Australian Broker magazine Issue 9.12

$4.95 POST APPROVED PP255003/06906

ISSUE 9.12 June 2012

Satisfying brokers aggregators’ top priority

Steve Kane

 Aggregators

viewing borrowers as their customers may have their focus the wrong way round The focus of mortgage broking often falls upon the experience of the borrower, but where aggregators are concerned, newly-minted Advantedge head of broker platforms Steve Kane has suggested this focus may be misplaced. In order to succeed, Kane suggested, aggregators must

focus on the broker as customer.

“In the aggregation business, we see the brokers as the customers of the aggregator. In any good business, you listen to the needs of your customers,” he said.

Nowhere is this more evident, Kane said, than in the company’s focus on software. The introduction of the Podium software across the company’s PLAN, Choice and FAST aggregation platforms has met with its fair share of opposition.

But Kane has said aggregator technology must be a constant evolution to meet brokers’ needs.

When former Advantedge head Steve Weston quit the role for a position with Barclays in the UK, he predicted that the resistance towards the Podium software would fade as brokers became more accustomed to it, and as the company provided training and support. Kane agreed, but said the onus is also on Advantedge to tweak the offering to meet brokers’ needs.

“We will continue to develop and continue to invest over time because we recognise that it is our role to continue to develop it with the needs of brokers in mind. It’s all about the customer, and the customer in this instance is the broker,” he said.

Kane said the group’s software offering would continue to evolve, with a major release due in September.

As the world increasingly becomes a technology-driven marketplace, software has become a linchpin for brokers. It forms the cornerstone of many aggregators’ offerings, and brokers have been known to abandon ship due to frustration with aggregator software. And if the focus of aggregators truly is on the broker as customer, Kane said evolution is a necessity.

“I don’t believe when you develop a piece of software you can put your hands behind your head and say that’s it for the next five years.

Then all you’ll have to do is start again in five years’ time, and you’ll be behind the eight ball,” Kane said.

Dodgy brokers beware Banned MFAA broker shown the door Page 2

Refunds no more Refund brokers can choose own model Page 4

Driving BDM growth Bank reaches out to brokers Page 8

Inside this issue Viewpoint 19 Consolidation breeds competition Analysis 20 Broker myths busted Forum 23 BDM slash creates controversy Insight 24 Getting a grip on change Market talk 26 Warm winter for property People 28 Bernie Lewis celebrates 25 years Insider 30 Taking a punt on shattered dreams

2

brokernews.com.au

News ASIC ban on turfed MFAA broker A broker who was stripped of his accreditation by Choice and ANZ and expelled by the MFAA has now been dealt a three-year ban

by ASIC. Victorian broker Ravind Prasad was handed the ban due to misleading statements on his licence application. ASIC said Prasad failed to divulge that his accreditation had been terminated in 2008 by Choice Aggregation Services and ANZ. The regulator claimed Prasad also failed to “clearly state” that the MFAA had previously disciplined him by requiring him to complete a mentoring program.

MFAA records show Prasad was expelled in December 2011, as well as having been suspended in 2009.

In addition to the three-year ban, ASIC has also cancelled the credit licence of Prasad’s business, Jazzrozz Pty Ltd. The regulator claimed an

investigation found Prasad’s business “failed to comply with general conduct requirements” in failing to be a member of an EDR scheme, and not lodging an annual compliance certificate by its due date.

“ASIC found that Mr. Prasad’s lack of skill and knowledge in complying with legal and regulatory obligations highlighted his inability to carry out the responsibilities associated with the role of director of an Australian credit licensee,” the watchdog said in a statement.

ASIC commissioner Peter Kell said the banning highlights the action ASIC will take against non-compliant brokers.

“This outcome shows the importance of credit licensees being aware of their obligations under the credit laws and emphasises the consequences of providing false or misleading

information to ASIC,” Kell said.

MFAA chief executive Phil Naylor said the association had provided details of Prasad’s conduct to ASIC following his expulsion in December.

“We can only make decisions with the information we’ve got, and based on the information we had our tribunal expelled him.

Under our constitution we have to provide that information to ASIC, w hich we did. Now, whether that alerted them to the situation or whether they were already carrying out their own investigation I don’t know, but I suspect that our decision may have alerted them to the problem,” he said.

Naylor said much of ASIC’s action on broker misconduct will come as a result of the industry making the regulator aware of non-compliant operators, rather than from ASIC’s own monitoring.

AFG’s drive doubles insurance sell AFG says its diversification drive is working, with insurance sales doubling over the last few months.

The aggregator hit a record for insurance sales in May, selling 600 contracts in a single month for the first time. The company’s general manager of sales and operations Mark Hewitt said the number represented significant growth since the start of the year.

“This has grown from a historical level of around 300, and particularly over the last three or four months we’ve noticed a big increase. This is primarily due to the support of our two insurance partners and our brokers’ preparedness to consider financial services products,” he said.

The aggregator’s insurance sales, through TAL and Allianz, operate on a no-advice basis, with brokers and clients giving consent

to be contacted by the insurers.

“Brokers would have a general understanding of the product and its specifications, but the model relies on Allianz and TAL quite heavily to handle the product explanation and sale, so it’s a referral model,” he said.

Hewitt said many of the company’s brokers lay the groundwork for insurance crossselling ahead of the contact.

“The most successful brokers are the ones who pre-position it and say, ‘I have a relationship with this insurance provider. Would it be OK for them to contact you?’ and emphasise the importance of getting covered,” he said.

While Hewitt said many of the company’s brokers prefer to direct sell insurance products, he said the partnership with TAL and Allianz has allowed brokers

previously uncomfortable or unfamiliar with the products to diversify into risk.

“It works for brokers who prefer Mark Hewitt to focus on their core competency of home loans, but also want to make sure the customer is protected,” he said.

And with diversification becoming increasingly important to brokers’ revenue streams, Hewitt said the system can help the company’s brokers to transition to a diversified offering.

“Cross-sell has been the mantra of the industry as long as I’ve been involved, only now with the help of this system we’ve been able to simplify it and make it simpler for the consumer and the broker,” he said.

brokernews.com.au

EDITOR Ben Abbott COPY & FEATURES NEWS EDITOR Adam Smith PRODUCTION EDITOR Sushil Suresh ART & PRODUCTION DESIGNER Ginni Leonard SALES & MARKETING SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak MARKETING EXECUTIVE Anna Keane TRAFFIC MANAGER Abby Cayanan CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley MANAGING DIRECTOR Claire Preen CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR – BUSINESS MEDIA Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil

Editorial enquiries Ben Abbott tel: +61 2 8437 4716 ben.abbott@keymedia.com.au Advertising sales Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak tel: +61 2 8437 4772 rajan.khatak@keymedia.com.au Subscriptions tel: +61 2 8437 4731 • fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Singapore, Hong Kong, Toronto brokernews.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor.

Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss

Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008.

The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.

4

brokernews.com.au

News

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

MFAA blasts major bank dominance The MFAA has come out in defence of mortgage borrowers which it says are ‘paying the price’ of dwindling lending competition as non-banks ‘whither on the vine’.

As part of a submission to a Senate Economics References Committee Inquiry, the MFAA has lambasted the exit fee ban, and reiterated arguments for imitating Canada’s system.

“It is clear there will be no long-term meaningful changes to bank competition unless there is a strong and viable non-bank lending sector,” CEO Phil Naylor said.

“The rise in wholesale funding costs and the closure of securitisation markets continues to compromise the business models of non-banks, regional banks and mortgage brokers.”

Naylor said broker clients were

‘paying the price’, with 90% of mortgages coming from major banks. “We need to adopt initiatives similar to those taken by the Canadian Government to successfully stimulate competition in the banking sector to the benefit of borrowers and the wider economy,” he said.

Naylor said the Canadian government had injected $300bn in National Housing Act mortgage-backed securities and bond programs over the last five years. The Canadian Mortgage Bond system assists competition by ensuring there is a quality flow of securitised funds available to non-bank and bank lenders, giving consumers more choice.

“Our uncompetitive market manifests itself in poor service levels and lack of availability of products,” he said. “A market

dominated by four large players who hold over 80% of the market share is not normal. Few people would agree the current position is good public policy and in the interests of the wider community.”

Naylor continued by saying that non-banks can’t be allowed to “whither on the vine”.

“More lenders mean more competition and downward pressure on interest rates. The impact of lower interest rates on home loans and the resultant flow-on wealth effects to the broader community and national economy cannot be ignored,” he said.

While the government and banks had previously argued that the market itself would be effective in ensuring competition, and government intervention was not desirable, the MFAA said

many western governments assist with competition in their own markets.

How is Canada similar to Australia?

• Similar population 22m vs 34m • Similar provincial/state structure • Strong broker channels • Four major banks in Australia versus five in Canada • Similarly sized mortgage market (Canada has $1.1trn in loans outstanding compared to Australia’s $1.2trn) • Both countries have a robust and prudent banking system and a strong economy, which avoided the worst impacts of the GFC. Source: MFAA

Refunds no longer required for Refund brokers The Homeloans Ltd purchase of embattled franchise network Refund Home Loans means brokers will no longer be required to refund part of their commission to clients.

Homeloans recently acquired the troubled Refund network, along with its $1.9bn loan book, after the franchise spent seven months in administration.

Homeloans general manager of retail sales Greg Mitchell said the acquisition means franchisees who sign on to become Homeloans branded brokers will not be bound to the former Refund business model.

“That’s an individual case-bycase decision that the actual franchisee would make once they become Homeloans brokers. If they want to make separate arrangements in that regard with the individual clients they take onboard, that’s up to them, but we will not be pushing the continuation of that model across the franchisee network,” he said.

While brokers will be able to make their own choice regarding client refunds, Mitchell said one decision was clear: the Refund Home Loans brand will no longer be used.

“We’re using the strength we’ve

got around the Homeloans brand being around in the market for more than 26 years. We’re using the traction of the Homeloans brand, and we won’t be using the Refund brand at all,” he said.

Mitchell said the company has sent contracts to 170 Refund franchisees, offering them the opportunity to become Homeloans branded brokers. He previously told Australian Broker some franchisees had decided to leave the industry while the company was in administration, but said initial contact with the remaining franchisees had been positive.

“It’s been going very well. We’ve

been quite proactive in terms of getting in contact with the franchisees we sent contracts to, and the response Greg Mitchell has been very promising,” he said.

“We’ve had great conversations with the franchisees, and they find it quite exciting with regards to joining up with Homeloans. There are some very good brokers and loan writers within that system, and we’re looking forward to working with them closely,” Mitchell added.

6

brokernews.com.au

News

Read the latest issue of Australian Broker online brokernews.com.au

Suncorp seeks 65% of ASIC takes Bankwest business through brokers to task over card ads Second tier lender Suncorp has told brokers it is one of the few credible alternatives to the majors, and that it eventually plans to do upwards of 65% of its business through the third-party channel.

Suncorp head of intermediaries Steven Heavey has commented that the bank has invested heavily in its back office processes in a drive for more broker business. He said the bank would have to heavily rely on the broker channel for growth, and could eventually see 65% of its business come through its third-party network.

“With Suncorp and the journey we’ve been on in terms of our back office, if you looked three or four years ago and said are we an organisation that can deal with scale, the answer probably would have been no. With the investment we’ve made, we can deliver on that scale, we can fund it and I think we’re a credible alternative to the majors,” he said.

Heavey said this scale and ability to fund growth through the broker channel were key factors in his decision to join the bank.

“Two key areas I was looking for when I joined Suncorp were their commitment to third-party and their ability to fund the level of growth they’re projecting, and they’re projecting some pretty serious growth targets into next year,” he said.

A commitment to third-party distribution has not always formed part of the bank’s strategy, but Heavey said Suncorp will focus heavily on re-energising its broker distribution moving forward.

“Four weeks into the role, I took the strategy to the executive committee at Suncorp to talk about reinvigorating the bank in the broker space again after a period of time where we had exited the market somewhat.

