Australian Broker 16.20 by Key Media

OCTOBER 2019 ISSUE 16.20

Primed to lead How and why prime loans are now outperforming near prime /16

The power of knowledge The story behind Westpac’s new Broker Academy /18

JAMIE OSBORN The CEO of GetCapital reveals the details behind Australia’s first bank-free overdraft facility /14

The solutions architect Game-changing product innovations are coming for SMEs /20

ALSO IN THIS ISSUE… A big deal Michelle Towner on broking the deal for a bespoke home /22 Housing market data The latest insight from Australia’s top market /26 In the hot seat Banker turned BDM Zoran Petkovski on his latest role /30

NEWS

IN THIS SECTION

Lenders Performance paves the way for branch expansion /04

Aggregators Aggregation group warns on best interests influence /06

Technology Bricklet heralds the dawn of fragmented ownership /10 p

Regulators APRA reveals new executive line-up /12

Market Generational gap in property sentiment /08

www.brokernews.com.au OCTOBER 2O19 EDITORIAL Editor Melanie Mingas News Editor Madison Utley Production Editor Clare Alexander

DATES TO WATCH

Upcoming can’t-miss events

Contributor Mariam Gabaji

ART & PRODUCTION

24 OCTOBER

29 OCTOBER

Regional property investment

A different kind of broking

The MFAA is running an online session, titled ‘Growth in Regional Areas for Property Investors’, designed to inspire investors to buy beyond their backyard. Local start times are 11am for WA, 12.30pm for NT, 1pm for Queensland and 1.30pm for SA. NSW, ACT, Victoria and Tasmaniabased brokers should log on at 2pm.

If diversification has inspired you to look into stockbroking, this event will arm you with the necessary know-how. Delivered by the Stockbrokers and Financial Advisers Association, topics will cover the basic jargon, a rundown of how markets work, and tax and regulatory requirements.

2 8 – 3 0 O C T O B E R    AFG National Broker Conference This is the first annual conference for AFG’s broker network since the aggregator announced its merger with Connective. The 2019 edition is themed ‘AFG Next’ and will cover three focus areas: evolve, excel and experience. The agenda includes thought leadership sessions, education, professional development and networking.

Designer Martin Cosme Production Manager Alicia Chin Traffic Coordinator Freya Demegilio

SALES & MARKETING Sales Manager Simon Kerslake Global Head of Communications Lisa Narroway

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

EDITORIAL ENQUIRIES

Madison Utley +61 2 8437 4700 madison.utley@keymedia.com

SUBSCRIPTION ENQUIRIES

30 OCTOBER

8 NOVEMBER

10 – 12 NOVEMBER

MPA Non-Banks Roundtable Live Stream

FBAA Gold Coast conference

COBA 2019: Stronger Together

For the second time in October, MPA editor Rebecca Pike will host a live lender roundtable, this time with a panel of non-banks. Starting at 12.30pm, the discussion will cover trends and opportunities in the non-bank space and can be accessed via www.mpamagazine.com.au/tv.

Returning slightly earlier in 2019, the FBAA’s annual Gold Coast conference will once again take over the Sea World resort. This year’s theme is ‘Challenge the Future’, and the association is due to reveal details of speakers and special guests over the coming weeks.

The Customer Owned Banking Association’s 2019 convention will take place over three days on the Gold Coast. Sessions will cover the future of the banking sector and the opportunities for customerowned institutions; the speaker line-up features APRA chairman Wayne Byres.

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14 – 28 NOVEMBER

27 – 28

NOVEMBER

5 DECEMBER

CAFBA end-of-year events

National PD Convention

Ethics for Financial Services

Following on from its recent AGM, CAFBA starts its roadshow of end-of-year networking functions on 14 November at WA’s Mosman Park Bowling Club. This gathering will be followed by similar events in Queensland (20 November), Victoria (21 November) and NSW (28 November).

This invitation-only event for FAST brokers and their staff returns to Sydney in November, this time tackling business diversification and growth opportunities; updates on the industry, economy and FAST itself; and information on enhanced business practices, latest market trends and high-performing behaviours.

Melbourne-based Deakin Business School is offering an intensive three-day course in Ethics for Financial Services. Combined with “comprehensive” online learning materials, the course is designed to provide both theoretical and practical knowledge to fulfil new FASEA requirements.

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This magazine is printed on paper produced from 1OO% sustainable forestry, grown and managed specifically for the paper pulp industry Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss. Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008. The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.

NEWS

LENDERS LIMBA CUTS SME LOAN COSTS BY 25%

RATE CUT UPDATE Non-major rate reductions following the RBA’s October meeting

has repriced its SME loan portfolio for the first time in three years following “an influx of investment”, cutting interest rates by 25% for new business loans. Limba, part of City Finance group, offers secured and unsecured loans between $5,000 and $100,000 for terms of up to 24 months. “We pride ourselves on our simple application process and transparency,” said Olly Guilleaume, Limba’s national manager of business lending. LIMBA LOANS

Heritage Bank

“The last three rate cuts have totalled 75 basis points. The banks have passed on 57 basis points of that”

Joshua Frydenberg Treasurer

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.25% reduction for owneroccupiers and investors on IO

.20% reduction on variablerate IO repayments

.25% reduction on credit cards

.10% reduction in variable rates for P&I

.15% reduction on variablerate P&I repayments

Effective 25 October

Lowest home loan: 3.07%

Bendigo Bank .15% across all variable home loans

P&N Bank .16% reduction across portfolio, with some rates reduced .25% Effective 15 October

Lowest home loan: 2.99% comparison on fixed home loans

Lowest home loan: 2.99% on one-year introductory rate

MyState Bank

ME Bank

Effective 14 October

.15% reduction across all variable-rate home loans Lowest home loan: 2.89% for new two-year fixed owner-occupied P&I loans

Effective 24 October

Heritage Bank’s results demonstrate strength in customerowned sector, despite increased cost of regulation the last financial year, Heritage Bank’s loan approvals increased 8.3% year-onyear, while its loan book grew by 109.8%. According to CEO Peter Lock, the results consolidated the bank’s position as “Australia’s largest customer-owned bank”. As a result, Heritage Bank will open two new branches in Sydney before the end of the year. Brokers originated $920m in loans over the period, up from $767.9m the previous year. That’s equivalent to 52% of the home loan book, a 5% year-on-year gain. Customer numbers grew by 1.8%, and Heritage ended the financial year with total assets of $10.1bn, up 5.9% on the previous year.

AMP Bank

.15% reduction in rates for all new and existing variable-rate home loan customers

FINANCIAL PERFORMANCE PAVES THE WAY FOR BRANCH EXPANSION

Effective 25 October Lowest home loan: 2.99%

Effective 15 October

.15% reduction across all new variable-rate home loans

Virgin Money

.15% reduction on all variable-rate personal loans

Effective 15 October

BLUESTONE OWNERS MAKE SME MOVE affiliate of Bluestone’s parent company, Cerberus Capital Management, has acquired SME lender Axsesstoday, which entered voluntary administration in April. The move saved 50 jobs and will protect access to finance for the lender’s 10,000 SME clients. “With Cerberus’ support, we will have access to resources and expertise to strengthen our robust platform, elevate our portfolio of financing solutions and capitalise on growth opportunities,” said Axsesstoday CEO Konrad Pels.

Bank of Queensland

Despite the gains, Heritage Bank chairman Kerry Betros said market conditions over 2019 saw customerowned banks “penalised for the misdeeds of the big banks”. “A clear finding from the royal commission was that much of the poor behaviour identified at the big banks occurred because of greed, with profit and personal gain taking priority over the best interests of customers,” he said. “We don’t have the conflict of trying to serve two masters – shareholders and customers. Everything we do is in our customers’ interests. The danger now is that the customer-owned sector will be penalised for the misdeeds of the big banks, because

the royal commission will result in us facing greater regulation.” However, market conditions won’t stop Heritage building on recent momentum. Betros confirmed that the first of two new branches will open in Sydney’s Castle Hill late this month, followed by a second in Parramatta by mid-December. The 144-yearold customer-owned bank currently has a network of 60 branches and three mini-branches. The new branches will be the first – and second – outside of its native Queensland. “We remain absolutely committed to maintaining and expanding the reach of our branch network, which is very different to the big banks, who are closing down branches,” Betros said. “Online and mobile capabilities are fantastic and play a central role in our approach to transactions, but it’s the interaction that our customers have with our staff that’s at the heart of our service offering.”

