Australian Broker magazine Issue 9.11

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ISSUE 9.11 June 2012

Bank desire to kill off brokers ‘truly dead’

John Flavell

 Brokers asked to

change an ‘us versus them’ mentality longsince abandoned by major lenders To see where the future of financial services and mortgage broking is going, NAB Broker general manager of distribution, John Flavell, says he need look no further than his kids.

“If you look at how things are evolving, and I think of my

children, I don’t think they have ever actually stepped into a bank branch,” he says. Flavell says they have online savings accounts, and are part of a new generation of customers.

“Their experience so far as they’re concerned with branch banking is they won’t have any.”

Coming from a senior banking executive, this progressive view might shock mortgage brokers, who Flavell says need to move past a view of the industry which is very much ‘us versus them’.

Instead, Flavell says banks have

now truly embraced the broking channel as a means of cooperative distribution, and a critical part of the banking matrix of the future.

“Our expectation at the NAB group level is that brokers will continue to provide a broader range of products to a larger proportion of the market,” he says.

“Other channels will certainly grow as far as online and telephone are concerned, though the branch network will probably diminish over this period of time.

That’s the trend that we see.”

For lenders, Flavell says integrating brokers into their distribution model will enable them to reach more of the market, and is therefore crucial to the future success of their businesses. “If lenders are out to shut brokers out of the market place – well that’s one thing they might endeavour to do. But if you’ve got consumers who are actually voting by their actions and making it very clear what their preferences are as far as where they access services and who they deal with, well then if you turn your back on 50% of flow then you’re doing so at your own peril,” he says.

Stepping back in time, Flavell says that lenders initially tried to compete with brokers in the late 1990s on price, and subsequently by providing more convenient service. However, he said that banks could not shut out the channel and it had increasingly grown market share.

Page 19 cont.

D-Day not today MFAA explains diploma deadline extension Page 2

Refund finds home Saga ends as Homeloans Ltd buys Refund Page 2

Broking on faith Daily contact reaffirms career significance Page 8

Inside this issue People 20 Broker sets sights on Vegas Viewpoint 22 Regulators need to KISS Forum 23 New deadline causes furore Insight 24 Meditation for success Market talk 26 Looking on the bright side Q&A 28 QBE LMI talks insurance Insider 30 Fame and frivolity at MFAA

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News Homeloans’ Refund buy a ‘free kick’ Homeloans has called its acquisition of the Refund network a “free kick” to increase its impact in the marketplace.

The company is acquiring the embattled Refund Home Loans, along with the company’s broker network and loan book of more than $1.9bn. Homeloans general manager of retail sales Greg Mitchell said the deal would substantially increase Homeloans’ exposure in the marketplace.

“This is basically a free kick we’ve got. About 170 contracts have been sent out to Refund brokers. If we get a majority of those franchisees onboard it just gives us that presence in the marketplace,” he said.

The deal will offer Refund franchisees the opportunity to

become Homeloans branded brokers.

In a letter to franchisees, administrator SV Partners urged Refund brokers to come under the Homeloans brand, saying it would ensure the re-establishment of their trail payments.

While Mitchell said some Refund franchisees had left the company, he claimed most were pleased with the acquisition.

“We’ve tried to make contact with a lot of them verbally, and it’s been mixed. A lot of them through that gap have left the industry or entered positions where they may not continue [with Refund], but the majority of them are happy to have come onboard with a brand that’s been around

for 26 years, and the place we hold in the market.

A lot of them see the upside of the acquisition,” he said.

Greg Mitchell Mitchell said the acquisition fit well with Homeloans’ strategy of ramping up its branded distribution.

“Homeloans has wanted to expand our brand, and we’ve been wanting to for the past two or three years. We just saw a fantastic opportunity with Refund to work with the franchisees out there that have obviously gone through a bad spate where they’ve been in no man’s land. It’s also a great opportunity for us to increase our book,” he said.

MFAA explains diploma extension The MFAA announced last month that it would postpone the deadline for the completion of the diploma at the last minute, due to a ‘massive backlog’ in processing enrolments.

At its annual member conference in Adelaide, CEO Phil Naylor said members would need to enrol in the diploma by 30 June, but now had until 31 January 2013 to complete them.

Previously, the MFAA had mandated a completion date of 30 June this year. While it had explained, as the deadline approached, that its intention was to help members achieve the

diploma in time, the threat of expulsion from the member body was always clear.

The MFAA said the decision to postpone was influenced by news that the MFAA had been granted $2.4m in government funding via Innovation & Business Skills Australia to help members complete the diploma. While the new batch of funding had been worked on for a period of six months by the MFAA’s education team headed by Rod Edge, Naylor said it wasn’t until very recently that the association could achieve the necessary sign-off.

However, the primary reason

Lobbying better from ‘inside the tent’ MFAA CEO Phil Naylor has defended its lobbying record, saying the association has aimed to stay ‘inside the tent’ to influence government rather than ‘throwing rocks’ at regulators.

Naylor said the association had achieved broker-friendly NCCP legislation that still achieved consumer protection goals, and taking the same approach with its feedback on NCCP’s second round, which aims to regulate business lending.

for the extension was due to a ‘massive backlog’ in processing last-minute enrolements, with trainers swamped Phil Naylor by the demand before the deadline.

Naylor said the new funding would be allocated to about 3000 of the association’s newest members, who would have the cost of the diploma course subsidised by up to two-thirds.

To be considered for course funding, Naylor said brokers must have enrolled by 15 June, but can’t yet have completed their study. This excludes those who have already completed the course.

Naylor said the changes were about getting its membership base “across the line”. Only 70% of its membership were on track to complete the diploma by the previous deadline.

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News

For all the latest mortgage industry news, visit brokernews.com.au

ING Direct aims to double commercial book ING Direct has vowed to double its commercial lending portfolio via a refocus on its broker channel.

The bank’s chief executive Don Koch has said he would like to see the bank’s commercial loan portfolio double within the coming three years. The bank’s head of broker distribution Mark Woolnough said many brokers remain unaware of the lender’s commercial offering.

“ING Direct is well known for having a competitive residential loan offering, but many brokers may not know that since 2003 we have also offered commercial lending products through the broker channel that are particularly easy for brokers to immediately diversify into,” he said.

Woolnough said that brokers

would find the transition to commercial lending with the bank a smooth one.

“Brokers only need the one accreditation with ING Direct to sell both residential and commercial loans, and we utilise the same application form and serviceability calculator as residential lending.

“So brokers who already deal with ING Direct will see similarities in the process,” Woolnough said.

Woolnough said commercial deals between the $250,000 and $2m mark were the lender’s natural “sweet spot”.

“Commercial lending in the $250,000–$2mloan bracket is where a lot of opportunity lies,” Woolnough said.

Woolnough commented that

the bank’s commercial offering was “set and forget”, and that there were no annual reviews for loans under $2m that were performing well.

“This offers a certainty to customers as we know that when some of our competitors review commercial mortgages, it may result in changes to the loan such as the structure, fees and interest rate,” he said.

Woolnough encouraged brokers who had typically focused on residential deals up until now to consider diversifying into commercial loans.

“Many brokers don’t realise the commercial possibilities which may exist within their own portfolio and it may be as simple as looking at existing borrowers who are also business owners looking to

Mark Woolnough

expand, for example,” he said.

The bank is currently running a promotion for commercial loans, reducing the application fee to a flat $500, down from the previous fee of 0.25% of the loan amount.

Utility and competence top of borrower wish list Brokers must show borrowers the practical value of their service, an industry analyst has claimed.

CoreData principal and founder Andrew Inwood said consumer behaviour has changed, and that utility now reigns supreme in consumers’ list of priorities.

“Post-GFC consumer behaviour is looking for utility all the time.

Five years ago all anyone was thinking about in their relationship with their home loan provider and their relationship with the market was opportunity. That’s changed.

The thing they’re seeking now is utility, and utility is the function of how much something costs and what does it do,” he said.

Inwood said this can be seen in the types of home loan products borrowers choose. While lenders jockey to introduce new features, he said consumers are primarily concerned with price.

“Interest rates provide utility.

People are looking for a way to sell their products, and they’re looking for a way to bundle features together, but the thing which is most important, the thing which most represents utility in a home loan is the cost,” Inwood said.

The same principle applies to the broker-client relationship, Inwood claimed. He said brokers can see greater success if they are able to clearly communicate the

value of their proposition to clients.

“It’s a really critical piece of shopping behaviour. When you’re talking to people in the process of buying a house, they are entering into a relationship with you, it’s important that you can very clearly articulate the utility of what you do. If you can get to that conversation, your ability to close deals and to bring deals forward is going to rise substantially,” Inwood said.

But utility and price are not the only things borrowers value, Inwood commented. He said consumers are also concerned about the know-how of home loan providers and brokers.

“The next most important thing you can show them is the idea of competence. You can’t actually tell someone you’re Andrew Inwood competent. You have to display it,” he said.

By showing both the value of their service and demonstrating competence, Inwood said brokers could find a higher level of success.

“If you can show someone that you can provide utility and you can show competence, then all those scores in terms of your ability to close deals are going to leap substantially,” he said.

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Suncorp’s FHB grab may come with risks

Bankwest aims to halve turnaround times

A regional lender is outdoing three of the four majors for share of the first homebuyer market, but could be increasing the risk profile of their portfolio.

Recent figures from AFG show that Suncorp has beaten ANZ, Westpac and NAB in its share of the first homebuyer market. The regional bank has seen the biggest gains in the first homebuyer market share of any lender over the past year, taking 14.8% of the market last month and peaking at 17.4% in February.

But the increase in first homebuyer loans could put pressure on Suncorp’s mortgage portfolio, AFG said.

“This approach is likely to have placed pressure on the risk profile of their book, and it has been noticeable of late that Suncorp have taken steps to address this by focusing heavily on their offer for sub 80% LVR lending,” the company said.

While Suncorp may have beaten three of the Big Four, Commonwealth Bank remained the lender of choice for first homebuyers. CBA took a 22.9% share of the market in April. But AFG general manager of sales and operations Mark Hewitt said the

Bankwest has announced policy changes it says will cut its turnaround times in half.

The second tier has launched initiatives tipped earlier this year by head of specialist banking Ian Rakhit. The bank will put more automated application processes in place, and will tweak its credit policies with the aim of bringing approval times down.

One of the mooted changes is to the bank’s income validation policy. Rakhit said Bankwest will now require only one acceptable electronic year-to-date income payslip to verify base income no more than 45 days from the application date, and covering at least two pay cycles.

Rakhit said the changes were decided upon after “indepth discussions” with the bank’s broker network. He predicted they would yield “significant improvement” in reducing the number of broker deals delayed because of further information being required.

“This policy change could take one or even two days out of the time taken to reach unconditional approval as well as reduce paperwork and the time brokers spend chasing customers for supplementary documentation,” he said.

Refinancers will also benefit from the new policy, Rakhit said. The bank will now accept three months of Bankwest transaction account statements showing salary credits.

success of Suncorp showed a shift in mindset among first-time buyers.

“These dynamics are significant for the Mark Hewitt mortgage market of the future. First homebuyers are a very important part of the overall market, both because they create momentum up the property chain and also because their attitudes signal future trends.

Today’s generation of first homebuyers are very willing to look outside the majors for their mortgage needs. This is good news for competition,” he said.

Indeed, non-major lenders have seen an increase in first homebuyer market share over the past. Lenders outside the majors averaged around 22–23% market share 12 months ago, but AFG figures indicate non-majors now average 28–29% market share among first homebuyers.