Steven Heavey

We’re on our way back,” he said.

Heavey claimed that Suncorp was well placed to credibly compete with the majors, arguing that the bank had the scale and funding to do so. He said many brokers were unaware of the scale of the group, which includes insurers GIO and AAMI, and commented that one in three Australians held a Suncorp product.

“We’re starting to see some good signs that brokers are starting to talk to their customers about lenders outside the Big Four.

There aren’t too many lenders who are a credible alternative to the majors, mainly because of funding and scale. I think Suncorp is very well placed to take on that mantle,” he said.

Happy trails One of Steven Heavey’s first orders of business upon taking the reins as Suncorp’s head of intermediaries last year was to introduce year-one trail payments. Having previously resurrected year-one trails at St.George, Heavey announced the bank would begin paying 15bps of trail in year one, increasing to 20bps from year four and beyond.

Another bank has been chastised

by ASIC over its advertising, this time for claiming it had the cheapest credit card on the market.

Bankwest has agreed to change its credit card advertising in response to concerns raised by ASIC. The bank’s Breeze Mastercard was advertised as “Australia’s Cheapest Credit Card” based on an award from Money magazine.

But the watchdog has said the award only compared the Bankwest product to credit cards offered by other banks.

“In fact, there were some other credit card issuers, such as credit unions, that offered cheaper credit cards,” ASIC said.

The regulator said Bankwest had been proactive in amending its advertising, and had contacted consumers who had already obtained the credit card to explain the nature of the ad’s claim.

“A careful approach should always be taken when promoting awards in advertising for financial products and services to ensure consumers fully understand the basis on which they have been made. Importantly, awards should be adequately explained to ensure they do not mislead consumers,” ASIC commissioner Peter Kell said.

The watchdog has already taken aim at advertising and communications from other banks.

Earlier in the year, ASIC contacted Westpac and CBA over what it considered misleading communication relating to consumers’ ability to raise their credit limits. Ahead of NCCP restrictions on credit limit offers due to come into effect on 1 July, both banks were accused by ASIC of misleading consumers by suggesting that they had to urgently give consent to receive

future offers or could lose the ability to increase their credit limits.

The regulator has also warned lenders on the advertising of comparison rates. ASIC raised concerns that lenders did not consistently advertise comparison rates, did not advertise them prominently enough, did not properly calculate them or failed to include an NCCP prescribed disclaimer about the accuracy of comparison rates.

The regulator has vowed to continue to scrutinise advertising by lenders, and to take action where necessary.

“ASIC will continue to actively monitor advertisements for financial products and financial services and will take appropriate action in response to misleading advertisements,” Kell said.

The action comes as ASIC has also released guidance for credit advertising. The regulator said its consultation paper was intended to promote good practice among credit providers.

“Ads should give balanced information to ensure the overall effect creates realistic expectations about a credit product or service,” Kell said.

Peter Kell

8

brokernews.com.au

News Kane to champion Advantedge enhancement New head of broker platforms at Advantedge, Steve Kane, has said he will aim to continue to raise the level of service Advantedge provides FAST, Choice and PLAN brokers.

Kane said the business would not undergo any major shift in strategy, but will focus on its white label offerings, the continued upgrade of its software platform, and diversification.

“There will be no major shift in approach to the marketplace, we

will continue to offer those services and support the broker channel as a viable channel in the market,” he said.

Kane said its white label products were averaging between 5% and 7% of volumes depending on aggregator brand, and that brokers appreciated the increased choice they provided.

“It’s certainly gaining traction,” he said. “We originally designed them when there was a shortage of product in the market due to the

FAST track for growth “FAST is well set up to move into the future,” says former CEO Steve Kane, who was recently promoted to head of broker platforms at Advantedge.

Having joined the business in August 2006, Kane said it has been a very successful aggregation business from a sales and growth perspective across residential, equipment and commercial. With a $42bn loan book and a new structure of partnership managers and sales support officers, Kane said it was well positioned to provide a higher level of consistent service to its constituent brokers.

impact of the GFC, and it was important for brokers to have alternatives when there was limited opportunity for choice.

Kane said the white labels are a service-based offering that ensures premium service through Advantedge, and this fit within the requirements under NCCP for responsible lending.

“Additional funding options, particularly in the environment we are in now, are top of mind as brokers need to be looking after their customers,” he said.

Advantedge will continue to upgrade its enterprise software architecture Podium, with Kane saying there were a number of upgrades in the pipeline in 2012.

“There have been a number of releases in recent times, and we will continue to do updates to the software in coming weeks and months based on the feedback.”

Steve Kane

“There will be several smaller releases over the next few weeks, and in August or September there will be a major release. These will position the software as comparable to any software available in the market and superior to many,” Kane said.

ING Direct ramps up BDM presence

Mark Woolnough

Second tier ING Direct has claimed its BDM visits are up 120% as a result of its program to ramp up broker service.

The lender said it has appointed new members to its broker sales and support team including new BDMs, relationship managers and

broker support staff. The bank’s head of broker distribution, Mark Woolnough, said ING Direct has seen tangible results in response to its focus on broker support staff.

“Under our Broker Partner Program, broker visitations from BDMs are up 120%. We’re also seeing clear increases in our applications and conversions, which are a direct result of our initiatives over the past six months,” he said.

Woolnough said the bank’s Broker Partner Program was launched in response to direct feedback from brokers.

“We’ve seen a clear increase in satisfaction amongst our brokers, with our internal broker satisfaction research program indicating the vast majority of our brokers are satisfied or very satisfied,” Woolnough said.

“I’m incredibly proud of our

team and the way the new structure is delivering for us, it’s so important our brokers are seeing a positive gain given third parties account for over 90% of our production,” he added.

The lender said it had also followed through with mooted changes to its credit policies.

Following commitments made during its national broker roadshow, ING Direct has said it has made changes to simplify its credit assessment process, pledging a “common sense approach”.

The changes include enhancements to income criteria and verification, simpler treatment and allowances for depreciation add-backs and a loosening of criteria relating to smaller properties.

The bank’s chief risk officer, Bart Hellemans, flagged the

changes at a broker roadshow in Sydney last month.

Hellemans said the bank would now allow add-backs on depreciation, would accept two dwellings on a single title, would decrease the minimum space on units to 40m2 and would allow casual employment and contractors.

“Brokers responded positively when we flagged these changes and we’re very happy to have delivered these so quickly,” the bank’s head of broker distribution Mark Woolnough said.

Woolnough said the changes followed on a previous initiative for the bank to allow brokers direct access to credit assessors.

“We’ll continue to evolve to ensure we make our policy and credit assessment simpler for brokers, making it easier to deal with ING Direct,” Woolnough said.

10 brokernews.com.au

News

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

Association unveils CPD tracking tool Brokers may soon have an easier way to track CPD points, even if they move from one company or aggregator to another.

The FBAA has signed a partnership with My Professional ID Australia giving its members access to web-based technology to track past, current and ongoing professional qualifications. FBAA president Peter White said the partnership was in response to member complaints about the complexity of tracking CPD points.

“The FBAA has listened to the

Keeping score The MPID system will track: ✔ CPD courses booked ✔ CPD courses attended ✔ CPD courses completed ✔ Hours accredited ✔ Hours left to do

membership and is addressing the complexity and time-consuming task of managing Continuing Professional Development compliance and other qualification information for our members. My Professional ID provides a repository of past, current and ongoing information for each individual member, and also gives members the ability to manage and share the information with external parties such as customers, your firm and ASIC,” White said.

White commented that the new system would store members’ identities, contact details, employment history, education qualifications attained, their professional development plan and CPD information and progression.

“This information will stay with members as they move from employer to employer, profession to

profession and country to country.

It will also allow members to request connections with other stakeholders in the network, which will facilitate sharing of this information. This means a member will not have to retype, resend or copy their information after completing their profile,” White said.

“With the ongoing regulatory focus on the finance industry, the FBAA believes it is vital our industry acts, and is seen to act, professionally and transparently at all times. By having the ability to access proven and certified information, we believe this initiative helps our members and will enhance the standing of our industry,” he added.

My Professional ID managing director Tim Ramson said the online information repository

could help save brokers time in managing their ongoing education compliance.

“With MPID the reporting of a member’s progress and completion of each standard is automated because the FBAA is able to see the information live and generate necessary reporting. For members this reduces paperwork and allows more time to concentrate on running the business,” Ramson said.

Smaller brokers better AFM to help brokers with commercial loans at commercial Mortgage manager Australian First Mortgage has told brokers unfamiliar with commercial lending that it will “hold their hand” through the process.

AFM recently announced it would drop rates on its commercial products, following on the heels of a rate reduction earlier in the month. The lender cut variable commercial rates by 30bps, and has introduced a new fixed rate commercial loan with a three-year rate of 6.90%.

AFM had previously announced cuts to commercial rates on its Smart Suite products, dropping five-year rates by 55bps and one-year rates by 35bps. The company’s director, Iain Forbes, said the lender’s commercial division was set for further expansion in the months ahead.

“That commercial division has expanded, and we are expanding even further with the introduction of new funding lines in the new financial year. When the cost of money has come down, and we feel we can get it out at the right price that’s what we do. We work on low margins,” he said.

Forbes said the commercial market was seeing activity from brokers who had previously restricted themselves to residential deals.

“What we are seeing is the broker who did not sell commercial loans because he thought it was too difficult is now embracing the

Iain Forbes

fact that it’s not too difficult,” he said.

Forbes said AFM was keen to train brokers to enter the commercial space.

“We are here to help the broker who wants to sell commercial loans. The commercial broker is not who we’re after. We’re after brokers who are looking to learn about commercial lending, and we’ll hold their hand all through the process,” he said.

Holding brokers’ hands, Forbes said, meant involving them in the commercial process to explain which deals the mortgage manager would do and which it would not.

“That type of broker acts as a collector of information for AFM in the commercial space, thereby learning the process. Basically, it’s an educational process,” he said.

Smaller broker groups have been “quick off the mark” to diversify into commercial lending.

Commercial lender Sintex has claimed that small broking groups holding their own ACLs have accounted for an increase in broker volumes for the company.

Sintex general manager Cathy Dimarchos said a growing number of brokers are expanding their offering into commercial lending.

“We are now seeing 60% of business coming from the broker network. We are seeing good quality business being sent to us that would normally go to the banks or other lenders,” she said.

Dimarchos claimed that smaller aggregators and broker groups seem more prepared to diversify into commercial offerings, saying they had been “quick off the mark” to diversify.

“They don’t seem to face the same types of obstacles that larger companies face, they simply introduce the product to their product suite, tell their network and referral base that they now have a commercial loan offering and immediately see the enquiry level come through,” she said.

Dimarchos said many brokers who have traditionally worked in the residential space now seem to be eschewing the notion that commercial lending is too complex.

“It’s a delight to see that brokers are breaking down the barriers and perception of commercial loans being difficult.

Cathy Dimarchos With the Sintex Commercial Loan the process is simple and transparent and the team here is focused on service, which I suspect is the reason why we are seeing an increase in volumes and accreditations,” she said.

She commented that the company’s niche was “small ticket”, non-specialised commercial loans, which Dimarchos claimed simplified the process for brokers and consumers.

“We have quick turnaround times – we always have – and this ensures a positive outcome all around,” she said.

For brokers looking to expand into commercial lending, Dimarchos said the path was simpler than many anticipated.

“Don’t get caught up in the obstacles and myths. Start with your existing customer base and referral source and look at the mums and dads who run their business from their shop, or office or their warehouse. Stick to the small purchases or refinances and you will see how targeting your audience will help diversify your business model,” she said.

12 brokernews.com.au

News

Read the latest issue of Australian Broker online brokernews.com.au

Big broker sees best month in three years The nation’s largest broker has seen its biggest month of sales in more than three years as falling house prices have coaxed borrowers back into the market.

