Australian Broker magazine Issue 7.1

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ISSUE 7.01 January 2010

Fewer brokers to take bigger slice Predictions: Channel size by end of 2010 AFG

 Broker numbers to fall but channel growth is forecast

The next 12 months and beyond should be a bumper period for those brokers who remain in the industry, according to Australian Broker’s exclusive aggregator poll.

Nine executives from large, mid-size and boutique aggregators were asked to predict channel growth and the impact of licensing on broker numbers in 2010 and the overwhelming consensus was that by year end, significantly fewer

Aggregator poll: Part two Read AB 7.02 for aggregators’ assessment of where securitisation and diversification is heading this year

brokers would be part of a bigger distribution channel (above 40%).

Channel size was forecast to be between 39% and 50% by end 2010 compared to Fujitsu Consulting estimates, which put broker originations at around 38% of all outstanding mortgages last year.

National Mortgage Brokers (nMB) managing director Gerald Foley was the most optimistic about channel growth, forecasting market share of between 45% and 50%.

Foley said the role and value of mortgage brokers had increased in recent times while the image of the banks – particularly the majors – has diminished through “perceived opportunistic pricing, poor service and low community regard”.

Foley added that while banks could offer the best pricing on products, brokers were “best placed to provide borrowers with the best acquisition experience”.

40%

Ballast Finance

39% – 40%

National Mortgage Brokers

45% – 50%

Connective

40%

Loankit

45%

Loan Market

43%

PLAN

45%

Choice

42%

Club Financial

40%

Loankit’s Kym Rampal also forecast a 45% share for brokers as did PLAN Australia CEO Ray Hair.

Rampal said recent adjustments had left borrowers confused about “which product and lender offers the best alternative, particularly when looking for a mix of products”.

“Brokers will also be able to take advantage of the re-emerging mortgage managers, which now offer well priced and flexible products as alternatives to the major lenders,” he said.

Hair said the increase would be driven by an improved wholesale funding market contributing to competition and increased choice of lenders. “In addition; while banks continue to shoot to themselves in the foot in a PR sense, consumers will continue to turn to and value the advice of brokers.”

Page 28 cont.

>>

The forecast is definitely cloudy Many in the industry predict the RBA will raise the cash rate throughout 2010, but there is disagreement on how much it will increase by Page 11

>>

Rates – how far, how fast?

Current cash rates, while on the increase, are still historically low. 2010 will see a return to more ‘normal’ levels Page 22

>>

Benchmarking Given last year’s credit crisis, the Canadian broker market has been shaken up in ways similar to our own.

But the road to recovery may be a different story Page 24

>>

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News

CBA and MFAA clash over accreditation policies The CBA has refused to change its volume-based accreditation policy, despite mounting pressure from the MFAA. Saying the bank required a “reasonable sample” to ascertain a broker’s understanding of its products, credit policies and processes, Kathy Cummings, CBA’s executive general manager for third party banking, defended its accreditation policy. She said it was in place to determine competency, not push volume.

Her comments follow the MFAA encouraging lenders to adopt quality rather than volume-based broker accreditation policies for its members, as it laid out in a proposal of what it deemed to be the requirements for a professional broker.

In an e-mail sent out to members late last year the industry organisation said its

Kathy Cummings

national brokers committee (NBC) was concerned by some lender decisions to use volume as a broker accreditation yardstick.

And while it strongly endorsed the need for quality loan submissions, the MFAA said it believed it was “inappropriate to use volume as a surrogate for quality”.

Cummings felt that the MFAA’s concerns were not valid, nor did she think the bank’s policies were inappropriate.

With the imminent introduction of national legislation the onus would fall on brokers to provide correct product and policy information to their customers, she said.

“Therefore we have to make sure that whoever is selling that product is competent. To judge that competency we need to see it. The only way we can see it, is if they lodge loans with us,” Cummings told AB. St.George Bank general manager for intermediary distribution Steven Heavey said St.George assessed broker performance against a range of competencies including conversion ratio, arrears, loan book, run-off, errors, and rework.

“The volume of business they write is irrelevant; it is all about being consistent enough with a lender in order to know their products, policy and process and therefore provide a quality service to their customer,” Heavey said.

www.brokernews.com.au Publishing director.... Justin Kennedy Managing editor.....George Walmsley Editor........................Larry Schlesinger Journalist.............................Tim Neary Production editor............Carolin Wun Design manager..... Jacqui Alexander Designer...................Jonathan Phillips HR manager.................. Julia Bookallil Marketing manager.........Danielle Tan Marketing coordinator... Jessica Lee Traffic manager............. Stacey Rudd Advertising sales Simon Kerslake t: 02 8437 4786 f: 02 9439 4599 simon.kerslake@keymedia.com.au Rajan Khatak t: 02 8437 4772 f: 02 9439 4599 rajan.khatak@keymedia.com.au

Steven Heavey

However, he said it would be difficult for a broker to write a “quality-based proposal” without the knowledge obtained through either using a lender frequently, or undergoing regular training.

“What is more important than volume is that a broker avails themselves of all the details of their panel of lenders and uses those lenders enough to be able to provide the best product choice for their customer,” he said.

Jeremy Fisher director at 1st Street Home Loans, who finished third in MPA’s Top 100 broker survey, felt it would be “challenging” for lenders to measure quality above volume – since volume “is very easy to measure and in the end it relates directly back to profits”.

“Volume is a key measure of business for the lenders and they have understandably extended this measure to brokers,” he said.

Editorial enquiries Larry Schlesinger t: 02 8437 4790 f: 02 9439 4599 larry.schlesinger@keymedia.com.au Distribution Australian Broker is available by subscription. E-mail all subscriptions and mailing enquiries to: subscriptions@keymedia.com.au t: 02 8437 4731 f: 02 8437 4753

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 can accept no responsibility for loss. © Key Media 2009 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.

This magazine is printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry

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News

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Non-banks take advantage of rates rises The decision by the major banks to pass on different rate increases in December has resulted in a noticeable change in mortgage origination activity, according to Australian Finance Group.

Comments by Mark Hewitt, AFG’s general manager of sales and operations in the Financial Review, suggest borrowers may be voting with their feet in response to recent rate increases.

Hewitt said new volume from NAB and ANZ were “quite strong” while Westpac volumes had “come off a bit” and CBA had “maintained share”.

Meanwhile, Loan Market Group chief operating officer Dean Rushton said more competition in the mortgage market would be of enormous benefit to homeowners with interest rates on the rise.

He anticipated an increase in mortgage holders making enquiries about switching to smaller lenders.

There was no guarantee that because a bank had only increased 0.25% last time around that they would not increase rates outside of the RBA in 2010, he said.

“What we saw in late 2008 and early 2009 were banks not passing on the full interest rate reductions and the amounts held back varied at each reduction. By the end of the cycle, they were still within 0.10% of each other on the standard variable rate.”

Adding his voice to the resurging competition debate, industry veteran Paul Ryan, managing director and founder of Opportune Home Loans, said the non-bank sector was “alive

Mark Hewitt

Paul Ryan

and well” and that it was helping to drive choice and competitive pricing. “While there has been consolidation in the sector, brands like Resi Home Loans, Mortgage House, Homeloans Limited, Firstfolio, Better Mortgage Management, Mortgage Ezy, Club Financial Services, Australian First Mortgage and Opportune Home Loans have all continued to support consumers in their quest for more competitive products and rates,” he said.

Ryan pointed out that the non-banks were playing a significant role in helping to keep the banks honest. “We need to maintain the healthy competition otherwise we’re going to see more of the elevated increases that many homeowners experienced last year,” he said.

According to Ryan, the nonbank sector was stronger than ever as a result of some of the majors opening wholesale channels, making funding options “even more secure”.

Aussie looking to outshine Mortgage Choice With a line now drawn under the Wizard integration, Aussie executive director James Symond says the business is aiming for $12bn to $14bn in mortgage settlements in 2010.

By comparison, its biggest retail rival, Mortgage Choice disclosed in

end-of-year presentation material, that it is aiming for $8.6bn in settlements in the 2010 FY. Aussie is also looking to spend more on advertising and marketing, with a budget of $20m.

A Mortgage Choice spokesperson said the ASX-listed business would

Battle of the shopfront brands Aussie

Mortgage Choice

Shopfronts/retail sites

154

165

Brokers/loan writers

950*

577

2010 settlements forecast

$12bn–$14bn

$8.6bn

2010 marketing budget

$20m

5.5% of gross revenue

Loan book

$34bn

$36bn

Recent innovations

Personal loans, insurance

Wholesale aggregation

*Made up of 500 sales people, 450 mobile sales channel

stick to its 5.5% of annual gross revenue marketing budget, “definitely less than Aussie”.

In terms of retail presence, the two businesses are now even.

Aussie now has 154 shopfronts, just nine fewer than Mortgage Choice, and also has a substantially bigger sales force made up of 500 sales people and 450 mobile brokers compared to Mortgage Choice’s 577 brokers.

Symond told AB the goal was to become one of the largest retailers of financial services in Australia.

He said one of the challenges of bringing the Wizard franchisees on board was pushing up lending volumes. “The concern was that the 24 shopfronts at Aussie (prior to the acquisition) were doing $6m–$7m per month and the Wizard guys weren’t used to these

numbers. Some were doing under $1m a month. They had to get their heads around the performance expectations.”

Symond said Aussie was working closely with those ex-Wizard branches that were still struggling. At the other end of the scale, he said one branch recently did $20m in one month.

On the recruitment front, Symond said Aussie was looking to recruit quality people, but would not recruit “just for recruitment sake.” Reflecting back on the integration of the Wizard businesses (beginning in January 2009) Symond said the key lesson learned was that of “cultural fit”.

“The most important bit is that it’s a people business. There must be a cultural fit. If there’s no meeting of the minds, it will fall apart.”

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News

ING dodges accreditation question What has changed?

The last time AB spoke to ING Direct about its accreditation policy (July 2009) it offered the following information: Requirements for obtaining accreditation:  Membership with MFAA or FBAA  Confirmation of completed AML training through either MFAA or FBAA  Membership with an accredited aggregator group  Product training and sign off from BDM Requirements for maintaining accreditation:  No mandated specific performance criteria  Regular reviews conducted of broker accreditations to “ensure a consistently high level of quality for both the banks’ performance and the performance of broker partners”.

Bank’s view on volume targets: “There’s a significant cost to both lenders and the broker channel in sustaining poor and inactive brokers, however ING Direct believes volume targets shouldn’t be the sole factor in brokers remaining accredited with their lenders” – Mark Woolnough, ING Direct

Broker-centric ING Direct has declined to comment on claims by Maria Rigoni, CEO of the Australian Institute of Professional Brokers, that it has made it much harder for brokers to gain accreditation with the lender.

Rigoni wrote an e-mail to AB claiming that under the “new” ING accreditation policy “all newly accredited brokers must

be a full-time broker, work from a commercial office or be part of a national franchise group”.

