Australian Broker magazine Issue 9.19 by Key Media

SEPTEMBER 2012 ISSUE 9.19

$4.95 POST APPROVED PP255003/06906

+ INSIDE + NEWS TRAIL BOOK THREAT

Consumer disloyalty to devalue trail books P4

Mark Haron

WRIGHT JOINS FAST

New CEO comes from NAB’s banking bench P4

+ WORKSHOP Avoiding the 7 biggest prospecting mistakes P16

+ CAUGHT ON CAMERA Smartline dresses up for awards bash P18

‘Own your business’

+ THE BIG IDEA

Brokers could become business success stories if they could just step back and become true business owners every once in a while

or Mark Haron, resigning as CEO of FAST in 2006 after helping to build it into one of the industry’s most successful aggregators was for one main reason. To own his own business. Six years later and with aggregator Connective due to sign up its 1600th broker in October, Haron, along with Murray and Glenn Lees, has become a great industry success story. And he says brokers would do well to follow him in becoming business owners themselves. FULL STORY PAGE 10

Getting rated online to boost your business P22

+ MARKET TALK Brokers from all corners debate arrears fallout P24

NEWS

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WHAT THEY SAID...

NUMBER CRUNCHING

KYM DALTON

$54.5m

“In the future I believe brokers should recognise that many consumers exist in a state of confusion in a financialised world.”

The asking price for ‘Altona’, a Sydney mansion in Point Piper

23.4%

The year-on-year jump in loan approvals for July in the Northern Territory

DID YOU KNOW?

40-44

KIM CANNON

“Brokers have got to be fools if they think the banks aren’t investing billions in online systems so they can cut out everyone else.”

The most common age bracket to declare bankruptcy in Australia

P16

BEN GAO

The number of ASIC staff members currently on board to tackle credit industry surveillance

The auction clearance rates in Hobart versus Sydney, for the week ending 9 September

SYDNEY:

P15

HOBART:

57.2% 14.3%

1.6% The amount consumer confidence increased over the first two weeks of September

“Even though small businesses have a bank relationship manager, they don’t get the service they should expect. We want to fill that gap.” P19

VOULA KOTSIRAS

“Typically women are more sympathetic in general and most referrers and consumers relate well to women.” P20

*Source: RP Data

NEWS

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Disloyalty will shake industry, says analyst ■ An industry analyst is

concerned increasing disloyalty of consumers will devalue trail books and see boutique brokerages suffer. Max Franchitto, management advisor and business analyst at

MAX FRANCHITTO

MGF Consulting Group told Australian Broker it would be increasingly difficult to sell books for two to three times their value. “Theoretically, [if] I buy a book from another broker, I’m not assured that I’m going to retain those clients,” he said. He said the abolishment of exit fees earlier this year contributed to borrowers treating mortgages like any other “commodity”. “With the new world of no real barriers to switching, you can’t do anything [to] stop the client from getting their money for a mortgage elsewhere.” Brokers were also on the receiving end of consumer switching, he said, due to increased advertising of broker services. “There are no real loyalty ties to a particular

EDITOR Ben Abbott A GATHERING STORM

On borrower loyalty

to banks: “With the new world of no real barriers to switching, you can’t do anything [to] stop the client from getting their money for a mortgage elsewhere.” On borrower loyalty to their broker: “There are no real loyalty ties to a particular product, nor – and this is contentious – is there anything that ties loyalty to the broker. Because, at the end of the day … there’s a multitude of offerings out there.” On the future of boutique brokerages: “It’s like the corner liquor store. When’s the last time you saw a corner liquor store? It’s all the Dan Murphys and the likes now – they’ve squashed the smaller ones out of existence. And it’s the same with this.”

Wright has welcomed the opportunity to take on a fullyfledged broking industry role, after 25 years in the financial services industry. Sourced from the ranks of NAB’s executive team, Wright was most recently general manager of distribution for NAB small business, but has held a number of senior roles at NAB across business banking, personal banking and agri banking, as well as credit and risk. Wright said he could leverage

BRENDAN WRIGHT Takes over as CEO of FAST, following Steve Kane’s elevation at Advantedge

DAVID O’TOOLE Steps back into national sales manager role, after caretaking FAST for six months

NEWS EDITOR Caroline Dann PRODUCTION EDITORS Carolin Wun, Moira Daniels ART & PRODUCTION SENIOR DESIGNER Rebecca Downing 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

product, nor – and this is contentious – is there anything that ties loyalty to the broker.” He said brokers were also switching to larger aggregators and brokerages due to the “multitude of offerings” they promised clients.

FAST goes Wright way for new CEO ■ New FAST CEO Brendan

COPY & FEATURES

this experience to drive the aggregation business forwards. FAST announced Wright’s appointment as CEO in September, following the elevation of Steve Kane from the CEO role to head of broker distribution at Advantedge. As part of the reshuffle, David O’Toole has stepped back into his previous role as national sales manager at FAST, ending a period as caretaker CEO. Wright said he was confident he could take over where Kane and O’Toole had left the business.

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, Toronto, New Zealand 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 EhrenbergBass Institute for Marketing Science at the University of South Australia in December 2008. The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.