AFG has reported it processed more than $3bn in loans during May, hitting an all-time high in Western Australia where it processed $683m in sales for the month. NSW led mortgage volumes, with $812m, with strong volumes also seen in Victoria at $641m, and Queensland at $627m.

AFG general manager of sales and operations Mark Hewitt said while the spate of Reserve Bank rate cuts had provided a boost to sales, falling interest rates were not the only factor in the aggregator’s result.

“The automatic assumption would be that we’re seeing the effect of the rate cut at the start of May, but that’s only part of the story. We’re probably also seeing more borrowers turn to brokers to help them get the best deal in an increasingly competitive and complex market. In addition, May

is generally a stronger month, after the public and school holidays in April,” Hewitt said.

Falling house prices also helped to woo buyers back into the market, Hewitt said, but consumer sentiment remained soft.

“These figures do not conflict with the softening house price data published late last week.

Mortgages are processed before sales are confirmed, so our data is more a snapshot of where we are right now. Reduced property prices and interest rates are bringing more people back into the market, but anecdotally, many potential borrowers are still worried by both the offshore news as well as weakening conditions at home,” he said.

Master Builders chief executive Wilhelm Harnisch has also pointed to weak consumer confidence, saying that recent ABS figures showing a second consecutive month of growth in housing finance belie the real state of the market.

“What is of concern in the April

2012 housing finance figures is the negative trend estimates for the value and number of commitments.

This negative trend vindicates the recent rate cuts by the RBA. If the negative trends do not reverse soon then a further cut from the RBA is necessary to stop the sector collapsing further,” he said.

ABS figures show housing finance rose a seasonally adjusted 1.2% for April. Along with the

AFG figures, the data has indicated that consumers are trickling back into the housing market, and HIA chief economist Harley Dale has expressed optimism that the property market may have found its floor.

“The number of loans for new housing has largely been bouncing along a bottom for over a year now, but hopefully that situation is coming to an end,” Dale said.

Lender share of the mortgage market Refinancers

77.6%

First time buyers

67.0%

Investors

82.6%

0%

20% Majors

22.4% 33.0% 17.4% 40%

60%

80%

100%

Non-majors

Source: AFG

Majors move on rates as RBA can stop second tiers follow suit playing ‘catch-up’ The Big Four have completed their latest round of rate cuts, with only one passing on the full 25bp RBA cut.

ANZ was the only major to follow the Reserve Bank, dropping rates by the full 25bps to 6.80%.

Westpac followed with a 20bp cut to take its rate to 6.89%, and Commonwealth Bank moved by 21bps to drop its standard variable rate to 6.80%.

NAB has retained its spot as cheapest among the majors. The bank mirrored CBA’s move of 21bps, taking its standard variable rate to 6.78%. NAB group executive of personal banking Lisa Gray said the bank remained committed to having the lowest rate among the majors.

“These are difficult decisions … to strike a balance between our mortgage holders and our deposit holders but we will continue to have the lowest standard variable home loan rate of the major banks for 2012 – as we have for the past 35 months,” she said.

Second tiers have followed on the rate cuts flowing through from the major banks, but only one has passed on the full RBA cut.

Bank of Queensland last week became the first bank to move in

the wake of the Reserve Bank’s cut to the official cash rate, dropping its rate by 20bps. Mutual Unicredit WA was Lisa Gray the only second tier lender to pass on the full 25bp cut. Westpac brands St.George and Bank of Melbourne have both moved on rates, but neither has passed along the full cut.

St.George has trimmed 18bps from its standard variable rate, taking its rate to 6.86%. The move leaves the bank’s rate 3bps lower than its parent company Westpac, but higher than the other majors.

Bank of Melbourne has also announced cuts, dropping its rate by 19bps to 6.80%.

ING Direct cut 20bps from its rates to bring the lender’s Mortgage Simplifier variable rate loan to 6.22%.

Suncorp has also reduced rates, cutting its standard variable rate by 20bps to 6.88%. ME Bank has passed on the smallest reduction thus far, cutting rates by 16bps, but chief executive Jamie McPhee has argued that the lender’s rates are more than 50bps lower than those of the nearest major bank.

An industry figure has said the RBA can stop playing “catch-up” following its 25bp rate cut in June.

Following flat inflation, worrying job ads data and disappointing retail sales, the Reserve Bank cut the cash rate by 25bps to 3.50% at its June meeting. RBA governor Glenn Stevens pointed to sluggish domestic growth and “a weaker and more uncertain” global economy. He forecast that cautious behaviour by households and businesses could continue in the months ahead.

1300 Home Loans founder John Kolenda praised the move, and claimed the cut would allow the RBA to “finally stop playing catch-up on the economy”.

“It is a relief to see that the RBA finally seems to have grasped the severity of the situation facing our main employment industries like construction and retail,” Kolenda said.

While Kolenda conceded that the rate cut would not be a panacaea for consumer sentiment, he said it would provide a muchneeded boost.

“This rate cut is not the end of the road by any means but it does mean that homebuyers and

consumers will be a little less cash-strapped and might step back a bit from their siege mentality,” he said.

John Kolenda The MFAA praised the move as well, but CEO Phil Naylor warned that borrowers may face confusion as banks increasingly divorce themselves from the RBA’s official decisions.

“Many lenders are not moving in lock step with the Reserve Bank and borrowers should not expect the whole 0.25% rate drop will be passed on to them,” he said.

But Naylor said brokers could find an opportunity to help consumers confused by out-of-cycle rate movements.

“The decision by lenders to run their own rate change agendas has resulted in a very complicated situation for borrowers to negotiate. Mortgage brokers currently have a market share of 42% of the mortgage market and represent the best chance for borrowers to capitalise on the change in cycle and negotiate a better deal with their own lender or move to another,” he said.

brokernews.com.au

13

INDUSTRY NEWS IN BRIEF Mutual pegs rates to Big Four CUA has announced its Rate Breaker Package loan, which will carry an ongoing discount of 1% to the average standard variable rate across the Big Four. CUA chief executive Chris Whitehead claimed the decision to peg the loan’s rate to that of the major banks was “beating the banks at their own game. There is currently no other product available in the market that has the same pricing mechanism as the CUA Rate Breaker Package,” Whitehead said. Whitehead claimed that since April 2010, CUA’s standard variable rate had been consistently at least 50bps less expensive than the average of the major banks’ equivalent products. “Our business model gives us the flexibility to make long-term rate decisions that are in our customers’ best interests. Our profits are reinvested back into the business to deliver superior products, better interest rates and lower fees,” he said.

Unemployment jumps, but worker pay rising A rise in full-time workers has not helped stave off a slight jump in joblessness.

ABS figures have indicated the unemployment rate increased 0.2% to 5.1% in May. The move was foreshadowed by a 2.4% drop in job ads for the month.

While the number of people in full-time work grew by 46,100 for the month, unemployment increased by 22,400 people. Underemployment remains an issue as well, at 7.4% in May. The ABS said that combined with the unemployment figures, underemployed workers bring the labour force underutilisation rate to 12.6%. In spite of the rise in joblessness, some good economic news may hold the RBA at bay for longer than expected. Recent national accounts figures showed a 1.3% rise in GDP for the March quarter, including a 2.5% increase in the compensation of employees.

Brokers call rates decision wrong Despite low inflation, disappointing retail numbers and continued worry over the European debt crisis, a Loan Market poll found the majority of brokers did not believe the RBA would cut rates in June. Fifty-five per cent of the company’s brokers said they expected the Reserve to leave the cash rate at 3.75%. The remaining 45% of the poll’s respondents believed the RBA would move, but disagreed on how much. While 38% correctly predicted the RBA’s 25bp cut, 7% were expecting a 50bp cut. The survey came on the back of inflation data showing that prices grew below the RBA’s target band. The TD Securities – Melbourne Institute Monthly Inflation Gauge was flat for May, with inflation tracking at 1.8% for the 12 months to May. TD Securities head of Asia-Pacific research Annette Beacher said inflation was expected to remain in the lower band of the RBA’s 2-3% target for the June quarter as well.

House prices headed south The RP Data-Rismark Home Value Index has indicated that home values continued to fall in May. Capital city home values fell 1.4% for the month, for a cumulative decline of 2.2% for the first five months of the year and a 5.3% year-on-year drop.

Adelaide was the only capital city to see improvement over the month, with home values rising 1.2%. Melbourne saw the steepest declines at 2.7%, followed

by Darwin at 2.4%. RP Data research director Tim Lawless said declines were driven by detached housing rather than units. Lawless said unit values had proven more resilient than detached housing.

Lawless said yields on units tended to be higher as well, and that units were generally “located more strategically” than detached housing. The performance of premium housing also gave evidence of the price driven market. Housing in the most affordable 20% of suburbs fell by 1.5% for the year to May, while premium dwelling values fell 6.1%.

Sidelined FHBs coming back in Queensland First homebuyers are returning to the Queensland market after spending the last two years “waiting on the sidelines”.

ABS data has indicated that first homebuyer commitments accounted for 20% of all Queensland owner-occupied dwellings financed in April. The result is above the long-term average for the state, and is up 35% on the same period last year. REIQ chair Pamela Bennett said first homebuyers were returning after being inactive in the market since the removal of the First Home Owners Boost in 2010. “There is little doubt that the FHOB was a successful policy during the GFC, which brought the buying decisions of many first homebuyers forward and helped to underpin our market during uncertain times. It has taken a few years for underlying demand from first-timers to strengthen once again and that is what we are now starting to see in the market,” she said.

NSW budget could penalise some homebuyers While homebuilders have praised the NSW government’s concessions to first homebuyers, a leading mortgage broker has claimed the proposals could actually hold buyers back. The NSW budget includes new proposals to spur activity in residential property. They include a doubling of the first homebuyers grant to $15,000 on properties up to $650,000, exemption from stamp duty for new houses and apartments up to $650,000 and a $5,000 grant for non-first homebuyers purchasing a new home under $650,000 or vacant land under $450,000. But a Loan Market spokesperson has said the measures could preclude some buyers. The spokesman said the measures penalised first time buyers who prefer to purchase existing property

14 brokernews.com.au

News

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

Variable rates back in style Variable rates have seen a modest increase in popularity on the back of the Reserve Bank’s cash rate cuts.

Data from Mortgage Choice has indicated variable rates accounted for 79% of all the company’s approvals in May. The result was up 1% from April, but

varied by state. South Australia saw variable rate loans increase in popularity by 12%, while variable rates actually declined in Victoria, falling by 5%.

Mortgage Choice spokesperson Belinda Williamson has said that the increase in variable rate popularity was driven by an

ate breakdown: R May 2012 Basic variable Standard variable Ongoing discount Line of credit

0.65%

20.69%

17.18%

2.72%

18.7%

Introductory rate Fixed rate

40.05%

Source: Mortgage Choice

uptake of basic variable rates.

“Out of all the variable rate home loan types, basic variable rates – which tend to be more affordable but less flexible with fewer features at the borrower’s disposal – were the only loan product to gain in popularity over the month, with demand rising to 17% in May from 14% in April,” she said.

This increase, Williamson said, could carry with it a message about consumer demographics in the housing market.

“The increased interest in basic variable rate loans, which is now at a nine-month high, could signal a return to the market by first homebuyers, as these loans tend to be more popular with lower income and less experienced borrowers who are still finding their feet in home loan market,” she said.

Fixed rates, meanwhile, fell 2.5% in popularity. Once again,

Williamson said the change in demand varied geographically.

“Victorian borrowers were the only group to record a fall in variable rate demand and a rise in fixed rate popularity. This more conservative approach by a growing number of borrowers may again be linked to an increase in price-sensitive first homebuyers entering the market now to beat the removal from 1 July of the state’s First Home Owner Bonus and Regional Bonus, and wanting the security of a fixed repayment level,” she said.

“The biggest tumble in May of fixed rate loan popularity took place in South Australia. There, fixed rate loan interest was down 12% compared with April. South Australians are wholeheartedly embracing recent variable rate cuts, and appear to have more faith in the general interest rate outlook,” Williamson added.