Refinancers also showed an increasing propensity to look outside the Big Four. Non-majors averaged around 20% of the refinancing market 12 months ago, compared to around 25% over the past three months.

Lender share of FHB market in April

Ian Rakhit

Rakhit added the caveat that the policy would not fully apply to borrowers who need an income level above their base income in order to service the proposed home loan. He said such deals would require additional supporting documents, such as a letter from a respective employer detailing written evidence of commission or retainer. The borrowers would also be required to have been with their current employer for a minimum of 12 months.

Rakhit said brokers can expect further policy improvements from Bankwest in the months ahead.

“In addition to the current initiatives we are excited to introduce later this year delegated underwriting authority and a customised broker checklist which will also significantly reduce turnaround times by simplifying processes and ultimately deliver a happier banking experience for our customers,” he said.

Flashback: Rakhit targets turnarounds

Source: Veda

In tipping Bankwest’s upcoming service improvements, head of specialist banking Ian Rakhit earlier this year said the initiatives would rely on broker buy-in.

“A lot of these improvements, we need brokers to come to the party. I can put as many processes and as much IT as I want around this, but brokers have to say ‘This is what Bankwest wants, this is what I’ll provide and I’ll provide it upfront,” he said.

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News Daily contact goals a ‘reaffirmation of faith’ Prospecting for new clients should be a daily part of a broker’s schedule, according to one sales expert.

MetLife senior vice president Joe Jordan has told the MFAA Convention in Adelaide that brokers should make a daily commitment to find new clients, even if it’s a task they dread.

“Every time I talk to salespeople, one thing they don’t like to do and that they wish they could really avoid is to face rejection or get a prospect on the phone who tells them no,” he said.

While most salespeople fear rejection, Jordan argued brokers must conquer their fears and seek out new clients rather than relying solely on referrals or walk-ins.

“If you’re not prospecting, you might as well go to the post office and get that job now. People ain’t lining up to see you. You’ve got to go out there,” he said.

Jordan encouraged brokers that their service was worthwhile, saying they were crucial in consumers’ securing what is likely to be the largest investment of their lives, and one that will hopefully outlive them. The significance of this role, Jordan said, should spur brokers to talk to new clients.

“Don’t just make it a labour. Do it for the fact that you could do something more significant and worthwhile than any of your predecessors were able to do,” Jordan said.

With this in mind, Jordan urged brokers to set a tangible goal for client prospecting.

“If that’s the one thing you hate to do, one thing you should do is set up a daily contact commitment.

The day doesn’t go by that you don’t ask X number of new people to see you,” he said.

“What’s important about that is you’re managing to effort, not results. You don’t control your results. The only thing you control is your effort,” Jordan added.

Jordan argued that “positive action always leads to positive thoughts”, and said that prospecting for new clients can help brokers remain motivated in their career.

Joe Jordan

“I don’t think this is just some exercise you do. I think it’s a reaffirmation of faith that you do something worthwhile,” he said.

Four dangerous words: I did not understand

Kym Dalton

An industry analyst has revealed that borrowers are woefully ill-informed about mortgage products, a fact that could find brokers under fire.

Industry consultant and Futurology principal Kym Dalton has revealed new results from his CreditED borrower education software showing that consumers often fail to comprehend the most rudimentary principles of

mortgage products. Consumers tested by the software, aimed at educating borrowers on credit products, showed poor understanding of some of the basic features of home loan products. Of 680 mortgage holders surveyed, 50% did not know their current interest rate. More than a quarter were not able to define “equity”, while nearly half did not know the definition of the terms “LVR” or “LMI”; 27% thought that home loans were non-recourse.

Dalton argued that brokers could safeguard themselves by better educating clients and ensuring their comprehension.

“What are the four most dangerous words in responsible lending? ‘I did not understand’,” he said.

“Responsible lending requires responsible borrowing, [and] responsible borrowing requires comprehension,” he added.

Dalton pointed to proposed amendments to the NCCP which could put further liability on

brokers should borrowers feel they were misled.

“Courts can make orders to address ‘unfair or dishonest’ conduct by finance brokers. This section does not apply to lenders,” he said.

As such, Dalton said brokers could limit this liability by confirming their clients’ comprehension of the credit they were being provided.

“It’s not what you say, it’s what

they hear. It’s not what you write, it’s what they read. It’s not what you mean, it’s what they comprehend,” he said.

Dalton urged brokers to confirm clients’ comprehension of mortgage terms and products, saying that confirmed comprehension shifts responsibility onto the borrower and enhances trust. He argued that, in spite of the NCCP disclosure regime, “you can’t legislate [people] to get smarter”.

Borrowers in the dark: How consumers fared on Dalton’s credit quiz Unable to define ‘equity’

27%

Unable to define ‘LVR’

47%

Unable to define ‘LMI’

45%

Thought that fixed interest meant interest only

11%

Thought that loans were non-recourse

27%

Did not know the difference between interest and principal

14%

Did not know their current interest rate

50.05%

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Brokers still leaving money on the table Brokers are leaving money on the table with borrowers, with fewer than half of consumers being offered risk products.

The Commonwealth Bank and MFAA Home Finance Index has revealed that brokers are missing cross-sell opportunities with clients. The survey of borrowers,

FHB fast facts

43.2%

Will go to a bank to source their loan

32.5%

will go to a broker for loan advice

65.4%

believe rent is too expensive

41.3%

save more than 20% of their take home pay Source: CBA/MFAA

conducted by Core Data, found that only 42.9% of clients are offered home insurance, fewer than a third are offered life insurance and only 47% are offered loan protection.

But the MFAA has claimed that the opportunity for cross-selling is strong, with high conversion rates for insurance when clients are offered the products. Thirty-six per cent take up home protection insurance, nearly 30% choose to take on loan protection insurance and 18.4% buy life insurance products.

The survey also found that first homebuyers were most likely to take up all three forms of insurance, while nearly 20% of next homebuyers were likely to take up loan protection products.

“The survey shows that mortgage brokers have a great opportunity to cross-sell insurance products, with both young and mature borrowers showing they are open to opportunities to

protect themselves. Quite a few of our members have already snapped up this opportunity to grow their businesses and I encourage more companies to investigate this area of growth,” MFAA chief executive Phil Naylor said.

The survey has also claimed that recovering buyer sentiment presents an opportunity for brokers. The index found that households were at their highest level of confidence in a year, with 51.7% saying now was a good time to buy a home. Though the number may seem somewhat low, the MFAA pointed out that it was up from 36.1% six months ago.

The MFAA said the rebound in confidence had been driven by flat property prices, coupled with growing rates of saving. Rising rents also have two-thirds of potential first homebuyers re-evaluating the idea of buying rather than renting.

Should buyers begin to move

back into the market, the complexity of mortgage products could drive many towards brokers.

Nearly half of respondents said they were uncertain about what mortgage product would best suit their needs. There has been a slight decline in the number of first homebuyers who say they will seek the advice of a broker, however, down to 32.5% from 34.6% in September 2011.

Pepper plots diversification drive beyond low-doc A specialist lender has moved closer to prime lending with the launch of a new product line.

Pepper Home Loans has announced a new near-prime product line. The Pepper Easy product is an alternative documentation loan geared towards self-employed borrowers with at least three years of clean credit history. The loan will carry a rate of 7.99%, and Pepper said the product differed from other alternative documentation loans in that it will allow borrowers to draw cash out for any specified purpose with an LVR up to 80%.

The company also dropped rates on its existing product range by up to 76bps, as well as lowering the LVR on its Flexi Advantage product. LVRs up to 55% will now

carry a rate of 7.99% and a reduced mortgage risk fee of 1%.

Pepper director of sales and distribution Mario Rehayem said the product changes were in direct response to broker feedback.

“There is no better way to promote our products than with lower interest rates and three new product ranges within the space of two months,” he said.

The lender has made moves of late to diversify outside of low-doc lending. Pepper recently acquired a $150m auto and equipment finance portfolio from Suncorp. The portfolio includes loans for passenger cars, commercial vehicles and equipment finance, which Pepper chief executive Patrick Tuttle said would allow it to eventually originate vehicle

financing under its own brand.

“The acquisition of this portfolio will enable us to accelerate our plans to originate car loans and equipment leases under the Pepper brand. This is an asset class which complements our expertise in the residential lending space and in which Pepper can provide a genuine funding alternative to consumers and small business owners,” Tuttle said.

Tuttle commented that the move would fit well into the company’s offering as a lender to small business owners and self-employed borrowers.

“By diversifying into auto and equipment financing, Pepper is further extending its product suite to small business owners, selfemployed borrowers and other

Patrick Tuttle

consumers. This also complements our existing strengths as a specialist residential mortgage lender and third-party loan servicer,” Tuttle said.

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News ‘Unacceptable’: Aussies locked out of banking A major bank boss has lamented revelations that nearly three million Australians are excluded from affordable financial services, calling the result “simply unacceptable”.

A joint study by NAB and The Centre for Social Impact (CSI) has found 17.2% of Australians are either fully or severely excluded from affordable or appropriate financial services such as moderate amounts of credit, general insurance or even a simple transaction account.

The result is up from 15.6% in 2010, and NAB chief executive Cameron Clyne said the results were alarming.

“In a country with a banking system and economy as strong as ours, it is simply unacceptable that nearly three million Australians are financially excluded from affordable financial services,” he said.

Clyne argued that combating financial exclusion would benefit the overall economy.

“Financial inclusion has an obvious and invaluable social impact, but there is also a very

strong economic case, like greater workforce participation, reduced welfare and health costs that validate and confirm its importance,” Clyne said.

The report has claimed that cost serves as the primary barrier to accessing financial services.

According to the study, basic financial services carry an annual cost of $1,794, effectively excluding many lower-income Australians.

Though the figure may seem modest, it represents more than 15% of the annual income of 12.7% of the population. For another 10.2%, $1,794 would deplete between 10–15% of their annual income.

Financial exclusion also varied by region, with high rates of exclusion in low-income suburbs, inner-city areas of capital cities or large rural and remote areas. The report also found a strong correlation between financial exclusion and low levels of education.

The report showed that up to 39% of Australians do not have any mainstream credit products.

However, Connolly said this group

may access non-mainstream credit services such as payday lenders, Centrelink advances and nointerest loan schemes.

Among the financially excluded, many are seeking services merely to pay for necessities, the report revealed.

“The report also shows that the list of current credit needs of consumers facing financial exclusion is dominated by regular

expenses, such as food, rent and utility payments,” CSI lead researcher Chris Connolly said.

Connolly said Cameron Clyne the findings indicated a “significant gap” between income and expenses that was not being appropriately addressed by credit.

Australians’ financial inclusion Included

1.1% 16.1%

Marginally excluded Severely excluded Fully excluded

40.8% 42%

Source: Veda Advantage

12 brokernews.com.au

News Brokers harder to budge Mortgage brokers are becoming harder to shift by new aggregators looking to build their distribution networks, even though innovative new offerings are clamouring for attention.

Liberty Network Services managing director Brendan O’Donnell said the recruitment market has entered a difficult period for aggregators looking to attract brokers.

“There has definitely been a slowdown on the movement of brokers between traditional aggregators. It is more difficult now but there have been hard times in the past,” he said.

Quoting MPA magazine’s recent Brokers on Aggregators Survey, O’Donnell said the promising thing for aggregators – including Liberty Network Services – was that close to 25% of brokers say they may look to switch.