NEWS

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ASIC: You get what you pay for

Aggregators unleash war of figures

■ ASIC has admitted it is overstretched, after

announcing it would take 37 years to conduct thorough surveillance on the credit industry. Releasing the findings as part of a new ‘transparency’ campaign, the numbers are based on the current speed and volume of ASIC enforcement. However, ASIC chairman Greg Medcraft admitted a thorough campaign is unlikely, given the limited resources. “I think it is important people know we aren’t on every street corner. We would like to be, but we’re not,” he told a parliamentary committee. “The idea behind this [report] about our resourcing is that you can have an ASIC at $350m and this is what you get, or you can have one at $250m and it shows the committee and the Australian public what you get for what you pay.” An ASIC spokesperson told Australian Broker the number of staff dedicated to individual campaigns would “change depending on the scope of the surveillance.” Currently, it lists 64 staff as being dedicated to the surveillance of credit providers, including brokers.

US lends an ear to borrowers, but could we? ■ A US system of counselling borrowers to assess

their suitability for a loan could be adopted on a voluntary basis in Australia, according to an industry commentator. Pre-loan counselling for ‘vulnerable’ borrowers will become compulsory in the US next year. It’s a concerted effort by the US to stamp out both irresponsible lending – mainly in the sub-prime arena – and increase consumer awareness. First-time buyers and line-of-credit borrowers receiving ‘high cost mortgages’ secured by their principal place of residence were also highlighted as vulnerable. Kym Dalton, executive chairman of consumer financial literacy company CreditED told Australian Broker such measures would help develop awareness of responsibilities, particularly in low-doc lending. “Choices facing consumers are complex and for certain vulnerable sections of a community, existing disclosure and responsible lending requirements may not be sufficient.” However, he cited problems in the US with implementation of the legislation as a reason why it should be voluntary in Australia. “The proposals are causing the industry some concern, as there’s a lack of certified counsellors.”

■ Aggregator Connective

ASIC: A TIME LINE Big four banks: YEARLY Non-big four lenders and deposit takers: 13 YEARS Insurers: 7 YEARS Trustee companies: 14 YEARS Non-ADI credit licensees (including brokers): 37 YEARS *Source: ASIC

stirred the pot earlier this month when it claimed to have a stronger measure of performance than its competitors. Principal Murray Lees said its method of reporting settlement figures, rather than lodgments or applications, was more meaningful to the broker. “All other measures may sound impressive but they don’t translate into income in brokers’ pockets,” he said. AFG’s general manager Mark Hewitt responded by saying while he agreed that “settlements pay the bills,” his company’s transparent approach made its figures far more valuable to the market. “AFG is totally transparent, to the point we publish our audited financials on our website, something many of our competitors, notably Connective, fail to do,” he told Australian Broker. “The purpose of the mortgage index is to provide a real time insight into trends in the Australian mortgage market. The best way to do this is by releasing our monthly lodgment results as close as possible to the end of the month,” he said. “We think the market values data provided by

I AM NOT AWARE OF A SINGLE BROKER WHO HAS LEFT AFG FOR CONNECTIVE AND NOT RETURNED IN THE LAST 12 MONTHS – MARK HEWITT, AFG

organisations who have their data audited by credible accounting firms and who post it on their sites to be scrutinised by others,” he said. Hewitt confirmed AFG’s loan settlements reached $1.9bn last month. Connective, by comparison, claimed a $1.3bn settlement figure in the same period. In response to Connective’s statement which said that it had increased numbers in WA over the past year, Hewitt told Australian Broker that AFG’s network was solid in the state. “I am not aware of a single broker who has left AFG for Connective and not returned in the last 12 months, including in WA where we have just had a record month,” he said.

NEWS

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ODDBA

City housing ‘preserve of the wealthy’

THE STRANGER SIDE OF NEWS

■ An analyst claims Sydney is

THICKENS ON STANDING

■ Day off? Don’t watch reality TV, indulge in

recreational drugs or devour bags of sweets: it lowers your IQ. Studies have identified such activities as leading to ‘neurological decline’. In the office, meetings, Power Point presentations and multi-tasking cause people to dumb-down. Perhaps sitting on a beach, reading a book will make us more productive.

FELINE RESIDENTS GET THE BOOT

■ According to a poll run by British newspaper

The Guardian, a house with too many cats is a big turn-off for prospective buyers. “This is especially when potential buyers worry about kids with allergies or asthma due to previous feline residents,” said an estate agent. ‘Wildly’ coloured bathrooms also made the list.

UNEXPECTED PERKS

■ A US whistle-blower who exposed tax evasion

at UBS has been awarded $104m from the IRS, for helping it raise revenue through his claims. The case led to $5bn in penalties being received by the government body. The whistle-blower is currently in prison for partaking in the fraud.

LIAR LIAR

■ A study has found one-in-three Australians

have lied to get a job. Training organisation Upskilled revealed 32% of survey respondents were dishonest about experience, qualifications or skills. “Lying on a resume or in an interview is a sackable or criminal offence,” said Mark Sexty from Upskilled. Come on now, who hasn’t?

DID YOU KNOW? A Kalgoorlie bank with two branches is hoping to write $91m of home loans over the next two years. Goldfields Money revealed its ‘ambitious’ plan earlier this month, after being demutualised only months ago.

at risk of an ‘affordability crisis’ after it failed to meet housing completion targets. The McKell Institute released its findings earlier this month, as it compared dwelling completion figures with targets in the Sydney Metropolitan 2036 Strategy, as well as McKell’s own target of producing 35,000 new homes annually in the city. The report found Sydney had fallen short of producing enough homes to offset an affordability crisis. “The newly-elected councillors across Sydney need to understand that home ownership is becoming a preserve of the wealthy,” said Peter Bentley, the Institute’s executive director.