NEWS

A G G R E G AT O R S PLAN ADDS PEER-TOPEER LENDER TO PANEL has welcomed peer-to-peer lender Ratesetter to its panel. The group, which has 1,700 brokers, now lists more than 40 residential lenders, 20 commercial lenders and 11 asset finance providers. Ratesetter has been added to more than 10 aggregation panels. Its recent promotions have included a reduction in auto finance, with rates now starting at 4.69%, and a broker client cashback offer, which rewards clients with a $150 GiftPay card. PLAN

AUSSIE BOSS AIRS CONCERNS

AGGREGATION GROUP WARNS ON BEST INTERESTS INFLUENCE From a convergence in broker businesses to a focus on time-saving tech, Loan Market boss highlights potential effects of the new regulation introduction of a best interests duty for mortgage brokers might not require the industry to “change its DNA”, but it could reshape the roles of brokers and aggregators, according to Loan Market Group executive chairman Sam White. “Unfortunately, with a best interests duty, professional indemnity costs will be increased. So, to maintain the same remuneration, brokers will need to see more customers,” he said. “Technology, systems and platforms will become incredibly important to running any broker business. Throughout all industries, the reality is that THE

everyone needs to become more productive. The only way to do that is to get more leverage out of your tech to save time.” The trends will likely reshape the landscape for brokers, making it more financially viable to find a business partner to share costs with rather than going it alone. “My view is that in the coming years, we will see fewer brokers but bigger broker businesses,” White said. “Being a broker can be lonely, so I think brokers will be looking to join other brokers rather than start their own business. The importance of broker communities has never been more important.

We all need spaces to share ideas with like-minded individuals.” Consequently, as brokers themselves adapt to the new industry landscape, White believes the role of the aggregator will need to adjust as well. “The role of the aggregator is changing; we recognise that. In the new environment, brokers will be looking to join businesses with training, mentorship, a physical premise,” he said. White expects the increased pressure placed on brokers by the best interests duty to be counterbalanced by a growth in market share that will naturally arise from the legislation. He believes it’s inevitable that customers will increasingly turn to brokers who are legally obligated to work in their best interest over bankers prioritising what’s best for their own institution. “The question will not be, ‘Should I use a broker?’, but rather, ‘Which broker?’” he said.

Fast money. Short term. $100k - $10million. Real Estate backed lending.

Treasurer Josh Frydenberg’s comments that “hard-working families” are being negatively impacted by stricter responsible lending rules, Aussie CEO James Symond has voiced concern about low listings and construction activity at a time of historically low interest rates. “We are concerned about customers being knocked back on home loan applications due to stringent interpretations of rules by APRA and ASIC,” he said. FOLLOWING

“Brokers are in an important position when it comes to their clients. The younger generations are not likely to seek advice from a financial planner” Huy Truong CEO, ALI Group

R R AT E S F R O M 8 .9 9 % PA R 2 DAY S E T T L EMEN T R U P T O 12 M O N T H T ER MS R B R O K ER ’ S C O MMIS SI O N PA ID AT S E T T L EMEN T

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NEWS

MARKET OWNERSHIP UNEASE AROUND RATE HIKES per cent of Australians believe they will be at least 30 years old before leaving home, up from 20% in 2017, according to CoreLogic’s 2019 Perceptions of Housing Affordability report. Additionally, 83% of non-property owners are worried about affording their first or next home: 48% said they’d struggle to meet mortgage repayments if interest rates rose two percentage points, and 25% said they’d be in trouble if the rate went up just one percentage point. THIRTY-FOUR

SATISFACTION UP AT CUSTOMER-OWNED BANKS per cent of those who bank at customerowned institutions are satisfied with the experience, according to new research from Roy Morgan. Over the past 12 months, the sector’s housing loans have increased by 7.8%, compared to just 2.6% for the major banks. “The customer is at the heart of every decision for our sector, which is a key reason why we continue to score so well on customer satisfaction,” said Michael Lawrence, CEO of COBA. NINETY

“With macroprudential policies eased further during recent months, it wouldn’t be a surprise to see a moderate increase in demand for non-standard and higher LVR mortgages” Cameron Kusher Analyst, CoreLogic

GENERATIONAL GAP IN PROPERTY SENTIMENT As FHBs increasingly look for help with deposits, the changing approach to home ownership prompts new flexible LMI product millennial approach to property ownership has caused such a shift in buyer sentiment that it led Genworth to develop a new monthly premium LMI product. The Genworth First Home Buyer Sentiment Report, conducted in June and July across 2,000 prospective FHBs and 1,000 recent FHBs, showed that rather than pursuing the traditional ‘Australian dream’ of lifetime property ownership, young buyers prefer “a more pragmatic approach”. Among prospective FHBs, 32.3% said they plan to sell their first property within five years. Consequently, freestanding homes are now more popular than units among FHBs, and investment THE

properties are also becoming more prevalent across the group. One in six prospective FHBs plans to buy an investment property as their first, compared to one in 10 among recent FHBs. In order to capitalise on the opportunity seen in the current market, around 60% of prospective FHBs plan to buy now with less than a 20% deposit, compared to the 47.4% of recent FHBs who bought their first property with less than a 20% deposit. To bridge the gap, 75.1% of prospective FHBs plan to apply for the government’s First Home Loan Deposit Scheme, 27.5% expect to ask their family for assistance, and 15.8% plan to use lenders mortgage insurance (LMI). Of the

recent FHBs, around 70% reported they did not fund their deposit entirely from their own savings; the majority (56.9%) relied on family assistance, while 35.6% used LMI. “Dynamic market conditions are resulting in changing first home buyer behaviour and needs,” said Genworth CEO and MD Georgette Nicholas. To address the demand among FHBs, Genworth has unveiled a new monthly premium LMI product in addition to its upfront LMI. The new product also gives borrowers the flexibility to refinance at a later date without the need for a refund. “This provides borrowers with the option to pay LMI in instalments, which means a greater portion of their loan can be utilised to support the purchase of their first home,” Nicholas said. “As FHB needs continue to evolve, it is important that a range of stakeholders – both public and private – work together to develop solutions that complement each other.”

MORTGAGE DEMAND SHIFTS Source: CoreLogic; year-on-year figures for the quarter ending June 30

52.8% decline in low-doc approvals 36.6% decline in loans approved outside of serviceability 5-year high in mortgage growth in July

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42.2% decline in other non-standard loans

$359bn Total value of interest-only mortgages, the lowest value since September 2012

$17.9bn Total value of mortgages written during the June quarter with greater than 80% LVR

21.6% Current outstanding mortgages that are interest-only, the lowest share in over a decade

22.4% Mortgages written over the period with greater than 80% LVR

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NEWS

TECHNOLOGY

WA FINTECH GETS FUNDING BOOST fintech Fair Go Finance has received a $20m funding boost that it plans to use to aid its expansion into new markets and the development of new tech innovations. The backer, Skybound Capital, now holds a 60% majority share, purchased from Fair Go’s parent company, Frankfurt-listed MyBucks. “These funds will support quicker pursuit of new avenues of finance technology and growth opportunities,” said Fair Go CEO Paul Walshe. WA-BASED

FRAGMENTED OWNERSHIP DAWNS AS BRICKLET DEBUTS New blockchain solution allows investors to buy into real estate “very quickly and easily”, with two Adelaide apartments the first to be fragmented blockchain-powered solution developed by Lakeba Group is promising to “revolutionise the property investment sector” by dividing land titles into small, affordable pieces. Bricklet fragments property deeds into individual units known as bricklets, making them available for purchase through an online market. “As a purchase is made, the fragment of that property deed will be transferred from vendor to owner, who will be listed directly on the property deed,” explained Lakeba CEO Giuseppe Porcelli. Lower-priced bricklets can be purchased by individuals who are unable to afford entire properties. A NEW

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Additionally, bricklets can be traded in the same way whole property titles are bought and sold, incurring only pro rata costs. According to Darren Younger, head of commercialisation at Bricklet, the platform allows investors to buy into real estate “very quickly and easily” and also makes portfolio diversification more attainable for property investors. Two apartments in a recently completed residential property in Adelaide, Kodo on Angas Street, will be the world’s first properties to be fragmented in this way. According to Bricklet, “the test will confirm that bricklets create greater liquidity in the property

sector, with demand for the first 40 bricklets already oversubscribed.” David Ridgway, minister for trade, tourism and investment in South Australia, said Lakeba’s choice of launch location was “a great win” for the state. “It’s exciting to see a company like Lakeba utilise blockchain to set up what could possibly be a globally significant service,” Ridgway said. “Australians will potentially be able to become investors in property for as little as $25,000 – directly holding the fragment of the property deed rather than investing in a trust, financial product or other intermediary platform.” Lakeba expects to formally launch Bricklet to market in the coming weeks and plans to have “at least four more states” on board by year-end. A national rollout is scheduled for June or July of next year. Lakeba and technology partner IBM then hope to work together to scale the blockchain platform globally.