While AB understands that changes along these lines have been implemented, the official response from Mark Woolnough, its head of partnerships, sidestepped the question.

He said: “In aligning with changes in the broking industry, ING Direct regularly reviews broker accreditations to ensure a consistently high level of quality for both the banks’ performance and the performance of our broker partners.”

“While awaiting the MFAA professional broker standards, ING Direct is consulting its aggregator partners to develop guidelines around the need to be more discerning in accrediting new and existing brokers.

“ING Direct conducts regular reviews of broker accreditations and recognises that there is a significant cost to both lenders and the broker channel in accrediting and sustaining poor and inactive brokers.”

Mark Woolnough

Commenting further, Rigoni told Australian Broker: “Accreditation shouldn’t be a privilege for a broker; it’s a privilege for the lender. If brokers weren’t accredited, no clients would get in the door – they have it round the wrong way.”

Asked for his thoughts on the matter, Gerald Foley, managing director of National Mortgage Brokers, said it was “a bit concerning” that lenders were going down the path of “controlling who is accredited”.

“They are doing it to control the level of new accreditations,” he said, but as a result was less

inclined to assist lenders by identifying “which brokers are writing business”.

“It has to work both ways – either accredit all our brokers and let us manage them or we won’t identify who is writing business with other lenders,” he said.

Before banks changed accreditation policies to block some brokers, Foley said it was common practice for aggregators to help out lenders by telling them which brokers are “going really well”.

“Now… they can find out for themselves,” he said.

NBG in new deal with planning group Many brokers are not interested in selling financial planning products so introducing competent brokers to competent financial planners should result in both doing more business overall, according to Steve Lambert CEO of National Brokers Group (NBG).

His comment followed the announcement of NBG’s signed agreement to provide aggregation services to financial planning group, Matrix Planning Solutions.

Lambert said the agreement offered NBG increased exposure to quality brokers and allowed existing brokers to build strong relationships with a financial planning company.

“Matrix has some brokerage businesses within its business, so the idea is for them all to come on board with the same offer and get more dollars through under the one group,” he told AB.

As part of the agreement, Matrix financial advisors will be able to offer mortgages by gaining access to NBG’s lending rates as well as a preferential fee split with the aggregator.

Managing director of Matrix, Rick Di Cristoforo, said the company had a strong focus on accessing related services such as mortgages, finance for succession loans, paraplanning, HR and other services where it can give advisors “preferential access and competitive rates” without affecting costs.

The NBG arrangement will further facilitate the service offering from a licensee level to the practices. Matrix currently has 40 practices nationwide.

The announcement comes soon after NBG revealed its merger plans with The Brokerage and The Mortgage Professionals as part of the Macquarie aggregation venture. The deal with Matrix will not affect these merger plans.

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News Aggregator execs to play key roles in ‘Wonderland’ The executive teams of the three aggregators that will make up the new Macquarie-led co-operative (currently projectnamed ‘Wonderland’) will take on either management or boardroom roles in the upcoming new venture.

Jeffrey Zulman, the proposed CEO of the business, told Australian Broker that each and every one of the executives from National Brokers Group (NBG), The Mortgage Professionals (TMP) and The Brokerage would remain involved.

He said the executives were “selling up and not selling out”.

“Some are going on to the board to become directors and to give us strategic guidance – others are remaining to form part of the management team and work day-to-day in the business,” Zulman said.

However, the three businesses will shed their brands to operate under a new brand identity.

Zulman said discussions with brokers had brought home the message “time and time again” that it was going to be a

AB asked Jeff Zulman what mortgage and aggregation experience he will bring to his role as CEO of ‘Wonderland’:

Answer: “I’ve spent several years working as a corporate advisor. In that capacity I’ve had the opportunity to be involved in start-up mortgage broking companies, advised them during their growth years and finally assisting them with the exit sale. More recently, I’ve spent considerable time working with the management and executives of our founding groups. I’ve also had an opportunity to work in early phase businesses right through to listed public companies and for some of the biggest and most successful global financial services businesses. In particular, I have considerable expertise and experience working in the field of IT that I believe will prove invaluable to this aggregation business going forward.”

“wonderful opportunity to bring a new brand to the market that is represented by the coming together of these groups”.

The new venture will allow existing brokers to retain their current commission models.

“There will be no change. But we anticipate being able to offer a menu of services. Brokers who join us can choose the items they value and pay for those and only those. It doesn’t have to be a one-size fits all,” Zulman said.

However, he rejected outright any rumour that the commission model currently being favoured was a flat fee model used by the likes of Connective.

While not giving details, Zulman explained the model in terms of a restaurant analogy: “You get fast food restaurants, right through to three-hat restaurants. You’ve got to position yourself somewhere in that continuum. We’re not at the fast food end of the chain. But the quality service we will offer will be highly competitive in terms of price.”

Jeff Zulman

He also confirmed that Macquarie’s role in the venture would be as facilitator and described it as “the beginning of an exciting journey”.

And with regard to possible exit strategies for those shareholders in the business, he said all of the parties that are involved had made the decision to remain investors and to not sell out.

“We see opportunities to grow and make acquisitions, so we’re more focused on what we can do going forward rather than any discussions about shareholders exiting,” he said.

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News

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Transparency needed on ING thanks brokers for referral fees support during GFC The major banks need to be more transparent about the referral fees they pay real estate agents, according to Andrew Zobel, general manager of SA franchise group Zobel Finance.

Zobel stressed that he did not have an issue with banks paying referral fees to real estate agents, but questioned the lack of transparency and the size of the fees. “We asked a manager in the area [where real estate agents are being targeted] to ring the banks and ask them if they were paying referral fees. Two of them denied doing it; the other two gave a nominal figure,” he said.

AB contacted all the major banks to find out if they paid referral fees to real estate agents and what the remuneration was if they did. Only NAB had responded by the time of going to press.

A spokesperson said the bank has an “introducer program”, whereby it pays introducers for referrals to NAB. “Introducers come from a diverse range of backgrounds, so it’s possible that some are real estate agents.”

NAB introducers go through an initial accreditation process, and then refer leads to the bank.

“These customers are then subject to NAB’s normal credit assessment and lending process, and where an application is successful and drawn down, we pay a commission to the

Andrew Zobel

introducer for the business,” the spokesperson explained.

Zobel questioned how banks could justify their “conscious effort” to pay real estate agents the same commission they pay brokers “just for passing on a business card”.

He claimed some banks were paying upfront payments similar to those paid to brokers, and in some cases trail payments, just for “a name and number”.

Sarah Eifermann, from SFE Loans in Melbourne, called the payment of fees to real estate agents a “very contentious issue” and said she did not believe in banks paying for a referral, especially to those working in the accounting, financial planning and real estate industries.

“Firstly, these industries have a duty of care to ensure their clients are looked after and I don’t see how that includes getting cash for doing this. Secondly, it clearly undermines the value of the mortgage broker and their relationship with the referrer,” she said.

Eifermann agreed with Zobel by saying that such an arrangement should be disclosed and was hopeful that licensing would “even the playing field”.

Scott Beattie, BDM from Cube Home Loans, agreed that banks were not disclosing referral arrangements with real estate agents. He said that in light of impending legislation, which will require brokers to disclose commission arrangements, he would like to believe that banks would be subject to the same disclosure requirements.

“I’m not sure if the banks will be subject to the same requirements to disclose these commissions post legislation, but here is a good opportunity to clean up a loophole should it exist.”

(L–R) Mark Woolnough, ING DIRECT, head of partnerships, broker sales; Mark Hewitt, AFG, general manager, sales and distribution; Brett Morgan, ING DIRECT, executive director, savings; Ray Hair, CEO, Plan

(L–R) Phil Naylor, MFAA, CEO; Lisa Claes, ING DIRECT, executive director, mortgages; Don Koch, ING DIRECT, CEO

(L–R) David Breen, ING DIRECT, head of public relations; Tanya Sale, finconnect, general manager; Steve Kane, FAST MD and chair of National Broker Committee

ING Direct took the opportunity, after hosting an MFAA National Broker Council meeting in late November, to thank brokers for their support during the GFC and to remind them that there are still alternatives to the major banks.

Speaking at drinks following the meeting, the bank’s executive director of mortgages, Lisa Claes, said it appreciated the feedback it received from brokers, which helped to develop its

Orange Advantage offset account product. She also said the concentration of the mortgage market to the Big Four banks made ING Direct more determined to offer a competitive alternative to brokers and aggregators.

ING Direct CEO Don Koch also addressed the audience and thanked them for their ongoing support and pledged to increase funding for mortgages and to improve service levels.

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11

More rate pain in February and March? 2010 growth forecasts very bullish

The RBA will raise interest rates in February and again in March if Citi expectations prove correct.

In its Global and Australian GDP Outlook for 2010 briefing, the bank’s chief economist, Josh Williamson said he expected the RBA to raise the cash rate to 4.25% by the end of the first quarter of 2010.

Given the RBA’s preference for incremental increases, this would mean 25bps increases on 2 February and 2 March.

Williamson said rates were still at a very accommodative setting and markets should not underestimate the need to push

the cash rate higher. Citi believes the neutral rate to be at 5.5% – a benchmark it expects the RBA to reach by the end of 2010.

However, Williamson said this neutral setting could be dampened if the proposed APRA liquidity requirements for banks remained in their current form.

Citi’s ceiling rate prediction was not shared by AMP’s chief economist Shane Oliver or Loan Market’s chief operating office Dean Rushton.

In his Outlook for 2010 report, Oliver explained that while the RBA would continue gradually raising the cash rate, it would

Citi: The bank has upgraded its 2010 Aussie forecasts “well above consensus” with GDP at 3.3%, compared with consensus at 2.7%. The 2011 growth expectation is 3.4%. Paul Brennan, co-head of economic & market analysis at Citi, said the bank was “very positive on the key drivers of growth in Australia”. The Australian dollar is expected to reach $1.01 by third quarter of 2010 while underlying inflation is unlikely to reach the middle of the RBA’s target band.

AMP: The rebound in business and consumer confidence, a housing construction recovery, numerous mining projects and increased public infrastructure spending are expected to underpin GDP growth of around 4% though 2010, according to Shane Oliver. He expects unemployment to head back down to around 5.5% by year-end with inflation likely to be 2.5% thanks to a combination of global excess capacity and the impact of the strong Australian dollar.

reach between 4.75% and 5% by year end.

Oliver said low inflation and additional increases in bank lending rates would stop a more aggressive rise.

Rushton said interest rates were unlikely to go back above 5.0% during 2010 and predicted a cash rate by the end of 2010 of about 4.5%. He also expected the

RBA to “keep its powder dry in February” due to the impact of the “first trifecta of interest rate rises in Australian history” on retail activity. “We might see another 25 basis points increase in March and a couple more increases during the year.

“But I don’t think we will see the cash rate go back over 5% during 2010.”

