centric ways to assess and secure home loans and other finance for a broader range of clients moving forward.”

La Trobe Financial partners with Tic:Toc on new home loan for borrowers who do not fit the conventional finance mould Financial has collaborated with Tic:Toc to launch CO:Lab home loans, which are designed to meet the needs of self-employed Australians and business owners, as well as customers looking to refinance in order to divert funds to their business.

Announcing the launch of CO:Lab, Tic:Toc founder and CEO Anthony Baum said that while major lenders continued to tighten lending to small businesses, Tic:Toc had specifically broadened its home loan suite to offer digital home loans to more people, including a broader range of self-employed professionals and small business owners.

“More than 17% of Australians work for themselves, so it’s LA TROBE

important home loans keep pace with the shifting workforce to support self-employed customers,” Baum said.

“Australia’s self-employed and small business owners have traditionally endured a notoriously difficult home loan process, with an often-impractical burden to provide large amounts of documentation.

“Our partnership with La Trobe Financial, one of Australia’s longest operating and leading non-bank credit specialists, has created a broader set of loan options via Tic:Toc’s streamlined home loan assessment and approval technology.

This means business owners and self-employed customers now have more loan options, with less hassle and at a lower cost.

GLOBAL FINTECH INVESTOR ACTIVITY, 2017–18 Source: M&A market report, Hampleton

Global fintech investment

$31bn

2018

2017

2018

$10bn

www.brokernews.com.au

349

2017

$15bn 0

10

Total deals

$20bn

$30bn

$40bn

300

369 320

340

360

380

FINTECH’S CONSUMER TOOL DEBUTS SMART Box comparison tool, detailed in the Australian Finance Industry Association’s Code of Lending Practice for fintechs, has officially launched. Devised by OnDeck US and implemented by a cohort of Australian fintechs, it displays four key loan details and seven pricing metrics. Moula head of sales Tas Tzimos said, “We think it’s a great start in making business lending more transparent and helping brokers and small business owners clearly understand how new fintech products work.”

THE

They get the cash.

You get the credit.

$2,000 cash back for your near-prime clients^.

Submit a scenario now.

pepper.com.au/scenarios Offer ends 31 March ^Excludes construction loans. Applications submitted between 1 February and 31 March 2019. Must settle before 31 May 2019.

The Real Life Alternative

This promotion applies only for new Pepper Easy loans applicants. Offer does not apply to internal refinance, construction loans, loans for vacant land or commercial real estate loans. Applications must be submitted between 12.00am AEST on 1 February 2019 until on 12.00pm AEST on 31 March 2019. All applications must settle by 6.00pm AEST on 31 May 2019. All applications are subject to Pepper Money’s credit assessment and loan suitability criteria. Pepper Group Limited ACN 094 317 665, Australian Credit Licence Number 286655, the servicer of loans made by Pepper Finance Corporation Limited ACN 094 317 647 www.brokernews.com.au

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NEWS

R E G U L AT O R S 30/06/2003

AFCA’S NEW DISPUTE COMPENSATION THRESHOLDS Source: AFCA

Most non-superannuation disputes Current FOS limits

New AFCA limits

Monetary limit

$500,000

$1m

Compensation cap

$323,500

$500,000

Dispute about a small business credit facility Current FOS limits

New AFCA limits

Facility limit

$2m

$5m

Compensation cap

$323,500

$1m

Compensation cap

$323,500

$2m

Dispute about whether a guarantee should be set aside where it has been supported by a mortgage or other security over the guarantor’s primary place of residence Current FOS limits

New AFCA limits

Monetary limit

No monetary limit

CALLS FOR GREATER REGULATION OF SMSF LENDING Lenders and the ATO have expressed concern over risks to retirement savings, with one research firm calling them “an accident waiting to happen” property group is calling for new legislation to ban borrowing against SMSFs for property purchases after all the major banks, their subsidiaries and AMP pulled out of the sector last year.

According to RiskWise Property Research CEO Doron Peleg, the ATO has expressed concern about the risk to the retirement savings of individual SMSF trustees in the event of a property decline.

Additionally, the Financial System Inquiry recommended a ban on direct borrowing

by SMSFs to prevent an unnecessary build-up of risk in the superannuation system.

Peleg called lending to SMSFs an “accident waiting to happen” A

and said that people were effectively gambling with their retirement funds.

“Super is the only asset class you can leverage against, but using it to buy property is definitely high-risk if things go wrong,” he added.

Peleg said this risk had been acknowledged by the major banks, and that the Council of Financial Regulators should take notice and implement bans across the entire industry.

However, while most banks have halted the practice, nonbank lenders are filling the void and continue to do so in order to meet growing demand.

There are more than 600,000 SMSFs in Australia, managing

nearly $750bn in assets, according to APRA. RiskWise said many SMSF borrowers were choosing off-the-plan properties, which Peleg said carried a high level of risk. This was mostly due to potential oversupply leading to squashed property values, high vacancy rates and a cooler market.

Peleg said, “What this means is that many individuals fall into debt they can’t climb out of as their SMSF hits the so-called rock bottom known as a property bust.”

He said that when considering buying property through a superannuation fund it was important to identify the potential loss of income if an oversupply situation were to occur in the area. This could cause subsequent difficulties in finding tenants to rent the property, especially as such dwellings appealed to a limited market and not to families with children, who typically seek bigger homes on decent-sized blocks of land.

$500,000 Facility limit for small business

AFCA POWERS EXTENDED

WHISTLE-BLOWERS PROTECTED

government has extended AFCA’s remit by allowing the new regulatory and complaints body to consider financial complaints dating back to 1 January 2008. The move provides expanded access to redress for consumers and small businesses harmed by financial misconduct (see graphic), in line with the royal commission’s scope of inquiry. AFCA will consider eligible complaints between 1 July 2019 and 30 June 2020. To qualify, disputes must not have been heard previously and must meet current compensation thresholds.

has said it welcomes the passing of new laws to protect whistle-blowers that were approved by Parliament on 19 February. ASIC executive director Warren Day said, “These reforms will help ASIC by encouraging people who have observed misconduct to come forward. They complement the measures we have put in place since 2014 to improve our processes for assessing whistle-blower reports and communicating with whistle-blowers during our inquiries.”

THE

$2m

$5m

Compensation cap

No compensation cap $323,500

12

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ASIC

$ $

$

$

$

$

$

$

www.brokernews.com.au

13

FE AT URES

SPECIAL REPORT

BY BROKERS FOR BROKERS

Finsure Group co-founder and MD John Kolenda reveals the aggregator’s plans for a new CRM system that will transform data into the ultimate performance driver

KEY BUSINESS METRICS

1,500

brokers in the network

19%

year-on-year increase in loan writers

60,000+

customers under management

$35.5BN

value of aggregation loan book

26%

quarter-on-quarter increase in loan book value

14

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months ago, big data was enjoying its time in the limelight. After years of scholarly papers, seminars and tech advances the business world was finally coming to terms with the fact that not only is data everywhere but it has commercial value.

However, big data has a severe limitation – it is the story of what has already happened. To be truly successful in business today, the trick is to know what will happen next and predict the solution that outcome will demand.

At Finsure, that isn’t just the goal, it is the next breakthrough, and it is already a reality.

Before the end of this calendar year, the aggregator famously built “by brokers for brokers” will roll out Infynity, its new, marketleading CRM that is set to redefine how and why brokers engage with their clients.

“The launch of Infynity is key to our plans for 2019. This new system is built on the basis of predicting customer behaviour before it happens,” says Finsure Group co-founder and managing director John Kolenda.

“The other thing we are doing is integrating it with social media so the system will create a centralised area for all customer interactions.

It’s a really insightful system that we can’t wait to roll out to our network.”

Infynity is just one element of how Finsure will support its brokers to ensure good customer outcomes are delivered.