LA TROBE FINANCIAL ROLLS OUT NEW TECH TOOL Financial brokers can now place valuation orders directly with CoreLogic PropertyHub 2.0, which the lender said will enable “greater transparency, efficiency and faster approval times”. Brokers will receive centralised access to valuation ordering and tracking for multiple lenders, eliminating the need to log in to different systems and creating a streamlined management system for valuations. The first 100 brokers who order a valuation through the platform will be entered into a prize draw. LA TROBE

NEWS

R E G U L AT O R S

FLOOR RATE SHIFTS CONTINUE lenders of all sizes reduced their floor rates in response to new regulation, Westpac has made a second adjustment, decreasing from 5.75% to 5.35%. The change will also be applied to Westpac subsidiaries St. George, BankSA and Bank of Melbourne. ANZ and NAB have each amended their floor rates to 5.5%, and smaller lenders have followed suit, updating their rates to either 5.5% or 5.75%. The exceptions were ME Bank, which dropped to 5.25%, and Macquarie, which fell to 5.3%. AFTER

APRA REVEALS NEW EXECUTIVE LINE-UP New executive team supported by revised organisational structure, effective from 1 December

new executives have been appointed to senior roles within APRA, the first step to changing how the organisation is structured. The regulator has made five new appointments as it shifts to an “industry-based supervision model” with separate supervisory divisions for superannuation, insurance and banking. Under the new structure, each of APRA’s six operating divisions will be led by an executive director. Therese McCarthy-Hockey has been appointed as executive director of banking and will be joined by Brandon Khoo in insurance and Suzanne Smith in superannuation. McCarthy-Hockey was appointed SEVERAL

ACCC RENEWS CALLS FOR INQUIRY ACCC is set to push ahead with its own inquiry into the banking sector, according to meeting notes obtained by the national press. However, unlike the royal commission, the ACCC’s work would also bring start-ups, fintechs and neo-banks into the spotlight. COBA has backed the ACCC’s calls. “The financial services royal commission looked into misconduct; now is the time to look into competition,” said COBA CEO Michael Lawrence. THE

to APRA in December 2017 in the then newly created role of executive GM of strategy and chief risk officer. Prior to that, she worked for Deutsche Bank London and Deutsche Bank AG Sydney and has also spent time working for Macquarie Bank. Meanwhile, Steve Matthews has been appointed CEO and executive director of enterprise services, and Sean Carmody has been named executive director of cross-industry insights and data. Heidi Richards will act in the role of executive director of policy and advice, pending a permanent appointment to that role. As announced on 3 October by chair Wayne Byres, the changes will help APRA maintain its focus on

“protecting the financial wellbeing of the Australian community”, while sharpening its focus and bolstering its capabilities in supervising new and emerging risks. “These organisational changes are designed to help us to deliver on our strategy and, in particular, on the four key community outcomes we have identified as critical for APRA to deliver for the Australian community: financial system resilience, superannuation member outcomes, enhanced GCRA across the regulated sector and cyber resilience,” Byres said. In addition to the appointments, APRA has established a new Accountability Regime unit dedicated to delivering on the government’s planned extension of the Banking Executive Accountability Regime (BEAR) across all industries regulated by APRA. Further appointments to the new structure will be announced in due course. The changes will formally take effect from 1 December.

AT A GLANCE: APRA’S LOAN BOOK REPORTING Source: APRA

Major owner-occupier loans for August 2019 ANZ

Major investor loans for August 2019 CBA

NAB

Westpac

$350bn

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June

August

June

July

August

$185bn

$114bn

$156bn

$87bn

$186bn

$114bn

$155.5bn

$88bn

$153.5bn

$104.5bn

$134bn

$227bn

$148bn

$285bn $159.4bn

$227bn

$280.5bn July

$77.5bn

$147.5bn

$50bn

$159.5bn

$150bn $100bn

$177bn

$200bn

$156bn

$250bn

$266bn

$302bn

$300bn

INDUSTRY UPDATE

ONDECK’S ENLARGED BD TEAM IS BETTER EQUIPPING BROKERS TO EXPAND INTO COMMERCIAL LENDING

Joshua Edmondston, Business Developer, OnDeck Australia

small business loan specialist OnDeck has reported 70% year-on-year volume growth in its broker channel lending following a restructure of its sales team that has seen a tripling of its broker Business Development team and, more recently, the appointment of a new National Broker Channel Manager. Mr Michael Burke, Head of Sales at OnDeck, said, “The broker market is a significant pillar of support for Australian SMEs, and we expect our brokergenerated lending to continue to outpace our other channels well into the future.” OnDeck has sourced its new Business Developers (BDs) from the ranks of its most experienced sales team. Mr Joshua Edmondston, Business Developer for NSW and ACT, said, “Our approach to LEADING

recruitment, and the experience each BD brings to the role, gives brokers confidence that we know our products and processes thoroughly, and are skilled at solving SME challenges.” “Brokers are now more prepared than ever to look beyond the traditional home loan market. Commercial loans don’t just add a revenue stream, they also allow brokers to deepen the client relationship and act as broader provider to their customer base,” added Mr Burke. OnDeck offers a range of resources to support brokers who are expanding into commercial lending, including helping them to identify opportunities within their existing databases. This includes the option to leverage co-branded or whitelabel marketing collateral. Key support, however, is provided by BDs.

Michael Burke, Head of Sales, OnDeck Australia

“We might be an online lender, but for us, that’s never at the expense of customer service or broker contact. We encourage brokers to partner with their OnDeck BD,” said Mr Edmondston. “OnDeck is about long-term relationships with our broker partners. The growth of our broker channel, coupled with our success with repeat enquiries, is testimony to the high level of support we offer brokers. “We really act as an extension to the broker’s team. Reflecting this, we always triage broker enquiries upfront so that their customer won’t have an unnecessary credit enquiry recorded on their credit file, and to save the broker valuable time,” added Mr Edmondston. Broker case studies “I have recommended OnDeck

products to a variety of my SME clients. Their speed of delivery is remarkable, and the pace at which OnDeck assesses applications and provides access to capital shows that they understand the needs of small business,” said Mark Redgewell of Loans Warehouse Australia. “For me as a broker, exploring a new market was confronting – and I wasn’t sure initially that I had the time to get up to speed with what was involved in commercial deals. OnDeck streamlined the process, providing outstanding support through my single dedicated business developer and workshopping the details with me. It has given me the confidence to add this revenue stream to my business, and I haven’t looked back,” added Carmen Gomez from Mortgage Achievers.

FE AT URES

SPECIAL REPORT

BUSINESS BANKING FOR THE MODERN AGE

A new bankless overdraft is about to shake up the SME funding market – while paying an effective trail commission to the arranging broker. GetCapital CEO Jamie Osborn shares the details

GETCAPITAL BY THE NUMBERS

270%

Growth in the GetCapital business over the last three years

Products in the suite, covering 70% to 80% of any SME financing needs

Aggregator lending panels that feature GetCapital products

Number of GetCapital BDMs and broker account managers across the country

$500,000

GetCapital Business Overdraft limit, at 14.95% to 24.93%

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ease, simplicity and familiarity, few financial products beat the overdraft. The UK’s Royal Bank of Scotland takes the credit for creating the first overdraft in the 1720s, when it crafted a facility at the request of merchant William Hog, who was experiencing cash flow issues in an otherwise strong business. Not only did the solution address Hog’s ongoing cash flow headache, but RBS had a new revenue stream that would soon become a globally recognised financial product. Fast forward to today: the Australian Banking Association lists the overdraft as the second most popular lending product for businesses after the credit card. However, as endeared as borrowers are to the humble overdraft, its connection to a transaction account has traditionally limited the choice of provider. “The nice thing about an overdraft is that everybody knows what it is,” says GetCapital CEO Jamie Osborn. “The biggest innovation in the last couple of decades has been the launch of non-bank products like debtor finance and instalment loans that try to mimic an overdraft – but they don’t quite get there because the lender wants to control risk by limiting the use cases and the customer’s control of the account. We have tried to leapfrog away from that to deliver exactly what the customer wants, which is a true revolving facility.” As the comparison sites confirm, the GetCapital Business Overdraft isn’t the first commercial overdraft FOR

to launch in the Australian market, and it won’t be the last. However, there is one big difference. “Ours is a pretty traditional overdraft product in that it is fully revolving. A customer can draw and repay as they see fit, but the one key difference is the customer can choose whatever bank transaction account they want to attach it to, which I think has great appeal,” Osborn explains. It’s even possible for a GetCapital Business Overdraft customer to

the strategy than meets the eye. “We wanted products and a service offering that play to that mainstream SME market at a price point that resonates with them, too,” Osborn says. “Business owners want a fast and efficient application process, a credit decision based on the strength of their business rather than the size of their family home, lending products that fit their specific requirements, and a high level of service. In the last 12 to

“With open banking, there is this fantastic opportunity to unshackle from your transaction banking provider and access other financial services” Jamie Osborn, CEO, GetCapital attach multiple bank accounts to the facility to provide even greater flexibility, which is only possible due to the advent of open banking and the completion of key legislation earlier this year. As Osborn explains, this is the real game-changer. “With open banking, there is this fantastic opportunity to unshackle from your transaction banking provider and access other financial services. That’s what our overdraft does,” he says. That an alternative lender is innovating a traditionally mainstream product in such a disruptive way is no surprise in the current climate. But there’s more to

18 months, in fulfilling those objectives, we have focused on technology, product innovation and bringing a high-quality service offering to market.” Soft-launched in April, the GetCapital Business Overdraft officially entered the market on 2 September, and Osborn reports that early feedback from both brokers and customers has been strong. In fact, the overdraft is now GetCapital’s core proposition, promoted in the market by a team of BDMs and offered through all accredited brokers. For brokers who aren’t yet accredited, the process can be completed within 24 hours.