“While that may have been closer to 50% a few years ago, if you are looking at 25% of about 10,000 brokers, there is still definitely a need there,” O’Donnell said.

Liberty Network Services has managed to recruit 27 brokers since November last year, with O’Donnell saying that close to 20% of these were actually new-to-industry players.

“Remuneration is actually still relatively good despite commission cuts,” O’Donnell said.

“If you are writing $1m–$1.5m per month and sustain that in terms of mortgages, and then diversify into motor and insurance you can make a fairly good living.”

O’Donnell will be marketing the group’s technological prowess at a road show around Australia in the coming weeks, primarily the new iPad SPARK broker software platform.

Bringing new SPARK to broking Liberty Network Services has launched a new iPad app claiming to provide the industry with the first ‘totally’ mobile and complete broker software platform. NCCP compliant, the software – exclusively running on the iPad – allows lead management, product searches and recommendation, loan application and submission, and document and customer relationship management.

Managing director Brendan O’Donnell declared that Liberty was being “relentless” in an effort to ensure that its advisors were successful.

Battening down hatches with tax refunds New research from Homeloans shows more than half of Aussies will use their tax refund to pay off debt rather than splashing out on consumer goods.

“With the end of the financial year fast approaching, most Australians traditionally look forward to their annual tax refund as a welcome bonus to spend on either themselves or their families, Homeloans national marketing manager Will Keall said.

But that trend may not be set to continue. The survey has revealed that 52% of Australians expecting to receive a tax refund this year will use it to pay down debt, citing economic concerns and the rising cost of living as their motivation.

Twenty-one per cent will save their refund. While one-quarter of those surveyed said they would spend their refund, only 10% said they would buy something for themselves.

The survey has also suggested

that consumers remain cautious and wary of spending. Eight in 10 respondents to the poll said Will Keall they were currently more cautious with money than they had been in previous years.

“Despite the relative strength of the Australian economy, international economic uncertainty coupled with the rising cost of living is having a major impact on our spending habits. Many of our survey respondents also had very real concerns about their job security, with redundancies already making an impact in certain employment sectors,” Keall said.

Keall commented that many consumers felt it was “time to batten down the hatches” by reducing household or personal debt. He urged consumers to be thrifty with potential tax refunds.

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INVESTOR NEWS

Four legs good, no legs bad Cats are fine in strata properties, but snakes should be banned due to their frequent escaping acts, according to a suggestion to come out of an ongoing strata law review in NSW. Dogs, too, should be banned, due to their “propensity to bark”.

The suggestions are part of the 134-page Strata Laws: Online Consultation Final Report from Global Access Partners.

The report summarises the numerous concerns about the current strata provisions in NSW that were brought up during the online consultation period, and offers a fascinating insight into the concerns of tenants, landlords and owner-occupiers.

There are several suggestions that may be of some concern to landlords. For example, one recommendation highlighted in the report is that owners should be made liable for the behaviour of their tenants, “with the sanction of fines for repeat offences added to strata levies. A percentage of such fines could be passed on to tenants from owners”.

Another suggestion mentioned in the report could take responsibility for the eviction process out of the hands of landlords, with any resident of the strata property being allowed to take a tenant to the NSW Consumer Trader & Tenancy Tribunal (CTTT) “to be warned, fined or ultimately evicted”.

And if you happen to run

through a string of tenants in quick succession, then you could end up facing severe penalties.

“Executive Committees should be able to apply for sanctions against owners of properties that change lessees or sub-lessees unreasonably often. Sanctions could include cutting off utilities, issuing fines to the owner or imposing higher levies on owners,” says one of the suggestions highlighted in the report.

Other suggested changes to strata laws • Prohibiting residents from selling or lending their personal car spaces or car park access keys to others.

• Banning smoking in strata buildings completely, and mandating the display of signs warning visitors that smoking is not allowed.

• To protect new owners and people “buying off the plan”, developers should be compelled to carry building insurance and bank guarantees against insolvency for the first six years of any building’s existence.

• Allowing the drying of all clothes except underwear, which should be dried on racks below the rail and out of sight of others.

• Ensuring that owners pay sinking fund levies on time.

Great Australian Dream: A property for a song State Suburb

Type

Median Price

12 Month Growth

Average Gross Annual Rental Growth Yield

NSW

BREWARRINA

H

$35,000

n.a

n.a

n.a

Qld

NELLY BAY

U

$40,000

n.a

n.a

46%

NSW

UNGARIE

H

$62,000

n.a

n.a

n.a

NSW

PEAK HILL

H

$63,000

-13%

8.1%

n.a

Qld

CUNNAMULLA H

$64,000

21%

12.3%

n.a

Tas

ZEEHAN

H

$67,000

-16%

25.2%

12%

Tas

QUEENSTOWN H

$75,000

5%

18.1%

10%

Tas

ROSEBERY

H

$75,000

22%

24.0%

10%

NSW

BOURKE

H

$75,000

-12%

6.7%

n.a

SA

PINNAROO

H

$80,000

n.a

n.a

n.a

Source: RP Data, March 2012

Do your clients have $35,000 sitting in the bank?

Well, that would be enough to buy themselves a house in Australia’s cheapest suburb outright. Almost three-quarters of the selected suburbs have a median price of less than $200,000.

14 brokernews.com.au

News

For all the latest mortgage industry news, visit brokernews.com.au

Growing number of Big Four get a bad rep borrowers set to jump ship from businesses Refinances have jumped to their highest level in nearly four years, and the numbers are likely to keep increasing.

Analysis of ABS figures by comparison site RateCity has found that 37% of home loans in March were for refinances. At 17,756 loans in March, the number of refinances during the month was the highest since April 2008.

The numbers mirror those released in May by AFG. The company’s Mortgage Index showed refinancers making up 37.6% of the market in March, slipping slightly to 36.2% in April.

RateCity spokesperson Michelle Hutchison theorised that the government’s unilateral ban on exit fees played a part in the refinancing surge, and predicted that the wave of borrowers switching lenders was set to continue.

“We believe we’re only beginning to see the very start of the impact of these changes and it’s likely that more borrowers will switch lenders more often than in the past,” she said.

Borrowers in NSW were the most active refinancers for the month, with 41% of all mortgages

written in the state represented by refinancing. Victoria followed with 38%, while Tasmanian borrowers were least likely to be refinancers, at 28%.

Hutchison said the ease of switching lenders would mean banks would have to ramp up their retention strategies.

“We believe that many borrowers who have taken out a variable home loan since July 2011 will switch lenders within the first five years. Switching home loans will be far more commonplace very soon and lenders need to work harder at keeping their customers with better customer service, offering more competitive deals and negotiating on their home loans,” she said.

Customers could also benefit from bank retention strategies, Hutchison claimed.

“The key here is that the savings from negotiating a better deal are much larger than the savings due to Reserve Bank of Australia-led rate changes.

For instance, switching a $300,000 mortgage at 7% to 6.5% could save a borrower $100 each month or $36,000 over 30 years,” she said.

bandoning ship: A Borrower refinancing by state 40

41%

38%

37%

30

Regional banks enjoy the best reputations, while the Big Four have copped it from business owners in a new survey.

The Bank Reputation Index, conducted by East & Partners and Daymark PR, has found that smaller businesses have a negative view of Australian banks. SMEs and micro businesses polled by the index showed a low opinion of banks, ranking the industry as having a poor reputation.

The poll asked businesses to respond to the question “Would you say Australia’s banking industry as a whole has a good reputation?”, rating their response on a scale of one to 10, with one being strong agreement and 10 being strong disagreement. Micro businesses and SMEs rated bank reputation poorly, at 7.9 and 7.3, respectively.

East & Partners principal analyst Paul Dowling said bank reputations varied greatly depending upon the size of the businesses surveyed. “The micro and SME segments remain a challenge for banks with their reputation well towards the negative end of the scale while very large businesses have a more positive view of the reputation of the industry,” Dowling said.

While the majors polled poorly overall, there was disparity between the Big Four, Daymark director Richard Peters said.

“For the second time we have seen reputation differences between the four majors with ANZ leading the reputation rankings with business customers and Westpac trailing the pack. The more positive end of the index remains dominated by the regional banks,” he said.

Regional banks fared better in the survey, with Bendigo and Adelaide ranking a 5.7, Bank of Queensland a 5.8 and BankWest rating a 6.1.

Foreign-owned banks also trumped Australian majors.

HSBC managed a 6.3 rating, while Lloyds fell between ANZ and CBA with a 7.3.

Reputation can have a practical impact on bank success, East & Partners said. The company claimed that reputation had a “strong predictive correlation” with banks’ ability to acquire new customers or cross-sell to existing ones.

Larger businesses had a more positive view of the banking industry. Institutional businesses rated banks most highly, at 5.9.

Bank reputation among business customers 7 6

35%

35%

5 31%

30%

29%

4

5.7

5.8

6

6.1

Bendigo and Adelaide

BoQ

ME Bank

Bankwest

3

20

2 10 0

1 0 NSW

Vic

WA

SA

NT

Qld

ACT

Tas

Source: East & Partners Source: RateCity

Note: (1 = good reputation, 10 = bad reputation)

brokernews.com.au

15

INDUSTRY NEWS IN BRIEF Major sees four rate cuts A major bank economist has predicted as many as four rate cuts before the end of the year. Westpac chief economist Bill Evans has said the Reserve Bank could drop the official cash rate as low as 2.75% by the end of 2012. “There’s a fair degree of disquiet. Monetary policy is too tight given the shock to confidence and fragility of the economy. Retail has lost its momentum, house prices have edged off, capital spending is quite soft excluding mining.” Evans forecast 25bp cuts in June, July and August, and one more before year’s end.

Get Australian Broker on your iPad “Do you remember when…?”

That’s the question many readers will be asking, following the publication of Australian Broker’s special 200th issue, which marked a milestone for the industry’s best loved publication. The good news is you can enjoy a history tour through the stories and headlines that tantalised, titillated and provoked more than any industry publication – right from your iPad. Enjoy the issue 200th – or any of our more recent issues for that matter – on iPad today. Download the free Australian Broker iPad app from the App Store.

Income types ‘normalising’ Banks are becoming more openminded about the income types they are considering, it has been claimed.

Mortgage broking franchise Smartline’s managing director Chris Acret said as more borrowers pursue alternative employment arrangements, banks are being more flexible with income. “While overtime, bonuses and second jobs used to be regularly accepted by lenders, unfortunately this changed when the GFC hit,” Acret said. “Thankfully, lenders are increasingly ‘normalising’ their lending criteria and are moving in the right direction.”

Government won’t force RBA An economic analyst has claimed the government’s push towards a budget surplus will not necessarily move the hand of the RBA. Senior Fitch Ratings executive Art Woo said the Reserve Bank will not be moved by the government pledge to bring the budget into surplus, in spite of some government cuts which could cool down the economy. “I’m not sure that’s a reasonable way to view it in the sense they are an inflation targeting central bank,” Woo told Dow Jones. Woo said the RBA would still focus its attention on its inflation target band.

Liberty slashes SMSF rate Liberty Financial has slashed variable interest rates by more than 1% as part of a new tiered pricing structure for its SMSF residential property investment loan, SuperCredit. The cut means Liberty now has a variable rate starting at 6.99% for LVRs below 60%. The loan comes with

a $695 set up fee, which Liberty says undercuts many offerings in the market.