The award-winning aggregator enjoyed a seminal year in 2018, hitting a number of new milestones.

ONLY

Firstly, broker network numbers enjoyed a 20% year-on-year boost as Finsure recruited its 1,500th broker. The client base also grew to 60,000 customers under management, and in November the aggregation loan book reached record values of $34bn, an increase of 26% on the previous corresponding period. This followed 71.6% growth in revenue during the 2017–18 financial year.

To top it all off, Finsure took the coveted first place in MPA’s

demanding regulatory changes in the post-Hayne environment. The debut of Infynity is just one of the support mechanisms that will be rolled out over the coming months, with Finsure pledging an additional focus on expanding its offering, activities and member value proposition, too.

“Our main goal in 2019 is to continue to grow our service offering but ensure it is done sustainably and without compromising the high levels of service we provide to our existing brokers,” Kolenda says.

Rising to the challenge When it comes to Finsure’s recent successes, its broker network, loan book and customer growth targets are only half the story. Dominating headlines in September last year, Finsure created a first-of-its-kind business model through its

“When it comes down to it, the aggregator that can maintain the strongest offering across all services will be the one that succeeds” John Kolenda, co-founder and MD, Finsure Group Brokers on Aggregators survey.

But that’s not to say it was a walk in the park.

“While Finsure was proud to be a high achiever and receive many industry plaudits, we also focused on helping brokers deal with the increasingly complex and challenging regulatory and lending landscape,” Kolenda says.

“The current lending market is the most complex I have experienced in more than 25 years in the industry.”

In Kolenda’s words, Finsure has dedicated “a large amount of resources” to broker education and training programs to ensure its network is ahead of the market’s

acquisition of Goldfields Money Limited – an “obvious highlight”, Kolenda says.

“In the past, banks have typically acquired aggregators, but this is the first time a bank and an aggregator have merged. The two companies coming together will provide benefits to both brokers and customers,” says Goldfields’ executive director and CEO, Simon Lyons.

Unlike other mergers, this is a meeting of minds as much as might. Financial stability and scale aside, the merger has created what Kolenda and Lyons term “Australia’s first truly scalable digital challenger bank”, with a

In partnership with

it’s yet another example of how the new model will shake up the banking sector,” Lyons explains.

From left: Simon Lyons, CEO, Goldfields Money, and John Kolenda, co-founder and MD, Finsure Group

market-leading digital platform designed to give brokers and their customers greater choice.

The resulting entity is focused on providing lending solutions via broker distribution, and it brings the proposition to the banking world at a time when the majors and regulators appear to be doing all they can to push third party distribution out of the equation.

The idea is to combine Finsure’s 1,500-strong broker distribution network with a suite of world-class products, including home loans, personal loans, transaction accounts and deposits.

“Together we’re creating a new force in digital banking,”

Lyons says. “The Finsure distribution network was one of the really attractive aspects when we were looking to merge.

They provide a low-cost and scalable means of distributing our loans. We are perfectly positioned to manufacture products specifically for Finsure brokers that will allow them to provide lending solutions for their customers that they may not be able to get elsewhere.”

The debut of this new model fills a number of gaps in the market.

For example, Finsure brokers can leverage one such product to borrow against their trail and invest in their business, with the

terms of such a loan being tied to the individual broker’s long-term performance with Finsure.

Another opportunity involves “plugging the gap” in interest-only and investor loans.

However, the real point of difference moves well beyond home loans to redefine banking itself. In this respect a partnership with blockchainbased solutions provider IvyKoin will commercialise the use of blockchain technology in banking to validate and legitimise digital currency without the need for the traditional banking framework.

“This is an area traditional banks have struggled with; however,

Embracing change New tools and business partners aside, there are many other challenges facing the industry, and in pledging to support its network through these, Finsure is actively evolving the role of the aggregator.

“When it comes down to it, the aggregator that can maintain the strongest offering across all services will be the one that succeeds in this market,” Kolenda says, and his words ring true for brokers too.

Diversification will take on new meaning and urgency over the coming 15 months, but it isn’t just about brokers protecting their income and revenue streams; it’s about meeting direct demand from an always-connected market in which the consumer expects multiple solutions under one roof.

“This presents brokers with a great opportunity to enhance profitability, and should lead to them looking for a greater share of the wallet in cross-selling or referring other services such as insurance, wealth and investment,” Kolenda says.

Partnerships will also gain importance as the maturation of the online space increases the pressure on single-broker operators. In order to compete with the large internet lenders, brokers must depend on aggregators and third party providers, and must therefore select partners that support them in both competing and excelling.

Following on from this, Kolenda advises that technology should be approached as an automation tool, with a view to freeing up the broker’s time to explore new revenue opportunities.

“Use technology to your advantage,” Kolenda says.

“Those brokers that embrace change, use technology to their advantage and sell a diversified suite of products will be the ones that come out on top.” AB www.brokernews.com.au

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NE WS ANALYSIS

LESSONS FROM CANADA Commissioner Hayne’s recommendation for a best interest duty may have the linguistic bells and whistles of pro-consumer reform, but when Canadian regulators attempted to do the same, their project failed at the first hurdle the furore over trail, Commissioner Hayne’s vision for a “best interest duty” has quietly taken a backseat.

According to Hayne, recommendation 1.2 is about aligning the law with customer expectations. However, in reality it is a loosely termed yet potentially high-stakes inclusion that could bring many challenges.

The reasoning behind 1.2 was clearly set out. In his report, Hayne said, first and foremost, that the recommendation was based on evidence provided to the Sedgwick Review by CBA, mentioning ASIC’s 2017 review as an additional trigger.

He later went on to assure the reader: “It is not an obligation that should affect the practices of lenders.”

The government’s official response says little other than that it will be acting on the recommendation.

Meanwhile, Labor’s recent pledge to implement “75 of the 76 recommendations” means it is equally uninspired as to how this proconsumer duty should work in reality.

The concern is that such a move would likely result in a measurement criteria either so narrow it is flawed, or so broad it is ineffective.

“A lot of it is going to be an art rather than a science, and they won’t be able to define it,” says Andrew Way, director at Semper Capital.

Way, who was a member of the consultative industry group for the NCCP, says such proposals are more about the language than the logistics.

“These things are easy things to say politically, but they are impossible to enforce. They are broad political statements, they are sound bites; they have no practical application because they haven’t explained how they will IN

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be measured, accounted for, or made meaningful,” he says.

The Canadian model In recent weeks much has been written about the ‘Netherlands

Administrators, announced it would introduce a statutory best interest standard following a consultation paper that itself was the product of a four-year investigation to consider how such a requirement

“These things are easy things to say politically, but they are impossible to enforce. They are broad political statements, they are sound bites” Andrew Way, director, Semper Capital model’ of broker remuneration and its impact on the Dutch financial system. In this case, there are lessons from overseas too.

In 2016, Canada’s regulatory body, the Canadian Securities

would alter the market.

From the start, people from across politics, finance and investment were dubious.

While a regulatory best interest standard was supported by the

provincial securities regulators in Ontario and New Brunswick, it was opposed by those in British Columbia, and regulators in Quebec, Alberta, Manitoba and Nova Scotia expressed “strong reservations”.

By May 2017, a little over a year after it was first announced, regulators in British Columbia, Quebec, Alberta, Manitoba and Nova Scotia abandoned the project to define what ‘best’ should look like. The following year, Ontario and New Brunswick followed suit – albeit with some reluctance – and Canada dropped its quest to enforce a standard.

However, according to Jesse Vermiglio, partner at Holley Nethercote Commercial and Financial Services Lawyers, ASIC’s previous experience regulating ‘best interest’ as part of the Future of Financial Advice (FOFA) reforms means it won’t necessarily run into the same issues.