European meltdown won’t destroy Aussie banks Australian banks could survive a European meltdown, even if credit markets dried up.

That’s the claim of APRA chairman John Laker. Speaking to the Senate Standing Committee on Economics, Laker said Australia’s banks could survive if offshore credit markets closed.

Laker conceded that a Eurozone collapse would have consequences for Australian banks.

“Despite their limited direct exposure to Europe, the market turmoil that would accompany any break-up of the euro area or a European sovereign or banking default would undoubtedly impact on the larger Australian banks, due to their reliance on global funding markets. The banks are well aware of this risk and have planned accordingly,” he said.

Planning accordingly, Laker

said, included moves by banks to strengthen their funding positions and decrease reliance on global wholesale funding. As a result, Laker said even a European collapse would not scuttle Australian banks’ ability to source funding.

“At this stage, the strengthened liquidity positions, coupled with the capacity to issue covered bonds and the unused self-securitisations that can be used in repurchase transactions with the Reserve Bank of Australia, provide APRA with comfort that ADIs could survive a period of months without access to global term debt markets, provided domestic markets continue to operate relatively normally,” Laker said.

Laker pointed to covered bonds, and said the instruments could provide banks with the ability to

raise funds in a time of tight offshore markets.

“The major banks have also all undertaken covered bond issues and this has established a market for these instruments. All retain significant headroom between issues made and the maximum limit they are able to issue, giving them the capacity to issue more covered bonds if additional funding challenges arise,” he said.

Laker said that in spite of the “dark clouds from Europe”, Australian banks remained sound.

But he conceded that banks still face challenges, and warned that the way they face these challenges will determine their strength in the future.

“Credit growth remains subdued. In this environment, strategic ambitions will be crucial

John Laker

in determining how ADIs maintain their financial strength and profitability in a durable way, and these ambitions are a key topic in APRA’s regular discussion with boards and senior management,” Laker said.

brokernews.com.au

15

HIA bursts Swan’s bubble The housing industry has dismissed Treasurer Wayne Swan’s optimism over strong national accounts figures.

Swan recently unveiled figures showing 1.3% GDP growth for the March quarter.

He pointed to the figures as a sign of the underlying strength of the Australian economy.

“This is a remarkable outcome and reaffirms Australia’s position as one of the strongest economies in the world, with the Australian economy growing faster than every single major advanced economy in the March quarter. In through-the-year terms, this result is the fastest growth in over four years, which have been the most turbulent in the global economy since the Great Depression of the 1930s,” Swan said.

But HIA senior economist Andrew Harvey claimed the numbers only served to highlight Australia’s two-speed economy, with many industries doing it tough in spite of the mining boom.

“The headline result of 1.3% GDP growth in the March 2012 quarter is excellent and well above expectations, but once we drill down it really is a story about the mining states that are headlining economic production, versus the others which continue to do it tough.

Quarterly growth in Western Australia and the Northern Territory was

phenomenal while NSW went backwards,” he said.

Dwelling investment detracted from 0.1% from quarterly economic growth, the HIA said, as Wayne Swan new housing expenditure fell 0.3% for the quarter and expenditure on renovations fell 4.4%.

“New dwelling investment has now fallen for four consecutive quarters, while renovations have detracted from growth in the last two quarters.

Meanwhile, engineering construction, driven by mining, contributed 1.1 percentage points to quarterly growth – without this component quarterly GDP would have grown by just 0.2%,” Harvey said.

But Harvey did see hope in figures showing household consumption grew by 1.6% over the quarter.

“The good news is that consumers do seem to be spending again, the aggregate GDP growth figure should help confidence and [June’s] interest rate cut will help underpin residential building going forward. However, there’s no doubt the challenges posed by the multi-speed economy will continue to see non-resource sectors face significant headwinds,” he said.

Debtor finance sees secondlargest surge on record Economic uncertainty has led to the second-highest yearly increase in debtor finance ever recorded.

Statistics from the Institute for Factors and Discounters show $1.26bn of turnover for the debtor finance sector in the March quarter. The result is a 31.4% increase on the March 2011 quarter, driven by a 99% surge in NSW and the ACT. Bibby Financial Services national sales director Gary Green said economic uncertainty has seen more SMEs make use of debtor finance.

The fluctuating Australian dollar, the knock-on effect of the Eurozone’s economic woes, weakening consumer appetites within the retail market as well as a continuation of the ATO’s focus on arrears, are all factors contributing to a sentiment of uncertainty within the SME sector. The manufacturing sector has been especially constrained by weak domestic demand and flat commercial and residential construction,” Green said.

“Due to this uncertainty, we are seeing many clients who do not wish to risk their personal property but need an increase in their lending facilities. Softening property values combined with stringent bank lending conditions might also be factors, as we are seeing many businesses that have had increases to their funding

facilities refused by traditional lenders,” he added.

But weak demand and difficult business conditions were not behind the increase in every state. Western Australia saw a 25.6% increase in turnover for the quarter, and Green said increased business opportunities in the state had actually led the growth in debtor finance.

“In Western Australia the drivers for debtor finance growth are quite different.

The flow-on effects from the mining boom mean that businesses are struggling to deal with cash pressures to fund the many new business opportunities,” he said.

Green said brokers were also beginning to identify opportunities for debtor finance within their client base, with referrals up 23% this year.

“We are starting to see debtor finance recover and continue to perform very strongly against other types of business lending. In this environment, SMEs need flexible funding solutions and strong cash flows to address the increased uncertainty, and we would urge SME owners and managers to review their funding arrangements at this time,” Green said.

16 brokernews.com.au

News Reverse mortgages surge Business still hurting Reverse mortgages have hit $3.3bn in funding, growing 10% over the last year.

Deloitte has released its 10th comprehensive study of the sector, and has found that reverse mortgages grew by 5,000 loans in 2011. The company said the market for reverse mortgages has seen growth of 22.5% over the last 24 months.

Direct sales still outdid brokers and planners, however. The survey found that 74% of reverse mortgages were via direct sales from lenders, with brokers and planners representing 26% of sales.

Sales have also failed to recover to pre-GFC highs, but industry body SEQUAL has predicted the products will continue to surge driven by an ageing population.

“I believe releasing home equity to fund retirement will continue to grow as the Australian population

State of the market: Reverse mortgages Market size Number of loans Average loan size Settlements

2010 $3bn

2011 $3.32bn

41,600

42,410

$72,474 $78,249 $332m

$317m

Source: Deloitte

ages. Given our ageing demographic the Government’s emphasis on ageing couples remaining at John Thomas home for as long as possible is likely to support this,” SEQUAL chairman John Thomas said.

Deloitte banking partner James Hickey agreed that the industry could continue to see growth.

“Although the appetite for this equity release product continues to grow, settlements have not yet returned to the levels experienced in the peak years of 2006 and 2007, prior to the GFC. Even so growth remains steady and a number of significant lenders remain active in the market,” Hickey said.

Loan size for reverse mortgage facilities has increased as well, Hickey said.

“The average size of each loan increased to $78,250 from $72,500 in 2010. When we initiated this study on behalf of SEQUAL in December 2005, the average loan size was $51,148,” he said.

Thomas explained that the reverse mortgage market appealed mainly to seniors who chose to remain in the family home rather than move into an aged care facility.

despite RBA action Businesses have yet to benefit from the Reserve Bank’s rate cuts, with business conditions falling to a three-year low in May. The NAB monthly business survey has shown that both business conditions and confidence fell sharply in May, despite the RBA’s 50bp cut early in the month.

NAB chief economist Alan Oster speculated that businesses remained concerned over the future of the Eurozone debt crisis, and the effects of the Federal Government’s budget.

In spite of strong 1.3% GDP growth for the March quarter, Oster said the survey portends poor growth in the months ahead.

“The deterioration in activity was broad-based across industries and across trading, profits, and especially employment. The significant deterioration in employment, a lagging indicator of demand, suggests the weakness in activity has begun to bite and employers are preparing for a more subdued outlook as forward orders and stocks trend lower, and capacity utilisation remains worryingly low. Overall, the survey implies underlying demand growth in the June quarter may slow to around 3%, while GDP growth may slow to around 2%,” Oster said.

The survey pointed to weakness in “previously strong industries”, such as mining, finance, business and property. Oster claimed the industries were “looking somewhat laggard at present”.

Oster said residential housing had proven a drag on the construction industry, with conditions “worryingly subdued.

But interest rate cuts could bolster demand for credit, he said. The proportion of the survey’s respondents indicating a need for credit rose from 31% in April to 53% in May. The results have seen the bank revise its GDP growth forecasts upward for 2012, but downward for 2013. Oster said the bank now predicted 3.1% growth for 2012, up from 2.75%, and 3.3% growth for 2013, down from 3.6%. He said NAB expected at least one more 25bp cut from the Reserve Bank.

The Budget 47% expect the Federal budget to negatively impact business

45% expect a neutral impact from the budget

4% expect to benefit from the budget

Source: NAB

WORLD

A foot on the ladder

First-time buyers in London could be getting a welcome reprieve, with the city’s mayor, Boris Johnson, expanding a shared equity scheme to aid first homebuyers. The scheme allows first-time buyers to take an equity stake in private or social housing.

Speaking to UK-based Mortgage Strategy, Johnson said the scheme had allowed many buyers to get a foot on the property ladder. “First Steps has helped about 25,000 first-time buyers to get a share of the value of their property. They have not been able to buy the whole house necessarily but they have been able to take a share. I believe if people want a share in their own home then that is a good thing and we should try to encourage it. The scheme is going to be expanded and encouraged,” Johnson said.

Burn that mortgage

A new poll has found that most Canadians believe they can be debt-free by 2017 – which includes their mortgages.

The poll, conducted by Leger Marketing for Bank of Montreal, showed that 54% expect to be debt-free in five years. It also revealed that the average household debt load (including mortgage, credit card, line of credit and loan debt) is $112,329.

One-quarter (26%) of those who carry debt say that their debt load exceeds $100,000.

The report also showed that while most Canadians (70%) say that they can afford to pay down their debt by paying more than minimum payments, onethird (30%) appear to be treading water by paying only the

minimum amounts.

According to the report, men are particularly likely to carry large amounts of debt, with 30% indicating that they owe more than $100,000 compared to 22% of women. Men are also particularly optimistic about their ability to pay down debt, with 20% saying that they will do so in the next year compared to 14 % of women.

Those between the ages of 35 and 44 also tend to be the most heavily burdened with debt, with 43% saying they carry more than $100,000 in debt.

Small rates spur big month

Our Kiwi neighbours have seen low lending rates translate into a surge for sales and house prices. Sales in New Zealand shot up nearly 25% in May compared to the previous

year on the back of strong competition among lenders. Sales were up 26.4% from month-tomonth. The increased sales activity has led to a surge for house prices as well, with median values in the country up 5.4%.

Perhaps most encouragingly, sales activity in the earthquakestricken Canterbury region saw a strong recovery. Sales in the region were up 56% from May 2011, with median values rising 4.4%. REINZ chief executive Helen O’Sullivan said that while May was typically a strong month, the growth in sales volumes was unique.

“May is typically stronger than April, ranking as the third busiest month in the year for real estate sales, but the increase is considerably stronger than normal seasonal trends would suggest.

This is likely partly driven by good deals on interest rates during the month, and a desire by buyers to complete purchases before winter,” she said.

18

brokernews.com.au

News THE COALFACE

Leapfrog helps business start-up get ahead Starting your own broking business can be a challenge, especially when the market is Dominique down, you are Bergel-Grant focusing on wealth accumulators, and you are starting from a standing start.

But 12 months after making her decision to go it alone, Dominique Bergel-Grant, director and principal advisor at Leapfrog Financial, said things are looking positive for the business.

Bergel-Grant, who has a financial planning background and previously worked for a large Outlook Financial Solutions business, said it has been all about getting out to the market.

“Realistically, it requires a lot of getting out there and meeting

people, lots of networking.”