In partnership with

Jamie Osborn, CEO, GetCapital

Non-resi trail Given the low levels of product literacy and awareness among SME owners, attaching a transaction account at one bank to a revolving overdraft facility with an alternative lender sounds like a complicated deal – but it doesn’t have to be. First, there aren’t any specific scenarios the product addresses. The reality is, almost any business with a working capital cycle can use an overdraft to bridge a working capital gap. Now there’s simply more competition and choice in who provides that facility. “We talk about scenarios for our instalment loan and trade finance product, but for the overdraft, we have moved away from that. It has

incredibly broad appeal across the vast majority of the SME market,” Osborn says. That isn’t to say the facility is without requirements; SMEs that apply must have been trading for three years and be able to demonstrate growth. “If you compare the overdraft to debtor finance or an instalment loan offering, this is more flexible. You draw down on it when you want, you don’t pay any line fees on the facility, you only pay interest on what you have used, and you can pay it back whenever you want,” Osborn explains. For brokers, the benefits continue – just as the overdraft is ongoing, so too is the commission, essentially

providing a trail income for a nonresi loan. “This is a great opportunity for brokers to build real equity in their business by having that consistency of revenue stream coming in year in, year out,” Osborn says. Brokers receive an upfront commission on the first draw-down, followed by a monthly service payment based on the outstanding balance on the facility. “Brokers can now generate a really good revenue steam over the life of their customer. The really good brokers, the ones who can build a book of business and build the revenue stream on their key commercial accounts, are finding this really powerful,” Osborn says.

The start of things to come Open banking puts customers in the driving seat, changing everything about the finance industry’s traditional power dynamic. As Osborn explains, the GetCapital Business Overdraft is the first generation of that change, launching at a time before open banking is even fully live in the commercial space. “On the commercial side, there is very, very low awareness, and I think rightly so, because commercial open banking legislation will lag the consumer side of things, but when that does get implemented, it will have significant ramifications,” he says. “It will make it a lot easier for non-bank providers to innovate, and it is going to increase choice for both customers and brokers in terms of the products offered in the market.” Osborn compares open banking to the dawn of mobile number portability in the 1990s, which exponentially opened up the telecoms sector, boosting choice and competition as a result. But the world has changed in the last 20 years, and today, choice and competition are second to speed and service – a point on which Osborn sees further change in the coming months and years. “I think, over time, one of the key things for everyone operating in this space, including ourselves and the banks, is to be conscious of the ‘Uberisation’ of the customer experience. Customer expectations have changed significantly in the last three years and will continue to do so. One of the challenges is how do we stay ahead of the curve as lenders?” It’s a big question, and one that no doubt has more than one answer, but with a high-tech and high-touch philosophy, GetCapital’s approach to intuitive and transparent service is on track to truly disrupt how businesses bank. AB www.brokernews.com.au

FE AT URES

BUSINESS TALK

PRIMED TO LEAD

increased its interest rate buffer from 2% to 2.5%.

With its prime loans now outperforming its core product suite, Pepper Money is poised to dominate a new sector of the non-bank mortgage space. Aaron Milburn, director of sales and distribution, tells Australian Broker what this means for the market

established market dynamics have been turned on their head in recent months. Interest rates are at new lows, bank accounts can be opened with a smartphone, and non-banks are outperforming established lenders. Pepper Money has become the latest non-bank lender to be ushered by the market in a direction it didn’t entirely expect. In 2012, Pepper Money stepped into the near prime space, a move it tactically executed to complement its then existing suite of non-conforming products. The following year, identifying another gap in the market, Pepper Money started to do prime mortgages differently by returning to what Australian CEO Mario Rehayem calls “old-school underwriting”. The move paid off. Although popular from the start, Pepper Money’s prime loans really gained momentum last year. In 2018, the non-bank lender originated more prime than near prime or specialist loans; prime loans made up 54% of its total loan book for the calendar year, compared to 11% for specialist loans and 35% for near prime loans. Brokers originated 95% of the prime loan book over the course of the calendar year. “Put simply, we look at borrowers through a real-life lens, rather than as a number or another application,” says Aaron Milburn, Pepper Money’s director of sales and distribution. “With the environment proving difficult for most home buyers, the increased certainty of an outcome using Pepper’s proven approach has been incredibly popular with brokers and, in turn, their customers.” While the royal commission and tightened lending criteria at the banks no doubt contributed to the MANY

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trend, it has been building for years (see the graph below). “What has happened is that traditional banks have become more risk averse, while we continue to operate under a risk-based pricing model, and it’s that consistency and

devised a new solution to address the increased demand for prime loans. In addition to its nonconforming securitisation offering (PRS), in 2017 Pepper created I-Prime, a new platform that allowed the lender to broaden its

“Put simply, we look at borrowers through a real-life lens, rather than as a number or another application” Aaron Milburn, Pepper Money certainty in our credit appetite that has helped us excel in an uncertain marketplace,” Milburn says. “So, while someone might be considered too high a risk from a traditional lender’s perspective, we are often willing to take on that risk because we’ve made the effort to really understand the individual’s circumstances. We take great care to offer the borrower a solution that is suited to their situation.” Behind the scenes, Pepper has

customer offering and provide prime loans to investors who have a greater appetite for this style of product. Earlier this month, in reaction to the RBA’s historic rate cut, Pepper adopted lower promotional rates – originally offered temporarily across several Pepper home loans – as the standard variable rate, starting at 3.12% for P&I and interest-only loans across various LVR bands. Pepper also lowered its interest rate floor from 7.25% to 5.85% and

Points of difference That a specialist lender’s prime loans are outperforming its core products is one story. However, that brokers are responsible for 95% of that business is also newsworthy. According to Milburn, not only has the trend continued year-todate in 2019, but there are several reasons for this. When an application is lodged with Pepper, it is assessed under three credit policies: prime, near prime and specialist. “That policy, combined with our faster turnaround times and the fact that we allow debt consolidation and cash out on a prime loan, meant brokers were able to get their customers the loan they needed, faster,” Milburn says. Backed with such tools as the Pepper Product Selector, this all but eliminates the heavy lifting for the broker in terms of credit policy knowledge. Brokers also received a helping hand in 2018 when Pepper launched its consumer-facing Real Life campaign, highlighting its focus on people and their individual circumstances rather than products and type of lending. “Consistency in credit is important for brokers, as it allows them to confidently recommend a particular lender to their customer, knowing they will get a suitable outcome,” Milburn says. “That’s the beauty of Pepper’s cascading credit policy – whether the customer is expecting a prime loan or not, it’s an approval nonetheless, and in today’s environment, that’s the outcome many are seeking.”