ADOPTING THE RECOMMENDATIONS

1.2 BEST INTEREST DUTY

?

Watch this space

1.3 BROKER REMUNERATION

X

Fee and trail changes unsupported by government

1.4 ESTABLISHMENT OF INDUSTRY WORKING GROUP

√

No public or political objections to date

1.5 MORTGAGE BROKERS AS FINANCIAL ADVISERS

?

Inevitable if other reforms are passed as outlined

“I’m not saying there won’t be teething issues, but it will be easier.

The path isn’t new. There are examples about the way in which this will be dealt with,” he says.

“The other thing you need to factor in is it’s the same regulator that is dealing with this for financial planners, so ultimately they are going to think about it in similar terms, obviously taking into account the differences between lending and financial product advice.”

Vermiglio expects ASIC will focus on a client’s best financial interests when interpreting the new duty and largely follow the existing approach for financial planners. Therefore, in the context of mortgage broking, it will consider best interest to be about the provision of credit assistance.

“It’s really all about the process.

If your processes put the client’s interest at the centre of your service, then complying with the new duty should not be difficult. However, mortgage brokers should learn the lessons from FOFA – make sure you have documented procedures which demonstrate your recommendations meet the new duty. Then make sure you follow them,” he says.

While such advice is sound, not everybody believes FOFA is directly transferable to broking, nor should it be.

“We tend to default and say mortgage brokers give advice, but they don’t. By law they give credit assistance, and therefore this best interest piece needs to appropriately align itself to our regulations,” says FBAA managing director Peter White.

Should FOFA fail to translate, White says the customer-first duty from the Combined Industry Forum

could provide a springboard.

“I can see this being a moving target for quite some time; hopefully not like the Canadian outcome, but I don’t think there will be a quick result. The CIF’s customer-first duty may be the most appropriate first step,” says White.

Despite this clear – and very recent – lesson from an economy that has many parallels with Australia, Hayne’s supporting words for the recommendation read, “the best interests obligation must be enforceable”.

New responsibilities Currently, Canadian advisers are required to adopt “fiduciary

doing so,” Tindall says.

“I have no problems with that statement, but bringing in a best interest threshold can be very tough because it could extend to the point of not charging a fee because it’s in our interest, not the client’s.”

If a suitable definition for ‘best’ was found and agreed upon, the problem would be solved. However, there are many variables to consider in such work, not least whether best can even be measured until a loan has been fully paid down.

One option is to consider the rate a borrower pays for a loan that fits their circumstances; however, such a framework would only be applicable to vanilla loans and customers, as

“Mortgage brokers should learn the lessons from FOFA – make sure you have documented procedures which demonstrate your recommendations meet the new duty”

BEST INTEREST DUTY Source: Royal commission final report, February 2019

Recommendation 1.2 The law should be amended to provide that, when acting in connection with home lending, mortgage brokers must act in the best interests of the intending borrower. The obligation should be a civil penalty provision.

Jesse Vermiglio, Holley Nethercote Commercial and Financial Services Lawyers responsibility”.

Although located in New South Wales rather than New Brunswick, John Tindall, finance specialist at Accumulus Holdings, works under a business model that takes a similar approach. His business is structured through a blend of independent ownership and the added obligation to act ‘‘like” a fiduciary.

“A fiduciary is morally obligated to work in the other party’s interests and may or may not charge a fee for

Bianca Patterson, director of Calculated Lending, explains.

“I think it’s imperative that the word ‘best’ is clearly defined,” she says. “For example, when we deal with clients in complex lending situations, best doesn’t necessarily mean the best rate. It’s often the best lender or the best product. We are trying to achieve something for their long-term goals.”

To illustrate the point, Patterson gives the example of a client who www.brokernews.com.au

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wants to purchase a property to demolish and build three new properties, pending council approval.

If the client is put on the best rate, the loan would most likely not be suitable for the construction phase 12 months down the line. If the client is placed in a loan that is suitable for both the purchase and construction, they are likely to be paying a rate higher than the market average.

Theoretically, if a broker takes a wrong turn in this process, it could lead to clients retrospectively assessing their loans and exercising their right to question them in court.

“There are possibly some difficulties with that from an insurance perspective,” says Murray Cowan, managing director at Better Mortgage Management.

“A best interest duty could see a spike in PI insurance because perhaps it may be easy for a client to look back and think, ‘This broker didn’t act in my best interests because this rate ended up being better’,” he says.

At the coalface With brokers’ reputations scathed as a result of the royal commission, the endorsement provided by another layer of regulation is welcomed and provides another dimension to the broker channel’s service proposition.

“I one hundred per cent welcome the change, and I think a lot of other brokers do too,” says Patterson.

“Why not regulate it? Let’s make it our clear point of difference from the bank. If I was a consumer I would choose to work with a broker over a bank because our standards are much higher, and there will be a better outcome.”

On the other hand, many maintain that such a fundamental principle of broking needs no regulatory framework.

“It’s the way every consultant or adviser should operate – in any field, not just the financial sector and 18

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mortgage broking,” says Kevin Lee, buyer agent and mentor at Smart Property Adviser.

“I think it all comes down to whether the adviser or consultant cares enough about their client.

If I didn’t love what I do and people didn’t appreciate what brokers do, I probably wouldn’t care. But when the care comes first, everything flows beautifully,” he says.

Despite the willingness of the industry to stand by its service proposition, until ‘trailgate’ has been brought to a sensible conclusion, it is likely that the focus on what best interest could and should look like may well be put on hold.

The recommendation still has to be refracted through a federal election and a regulator that it could be said leveraged the royal commission to get a substantial funding boost.

However, as and when the decision-makers meet, it is imperative that attention isn’t diverted by the ongoing trail debate – or another crisis that has yet to arise. AB

COMPETITION CONTRACTS IN NETHERLANDS Competition declined in the Netherlands following the introduction of broker fees Total number of banks in the Netherlands, 2008–17 100

93 90 80 70

88 81

77

74 66

60

52 50

50 45

44

40 30 20 10 0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

PEOPLE

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

FEE-FOR-SERVICE ‘FAILED’ IN NETHERLANDS

LABOR TO OPPOSE CUSTOMER-PAYS MODEL

A broker group has said the ‘Netherlands model’ recommended by Commissioner Hayne in the final report from the royal commission has actually been a failure in the Netherlands since it was introduced in 2008. According to a 2017 report entitled Banking in the Netherlands obtained

by Loan Market Group, the total number of banks in the Netherlands decreased from 99 in 2007 to just 44 in 2017.

Group executive chairman Sam White said, “This just further demonstrates the Netherlands model would be a terrible outcome for Aussies.”

After two weeks of silence, Labor has softened its approach to Commissioner Hayne’s recommendations.

In reports on 21 February, the party backed a 1.1% commission payment. Industry groups are celebrating that both main parties now recognise the importance of mortgage brokers. The MFAA is urging more caution, however, until Labor has made its official response.

CEO Mike Felton said, “We feel we should wait for [confirmation]. If their position is aligned to what is being outlined, then we would say it is encouraging.”

Brilliant research and commentary. It seems to me that Hayne’s recommendations and use of the Dutch model stems from a need to satisfy an ideological viewpoint that, as brokers are paid by lenders, brokers are conflicted. Be damned the logic and consequences, just do it! Wonder how many Dutch banks left the market by 2008 due to the GFC and not the fees issue?

That’d be interesting to know.

Broker in the burbs | 20 Feb 2019, 08:26 AM

It seems Hayne’s 30 seconds on Google wasn’t quite enough research for his ludicrous proposal...

Andrew | 13 Feb 2019, 08:51 AM

That is terrific research. I actually enjoyed my morning coffee today reading that. Pity it highlights the true motivation of the recommendation, and that in itself is frightful.