KEY FINDINGS: While the median price for a home in Sydney is $642,000, Sydney is internationally the third most ‘severely unaffordable’ city for homebuyers after Hong Kong and Vancouver Less than one-third of Sydney residents under the age of 35 own a home Over the last five years, Sydney’s housing approvals numbered 98,822 compared to 192,648 in Melbourne NSW Treasury has estimated that up to 50,000 homes must be built annually across Sydney *Source: The McKell Institute

Gollan: Housing needs lender support ■ A new construction grant in

Queensland will have little effect on the property market unless lenders change their rules, claims an industry veteran. The comments were sparked as the Queensland government announcing its abolishment of the $7,000 first homebuyers scheme earlier this month, which will be replaced by a $15,000 scheme for buyers of new builds only. Paul Gollan told Australian Broker the scheme will not help borrowers get loans unless lenders loosen their savings requirements. Under current rules, a sudden lump sum, such as the proposed $15,000, is not considered part of a borrower’s savings, he said. “If the government’s going to give [borrowers] $15,000, the only way that’s going to actually

provide a genuine stimulus is that if the buyers are able to use that as part of the money they need to actually get into a property. “There are very few people in Australia that can genuinely save 5% or above in a three-month period,” explained Gollan. Meanwhile, the announcement allegedly caused a ‘rush’ in buyers securing homes before the deal ran out. Mortgage Choice even released a statement urging borrowers to “get in quick.” “We encourage first homebuyers who have done their sums and who are prepared to buy to contact their local broker to arrange loan pre-approval now so they are a step ahead in the loan process,” said a Mortgage Choice spokesperson.

ACCORDING TO STATE PREMIER CAMPBELL NEWMAN, THE NEW CONSTRUCTION GRANT WILL: ■ ■ ■

Provide an incentive for first homebuyers to build their own property “Inject confidence” into the construction sector Provide a long-term solution to a stagnant market

NEWS

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CONTINUED FROM PAGE 1

Mark Haron: ‘Own your business’

ne of the greatest challenges for many mortgage brokers, Haron explains, is to stop being brokers every now and then and instead become true owners of their businesses. “Even if you are a one-man band, you’ve got to take time out every now and then to put your business owner hat on and really step right away from your mortgage broking business.” Haron says many brokers want to get their finance businesses to the point where they are actually business owners. “That requires some real focus and some proper business planning,” Haron says. “If you are really serious about that, you should probably work with a coach, consultants, or get the assistance of a board – it doesn’t have to be a formal board – but people coming in and providing you some guidance and structure on how to do that.”

OWNING CONNECTIVE

Owning a business is something Haron can give experienced advice on. At the time he joined Connective in 2006, the aggregator had only 250 brokers. Fast forward to 2012, and the aggregator is now among the industry’s largest. “We’ve been able to grow the business quite well. Obviously in the first couple of years it’s often slightly slower growth, but the better growth is coming now.” Connective was initially propelled forward by a model designed to tune in to what many of its customers – mortgage brokers – were looking for. A flat fee structure that differed from the traditional commission-split aggregator proposition, as well as giving them control of their clients and trail books. However, Haron says the business had to become more than this. “One of the big criticisms that our competitors had about us was ‘flat fee, no service’,” he says. “Actually, the experience that Connective brokers have is that the service they get from us is far better than the service they can get from a lot of other aggregators.” Haron said from the beginning the business has always focused on technology that allowed its brokers to manage their client relationships better. Connective’s systems were also built to allow it to manage broker relationships more effectively. But Haron says the business has had to become better at delivering on this service proposition, and that a recruitment drive in the last 12–18 months has augmented its service.

Mark Haron is confident brokers have won their place as an indispensable channel for distribution

MARK HARON

PRODUCT PUSH COULD FACE ASIC SCRUTINY The conflict created by aggressive aggregator white label product sales could end up facing the scrutiny of regulators, according to Connective’s Mark Haron. “Some of our competitors are less about aggregation these days and more focused on product sale, particularly their own internal product. That is their drive,” Haron says. Haron says in some cases, competitors are reducing aggregation fees as long as a particular broker sells more of that aggregator’s internal product. “That is not very healthy,” Haron says. “There is no doubt that over time ASIC will be looking more closely at that and the disclosures around that type of product push coming down through the aggregators.” Haron said that Connective’s white label product, funded by ING and Adelaide Bank, runs as a mortgage management program with service provided by National Mortgage Company. “Our aspirations for this business is for it to have a reasonable uptake from brokers, but it is not the be all and end all for us,” he says.

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THE BANKS ALL HAVE A FAIRLY POSITIVE VIEW OF THE THIRD PARTY MARKET EVEN AT A SENIOR LEVEL, NOT NECESSARILY BECAUSE THEY WANT TO, BUT DEFINITELY BECAUSE THEY HAVE TO.

“We’ve grown the business into providing services that include loan processing and marketing, and services brokers can outsource as well,” Haron explains. “We will look to extend those and add more of those services to brokers.” The result is a business Haron says would pass the ultimate broker customer test. “I’d be very confident that if everything changed tomorrow and brokers didn’t need to use an aggregator we would still have the majority of brokers using our services.” And is that satisfying for a business owner like Haron? “It is very rewarding when you can sit back and see that you developed a great business.”