Liberty’s Suresh Pillai said much of the business Liberty writes is in the sub-60% LVR range for this product, enabling it to introduce a tiered structure that ranges up to 7.69% for 80% LVRs. Apple, Google and an Aussie bank A global report has ranked one of the Big Four as the only Aussie company on the list of the world’s 100 most valuable brands. The BrandZ Top 100 Most Valuable Brands report has ranked Commonwealth Bank among the most valuable brands in the world. CBA was the only Australian company to make the list, coming in at number 60. Branding juggernaut Apple predictably took out the top spot, with tech giants IBM, Google and Microsoft also appearing in the top five.

Winter a great time to sell Property vendors have been warned not to let the cold weather go to their head and start discounting their asking prices as the mercury drops – and it’s even been suggested that now could be the time to put their property on the market. Raine & Horne CEO Angus Raine argues that despite the seasonal drop in buyer activity that comes as buyers put their plans on ice until spring, winter actually represents a great time to be selling. “Generally, sales volumes are down by as much as 20% as a result of fewer homes for sale. However, this doesn’t necessarily mean there is a smaller pool of motivated buyers,” he said.

Brokers see clients under siege Two-thirds of brokers believe borrowers will remain in a “siege mentality” until the RBA makes further cuts to rates.

Following the May rate cut, a poll conducted by 1300 Home Loans found 65% of brokers surveyed believe the cut will provide only a small boost to consumer sentiment, with more cuts needed to bring borrowers out of hiding.

Thirty per cent said the cut would deliver no help to the market at all. 1300 Home Loans managing director John Kolenda said pessimism abounded in the property market. “Consumers are developing a siege mentality, and only action that really puts some money back in their pockets, such as repeated interest rate cuts, is going to fix that.”

World house prices tank House prices around the world have seen their weakest year since the GFC. The Knight Frank Global House Price Index saw only 0.9% growth for the year to March 2012. The result is the worst since 2009, and marks the first time since the GFC that the index has fallen below 1%.

Knight Frank said consumer confidence worldwide had taken a hit due to the European debt crisis, along with the IMF decision to downgrade global GDP forecasts. House prices across Europe remained flat over the year.

16 brokernews.com.au

News Non-banks struggle as Sagging confidence majors move fixed rates may benefit brokers A non-bank head has claimed that the sector has often been uncompetitive on fixed rates as two mortgage managers move to undercut the majors.

Better Mortgage Management has introduced a two-year fixed rate loan at 5.94%. The loan includes an offset account, Visa debit card, redraw facility and no annual or ongoing fees.

BMM managing director Murray Cowan said it had been historically difficult for non-bank lenders to compete against large banks on fixed rate pricing.

“Traditionally the non-bank sector has struggled to compete with the fixed rate offers from the banking sector and that has cost our sector considerably,” he said.

The comments come as Australian First Mortgage has also announced cuts to its fixed rate product suite. The mortgage manager has decreased fixed rates on its Complete Option full doc product by as much as 40bps, and dropped rates as much as 30bps for its Flexible Option full doc loan.

AFM also announced cuts to its low doc products, ranging between 19bps for its one-year fixed rate and 30bps for its five-year rate.

The lender will also reduce commercial interest rates on its Smart Suite products, dropping five-year rates by 55bps and one-year rates by 35bps.

Murray Cowan

“These reductions in interest rates have provided AFM with an opportunity to offer some market leading fixed rates to enable the company to move forward in building its portfolio, and its strategy of organic growth,” AFM director Ian Forbes said.

The moves came as the majors have also jockeyed for fixed rate positioning. Westpac recently announced cuts to its fixed rate products, bringing its discounted one-year and three-year fixed rates to 5.99%, and the headline rates for its one- and three-year fixed products to 6.19%. The move briefly brought the bank in line with CBA’s discounted rates, though NAB still held the lowest position with one-year rates at 5.79%

A pair of leading economic analysts have claimed that sagging consumer confidence could actually benefit mortgage brokers.

Speaking to the MFAA Convention in Adelaide, senior journalist with The Australian George Megalogenis claimed that in times of economic uncertainty, the Australian housing market has historically reaped benefits.

He pointed to a run-up in house prices following the recession of the 1990s, the introduction of the GST and the GFC. “In times of financial stress, the first thing the Australian consumer does is go to bricks and mortar,” he claimed.

Megalogenis predicted that house prices would begin to rise over the next year as Australians fled other asset classes.

JP Consulting director and author of The Pain Report Jonathan Pain agreed.

“The environment of uncertainty could be beneficial to property values over the next 12–18 months,” he said.

In spite of the possibility of a bump in values, neither Pain nor Megalogenis anticipate property values rising sharply in the near future, and Megalogenis commented that Australian property was overvalued.

“You have to ask if we are going to reach a situation where home

ownership is denied to the middle class,” he said.

But home ownership may be more attainable to the middle class as housing affordability increases. As incomes rise and house prices stagnate, the HIA – Commonwealth Bank Housing Affordability Index has revealed that affordability is rising, with the index increasing 6.4% over the March quarter to be 11% higher over the year.

HIA senior economist Andrew Harvey said lending rates had tapered somewhat, while incomes saw modest gains. However, Harvey commented that affordability may have seen greater improvement had lenders not held back a portion of the Reserve Bank’s cuts at the end of 2011.

Jonathan Pain

Short and sweet is how ASIC likes disclosure Just days after the MFAA told the government in May that it wasn’t happy with complex disclosure for mortgage brokers, advice out of ASIC says the regulator thinks the same.

The AIOFP (an association of independent financial advisors) has confirmed the outcomes of a recent meeting with ASIC’s Statement of Advice (SoA) experts. Financial advisors – much like brokers – give SoAs to their clients to explain the basis and content of their advice, and disclose any conflicts. However, SoAs sometimes number as high as 100 pages.

AIOFP executive director Peter Johnston said he did not think compliance groups and lawyers would be particularly happy with ASIC’s guidance to its representatives during the meeting. “It has suited the commercial agenda of compliance groups and the many lawyers who

have been living on our fees for years to run a ‘scare campaign’ to keep us on a diet of enormous SoAs,” Johnston said. “We all walked away from the meeting feeling very satisfied that the days of large SoAs are over.”

The key messages put forward

by ASIC at the meeting in relation to SoAs were:

• ASIC has released a number of short example SoAs. These examples are contained in RG 200 and CP 164. Many of these examples are only two pages and are deemed suitable for simple advice. Where advice is more complex, the SoA might need to be a bit longer to deal adequately with all the issues

• ASIC would like much shorter SoAs. Long SoAs don’t speak to consumers and often paint a confusing picture of the advice being provided. SoAs need to tell a story – a consumer should be able to understand the advice and the pros and cons of the suggested approach. They should also know how much the advice is costing them.

According to ASIC consumer research, most consumers only want and will only read a three-page advice document

• Compliance professionals and lawyers may be driving long SoAs. This is a matter of concern to ASIC, and over the next few months the regulator is keen to work with compliance professionals and lawyers to break down any misperceptions about SoA length.

• Long SoAs shouldn’t be used to justify charging clients higher fees. It doesn’t mean the advisor has done more work. Advisors should justify their fees based

on the quality of advice they provide. Document length is irrelevant • SoAs need to speak to the client getting the advice. If a client wants more detailed information about a product etc an advisor can still provide this information, but they shouldn’t load an SoA with unnecessary and irrelevant detail.

brokernews.com.au

17

Double displeasure: ANZ leads satisfaction slide The majors have all drawn the ire of consumers for their out-of-cycle rate moves, but one has taken the brunt of the anger with its satisfaction rate dropping more than twice that of its rivals.

ANZ has seen its customer satisfaction rate fall by 3.1% for the three months to May, more than double that of the other major banks. The bank has taken the heat from borrowers for initiating February’s out-of-cycle rate hikes as first mover following the RBA meeting.

Home loan customers have been particularly tough on ANZ, with satisfaction among its mortgage holders down 5.6% over the last three months. By comparison, Westpac saw its mortgage customer satisfaction decline 3.3%, CBA was down 1% and NAB actually increased home loan satisfaction by 0.4%.

The decline has seen Commonwealth Bank move to second among the majors in terms of satisfaction, at 77.2%. NAB remained the leader in customer satisfaction at 77.7%, while ANZ fell to third place at 75.5%. Westpac remained last among the Big Four at 75%.

The major banks have now seen their third consecutive month of satisfaction declines. Satisfaction with the Big Four on a whole fell 0.4% in April, following a 0.4% decline in March and a 0.5% drop in February.

But the major banks remain ahead of where they were last year. NAB is up 5.8%

in satisfaction over the last 12 months, while CBA has seen a 5.7% increase, Westpac has risen 1.1% and ANZ has managed a 0.3% improvement.

Business owners have been even more scathing towards the banks. The Bank Reputation Index, conducted by East & Partners and Daymark PR, has found that smaller businesses have a negative view of Australian banks. SMEs and micro businesses polled by the index showed a low opinion of banks, ranking the industry as having a poor reputation.

The poll asked the business community to respond to the question “Would you say Australia’s banking industry as a whole has a good reputation? ”, rating their response on a scale of one to 10, with one being strong agreement and 10 being strong disagreement. Micro businesses and SMEs rated bank reputation poorly, at 7.9 and 7.3, respectively.

Regional banks fared better in the survey, with Bendigo and Adelaide ranking 5.7, Bank of Queensland 5.8 and BankWest rating 6.1. The majors ranked towards the lower end of the scale, with ANZ receiving the best rating at 7.2 and Westpac the worst at 8.0.

Roy Morgan communications director Norman Morris said banks should be mindful of their reputation with small business, as it could impact their overall satisfaction rankings.

Broker launches TV ad blitz A franchise brokerage has launched into a TV ad campaign it says will put its brokers centre stage.

Loan Market has announced it will make its foray into a year-long TV ad campaign this weekend. Executive chairman Sam White said the ads would feature the company’s brokers.

“When a customer responds to our ads the ‘moment of truth’ for the Loan Market brand is their experience with our broker.

The stars of our new TV ads are Loan Market brokers because our brand is all about that partnership,” White said.

Mortgage broking is seeing growing exposure in television advertising.

Industry heavyweight John Kolenda’s 1300 Home Loans launched into television advertising earlier in the year, while Aussie Home Loans brought back executive chairman John Symond as the face of its TV campaigns. NAB has also spotlighted brokers, with its TV advertising urging consumers to consult their mortgage broker. NAB Broker general manager of distribution John Flavell claimed the broker focus was a first for a major bank.

Loan Market’s TV campaign comes as the company has appointed a new general

manager of marketing.

Loan Market announced it would bring on Ed Thian to head its marketing efforts. Thian was previously senior manager of consumer finance for Sam White Aussie Home Loans.

Loan Market national director of sales Mark De Martino said Thian, in addition to his time at Aussie, had previous experience in growing the business of Pepper Home Loans, Western Union and Singapore Airlines.

“Ed has an enviable reputation as an innovative, multi-award winning, marketing and product leader with a proven track record delivering outstanding results. His extensive experience in exceeding expectations in relation to business growth with companies such as Aussie Home Loans and Pepper Homeloans will allow us to continue to expand our company throughout Australia and New Zealand,” De Martino said.

Thian said his extensive experience with mortgage broking gave him the understanding needed to properly market the industry, and grow Loan Market’s brand awareness.

18 brokernews.com.au

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Bank behaviour bedevils Aussie mood A major bank economist has conceded that the Big Four’s decision to pass on only part of the RBA’s May 50bp cut has dented consumer sentiment.

The Westpac Melbourne Institute Index of Consumer Sentiment saw only a 0.8% bump in May, a result Westpac chief economist Bill Evans said was disappointing considering the Reserve Bank’s rate cut and a surprise decline in unemployment.