TMAC | 13 Feb 2019, 08:51 AM

Self-serving politicians and exorbitantly paid “consultants” like Hayne have no idea of the real world of finance. They clearly have not researched the broker value and benefits provided to everyday consumers confused by the home loan landscape.

Politicians don’t care what happens to mortgage brokers because they know they have a big fat taxpayer-funded pension to fall back on when they decide they have exploited the system enough and want to retire at taxpayers’ expense.

Anonymous | 13 Feb 2019, 09:00 AM

This is not a celebration. 1.1% is equivalent to a loan lasting three years on a trail book. That’s a very high run-off rate. The only acceptable and reasonable outcome is to leave the current model as it is. Government has no place interfering with the free market.

Paul Lewis – Lighthouse Financial Services | 22 Feb 2019, 9:12AM

Let’s hope Labor does ignore Hayne and the consumer-pays broker model. As a broker, I believe a flat fee paid by the lender could work, if trail was increased. For example, a commission paid by the lender of $2,500 per loan application. This would be the same regardless of loan size. This then gets rid of the ‘perceived’ conflict of being paid based on loan amount.

Clawbacks would be removed. Trail would then remain and be increased to compensate, as there is clearly no conflict with trail and it leads to better consumer outcomes. Trail was increased to 25 points, for example. As a broker trying to build a book and business value, this model would appeal to me very much, to be honest.

Angry Broker | 22 Feb 2019, 09:13 AM

Labor has basically agreed to pay three years’ trail up front – increasing upfront costs to the banks (which we know will be passed on to the clients). It’s basically back to the ’90s. The commission has achieved what? Increased validation costs; reduced number of loans getting approved; opened the door for greedy lawyers to take class action against the banks; created additional costs for aggregators and banks to deal with the fallout; contributed to the current housing market decline.

Shows how much research was done by the Royal CBA Commission.

Another Angry Broker | 22 Feb 2019, 09:52 AM

Bottom Line | 13 Feb 2019, 09:03 AM

The brokers who think that Hayne and Co. didn’t know these facts are naive. They knew all right – why would Hayne convey any negativity when his agenda was to protect the big four? The banking industry is inherently corrupt.

That’s not a win. It’s just a political move to win votes and get through the next election. The damage to the brokerage firms, aggregators and non-branch lenders is done. The major bank share price is indirect proof. Stay smart and alert, fellow brokers. Justice Hayne had blinkers with big bank logos printed on the inside.

Tui | 13 Feb 2019, 10:22 AM

OB | 22 Feb 2019, 10:08 AM

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BUSINESS PROFILE

A SECOND LOOK AT COMMERCIAL Following the royal commission’s final report, brokers have a new reason to look at commercial lending. Australian Broker speaks to La Trobe Financial, Prospa and Thinktank to discover how, when and why they should tap the $658bn sector finance most commonly refers to property-secured finance, including development funding, but is also taken to include other asset-backed finance, such as for vehicles, plant and equipment, along with a variety of other finance types, for example debtor, inventory and trade as well as cash flow and unsecured finance.

The total volume of commercial loans in Australia currently stands at $658bn, and this ranges from smaller loans for $5m to $10m and up, to specialist loans for $25m to $50m, and large commercial loans for $50m to $300m.

According to Thinktank CEO Jonathan Street, first mortgages also play a significant role.

“The greatest component of the commercial market is in the first mortgage space, which covers construction and development finance, alongside the traditional financing of industrial, retail, office and other mainstream commercially utilised properties. These could include childcare centres, medical and professional centres, boarding houses, serviced apartments, motels, clubs and pubs,” he explains.

One of the many implications of the royal commission is that, in order to protect business revenue, brokers will need to conquer commercial lending before July 2020 – and that in itself is set to heighten competition across the sector.

“Brokers have realised the importance of diversification as a means of growing their business,” says Cory Bannister, VP chief lending officer at La Trobe.

“For 2019, what we are seeing is that diversification is no longer an COMMERCIAL

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option but a necessity for brokers to safeguard their business.”

He predicts the coming year will be characterised by a sharp rise in commercial mortgages, an extension of the low interest rates seen in recent

retail, industrial and rural property, as well as those looking to secure funds through development finance, or perhaps to transact via SMSFs. These products also allow for full-doc and alternative income

“The number of commercial mortgages written via the third party channel, which currently stands at around 30%, will inch much closer to the level of residential mortgages” Cory Bannister, VP chief lending officer, La Trobe Financial years, and a rise in returns on non-residential investments.

La Trobe Financial offers one of the broadest commercial product ranges in the market, catering to the purchase and refinancing of office,

verification options.

“We expect the number of commercial mortgages written via the third party channel, which currently stands at around 30%, will inch much closer to the level of

residential mortgages, which currently stands at around 59%.

This gives some perspective as to how large the opportunity set could be,” Bannister says.

The business case Commercial loans can also be leveraged to help SMEs make ends meet. Research into the economic impact of Prospa’s lending has revealed that, together with its broker partners, the lender has contributed $3.65bn to Australia’s GDP, helping to support 52,500 jobs in the wider economy.

“Brokers need to recognise that small business owners face unique cash flow challenges that are very different from those of consumers or large corporations and are affected by seasonal trends,” says Matt Bauld, general manager of sales and business development at Prospa.

“To really understand the finance needs of small business, there are lots of educational resources and marketing tools available through partners like Prospa, for those who want them.”

Reporting a “big shift” away from traditional banks and lenders in 2018, Bauld says awareness of alternative lenders is increasing and is set to grow even further as the current climate continues to evolve.

“It’s always been hard for small businesses to access finance, but it’s getting harder,” he adds.

Quantifying his observation, the September 2018 Sensis Business Index reported that 30% of small businesses that tried to access funds were unsuccessful.

“Many have been motivated to look

NEED TO KNOW: CORY BANNISTER’S ADVICE FOR BROKERS Diversification is no longer an option but a necessity, and it proves a finance broker’s core value proposition – choice, trusted advice and finding solutions where others could not. Current market conditions are certainly prime for showcasing this. Some benefits include new revenue sources, expanded business capabilities and fresh opportunities. In short, brokers can spread risk by sourcing income from multiple asset classes. The more solutions a broker can provide to their clients, the more likely those clients are to return for future needs. All brokers need is strong knowledge of how to leverage their CRM.

Matt Bauld, GM sales and business development, Prospa

for fast, simple and service-driven solutions, and lenders such as Prospa, who put customer experience first, experienced significant growth in 2018 as a result,” Bauld says.

Availability is only half the story.

Transparency was also a major focus in 2018, not just in commercial lending but across the broader

Jonathan Street, CEO, Thinktank

mainstream commercial lending space last year, demand was evenly split between purchases and refinances or equity release, while SMSF lending remained buoyant – a trend that occurred despite the major banks’ withdrawal from the sector in the second half of the year.

“While house prices and housing

“Brokers need to recognise that small business owners face unique cash flow challenges that are very different from consumers or large corporations” Matt Bauld, GM sales and business development, Prospa financial sector. As a result, last year Prospa contributed to the development of the Australian Finance Industry Association’s Code of Lending Practice, which provides best practice principles and guidelines for the industry with respect to transparency and disclosure.

Digging below the surface of such trends, Thinktank reports that, in the

finance softened in 2018, commercial finance remained in strong demand, with the exception of development finance, which has been consistently trending down over the past couple of years after a massive run up from around 2011 to 2016,” says Street.

Consistent GDP growth, low interest rates and high employment all contributed to the strong

Cory Bannister, VP chief lending officer, La Trobe Financial

NEED TO KNOW: MATT BAULD’S ADVICE FOR BROKERS Commercial brokers need to be prepared for new entrants to their space, such as residential brokers who are diversifying. They should take comfort from their experience in small business lending but also take steps to remain competitive.