12 www.brokernews.com.au

News movers & shakers Name: John Mohnacheff From: BEAT Home Loans To: Liberty Financial Title: Group Sales Manager – Personal Business Mohnacheff will be responsible for Australian residential and motor sales. He was previously responsible for Liberty’s sales team between 2001 and 2006. More recently he held the role of managing director, BEAT Home Loans. His return to the Liberty sales team reflects an ongoing commitment to support the third party market to keep competition alive.

Name: Bob Turnbull From: Liberty Financial To: Liberty Financial Title: Group Sales Manager – Commercial In his new role, Turnbull will turn his attention to building new networks to help SME customers.

“Bob’s done a terrific job as an advocate for the broking community through some very challenging times over the last couple of years. We are all excited and looking forward to Bob now turning his attention to expanding our network of business partners,” said Liberty COO James Boyle.

Name: Toby Stapledon From: Citibank To: The Loan Arranger Title: Mortgage Consultant Stapledon has joined The Loan Arranger to commence a career in broking after three years as BDM at Citibank. Prior to that, he worked overseas with Royal Bank of Scotland and with Adelaide Bank prior to departing Australia. “He has a strong financial background of 10 years in banking, which he will bring to the mortgage broking industry,” said the Loan Arranger’s Steve Marshall.

Name: Peter Hanlon From: Westpac To: Westpac Title: Group executive, People and Transformation Hanlon has been appointed to this newly created position, having previously headed up retail and business banking at Westpac. His new role will include the customer, people and productivity elements of Westpac’s transformation program. It also includes corporate affairs & sustainability. His position takes effect on 1 February 2010.

Name: Rob Coombe From: BT Financial Group To: Westpac Title: Group Executive, Westpac Retail & Business Banking Prior to this appointment, Coombe was chief executive at BT Financial for five years. “In his time at BT, Rob’s customer focus, passion and innovation have driven outstanding results and he will bring these important qualities to his new role.

Importantly, his experience at BT will help drive our One Team approach, including earning all of our customers’ business,” said CEO Gail Kelly.

Coombe’s position at BT has been filled by Brad Cooper. Both appointments take effect from 1 February 2010.

Registration: Background checks essential How well do you know your business partners?

This is a question many brokers will be asking themselves in the first few months of 2010 as they prepare to register with ASIC. As part of the registration process, brokers will need to make statements not only about their own past history and conduct, but also about fellow directors, secretaries, partners and trustees of their businesses.

While they will not need to present evidence as part of their application, they will need to be certain that none of these people have been banned or disqualified under national or state laws, lost their relevant state licences or had their AFS licence suspended or cancelled in the last seven years.

In addition, brokers will need to satisfy themselves that none of their colleagues are insolvent, have been disqualified from managing corporations, been convicted of serious fraud or have other state or territory criminal convictions.

Besides meeting these history and conduct requirements, brokers will also need to be members of either the Financial Ombudsman Service or the Credit Ombudsman Service Ltd (COSL).

Applicants as well as each director and secretary (if they are a company) will need to declare that all the information in their application is, to their knowledge, complete, accurate and true.

Brokers that submit false or misleading information or omit a material matter may have their application refused by ASIC.

Key dates for your 2010 diary 1 April First day to register with ASIC 18 June Applications made after this date may not be processed by 1 July cut off (see box out below) 30 June Last day to register with ASIC if you wish to continue working as a broker 1 July ASIC takes over the regulation of consumer credit and finance broking 1 July First day to apply for Australian Credit Licence (ACL) 31 December Last day for registered broker to apply for ACL Brokers will be notified of successful registration via e-mail and will be officially registered when ASIC enters their name on the Australian Credit Register.

Should registration be refused ASIC will provide brokers with reasons for this. If these are addressed, brokers will be able to re-apply for registration.

Brokers will be able to seek review of a decision to refuse an application via the Administrative Appeals Tribunal.

Registrations will be possible from 1 April at www.asic.gov.au/ credit. All successful applicants will be notified electronically.

Warning: Apply early!

Brokers should apply early for registration with ASIC or run the risk of not being registered by 1 July cut off.

In its guidance notes, ASIC said all applications received by 18 June would be processed by the end of 30 June. However, those received after, might not be processed by 1 July (due to the large number of applications it expects to receive) meaning brokers will not be able to continue operating until they have a credit licence.

“To ensure that we can decide on your application by 30 June 2010, you need to apply early in the registration period. We will process applications in the order in which we receive them. While we have put in place systems to process registration applications as quickly as possible, registration is not automatic and some checks need to be made on whether you are a person who can be registered,” ASIC noted.

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News

Small lenders key to mortgage revival Should a number of funding initiatives currently being explored by second tier lenders come to fruition in 2010, the mortgage market may return to growth sooner than predicted.

This was the view of the MISC (Market Intelligence Strategy Centre), which said that without this additional funding, the mortgage market would continue to contract in the first three months of 2010, only returning to growth in the June quarter.

Without this additional funding, the MISC predicted a $14.4bn fall in the value of mortgage settlements by the end of September 2010 compared to the previous 12 months, a drop of 8.82%.

According to the MISC, the extension of the First Home Owner Grant (to 31 December 2009) delayed the bottoming out of the market.

The value of settled mortgages was expected to fall by $1.15bn in the March 2010 quarter.

However, a return of second-tier

funding might not only turn around market growth, but would benefit brokers; given many smaller lenders and non-banks rely on the channel for distribution of mortgages.

It would also strengthen the broker proposition by increasing the range and availability of loans on offer to borrowers, while also presenting refinancing opportunities.

And forecasts are on the optimistic side.

The Deloitte Australian Mortgage Report predicted the return of the regional and non-bank market in 2010 “albeit at a gradual pace”.

“This will be the result of the continued thawing of the RMBS market, allowing such lenders access to certain funding for high-quality lending at more economic rates than since the onset of the GFC,” wrote report co-author, James Hickey, banking partner with Deloitte.

Furthermore, those that participated in its lending round table in October (which was part

of the Deloitte report) agreed that the return of the RMBS market was both “necessary and anticipated”.

Deloitte partner and co-author Graham Mott also noted “solid evidence” that the RMBS market was returning, and at current rates would “reach ‘break even’ levels in 2010 – triggering the environment for more competition”.

Also optimistic about funding for smaller lenders in 2010 is Loan Market Group, with executive chairman Sam White telling AdelaideNow.com.au he expected to see more competition

Possible additional sources of funding for smaller lenders • • • • •

AOFM support for warehouse funders of new originations AOFM support for non-tender based initiatives A credit union mutual fund sourcing $1bn from superannuation funds Building society govt guaranteed three- and five-year bond issues Banks such as Bendigo & Adelaide and NAB funding mortgage managers • Securitisation without AOFM support Source: MISC (Market Intelligence Strategy Centre)

Mansfield does it!

Looking back, Brett Mansfield says for a number of years he had dreamed of running a full 42.2km marathon.

In September 2008 he ticked that box and immediately moved onto another challenge, “… and this time it was something even more special,” he said.

It was to run the New York City Marathon – widely recognised as the world’s greatest marathon.

The first challenge for Mansfield was just being able to take part. Entry into the event is difficult as it attracts a global field of 100,000. There is a global ballot from which only one in four are successful.

However, the Heart Foundation in Australia is awarded 15 guaranteed entry places and these are provided to selected competitors who are required to raise $12,500 in sponsorship and donations.

“Following an interview process I was fortunate to be selected as one of the 15 chosen runners and set about raising funds to meet the Heart Foundation requirements.

“I was overwhelmed at the response received by those I

approached for support and would like to thank all who contributed, with a special mention to my family and major sponsors; National Mortgage Company, Homeloans Ltd, Mortgage Ezy, My Rate, Loan Services Australia, Genworth, Gallilee Solicitors, Michele Druery at EquityVision and all the staff at ING Direct,” said Mansfield.

On the day of the race the temperature was a cold 5 degrees. “But the excitement of the runners was electric. Some sat quietly contemplating the run and others couldn’t sit still or stop talking,” he said.

After the Stars and Stripes was played the runners roared, and Mansfield took his first steps across the dual-deck Verrazano-Narrows Bridge.

From Staten Island he made his way through the full length of Brooklyn; the streets lined with cheering spectators and bands playing from the many diverse ethnic groups.

“At the 5km mark, the crowd support was amazing and the adrenalin was still running fast through the veins,” he said. One hour and 47 minutes later at

coming through next year.

Besides a return of securitisation, other proposals that may benefit lenders outside of the major banks include AOFM following through on pledges to support warehouse funders’ new originations up to $250m; credit unions proposal to tap superannuation funds; building societies obtaining funding via government guaranteed bond issues; and wholesale lenders (particularly NAB’s Advantedge and Adelaide & Bendigo Bank) supporting the mortgage management industry.

Brett Mansfield

Queens, and at the halfway mark, Mansfield was still running to his pre-race plan.

“I had been running alongside Phillip, a Belgian runner and we were feeling strong so decided to increase the pace,” he says.

The impact was immediate and Mansfield passed numerous runners as he crossed the Queens Boro Bridge into Manhattan. Then onto First Ave where the spectators were 15

deep and the cheering so loud he said “it was like a football final”.

“I managed to keep up this pace until the 32km mark – but this is where it all went pear shaped,” he said. His pace dropped and his stride shortened, but he soldiered on across the last 10km through Manhattan and into The Bronx.

And as he headed down Fifth Ave into Central Park his left hamstring started to cramp, but the beat of the steel drums lining the road kept him shuffling forward.

“The massive crowds kept cheering and yelling encouragement to all participants. My mind tuned out the pain as much as possible. I couldn’t stand the thought of not finishing now, that would be worse than the pain of continuing and I felt I would be letting down not only myself, but also my family, sponsors and well wishers.”

When the final 200 metres came into sight he made one final surge to the finish line and crossed in 4 hours 1 minute and 52 seconds.

Mansfield was presented with his finisher’s medallion, then covered up in a silver heatblanket and went down the longest 2km road of his life to exit Central Park.

www.brokernews.com.au

AIPB ‘open forum’ rejected A proposal by the Australian Institute of Professional Brokers (AIPB) to hold an open forum to discuss unfair and unethical lender practices affecting brokers has fallen on deaf ears.

AIPB founder Maria Rigoni wrote to the FBAA, MFAA and the Australian Brokers’ Association (ABA) on 6 December asking for their participation in a forum to discuss practices “initiated by” a “number of members” of these organisations.

While the letter did not mention any members by name, the list of nine unethical practices (covering things like access to products, commission payments and accreditation fees and policies) made it clear Rigoni was referring to policy decisions made in recent times by major banks.

However, none of the three organisations appeared interested in taking part in the discussion, with only the FBAA responding, and this was only to

Dirty deeds The AIPB believes the following lender practices are inappropriate: • Deciding who can and cannot work as a broker • Publicly belittling brokers who choose to work part-time • Restricting part-time brokers’ access to products • Continually reducing broker remuneration for completing outsourced lending tasks • Having unfair ‘take it or leave it’ commercial agreements in place with aggregators • Not disclosing upfront commission to be paid to third parties for the introduction of business via client connections • Limiting broker access to products due to volume hurdles • Not following through on publicly stated promises to support borrowers’ choice of distribution channel • Fee of up to $500 for access to a suitable product for their client

reject the offer outright and slam the letter as “poorly structured and worded” and “reeking of legal recourse”.