But Evans said the positive economic news did little to brighten Aussies’ mood.

“Other factors appear to have offset these positives. Firstly there might have been a degree of disappointment amongst households that the standard variable mortgage rate was reduced by ‘only’ an average of 0.37%. Secondly, increasingly disturbing news around Europe and specifically Greece is likely

to have unnerved households,” Evans said.

Evans said similar woes plagued consumers following the Reserve Bank’s last rate cut in December, when consumer sentiment actually fell by 8.3%. He said a number of issues had “unnerved” households.

“Firstly, and most importantly, concerns around the situation in Europe, and secondly some confusion around the flow on to the mortgage rate as banks delayed their decisions after having responded rapidly following the first official rate cut in November. This issue around mortgage rates was also likely to have been a factor behind the 5.0% fall in the Index in March following a surprise increase in

mortgage rates of 0.10–0.12%,” he said.

Mortgage holders did not appear to rate the RBA cut highly either.

Evans said confidence among the group increased only 3%, despite the largest cut to standard variable rates since February 2009.

“Since October 2011 the standard variable mortgage rate has fallen by 0.76% yet the confidence of mortgage borrowers has actually fallen by 1.8%,” he said.

Evans predicted that the marginal rise in confidence would disappoint the RBA, given that the Index was 2% below its level in October when the cash rate was a full 100bps above its current level.

Positive regime praised Investors now the as ‘debt spiral’ lamented market’s best hope Credit rating agencies have praised the introduction of legislation paving the way for the controversial positive credit reporting regime.

The Federal Government has proposed changes to the Privacy Act allowing for the introduction of positive credit reporting. The regime will see additional information listed on credit reports, including account payment information.

“The use of comprehensive rather than just negative credit information provides greater visibility of under-served consumers who would otherwise find it difficult to access credit,” Dun & Bradstreet director of consumer services Steve Brown said.

Reporting agency Veda also praised the scheme, with senior advisor Matthew Strassberg claiming it would provide a more accurate and safer system.

Strassberg pointed to research by the reporting agency, which he said showed Australian consumers were over-reliant on credit.

Strassberg claimed the new regime would alleviate this problem.

Veda’s Australian Debt Study has revealed that 21% of Australians are already struggling to make payments on their credit commitments. The credit reporting agency claimed around 750,000 Australians risked falling into a “debt spiral” in an economic downturn.

Consumers showed varying responses to the possibility of economic stress, with 66% saying they would draw on their household savings while nearly one-third said they would borrow from family. Twenty-five per cent said they would increase their credit card limit, mortgage or personal loan to make ends meet.

Strassberg claimed the controversial positive credit reporting regime would help to keep consumers from falling into an over-reliance on credit in the face of financial difficulty.

“Credit reports do not show a person’s credit limit, or if they are failing to make the minimum payment on their credit cards or loans. It makes it easier for someone already in trouble to get yet more credit, pushing further into a debt spiral,” Strassberg said.

Investors are predicted to be lured to the property market by a slowing rate of house price declines.

According to the PRD Nationwide Quarterly Economic and Property Report, a quick recovery of the property market to a pre-GFC boom is “unthinkable”, though the rate of decline in values has slowed and may even be stagnant.

The real estate agency said that this is primarily due to what global markets face in the near future.

However, investors may provide increased business for mortgage brokers, as they eye bottom price.

Research director Aaron Maskrey said 33.9% of the property market is now made up of investors, and claimed this number could increase as rental yields continue to grow.

“Looking at the macro level property market, the reality is that the rate of decline in values has slowed and could be even stagnant.

“Investors could now be tempted back into the property market as the rate of decline in values erodes away, while the equity market remains not only turbulent, but has provided returns inferior to fixed bonds over the past five years,” Maskrey said.

Investor finance increased in February to a record $6.9bn, up $400m. Spending across the broader housing market increased as well, up

$1bn to $20.3bn. But the report said the property market still faces a number of significant challenges going forward.

“The property market continues to contract, as shown by housing finance approval’s data, while bank rate increases and a tight fiscal federal budget will likely prevent any substantial green shoots in the market from gaining significant traction,” the report said.

“So far unemployment has been fairly contained, but any significant downward trend to the existing level of employment will hurt the property market.”

However, the report also delivered some good news for affordability. Maskrey said home loan affordability had increased, giving households some breathing room.

“On average, Australian households now need approximately 32.9% of the family income to service their home loan,” Maskrey said.

brokernews.com.au

19

Second tier undertakes BDM restructure

RAMS expands into high interest deposits

Suncorp is in the process of reviewing its overall BDM headcount, with channel manager Steven Heavey saying the second tier is currently “a bit overweight”.

As part of a series of changes Heavey has overseen since his appointment, he has confirmed the bank will be reducing BDM headcount from 30, to in excess of 20.

However, at the time of going to press Heavey said the bank was only in the process of review, with some BDMs to be redeployed to other channels including retail and business lending arms.

He also said since the bank had reinstated the broker channel as a separate business, there had been four state manager appointments, meaning the overall net impact was minimal.

“We are in the middle of a review, and no individual has been advised they won’t be needed,” he said.

“At the end of the day, there may be some people that aren’t required, but we will do everything we can to redeploy these people into the broader business,” he said.

Heavey said since coming on board, he has overseen a strategic review that has included changes to commissions, and the introduction of back office changes to improve workflow.

He said the review of its BDM footprint on the ground was the next stage of this business review.

“We only have a market share of

RAMS has expanded its product offering to include online deposit accounts for new customers for the first time.

RAMS will now offer the RAMS Saver, a high interest savings account which the Westpac-owned business said offers the highest bonus variable interest rate currently available in the market – at 5.75% per annum – and a high base variable rate of 4.95% per annum.

RAMS will also offer RAMS Action, a transaction account with optional linked mortgage offset.

RAMS chief executive Melos Sulicich said the home lender was entering a new era by delivering an alternative in the market for Australians who want a “simple and real deal”.

Sulicich said RAMS aimed to build a more sustainable business through deeper relationships with more customers that stay longer.

“We have listened to our customers who have told us online savings accounts, transaction accounts and offset accounts are a big priority to help them to save money and pay off their home loan faster,” Sulicich said.

“Not only does the RAMS Saver bring truly great interest rates to reward Australians who save, customers will be able to have fast and simple direct access to their savings account.”

RAMS is launching with technology that electronically verifies the identity of the applicant and sets up a new

account, ready for use within a few minutes.

“As more and more Australians are shopping through the Melos Sulicich internet, using hand-held online devices and seeking to do their personal banking at a time that is convenient for them, it naturally makes good business sense to offer simple and fast access to deposits online for our customers,” he said.

Sulicich said by taking a more proactive and conscious approach to their banking Australians can grow their money further.

“It is of concern that potentially more than $5bn in savings are being lost annually, simply because so many people are not putting their money into a high interest savings account. Our research has found that high interest account holders tend to be more proactive, save more money and are more satisfied with the way they save money, than those who don’t have one,” he said.

“While RAMS has traditionally focused on bringing great home loan rates to Australians we now want to bring our same great deals to Australians who are serious about their savings. Our deposit accounts see us step into a new era to enable Australians to make more money from their savings.”

that are system approved, and between the broker channel and the proprietary channel there is no difference in that,” he said.

Statistics show in 2011 64% of deals through third party were system approved, compared with 63% for proprietary.

“In terms of the quality of the applications being submitted there is no difference between the proprietary channel and the

broker channel, and I think that is a feather in the cap for brokers.

They have numerous lenders policies and processes to understand,” he says.

Flavell said that the arrears performance of loan books sourced through brokers was also very similar to that of the bank’s proprietary channels, meaning their loan quality was just as good.

John Flavell

“Back in ’97 lenders probably thought they could make a difference and close the brokers out, but it wasn’t true then and it’s even less true today,” he says.

Flavell says NAB’s strategy now is all about embracing the broking

Steven Heavey

6% of the broker market,” Heavey said.

“We’ve looked at our model, and looked at the market share we currently have today. We believe that we don’t require 30 BDMs to deliver the results we are looking for. With the market share we have, we believe we are a little bit overweight,” he said.

“We have been able to improve efficiency and productivity through our investment in technology, and we are now looking at appropriate resourcing in the field to deliver broker channel growth.”

Heavey reasserted the desire for Suncorp to further embrace the broker channel despite the BDM review.

“Our goal is to outgrow system, and in terms of the ratio of business that is weighted to the third party channel we still have growth aspirations. We are full steam ahead,” he said. channel. “It’s about optimising it.

In an environment where you’ve got licensing, you’ve got regulation, you’ve got complexity and you’ve got uncertainty, brokers are going to be increasingly relied upon by their end customers to deliver a full advice proposition with a broader range of financial solutions. As a lender, if you turn your back on it – if you don’t embrace it and encourage it – then you’re going to cut yourself off from maybe 50%, 55%, even 60% of the market.”

In fact, brokers are now performing the same as banks – or even better – on key profitability metrics, such as conversions – which Flavell says is a ‘feather in the cap’ of brokers.

“If you look at some of the key indicators in terms of how a portfolio will perform, then there is the proportion of applications

The facts, according to Flavell • Licensing and regulation will add to the standing of the broking industry in the eyes of the consumer.

• A complex uncertain environment will drive more consumers to brokers for help, guidance and advice.

• Brokers will provide an increased range of financial services for consumers • Brokers represent 40%–50% of the market, lenders cannot afford to ignore this channel.

20

brokernews.com.au

People Vegas or bust for NSW broker An NSW broker has been handed a free trip to Las Vegas, but he’s not expecting to break the bank.

Intellitrain announced in May that Andrew Campbell of Bay Finance Solutions won the company’s Vegas promotional contest.

Campbell told Australian Broker he plans to head to the States at Christmas. Campbell said he and his wife have travelled to the US three times in four years, and loved “the vibe”. After winning the Intellitrain promotion, Campbell admitted he would try his luck at

the casinos as well.

“I’m not the biggest gambler. It’s not what I’m good at, but you can’t go to Vegas and not play at least a few rounds of blackjack,” he said.

But Campbell said he doesn’t expect to beat the house.

“I consider it a win in blackjack if I get to stay at the table for longer than 20 minutes,” he said.

Campbell said he chose Intellitrain for his diploma because the course work was challenging. He argued that the trainer provided more than a “token” qualification.

“I have to give Intellitrain a rap for the standard of their training.

The Diploma of Financial Services was not an easy course. The last thing you want when you’re presented a diploma is to know it’s a token diploma. I hope that their qualifications might become recognised by the industry as pretty tough to get,” he said.

Credit repair body appoints new president

The original representative body for credit repair agencies in Australia has appointed a new president, following the decision of its founding leader to step down.

The Credit Reporting Institute of Australasia (CRIA) has appointed solicitor and founding member Joseph Trimarchi as national president, filling the role vacated by Oasis Financial Services’ Graham Reibelt.

Trimarchi is the principal of Joseph Trimarchi & Associates Solicitors, and practices in the area of Australian credit reporting law.

Speaking with Australian Broker, Trimarchi said he would work towards advancing the core values of the CRIA, and ensuring all members abide by stringent

Joe Trimarchi

codes of ethical conduct.

The CRIA, which was launched in December last year, has recently faced competition from rival association the Credit Repair Industry Association of Australasia, with the similar moniker of the CRIAA. The CRIA attests that its members meet a higher standard of ethical conduct than the CRIAA, as set out by its code of practice. The CRIAA, meanwhile, has been endorsed by the FBAA. Reibelt has stepped down to focus on his business, but will remain an active member of the association.