AN INDISPENSABLE CHANNEL

The next few years could present challenges for the intermediary channel, but Haron is confident brokers have won their place as an indispensable channel for distribution. “I think the banks all have a fairly positive view of the third party market even at a senior level, not necessarily because they want to, but definitely because they have to,” he says. Indeed, brokers have become a huge component of most major bank home loan book growth, and are particularly important when it comes to sourcing crucial new-to-bank customers. However, this relationship could be put to the test; sooner, rather than later. As Haron explains, new international Basel III banking requirements mean lenders need more liquid assets – such as cash – on their books. A flood of cash into property or other investments could mean banks are caught short, leading them to tighten their credit policies. Haron said banks are unlikely to cut broker commissions in the event of a liquidity crunch. “Any major bank who decided they were going to have a different policy or structure for brokers will see their market share suffer. The brokers will react poorly to that because that channel parity is really, really important.” Instead, Haron said the banks are likely to continue to follow a trend that he has witnessed during his long career in the industry – one of ever-growing collaboration. “The collaboration between brokers, aggregators and lenders is getting stronger and more significant and I think that is important,” he says.

BIGGER AND BETTER

For Connective, the future will be about continued broker numbers growth, and adding more value to members. And no, Haron says Connective has no immediate plans to sell. “Certainly at the moment, we have no desire to sell the business. We still have a lot that we want to achieve,” he says. Haron says over the next 12 to 18 months it will look to leverage its distribution footprint more. It will also aim to build on its current numbers. “I don’t see any reason why we couldn’t double our business,” Haron says.

NEWS 12

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BEST OF THE REST SUNCORP BETS ON GILCHRIST’S BROKER RAPPORT Suncorp has signed cricketer Adam Gilchrist as the face of its new campaign, which it claims “complements brokers’ achievements”. Gilchrist will appear in television, online and print advertising. Suncorp’s general manager intermediaries Steven Heavey said its intermediary channel played a major part in the campaign’s structure. “Suncorp Bank intermediaries have made a genuine commitment to the third party channel and ADAM GILCHRIST improving our broker proposition,” Heavey said. “We’ve achieved significant growth by investing in our back office and online capabilities, together with the implementation of an attractive, simplified commission structure and a new leadership team to drive business development,” he said. HAVE YOUR SAY: Will the face of Adam Gilchrist help Suncorp’s broker fortunes? Email the editor at ben.abbott@keymedia.com.au

COMPETITION PROMPTS COMMISSION INCREASE

Macquarie’s recent increase to its broker commission rates was prompted by intensified competition between lenders. The second-tier announced it was lifting upfront commission from 0.6% to 0.65%, while flat-trailing commission would

increase to 0.2%. James Casey, head of mortgage product at Macquarie, told Australian Broker Online maintaining a competitive edge was crucial in the broker market. “It is of the upmost importance to us and we believe that our proposition offers appropriate value for the service provided by

brokers. Brokers are our primary distribution channel and we value the relationships we have built with them,” he said.

‘DRAMATIC’ IMPROVEMENT IN FIRST-TIMERS

New statistics show first homebuyers are back in the market, bringing the numbers to a level not seen since the GFC. Comparison site Rate City said it had not seen such an improvement in the three years since it began conducting the research. “While the number of loans financed each month hasn’t quite recovered since the GFC began in 2007, the proportion of first homebuyers is back to the ‘normal’ levels experienced before the GFC,” said a spokesperson.

DON’T DUMB US DOWN, SAY REAL ESTATE AGENTS

The Real Estate Institute of Western Australia is strongly opposing a move by the federal government to lower educational standards for estate agents. It released a statement last month claiming to be ‘alarmed’ by the move, which it said represented a ‘watering down’ of standards.

The federal government has proposed a plan to downgrade educational requirements of estate agents in WA from a diploma to a Certificate IV. It is also looking to abolish annual development training, as well as ‘do away with licences altogether’, according to REIWA. The government, however, has claimed it is working towards a single, national licensing scheme for real estate agents.

SECOND TIER TURNAROUNDS REDUCED

ING Direct claims its approval rate and turn-around times have dramatically improved since it made changes to its policy and assessment team. The second tier recently increased its credit assessment team and added 18 policies with a focus on pushing deals through quickly. ING’s head of broker distribution Mark Woolnough said 43% of cases, which previously required additional information, were now approved on the spot. “It’s clearly addressing a key detractor that brokers previously identified and we’re really happy with the results,” he said.

ONE YEAR ON

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ONE YEAR ON What a difference a year makes … or not. Australian Broker reflects on the punditry, news and influential trends that made headlines 12 months ago Australian Broker Issue 8.19

Grassroots will get greener, says Kane

Beware ‘advisor’ title: ASIC

Mystery shop a victory for brokers

MFAA president-elect (at the time) Steve Kane vowed to focus his energy on grassroots engagement with MFAA members. Kane also said education and government lobbying would be priorities.

Brokers were warned by ASIC to be careful before branding themselves as advisors, and ensuring the term accurately reflects their business model. The regulator said brokers should be ‘very careful’ the label does not mislead.

A mystery shopping survey of home lenders ranked brokers ahead of both banks and credit unions in results that made ‘a mockery’ of ACA claims that consumers were poorly served by the broking channel.

What’s happened since?

You will no longer find Steve Kane in the office of MFAA president, after his elevation to head of broker platforms at Advantedge put him in conflict, leading to his resignation. Martin Leedham has been elected MFAA president.

Despite the regulator’s focus on terminology, the industry continues to move rapidly towards an ‘advice’ model of doing business, as convergence between financial services industries intensifies.

A recent media witch hunt focusing on pre-GFC fraud in low-doc lending may have smeared the broking industry, but consumers haven’t seemed to notice. Volume figures at major aggregators have recently been heading north.