PEPPER MONEY’S PRIME LOAN BOOM Source: Pepper Money, Balu

Year-on-year growth in prime settlements 2016

2017

2018

37%

62%

88%

In partnership with

FEATURES OF PEPPER MONEY’S PRIME PRODUCT Loan term: 10 to 30 years

100% offset account available

Redraw available; minimum $50 online and $1,000 manual

Free additional lump-sum payments

Fee capitalisation up to 95% (including LMI) for purchases

Fee capitalisation up to 90% (including LMI) for refinances

Aaron Milburn, director of sales and distribution, Pepper Money

The power of alternative Over the last two years, property developers, businesses and consumers alike have turned to the non-banks in droves. In fact, in the first nine months of last year, loans and advances by non-bank financial intermediaries rose by 11.4%. It was the strongest annual growth in 11 years, and according to Milburn, it’s mostly down to brokers. “The valuable guidance an experienced and diversified broker can provide is vital and ensures borrowers get the best outcome from an array of credible and reliable lenders, like Pepper Money,” he says. “Now that brokers have experienced the Pepper difference – our turnaround times, the flexibility in our product range and the technologies we provide

to help them get their customers a solution – we’ve seen a greater willingness from brokers to keep recommending Pepper for prime.” Assuming current trends continue and non-banks keep outperforming traditional competitors on everything from product range to service, the future could see even more drastic changes for borrowers – not to mention the wider finance ecosystem. “Whilst many borrowers have likely never needed to consider an alternative lender in the past, the changing lending landscape throughout 2018 and 2019 has exposed them to other lenders in the market that offer a genuine alternative and who can help them succeed. This is all due to the efforts of mortgage brokers,” Milburn says. The majors won’t relinquish their

market share without a fight, but the ability to bring their A game to the ring is somewhat limited, and clumsy legacy IT systems are just the tip of the iceberg. For Pepper, such market factors are merely background noise. Its focus moving forward will remain on offering borrowers a diversified and flexible product suite backed by real-life decisionmaking. For brokers, the focus will be on education and empowerment. “For us, it’s really about helping a wider range of people by always looking at the bigger picture,” Milburn says. “We take their individual circumstances into account, and in many cases, we can accept situations that some traditional lenders will decline.” AB

Account splits: maximum of three splits with offset or four splits without offset

Cash out up to 90% LVR

No genuine savings required for prime alt doc; 5% required for prime full doc at less than 90% LVR

Up to four debts can be consolidated

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FE AT URES

IN THE NE WS

THE POWER OF KNOWLEDGE With the launch of its Broker Academy, Westpac has created what it’s calling “the biggest broker learning pathways resource”. Academy head Kylie Lano tells Australian Broker what it means for the industry and why it offers something for everyone

Kylie Lano, head of Westpac Broker Academy

far as investments go, brokers in the current operating environment can arguably find the greatest returns by investing in education. Enter the Westpac Broker Academy. Officially launched this month, the online portal is described as the industry’s “biggest broker learning pathways resource”. It features modules on compliance, sales, marketing and contract law negotiation, with CPD points throughout. Developed and delivered in collaboration with the Institute of Strategic Management and GO1.com, the academy also offers access to CAFBA’s Certificate IV and the new Diploma in Financial Services. Two years in the making, the initiative was spearheaded by Janelle Pearce, Westpac Group’s national AS

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head of commercial intermediaries, and Neville Anitelea, national manager of strategy, communications and marketing.

Heading the academy is Kylie Lano, an award-winning commercial broker and passionate advocate for education. In her more than 20 years in the industry, Lano has invested “thousands” in her own professional development, from a BA in teaching to qualifications in everything from executive leadership to yoga tuition. “I discovered early on that I had a real passion for people by my nature, so I started to head in a leadership direction instead of sales,” Lano says. “I’m constantly asked about leadership, mentoring and business skills, but what I am really excited about in this role is to direct people through those learning pathways and to be that shoulder-to-shoulder person as a resource for [brokers], specifically how I can help mentor them to get the most out of the academy.” Lano’s initial priority is to engage with GO1.com and Westpac’s executive team to appoint a Broker Academy Council, the inaugural group of industry participants, C-suite stakeholders and Westpac leaders who will steer the academy’s future direction and content. Aiming

for “quality, not quantity” in the appointments, Lano says the focus is on expertise. “We are looking for those innovators, thought leaders, those who have a wonderful temperature check of the industry. We will be meeting with them every quarter to make sure that what we are doing is relevant and meaningful,” she says. Lano notes that there is “a real issue” around talent retention in the industry, and as such, the academy’s courses are designed to be suitable for all brokers, regardless of age or experience. Established industry participants can develop their staff, while millennials can take advantage of clear career direction and enjoy the gamification of certain lessons. The bottom line, Lano says, is that after a year of turbulence and change, knowledge really is power. “Even the most established and experienced brokers know that to have a sustainable business, times have changed, and online education is critical. If it reduces their time attending professional development days to get CPD points, it all helps.” AB

WESTPAC BROKER ACADEMY AT A GLANCE

INTRODUCTION 15 courses Cost: Complimentary

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ISM DIPLOMA IN FINANCIAL SERVICES Access to the Diploma in Financial Services courses Cost: $1,500

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To partner with a team that is looking out for you, and help you grow your business call us today 13 80 10 or visit www.latrobefinancial.com

La Trobe Financial Services Pty Ltd ACN 006 479 527 Australian Credit Licence 392385. La Trobe Financial Asset Management Limited ACN 007 332 363 Australian Financial Services Licence 222213 Australian Credit Licence 222213. Terms, conditions, fees, charges and La Trobe Financial lending criteria apply. To view our ratings and awards please visit our Awards and Ratings page on our website. This publication is for accredited broker use only and is not for distribution to consumers. Copyright 2019 La Trobe Financial Services Pty Ltd ACN 006 479 527. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial. www.brokernews.com.au

FE AT URES

BUSINESS TALK

THE SOLUTIONS ARCHITECT

Sensing trouble on the horizon in the business credit space, Fifo Capital CEO Wayne Morris is heading a series of product innovations that will support Australia’s private sector to tackle its cash flow conundrums interconnected nature of the national and global economy means that a shortage of available, affordable and suitable business finance at one point in the chain soon creates a crunch elsewhere. It’s a problem the International Chamber of Commerce and World Trade Organization are both acutely aware of. The ICC says trade finance and supply chain finance (SCF) are “essential for the future outlook of global growth”, and a 2018 report by the organisation found that 60% of surveyed banks had or were planning to digitise trade finance operations. Meanwhile, WTO director general Roberto Azevêdo says the lack of access to SCF is preventing SMEs around the world from leveraging opportunities, making it an issue that “demands our urgent attention”. In Australia, several solutions have emerged in recent years; however, the concept of trade and supply chain finance remains misunderstood and, as a result, underutilised. Providing invoice finance, SCF and trade finance, as well as traditional business credit, Fifo Capital launched in 2009, and CEO Wayne Morris says the company is on a mission to “rewrite the rules of finance”. “Our products aren’t debt masquerading as supply chain finance. I’ve seen many other things called supply chain finance, but those products are sheep in wolves’ clothing,” Morris says. Fifo’s solutions provide an SME’s suppliers with a non-recourse payment, allowing customers to extend their services with neither party required to provide security or carry debt. Once on board, the digitised system allows businesses to log in to a cloud-based platform, select the invoice to factor, and THE

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100% of the money is transferred within a few hours. Having evolved from a simple SME finance solution, Fifo Capital also caters to the needs of corporates and ASX-listed companies, “effectively

In doing so, Fifo Capital aims to tackle what Morris calls ‘businessism’ – the marketplace prejudice that manifests in many areas of the business world, including finance.

“This would make innovative solutions available for everyone – no segmentation in the market, access to all who want it – using our tech and holistic partnerships” Wayne Morris, CEO, Fifo Capital breaking the barriers on business size and what funding is available to the little guys”. “When we talk about rewriting the rules of finance, it’s about rewriting them for everybody,” Morris says.

“This would make innovative solutions available for everyone – no segmentation in the market, access to all who want it – using our tech and holistic partnerships,” Morris says.

Getting the word out The next step is to boost awareness among brokers of both the existence of credit-free finance solutions and the danger of ignoring them. In Australia, credit solutions for businesses are used for everything from equipment purchases to payroll, but as Morris explains, credit isn’t always the best solution for an SME. In fact, due to the low awareness of debt-free alternatives among brokers and business owners alike, small and medium-sized enterprises are stacking loans to the detriment of their business. Many SMEs use loans to pay bills without ever questioning why they don’t have the working capital to cover basic overheads. “For brokers, it’s about really understanding the financial make-up of the SME. There are so many loan providers, and you can get loan after loan, but we want to help our brokers to be able to actually solve problems for our clients, rather than simply put a band-aid over them. I think the loan space has some problems on the horizon, and providing loan after loan will cause issues,” Morris says. “As a broker, simply offering a loan that a business could get for themselves on the internet, with no other innovation, isn’t going cut it in the future,” he adds. Spot the difference In recent years, Fifo Capital has introduced two new-to-market alternatives to provide both onand off-balance sheet finance for

‘BUSINESSISM’ IN ACTION Source: RBA, royal commission, December 2017

Typical interest charged to businesses of different sizes Facility below $2 million

Facility $2 million or more

6% 5% 4% 3% 2%

5.70%

5.30%

5.25% 3.55%

3.55%

4.05%

3.30%

3.45%

1% 0% Variable rate

Fixed rate

Bills

Average

whilst allowing them to extend their own terms should they need. Supported by our world-class invoice processing platform, STREAM, your clients can free up their working capital at the click of mouse. It’s new, it’s innovative and it’s changed the way businesses can access capital.