WORLD

Name them, and shame them Australian lending institutions and brokers aren’t the only ones copping it from the regulators for misleading advertising – in fact, they may just be getting off lightly.

The Financial Services Authority in the UK has reportedly removed close to 600 misleading advertisements in the past two years – increasing from 262 in 2010 to 327 in 2011.

The figures from Which?, reported by UK mortgage magazine Mortgage Strategy, has led the consumer organisation to ask the FSA to name and shame the offenders. A new body that will replace the FSA next year – the Financial Conduct Authority – will have these powers.

Which? Says that a survey it conducted found that 66% of consumers want the financial regulator to be proactive about

taking misleading ads off the market.

“Our findings demonstrate why this new approach is important – 300 adverts have been removed but no-one knows which companies and products they were promoting.”

Don’t go west, young man

It may be a ‘buzz killer’ for young mortgage agents in Canada looking to escape competitors in larger cities, but virgin territory anywhere in the country may no longer exist.

“So is a boom town the place to go and chase your mortgage fortune?” asks Len Lane, owner of Verico Brokers For Life. “Is there a virgin market left in Canada? I don’t see one.”

The analysis comes as a growing number of young mortgage agents consider abandoning Canada’s mature markets such as Vancouver and Toronto for mining and oil towns, which are now gearing up

for another economic growth spurt.

Many of those hopefuls are looking to Fort McMurray, at the centre of Alberta’s oil sands, which has become one of the busiest places in the country, with listings for $450,000 mobile homes to now more than over 60 $1 million-plus ones.

“The mortgage industry (in Fort Mac) is very busy and many brokers from across the country target this mega market hoping to make a dent,” he told Canadian Mortgage Professional. “But there are a dozen mortgage brokerages here already, many who have offices in Fort McMurray.” Agents may need to give the greener pastures plan a second thought.

US originations to rise The Mortgage Bankers Association (MBA) says that originations in the US will likely hit $1.28tn in 2012, up from $1.26tn in 2011.

The MBA revised its annual projections upwards due to an increase in refinancing, which will likely total $870bn in 2012, an almost identical amount to 2011.

“Scenarios we have consistently highlighted that could drive rates down and refis up have materialized, primarily due to market turmoil in Europe,” said MBA research head Mike Fratantoni. “Deterioration of the debt situation in Spain and Greece and a new regime in France that is a weaker proponent of European austerity, along with slower economic growth globally, have driven the US Ten-Year Treasury yield down. Thus, we are projecting lower U.S. mortgage rates for the rest of the year and raising our refinance forecast as a result.”

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21

Review

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What a difference a year makes … or not. Australian Broker reflects on the punditry, breaking news and influential trends that made headlines in the magazine 12 months ago Australian Broker Issue 8.11 Headline: ING Direct cuts rate, tips product tweaks (page 2) What we reported:

What we reported: ING Direct last year tipped product improvements on the back of a cut to its Orange Advantage loan.

The bank’s head of broker distribution, Mark Woolnough, said ING Direct had product enhancements “in the pipeline”, which would appeal to the lender’s broker network. While credit growth was noticeably slowing last year, with ABS housing finance figures hitting a then 10-year low, ING Direct head of mortgages Ray Esho said the bank was well-positioned to compete with the majors.

What’s happened since:

ING Direct has spent much of the last year tweaking its service proposition to brokers, along with its credit policies. The bank responded to broker feedback, implementing a variety of reforms including allowing credit assessor access, online variations and emailed supporting documents. ING Direct’s chief risk officer Bart Hellemans recently told brokers the bank would also ease some of its credit policies to satisfy its “appetite for more risk”. Hellemans told brokers he would be open to feedback on the bank’s policies.

Headline: Banks told to expect slow credit growth (page 8) What we reported:

What we reported: in a speech to stockbrokers last year, RBA deputy governor Ric Battellino warned that banks would no longer be able to expect the rapid expansion in credit as the pre-GFC era.

While credit growth for the three years to mid-2008 averaged 14%, it slowed to 4% a year following the GFC. Battellino said consumer demand for credit was likely to rise eventually, but warned that it may never again reach the double-digit heights it saw prior to the financial crisis.

What’s happened since:

The “new normal” of sluggish credit growth has been heralded by a variety of sources over the past year. Perhaps most notably, JP Morgan and Fujitsu’s Australian Mortgage Industry Report predicted that broker numbers could see a decline as consumers increasingly eschew debt. The report revealed that credit growth had slowed to 3.3% per annum, and forecast that more brokers may leave the market in the face of a “lower growth higher risk environment”. Rather than fight against low credit growth, the report urged banks to accept it.

Headline: Pepper to become ‘one-stop shop’ (page 16) What we reported:

Pepper touted its purchase of GE Capital’s $5bn loan book in May as the non-conforming lender’s step into the prime space. The acquisition marked one of the largest whole loan transactions in Australian history, and chief executive Patrick Tuttle said he hoped the move would cause brokers to see Pepper as a “one-stop shop” rather than a specialist lender. He said the non-bank would focus on customers considered prime by banks prior to the GFC, rather than vying to take on the majors head-to-head.

What’s happened since:

Pepper has spent the last year expanding its offerings in its push to become a one-stop shop. The lender recently acquired a $150m automotive and equipment finance portfolio from Suncorp. Tuttle said the acquisition would eventually allow the company to originate its own branded vehicle and equipment finance, with a focus on small business owners and self-employed borrowers. The lender also launched a near-prime alternative documentation product, as well as cutting rates and raising maximum LVRs on its existing suite.

Headline: St.George expands Flame services (page 16) What we reported:

St.George’s then-general manager of intermediary distribution, Steven Heavey, last year touted the expansion of the Westpac subsidiary’s Flame services. The bank’s initiative, dubbed Flame Office, expanded its segmentation perks to include staff of St.George Flame Brokers. The perks included direct credit assessor access, upfront valuations and document printing. Heavey said the expansion of the segmentation policy could serve as a recruitment tool for brokers looking to bring on staff, and would help Flame brokers’ businesses see improved turnaround times.

What’s happened since:

The past year has seen not only the expansion of further segmentation benefits to the broader broker community, but segmentation strategies in general called into question. NAB Broker’s John Flavell sparked debate when he canned the bank’s segmentation policy, extending its perks across the lender’s broker network.

Brokers were near uniform in their praise for the move, but it stirred controversy among other lenders. While Westpac and CBA have remained steadfast in their segmentation strategies, lenders such as ANZ and ING Direct have publicly derided the programs.

22 brokernews.com.au

Comment VIEWPOINT

For all the latest mortgage industry news, visit brokernews.com.au

When it comes to broker disclosure documentation, things could be a lot simpler, but maybe not so the Australian economy, say our industry pundits

Being different is never easy

Vicki Grey, Gadens Lawyers

Teaching the regulators how to KISS Why have three, when you could have one?

That’s the question partner Vicki Grey of Gadens Lawyers is asking, when it comes to mortgage broking disclosure, with implementation still costing brokers time and money.

“I think the disclosure documentation regulations are very complex, and unnecessarily complex. Certainly I think the MFAA would support clear disclosure to consumers, but the problem that we have at the moment is that there is so much disclosure to consumers, and when you have a lot of disclosure, you find that consumers turn off,” she said.

Perhaps KISSing (keeping it simple, stupid) would be better than turning brokers off? You bet, says Kellie Lam of Abacus Home Loans, who is feeling the impact of the regulation.

“The timeframe involved – especially to train my staff and myself as well – is dramatic, cost wise,” Lam says. “Our business did actually drop, because we could not take more clients in, we had to reject clients. We are actually part of the 1300 Home Loans banner, but when they give us leads, we won’t be able to look after them all,” she says.

For any business, compliance is also a difficult enterprise. But when compliance is a seemingly moving feast – and you are a small business – it’s just that much harder.

“Particularly small business, they cannot bring in a large group of people to do the whole thing, and they have to spend a lot more time on it,” Lam explains. “I think time and money wise it is a big

Kellie Lam, Abacus Home Loans

Our business did actually drop, because we couldn’t take more clients in issue for them. We do have small business brokers, we sometimes talk together and that is the problem we are facing,” she says.

For Grey, the situation could be simplified for businesses such as Abacus Home Loans by the creation of a new arrangement with less disclosure documentation.

“I think a one-document arrangement is much simpler for consumers to understand and have all the information they require upfront, and is certainly less costly from a compliance perspective for the brokers out there that need to make sure that they are always complying at all times with the legislation.”

Grey says that there is an increasing crossover between mortgage broking and financial planning professions, creating even more confusion for clients on disclosure.

“The disclosure arrangements between the Corporations Act and the NCCP are similar, but not the same. So there is another level of cost. And I was speaking with one of our clients in great depth about the arrangements this particular organisation was going to try and make sure that their people who had dual qualifications could comply with both the corporations act’s disclosure requirements, and the NCCP’s disclosure requirements. So I think it would be really nice if we could move those two closer together,” Grey says.

The economy is different now than five years ago – and consumers just don’t like it.

According to economist Paul Bloxham from HSBC, consumers are used to things being on the up and up, and maybe it’s time they adjusted to the new normal.

“We are in a different economy than we were five years ago,” Bloxham said. “House prices are not rising quickly, household wealth is not building quickly, the global environment is very different. And that means households need to change the way they think about the world, and because they haven’t, because the structure of the economy has changed, households are just not very happy about things. They are used to seeing their house prices rising, they are used to seeing their equity rising and that is just not happening now,” he said.

The question is then, will there be further rate stimulus to keep consumer spirits up?

“The rate outlook is a very tricky one at the moment,” Bloxham says. “I think that based purely on domestic conditions here in Australia it is hard to build a case for the RBA to cut any further. The labour market is looking a bit better, the unemployment rate is stable, retail sales rose in the first quarter of this year, and I think there is a rebalancing going on.

However, there is one word from offshore that will continue to dog economists – Europe.

“The elephant in the room is what is going on in the rest of the world and particularly what is

Paul Bloxham, HSBC

going on in Europe. And that could see decisive cuts by the RBA,” he says.

LJ Hooker Financial Services’ Peter Bromley says rates at the moment are “still very high”, and he would expect 50 basis points at least by the end of the year. Regardless, he says that experienced brokers will be capitalising on the rate uncertainty.

“The experienced brokers are doing two things. One is talking to their clients about whether they have the best deal. And in terms of refinancing I think there is a great opportunity.

Competition is strong: with no exit fees now on loans, a consumer can really shop around. So talking to consumers about that and really capitalising that is important,” he says.

“The other thing from a broker’s point of view is they should be making sure they are speaking to those customers they have put into a loan over the last two or three years because people are conscious of what rates are doing, people are conscious about what their property is worth, so I think it is important to actually communicate with your customers.”

I think that based purely on domestic conditions here in Australia it is hard to build a case for the RBA to cut any further

Peter Bromley, LJ Hooker Financial Services

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23

FORUM

Compliance not that hard, say brokers Australian Broker’s online readers say that getting their compliance documentation right is not the headache that others in the industry have claimed that it is.

Following an Australian BrokerNews TV report that showed some brokers have seen business impacts – and have even turned clients away – others say they are coping fine.

Online reader Country Broker (21 May 2012 10:55 AM) said using CRM software that populates all of the disclosure documentation is “not that difficult”.