COMMENT

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A GREEDY CASH GRAB

Each issue, Australian Broker will publish the best online comment from the previous fortnight – along with your other feedback. So get online, and get participating! BROKERNEWS. COM.AU

I believe the Queensland state government has got it so wrong with the abolishment of the First Home Owner Grant (FHOG) for existing homes. Encouraging young people into large mortgages with the new grants for building new homes is a disaster waiting to happen. First homebuyers should have been coming in at the lower end of the market; incentives for building are great and are needed but not at the expense of mortgage stress on young people who are yet to have families. Wendy Underwood on 13 Sept 2012 08:09 PM

When the Queensland government announced it was scrapping the FHOG in favour of a construction grant, brokers unleashed their disdain for its controversial premier. Roger on 12 Sep 2012 11:16am This is a thinly disguised cash grab by Campbell Newman. The FHOG of $7,000 was very successful and enabled many struggling first homebuyers to enter the market. This change to the legislation just means less money out of state government coffers which is exactly what Newman wants. Peter Wood on 12 Sep 2012 10:52am Another stimulus package which will only increase prices short term and leave first homebuyers with negative equity over time! Thomas on 12 Sep 2012 3:26pm Brisbane is already overbuilt with units, and house and land packages are valuing horribly. Why inject further stimulus into that? It will just increase prices short term as developers go for greed and gently lift prices to get a piece of the $15,000. What do you think? Leave your comments at brokernews.com.au

AN UNSOUND DECISION

Readers denied claims that borrower disloyalty was bringing down the value of trail books, with one questioning why anyone would consider selling them in the first place Laurie NSW Country Broker on 11 Sep 2012 10:26am Why on earth would anyone sell their trail book? I still have trail income from loans written 12 years ago. Are there really people desperate enough for a short-term gain but an overall loss over time? Selling your trail book has to be a very unsound financial decision, and we are supposed to be people who know about finances…Der! Coast Broker on 11 Sep 2012 10:22am Having been in finance for over 30 years and brokering now in excess of seven years, I could count on one hand the number of clients I have lost. Patrick on 11 Sep 2012 10:36am I think that if the broker is doing the right thing by their client and can show this through appropriate advice and perhaps even telling them to stay where they are, then they will keep coming back for the advice. Key is to put the client into the right loan at the beginning.

GO TEAM, GO! When aggregator Connective attacked commission-split aggregation models earlier this month, and claimed it was seeing brokers switch to Connective in droves, it sparked a debate (albeit a little one-sided) on Australian Broker Online’s reader forum. The first two comments were a scathing analysis of Connective’s motivations. “Connective has a great ‘spin’ department, but once you sign up for your cheap flat fee service, all you get is lip service. I’ve had virtually no support since my group moved over to Connective,” said Dissatisfied Connective Broker (12 Sep 2012 09:31am).

THEY MAY NOT BE FOR EVERYONE, BUT STILL OFFER SOME GREAT SUPPORT, TRAINING AND PROFESSIONAL DEVELOPMENT

In the Know was equally disparaging. “Read the fine print before signing on the dotted line. Their flat fee model equals no BDM support,” he said (12 Sep 2012 09:52am). However, Connective brokers were quick to rush to the defence of their aggregator. No less than 18 cries of support followed. “I have now been with the amazing team at Connective for the past three years and have nothing but praise for the systems and the support from the BDMs,” said Mary (2 Sep 2012 10:19am). Jon Colley – Loan Wize (13 Sep 2012 10:06 AM) was

equally complementary about it. “We have been with Connective for over two years and couldn’t be happier. They may not be for everyone, but still offer some great support, training and professional development programs. The best guarantee that they provide is that if you don’t like their business model, you can leave and take all of your trail with you,” he said. Peter T promptly tried to throw some cold water on the love-in. “I’d say the average broker at Connective is actually pretty average, these figures are nothing to brag about,” he said (12 Sep 2012 12:00pm).

AXE TO GRIND brokernews.com.au

‘Financialisation’ need not be simply complex Brokers are at the vanguard of making the complex comprehensive, writes Kym Dalton

he good old times probably weren’t. There’s a tendency to look back to a ‘golden age’ where things were somehow ‘better’ and more simple. It’s easy to forget about outside loos, South East Asian wars, mobile phones bigger than bricks and a time when broking enjoyed a reputation little better than loan sharks, rather than the skilled profession that it is now. What was certainly more simple in the past, however, was the composition of household finances. ‘Household balance sheets’ generally had very few entries indeed: a home mortgage was generally principal & interest over 25 years with no features, usually from a stateowned ‘savings bank’; maybe a hire purchase contract for a car; one bank account; and perhaps a whole of life insurance policy. Now? At level one there’s a vast array of mortgage alternatives from an equally vast array of providers. Add to this multiple bank accounts, compulsory superannuation, ‘risk’ products, credit cards, other forms of consumer credit and even ways to ensure you have a decent funeral! At level two there’s even more complexity. Fixed or variable? Bank or non-bank? Would a negatively geared investment property be good or would a term deposit be better? Is a SMSF the right option? Which asset allocation? How many credit cards do I need? It’s as if a Cert IV in complexity will soon be needed just to cope with everyday life! A definition of financialisation

THE LONDON OLYMPICS HAD BARELY FINISHED WHEN WE STARTED TO SEE DISCUSSION ABOUT THE ‘COST PER MEDAL’ AND WHETHER THE ‘INVESTMENT’ WAS WORTH IT

is the process of reducing all things of value to something that can be measured and exchanged – with the most obvious unit of measurement being money itself. Our world is increasingly financialised. For example, the London Olympics had barely finished when we started to see discussion about the ‘cost per medal’ and whether the ‘investment’ was worth it. Consumers are pressured to consider their life decisions in terms of the monetary impact of their choices. The complexity facing consumers causes confusion and anxiety, which can lead them to making decisions which are not the best for them. Brokers would be well served to recognise that many consumers exist in a state of confusion in a complex financialised world. ‘Future Broker’ should ensure that they make the complex comprehensible, they should ensure that their customers fully understand the nature of their responsibilities and they should seek to ‘de-financialise’ at least a part of their engagement with customers so that appropriate choices can be made that lead to happy, healthy and holistic lives. Remember. The future isn’t what it used to be.