“No one with a common sense legal mind would take part,” FBAA national president Peter White said.

His chief issue with the letter was the AIPB’s failure to name any of the FBAA members accused of unethical and unfair practices.

“It says ‘members’ [of the FBAA] but won’t name them.

Yet they want to discuss these members in an open forum,” White said.

Instead, the FBAA offered the AIPB the opportunity to air any grievances involving FBAA members confidentially via its internal dispute resolution committee.

This offer was rejected by Rigoni who said the AIPB did not support “ ‘secretive’ strategies or agendas or inhouse investigations about things the FBAA should already

15

have plenty of evidence about if they are in the broker space, and should have acted on many moons ago”.

And she went on to accuse the “self-proclaimed peak industry ‘finance broker’ bodies” of demonstrating “no genuine interest in the hard working individual independent finance broker”.

Despite not attracting many members to date, Rigoni said she felt strongly that brokers needed an industry body “that represents brokers”.

She said she respected the other industry bodies, but maintained they couldn’t possibly have a “real honest open outlook on things” when they are representing opposing forces.

Maria Rigoni

16 www.brokernews.com.au

News Planning software tailored for mortgages

Gundeep Sidhu

The increasing cross-over and collaboration between financial advisors and mortgage brokers has seen a financial planning platform provider develop a mortgage solution as part of its software offering.

AdviserLogic managing director Gundeep Sidhu estimated that 50% of the financial planners who used its software also played a role on the mortgage side of things.

“Among our users there are planners who dabble in mortgages and brokers operating in the planning space,” he said.

Furthermore, he said most financial advice firms were now set up so that people within the office do exclusive functions.

“So they will have a mortgage specialist, an investment specialist, and an insurance specialist who all service the same client.”

He said “user demand” from advisors and mortgage brokers attached to dealer groups had spurred on the company to develop its ‘Mortgage Solution’ enhancement.

“They have been trying to use another [mortgage] application and duplicate the data, which is not a very efficient solution.

That is what has pushed us into this development,” he said.

AdviserLogic has already added some mortgage functionality to its platform such as calculators and the ability to upload a client’s loan information and bank statements. It is currently working on integrating the platform with financial

Key points  More signs of cross-over between planners and brokers  AdviserLogic platform extended to offer mortgage solution  Will integrate with financial institutions using LIXI  70% of data used by planners correlates with broker data institutions using LIXI standards.

In addition, the software will also provide a CRM capability, given 70% commonality between the client data held by financial planners and mortgage brokers.

A key feature of the new functionality is scalability so that as advisors and brokers grow within their dealer group frameworks the software is able to accommodate this growth.

AdviserLogic initially started off as a dealer group, before developing its own software platform based on a “practitioner’s point of view”.

It stepped out of the practice side 18 months ago to relaunch solely as a financial planning platform provider.

Forgery with Xerox and scissors Just a few short months after being celebrated as her company’s top performer, a New Zealand mortgage broker is facing the possibility of 10 years behind bars for fraud.

The broker – a 43-year-old mother who cannot be named – pleaded guilty in a Wellington district court in December to using a photocopying machine and scissors to create false documents to write more than NZ$15m in mortgages.

Some clients have lost their homes and others are struggling with their mortgage payments, according to a report in Christchurch’s The Press.

The woman’s branch was the best performing one in the company during the period the offences took place. The parent company began an audit into her loan applications because her branch’s outstanding performance was at odds with its geographical location.

Most of the loans obtained through the woman’s actions are being repaid. The broker was expected to return to court for sentencing on 27 January.

Bouris finds ‘Gateway’ to mortgages Key points  YBR offering its own mortgage products  Finding provided by Gateway Credit Union  Rate undercuts all the major banks  Bouris says increased competition will keep banks honest  Plans for 100 stores by end of the year

Gateway Credit Union has provided the avenue for Mark Bouris to return to mortgage lending, after he secured funding for his Yellow Brick Road franchise businesses.

At the time of going to press Bouris, the founder and former chairman of Wizard Home Loans, was offering a standard variable rate of 6.34%, cheaper than all the major banks.

He spent six months negotiating funding from

Gateway Credit Union. Paul Thomas, CEO of Gateway, said the new Yellow Brick Road home loans would give Australians access to greater choice.

“We have been in the mortgage business in Australia for more than 50 years, and we believe that the combination of our balance sheet and back office capabilities with Yellow Brick Road’s brand and distribution network is a fantastic development for Australian homebuyers,” he said.

“This kind of competition is what’s needed in today’s marketplace in order to maintain downward pressure on fees, charges and rates.”

Bouris used the launch of his line of mortgages to criticise the behaviour of the banks in the wake of the GFC: “Following the global financial crisis and the funding crunch, most non-bank lenders have either been forced out of business or swallowed up by the

major banks so they’ve been able to raise interest rates to recover costs without much fear of losing market share.

“That’s what Yellow Brick Road aims to change.

With interest rates on the way back up, new lenders like us need to enter the market in order to keep the big banks honest and ensure that there’s strong competition in the marketplace.

Increased competition will mean that the big banks will have to think twice about raising interest rates beyond the official rate or risk losing market share to us.”

Yellow Brick Road has 10 branches in Sydney and several more are scheduled to open in Queensland and Victoria in the next few weeks.

Bouris has set an ambitious target of having more than 100 branches before the end of 2010 and to make home loans available via the internet.

Bouris said the business has been strategically

Mark Bouris

acquiring other financial advisory businesses and putting in centralised systems.

“Yellow Brick Road is now at the stage where we can roll out our distribution network and make a significant impact on the home loan market,” he said.

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News analysis

Margin calls

 In the light of recent rate movements by bank lenders outside of the Reserve Bank policy, AB’s Tim Neary asked three market commentators to shed light on what drives lenders to independently move their rates

A

s the global credit crisis recedes, rising capital market costs continue to create a fundamental lending dilemma for Australia’s bank lenders.

Either they credit ration and become reliant only on deposits, or they continue to outpace the RBA’s policies and lend to those businesses and personal customers with an appetite to borrow even at the higher rates.

Consistent (and often unpopular) decisions by the majors to pass on different (and most recently higher) rate increases to the official movements indicate they have chosen the latter, says Fujitsu Consulting’s managing consulting director, Martin North.

After the RBA’s December increase of 25 bps, Westpac caused a furore when it pushed its rates by an unprecedented 45bps, nearly a full 100% more than the RBA. After a little cat and mouse posturing, the CBA followed with an odd-shaped 37bps rise and ANZ by 35bps. NAB, taking aim at Westpac in a strategic bid to gain market share, was the only major bank to stick with the RBA’s 25bps official increase.

The banks take a lot of heat when they act like this, but setting rate policies is a much more complicated situation than simply ‘parroting’ whatever the RBA does through to the markets. It is an outcome that North describes as “unrealistic and will never happen”.

“And over the last 12 to 18 months we’ve seen the banks take a significant hit in terms of their margins, and they are trying to recover that margin leakage in terms of raising rates outside of the RBA cycle,” he says.

In this instance all the heat came down on Westpac, while NAB walked away the least scathed. However, track back 18 months says North – highlighting the strategic nature of the game – and you will notice that the NAB actually made more movements outside of RBA policy than Westpac did.

“What’s more, take a look at absolute rates at the moment, and you’ll see hardly any difference between them. So the majors’ rate decisions are more about market positioning and strategy than they are about pure economics,” he says.

Lion hearted

So was the 45bps hike a brave move by Westpac?

Not really, says North. Rather Westpac “did what they had to do” because of the funding mix already on its book. It did not have a lot of choice in the matter.

And he suspects that rate manoeuvring is really far from over.

North expects the banks will probably continue to move rates higher than the RBA – because of these funding issues firstly; but also because deposit rates are

likely to become increasingly more competitive as global markets re-find their footing.

“There is a real battle for deposits going on at the moment because it is a very good source of funding for the banks. And remember that the majors are competing with sovereigns like the US and UK who are taking on even more debt to get their own economies out of the woods,” he says.

The other option, according to North is that shareholders be content in receiving an overall lower ROI on their investments.

“Remember,” he says, “that most of the banks have cut their dividends over the last 12 to 18 months. And so the only other way around spreading the pain away from borrowers is to say to the shareholders that they have to take a haircut in terms of dividends.”

Mortgage Ezy’s chief executive Garry Driscoll is less accommodating in his assessment of the major lenders’ rates movement policies.

He says quite simply that the majors move rates independently of the RBA “because they can”.

“They will give you every reason under the sun about capital markets, spreads, shrinking margins and average weighted cost of funds. However, unless you have access to their treasury information – which will never happen – then we can only rely on what they disclose publicly,” he says.

But Driscoll does think Westpac’s aggressive move in December last year has backfired, and that it has probably already cost the banking giant a fair chunk of market share.

Banana slip Martin North

Garry Driscoll

Steven Porges

there’s hardly any difference between … rates

And that Banana Smoothie skit certainly didn’t do it any favours either.

“Sometimes marketing ideas do not quite hit the mark and this one was a cracker. I would hate to be the marketing executive who signed off this skit as they will not be putting this one on the resume,” Driscoll says.

But he says Gail Kelly has had a “golden touch” in the past so doubts it will have any long-term damage to either her’s or Westpac’s reputation.

Also, he points out that the banking giant had significantly increased its share of the home loan market in the past year “so even a small dip in their new business would not cause it too many concerns”.

Without putting too fine a point on it, Aussie chief executive Steven Porges says banks move rates to recover margin rather than costs, since recovering costs on its own infers that they are losing money.

And that is something none of them is doing.

“But there is still a margin squeeze going on. The cost of funds at the short end is still more expensive than the funds they are replacing, so they have to recover that margin,” he says.

Porges also makes the point that the whole rate policy issue is somewhat of a double-edged sword, since the way Australia benefited by way of a limited GFC fallout was largely due to the performance and excellent rating of its major banks.

“And for that status to continue the major banks now have to recover margin and maintain profitability,” he says.

On a lighter note though, as far as Westpac’s Banana Skit is concerned, he thinks it has the potential to go down in Australian marketing folklore – as one of the worst constructed pieces of public relations material ever produced.

It is fine to make an easily understood analogy if it’s just to explain a point, he says, but it is an outright mistake to make up trite childlike stories about issues that are really serious.

“I see what they were trying to do, and applaud them for it but it was just terribly executed. It came off as being insulting – and would definitely not have delighted customers,” he says.

Welcome to 2010 and Broker news!

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News

Banks looking for deeper relationships Brokers can expect to be rewarded for stickier customers with deeper pockets as banks look to increase their cross-sell penetration in 2010.

This was the view of Citibank’s head of mortgages Steven Ramage as part of his mortgage market outlook for the coming year.