This includes emphasising their credentials through marketing and customer communication and reinforcing their sector expertise. Finally, they need to know there is increasing awareness of alternative lenders as a viable and important solution for SMEs. Demonstrating this point, Prospa’s internal research has shown that one in four small businesses are uncertain whether they would exist today without their most recent Prospa loan.

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economic factors that underpinned strength in property, equipment and most other forms of commercial finance. Additionally, the non-banks continued to lift their market share as the mainstream banks adjusted their credit appetite, pricing and products.

“In effect, this trend invited borrowers to increasingly look elsewhere for better deals, support and service – a trend that is set to continue,” says Street.

Capturing the trend In the last two years, the market share of brokers entering the commercial space has more than doubled.

Bannister says some recent reports have highlighted as much as a 123% increase in broker participation in commercial, from 1,641 during the October to March 2016 period to 3,668 in the same period in 2018. But that doesn’t mean it’s plain sailing.

“Unfortunately, the timing of the increase in demand-side appetite was met with a shrinking supply side following the constraint on commercial property credit supply from the banks as they looked to simplify product offerings,” Bannister says. “This resulted in a challenging period for brokers and their clients.”

As one of Australia’s largest non-banks, La Trobe Financial currently boasts a loan book of circa $7bn, originating upwards of $6bn in new loan applications annually.

“Our appetite for commercial lending remains unchanged, largely due to our commitment to the sector, and assisted by our diversified model of funding,” Bannister says, adding that new market niches are also starting to open up.

“We continue to operate business as usual, stepping in to fill the void where we can by offering brokers solutions when others have turned them away. The commercial lending landscape has become more solutions focused, rather than price focused,” Bannister says.

A number of factors, including major economic and legislative developments, are set to influence commercial lending over the next 12 months, and Commissioner Hayne’s recommendations are among them.

“With the commission exclusively levelling its focus on coded lending, the consensus view is that commercial lending will not be caught up in the resulting legislative and regulatory changes, which in turn represents considerable opportunity for brokers looking to fortify their business and diversify 22

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their income streams,” Street says.

Other factors include a strong national infrastructure pipeline and an anticipation of increased commercial SMSF lending by the non-bank sector, spurred by tax incentives. However, there could be a bump in the road ahead.

“With uncertainty surrounding the policy settings post the upcoming federal election, most notably to do with negative gearing, there may be a lull in economic and finance activity in the lead-up to election time,

decide if and how they are going to adapt, and existing commercial lenders will need to prepare themselves for an increase in competition. The opportunity is there for those that embrace it, as is the support.”

“Brokers planning to diversify into commercial lending need to know they are making a smart decision.

The opportunities are significant and will help them build a more sustainable business.”

While brokers are fully supported

“In effect, this trend invited borrowers to increasingly look elsewhere for better deals, support and service – a trend that is set to continue” Jonathan Street, CEO, Thinktank though history suggests that once a level of certainty around government re-emerges, businesses and consumers get going again whether the outcome is good, bad or indifferent,” Street says.

New-look lending While strong opportunities no doubt exist – with others set to emerge in due course – commercial lending as a component of the wider lending environment is in for some changes.

“The commercial landscape is going to look very different in 2019,” says Bauld, who predicts that growing awareness of alternative lenders and increased competition among brokers and lenders will both play a role.

“Residential brokers will need to

by their lending partners, the mechanics of how to move into an entirely new sector are important to remember.

Street explains: “For the most part, originating mortgage-secured commercial finance isn’t far removed from self-employed residential lending in terms of the process and engagement between clients and the lender. It can get complex, but when it does, a good aggregator and a good lender will always be there to help bring it together.”

Meanwhile, Bauld advises that brokers can leverage their current client base to find commercial opportunities as a starting point.

“Brokers may already have numerous clients who also run a

small business or know a small business owner that needs access to finance. Diversifying doesn’t just mean expanding a client base; it’s an opportunity to deepen your existing relationships,” he says.

In fact, existing CRMs are an untold source of new client opportunities, and thorough and dedicated reviews of the CRM can provide a strong starting point, according to Bannister.

Firstly, he advises brokers to look for clients who already hold commercial property, and once this has been done the CRM should be mined for self-employed client leads. Having this information is likely to identify businesses that could be looking to buy their own premises and therefore require commercial finance solutions – or even SMSF structures.

“The opportunities are under your nose. We often see untapped equity sitting in a customer’s asset and liability statement tied to commercial property,” Bannister says.

CRM aside, Bannister also advises brokers to align their services with those of financial planners, accountants, real estate agents and other complementary partners, who are often a good source of referrals.

“Finally, brokers could also target local small businesses by running seminars, which may include topics such as purchasing your business premises through your SMSF; consolidating business debt through refinancing; managing ATO obligations; and business expansion strategies,” Bannister says.

“Not only could this initiative drive specific commercial loan originations; it could also help raise the broker’s profile in their local community.” AB

NEED TO KNOW: JONATHAN STREET’S ADVICE FOR BROKERS Brokers who understand their clients’ needs and stay in regular contact will continually open up new and repeat opportunities. They also need to maintain close relationships with responsive and supportive lender relationship managers and to find out where and who to turn to for new insight and solutions. Staying on top of which lender offers the products and terms that fit clients’ needs is essential, and this is where good relationships with aggregators and lenders can mean the difference between converting an opportunity and missing out. Finally, the value of clear, timely, accurate and complete communication, especially in relation to deals, cannot be understated.

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IN THE NE WS

LEADING

BY EXAMPLE Last October, 13,500 MFAA members were asked to elect their board representatives for the year ahead and, for the first time in the organisation’s history, the resulting line-up is predominantly female. Australian Broker examines what it means for diversity, inclusion and representation in the industry

Deputy chair Melissa Gielnik says, “Our election was about skill set and experience as a collective group, and what we bring to the table. The board as a whole represents so many different parts

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Donna Beazley Chairman, MFAA board

Beazley and Gielnik are joined on the board by elected directors Kathryn Harrison, Sarah Wells and Rose De Rossi, as well as appointed board director Vladimír Malcík. As frontline brokers they

“The composition of the overall management team and board has happened organically, but it’s a good mix” Donna Beazley, chairman, MFAA board of the market in our locations, our customer demographic and our family circumstance, and so we are able to represent a wide cross section of the broking community.”

represent various business structures, locations and customers, and together they are the only board in the history of the MFAA that is predominantly female.

While the board has almost always

FEMALE BROKERS IN THE INDUSTRY Source: MFAA Opportunities for Women report, 2018

Vladimír Malcík Appointed director, MFAA board

Number/proportion (%) of female brokers in the industry Number of female brokers

4,500

27.8%

28.3%

Proportion of female brokers

27.4%

27.3%

27.1%

30%

4,000 25% 3,500 3,000

20%

1,500

3,779

3,871

3,708

2,000

3,700

2,500 3,312

2015 and 2018, female representation in the broking industry declined by almost 7% from a peak of 34% in September 2015 to a mere 27.1% by March of last year.

In a bid to find out why, the MFAA collaborated with business consultant and coach Jane Counsel to produce the Opportunities for Women reports. The final results were published in December, concluding, among many things, that while 72% of men believe the broking industry provides opportunity to all, only 51% of women agree.

It isn’t just women who are under­ represented. The figures also highlight a diversity imbalance that spans ethnicity, sexuality, faith, disability and age.

So when an industry at such a point in its diversification journey organically elected a nearly all-female board for 2019, it made an undeniable statement.

“When you say five women out loud it’s awesome and it’s exciting, but it’s not a surprise because it is a skill-based outcome.

It’s just the way things have worked out,” says board chair Donna Beazley.

Like any election, the process of campaigning for a place on the MFAA board calls for each candidate to present their unique skill sets, as well as the added value and experience they can bring to the organisation. The election itself is handled externally and conducted independently of the MFAA’s board, executive and staff.