Debt-free finance has just become the new rule.

To set-up a time for personalised training, facility demonstration sessions or simply find out more please call 1300 852 556 or your local Fifo Capital office today. partnership with Invoice Finance | Trade Finance | Supply Chain Finance | Business In Loans

fifocapital.com.au | Backing business success

FCA821

businesses of all sizes, with secured and unsecured options to reduce risk and maximise choice. This year, Fifo surveyed its customers and brokers on their perceptions and understanding of those products, an exercise that gains even greater importance in a market where products are SCF by name, but not by nature. On the customer side, questions focused on market awareness and usability of products to allow Fifo to refine its offering. On the broker side, a series of research workshops investigated how closely the product suite meets expectations, among other areas. The next step in this process will be to conduct similar exercises with brokers who aren’t familiar with Fifo. “Brokers love the challenge of delivering the impossible and trying to solve the client’s problem. We are demonstrating to the ones we work with that we like doing that as well, so we want to be side by side with them, supporting them,” Morris says. “Our next 12 months is also about educating and supporting brokers, generating more awareness, and explaining why supply chain, why working capital, why cash flow finance. We will be on that trajectory for the next two or three years.” However, in terms of the company’s next move, Fifo Capital is aiming far higher than just market education. “Because of the research we conducted, we can now evidence what we are saying, so next we are going to help wean the market off this thought process of constantly providing loan after loan,” Morris explains. “Businesses are also getting tired of taking out loan after loan after loan. They want solutions to a bigger problem, and that bigger problem is working capital or cash flow.” In preparation for what lies ahead, Fifo Capital has already boosted its support team and is next looking to increase the amount its business clients can leverage through its solutions. Among the innovations Fifo Capital has planned is a solution that keeps a client’s use of financiers confidential. On the rest, Morris is tight-lipped, but he does hint that “innovation is coming”. “Supply chain is great, but what we have coming up is even better,” he says. AB

Wayne Morris, CEO, Fifo Capital

SME SNAPSHOT Source: ABS, June 2017

Companies 839,507

12%

Sole traders 586,547 Trusts 544,410

37.5% 24.3%

Private sector businesses by legal entity type

Partnerships 267,442 Total 2,237,906

26.2%

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PEOPLE

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

madison.utley@keymedia.com

BIG DEAL

When repeat clients approached Michelle Towner to broker the finance for their bespoke-built home, she designed a holistic solution so impressive that she received referrals from the project’s builder, agent and valuer

THE FACTS

Loan size and term $1.15m over 25 years

Client Self-employed couple in their mid-30s

Goal Designing and building a bespoke home

Location Bassendean, WA

Lender P&N Bank

Aggregator AFG

ahead unless we found a solution. He checked his numbers and said he couldn’t build the house as designed for any less but wanted to make it work somehow. The couple didn’t want to change anything about the house or put another $15,000 of savings into the deal. Over the next five days, we negotiated with the builder to include $14,000 of upgrades for an additional $2,000. This satisfied the valuer and the lender, and we were back on track. Construction started in February 2018, and the family moved into their beautiful new home that December. These clients had worked with me for many years, and although I had pulled rabbits out of the hat before, they couldn’t believe how far above and beyond finance I went. I have since settled loans for another seven clients they referred. After seeing how hard I worked to craft a viable solution, the valuer has also obtained finance through me, and the agent and builder have referred clients, too. THE TAKEAWAY

luckily, the most competitive one was also the builder they liked best. The building contract was signed, the local authority approved the plans, and construction was to start within four weeks. I had already negotiated a very competitive pre-approval for the build, and it appeared the clients were one step closer to their dream. That is, until the panel valuer decided the completed project would be $15,300 less than the total cost. I have persuaded valuers to increase valuations on existing houses in the past,

THE SCENARIO

For many years, I have worked with a lovely couple, helping them to secure finance for three owner-occupied properties and two investment properties. However, their ambition was to build a brand-new home to their specifications. In late 2017, they decided to pursue their dream. The clients spent months researching the market, and most weekends they were out looking for the right block, close to their business. I was always behind the scenes, helping with advice and countless RP data reports. Then, following a conversation I had with a real estate agent who was working with other clients of mine, they struck gold. Even better than having to demolish an old house, they had found a full-sized vacant block only four minutes from their place of work. It was perfect. Together, we crafted an offer. I advised on strategy through the negotiation phase, and they secured the block well below asking price. The couple had a clear vision of what they wanted in their new home and engaged a designer to document their dreams. The design suited the block perfectly, and the layout was lovely. They admitted the house was bigger than they needed, but with a growing family, it suited them to a tee. With my husband’s help, they put the design out to tender with five builders – 22

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Most clients don’t buy property often, so it can be overwhelming and stressful for them. Brokers work through property transactions and deal with the various stakeholders every day. This gives us unique experience and perspective from which to help clients achieve their goals. Clients call wanting a great deal on finance, but finance is only part of the equation. Finding the right property, negotiating the deal and arranging finance are barriers between our clients and the outcomes they desire. I see my role as doing whatever I can

Although I had pulled rabbits out of the hat before, they couldn’t believe how far above and beyond finance I went but sadly, because this was a new build in an established suburb, there was little applicable sales evidence, and the valuer wouldn’t budge. There were tears on the phone when I broke the news, and I really felt their pain. It was a devastating blow for the project.

Michelle Towner Director, Towner Finance

THE SOLUTION

Despite the setback, I knew there had to be a way. I called the builder and explained that the project couldn’t go

to help clients achieve their financial and lifestyle goals. Taking a holistic approach and helping clients navigate through or around barriers must be the focus. This is the ‘secret sauce’ for converting people from leads into lifetime clients and ardent advocates for your business. There is more to it than negotiating with lenders and submitting applications: be an empathetic, trusted advisor and advocate for your clients, and you will never be short of work as a broker. Your clients will see to that. AB

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Get involved in the discussion Share your thoughts at

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FROM THE FORUM

Top comments from trending stories on brokernews.com.au

BROKER REMUNERATION AT “LOWEST LEVELS EVER OBSERVED”

Peter White, managing director, FBAA

FBAA APPEALS FOR IMPROVED ABA IMPARTIALITY FBAA managing director Peter White has called on the Australian Banking Association to appoint an independent chair to head the effort to restore both the public’s and the industry’s trust in the banking sector. His comments followed the news that CBA CEO Matt Comyn is taking the ABA chair, replacing ANZ CEO Shayne Elliott. “It’s time to overhaul the big four banks’ rotation system of the chair. The royal commission exposed the dishonesty, gross breaches of trust and lack of transparency by the banks,” White said. “It was CBA that was found to be covertly planning to remove broker commissions. Then they threw brokers under the bus at the royal commission by promoting the Netherlands model without giving a full explanation of the devastating impact it had on borrowers.” Seems like a reasonable idea ... thanks, Peter.

The eighth edition of the MFAA’s Industry Intelligence Service Report confirmed that brokers settled $87.56bn in home loans in the last reporting period – the lowest six-month value recorded by the association and a decline of 10.32% on the previous year. The report drew on data supplied by 12 major aggregators from October 2018 to March 2019. While broker channel activity for the period achieved a record market share of 59.7%, the average value of new home loans per broker declined at a rate “far greater than ever before,” down 10.66% year on year. The number of loan applications also reached uncharted territory – applications were down 8.53% from the previous period and down 13.39% year on year. Further, the average number of applications lodged per broker declined across all states except Tasmania.

Is it really a bad thing that there are fewer hairdressers with no experience becoming mortgage brokers? Sydney Broker

Everyone’s got to start somewhere. The best brokers don’t necessarily come from branch land, Sydney Broker. Perhaps reflect on the business skills required to run a hair salon – a lot of crossover there with running a successful brokerage (marketing, cash flow, people management). As for product knowledge, that’s where mentors, the associations, aggregators and lenders come in to help connect the dots in those early years – although we see, of course, that even seasoned brokers are still asking questions of peers on Facebook. All your comment reminds us of is that the industry does indeed need to redress its boys’ club culture. Jamie

John Norgett

Good to see someone with a voice taking on the big four club (ABA) and exposing the uselessness of the royal commission. Instead of honing in on the banks, it exposed the weaknesses in the regulators – who, like the banks, still seem to think it is business as usual. When will the government bite the bullet and take some decisive action to reform the entire banking system so it becomes a productive part of the economy, especially where business lending is concerned?

Brendan Jordan

It has long been the big four boys’ club. The ABA needs to change its method of operation. Everything else has.

What, no mention of CIF reforms as the main reason income is down? Net of offset and redraw have been the real winners for the lenders. Worst decision ever made by the powers that be!