Speaking as part of Citi’s annual ‘Prospects for Economies and Financial Markets for 2010’ update, Ramage told journalists and analysts to expect bank initiatives with mortgage brokers to “drive behaviour to deepen relationships” and said recent acquisitions (NAB/ Challenger) had been made along these lines.

Ramage said banks would look to leverage their distribution channels to sell mortgages and other products on the back of good cross-sell penetration with borrowers through “packages and bundling”.

Offset accounts have also helped forge deeper relationships with customers, he said, “via the mortgage and salary credit held in the same place thus determining where the major banking relationship sits”.

“I expect mortgage brokers and branch managers to work together more in order to deepen

Do you have a bone to pick? Do you have an opinion on any story you may have read in the magazine or in our weekly newsletter? Australian Broker is eager to hear back from its readers, so if you feel strong about something, send an email to: comments@ausbroker.com

the relationship with the customer and also maintain margins,” Ramage said.

Ramage highlighted the dominant position of the major banks and their subsidiaries in 2009, but said funding markets were now beginning to improve: “We are already hearing reports that applications are being spread more across the market.”

However, with residential mortgage spreads much tighter due to increased cost of funds as well as the RBA moving into a rate increasing cycle, he said banks would need to find opportunities where greater spreads are available – namely commercial mortgages.

“You will see the majors focusing on this market, where the margins are much bigger,” he said.

“Commercial property will attract attention because pent-up demand has increased the spreads available in this sector,” he said. This attraction has been aided by the third wave of the GFC – the collapse of the commercial real estate market – not having occurred.

On the broader economic recovery in 2010 and beyond, Citi was optimistic, both in Australia and globally.

Michael Saunders, Citibank’s global head of developed markets economics, said the bank now expected “sustained but uneven global recovery” following “the most severe global recession for decades.”

After almost all major economies exited recession in the second and third quarters of 2009, Saunders said Citi was making more growth forecast upgrades than downgrades.

In December, Citi upgraded its 2010 GDP forecasts for the US, Japan, UK, Australia, New Zealand, Hong Kong, Korea, Argentina, Hungary, Poland, Czech Republic and Turkey.

Citi forecasts global growth of 3.3% in 2010 and 3.4% in 2011.

Steven Ramage

Letter: Lenders must tow the line on regulation Dear editor, I read with interest the reasons for a minimum standard for brokers and relate that to comments from Kathy Cummings.

On one hand, regulators and supporting groups such as the MFAA and the FBAA and the majority of active finance brokers are moving collectively to establish one standard.

However, the CBA along with Westpac and NAB – after acquiring broker groups or high volume broker lending channels – now proclaim that the only test of ability is individual broker volume to them. Low volume spells incompetence according to Cummings. No consideration is given to the fact that other lenders may be applicable to a broker’s clients.

In a time, long ago, the banks also claimed volume was required in order to deal with them. Then

came the birth of aggregators, a simple channel which provided group volume via a distribution agent which then applied the required volume to a lender as a united body.

It seems the broker world is directed by spoiled brats, at no cost to the bank; a broker works on their behalf and they only pay on success and then with special conditions should they fail to retain the introduced client. Not good enough, they proclaim, give us all or nothing.

Without lender acknowledgement of the same qualifications promoted by the regulators (under new licensing rules) then it is most defiantly a farce. For regulation to be effective it must be uniform to all parties.

Tow the line lenders.

Craig Fulton Mortgage broker

Industry support for Movember The Macquarie Group’s Sydney office contributed a whopping $255,000 to the coffers of Movember, making it the top fundraising team in Australia.

More than 258 staff members in Sydney participated in the annual charity drive to raise money to fight prostate cancer and male depression.

This effort was mirrored around the globe with Macquarie Group staff raising a combined donation of $560,000, placing the investment bank in the top three of corporate supporters worldwide.

“We are incredibly proud of the individual and team worldwide ‘mo’-growing efforts of Macquarie Group staff,” said Julie White, head of the Macquarie Group Foundation.

Luke Slattery, founder of Movember, thanked the Macquarie staff for their outstanding efforts.

“Macquarie Group’s donation to the campaign is fantastic and their year-on-year support

Industry fundraisers • Macquarie Group Sydney – $255,000 • Sam Boer’s ‘Upper Lippers’ (CBA) – $15,000 • Ballast Finance – $3,000

has played an important part in helping us to grow Movember in Australia and around the world. The year 2009 has been a phenomenal one for Movember, with over 250,000 participants taking part across the globe,” he said.

Others to have raised funds for Movember include Ballast Finance in WA, which raised over $3,000 for the cause and the CBA ‘Upper Lippers’ team, lead by Sam Boer, general manager broker sales & service in the bank’s third party banking division, which raised close to $15,000.

For photos turn to Insider

www.brokernews.com.au

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industry NEWS IN BRIEF BoQ recognised for equipment finance

The Commercial Asset Finance Brokers Association named the Bank of Queensland its 2009 Financier of the Year. While the bank does not use mortgage brokers for home lending, it does use the channel for equipment finance. BoQ group executive David Marshall said the award was a tribute to the hard work by the bank’s equipment finance team in what he said was a challenging year for all financial services businesses. He added that it was also a reflection of the bank’s continued support of small business.

“I believe this is clear recognition that the bank continued to support small business during the tough times, when perhaps other lenders were battening down the hatches. We set out to show our existing clients that we were there for the good times and the bad, and I believe this award shows that we have succeeded in doing so.”

UK looking to promote “sustainable” RMBS

The UK government is looking to encourage more investors into dormant securitisation markets. In his pre-budget report delivered in December, chancellor Alistair Darling said: “It is important that lenders continue to have access to a diverse range of funding sources, including securitisation markets. These markets, however, need to be robust, more liquid and consistent with financial and macroeconomic stability more broadly.”

The UK government will work with the Bank of England and regulator, the Financial Services Authority (FSA), and hold discussions with issuers and investors in order to establish a broader investor base and lay the foundations for stronger markets in the future. Darling believes that investors will be encouraged back into the market if RMBS are more sustainable, transparent and standardised.

Guard against global reforms for local banks: Stevens

At a time when many market commentators are crying foul at proposed global regulatory reforms, RBA governor Glenn Stevens has questioned the effectiveness of certain measures designed to protect the banking system from another global meltdown.

Also, he implied that regulators should be careful not to lump local banks with reforms which are better suited to their global peers.

In particular, Stevens is doubtful of the ability of leverage ratios, counter-cyclical capital buffers and balance sheet regulation to curb risk-taking and increase protection, according to a report in The Australian Financial Review. The most “egregious behaviour” came mainly from 30 to 40 large globally active banks, he told guests recently at an Australian Business Economics dinner.

“But there are thousands of other banks in the world whose risk appetite did not get out of control,” he added. Stevens said the difficulty regulators had was to reconfigure regulations to lower the chance of a repeat performance of the financial crisis, while aiding the recovery.

Westpac blames rate increase on expensive “bananas”

Westpac compared itself to a banana smoothie maker in an animated video attempting to explain how the GFC forced its hand on interest rates. The video was originally made for staff, but was later sent out to mortgage holders. Delivered in the form of a children’s parable, the three-minute video clip depicts a storm that destroys the banana crop making the cost of buying bananas more expensive and hence driving up the cost of making the smoothies.

“A + B = C, right?” the voice-over says, “… but the same formula seems so hard to understand when it’s about money, about lending, about mortgages, about banking.” Following a series of animations showing the impact of the GFC on other countries and banks, Westpac explains that when a storm blows in it has to “batten down the hatches and make the foundations secure”.

However, the bottom line is that borrowing money has become more expensive, Westpac explains, meaning “there really is no other choice” but to raise rates. “By not taking action, we risk the future of our business.” The video followed the bank bumping up rates by 45bps, nearly double the RBA’s 25bps cash rate increase announced on 2 December.

For the reaction to this story, go to: http://www.brokernews.com. au/site-search/westpac-blames-rate-increase-on-expensive-quotb ananasquot/39160?keyword=banana

Liberty shakes up organisational structure

John Mohnacheff, who headed Liberty Financial’s sales team between 2001 and 2006, has returned to the non-bank lender as group sales manager – personal business. Mohnacheff left Liberty to run its franchise arm BEAT Home Loans. In his new role, he’ll be responsible for Australian residential and motor sales. Liberty also appointed Bob Turnbull as group sales manager – commercial.

22

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Inside economics

Dr Shane Oliver is head of investment strategy and chief economist at AMP Capital Investors

Rates – how far, how fast?

AMP’s Shane Oliver expects the RBA to continue with its gradual tightening of interest rates with a ‘normal’ level of 5% not reached until the end of 2010

A

head of Christmas, the Reserve Bank of Australia again increased the cash rate by another 0.25% taking it to 3.75%. While much will no doubt be made of the fact that the RBA hasn’t increased rates three months in a row since the 1980s, it should be noted that 3.75% is still very low for the cash rate in an historical context.

Bank mortgage rates also remain historically low.

Assuming the average bank standard variable mortgage rate moves up by the 0.25% hike in the cash rate this would take them to around 6.5%. Apart from the recent months, the last time it was lower than this was briefly just after the 9/11 terrorist attacks and prior to that was in the early 1970s.

While the latest statement from the Reserve Bank is non-committal regarding interest rates going forward, the RBA’s generally upbeat tone suggests that more rate hikes are likely if the economy continues to recover as expected. This is consistent with our own composite leading economic indicator which is pointing to 4% economic growth over the year ahead.

While there was a case to hold fire in December, in terms of the big picture with economic growth heading back above trend there is no need for interest rates to remain at historically low levels, and so interest rates are on their way back towards a more normal level.

The ‘new normal’ for the cash rate

The normal level for the cash rate is basically the level below which monetary policy stimulates the economy, but above which it acts to slow the economy. So, the big question is, what is the ‘normal’ level for the cash rate?

This is important because it may provide a rough guide as to where the RBA is likely to take the cash rate in the next year or so, and it also suggests a level that once we go beyond, monetary policy will begin to constrain the economy and be more of a concern for the share market.

In the past, the normal rate was thought to be around 5.5% to 6%. In theory, the normal level of interest rates should be around a country’s potential nominal GDP growth rate. So if Australia’s long-term inflation rate is going to be at the mid point of the inflation target (ie, 2.5%) and potential real GDP growth is around 3% then

this would imply a normal rate of 5.5%. Surprisingly, the average level for the cash rate over the period since inflation targeting began is 5.5%.

However, several considerations suggest the normal level of interest rates may have changed. Two factors are likely to be pushing it up and these are stronger population growth on the back of higher immigration levels, and the boost to national income and mining investment from the commodity boom, which we suspect has much further to go. Against this though, several other factors suggest the normal interest rate may have declined: • Bank lending rates are running at higher levels relative to the cash rate than has been the case in the recent past. For example, over the 10 years to December 2007, the gap between the standard variable mortgage rate and the cash rate was 1.8 percentage points. It is now 2.8 percentage points.