With 13,500 members eligible to cast a ballot, every detail of a candidate’s career is considered in the decision.

Once elected, the board is responsible for providing leadership and guidance as well as overseeing the implementation of strategic initiatives. Each elected board member serves an initial two-year term and has the option to stand for re-election for a second term.

BETWEEN

15% 10%

1,000 5% 500

Sarah Wells Elected director, MFAA board

0

0% Oct 15-Mar 16 Apr 16-Sep 16 Oct 16-Mar 17 Apr 17-Sep 17

Oct 17-Mar 18

featured female members, the most recent election result is evidence of a sharp U-turn in attitudes since the association’s last diversity poll, which confirmed that the average broker is still male, heterosexual and aged between 47 and 57.

It also reflects current trends at the Australian Stock Exchange, where female representation on ASX-listed company boards increased 8.3% in the last decade.

However, as Wells says, the new board echoes the diversity that already exists throughout MFAA management and staff, as well as the passion all members hold for the broker channel.

“The commonality is that we are all here to serve a purpose irrespective of our diversity, and I think the diversity itself brings the ability to better identify and dissect issues. We come at things from a different perspective, but we are working for a common good. I truly feel that we function incredibly well together,” Wells says.

On the agenda There are plenty of issues for the board to address over the coming months. Since the royal commission’s final report, the industry has been hijacked by politicians keen not to isolate – or demonise – more than 10,000 small business owners potentially weeks before an election.

In working to protect the future of broking, there are many roles brokers can play as individuals. However, a visible source of leadership and action will be crucial to industry morale and ultimately sustainability, and this is one of many things the board plans to achieve over the coming months.

Harrison says, “Sustainability through this period of flux is essential, and we must have the capacity to be reactive

Melissa Gielnik Deputy chair, MFAA board

Kathryn Harrison Elected director, MFAA board

Rose De Rossi Elected director, MFAA board

as well as proactive; whatever happens we will have to respond. Despite the effort and work that has gone into our solid growth, there have been some diversions on the road, and we have to respond accordingly.”

The agenda for 2019 is already set and will see a continuation of current work to support all the association’s members, as well as prioritising the fight for consumer outcomes, competition and access to credit.

“Moving forward in the coming year, our job is to support MFAA management and the wider broker community as we forge a path forward into sustaining the future longevity of our industry,” Geilnik says.

program it launched last year. The Accidental Councillor scheme will be extended throughout the coming 12 months following a successful pilot last November. Further, new support initiatives and services for brokers will be announced soon.

“Mental health, economic stress – it doesn’t discriminate based on gender or race,” says Wells.

“There has been a lot of thought and consideration put into the diversity and needs of our individual members, and I’m very proud to be a board member and serve with the people around this table.”

While each of the 2019 board members has been elected on their own merit by thousands of their peers, the resulting

“Sustainability through this period of flux is essential, and we must have the capacity to be reactive as well as proactive” Kathryn Harrison, elected director, MFAA board Beazley adds, “The agenda is quite revolutionary; it’s economically going to be challenging at times, but we are all ready to go to support the industry.

That’s our main focus.”

The royal commission isn’t the only diversion on the road. At the time of the interview, Queensland and Tasmania were experiencing unprecedented natural disasters, with communities losing their homes and livelihoods to fires and floods.

Acknowledging the difficulties that so many face at this time, the MFAA’s agenda as an association will also continue the mental health support

line-up could also signal a change in attitudes across the industry, a readiness to reflect a new generation of brokers, or simply chance. Regardless, the work ahead will shape the broking community and industry for years to come, and in achieving that the most important factor is that differences are leveraged to address a common cause.

“The composition of the overall management team and board has happened organically, but it’s a good mix in age and gender when you look at the full line-up of decision-makers,” Beazley says. “We are all on the same path and we all have the same priorities.” AB www.brokernews.com.au

25

DATA

WESTERN AUSTRALIA

NSW SPOTLIGHT

Perth starts to see an economic upswing as resources sector picks up The resources sector may have been a significant driver of Perth’s decline in the past several years, but for Propertyology MD Simon Pressley this industry could turn the state’s economy around once more.

“World demand for commodities such as iron ore, coking coal, gold, copper, thermal coal, gas, lithium and others is driving a new wave of increased mining production that includes a $75bn project pipeline in WA,” he says.

In response, the population is beginning to see growth – CBRE reported that the state recorded an increase of 21,000 residents over the 2017 to 2018 period.

“This is the first step in the recovery. It’s really exciting as there are two real positives that come out of the population growth,” says Craig Gemmill, MD of Gemmill Homes. “Existing housing gets soaked up. That affects supply, and people then go to the next level of pricing or they build. It will really stimulate the market.”

Area

Type Median value

Quarterly

12-month

growth

growth

Perth

H

$487,500

-1.0%

-1.0%

WA Country

H

$320,000

-1.2%

-3.5%

Perth

U

$373,000

-1.9%

-4.0%

WA Country

U

$228,250

-2.2%

-15.4%

QUEENSLAND

Market growth and good living drive investors to Brisbane Brisbane is overcoming its apartment oversupply and attracting investors, but they need to tread carefully. “Brisbane in 2018 was still one of the best places in Australia to live. However, as an investment option, it’s still to hit its straps,” says Propertyology managing director Simon Pressley.

“Queensland is once again enjoying increased population gains. It’s largely due to the relative housing affordability and less stressful lifestyle.

But the failure of consecutive state governments to capitalise on a worldwide tourism boom and an extremely exciting outlook for agribusiness is telling.”

Century 21 Australasia’s chairman and owner, Charles Tarbey, has also expressed concern at how tied Brisbane’s market is to the Sydney and Melbourne markets. “Queensland can often benefit from the equity wave effect where increases in housing equity in NSW and Victoria often lead to increased demand for housing in Queensland.

The problem is that the opposite can also be true.”

Area

Type Median value

Quarterly

12-month

growth

growth

RIDING THE SYDNEY STORM

The sharp decline in Sydney property prices has been good news for some, as a new wave of buyers take advantage of the increasing affordability

values in Sydney have recorded their sharpest annual decline since 1983, at 8.1% according to CoreLogic data. However, banks are not duly concerned and are letting the slowdown play out.

“To date, the Reserve Bank has not been overly concerned with falling dwelling values, largely because it has mostly been contained to Sydney and Melbourne, and both cities have seen a substantial run-up in values over recent years,” says Cameron Kusher, research analyst at CoreLogic.

As a result, dwelling prices are set to drop even more throughout 2019, with Sydney taking the brunt of it, alongside Melbourne.

“If the slowing housing market delivers an impact to consumer consumption, we could then see a change of tack and see some of the temporary macroprudential measures eased back throughout 2019,” Kusher says.

The Sydney downturn has also affected areas like the Central Coast and Wollongong, but REA Group chief economist Nerida Conisbee has identified areas that are outperforming the market.

“Places like Orange are doing pretty well, along with the Northern Rivers shire going up towards the Queensland border. Byron Bay and the smaller towns around seem to be seeing high demand as well.”

For buyers looking to upgrade, the downturn has been a positive market movement, as upgraders are now able to save a considerable chunk on homes in prestige suburbs.

“I don’t think conditions have ever favoured [trade-up] buyers as universally as they do now,” says Nick Viner, founder of buyers’ agency Buyers Domain. “There’s an incredibly rare window of opportunity to secure a really good quality property with extraordinary long-term potential because the competition just isn’t there at the moment." AB

H

$539,999

0.8%

2.6%

Median price (houses)

QLD Country

H

$438,000

0.0%

0.0%

$491,565

Brisbane

U

$385,000

-1.3%

-3.5%

QLD Country

U

$370,000

-0.1%

0.7%

www.brokernews.com.au

Challenges exist in the Sydney market, but sentiment is improving Currently, sentiment is low in Sydney and there are some challenges for those who purchased property in recent years. We are also seeing low price levels and negativity sparked by the upcoming elections, particularly due to potential changes around negative gearing – and that could be detrimental in the short term.