Bergel-Grant says it has also meant being clear about who the business wants as its clients, what she is personally good at, and communicating that niche effectively to key referrers.

With her background in financial planning, Bergel-Grant has built her business primarily targeting wealth accumulators, which include first homebuyers and upgraders.

But she is even more specific: financially savvy women in Sydney.

“Essentially the focus is on providing advice to women, but it is more holistic than what a lot of other brokers do. I do offer financial planning, but I’m not a typical financial planner either. I do a lot of work with accumulators who don’t have a lot of assets.”

This means the financial advice centres around cash-flow management and budgeting, and

exit strategies for the mortgages that she is putting people into, and insurance.

“Mortgage brokers have a huge opportunity, because they have a huge list of names of people who are accumulators, who financial planners don’t really want to talk to.”

Bergel-Grant is leveraging social media in an attempt to boost the Leapfrog brand, though she says that after a year of investment, it is only now just starting to pay off.

She said a LinkedIn network of women in Sydney has started to yield actual leads. Likewise, she has joined up with new business 1300 Home Loans, and owns the Crows Nest post code in Sydney.

She said leads are beginning to flow, and so far they are good quality.

Bergel-Grant recently organised a seminar on shares versus property, which had experts to talk on the

benefits of different asset classes, for an audience of 100.

Over time, Bergel-Grant says she hopes that the Leapfrog brand will be remembered, and that so far, the brand had stood out in her clients’ mind – despite her apprehension at first.

“One of my first clients said to me, ‘Dominique, it sounds like I’m going to move ahead faster than the rest’. If it leaves them with the right positive message that they are going to get ahead and it’s a name people remember, then that will help me in the future.”

Mortgage broking: More than just writing loans

was going to be a backup for the holidays and help when it got busy, but since then I haven’t had a day off,” she says.

And with the Perth market back in gear, Joseph is targeting – with the help of her PA, and loan processing assistant – a consistent $7m-amonth-plus worth of loans. At the top end of her target range, Joseph says her ultimate goal is to write $13m a month.

“We certainly had a period of volatility post-GFC, but probably in the last seven months, things have become more consistent in terms of confidence in the market and housing prices starting to hit bottom, so I have a really good feeling about the next 12 months,” she says.

Perth has transitioned from conditions where properties were sitting on the market for 8–9 months, to properties being sold within 4–6 weeks. Joseph says first homebuyers are coming back to the market, allowing upgraders to now move up the property ranks.

But it is SMSF lending Joseph is personally concentrating on developing this year. “I’ve been making sure I’m gaining all the accreditations, and getting up to speed with SMSF lending. That is really a space to be confident in.”

Joseph said there are a “lot people in WA earning a lot of money”, and she expects it to account for 5–10% of her loan book in future. She said it was critical to maintaining a high level of service for the financial planning and

accounting referral partners, with their clients increasingly borrowing through SMSFs.

“Now I generate a lot of leads myself and most of these are Asians, many of whom are confused about what I do.”

Mak, a former civil engineer and property developer in Singapore, says it was a twist of fate that brought him to Australia in 1989. (A friend persuaded him to drive him to the Australian Embassy, talked him into filling out an Australian Visa application and ironically missed out while Mak was granted one.)

Mak told Australian Broker that it isn’t only customers who don’t understand the role of a mortgage broker. Expressing his frustration at the inability to find good staff, he says, “a lot of people who apply for a job think that a mortgage broker simply fills in forms”.

While admitting that his standards are high, he maintains, “I’m not asking a lot”.

“I want someone who understands financial credit, what the banks are up to, how to fulfil the banking policy, how to interview clients and how to address their needs. If they don’t know any of this we have to start from scratch and despite my best efforts I usually still find they make a lot of mistakes.

For Sandra Joseph of the high performing Mortgage Solutions Australia office in Perth, mortgage Sandra Joseph broking is much more than just writing a loan for a client.

“I like to think that we are doing more than just writing loans for people; we are giving that person sufficient education to make the right choices, ask the right questions of their accountants and financial planners, and make sure all their risk is covered,” she says.

“We are also looking at what their five or 10-year goals might be, and making sure what we implement fits with those – or at least providing the information for them to make an informed choice. That’s certainly better than the client just walking into a bank branch and getting whatever rate they might get on that day,” she said.

For someone who became a mortgage broker almost by accident in 2001, Joseph has developed quite a passion for the business, as well as ambitious growth targets.

Linked to the Ausnet real estate group that was managed by her husband, Joseph said she fell into mortgage broking by “default”. “I

• Broking more than writing loans • SMSF becomes critical knowledge set • Perth market bouncing back

The forgotten consumer group Mortgage House franchisee Tom Mak believes that steps should be taken to initiate a campaign that explains the role of a mortgage broker to prospective Asian borrowers.

Mak is of the opinion that there is a forgotten section of the community who don’t use brokers simply because they don’t understand the concept.

Hong Kong-born Mak’s Mortgage House franchise is based in Chatswood, NSW, which has a high Asian population, and the majority of customers who walk in off the street express surprise when they learn that they don’t have to pay him for his services.

“It often takes me a while just to explain what I do and why I won’t be charging them a fee,” he says.

“When I started with Mortgage House most of my customers came through head office and were Australians who were familiar with mortgage brokers.

• Targeting financially savvy Sydney women • Clear niche value proposition for referrers • Uses 1300 Home Loans, social media

• Campaign to educate Asian borrowers on the role of a broker • Clients confused • Hard to find good job candidates

brokernews.com.au

19

Opinion

Receive breaking news updates direct to your inbox. Sign-up for the FREE e-newsletter at brokernews.com.au

VIEWPOINT

OPINION

Assessing the exit fee ban’s failure

As Homeloans’ Refund acquisition implies, consolidation continues apace, and our pundits say competition is coming in new and innovative forms

The MFAA protested vehemently against an exit fee ban it said would stifle rather than support competition. CEO Phil Naylor charts its performance since 2011 The Government’s ban on exit fees took effect from 1 July 2011, with consumers being exhorted to ‘walk down the road’ if they didn’t like their existing lender.

MFAA argued, unsuccessfully at the time, that this ban would have little impact on the operations of major lenders but would hurt smaller and non-bank lenders.

We also expressed doubt as to whether it would bring about any material changes in the competitive structure of the industry.

An analysis of borrowers refinancing their mortgages [see table] shows that the average monthly refinance percentage for 2010 was around 35%. Clearly then, there was an upsurge in refinances each month starting at the time the government’s exit fee ban intention was announced in December 2010 and coinciding with two major lenders voluntarily dropping their exit fees and a campaign by major lenders encouraging borrowers to switch.

However, bank market share figures suggest that there was no negative impact of refinancing on the major lenders as the market share of major lenders actually increased between October 2010 (73.5%) and March (75.7%), June (76.3%), July (76.5%) and December 2011 (76%), as well as January 2012 (75.8%) and March 2012 (75.6%). This was despite, or perhaps, because of, the publicity campaign from the government and banks encouraging borrowers to switch.

Interestingly, Canstar reports that according to its customer research: “Our findings … revealed that only 5% of surveyed banking customers followed the advice of industry commentators and switched their main financial institution in the last 12 months.”

This is consistent with CBA MFAA Home Finance research in September 2011, which indicated 15.2% of mortgage holder respondents had refinanced in the past 12 months – an increase on January 2011 (12.2%). Of this 15.2%, only 36% reported that they changed mortgage provider, ie 5.5% of total mortgage holders.

In January 2011 36.9% reported they changed mortgage provider,

i.e. 4.5% of total.

However, of those who refinanced in the year up to September 2011 64.3% said they Phil Naylor benefited from their refinance (compared to 52.9% in May 2011) but these percentages pale in comparison to the 77% that said they benefited in 2007.

Even earlier when there were far more alternatives for refinancing in December 2005, some 44% said they changed lenders and 80% of those said they benefited from the change.

Clearly, over the period 2005–2012, the percentage of all mortgage holders refinancing has not changed materially, but the proportion of those saying they had benefited from the refinance has dropped significantly by 2012 compared with 2005 and 2006.

The ban on exit fees has brought about no improvement in industry competition and has merely reinforced the dominance of the major banks and depleted the force of the smaller and non-bank lenders. Clearly the solution to the lack of competition does not rest in banning exit fees.

Major bank customer satisfaction Month

Refinances as % of total finances

January 2011

39.2%

February

38.3%

March

37.1%

April

38.1%

May

40.7%

June

41.5%

July

41.1%

August

42.2%

September

42.2%

October

39.3%

November

44.4%

December

39.2%

January 2012

40.5%

March 2012

42.9%

Greg Mitchell, Homeloans Ltd

Shrinking the market to grow innovation When Homeloans Ltd finally snapped up Refund Home Loans – putting an end to a longrunning saga that started when the brand went into voluntary administration – it was yet another symptom of a trend that that has been playing out since the GFC. Consolidation.

While it has its proponents, and its detractors, consolidation is taking its course, and in the case of Homeloans, it may just result in some increased competition for the major banks.

“Over the last couple of years we have been trying to increase the exposure of Homeloans within the marketplace and get likeminded brokers to come on board with us, and this is basically a free kick that we have got because Refund has such a presence,” says Greg Mitchell, general manager of sales at Homeloans. “There were 170 contracts that we sent out after the deal was announced, so if we get the majority of those franchisees on board it just gives us that much more presence in the marketplace,” he says.

The acquisition may give the non-bank a chance to pit itself against the bigger lenders. “The GFC has seen the major banks have penetrated the market aggressively. So we have certainly found it more difficult to try and find or even keep the brokers we have on our panel in our best businesses. I think it is imperative that the smaller players start to grow and be more of a presence out there in the marketplace so we can actually be a true alternative,” Mitchell says.

Brendan O’Donnell, managing

Brendan O’Donnell, Liberty Network Services

Ours is a hybrid model that has looked at all the franchises and branded businesses director of nascent aggregation group Liberty Network Services, says being an aggregator in a consolidated space means designing for brokers.

“Ours is a hybrid model that has taken into account all the franchised operations and branded businesses that exist in the marketplace and all the traditional aggregators; we looked at the best of both worlds in terms of what’s available. We understand brokers clearly and we have broken the barriers to entry and to exit down with the broker in mind,” he says.

So what’s the key to standing out from the bigger players in the aggregation market? “Firstly, marketing and branding support is coming of age. Secondly in terms of technology there is some really good technology platforms out there but most have been built without the broker in mind. And what I mean by that, if you look in terms of productivity and process, it is really important to manage those two,” he says. Enter SPARK. “What we have done is develop a new age revolutionary platform, which is mobile so you can actually engage your entire business from lead to opportunity, CRM, all the way through to dealing with the client and the application on your iPad,” he says.

20

brokernews.com.au

Analysis

Busting the myths: Brokers and value NAB Broker’s John Flavell demonstrated his faith in brokers at the recent MFAA conference by busting some time-honoured myths. He deconstructs them for us

MYTH #1 Major banks will squeeze brokers out of the market

If lenders are out to shut brokers out of the marketplace – 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, then if you turn your back on 50% of flow you’re doing so at your own peril.

Back in ’97 lenders probably thought they could make a difference and close brokers out, but it wasn’t true then and it’s even less true today. So from a lender’s perspective, I think it’s about embracing the channel, it’s about optimising and it’s about making sure that 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.

MYTH #2 Broker business has poor conversion

The broker business competes very, very favourably for the allocation of equity

John Flavell

If you have a look at data that has been put together recently by the Comparator Group, you can see the proportion of business that’s auto-approved versus referred or declined in bank systems. The difference between proprietary and broker channels is subtle – there is absolutely two-thirds of no difference in it whatsoever. In fact, the gap is closing. As a broker, most brokers probably have about 15, 16, 17 lenders on their panel – they probably do business with that many lenders – so I think to get a conversion rate like that given the complexity that brokers have got in terms of dealing with that raft of lenders speaks volumes for the quality, and I think it speaks volumes for the research and understanding that the brokers have to go through in the first instance, as opposed to a lender who is only familiar with their own policies and processes.