Assuming the gap remains this high, the RBA won’t need to increase the cash rate as much to attain a given level for private sector borrowing rates. The 1 percentage point blowout in the spread between the mortgage rate and the cash rate would suggest that the normal cash rate is now 1 percentage point lower than it was two years ago.

• Secondly, the level of household debt to income has increased in recent years with the result that households are likely to be more sensitive to interest rate increases than in the past. In other words, the RBA won’t have to increase the cash rate as much to achieve a given slowing in the economy.

• Finally, the Australian dollar is running well above the average level that prevailed since the float of around $US0.70, and this will be having a constraining impact on the economy similar to monetary tightening.

Weighing up these conflicting forces suggest to us that the normal cash rate has fallen to around 5%.

With growth improving but underlying inflation falling thanks to excess capacity globally, the strong Australian dollar bearing down on import prices and uncertainty remaining regarding the strength of the global recovery, our assessment is that the RBA can continue taking a very gradual approach in raising the cash rate. In fact, having increased the cash rate three months in a row there is a case for the RBA to see what impact has been made before moving again, which suggests that the next hike may not be until March.

Our view remains that the 5% level for the cash rate in Australia won’t be reached until the end of 2010 and

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in the absence of inflationary pressures, monetary policy won’t move into tight territory until 2011 or 2012.

Interest rates and shares

There is an ambiguous relationship between rising interest rates and the share market. While higher rates place pressure on share market valuations by making shares appear less attractive, early in the economic recovery cycle this impact is offset by improving earnings growth. The official cash rate and share prices in Australia since 1980 indicate initial cash rate tightening cycles in periods of recovery. Sometimes rising interest rates have been bad for shares, as in 1994 for example, but other times this has not been the case.

For example, between 2003 and 2007 shares went up as interest rates rose.

Several considerations are worth noting: Firstly, rising interest rates from a low base are not normally initially bad for shares as they go hand-inhand with improving economic conditions. (Just like falling interest rates in a recession are not initially good for shares, as occurred last year.) For example, this was evident during the initial stages of monetary tightening in the late 1970s/early 1980s, the 1984 tightening, through 1988 and through much of the 2002 to 2008 tightening.

Secondly, rising interest rates are only really a major problem for shares when rates reach onerous levels (i.e. above normal), contributing to an economic downturn, eg, in 1981 to early 1982, late 1989, and in late 2007 to early 2008. They are also a problem when rate hikes are aggressive, as in 1994 when the cash rate was increased from 4.75% to 7.5% in just four months. Finally, given the high short-term correlation between Australian

shares and US shares, what the US government does is arguably far more important than local interest rates.

So, in terms of the current situation, the rise in Australian interest rates from 3% to now 3.75% is not likely to derail the cyclical bull market in shares as: • rising interest rates reflect economic recovery rather than a sign of an eventual growth downturn and so the improving profit outlook will provide an offset • interest rates are still at generational lows and with inflationary pressures so subdued it will be some time before interest rates reach onerous levels. In fact this is not expected until 2011 or 2012 when the cash rate will rise above the ‘normal’ level of 5% • US rate hikes are unlikely until mid 2010 at the earliest

Interest rates and the Australian dollar

The Australian dollar is already up sharply from its $US0.60 low last year. With the interest rate differential between Australia and other major countries getting wider, and commodity prices likely to see more upside, the upwards pressure on the Australian dollar is likely to intensify. We remain of the view that the Australian dollar will breach parity against the US dollar sometime in the next six months.

Concluding comments

Interest rate hikes in 2010 in Australia are likely to be more gradual, taking us up to around 5% by year end.

Only when rates move noticeably beyond this and US interest rates rise above normal will interest rates be at levels judged restrictive enough to hurt the economic outlook and hence shares.

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…interest rates are on their way back towards a more normal level

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Feature

Benchmarking Indeed a popular topic during the Canadian panel discussion was the changing relationship between brokers and lenders.

“If brokers and lenders wrote down the definition of partnership, the answers would be so different,” said the Mortgage Centre’s Tom Hogg, also part of the panel discussion. “I remember speaking a few years ago and saying we have to change the way we do things.”

Peter Kinch, this year’s Canadian Mortgage Professional’s (CMP) Top 50 broker concurred. “You have two customers – one is the borrower and one is the lender.”

The general consensus was that keeping lenders happy is equally as important in today’s climate as serving clients, but it’s something that has to be balanced carefully.

Another Canadian bone of contention close to the hearts of Australian mortgage brokers was also raised

by Kinch during the discussion: “Clap your hands if you’ve submitted a deal and then not lost it, but had to compete with the bank branch to keep it.” The overwhelming applause spoke volumes.

Brokers to grow market share

 Australian

Broker attended the Canadian Association of Accredited Mortgage Professionals (CAAMP) annual conference and discovered many similar trends emerging in the one remaining Northern hemisphere market that is still playing a similar game to Australia

H

eld at the end of 2009 in the Toronto Convention Centre, the Canadian Association of Accredited Mortgage Professionals (CAAMP) expo provided a good barometer of broker confidence as well as providing forecasts for the year ahead for the country’s economy and housing sector.

Credit crisis fallout

Not surprisingly, the GFC was a hot topic.

The credit crisis reshaped the relationship between mortgage brokers and major lenders in Australia and was one of the main talking points among Canadian mortgage professionals.

Industry members who attended the event heard that if there was anything good to have come out of the credit crisis, it was the opportunity to improve broker/lender relations. “I was pleased with the credit crisis because it brought everything to the table,” said Vince Gaetano, vice-president of Monster Mortgage, who was part of the mortgage broker panel discussion.

“Before it was just a volume game, now it’s a quality game,” he said – comments that would not have sounded out of place at an Australian mortgage conference in 2009.

The most recent Fujitsu Consulting Australian Mortgage Industry Report (Volume 10) noted how mortgage brokers had regained market share as a distribution channel (and reversed a slide) by directing business to the major banks. The common consensus is that this share of market will continue to grow from 38% to near 50% over the next few years.

Similarly, at the CAAMP conference, a panel of lenders said they believed mortgage brokers’ share of the market would continue to grow, but at the same time emphasised the need for greater efficiency and speculated that volume bonuses could be scaled back over time.

“There is increasing penetration of the mortgage broker channel because it takes all the grief of getting a mortgage off a person’s shoulders,” said Stephen Smith of First National, adding the under-40 generation has created a culture of using mortgage brokers as opposed to their parents’ generation who turn to banks.

Such sentiment fits in very nicely with Australian research – the mid-year Bankwest/MFAA Home Finance Index found that the main reason why respondents favour mortgage brokers is because they do the leg work (73% of respondents).

In addition, research by the Retail Finance Institute (RFI) in its Consumer Attitudes to Mortgage Brokers 2009 report found brokers were most popular with 25 to 44-year-olds and less popular with those over 65 years.

Different things to different brokers

Among the positive outlook for Canadian brokers there was also critique.

Ivan Wahl of Xceed Mortgage Corporation talked about his company’s goal to do 80% of volume with 20% of brokers and speculated there are only a small number of brokers who “do what they say they’re going to do.”

John Webster of Scotia Mortgage Authority said he didn’t think lenders needed to be “all things to all people” in response to one of Smith’s comments about catering to all brokers, not just the ones who send in lots of deals.

Again, such a statement could easily have come out of the mouth of an Australian third party banking executive; most notably NAB, which now offers

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enhanced services to their four-star brokers such as access to higher LVRs and real-time customer data.

And just like the major Australian banks are looking to work more closely with the top performing brokers, the topic of lender exclusivity was raised at the Canadian lender panel discussion.

Boris Bozic of mortgage lender Merix Financial said it appeared lenders were after “the same 750 brokers across the country even though there are 14,000”, stating brokers can have trouble gaining direct access to a lender. He also said volume bonuses had a “shelf life expiry” and warned the industry to prepare for changes.

The panel agreed on a trend toward more screening of brokers (such as Scotia Mortgage Authority’s mortgage scorecard) focusing on efficiency ratios, number of delinquencies and deal quality – a trend many brokers in Australia could identify with.

Similarly, just like things had started to turn around for brokers and lenders towards the end of 2009 in Australia, John Webster noted that the last half of 2009 was much better than anyone expected [in Canada].”

“But there is still a lot of uncertainty,” he added.

Expert advisors

The Loan Market Group conference held in Melbourne in October stressed the need for brokers to build their expert knowledge and to be seen as being trusted advisors by consumers.

Similar sentiments were expressed by CMP Top 50 broker Peter Kinch at the CAAMP expo.

He stressed the importance of finding a niche and becoming an expert as one the most effective ways to grow your business.

“There weren’t many players in the sandbox [of real estate investment] so I realised you could become an expert quickly,” Peter Kinch told the CAAMP crowd.

“The clients value the information so much that they just want you to do the mortgage based on you being the source of that information.”

Kinch along with the two other brokers on the panel – Gaetano and Hogg – stressed the importance of having expert knowledge.

“You have to go home and study all the lenders, whether you are going to support them or not,” explained Hogg.

Gaetano emphasised making sure your client understands what’s going on. “They don’t want to hear acronyms, they don’t have to hear buzz words,” he said.

His advice for brokers starting out was that before picking a brokerage, they should be sure it provides adequate training. “Job shadowing is a good thing, for at least six months.”

Kinch added to that, saying training should be the first thing on every new broker’s mind.

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US: Opportunities for those who survived The National Association of Mortgage Brokers (NAMB) West 2009 conference, held in Las Vegas in December, provided some direction for those brokers who have survived tremendous upheaval.

Fred Arnold, president of mortgage originator American Family Funding Mortgage, said brokers could thrive in these challenging economic times by undertaking a number of simple yet profitable marketing activities.

Arnold told attendees that the recent credit crisis should be viewed as an opportunity. With a vast swathe of US mortgage brokers now out of business, now was the time for those still in business to capitalise.

The 15-year industry veteran told mortgage brokers they should begin by rebuilding their customer databases, starting with data about their own families. Rather than seeing this as mixing personal and business lives – something he believes many brokers think is taboo – he says this way they can ensure their families don’t get taken advantage of by unscrupulous mortgage brokers.

He stressed it wasn’t about making money from family – he would generally do the business at a lower interest rate – but instead more to do with building his database and sphere of influence.

“I don’t have to sell them a loan,” he said. “I just simply talk about the state of the market.”

His goal was to be known to them as the real estate market expert they could turn to and trust.

On what data to collect, Arnold said e-mail addresses – the cheapest means of staying in touch with customers and prospects – as the most important bit of information to gather. Yet collecting some of the most personal information about a client, including family status, personal interests, hobbies, could be as easy as listening to clients more intently.

“When it’s someone’s birthday, I either text them, call them or e-mail them.” This is something only family usually does, he said, and it’s unlikely the client will be offended if you wish them a happy birthday.”

Another key strategy Arnold stressed as being important was automating tasks to ensure they occurred, removing the chance they would be forgotten.