Kym Dalton is a principal of SAKS Consulting and the founder of the new consumer credit education and certification service CreditED

THE WORKSHOP

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How to avoid the

THE GURU

7 BIGGEST

prospecting mistakes Developing and believing in your sales concept could be the key to unlocking a wider range of prospects

hat are your prospects for success in the financial services industry? A key attraction for many is that there is no ceiling on your opportunities. However, there is a ceiling on the number of hours you have in a day and what you can accomplish during the day if you do not have a plan to utilise those hours to your advantage. Welcome to the sales profession. Regardless of your income goals and dreams, they will remain unreal, wishful daydreams unless you can pin them down to specific prospects – people – who will buy from you. Your entire future as an independent professional in the financial services industry depends on your ability to develop a steady flow of prospects and resulting sales.

SOME FACTS

Research was conducted of individuals (brokers and agents) who had failed as independent financial services professionals within their first 18 months in the business. They were asked: “What did you find most difficult about selling?” The most common answer was prospecting. Depending on your attitude, prospecting can be your biggest problem and headache, or it can be your greatest opportunity and your greatest challenge. To become a top producer, you need to develop good prospecting habits early and avoid these seven mistakes: Poor selling concept Failure to establish goals and priorities Weak selling proposition Not having a clearly defined market

Inability to build networks Poor telephone skills

KIM CANNON

Inability to handle resistance and overcome prospects’ concerns

Q: How important is the internet to the future of loans? A: There is no such thing as a straight-through home

CREATE A POWERFUL AND ENTICING SELLING CONCEPT

The basic element of every top producer is their concept (belief) about their profession when a prospect says, “I prefer to deal directly with my bank instead of using a broker.” A top producer is not intimidated; they do not see themselves as someone who is simply selling loans. Instead, they see themselves as a professional service provider who has something unique that will meet their prospect’s needs, and that their service is the practical vehicle that attains the result. Prospecting is hard work; there will be many times that you will be rejected, it happens to the best of us. However, having a powerful selling concept is an inspirational force that will allow you to communicate on a level with a prospect better than those who lack it. Top producers are not productcentred but concept-centred. An example of a powerful sales philosophy for a real estate professional would be: “Real estate is the best investment you can make; whatever price you pay today will be a bargain many years from now.” Being conceptcentred allows you to prospect with ideas instead of products or services. Start developing your selling concept brainstorming with you colleagues and observing the top producers. Write it out and place it on your desk, near the telephone, in the car, to serve as a constant reminder of your value. The first sale is always to yourself, if you don’t believe it your prospects won’t either. Welcome to the sales profession.

loan application. There is no such thing as a borrower who applies online, sends all their stuff through, never talks to a human being and the money appears in their bank account. Do you know what online is? It’s a lead generation tool. You’ve still got to talk to the salesperson. The brokers have got to be fools if they think the banks aren’t investing billions in online systems so they can cut out everyone else. So the brokers will have a place; they just need to start positioning themselves.

Q: How important is training for brokers of the future? A: Education and training of brokers is going to be

the most important thing going forwards. I had a lunch with a dozen brokers recently and we talked in general about what we are planning and only two of the brokers had an AFSL licence. Bringing on other products gives them the ability to manage the customer relationship, and the more professional brokers become with education the more better off the customer will be. If you just want to go and run through a two-week training course to learn how to be a broker and fill out an application form, well I think that is not what broking is about in the future.

Clifton Warren, CMC, principal of Corporate Eye Consulting, is a marketing and sales strategist, coach and speaker who works with banking, insurance and financial services professionals. Contact him on (03) 9808 1136 or Clifton@ corporateeye.com.au

Q: What do brokers need to do to cope with future customers? A: Just look to the future, look to the future

customer. They are going to be internet savvy, they are going to buy online. What does the broker have to offer? They have to be able to provide a service. And sitting down with mum and dad and saying, “Who do you bank with? Oh, you bank with ANZ and here is ANZ’s best loan” doesn’t really empower anybody. When we launched our online offering loans.com.au, we didn’t see Gen Y there or first homebuyers - they still need to go and talk to somebody to get advice. The majority of people we saw were the tech-savvy 40–50 year olds who are time-poor, just want the money, a good deal, and for you to keep it simple.

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IN FOCUS

martline honoured those franchisees for taking a ‘smarter’ approach to their businesses, at a recent annual awards gala dinner in Hobart. Showcasing examples of those brokers who had made their business grow despite the tough market conditions, the cast of colourful characters that attended also proved that Smartline’s brokers thrive at ‘innovation’. Australian Broker wants to feature your industry event photos. Contact the editor: ben.abbott@keymedia.com.au

1. 2.

5. 6.

8. 1

Cathy Anderson and Todd Haffner (Franchise of the Year Multiple and Single operator)

2 3 4 5 6 7 8 9 10 13. 11 12 13 14 15

Brad Gooda, Scott Stevenson and Ian Kilpatrick Todd and Denise Haffner Kylie and Rob Whyte, Steve O’Halleron and Sara Hendon

Neil Pinner and Harrie Swanson

10.

Jim Ellis (NSW), Karen Forbes (NSW) and Paul Raad (NSW)

Ian Bennetts

Ganesh Radhakrishnan (Smartline IT manager) and broker Sheryl Smith

Eileen O’Neil, Denys Warren and Jason Howell Smartline Queensland team

11.