However, when you look beyond this it really isn’t that bad.

The economy is relatively strong right now, so if you look at the housing market with a long-term view, these current uncertainties go.

The unemployment level in the state is currently at 4.3%, so nearly everybody has a job.

You have mostly low-rate loans available, even though lending conditions are tighter and the cost of funding has increased, and then we have strong population growth. Wages are starting to pick up a touch, and if you look at the long-term view, we’re actually doing OK from a property perspective.

Peter Vassilis Mortgage broker, Black and White Finance

SUBURB TO WATCH: TOUKLEY

Brisbane

26

BROKER PERSPECTIVE

PROPERTY

Median price (units) $372,024

Source: CoreLogic

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

-5.1%

12.4%

54.8%

3.6%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

-7.4%

13.9%

42.4%

3.9%

HIGHEST-YIELD SUBURBS IN NEW SOUTH WALES Suburb

OPPORTUNITIES AND KEY INFRASTRUCTURE

Type

Median price

Quarterly growth

12-month growth

Vineyard

U

$190,000

-8%

9%

Falls Creek

H

$832,500

0%

4%

North Narooma

H

$488,750

-1%

1%

Rail transport

Roads

A 12k light rail service project and multiple metro extensions are underway

The $3.6bn WestConnex project will see 33km of new roads constructed

Peak Hill

H

$100,000

-13%

-5%

Dareton

H

$105,000

11%

-1%

Broken Hill

H

$120,000

9%

20%

Narooma

U

$232,500

8%

-10%

Ganmain

H

$125,000

4%

4%

Whitton

H

$92,000

0%

-15%

Affordability

Housing pipeline

Prices in Sydney have dropped 12.3% from their peak in mid-2017

The state government says 725,000 additional homes are needed to 2036

Darlington Point

H

$155,000

-3%

-5%

Nelligen

H

$465,000

0%

-25%

Mystery Bay

H

$450,000

-7%

-4%

AUSTRALIAN CAPITAL TERRITORY

Area

Type

Median value

Quarterly growth

12-month growth

Canberra

H

$665,000

0.5%

3.2%

Canberra

U

$435,000

0.4%

0.6%

Rental market sparks investor confidence Canberra is recording some of the highest property prices in the country and was one of the strongest markets in Australia as 2018 came to a close. Now rental conditions are starting to mirror this trend. The positive performance of the city’s rental market, as recorded over recent months, is likely to continue to attract interest from investors.

“The median rent for three- and two-bedroom houses remained steady in Sydney, Perth and Canberra,” Gunning says. “The markets of Sydney, Melbourne, Brisbane, Canberra and Hobart have vacancy rates below the 3% benchmark, indicating a strong demand for rental accommodation in these capitals.”

Data and analysis from CoreLogic supports this view, and the Hedonic Home Value Index in December 2018 noted that Canberra had the tightest rental market in Australia, with demand outstripping available supply. CoreLogic also highlights Canberra as having the second-strongest market conditions overall, after Hobart.

www.brokernews.com.au

27

DATA

SOUTH AUSTRALIA

SA Country

H

$265,000

0.8%

-1.9%

Adelaide

U

$335,000

-0.6%

-0.9%

SA Country

U

$202,500

1.8%

-3.2%

VICTORIA

MEDIAN HOUSE AND UNIT PRICES

Melbourne continues to slide

$1,000,000

Area

Type Median value

Quarterly

12-month

growth

growth

Melbourne

H

$710,000

-1.0%

3.9%

VIC Country

H

$355,000

1.4%

6.9%

Melbourne

U

$533,000

0.0%

2.9%

VIC Country

U

$265,000

-1.9%

-1.1%

28

www.brokernews.com.au

Clearance rate

52.5%

PERTH Total auctions

36

Sold

6

Not sold

8

Clearance rate

42.9%

Houses

$900,000

Units

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

$490,000

$600,000

$630,000

$700,000

$637,000

$800,000

$760,000

CoreLogic expects the nationwide pattern of property market decline to continue throughout 2019, and Melbourne is leading the charge alongside Sydney. While it ended 2018 on a stronger note than its counterpart, Melbourne is still seeing falling dwelling values, influenced by the lack of foreign investment and heightened restrictions on financing.

“The ramp-up in housing supply has been more pronounced in these markets against a backdrop of slowing demand,” explains CoreLogic research analyst Cameron Kusher. “Additionally, housing affordability constraints are more pronounced in these markets and rental yields are substantially lower, indicating an imbalance between rental values and dwelling values.”

As a result, leverage has shifted from sellers, who were better able to dictate prices in the past, to buyers, who are now able to negotiate, given the larger pool of choices available to them. On the bright side, the regional market is absorbing much of the demand seeping out of Melbourne into more affordable areas.

19

Sydney Melbourne Brisbane Adelaide

Perth

Hobart

Darwin

$399,725

1.7%

Not sold

$615,000

1.0%

21

$510,000

$455,000

Sold

$350,500

growth

H

76

$420,000

growth

Adelaide

Total auctions

$380,000

12-month

ADELAIDE

$472,900

Quarterly

$310,500

Type Median value

Auction activity is continuing to ramp up after the seasonal slowdown, with 929 capital city homes taken to auction during the week ending 10 February, a marked increase on the previous week when 536 auctions were held. This activity returned a preliminary auction clearance rate of 54.1%. Although clearance rates and auction activity remain low, the early flow of auction data for 2019 is showing a subtle bounce-back in the clearance rate relative to the lows recorded through December – a seasonal trend similar to that seen over previous years. Volumes and clearance rates are significantly lower than one year ago when 1,470 capital city homes went to auction and 63.7% were sold.

Looking at results across the capitals, volumes were higher over the week across all auction markets, with the exception of Adelaide.

Melbourne was the busiest auction market in terms of volume, with 352 auctions returning a preliminary auction clearance rate of 53.7%. This is quite a bit lower than 2018, when 70.7% of 619 homes were sold over the same week. There were 321 Sydney homes auctioned this week, returning a preliminary clearance rate of 59.2%.

$445,000

Area

WEEK ENDING 10 FEBRUARY 2019

$370,000

With its remarkable affordability and rising economy, things may be coming up roses for Adelaide. “It is a very popular location for investors.

You can buy a small cottage that’s very well located for well under $750,000. This affordability element makes this a popular destination,” says REA Group chief economist Nerida Conisbee.

“The affordability makes it attractive for people who want to start new businesses. The city is picking up some major defence projects, and this, along with the rise of the submarine manufacturing sector, has helped to pull up the economy following the downswing of car manufacturing.”

In addition to these economic boosters, Herron Todd White’s Month in Review report for December 2018 highlights ongoing efforts to improve infrastructure. Some road projects due for completion shortly are the South Road Torrens to Torrens and the Darlington Upgrade. Other works are in progress to further improve road links across Greater Adelaide.

CAPITAL CITY AUCTION CLEARANCE RATES

$515,000

New economic drivers attract fresh demand

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Weekly change

Monthly change

Year-to-date change

12-month change

Sydney

-0.2%

-1.1%

-1.7%

-9.9%

Melbourne

-0.3%

-1.4%

-2.0%

-8.7%

Brisbane

0.0%

-0.2%

-0.3%

-0.1%

Adelaide

0.0%

-0.2%

-0.3%

1.1%

Perth

-0.4%

-1.1%

-1.6%

-6.1%

-0.2%

-1.0%

-1.5%

-7.5%

Combined 5 capitals

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

BRISBANE CANBERRA Total auctions

46

Sold

18

Not sold

14

Clearance rate

Total auctions

91

Sold

23

Not sold

31

Clearance rate

42.6%

56.3%

SYDNEY Total auctions

321

Sold

126

Not sold

87

Clearance rate

59.2%

TASMANIA

MELBOURNE Total auctions

352

Total auctions

7

Sold

145

Sold

2

Not sold

125

Not sold

2

Clearance rate

Clearance rate

53.7%

TASMANIA

Area

Hobart shines but housing affordability suffers Hobart currently boasts the strongest market conditions in the country.