Terry Shoesmith

Anthony Costigan

Quaggie

What we have here is failure to communicate! The RBA failed to communicate that the reason for cuts is for people to spend and hence improve the economy. The regulators failed to communicate that regulation is for the benefit of borrowers, not to their detriment, which is how they took it. RBA and regulators, bearishly killing the economy with unintended consequences.

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Look out for complete coverage of the Australian Mortgage Awards 2019 in the next Australian Broker magazine and on www.australianmortgageawards.com.au #AusMortgageAwards

Official Publications of Australian Mortgage Awards

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DATA

WESTERN AUSTRALIA

NSW SPOTLIGHT

Steps to boost jobs as construction activity plunges

RECLAIMING THE CROWN

While construction activity in WA is low at the moment, there are more mining sector and construction projects being approved, which is helping to boost jobs growth. Over the 2018-19 financial year, the decrease in property prices also led to a corresponding increase in the share of affordable properties sold. CoreLogic research analyst Cameron Kusher points out that 31.2% of house sales in WA were of properties priced under $400,000, compared to 28.7% last year. In the unit market, 55% of units sold were under $400,000, a considerable step up from the previous year’s 50.2%. But even with low-priced properties selling like hotcakes, Perth’s million-dollar market has not taken a significant hit. Sales of million-dollar houses still made up 10% of all house sales in the capital, while 4.1% of all unit sales were in the upper quartile of the market.

Area

Type

Median value

Quarterly growth

The latest Knight Frank Prime Global Cities Index named Sydney as Australasia’s prime residential market, indicating that the city is returning to business as usual

12-month growth

Perth

$875,000

-2.7%

-6.7%

WA Country

$320,000

1.5%

0.0%

Perth

$685,000

-1.4%

-2.8%

WA Country

$200,000

-2.2%

QUEENSLAND

Healthy vacancy rates, improving migration and jobs growth on the horizon In the Brisbane local government area, vacancy rates recently hit a healthy 2.8%, as did rates in Inner Brisbane (3.3%). According to local property managers in the Greater Brisbane area, even though there is unit oversupply, demand is strong, leading to the absorption of more and more stock. Metropole Property Strategists national director Kate Forbes attributes Brisbane’s recent positivity to an improving economy, which, coupled with attractive rental returns and relative affordability, is spurring population growth from the southern states. “Brisbane’s economy is being underpinned by major projects like Queen’s Wharf, TradeCoast, Cross River Rail and the second airport runway, although jobs growth from these won’t really kick off for a few more years,” she says. “But with migration rates lifting, supply under control and generally healthy levels of affordability, Brisbane’s market fundamentals are looking healthier compared to most other capitals.”

Area

Type

Median value

Quarterly growth

a period of decline, the national property market seems to be regaining ground as the slowdown in Sydney and Melbourne abates. According to CoreLogic’s Home Value Index for July 2019, Sydney’s prices have been trending upwards for two months – a positive sign that has had spillover effects on the rest of the country. Furthermore, even with the recent drops in prices, Sydney’s million-dollar market continues to make up a sizeable chunk of sales: 30.2% and 16.4% of all house and unit sales, respectively, were worth at least $1m. This has allowed Sydney to reaffirm its status as Australia’s number-one prime residential market in the Knight Frank Prime Global Cities Index for Q2 2019, besting Brisbane, Melbourne, the Gold Coast and Perth. “The Sydney prime market remains resilient at a healthy 2.5% growth per annum, being the best prestige performer in Australasia,” says Michelle Ciesielski, head of residential research at Knight Frank. “Prime property performance in Sydney is now in the sixth year of positive annual growth, averaging a remarkable 8.7% growth over this time. This outstrips the average of 1.8% recorded in the six years prior.” Throughout the period of decline, units have also stood out, performing even better than houses. “Despite an unprecedented amount of new apartment stock entering the market, Sydney and Melbourne unit values have consistently outperformed the detached housing sector through the downturn, and this trend is continuing into the recovery phase,” says CoreLogic head of research Tim Lawless. In addition, based on recent search trends focused on higher cash flow and equity or added value, Real Estate Investar CEO Clint Greaves says the downturn might have shown investors that a strict focus on capital growth doesn’t always pay off. AB FOLLOWING

12-month growth

$475,000

-0.5%

0.0%

Median price (houses)

QLD Country

$435,000

0.0%

-1.6%

$485,705

Brisbane

$305,000

-6.0%

-12.3%

QLD Country

$362,000

-1.2%

-1.3%

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Spring promises to bring new signs of life to the property market With the arrival of spring comes the property market’s busiest season, and it will be an interesting time to see if property prices continue to head north, even if more properties come onto market. And with the next phase of comprehensive credit reporting here, we’re waiting to see the impacts. We don’t think these CCR changes will have much of an impact, but as a broker, it's nevertheless good to be on top of the trend for our customers to ensure the experience continues to be amazing. Lower interest rates (which are predicted to edge even lower), a somewhat stable government, the recent tax cuts and the banks lending more money than they would have before should support what some are calling the recovery in our property market. Things are looking positive!

Peter Vassilis Managing director, Black and White Finance

SUBURB TO WATCH: QUEANBEYAN

Brisbane

BROKER PERSPECTIVE

Median price (units) $297,603

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

1.0%

13.8%

17.4%

4.7%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

7.0%

14.8%

9.1%

5.5%

HIGHEST-YIELD SUBURBS IN NEW SOUTH WALES Suburb

OPPORTUNITIES AND KEY INFRASTRUCTURE Weekly median

Gross rental

Type

Median price

Quarterly growth

12-month growth

advertised rent

yield

BROKEN HILL

$119,000

-2%

$260

11%

BERRIGAN

$120,000

-20%

$210

HAY

$130,000

-21%

$220

$4.1bn

42.9%

Investment made in the Western Sydney Infrastructure Plan over 10 years

Percentage of Australia’s total infrastructure spend concentrated on NSW

MOREE

$180,000

-16%

-27%

$300

WELLINGTON

$160,000

$260

BOURKE

$155,000

-14%

$250

BARRABA

$128,000

-7%

-10%

$205

CULCAIRN

$160,000

-11%

$240

SMITHTOWN

$262,500

-6%

$390

$100m

33%

Amount committed to tourism in regional areas in 2018

Year-on-year decline in the number of homes for sale in Sydney

GILGANDRA

$167,500

15%

$240

TUMBARUMBA

$194,000

-7%

-10%

$278

FINLEY

$151,500

-2%

-18%

$215

AUSTRALIAN CAPITAL TERRITORY

Area

Type

Median value

Quarterly growth

12-month growth

Economic conditions cushion Canberra from oversupply Canberra could soon experience an oversupply of property for the area it covers, according to Michael Kumm, president of the Real Estate Institute of the ACT, who says this would be bad news for off-the-plan buyers, as the trend could lead to lower prices for final units. However, BIS Oxford Economics’ Residential Property Prospects 2019 to 2022 report notes that while the next year should see more completed residential constructions, Canberra’s combination of a strong local economy, solid population rises and affordable houses in a high-income economy will keep prices strong, despite supply. Indeed, price growth in Canberra has slowed only slightly. CoreLogic research analyst Cameron Kusher reported that over the 2018-19 financial year, the share of property sales under $400,000 has continued to fall. The proportion of house sales at this price point went from 6.8% in the 2017-18 financial year to 5.0% in 2018-19.

Canberra

$695,000

2.3%

3.6%

Canberra

$425,000

0.6%

1.2%

www.brokernews.com.au

DATA

VICTORIA

Bargain hunters abound in Victoria’s capital In the wake of newfound stability in the Melbourne market – coupled with increased borrowing and a reduced serviceability floor – buyers are looking to capitalise on the downturn and snag highvalue properties. “More expensive housing stock has generally recorded greater declines, which may be offering homeowners the opportunity to upgrade into a more expensive property,” explains Tim Lawless, head of research at CoreLogic. “The middle to upper end of the Sydney and Melbourne housing markets are showing the stronger trajectory in housing values after recording deeper declines during the down phase.” Melbourne’s recovery extends to the auction market, where activity is rising, with more bidders and larger inspection crowds. “Overall, there’s significantly lower auction activity compared to the same time last year, but we expect total auction numbers to increase over the coming months,” says Antony Bucello, state manager at National Property Buyers Victoria. “We also expect the investor market to slowly kick into a higher gear over the coming weeks.” Area

Type

Median value

Quarterly growth

12-month growth

Melbourne

$471,000

-1.0%

-3.0%

VIC Country

$370,000

0.6%

3.4%

Melbourne

$370,000

-1.3%

-6.3%

VIC Country

$278,000

1.1%

-1.5%

CAPITAL CITY AUCTION CLEARANCE RATES WEEK ENDING 29 SEPTEMBER 2019 Sydney flexed its muscle this week, posting its busiest auction results so far this year, while the AFL grand final slowed activity in Melbourne. Across the combined capital markets, there was a significant drop in the number of auctions at 1,262, compared to 1,983 last week. However, despite the lower number of auctions, the combined preliminary clearance rate came in at 74.4%, up from 70.7% the previous week. Over the same week last year, 895 homes were taken to auction, returning a much lower clearance rate of 45.8%. Melbourne saw a significant drop in volumes, with only 103 homes taken to auction, down from 1,020 the week prior. The lower volumes returned a preliminary auction clearance rate of 82.5%, coming in higher than last week’s final clearance rate of 75.6%, as well as last year’s 57.7% over just 70 auctions. Meanwhile, Sydney stole the show with 939 homes taken to market and a 77.7% preliminary auction clearance rate, compared to 72.7% last week and 43.8% this time last year.