12.

Linda Clucas, Janelle Moodie, Denise Haffner, Jane Brazenor and Merilyn Holmes Rob and Kylie Whyte Paul Jarrett and Linda Clucas

Peter Semmel, Nick Peters and Christopher Lowes Sandra Dennis, Karen Forbes and Kerrie Morris

14.

15.

View more photos from this event at brokernews.com.au/industry-events

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THE COALFACE 19

Young gun eyes Chinese small business banking

or upcoming broker Ben Gao, Chinese first homebuyers and refinancers have been critical to propelling him from an experienced rookie, to a potential Young Gun of the Year. Having only started in the industry back in August 2009, Gao has quickly grown his client base among the Chinese community, operating out of Sydney’s inner-city suburb of Haymarket. Gao says he only fell into the industry as a result of a friend’s recommendation. “A friend of mine was working as a broker and referred me to the company,” he said. “It was my first job out of uni, and I had no idea what I should do, so I just took it,” he said. Gao says his early success in the industry has come from providing ‘excellent service’ to his clients, 90% of whom are of Chinese heritage. He said that Chinese clients appreciate exceptional service, such as visiting their homes on the weekends to help them. Gao says he also treats all clients the same, regardless if it looks like they will take out a loan in the near future, or may be waiting until some time further down the track. He also said his Chinese language skills are a key draw card for new clients. “Because some of my clients find there is a language barrier when applying for a home loan at a regular bank, they need a professional who fully understands the products to explain the terms and conditions in their language. They need to find somebody that they really trust for that,” he said. Strong local bank branch relationships and contacts are helping Gao provide a full service to his clients, enabling him to more smoothly assist clients across their range of financial needs. Looking forwards, Gao says he is likely to target small business clients for business growth. “We want to partner with small to medium companies,” he explains. “They don’t have a big bank to look after them, so we want to be the financial services company to provide them with things such as their business loans and financial advice.” Gao says while larger corporates have strong bank relationships, lots of smaller companies who are running their own business don’t get that level of strong service from the bank. “Even though they have a relationship manager, they don’t get the service that should be expected. We want to fill that gap,” Gao says. At present, Gao says that he has no plans to build in his own financial advice proposition, but refers clients to specialists who provide these services. Crown Mortgage Solutions has a strong relationship with Westpac, which Gao says has been proactive in its approach to the Chinese community in Australia. He mentions a new Westpac mortgage package brochure. “The brochure has been translated into Chinese, making Chinese customers feel very comfortable with banking in Australia.”

BEN GAO

IT WAS MY FIRST JOB OUT OF UNI, AND I HAD NO IDEA WHAT I SHOULD DO, SO I JUST TOOK IT - B EN GAO

BEN GAO’S GOALS  To advise more small business owners on banking and lending  To provide a wider range of services to clients via referral  To grow his Australian clients, as well as Chinese clients

PEOPLE

brokernews.com.au

L-R: Anita Gaynor, Stephanie Valasis, Voula Kotsiras, Noelle James and Teresa Tran

More women, please For aggregator Port Group, a campaign to attract more women to broking is a push for better business

omen in broking are a rare and valuable asset, according to Port Group’s CEO Voula Kotsiras. She believes the industry is still lacking numbers when compared to other financial areas, including real estate. “In my 12 years in the industry, I do believe I have seen more women entering into broking,” she admits. “However, when we compare our industry to those such as accountants, financial planners and real estate agents, they seem to be making more progress in attracting female numbers.” Kotsiras is so passionate about attracting women, she recently commissioned a photoshoot of existing female brokers to encourage more to join. “The culture in our industry has typically been male dominated and more female brokers in the industry would be welcome,” she says. “We will continue to promote women and a strong objective will be to attract great new talent into our industry.” Ms Kotsiras said women could be a “great advantage” to clients. “Typically women are more sympathetic in general and most referrers and consumers relate well to women,” she says. The idea of emotional intelligence being a natural, and highly valuable, gift enjoyed by

women is supported by two of Kotsiras’ top female brokers. “Women are natural communicators and as such most consumers find they can open up and speak comfortably with a woman. There is less ego involved and most find women are not a threat in any way,” says Anita Gaynor. “As a woman broker, it is easy to establish rapport and trust particularly if you are empathetic and a professional.” Broker Stephanie Valasis says clients let their guards down more easily with her. “I find my customers don’t put their guard up and are quite happy to discuss even sensitive issues with me,” she says. As with any discussion on gender equality in the workplace, family commitments are clearly a key issue. “Women in our industry face similar obstacles to men, however those that decide to raise a family, for example, can miss out on crucial relationship building periods,” says Kotsiras. “Strong relationships and a large referral network are critical to a successful broker.” Valasis believes any obstacles facing females in broking are purely the vestiges of a previously male-dominated profession. “Conferences and seminars tend to weigh heavily towards males and not enough focus or emphasis is placed on suitable topics for females,” she says.

WOMEN ARE NATURAL COMMUNICATORS AND AS SUCH MOST CONSUMERS FIND THEY CAN OPEN UP AND SPEAK COMFORTABLY WITH A WOMAN - A NITA GAYNOR

ASK THE EXPERTS

Q WHY SHOULD WOMEN GET INTO BROKING?

VOULA KOTSIRAS

“It is a great time to get into the industry and enjoy great success that is only limited by how committed you are prepared to be. Regulation has lifted the bar for professionalism and the industry is constantly evolving.”