“The system, if it is a good one, should generate all that you need to give the client ready for signing automatically. I am not that technically minded, and I can do this and do not find it a burden," he said.

Ken Crawford (21 May 2012 11:10 AM) agreed. “The documents used now, apart from some changes to the logos, are very similar to those I was using immediately prior to NCCP,” he explained. “Yes, the privacy document (Credit Guide) might be longer, and yes there can some repetition

between Credit Assessment and Credit Proposal documents, but in the main I am taking the same time to do my interviews as I always have.”

Steve McClure (21 May 2012 05:11 PM) said if compliance documents are taking too long, then it may be that a broker’s forms are poorly constructed. “ACL holders have to take responsibility for that. But really, turning away clients because of compliance obligations? Send ’em over,” he said.

A Broker (22 May 2012 09:02 AM) said that salespeople are traditionally poorer at doing paperwork, and that perhaps an individual’s own work practices may be to blame than the documents themselves. “Sure, they’re an extra layer of complication, but they take perhaps 10 minutes to produce. If brokers are finding that these documents are taking up that much time, maybe they need to hire an admin assistant to free them up from paperwork, thus freeing them up to sell?” he suggested.

When Australian Broker broke the news that the MFAA had extended its diploma deadline, the reaction from online readers included acclaim, and outrage.

have left it for the last minute get assistance.

Just another way to support brokers that are disorganised and a let-down to the industry.

Well done MFAA. Christos on 24 May 2012 01:24 PM

Brokers have known about this deadline for some time now and if they have not bothered to “get around” to getting their diplomas completed, this is not fair on the brokers that have paid (without compensation mind you) and completed the course in the appropriate timeframe.

Annoyed broker on 24 May 2012 09:36 AM

Having made the effort to complete the diploma by the supposed “deadline” I am angry that the MFAA has capitulated. Members have known of the deadline for over a year. Can we take anything they [the MFAA] say seriously from now on?

Perth Broker on 23 May 2012 04:39 PM

Ridiculous, I have worked hard to get my licence and my diploma by the due dates, missing out on business along the way while a lot of so-called professional brokers continue to get a free ride. Next time I won’t bother trying to do the right thing.

Ian on 24 May 2012 09:44 AM From memory, we were given around two years’ notice to get the diploma. Most of us have taken the time out of our businesses to complete it and at our own expense. So now those who chose not to, or to leave it until the last minute, will not only get a further six months but will also get up to two-thirds of the cost subsidised by tax-payers’ money.

Thinker on 24 May 2012 10:07 AM Typical ... those of us that actually pulled our fingers out to get this done in time get squat, whereas those that are whingeing and dragging their feet get a big fat subsidy to push them along.

A Broker on 24 May 2012 01:10 PM Absolutely ridiculous. So those that have looked after their diploma in time get no reward, yet those that

So by being a member for a number of years and having completed the diploma I am not entitled to the subsidy? But if I were a recent member and have not yet enrolled or completed the course I will get rewarded… Wow there’s incentive for you to do the right thing.

PC on 23 May 2012 04:54 PM Amazing, once again make allowances for the slack disorganised brokers who have not bothered to complete the material within the allotted time frames. Will there be refunds made to those brokers who have paid the full course costs ?

John @ Mount Annan on 23 May 2012 05:13 PM Okay professional brokers no more excuses. You know you can do it.

Incognito on 23 May 2012 06:00 PM The whole mess with the diploma just shows the MFAA is totally out of touch with the frontline broker network. They act as arrogant police. We don’t need the MFAA anymore, we have ASIC. I and many others are already moving to the FBAA. Will – Perth on 23 May 2012 09:11 PM

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brokernews.com.au

Insight

Meditation, sales and success You’ve heard numerous sales tips – but have you tried meditation? Sue Barrett explains why meditation is not just new age mumbo jumbo, and how it can help you succeed

In this increasingly complex world emotions such as empathy, compassion and benevolence are emerging as critical qualities of highly successful people. What’s more, a growing number of companies are buying into the notion that developing these qualities through meditation can alter the brain in ways that drive important organisational outcomes.

Sight, not fright

Alongside a growing body of research, and a couple of thousand years of anecdotal evidence – relating to Buddhism, yoga, Sufism, and other spiritual practices – neuroscientists Antoine Lutz and Richard Davidson at the University of Wisconsin-Madison demonstrate that meditation can help with “positivity” training since it stimulates the area of the brain associated with emotions such as empathy or compassion.

To verify this, Davidson mapped the brains of employees at a bio-tech company where more than half the group completed three hours of meditation training.

After meditating, participants noticed an elevation or boost in their mood and a decrease in anxiety.

Meditation produced significant increases in activity in the prefrontal cortex, the part of the brain responsible for positive characteristics like optimism and resilience, as well as “higher” functions like decision-making, judgment, and planning.

When we operate in the prefrontal cortex (the front part of the brain) we are able to think more clearly, make better decisions, listen more attentively, see other people’s points of view, come up with better ideas to problems and work together more effectively.

By contrast, staying stuck in the amygdale – the primitive, reptilian (hind) part of the brain – where our ‘flight and fright’ response resides, we risk jamming our senses, limiting our thinking, and we end up creating personal and work settings around constant fear and distress.

The 20th Century’s ‘Me’ focused culture has inadvertently set up ‘lifestyle threatening’ situations

and managementby-fear business cultures leading many people to operate in the amygdale for sustained periods. The pressure of ‘keeping up with the Joneses’, and striving for external validation of one’s worthiness is leaving many suffering from sustained distress.

Medical research is confirming that living in a constant or sustained state of fear is leading to adrenaline fatigue, lower immune responses, dramatic increases in heart disease and early onset dementia.

In addition to the stark medical news, if we operate from a constant state of fear we see a reduction in empathy, compassion and benevolence across all walks of life.

Meditating for success

What this study also revealed was that practising meditation can increase job satisfaction and productivity.

A number of companies are encouraging employees to take up meditation practices. This in turn is reducing distress and increases wellbeing, which ironically helps people be more effective and productive. So instead of living in constant fear of achieving our sales targets, keeping our businesses afloat, and all that goes with it, maybe we could take some time out of our busy days and, at the very least, start to meditate. By practising meditation we can train our brains to start working in the prefrontal cortex and tap into our creativity and quality decision making, as well as our empathy, compassion and benevolence.

MOTIVATION

Take responsibility It may sound simple, but motivational speaker Larry Winget says it’s one of the main areas where people still founder Taking responsibility is the most critical step towards any success you will ever make in anything you undertake, either personally or professionally. The ability to take responsibility for everything you are, everything you do and

everything you have is also the biggest challenge you will ever face in your life. Follow these six steps: 1. Make a list of all the things that are keeping you from being successful in each area of your life: why you are broke, why you an unhappy, why you are unemployed, why your relationships suck. All of it.

Whine, cry and get it all out there and written down 2. Go to each one of these lists and write your own name at the top of each list. Why? Because you

are the reason your life is the way it is. Nothing else you have written down matters. Your thoughts, your words and your actions created the life you are living. Stop making excuses and face that reality.

3. Go to the mirror, look yourself in the eye and have a little heart-to-heart with yourself.

Say these words: “My thoughts, my words and my actions have created the life I am living. I take complete responsibility for everything going on in my life. I will stop blaming. I will stop making excuses. I am in charge of my life and I am taking control of my results from this

moment on.”

4. Repeat this affirmation daily until it is ingrained in your psyche. Yes, daily. It works.

5. Remember this line: Affirmation without implementation is self-delusion.

Saying the words alone isn’t enough. The affirmation is only a verbal reminder that you are responsible. Now you have to prove you are responsible by taking action.

6. Live by this rule, which is my Number One Rule For Life and Business: Do what you said you would do, when you said you would do it, the way you said you would do it.

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Market talk

Always look on the bright side of life

increased substantially, but it’s done so off a terribly low base, and it’s very segmented and geographically located.

It’s not something which is across the market. Mass affluent households – those are people earning better than $80,000 a year – as households are showing no significant evidence of stress in the current market.

Borrowing to be back in fashion

“People who aren’t borrowers are starting to see a marked improvement. The reality is that people are actually starting to save money, and have been saving money for a while. Their decision-making power is starting to increase. People who aren’t in the market are starting to become more warm to the concept of borrowing and more warm to the idea that they can get into the market. One of the challenges for you as an industry is that people still think they need a 20% deposit. That’s not necessarily the case, but that’s what they’re aiming for. The other part of this is ambitions have also started to change. A while ago, we were seeing purchaser behaviour where they were deferring their purchase so they could live in their destination suburb.

That’s started to change now. People are starting to look for different places to live.”

Under pressure: Stacked up savings set to release

“Net new houses at the moment are at a 15-year low cycle. What happens is that increasing pressure comes on existing stock. Now if that’s going to turn and it turns relatively quickly, the pressure is enormous. Let’s say 10% of the available retail savings – and that’s just retail savings, not SMSF savings or business savings – starts to move into the market. That’s $54bn in motion. It’s an extraordinary number of houses and an extraordinary number of properties in a short period of time, and it’s important for you to understand how to capitalise on that.”

Doom yes, gloom yes, but sunlight may soon break over the housing market

People who aren’t in the market are warming up to the concept of borrowing

T

Back, for the very first time

Economic sentiment on the up

The best brand is brand you

hings may still look a bit dicey out there with lagging consumer confidence, record low housing starts and slowing credit demand, but there may be hope on the horizon. The MFAA/CBA Home Finance Index Report has uncovered some encouraging signs that the Aussie housing market may not be so bleak in the months and years ahead. CoreData founder and principal Andrew Inwood gazed into the crystal ball of the findings at the MFAA’s recent annual convention; here’s what he said to prepare brokers for the potential opportunities ahead.

“People are expecting the economy is going to improve going forward. There is the hangover of Greece on this, so these things aren’t going to change very quickly. Greece – let’s be candid – is the first domino over there. There’s Greece, there’s Spain, there’s Portugal, and they’re all facing some of the same issues. I’m not sure that’s really a big issue for property. It’s a big issue for shares. What’s really going to happen is that at a time when people are finding asset classes choppy, property is going to be a relatively attractive asset class. So things are grim out there, but it is heading up. I’m not suggesting for a moment that things are looking good and the market’s hot, but it is starting to warm up.”

Mortgage stress: Not as stressful as it’s made out to be

“One of the things that people talk about in the marketplace is that there’s mass affluent stress; that the number of people not paying off houses or getting into mortgage stress is increasing. We can’t see that. Most affluent households are doing OK. The real issue here is the spectre of no future employment. People being laid off or losing jobs. Yes, the number of houses being repossessed by the sheriff’s office has increased, and

“First-time buyers are back in the market. They had been sucked out of the market in previous years because of the way the government had structured the first-time buyers’ allowance. They’ve started to emerge again, because they’ve been saving for a while, and they also consider that prices have been fully discounted. Six months ago when we asked [if now was a good time to buy] they weren’t particularly interested because they thought house prices were going to fall, but now they’re starting to expect that they’re actually going to rise, so they’re becoming active again.”

“One of the really difficult parts about running a broking business is that the relationship is very rarely with the broking channel; it’s with the individual. In the end, it’s the brand called you. It’s the individual broker. It’s not YBR or Mortgage Choice. It’s Sam, or George, or Betty or Simon. It’s really important you understand that. It’s important to have a halo brand, particularly with concerns of security at work, as it is at the moment, but the really important part is understanding that it’s the brand called you.”

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27

Housing on ‘brink of recession’: HIA The HIA has claimed a bounce in new home sales is not enough to stave off a recession in housing construction.