MYTH #3 Broker business is poor quality

In proprietary lending, you are looking at an average (across lending institutions, it’s not the case for all) total impaired rate of maybe 60 or 70 basis points in terms of 90 days plus arrears, compared with 70 to 80 points from a broker perspective. That is absolutely marginal in terms of the difference there. But the thing about it is that what you don’t see – and I’m looking forward to a lot of this data coming out in the future – it’s one thing to have loans that are in arrears, but at the end of the day the bigger issue is bad and doubtful debts and write-offs.

My expectation is when we work collaboratively with brokers and we actually identify customers that are in a situation that is causing them pain then a broker, collaboratively working with us, is in a better position than potentially one of our branch staff, to find a solution.

MYTH #4 Broker business generates poor returns

Lending institutions are obviously very interested in the returns that we deliver for the equity that we hold.

And our shareholders demand that. And so there is any amount of business units with compelling and different business propositions that are competing for the equity that an organisation has to leverage into the market.

And this myth exists that broker business generates poor returns. But looking at the average in terms of ROE we are exceeding that and we are exceeding that consistently in our broker business. And it’s been a positive trend. Yes, there has been pressures in terms of funding costs and yes there has been pressure in terms of our investments in the platforms and so forth and yes it’s been a soft market, but what I’m saying to you is that – and I can’t imagine that it would be significantly different to our competitors – the broker business competes very, very favorably for the allocation of equity.

MYTH #5 It’s them vs us: brokers vs branch vs online vs call centre

My view of my relationships in my financial world is that I don’t have one single product, I don’t have one single channel and I don’t have one single point of relationship.

What I’ve got it s a web of financial services that are provided across a number of brands through a number of channels. And if you ask yourself how different your own situation is to mine and how different your own situation is to that of your customers, the reality is, it’s not. As opposed to getting preoccupied with the them versus us versus online versus retail, from a consumer perspective, I don’t care about your petty jealousies, all I care about is the solution that I get and that I can access the best of all those services through any channel I want at any given point in time and my needs will be met. If I can’t access all of those points in one bundle then the solution that I get is inferior. I think that the learning is how a lender and a broker can actually work together to enable a customer to access a broad range of products across a number of channels to deliver a superior outcome. That’s the real future. We will always go out there and put our proposition forward, but the solution is actually about how we weave that web and make sure the customer gets the best outcome across all of the channels.

brokernews.com.au

21

Review

Receive breaking news updates direct to your inbox. Sign-up for the FREE e-newsletter at brokernews.com.au

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 8.12 Headline: University degrees are next: MFAA (Cover) What we reported:

Then-MFAA president Joe Sirianni last year raised a few eyebrows when he suggested that a university degree could one day be the minimum standard for mortgage brokers. With the Diploma deadline then set at July 2012 for MFAA members, Sirianni said the association would develop a process allowing members to seek a Graduate Diploma through a university. Though Sirianni said uni could be the future of broking, he conceded that this would probably not come to pass for some time.

What’s happened since:

Educational standards have remained a source of contention for the MFAA and its members. As the July 2012 diploma deadline loomed and reports filtered through of brokers procrastinating, and RTOs being buried under the pressure of processing, the MFAA revealed at its Convention this year that the deadline would be put off until 2013. The association sweetened the deal by announcing a $2.4m government grant that will be used to aid brokers who have not yet completed their qualification.

Headline: Bubble or not, house prices headed nowhere (page 2) What we reported:

A Sydney debate last year saw economists once again tackle the perennial question of an Australian house price bubble. While bubble promoters Steve Keen and Kris Sayce argued that the Australian property market was in for a precipitous crash, AMP chief economist Shane Oliver and HIA chief economist Harley Dale expressed doubt that Australia’s housing market would see the dramatic downturn experienced in the US. One thing all the commentators could agree on was that house prices were unlikely to climb in the near future. Whether or not a bubble existed, Australian homeowners could not expect immediate gains in value.

What’s happened since:

While housing has yet to crash and burn, it’s at least foundering and smouldering. According to RP Data, capital city home values had fallen 5.3% year-on-year as of May. Adelaide was the only capital to see monthly improvement, rising 1.2%, while Melbourne continued to decline significantly, dropping 2.7% for the month. Premium property took the worst hit, falling 6.1%, while housing in the most affordable 20% of suburbs fell only 1.5% for the year. But falling values could be reawakening activity, with two straight months of housing finance gains reported by the ABS, and AFG recording its biggest month since March 2009.

Headline: Last stand: Industry unites in final exit fee fight (page 4) What we reported:

In the wake of the government’s unilateral ban on exit fees, the industry pulled together for one last push to see the ban overturned. The MFAA, leading mortgage brokers and non-banks took out full-page ads in The Australian and The Australian Financial Review claiming the ban would sound a death knell for smaller lenders. The ad was released in the wake of a Senate report recommending the exit fee ban either be scrapped or only applied to large lenders.

What’s happened since:

A noble fight it may have been, but the industry’s efforts were ultimately in vain. The exit fee ban was put into place last year, and while it has yet to kill off small lenders, there’s little evidence it has helped consumers either. A recent MFAA submission to the Senate inquiry into the post-GFC banking sector pointed out statistics indicating that fewer consumers saw benefits from switching than before the exit fee ban. The association also produced figures showing major bank market share actually increased in the wake of the ban.

Headline: Out-of-cycle rises keeping lid on RBA (page 14) What we reported:

After major banks last year moved above and beyond the RBA’s rate hikes, the industry claimed their out-of-cycle moves had actually kept the Reserve Bank from raising the cash rate as sharply as it otherwise would have. Australian Bankers Association chief executive Steve Munchenberg went so far as to claim that the RBA would be “horrified” if banks made sharp cuts to lending rates.

What’s happened since:

The out-of-cycle moves don’t appear to be a two-way street for lenders.

Following 125bps worth of RBA cuts, banks passed along partial cuts of their own. It’s difficult to gauge whether or not the RBA was “horrified” by banks’ actions, but the Reserve did make a 50bp cut to the cash rate in May with the stated intention of driving lending rates down.

22 brokernews.com.au

Opinion

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

OPINION

Convergence: Your path to sustainability ING Direct’s Lisa Claes sees a future for mortgage brokers that embraces closer ties with financial planners, therefore avoiding the risk of ‘treading water’

A broker must capture a full financial snapshot of a client

Lisa Claes

I had the benefit of travelling around the country last month speaking to brokers and aggregators in all capital cities and many regional centres in between.

While promoting the benefits of our recently launched Broker Partner Program I gained greater insight into the industry as it stands today and the potential opportunities looking ahead. These insights confirmed some of the developments I had been seeing emerge in distribution – both within our Australian business and with ING Direct businesses globally.

Some of the brokers I spoke to are questioning whether they are doing enough to create long-term sustainability.

They were inevitably working hard and writing good home loan business but there was a nagging doubt among some about the longer term future.

Nothing surprising there, we all worry; I know I do. But on reflection and in the context of these emerging trends some of the areas of concern present some of the greatest opportunity.

option some are embracing, but there are other ways to become part of the broader customer financial life cycle.

Brokers are doing this in various ways. Time will stress test these models emerging in the market and determine those that will prove most resilient and profitable.

However, a truth remains. The information gleaned throughout the fact finding process not only guides the broker on providing robust credit assistance but should also be leveraged to partner with the customer on his or her journey through the various financial phases.

Irrespective of whether the customer chooses to indulge in the more exotic product offerings within the realms of SMSF, property investment or margin loans, the inevitability of these phases provides the opportunity to add future value to the more mainstream financial activities whether it be refinancing, upsizing or downsizing, taking out insurance, investing in managed funds platforms, direct shares, or superannuation offerings.

Broking in the 21st Century

The most simple way to test the waters is to develop a referral relationship with financial planners located in areas mirroring the demographic of your client base.

The ideal referral relationship is built on trust. Both parties are expected to perform to the satisfaction of the customer, thus ensuring positive feedback to the referral source, instinctively creating a loyal referral base and increasing their respective customer bases. This referral exchange often flourishes without referral fees.

However, this system of sending customers to an outside source has its sceptics.

Another and potentially more sustainable approach is to co-locate and brand under the one roof. Pitching the brand in a manner that telegraphs a more holistic financial offering has proven to enhance success in businesses locally and overseas. The model operating beneath the brand can be an integrated one, or with two distinct operations. There is appeal to customers to know that their broader financial needs can be serviced all under the one roof. Some businesses take the extra step of matching employee and customer within the respective planning and broker businesses using personality profiling tools or a common recruiting agency to shore up consistency of customer experience within the conjoined brand.

Then there’s full convergence where the entity running the business holds both an AFSL and an ACL. CEO of Acceptance Finance Daniel Di Conza, for example, runs a converged model and is convinced it’s the way of the future. The group has three financial planners piggy backing off 12 mortgage brokers. Ultimately, Daniel believes that the ratio of two mortgage brokers to one financial planner will eventually be about right. His brokers and planners remained specialised but they operate as a one-stop solution for the customer under the one brand.

Narrowing margins, a sluggish credit growth outlook, added compliance, rising costs and NCCP are all cited as potential impediments to longer term sustainability.

But at the same time a customer’s desire for reputable information on mortgages from a trusted source, with whom a relationship has developed independent of banks, has never been stronger.

Although this strong customer preference augurs well for brokers, many are treading water, or just getting by, and remain very concerned about the future.

There are, however, a growing band of brokers who are embracing these forces to build a stronger business. For them, the penny has dropped; the decision by a customer to buy a home occurs relatively early in the financial life cycle and more importantly prior to the phase of wealth creation.

Most of us follow the same financial journey. We save, transact, borrow for a home, invest and then retire. At this formative stage within the financial lifecycle customers seek out a mortgage broker for tailored personalised advice. This is the time they’re yearning for advice, reassurance, education and direction as they make one of the biggest financial decisions of their lives.

What an opportunity.

A broker must capture a full financial snapshot of the client to comply with the NCCP requirement – that the credit assistance a broker provides is suitable to their specific needs.

The fact finder and the interactive process experienced by the broker and the customer delivers a platform to the broker to become the financial “go-to” person for their customer now and into the future.

I understand that a broker cannot offer financial advice without proper authorisation under an AFSL and that is an

Your model converged

brokernews.com.au

23

FORUM

Brokers: Cowboys can no longer sleep easy The ASIC banning of Victorian broker Ravind Prasad is a warning to the cowboys of the industry, say brokers: “You can no longer sleep well at night”.

Australian Broker Online recently reported that ASIC had banned Ravind Prasad, who had been formerly expelled by the MFAA and had his accreditation cancelled by Choice and ANZ. His offence? Prasad had failed to let ASIC in on these previous censures.

Brokers were impressed by ASIC’s action, though some said it may have taken too long for the regulator to move.

“This is great news, it’s nice to see ASIC out there doing this, I just have to wonder why it took six months from him being expelled by the MFAA,” Ozboy wrote on the Australian Broker Online forum.

“It is good to see that ASIC have acted. I would have preferred to see that happen a little quicker,” said Country Broker.

“The question has to be asked: if this

bloke wasn’t good enough to be a Choice or ANZ broker and was expelled by the MFAA why let him back at all?”

Tim asked.

Stephen Dinte raised the question of whether it was still too easy for cowboys to enter the industry.

“This story highlights the fact that it remains too easy for a person with limited knowledge and experience to gain acceptance by an aggregator, by our industry body and then be granted accreditation by lenders. It is the drive by these groups for income (greed) that allows this to occur. Nothing has changed during all my years as a broker, and I certainly don’t expect that things will change in the future.”

It was Country Broker who threw down the gauntlet to any remaining cowboys.

“This serves as notice to all the cowboys out there, you can no longer sleep well at night.” he said.