Texting is also part of Arnold’s sales armoury. He says, when sitting in an aeroplane, he can write a mass of text messages that are automatically sent once he lands. Often these texts (and e-mails) will simply be motivational messages, wishing his clients all the best for the working week ahead, while not forgetting to ask about their spouse.

There is increasing penetration of the mortgage broker channel because it takes all the grief of getting a mortgage off a person’s shoulders

UK: Massive consolidation likely Consolidation is happening rapidly in Australia, but probably not as quickly as in the UK, where one in four mortgage broker companies could change ownership as a result of the current economic climate.

This was the finding of a recent study carried out by UK financial analysts Plimsoll, who forecast a prolonged period of consolidation due to a high number of cash rich competitors.

David Pattison, author of the new Plimsoll Industry Analysis – Mortgage Brokers, said “any director worth his salt would agree that, in the current climate, there are simply too many companies chasing too little market”.

“With many directors eyeing the exit doors and highly leveraged buyouts consigned to history for the time being it really is a buyer’s market out there for cash rich companies,” he added.

The Plimsoll Industry Analysis rated 369 mortgage broking companies on their acquisition attractiveness and identified 92 with sizeable cash reserves on their balance sheets that, due to record low UK interest rates, were generating no returns.

As a result, “these companies are now in the position to buy up large chunks of market share at rock bottom prices and make that money work for them”.

Plimsoll said the UK mortgage brokers market is still widely regarded as one of the UK’s most fragmented sectors.

“If one of [the new broker’s] first questions is ‘what’s your commission split?’ then that’s the end of the conversation,” he said. “Training should be the most important part.”

Economic fortunes

Australian economists are largely optimistic about 2010, and so too were their Canadian counterparts at CAAMP 2009 – though geography appears to give Australia the edge heading into the New Year.

Whereas Australia’s economy is being driven by continued demand from its main trading partner China, Canada’s proximity to the flagging US economy has not been to its advantage.

These two points – optimism, but US alignment – was brought home by Benjamin Tal, senior economist at CIBC World Markets.

Tal kept an optimistic tone during his talk, saying the recession was over and business bankruptcies were down.

However, whereas Australia has started to lift interest rates off historical lows, Tal said key interest rates in Canada could remain low well into next year depending on when US rates rise.

He also emphasised the differences between the Canadian and US economies: “In Canada, there was no need to print money for stimulus during the recession, so when interest rates rise, they won’t go up as much as in the US.” Other positive differences he listed were a shorter duration of unemployment among laid-off workers compared to the US, excess liquidity among individual investors and soaring consumer confidence.

And despite a forecast of just over 2% GDP growth in 2010, Tal said Canada “will outperform the rest of the G7 in 2010 for the first time.”

He also said there was “no indication” of a housing bubble, a theory being speculated recently in the media as it has been (and put to bed) in Australia.

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Feature

One year on What a difference 12 months can make … or maybe not. Australian Broker reflects on the stories that made headlines in the magazine one year ago

Issue: Australian Broker issue 6.1 Headline: “Commissions to standardise once again” (Page 6) What we reported: As brokers adjusted to new commission models tied to quality metrics (online lodgment, conversion ratios, cross-selling, etc), Choice CEO Brendan O’Donnell predicted that these new measures would become largely redundant in the short to medium term. “My view is that a year from now there’ll be more standardisation leaking into the market,” O’Donnell said, adding that he believed lenders had created something that would be really hard to sustain. As a result, he predicted a more simplistic approach to remuneration. The FBAA’s Peter

Brendan O’Donnell

White disagreed, saying quality metrics would remain until they were met.

What has happened since?

While O’Donnell’s prediction did come true in the case of St.George, which simplified its commission structure on 1 October, quality metrics have remained part and parcel of commission models (including St.George) and look unlikely to disappear anytime soon.

Indeed quality metrics have been taken one step further, if you believe the bank rhetoric that minimum volume requirements are all about ensuring quality submissions. In the case of e-lodgment, this is no longer a quality metric, but a standard requirement of brokers should they wish to do business with St.George, CBA, Bankwest, NAB or Westpac.

Headline: “Deloitte: major banks to force broker consolidation” (Page 10) What we reported: Speaking at Deloitte’s annual Australian Mortgage Report presentation, author and banking partner, James Hickey, predicted that banks would be looking to limit their relationships with top aggregators and encouraging consolidation within the sector.

His comments came at a time when both Bankwest and ING announced they would only deal with the country’s largest aggregators. The report also predicted that 2009 would be “the

James Hickey

year of the large bank” and an opportunity for them to capture market at the expense of nonbanks and other smaller players.

What has happened since?

Hickey’s prediction has come true with consolidation continuing at a rapid pace; most notably the Macquarie aggregation venture involving three aggregators and Mortgage Choice buying Loankit (with more deals in the pipeline) the two standout stories.

In addition, RAMS joined ING and Bankwest by cutting ties with aggregators not bringing in enough volume. However, with the likes of Westpac and CBA (plus Bankwest) implementing minimum volume requirements and NAB introducing limited accreditation for brokers that rate poorly on its star rating system, the attention has shifted to the individual broker. Being part of a major aggregator no longer guarantees accreditation with any major lender, unless you can meet the volume or quality hurdles. Of course Hickey was also spot on about the major banks dominating mortgage lending in 2009.

Headline: “Strategic role for Moulieris at Challenger” (page 8) What we reported: PLAN founder Alex Moulieris was

promoted to the role of chairman of broker platforms at Challenger Mortgage Management (CMM) having previously headed up Challenger Broker Support Services, the division set up to create a central IT and back-office hub for PLAN, FAST and Choice.

The new role allowed him to focus more on strategic direction and less on day-to-day issues.

His promotion was part of an internal restructure, which saw Steve Weston assume the role of GM for distribution, having been previously GM for residential and commercial lending. The changes were initiated by newly appointed CEO Drew Hall, following Brian Benari’s promotion to COO/CFO at Challenger.

Alex Moulieris

What has happened since?

Following CMM being sold to NAB and renamed Advantedge, Drew Hall retained his role as CEO as did Steve Weston, whose full title is GM for distribution, broker platform and lending.

Weston told AB that Alex Moulieris continues to work with the renamed business in the role of non-executive chairman of combined broker business, a part-time position that sees him involved in entrepreneurial activities and advising on regulatory changes.

www.brokernews.com.au Eddie Chung from BDO (Qld)’s Private & Entrepreneurial Client Services can be contacted on (07) 3237 5999 or via email at eddie.chung@bdo.com.au.

Opinion things to know before developing a property Eddie Chung, a partner at professional services firm BDO, provides some tips for brokers diversifying into property development or for those just looking to improve their expert knowledge Risk The structure used to undertake a development project should minimise the exposure of the joint venture parties’ assets to potential claims where possible. This will be a critical issue for the land owner.

If the property to be developed is currently owned by a discretionary family trust and the trust also owns other valuable assets, you should look at strategies to protect the other assets and ensure that the development vehicle is a separate entity.

Also, if an individual owns significant assets, it may not be prudent to appoint the individual as a director of the development company as it may expose the director’s personal assets to potential claims.

Return You need to negotiate with the developer to ensure that the return from the project will be commensurate with the risks you are assuming.

If the borrowings will be in your name and the developer is essentially being ‘free carried’, your return should reflect the extra risk you assume by carrying the debt. The inherent risks associated with your ownership should also be factored into the profit and risk sharing arrangement.

Funding If you use the loan funds to initially pay down the loan on your private residence and redraw the funds from the home loan to fund development expenses as they are incurred, the interest on both the development loan and home loan will need to be apportioned for tax purposes.

It will be important to limit the bank’s recourse against your personal assets as much as practicable.

Structure If you do not wish to be liable for acts done by the developer, you will need to ensure that you and the developer are not parties to a common law partnership.

The absence of a common law partnership does not necessarily mean that there is no partnership for taxation purposes. In fact, the income tax and GST law specifically broaden the definition of a “tax partnership” to include arrangements where parties are jointly in receipt of income.

Ownership Be careful that the formation of the partnership does not inadvertently cause you to dispose of some of your interest in the property.

Under an unincorporated joint venture, you as the landowner may continue to own the property in your name and enter into a joint venture agreement with the developer. Rather than having a direct interest in the property, the developer will merely be rendering property development services to you in return for a bundle of fees.

Taxation If the property developer borrows money in their own name to fund the development project, you as the land owner will not be able to directly claim a tax deduction on the interest.

The tax costs of a project may also be affected by the type of entities used in the structure. For instance, if a unit trust is used to undertake the development project, the unit holder should perhaps be a discretionary trust, which has the flexibility of distributing any income from the unit trust to an entity that pays tax at a lower marginal tax rate. Other taxation aspects to consider include GST. Exit strategy This allows the parties to bring the arrangement to an end without unintended commercial and taxation outcomes.

Important disclaimer: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This article is provided on the terms and understanding that the author and BDO (Qld) are not responsible for the results of any actions taken on the basis of information in this article, nor for any error in or omission from this article. The article is provided for general information only and the author and BDO (Qld) are not engaged to render professional advice or services through this article. The author and BDO (Qld) expressly disclaim all and any liability and responsibility to any person in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this article.

WINNER!

Comment of the month Congratulations ‘Clint’ on winning the $10,000 media package

“

Brokers given until mid-2014 to get Cert IV Under transition arrangements released by ASIC, brokers and their representatives now have until 30 June 2014 to obtain a Certificate IV qualification.

This was made clear in a series of guides issued today to help those preparing their credit licence applications.

While Certificate IV in Financial Services (Mortgage/Finance Broking) is a training requirement for both ‘responsible managers’ and their credit representatives, both have been provided with a transition period, until 30 June 2014 to obtain the necessary qualification.....

Commented by: Clint

”

Unfortunately ASIC are not taking the finance brokering industry seriously. That ‘ s why we have cowboys like “New Broker” destroying our industries reputation. By now we should all have Cert IV under our belts and be giving consideration to the Dip of FS. We have had it pretty good to date when you consider the compliance and regulation that other advisers (eg Fin Planners) undergo in comparison to our requirements. AML was made compulsory and we were required to comply in a short period, why not Cert IV which can be completed in no time? If we want to make our industry more professional, it’s time to step up to the plate and broaden our knowledge of what we are selling and our responsibility to our clients. After all, we are assisting people in what is considered probably the biggest investment of their lives. Move with the times guys and help improve the reputation of our industry.

be in the running this month: »» if you have an interesting view on industry developments, register your contact details and share it with us! »» professional, thought provoking opinions are what our readers want »» share your expertise

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News off the cuff Peter Heinrich

The National Finance Institute’s managing director

What was the last book you read?

The Reluctant Fundamentalist by Mohsin Hamid If you did not live in Australia, where would you like to live?

Paris, France. I spent almost a month there in 2007 and fell in love with it – the city, the people, the transport system, the history, culture and the sights.

If you could sit down to lunch with anyone you like, who would it be?