“Conditions across the Australian market are increasingly diverse, but Hobart and regional Tasmania continue to be the standouts for capital gain, with values up 1.7% across both regions over the past three months to November 2018,” says CoreLogic head of research Tim Lawless.

In fact, CoreLogic data indicates that Hobart’s property prices rose by nearly 10% overall in the year to November. Some pockets of regional Tas saw doubledigit growth in that period. Certainly a big contributor to this upward trajectory is the University of Tasmania (UTAS) campus development in Inveresk.

“It is the single-largest infrastructure project in Launceston’s history,” says Henry Fields, property research and acquisitions coordinator at Research Property Real Estate.

N/A

Type

Median value

Quarterly growth

12-month growth

Hobart

H

$440,250

1.6%

12.7%

TAS Country

H

$295,000

1.7%

8.9%

Hobart

U

$350,250

3.0%

11.3%

TAS Country

U

$232,500

-0.6%

-2.5%

All data sourced from CoreLogic.com.au

www.brokernews.com.au

29

FE AT URES

OPINION

SOLVING THE SME CREDIT SQUEEZE The late payment of invoices is stifling SMEs, and with the banks retreating from business lending, enterprises must look elsewhere to make ends meet. Greg Charlwood, MD of Australian Invoice Finance, presents an alternative solution

businesses are battling a credit crunch, and they are pointing the finger at the royal commission into financial services for causing the big four banks to further pull back on lending.

In a report released in September 2018, the RBA said the proportion of small businesses that perceived it to be relatively easy to access finance was already in decline. The RBA also noted that many small businesses found it challenging to access finance, particularly without providing real estate as security.

On the other side of the coin, traditional lenders say they are keen to lend to small businesses, but unsecured finance exposes them to a higher degree of risk.

APRA has been gradually tightening loan serviceability rules over recent years, forcing banks to apply tougher tests of borrowers’ income and expenses. Under the Basel III rules that were introduced in the wake of the 2008 GFC, banks were required to hold more capital against small business loans, which made the provision of that credit more expensive and therefore costlier for the borrower.

More recently, banks also began to apply stricter checks on loan applications, delaying the time it took for loans to be approved.

Combined, the extra cost and time associated with bank credit means that the banking sector is now unable to adequately meet the credit demands of more than two million Australian small businesses.

for growth and even threatens to put some small businesses out of operation.

It is so bad that the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, initiated a review of payment times. She did so after

SMALL

Small business borrowing against invoices Working capital is the lifeblood of small business, but in Australia late payment of invoices is the number one problem.

It reduces cash flow, restricts opportunity 30

www.brokernews.com.au

The essential difference between invoice factoring and invoice financing lies in who collects the accounts receivables. With factoring, the lender runs the accounts receivables and takes over chasing payment from the buyers. Under an invoice discounting arrangement, the seller is responsible for chasing payment of outstanding invoices.

Most invoice lenders will lend up to 80% of unpaid invoices, whereas Australian Invoice Finance will lend up to 85% of unpaid business invoices and offer fast, same-day approval.

Government and political support for small business The government has belatedly proposed other changes that, if introduced, could also help provide small businesses with better access to credit.

The government’s 2017 review into open banking aimed to promote greater competition within the banking system.

Key recommendations included facilitation of an economy-wide,

An inquiry found that Australian late payment times were among the worst in the world, with invoices paid on average 26.4 days late

Greg Charlwood MD of Australian Invoice Finance

an inquiry found that Australian late payment times were among the worst in the world, with invoices paid on average 26.4 days late. The inquiry also identified a growing trend for large Australian and multinational companies to delay and extend payments from 30 days to 45, 60, 90 or even 120 days.

Carnell recently issued a report with 10 key recommendations, including that the Australian government should legislate to set minimum repayment times for larger businesses.

The Liberal/National Coalition responded by announcing it would require all government entities to make payments within 20 calendar days. While this will help suppliers to government departments, there is an alternative solution for the companies that sell their goods and services primarily to the private sector.

Invoice factoring and invoice financing are both alternative finance sources that can release the funds tied up in a business’s unpaid invoices, involving a lender who agrees to advance money against outstanding debtor balances.

consumer-directed data transfer system, and further that the rules around open banking should include standards for transfer of data and security.

Mandatory comprehensive credit reporting (CCR) will come into full effect on 1 July 2019 and will be vital to the development of the small business credit market, enabling lenders to access both positive and negative credit reports.

In October 2018 Prime Minister Scott Morrison called for reform to boost small business, and proposed initiatives such as the $2bn Australian business securitisation fund to provide additional funding to small business lenders, as well as simplifying tax dispute resolution with the ATO. Australian Invoice Finance welcomes these changes but understands that they will take time to be introduced to Parliament, if in fact the Liberal Coalition is able to remain in power.

In the meantime, small businesses have other non-bank options to explore and, through their brokers, should be guided on how to tap these. AB

www.brokernews.com.au

31

PEOPLE

CAUGHT ON CAMERA ALI Group’s 15-year anniversary celebrations continued through to year-end with celebrations in Adelaide and Perth. Taking place in November 2018, they were attended by management, employees and more than 130 brokers.

High-achieving brokers were recognised for their work by group CEO Huy Truong. They included Leah Busby, Belinda Sugars, Gary Page, Grant Hocknell, Scott Bament, Maxine Farmer, Martin Ireland, Lihong Shi, Jamie Nani, David Foot and Russell Crook. The celebrations also welcomed guest speakers Kerry Reinhold from the Live in the Now Foundation, and Melissa Del Poppolo from Breast Cancer Care WA.

32

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33

PEOPLE

Aggregator nMB

IN THE HOTSEAT Headhunted from a part-time job while at university, uno Home Loans adviser Tian Liu explains how a chance encounter put him on the path to his dream career

Who or what inspired you to become a broker?

My first job was as a casual sales assistant at Dick A Smith Powerhouse while I was studying engineering at university. One of my regular customers said he had been very happy with my services and thought I would be good at mortgage broking. He was establishing a new mortgage broking company and approached me to join.

I had always had a passion for finance, so I took the offer without any hesitation. I bought my first home not long after that and I remember thinking to myself, “What a feeling!”

I have been in this industry now for 12 years and I know I am in the right job. I have the ability to help people get that same amazing feeling of owning their own place, and I have done this many times in my career to date.

Q

What’s the greatest challenge for brokers at this time?

There are so many changes happening in our industry, from A a risk and compliance perspective to a tightening of lender policies, changing processes and the royal commission. A broker must be on their toes and extremely thorough in everything they do. Creating strong relationships with colleagues, lender BDMs and your customers is key to surviving in this market.

Q

If you won $1m, what would you do with it?

I would split it three ways. Firstly, I would set my parents up A so they could really enjoy their retirement. They have worked very hard all their lives, and to see them enjoy their later years would give me peace of mind. Secondly, I would like to repay my mortgage, and thirdly, I would start a business with my partner using both of our strengths in IT and finance to pave the way to a successful future, discovering how we can best serve the community by combining what we love to do.

Q

What are your top survival tips for working in finance?

I have three top tips for working in finance: don’t ever stop A learning, as lending is an ever-evolving industry; build a strong network of contacts across a broad range of industries; and maintain lifelong relationships with your customers. AB

Q

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