Homeloans’ decision to kill off the Refund brand – though leaving it up to franchisees if they would continue to ‘refund’ – left brokers with a sense of vindication.

Cut Andrew Love in the ACT at your peril Suncorp. He’s one of the few reasons I use Suncorp and you are constricting your credit policy.

Marc 1 on 01 Jun 2012 09:56 AM

How interesting. After years of touting that clients deserve to receive refunds we will finally be in a position to witness if the franchisees truly believe in this philosophy or was this nothing more than rhetoric?

Broker – 14 Years on 06 Jun 2012 10:05 AM

If you are lamenting only holding 6% of the Broker market, the way to push that number upward is to support your BDMs. Prisco on 01 Jun 2012 10:12 AM

It was an ultra-competitive idea, but that was the problem along with management mistakes.

I’m glad I didn’t get roped into matching what they did. Current commission levels are the absolute minimum a brokerage can operate at.

Incognito on 06 Jun 2012 10:30 AM At last common sense rules that the model was never viable, I feel sorry for the brokers who parted with hard-earned to buy in. Hope they progress well under the new owners, a great lesson for all involved in the industry, if it looks and seems flawed it probably is.

Country Broker on 06 Jun 2012 10:55 AM

When Suncorp announced it was in the process of trimming its BDM headcount, brokers called for them – and especially their favourite BDMs – to be saved.

Until Suncorp get their credit area firing on all cylinders, any reduction in BDM numbers is probably somewhat premature. My recent experiences with this lender have been underwhelming and it is only as a result of the intervention of my BDM that the deal proceeded. “Don’t shoot your messengers”.

Stephen Dinte on 01 Jun 2012 09:54 AM

Haven’t seen a Suncorp BDM at the office in two years. Previous dealings have resulted in phone calls from assessors asking for extra information beyond so-called minimum. Quick to decline deals that should really be approved and unhelpful BDM. Quite a lot to work on still.

JBJB on 01 Jun 2012 10:29 AM  To vote in our latest online poll or get involved in our forum, visit our Australian Broker Online home page at www.brokernews.com.au

Poll: Were you happy with the MFAA’s lastminute diploma extension?

At its annual conference the MFAA extended the deadline for diploma completion to a round of applause. But did you appreciate it?

Here’s what our online readers thought.

Yes (40%) No (60%) Source: Australian Broker Online

24

brokernews.com.au

Insight

Navigating complex change It’s one of the most talked about topics at industry conferences: change. Here’s how Michael Hall of Wildworks says you can deal with the only certainty in life

I

n the world of business, we often face situations that can make us feel like we have to pat our heads whilst rubbing our stomachs – and clicking our heels all at the same time.

How confusing.

A very common cry from leadership is: “We must fundamentally change as an organisation!” But there is also: “We must continue delivering on our existing business at the same time.”

And: “We must be mindful of costs and people’s focus!”

Leaders can be paralysed into inaction by this seemingly impossible challenge. In addition, we are faced with an increasingly complex world of: 1. Uncertain markets (Political influences, currency variations, varying resource demands, natural and man-made disasters) 2. Changing behaviours (Social media, customer expectations, employee expectations, lifestyle demands) 3. Increasing technology (Enhancing and liberating, distracting and confusing, constantly evolving, omnipresent) … just to name a few.

The answer is in our everyday lives. We are constantly facing big changes in our personal lives. Some are forced on us, others we get to choose. Some big ones may involve: • Changing jobs • Relationships and family • Sadness with loved ones • Moving house • Travelling or moving abroad ... to name a few.

You hear concerns about coping, but generally, we get by. At some point we are able to understand what needs to happen and why. We make the necessary changes, while getting on with our day to day lives. We adjust accordingly.

Sometimes we do this on our own; often we enlist the help of others.

It’s the nature of change, especially when nothing ever seems to stay the same.

So, in order to make our everyday lives a little easier: take the time to occasionally step back and reflect. When you look at the overall picture, it’s normally just a process of natural change. If things weren’t changing, there’d be something wrong.

So, back to business. A simple process to navigate complex change:

Michael Hall

1. Understand what’s changing, or needs to change, and why (what areas do we need to focus on over the long term?)

2. Plan for the necessary changes, taking into account the necessities of day-to-day business (what needs to happen in the short and medium term?)

3. Adjust our activity accordingly (what needs to be re-prioritised?)

Make sure you: 1. Give yourself and others enough time to reflect on the big picture, bring the right people in at the right time 2. Are clear about any decisions – commit and be prepared to explain yourself … retain accountability 3. Involve others authentically and help them understand what it means to them and how they might help 4. Are realistic and adaptable – your assessment won’t be perfect and neither will your plan, that’s reality, so be ready to adjust Change can almost always be translated into an energising opportunity. It takes work, but it also makes it engaging.

Larry Winget’s guide to creating positive change in your life: 1. Decide to change: Most people say they want to change without making the real decision to change. A true decision is based in commitment. You have given your word to yourself. It’s a decision that says regardless of what you run up against, you are going to change. It’s a deal you have struck with yourself and there is no going back.

2. Know WHY you want to change: Too many people get caught up in how they are going to change. That comes later. There are lots of ways to change. How, is the easy part. Why, is much tougher.

Let’s say you have decided to lose weight. Good for you.

Why? To be healthier? To live longer? All great answers.

Go deeper. Why do you want to be healthier? Why is it important to live longer? I did this exercise with a woman who after asking why several times, it came out that she just wanted to look good in a swimsuit this summer so she wouldn’t be embarrassed. Embarrassment was the answer. This is just an example, but you get it. Dig deep for the WHY you want to change.

3. Be willing to do whatever it takes to change: It’s a rule: Life doesn’t always ask you to do whatever it takes, but you had better be willing to do whatever it takes. If you aren’t willing, save yourself the time and don’t even start the process as you will end up quitting soon anyway.

4. Do whatever it takes to change: Yeah, this is the work part. No change is going to happen without work and action. There’s no way around it so roll up your sleeves, get off your butt and do the work.

5. When you fail, dust yourself off and start again: You will fail. Success is about moving past failure. Don’t cry, don’t whine, don’t get stuck. Just play through the pain and keep going no matter what. No excuses are acceptable.

26

brokernews.com.au

Market talk people a much needed sense of security especially in this time of economic volatility. Buyers need to be brave – this is exactly the type of market they will look back on and say ‘I wish I’d bought in 2012.’

Key market observations

The first quarter was reasonably strong with property prices stabilising nationwide, and Sydney, the stand-out performer, up 1.1%. Since then, things have slowed down with recent interest rate cuts not having the usual impact.

The lion’s share of sales activity is occurring at the more affordable end of the market under $1m. While there is some new interest up to $2m as well as a few sales in the $5m range, the top end market remains soft and offers the best buying opportunities of all. RP Data reports a 5.7% decline in property values in the most expensive 20% of capital city suburbs compared with a 2.3% fall in the most affordable 20% of suburbs in the year to March.

John McGrath Chief Executive McGrath Estate Agents

Winter wonderland Brave buyers could find some hot deals during the cold months, writes John McGrath

The best time to buy is when others aren’t.

Markets have a herd mentality

T

he market is somewhat inconsistent at the moment as overseas economic factors continue to weigh heavily on people’s minds. The European issue coupled with lagging business confidence at home and political instability at the federal level is causing consumers to hold off on making major financial decisions.

With these conditions in mind, the market under $1m in most metro areas is strong but activity weakens the further up the price scale you go. A lot of cash is sitting on the sidelines. People deleveraged during the GFC and adopted a ‘wait and see’ approach that continues today.

However, buyer enquiry is up. In March, the country’s largest mortgage broker, AFG, had its second biggest month ever in NSW since their index commenced in 2004 with $842m in new lodgements. While this clearly indicates more buyers are out there, they remain very price sensitive.

Reserve Bank interest rate cuts will no longer have the effect we’re used to given the banks’ reluctance to pass on the full amount. The official cash rate is now at its lowest since November 2009 when the economy was recovering from the initial impact of the GFC. While this might result in more sales activity in winter, it won’t push prices higher because buyers are still worried about Europe and are careful to protect themselves financially as we enter a new era of aversion to debt.

Overall, the market is not in a bad state but people continue to wait for positive signs. This has been a protracted and agonising period of uncertainty. The constant flow of good and bad news both at home and overseas continues to undermine confidence. Once we see some positive and sustained economic change overseas, I believe our property market will begin a long and slowish recovery over a three- to five-year timeframe.

The flipside to a market downturn is the exceptional opportunity it presents to buyers. Affordability has grown significantly with the recently-released HIACommonwealth Bank Affordability Index showing an improvement across the capital cities for the fifth consecutive quarter in March.

The best time to buy is when others aren’t. Markets have a herd mentality and following the crowd gives

Home loan rates are very competitive and while the margin between fixed and variable is tight, 1 in 5 borrowers are choosing to fix for certainty with repayments, according to AFG. Investors make up a huge proportion of the market – 44.4% in NSW (highest in the country) and 35.2% nationally according to AFG. Buying through self managed super funds continues to be a growing trend as more people get used to the idea.

Rental yields are as strong as we have seen them for a very long time, particularly in Sydney but other capitals are replicating. RP Data reports house rents in the capitals up 4.1% over the year to April 2012 and up 3.7% for apartments.

The July 1 cessation of stamp duty relief for buyers of new properties under $600,000 is likely to result in more off-the-plan sales in June.

Australia has a significant housing shortage and new building approvals remain low. Funding issues for developers and the red tape of planning approvals is adding to the housing shortage for a population that will inevitably continue to grow.

The Brisbane market is trending upwards. There is a new State Government, the financial benefits of the resource boom are filtering through to the commercial sector and the impact of the GFC and floods is fading.

Queensland property prices have improved for the first time in 18 months, according to new REIQ figures, with sales activity up across the state and Brisbane’s median house price rising 1.2% over the quarter.

The weakening Australian dollar will encourage expat activity among those who want to get their money out of Europe and take advantage of excellent buying opportunities here at home.

The fast facts • Europe, faltering business confidence and political instability are worrying buyers • The under $1m market is strong, but demand is weaker up the price scale • AFG has recorded its second best month in NSW since 2004 • At 3.50% the official cash rate is at its lowest since November 2009 • Property market recovery will take 3–5 years • Affordability improved 6.4% across capital cities in the March quarter

brokernews.com.au

14%

32%

House Prices The cost of living

22%

Interest rates

27%

The local or international economy Political leaders

Source: Citi Investment Research and Analysis

11.0%

9.8%

-16.3%

India

-9.8%

Estonia

-8.6%

Brazil

-4.5%

12.0%

Worlds apart: Yearly house price growth by country

13.9%

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, with Ireland taking the biggest hit with a 16.3% decline.

Closer to home, the Asian housing market has cooled off as well. In 2010, Asian house prices exceeded 16% in annual growth.

The region’s growth still exceeds the global average, but is now closer to 2%.

“The Chinese housing market has had a tough 12 months as developers and purchasers alike have had bank finance squeezed as a consequence of the on-going cooling measures. Lending restrictions, new taxes, the curbing of multiple property purchases, and new regulations to restrict the inward flow of hot foreign money have had the desired effect,” Knight Frank director of research in Asia Nicholas Holt said.

5%

What do home builders see as the greatest challenge facing the sector?

-1.9%

The Reserve Bank’s rate cuts have yet to provide a boost to the housing market, with median prices continuing to head south.

The RP Data-Rismark Home Value Index has indicated that home values continued to fall in May. Capital city home values fell 1.4% for the month, for a cumulative decline of 2.2% for the first five months of the year and a 5.3% year-on-year drop.

Adelaide was the only capital city to see improvement over the month, with home values rising 1.2%. Melbourne saw the steepest declines at 2.7%, followed by Darwin at 2.4%.

RP Data research director Tim Lawless said declines were driven by detached housing rather than units. Lawless said unit values had proven more resilient than detached housing.