Wallaby coach Robbie Deans. I would like to discuss how he plans to get the team in a position to win the next World Cup in 2011. A person no longer with us who I would have loved to talk with over lunch would be Miles Davis who was possibly the most original, unique and influential Jazz musician ever.

What was the first job you ever had?

When I was at school I spent most school holidays working with my father who was a builder – consequently there is not much DIY building I can’t do. My first real job was as a management trainee with Woolworths – where I learned the value of being able to close a sale.

What do you do to unwind?

I like to read when I’m travelling for work, and walk along the beach with my family and dog when I’m at home.

What’s the most extravagant gift you ever bought yourself?

A five-week trip to London and Paris in 2007 to follow the Rugby World Cup quarter finals, semi finals and Grand Final.

What CD is currently playing in your car stereo?

A compilation CD I burned from iTunes; including Ame Strong, Tout est bleu, Amp Fiddler & Sly & Robbie and Black House (Paint the White House Black). Most of my CD’s are Jazz or Fusion oriented.

If you could give anyone starting out in business one piece of advice, what would it be?

Just do it! Go for it with all the energy you have and don’t let people tell you can’t do it.

If I was not working in the mortgage industry, I would like to be…?

Permanently travelling around the world.

Where was the last place you went on holiday?

Camping with family and friends in Kalbarri, 700km north of Perth.

What is the one thing most people would not know about you?

Until my mid-40s I had a handlebar moustache that was bigger than John Newcombe’s.

Bankwest announces new head of broker sales Bankwest recently announced the appointment of Aaron Milburn as its new head of broker sales.

A strong and effective leader is a key driver in delivering the bank’s vision to focus on quality, said Mark Reid Bankwest’s head of retail sales.

“Aaron is talented, experienced and thoroughly focused. He has an in-depth knowledge of the local market, and a real understanding of the broking and mortgage industry,” he added.

As well as focusing on the changes to industry regulations this year, Reid commented that providing a quality experience was

cont. from cover

>>

More modest forecasts came from AFG, Ballast and Connective.

Mark Hewitt, general manager for sales and operations at AFG, predicted a 40% share based on “improved competition, better access to funding for the second tier and strong customer attraction” while Ballast Finance general manager Frank Paratore said the introduction of licensing would give a “greater comfort factor” to

“a central objective” for the bank moving forward.

“We want quality across every interaction that we have with brokers. This includes developing our already existing quality relationships, which in turn will result in quality applications,” he said.

Milburn began his career with Halifax Bank of Scotland in 1999 in a range of roles throughout retail banking but specialised in sales and area management.

After this stint he was employed as the regional manager for the store business within Bankwest. In this role, he was responsible for the

management and delivery of 58 retail branches in WA. Most recently, Milburn headed up WA broker sales in the capacity of state manager.

Reid said Milburn’s key objective in the new position is to “ensure quality across every interaction with brokers”.

Bankwest was in the news recently over its Rate Tracker home loan product.

Late last year, television commercials and messages on the Bankwest website had emphasised that the product was available only in Bankwest branches or over the phone. At the time, Reid confirmed

the product had not been available to brokers since October 2008. He said the key element behind this decision was to “continue to drive the success of Bankwest as a challenger brand”.

“This is a business decision that has been made in line with our strategic target, as we continue to build awareness of the Bankwest brand on the east coast,” he added.

However, Reid reiterated that the broker channel remained “an important distribution channel” for retail in Bankwest and that it would continue to do so in the future.

consumers using brokers. On the question of broker numbers, all respondents, apart from nMB, expected a significant (greater than 10%) decline in the wake of registration and licensing.

The Loan Market’s chief operating officer, Dean Rushton, said that as per the experience in the planning industry, regulation would “act as a catalyst for brokers to decide whether they have the

resources and motivation to want to commit to the profession moving forward”.

Both Choice CEO Brendan O’Donnell and Club Financial director Andrew Clouston expected an exodus of ‘part-time’ brokers from the industry” due to licensing requirements. Clouston also expected “semi-committed and nearing retirement brokers” to exit the market rather than commit

themselves to “professional qualifications, continuing education and the accountability of a transparent compliance regime”.

Foley’s bucked the trend with his view that “licensing may encourage more businesses to enter the mortgage broking space”. He said those that already departed had done so mainly due to economic factors and due to bank changes to accreditation rules.

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Insider

Got any juicy gossip, or a funny story that you’d like to share with Insider, drop us a line at insider@ausbroker.com

Macquarie’s amazing Mos

F

resh from raising a whopping $255,000 in support of Movember (the biggest amount raised in Australia), Macquarie Group also showed that financial institutions have a sense of humour when staff in its Sydney office posed for these photos:

many Australians may need to put themselves on a debt diet (as well as that weight-loss one) to shape up for the year ahead is spot on.

And in the spirit of continued good cheer – not to mention the resurgent non-bank sector – it points out that borrowers can get all the help they need as there are “plenty of lenders out there” happy to assist with competitive rates.

Betting on Golden Bouris

H

ot on the heels of Mark Bouris’ television debut on The Apprentice, a story in the main press caught Insider’s eye just recently.

As if he’s not already famous enough, right?

But it seems this time things aren’t rolling as smoothly anymore for the millionaire founder of Wizard Home Loans.

While certainly there was no ambiguity around when he shot the index finger out on air yelling: “You’re fired”, these days in the recently acquired chair of listed industrial fastening company TZ Limited Bouris is having a little more trouble getting his point across.

Apparently his first few months in the job have not been without incident – and according to the SMH, the latest hoop he has had to jump through was to issue a series of clarifications on the company’s cash positive position contained in TZ’s annual report.

But Insider reckons smooth Bouris – well known to the mortgage industry for his Midas touch – is worth an each-way punt (at least) on being properly understood in the end.

A ‘MO’ment in time

C

ongratulations to the team at Ballast Finance who raised $ 3,000 in support of men’s health by growing some impressive moustaches during November.

The guys at the WA-based brokerage reluctantly reached for their razor blades on 1 December having created (we are told) a real ‘Magnum PI vibe’ in the office.

For those who missed the Tom Selleck inspired facial creations, here’s what the team looked like at the end of November:

Of commission cuts and Brazilians

N

o, Michael Russell wasn’t talking about those skilful football players when he made the connection between Brazilians and cuts to broker commission in a recent interview with SME website, Smart Company.

When asked what impact the GFC had had on things like commission cuts, Russell mentioned a “very funny quote in The Australian” which he

said summarised the situation very well.

“It said the commission cuts were quite severe but they certainly were a long way off a full Brazilian,” Russell said, adding that he thought the quote “quite funny actually” and “probably correct”.

On both counts, Insider concurs.

Bank shows sisterly love

B

rokers are feeling rightly aggrieved at reports that some banks are paying real estate agents not only upfront commission, but (would you believe it) in some cases trail, and all for doing little more than passing on business cards.

However, it seems they don’t even have to do that for some banks to pop a cheque in the post.

Apparently in South Australia, a story is doing the rounds of a real estate agent who received a hefty payment ($1,000+) when their sister took out a mortgage at a bank.

The bank assumed the agent had referred on their sibling and thought it best to say thank you.

In reality (or so the tale goes), no such referral had ever been made – the woman in question, without any brotherly persuading, had simply walked into her local branch to get a loan.

And who says there’s no such thing as a free lunch, hey?

Macquarie Mo Bros L-R Simon Foale, Richard Crookes, Damian Graham, Tim Oldham

Debt diets all round after binge spending

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ow that the silly season is over the press is inundated with get backin-shape promotions.

Fair enough too as far as Insider is concerned, since during the holidays the act of taking an extra mince pie, a bitterly cold beverage or slice of fruit cake is seen as compulsory.

But the industry’s very own Opportune Home Loans has gone one better this year.

Its recent warning that after the Christmas ‘spending’ season

When the going gets tough, the tough do it for charity

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nsider doffs his hat to eChoice’s Brett Mansfield for running the New York marathon late last year.

But by Mansfield’s own admission it was a painful slog in the end – read his report on page 14 – so it was just as well that he had a noble reason to plug on and finish the job.

In this case it was for good cardio health. In and amongst all the puffing and panting, which is standard drill to prepare for such an event, Mansfield found the time to chalk up $12,500 for the Heart Foundation in Australia.

So Insider says: ‘Brett, here’s to your jolly good health. Cheers.’

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Caught on camera The circus came to town as Liberty Financial hosted mortgage brokers and business partners as part of its ‘Enjoy the Experience’ series of events across Australia

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Photo 1: The Aussie Team enjoying the entertainment in Brisbane Photo 2: Liberty SSM Joe Mullen with the team from Choice Money Advisors Adelaide Photo 3: MC Christa Hughes with her lovely dancers Photo 4: Alison, Murray and Joe from Liberty presenting lucky prize winners Chris and Rebecca with new i-Pods Photo 5: Ring Master Cairn-do Photo 6: Liberty’s Bob Turnbull with Mike Barrington from UFS Photo 7: Liberty’s John Mohnacheff with Tony and Mary from Natloans and Natasha from FAST Photo 8: Guests getting involved with the entertainment Photo 9: Ring Master Cairn-do with staff from Choice Sydney Photo 10: Liberty’s Paul Concannon with the boys from Aussie Photo 11: Hooping around Photo 12: Entertainment Photo 13: Liberty’s Leon Stern with Marie and Tania from Mortgage Choice Photo 14: The team at Redlend Australia, Sydney

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Services

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AGGREGATOR / WHOLESALE BROKER PLAN Australia 1300 78 78 14 www.planaustralia.com.au mail@planaustralia.com.au page 5

Banks Commonwealth Bank 13 20 15 www.commbank.com.au page 13 www.residex.com.au The House Price Information People

LENDER MKM Capital 1300 762 151 www.mkmcapital.com.au page 8

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Pepper Homeloans 1800 737 737 www.pepperhomeloans.com.au page 4

NCF Financial Services Pty Ltd 1300 550 707 www.ncf1.com.au page 11

OTHER SERVICES Financial Services Online www.leads.financialservicesonline.com.au page 17

Prime Finance Pty Ltd 1300 130 538 www.primefinance.com.au page 10

Residex 1300 139 775 www.residex.com.au page 23

software/it Finware 1300 762 444 www.finware.com.au sales@finware.com.au pages 31

RP Data www.rpdata.com page 21

RAMS Home Loans 1300 130 769 www.ramsbroker.com.au page 3

Trailerhomes 0417 392 132 page 26

MORTGAGE MANAGER / NON-BANK Mango Media 02 9555 7073 www.mangomedia.com.au page 1

SHORT TERM LENDER Crown & Gleeson 1800 735 626 www.crownandgleeson.com.au page 2

NON-CONFORMING Liberty Financial 13 11 80 www.liberty.com.au page 7

Interim Finance 02 9971 6650 www.interimfinance.com.au page 6

Wholesale Advantedge Financial Services Pty Ltd 03 8616 1600 www.advantedge.com.au page 9

Resimac 1300 764 447 www.resimac.com.au newbusiness@resimac.com.au pages 15 & 32

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