The HIA – JELD-WEN New Home Sales report has indicated a rise in sales both for detached housing and multi-units. Housing sales overall increased by 6.9%, with detached housing sales rising 6.4% and multi-unit sales jumping 10.3%.

But HIA chief economist Harley Dale has argued that the result will not keep the home building sector from heading into recessionary levels.

“Even with this latest improvement, the aggregate volume of both new home sales and local government building approvals imply that in the absence of a rapid and sustained recovery, national new home building is heading to a recessionary level in 2012,” Dale said.

Dale claimed a lack of consumer confidence continued to dog

Australian home sales.

“We keep hearing that Australia is one of the world’s strongest economies in aggregate. That’s a redundant concept if people on the ground aren’t feeling and experiencing that, and they haven’t been for quite some time,” he said.

While Dale said further RBA cuts would be needed to boost the sector, he called on further action from the government.

“Further interest rate cuts are required, and the Reserve Bank should just get on with the job on June 5. However, rate cuts are not a panacea, and the key to a housing recovery lies with government at all levels,” he said.

Barring government intervention, Dale claimed the sector could see further job cuts.

“Job losses are mounting, and governments need to collectively act to revitalise new home building through reducing the sector’s excessive tax burden and through an immediate injection of

investment and funding,” he said.

HIA managing director Shane Goodwin agreed, and called on the government to halt the “spectre of even further declines”.

“The Australian housing industry is facing its worst conditions in decades. New home building has collapsed and jobs are being shed right across the country,” Goodwin said.

Goodwin commented that the home building industry had suffered eight years of declining activity, placing it on the “brink of recession”.

“What the Australian economy needs now is a revitalisation of the housing industry through tax relief and an injection of investment and funding into the new housing sector. Such an injection will provide a profound economic dividend to the broader economy,” he said.

Goodwin warned that should the housing industry enter recession, it could drag the rest of the Australian economy with it.

NUMBER CRUNCHING Affordable suburbs close to CBDs City

Suburb

Median Price

Distance from CBD

Sydney

Granville

$430,000

19km

Melbourne

Coolaroo

$300,000

17km

Brisbane

Gailes

$215,000

19km

Adelaide

Wingfield

$235,000

10km

Perth

Midvale

$290,000

17km

Hobart

Herdsmans Cove

$138,000

16km

Darwin

Bellamack

$213,500

12km

Canberra

Chamwood

$382,000

12km

-4.6

Sydney Melbourne

-7.8

-6.6

Brisbane

-3.7

Adelaide

-3.8

-2.2 0.4 -0.9 -1.7

Perth Hobart

-6.7

March QoQ change March YoY change

1.1

-2.7

3.5

Darwin

Source: RP Data

At a glance…

Still falling: Home values on the way down

64%

*

-0.5

Canberra *The proportion of Australians who say online banking is the number one reason they use their computer Source: Canstar

National -8 -6 Source: PRD Nationwide

-4.5

4.4

1.2

-1.1 -4

-2

0

2

4

6

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brokernews.com.au

Feature Q&A

Surety for an uncertain world Mortgage insurance is not well understood, but continues to help buyers into the market. We caught up with QBE LMI’s Jenny Boddington for her outlook.

You’ve recently been appointed CEO. What’s happened since?

It’s been about three months now, but I was an internal appointment – I’ve been with the company since 2005 in various different roles – so it wasn’t like I was coming from the outside with a mandate for change.

I’ve been part of the team for some time now, so it’s about continuing on the journey that we had already started in terms of what we are trying to achieve as a company, which is really about partnering with our customers.

Are claims trends in Australia showing you any surprises?

There are parts of the economy that are under pressure. There is no question about that. Everything you read about the two-speed economy is definitely true. Having said that, we are not seeing anything out of the ordinary.

Generally speaking you can see things coming over the horizon; you don’t just wake up overnight and find that unemployment has doubled. Things happen in trends, and you can see things happening in trends.

The exception to that of course would be the Queensland floods. That was obviously a cataclysmic event. But the ebb and flow is not showing anything dramatic.

How are you dealing with events in the global economy?

We cannot with any confidence say what the end of the year is going to look like, because I don’t think that anybody else can

Jenny Boddington

This is a world of uncertainty. The only thing you can do in such an uncertain world is to work out what’s within the bounds of reality – what could happen in terms of the downside, what could happen in terms of the upside – and make sure your business is structured to cope.

Australia relative to the rest of the world is in a really good position, but so much of our economy is hinged on China, and interestingly not very much Europe. The impact that Europe has on our economy is more in terms of confidence and financing.

So we cannot with any confidence say what the end of the year is going to look like, because I don’t think that anybody else can.

What is the important thing for brokers to know about loan applications?

get because of that, which is being able to borrow the money where otherwise they wouldn’t be able to take out a loan at all. It’s a question of choice. We want to make sure that it is there and it is transparent, so we applaud the LMI facts sheet.

What about LMI portability? Is that desirable?

We can work with whatever the system wants, and if the system wants to have portable loans, then we can work with them to apply it.

But there are some fundamentals to consider – and one of those is that our contract is with the lender. That doesn’t mean that you are necessarily going to take it from one lender to another. Nearly always when somebody refinances, the loan is not identical when it goes from one lender to another; in fact it almost never. There would also be implications in terms of the fundamental structure of the business. For example, in Australia we have one upfront one-off premium. In America, they’ve had monthly premiums. They’ve consistently been higher than us.

The important thing for efficiency is completeness, to get everything organised upfront. If our underwriters have to go back and ask for more information all the time, that prolongs the process. So the important thing is to get it organised.

Now that brokers are so much more responsible than what they have been with the NCCP, it’s also in their interests to be very clear. It’s in nobody’s interest to put somebody in a loan they shouldn’t be taking out.

In the end, we hate to hear the mortgage insurer said no.

We want to explain why is it that we said no, and often it is the lender who has said no as well. There’ll be a reason there. We like writing loans – we are not just saying no for the sake of not writing them.

What’s the strategy for QBE LMI going forward?

What’s your view on the mandated LMI facts sheet?

We are part of a large insurance group, and they obviously provide very different products from what we provide. They provide products such as home insurance, travel insurance and car insurance. So we have been exploring whether there are ways in which we can leverage off these product lines to create something new and innovative .

We applaud transparency. I think people need to be very clear. Consumers get very confused about what LMI is covering, and it is very important that people go in with their eyes open and know exactly what it is that they are paying for and what it is for, and the benefits that they

We tend to have long-term contracts with our customers and when you do have long-term contracts you can commit to the long-term and try and build something together. So our strategy is about really understanding what makes them different in terms of what they are trying to achieve.

Because mortgages aren’t all equal, different lenders have different types of strategies in the marketplace and they are targeting different types of groups. It’s important for us to understand what they are trying to do, what is their niche, and work with them.

Are you looking at any product changes?

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Caught on camera The MFAA took its annual convention to Adelaide this year, where it succeeded in informing, motivating – and entertaining – a contingent of futurefocused brokers. Among others, they heard from keynotes Michael Clarke and Ralph Fiennes

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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

Religion and politics? At this dinner, sure

how Naylor felt to be a star at the opening of the MFAA convention, when he achieved perhaps the biggest round of applause that Insider was to witness during the entire event. Sure, there were other special guests including cricketer Michael Clarke, Olympian Alisa Camplin, and even a cake with candles on it that should have been former Liberal leader John Hewson if he’d made his plane, but none of these could evoke the rapture that gripped the audience when the MFAA’s Naylor took the stage with a nugget of information that would make any broker ecstatic.

His announcement? The end-ofJune diploma deadline had been extended, and brokers had an extra six months to get it done.

Insider’s ears are still ringing, but there is doubt Naylor was happy with the reception – after all, other attendees had to clear him some space on the dance floor at the Gala Dinner when Bob Seger’s ‘Old Time Rock ’n’ Roll’ was played by the band.

Getting rid of ‘gobbledygook’

“At least this mic can’t insult anyone…”

S

omething tells Insider that when the MFAA hired comedian Akmal Saleh to entertain guests at its recent conference in Adelaide, they weren’t quite sure what they were in for.

A veteran of Australian TV programs including Rove Live, The Glasshouse and The Footy Show – just to name a few – MFAA’s events team would have expected the odd jibe directed at the host city of Adelaide (tick), his home country of Egypt (tick) and a few odd anecdotes from his life that would put the (by then quite inebriated – it was almost 9pm) audience in a good mood, chuckling over their South Barossa-sourced glasses of wine.

However, when Akmal decided to broach more taboo subjects, particularly religion – which he didn’t hesitate to profane with a mixture of delicacy and bluntness – the audience’s laughs turned to shocked groans and sideways glances at their peers, and at one point, even Insider was amazed at the buttons Akmal had managed to push in a near-silent audience.

And then – as if performing

the comedian’s socially challenging role in society was not enough – Akmal proceeded to pick on people in the front of the audience (which, perhaps he was not aware, was actually the MFAA’s head table who were paying his appearance fee), debauching proceedings to the point of embarrassing them and everyone else in the room.

Well Akmal, you did a fantastic job of getting Insider laughing – and holding the attention of a tough, drunken audience – but something tells me you may not get an invite back next year.

Fame is just like rock’n’ roll

The MFAA’s Phil Naylor is not one known for his love of the media spotlight, though he does regularly make himself available to the press. In fact Naylor has achieved a measure of stardom in the industry, Insider believes, through his sheer length of tenure at the association, and a tendency to beaver away behind the scenes to manoeuvre mortgage brokers through a market and regulatory minefield.

And so, Insider is not sure just

Do you find the NCCP confusing?

Is disclosure giving you headaches? A new campaign is slated to fight “legalese” from laws, application forms, public notices and even TV set user manuals. The US Center for Plain Language has held a conference to banish confusing legal terms, saying it will fight to end “gobbledygook”. The event drew people from 20 different countries, including Australia, and centred on efforts to communicate with consumers in plain language everyone can understand. Should its efforts come to fruition, Insider sees bright days ahead for brokers.

Can you imagine ASIC communicating with you without all the cloak and dagger obtuseness? Or being able to clearly communicate the terms of a mortgage to clients without first putting them through a Cert IV so they can understand LMI, stamp duty, variable rates and the like?

Insider can imagine a wondrous day when terms like “serviceability” will be replaced with “Hey, moron, don’t take out a loan you can’t afford” and “financial hardship application” will be eschewed in favour of “you really stepped in it this time”. The entire NCCP could be replaced with the words “banks and credit providers will agree not to screw you if you agree not to screw them”. It’s a win for everyone.

Spendthrifts want government gone

With unemployment low, inflation below expectations and income growth at least modestly rising, why is it that consumers just won’t open their wallets?

ABS figures show retail spending fell in April for the first time in 10 months, and that was after the RBA had already dealt two of its rate cuts. So what’s bedevilling Aussie buyers?

The government, apparently. A recent poll from Loan Market has found that respondents believe that a cut in taxes, followed by a change in government, would most improve consumer confidence in Australia.

Forty per cent of those surveyed said tax cuts would boost confidence, while 35% said ditching the current government would make consumers less glum. Gen Y respondents were more scathing of the government, tipping a change in government as the top factor that could get consumers spending again.

Personally, Insider doesn’t see what Julia Gillard or Wayne Swan have to do with his decision of whether or not to buy a new TV. If anything, the Craig Thomson saga has made him want to trade up, because angry tears and outrageous conspiracy theories always look better in HD.

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