“It is clear that the market is becoming increasingly price point driven. Unit values across the combined capitals increased in May, and they are up 1.3% over the first five months of the year. Based on median prices, unit prices are generally around 15–20% lower than house prices,” he said.

Lawless said yields on units tended to be higher as well, and that units were generally “located more strategically” than detached housing.

The performance of premium housing also gave evidence of the price driven market. Housing in the most affordable 20% of suburbs fell by 1.5% for the year to May, while premium dwelling values fell 6.1%.

But a global study has found that Australia is not alone in its house price woes, with the Knight Frank Global House Price Index seeing only 0.9% growth for the year to March 2012. The result is the worst since 2009, during the depths of the GFC. It marks the

NUMBER CRUNCHING

23.5%

House prices still struggling globally

Austria Germany United Australia Portugal Greece Ireland States

Source: Knight Frank Global House Price Index

At a glance…

27%

*

*The proportion of Australian businesses which expect declining sales in the months ahead Source: Dun & Bradstreet

27

28

brokernews.com.au

People We are the 2%, says Bernie Lewis Diversification and marketing to spur Bernie Lewis’ next 25 years The principals of Adelaide-based business Bernie Lewis know what it takes to make in the tough world of financial services – after all, they’ve done it for a full 25 years now.

And, as chief executive officer Stefan Lipkiewicz noted at the group’s birthday bash, that in itself is some achievement – only 2% of Australian businesses can claim to be that old.

“It is a privilege for us to be in such elite company,” Lipkiewicz said.

With close to $2.8bn worth of South Australian mortgages and funds under advice to its name, Bernie Lewis is a success story of growth, diversification and consolidation.

When the late Bernie Lewis established the business in 1987, it was purely a mortgage broker. He established himself as a key player in the state’s financial services industry.

However, the business and family was hit with tragedy when Bernie and his wife, Christine, were killed in a plane crash in New Zealand seven years ago.

The resilience of the business over such a long period was embodied then in Bernie’s son, Mark Lewis, who as managing director and executive chairman implemented strategic changes that created continued steady growth for the business. Stefan Lipkiewicz was appointed CEO in 2009, and is continuing to spearhead its diversification efforts.

“In 2007, in the face of major structural changes in the industry,

Bernie Lewis staff celebrate 25 years

Bernie Lewis made one of its most significant decisions by becoming an integrated advice business,” Lipkiewicz said.

“Just as Bernie believed some 20 years earlier that there was a better way to get the right home loan, we also believe that there is a better way to meet all of the important financial needs of clients. From a business point of view, it has been about diversifying and building a stronger Bernie Lewis for the future. Today, about 25% of our revenue already comes from wealth, with nearly 10% from personal protection,” he said.

The business has put in place bold new marketing strategies to build the business and engage with clients, with Mark Lewis determined to ensure it remains true to his father’s values.

“By 2016 we aim to have in excess of $4bn in mortgages and funds under advice through our integrated financial services,” Lipkiewicz said. “This will involve some very innovative communications strategies and leadership to help our clients make informed financial choices.

However, the family roots of the business will not change.

“Our future is based on our past achievements and our reputation of being a longstanding family-owned business with a proud record of supporting other families. That is and always will be one of our major strengths,” he said.

In the end, the move towards diversified advice is about keeping up with the times.

“All of these initiatives have brought change. Without change, there is no progression. We are definitely on the right path and headed for a very exciting future.”

MOVERS & SHAKERS

Don Koch has resigned as CEO of ING Direct in Australia, and will now head its Italian operations

ING Direct bids farewell to Don Koch ING Direct chief executive Don Koch has announced his departure from the helm of the group’s Australian operations, as he readies himself to head up its Italian banking arm as chief executive.

Having headed up the Australian bank for three years, Koch has been charged with spearheading ING Direct in Italy, along with all commercial and wholesale banking.

Koch is set to take on the role in Italy in August, and is to be replaced by Vaughn Rictor, a previous chief executive for the bank who oversaw its Australian launch and managed the lender from 1996–2005.

Rictor currently sits on the ING

Bouris steps in as chief exec flees Yellow Brick Road executive chairman Mark Bouris has stepped Mark Bouris in to lead a technology company he chairs after the resignation of its CEO. In a statement to the Australian Stock Exchange, Bouris revealed that tech company TZ – or Telezygology – had seen its chief executive John Wilson resign following a scuttled deal that led to the group’s share price plunging by 45%.

The company, which owns the prototype for a secure mail locker, missed out on a tender with “one of Australia’s largest parcel delivery

Former CEO and current board member Vaughn Rictor will fly in from Singapore to take on the vacated role Direct Australia board and will manage the business while continuing to be responsible for ING retail banking in India, Thailand and China. Rictor will be relocating from Singapore to take up the Sydney based role.

Following the announcement, ING Direct named the expansion of the group into transactional banking and the restructuring of the business as his legacy. Koch oversaw 12% growth in the bank’s deposit book last year, taking ING Direct’s total savings portfolio to $26.1bn. He will be relinquishing his role on the board of ING Direct as part of his move.

ING said that the appointment of Rictor was a reflection of the increasing significance of the Australian market for ING Group as part of the broader Asia region. and logistics operators”, Bouris told investors in a statement. “TZ would have benefited greatly if [the] bid had been successful,” Bouris said.

The tender was to package TZ’s technology with that of mail and logistics giant Pitney Bowes. The deal was to be put forward by Pitney Bowes, and Bouris said TZ had no control over the final pricing and content of the proposed tender.

Following the unsuccessful tender, Bouris said the board had accepted Wilson’s resignation.

Bouris said Wilson had agreed to consult with the company on the CEO handover, and that he and the other executive directors would perform Wilson’s duties during the hunt for another chief executive, which he said was ongoing for the time being. Bouris told investors the company had no immediate plans to hire a replacement.

brokernews.com.au

29

Caught on camera The Commonwealth Bank hosted broking and industry guests at the recent MFAA conference in Adelaide, as part of a fundraiser for the Prostate Cancer Foundation of Australia. A selection of cricketing memorabilia went up for auction, with the bank raising $5000 for the charity.

30

brokernews.com.au

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

Gambling on Vegas

had participated in the recent CEO Cookoff in Sydney to raise awareness on food security and homelessness, and turned out to be among the top 10 fundraisers amid formidable competition from the other Aussie CEOs. He’s also been very active and high-profile in his support of other charities to fight homelessness, participating in St Vincent De Paul’s CEO Sleepout. And so, Insider had visions of Sam standing aloofly alongside George, Gary and Matt, pronouncing god-like culinary judgments upon the quivering contestants. Barring that, Insider at least expected to see him. But, as it turns out, Sam was one of 25 judges. And unfortunately not one who was actually featured on screen (at least according to Insider’s keen eye). We’re sure Sam was as disappointed as Insider to see that his moments of MasterChef glory were relegated to the off-cuts pile.

Property for a deposit

“We are cashing in on all those broken dreams…”

W

hen most people think Vegas, they think gambling. But not this type of gambling. How about gambling on a few broken dreams, and someone else’s fair share of hard luck? Cause that’s what’s happening down in Nevada, which was the leading state for housing foreclosures in the US for five straight years, before it was replaced by Arizona. Each week, realtors from across the state gather to buy up houses (which they can only pay cash for) of the unfortunate victims of America’s housing bust. And you don’t have to go far to find a victim. In Las Vegas, about two-thirds of house owners owe more on their mortgages than their houses are worth. And so, foreclosures are rife, with 300 houses up for grabs per day. Enter the gamblers.

Armed with just a few tens of thousands of dollars, these ‘flippers’ aim to purchase a house, fix it and flip it to investors – all with a hefty profit. And they are

succeeding. After clearing liens, securing the deed, paying back taxes, and ‘rehabbing’ the house, these new-age housing gamblers are often able to flip for double their money. Doing one or two houses a week, they can manage to make in the vicinity of $1m a year.

Makes any uptick in repossessions in Australia look like a blip on a Vegas slot machine screen.

MasterChef serves up some disappointment

The show may have come off the boil a bit in recent seasons, but Insider still can’t get enough of MasterChef. That’s why he was so excited recently to come across a release saying that a major figure in the mortgage broking world was going to be making an appearance on his favourite gastronomical gala. That’s right, Loan Market let everyone know that its own Sam White would be making his MasterChef judging debut. And why wouldn’t he be invited? White

With all the talk of the lack of housing affordability and first homebuyers having to mortgage themselves to the hilt to afford a property, any entry-level house below half-a-million is starting to sound like a deal. But picture this. A three-bedroom home on a 682m2 block. Price: $45,000.

Deposit required? $2,250.

Mortgage payments? $113 a fortnight. Sounds like a dream to your inner-city FHB types, doesn’t it? Well, the property is no latte-fuelled daydream. It actually exists. Sure, it’s not in your upmarket, trendy innercity suburbs, with a choice of restaurant, pub or cafe in just about any direction you could throw a stone. But it exists, and no doubt a few FHBs would be salivating over the thought of slapping down a deposit from their next pay cheque. The property, unfortunately, is in New Zealand – and we aren’t talking downtown Auckland either. It’s in Wairoa at Hawke Bay, a fair journey from the trappings of civilisation that most of us are used to. But look at the price. With all the whingeing that goes on from FHBs trying to get into the housing market, they could just shut up and buy the house outright with the size of a normal deposit if they are willing to ship themselves to Wairoa. Only caveat is it needs a new tin roof. Oh, and you have to

work in forestry … go get a job there. Sure, it’s not for every FHB, but there’s got to be a few takers?

Perhaps we can get an auction going.

The only place he flew was off the handle

Insider can fully understand that most people in this industry are eternally glued to their phones.

For brokers, part of their service proposition is being accessible anywhere, any time. For bankers, the world of finance moves so quickly that they have to be able to respond at a moment’s notice.

But there are limits to being tethered to that Blackberry. For instance, it’s probably a good idea when travelling in one of the world’s more paranoid countries – especially when it comes to air travel – to graciously turn off your phone on a plane when asked.

Airlines in the US will kick you out for looking at them funny these days, so the best bet is to calmly comply with any directions from the cabin crew. That wasn’t the case for a US-based Macquarie exec, who was booted from a flight for refusing to power down. The exec, who happens to be the former head of Citigroup’s investment banking in Australia, was turfed from a Qantas flight in New York for “disruptive behaviour” when he argued with a flight attendant about turning off his phone. Now, Insider loves Angry Birds too, but there’s a time and a place.

“Geez that deposit was easy…”

brokernews.com.au

Services

Receive breaking news updates direct to your inbox. Sign-up for the FREE e-newsletter at brokernews.com.au

BANK Commonwealth Bank 13 20 15 www.commbank.com.au Page 32

FINANCE Semper Capital Pty Ltd 1800 SEMPER (1800 736 737) enquiries@semper.com.au www.semper.com.au Page 21

MKM Capital 1300 762 151 www.mkmcapital.com.au Page 6

Mango Media 02 9555 7073 www.mangomedia.com.au Page 1

NCF Financial Services Pty Ltd. 1300 550 707 www.ncf1.com.au Page 8

Quantum Credit 1300 135 212 www.quantumcredit.com.au Page 11

Pepper Homeloans 1800 737 737 www.pepperonline.com.au Page 9

OTHER SERVICES www.residex.com.au The House Price Information People

LENDER ANZ 1800 812 785 www.anz-originator.com.au Page 7 Homeloans Ltd 08 9261 7000 www.homeloans.com.au Page 13 Liberty Financial 13 23 88 www.liberty.com.au Page/s 3 & 15

31

PLAN Lending 1300 787 874 www.planlending.com.au Page 5 Versara 1300 CAVEAT (228 328) www.versara.com.au Page 4

Residex 1300 139 775 www.residex.com.au Page 31 RP Data 1300 734 318 Page 23 Trailerhomes 0417 392 132 Page 27

SHORT TERM LENDER Interim Finance 02 9982 2222 www.interimfinance.com.au Page 2

To advertise in Australian Broker call Simon Kerslake on +61 2 8437 4786