ADELAIDE Total auctions

Cleared

Uncleared

Clearance rate

62.2%

PERTH Total auctions

Cleared

Uncleared

Clearance rate

60%

MEDIAN HOUSE AND UNIT PRICES

Area

Type

Median value

Quarterly growth

12-month growth

Darwin

$535,000

0.0%

1.9%

NT Country

$415,000

-2.3%

-3.4%

Darwin

$380,000

0.0%

-1.8%

NT Country

$267,500

-3.1%

-1.3%

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Sydney Melbourne Brisbane Adelaide

Perth

Hobart

Darwin

Units

$650,000

$450,000

$345,000

$455,000

$332,500

$485,000

$100,000

$322,000

$200,000

$441,500

$300,000

$389,500

$500,000 $400,000

$560,000

$600,000

$573,500

$700,000

$741,000

$800,000

$685,000

Darwin’s steady freefall in property values has resulted in ever-increasing affordability; more units are selling at under $400,000. Over the 2018-19 financial year, 67.4% of unit sales in Darwin were below that price point, up from 61.2% in 2017-18. In the regional pockets, a whopping 77.1% of units and 39% of houses sold at under $400,000. Even though sentiment remains cool in terms of the city’s economic prospects, the market is predicted to see some rental growth over the next 12 months, as Darwin remains the capital city with the highest average yield. “While … confidence is lacking, there are areas of encouraging activity within sections of the market,” says Libby Greenwood, retail GM at NAB SA and NT. “Owner-occupiers have become more active in the new market, while first home buyers are the dominant players. For established property, it’s the upgraders who are most active.”

Houses

$900,000

$890,000

Darwin on sale as new average property price emerges

$446,500

$1,000,000

$330,000

NORTHERN TERRITORY

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Weekly change

Monthly change

Year-to-date change

12-month change

Sydney

0.5%

1.6%

-0.9%

-4.8%

Melbourne

0.3%

1.8%

-0.7%

-3.8%

Brisbane

0.1%

0.2%

-1.9%

-2.0%

Adelaide

0.1%

-0.1%

-1.6%

-1.2%

-0.2%

-0.8%

-6.7%

-9.1%

0.3%

1.1%

-1.7%

-4.5%

Perth Combined 5 capitals

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

BRISBANE CANBERRA Total auctions

Cleared

Uncleared

Clearance rate

Total auctions

Cleared

Uncleared

Clearance rate

50.9%

58.5%

SYDNEY Total auctions

939

Cleared

553

Uncleared

159

Clearance rate

77.7%

TASMANIA

MELBOURNE Total auctions

103

Total auctions

Cleared

Uncleared

Clearance rate

82.5%

TASMANIA

State’s market too small to be investment-grade According to CoreLogic research analyst Cameron Kusher, Tasmania’s rising prices have caused the share of properties sold under $400,000 to plummet, falling from 43% in the 2017-18 period to just 31.8% in 2018-19. This issue wasn’t limited to Hobart; the spillover effect caused values in regional Tasmania to rise as well. In 2017-18, almost all units in Tasmania sold at under $400,000, but over 2018-19, only 85.8% sold at that price point. Returns have also fallen sharply in Hobart over the 2018-19 financial year, from 17.4% to just 8.1%. “Home buyers create a property market – they make up 70% of buyers. And investors create property booms, which is what’s happened in Hobart. But it is too small a market to be a long-term ‘investment-grade’ proposition,” says Kate Forbes, national director of Metropole Property Strategists.

Area

N/A

Type

Median value

Quarterly growth

12-month growth

Hobart

$689,000

-2.1%

-4.1%

TAS Country

$310,000

1.7%

5.9%

Hobart

$545,000

0.0%

TAS Country

$250,000

0.0%

2.0%

All data sourced from CoreLogic.com.au

www.brokernews.com.au

PEOPLE

Aggregator FAST

IN THE HOT SEAT

Newly appointed BDM Zoran Petkovski explains why he left banking for a new career at Marketplace Finance and why all life skills matter when it comes to building customer connections

Who or what inspired you to become a broker? What has mostly inspired me to become a broker has been the A importance of the role that brokers play in connecting clients with the appropriate product or solution that they need. I have always been motivated by finding a solution that was best suited or tailored to the specific requirements of the client. Joining Marketplace Finance was an opportunity to provide the holistic solution to clients that they need, as it opens up the landscape of lenders that can be offered to them to meet their individual circumstances.

What’s one of your recent career highlights? The biggest highlight of my career thus far has been the decision A to join Marketplace Finance. It has been an amazing experience stepping out of banking to join a firm with a group of very successful and like-minded individuals who complement each other and allow me to utilise my own unique approach to continue the success of Marketplace Finance and our clients.

What’s the greatest challenge for brokers at this time? We certainly have some stability and confidence back in the broker A market. However, the current lending and credit landscape is certainly proving to be challenging for brokers. Not only are brokers required to be versed in the credit policy and appetite of a multitude of lenders, but they need to be up to date with the constant changes in credit policy and evolving appetite of lenders to suit their clients’ needs. Compliance and training will also continue to play a significant role in the broker industry moving forward.

What do you wish you’d known when you started out as a broker? All life skills matter. Broking is one of those industries with A members from all walks of life and backgrounds. Never discount any previous experience that you may have gained in other roles or industries, as it will enable you to connect with customers in different ways. Customers will always be the backbone of your business, so any way that you can strengthen the relationship with them will be invaluable. AB

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A $2,000 blockbuster bonus for your customers. Home Package Plus home loans now come with a $2,000 cash bonus.^ Talk to your BDM or visit businesspartners.suncorp.com.au to find out more. ^Apply by 13 December 2019, settle by 5 March 2020. Available for eligible new to bank home lending of $250,000 or more taken with “Home Package Plus” and an LVR of 90% or less. Further T&C’s and eligibility criteria apply.

Home Loans are provided by Suncorp-Metway Ltd Australian Credit Licence 229882 (“Suncorp Bank”), to approved applicants only. Please read the relevant Information Documents before making a decision regarding any Suncorp Bank products. ^The $2,000 cash bonus (the “Cash Bonus”) is applicable when you are approved for and settle an Eligible Home Loan with Suncorp Bank. An Eligible Home Loan is a home loan that is: (1) applied for between 2 September – 13 December 2019 and settled by 5 March 2020; (2) a loan amount of at least $250,000 in new to bank lending with a Loan to Value Ratio of 90% or less; (3) Purchase or Refinance, for Owner Occupied or Investment purposes; (4) a Standard Variable or 1, 2, 3 or 5 Year Fixed Rate loan in the Home Package Plus; (5) Back to Basics & Line of Credit / Access Equity is excluded, except when application is split with another eligible loan product of at least $250,000; (6) not established in the name of a company, business or trust. Refinancing of an existing Suncorp Bank home loan or pre-approvals are ineligible for the Cash Bonus. The Cash Bonus cannot be taken in conjunction with “Switch & Save” Offer or any other cash promotional offer, unless expressly stated otherwise. A limit of one (1) payment of $2,000 will be made to a borrower and if there is more than one borrower, one (1) payment will be made to them jointly. Each borrower, whether individually or jointly, can only ever receive a payment of $2,000 once. If any of the borrowers have received a payment whether individually or jointly under the Cash Bonus previously then no further payments will be made. The $2,000 cash payment will be credited to the linked Everyday Options account which forms part of the Home Package Plus, within 30 days of the settlement date. Suncorp Bank reserves the right to vary or withdraw the Cash Bonus at any time. Applications subject to credit approval. Fees, and charges may be applicable. Full terms and conditions will be included in our loan offer. Depending on your financial circumstances, you should obtain independent advice before making any decisions regarding the Cash Bonus.