STEPHANIE VALASIS

“[Helping those who have taken] on too much debt and looking at strategies for paying out the debt sooner, or how they would cope if one income ceased.”

ANITA GAYNOR

“I ‘fell’ into the broking industry and am so glad I did. I began as a loan writer for an accountant and a financial planner, so I was always guided by legislation. Ten years on, I am still very happily working in the industry. We need more women to network with and balance the genders a little.”

AUSTRALIAN BROKER WANTS YOUR STORIES! The world of mortgage broking is a lot more than just business – it’s a fun, people industry. Have you got a great photo, interesting story, or a passion you want to talk about? If so, we’d love to hear from you. Email ben.abbott@keymedia.com.au

PEOPLE brokernews.com.au

A new ‘vow’: Zulman champions local residents

hen Jeff Zulman left the helm of Vow Financial, he wasn’t expecting to run for political office. In fact, he thought his Book Buyers Brokerage business would keep him busy. But then, ASIC chairman Greg Medcraft twisted his arm. “Greg was a councillor and former mayor in Woollahra and due to his ASIC position could no longer stand for re-election in any political office,” Zulman says. “He was given my name and approached me as a local resident who has a strong interest in proper and responsible financial management. He is very persuasive and inspired me to run for office.” The result? Zulman is now a councillor representing the Bellevue Hill Ward of Woollahra Council, following elections held across Sydney in September. Zulman is a representative of Residents First, a party that appealed because Zulman believes that local government shouldn’t be the domain of large political parties. “It is about the efficient provision of essential but nonglamorous services such as waste removal, sidewalks and use of ratepayer monies to enhance the local area,” he says. “It should not be used as a training ground for political aspirants, or for pushing party

political messages and policies,” Zulman says. Zulman backed this view by saying he was not considering a career in politics at this stage. “I just want to give something back to my local community during the next four years of office and have no further political ambitions at this time,” he says. Zulman is still running the Book Buyers Brokerage, which he says is filling a niche in the industry, particularly when it comes to funding brokers and managers looking to expand. He is soon moving to a new office – in the electorate he will represent – and hiring new staff. It is expected that as a local councillor Zulman will champion issues such as preserving views from Rose Bay’s heritage listed promenade and sea wall, oppose further marina expansion in Rose Bay, and continue to monitor speed management and pedestrian issues. “I want to ensure all developments are balanced with the local environment and do not threaten the existing residents’ access, safety and lifestyle,” he explains. Zulman will also push for greater support for kids, families and the aged, as well as continued improvement in council planning, services and procedures by making council a real service to the community. Zulman is known as a professional investor and

FORMER VOW CEO JEFF ZULMAN’S PLATFORM 1. Preserve heritage listed Rose Bay promenade and sea wall 2. Veto any further development of marina in Rose Bay 3. Manage speed and pedestrian issues in Bellevue Road shopping area 4. Maintain road maintenance and efficient garbage collection

JEFF ZULMAN, RESIDENTS FIRST

[RESIDENTS FIRST] IS ABOUT THE EFFICIENT PROVISION OF ESSENTIAL BUT NON-GLAMOROUS SERVICES SUCH AS WASTE REMOVAL, SIDEWALKS ETC corporate advisor, who studied, lived and worked in South Africa, England and America, before immigrating to Australia in 1994. He has served as the chief executive and a director of several businesses including Vow, whilst chairing communal activities and balancing “the needs and love of his family and pets”, according to the Residents First political party.

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Becoming number one online New Zealand’s most highly-reviewed broker on website Trade Me, Jeff Royale, is showing that putting the site to work for his next lead is a good bet

or the majority of traditional mortgage brokers, sourcing highly convertible finance leads while fishing off the back of a boat may seem like just a pipe dream. However, there is one New Zealand broker who has made this dream a reality. Living in a house on the coast outside of Auckland, iLender’s Jeff Royale receives an average of 10 leads a day, often while enjoying fishing trips or walking the dog. His secret? New Zealand’s online buy and sell website, Trade Me. On a website that is a veritable institution in New Zealand, Royale has risen to become the number one recommended broker in the country – and the leads are flooding in.

GETTING STARTED

Royale’s first foray on Trade Me “wasn’t by design”. However, as the most-used chat room on the site was real estate, he thought it was a good way to build his business and name. “I started posting in real estate about two-and-a-half years ago,” he says. Royale then added his own business page when Trade Me added the feature ($20 every three months), and began asking clients to review him online to rate their experience with him. “After settlement, I email the client, say congratulations that’s all settled, and when you get a

30%

The proportion of leads received as a result of Trade Me activity, or about three per day

1 in 3

The conversion rate of Trade Me leads, compared to 1 in 5 from Google lead generation

mo’, here’s a link, so would you mind writing up what you think about me? “I’m glad to say that 52 people have done so to date,” he says. These reviews have now become a core method of marketing for the business. “It works really well. I’ve had three calls this morning from people who have read the reviews, who have said ‘you seem to be the guy who can help us out’. It works.”

QUESTIONS ANSWERED

The questions and engagement with the online public is at a fairly basic level, Royale says. “People ask what you and I might think to be really basic questions, but that’s because we are in the game,” he explains. “It’s just saying, no you don’t need to do that, or yes you need to do this. Or telling first homebuyers not to believe everything a real estate agent says.” Royale now invests at least one hour a day on Trade Me. The result? Thirty per cent of his leads are now sourced from the site, and they convert at a higher rate than other online channels. “The benefits are that people have read something about you, and know that what they want matches what you do; they also have confidence after reading the reviews that you actually know what you are doing,” he says. But it’s not an easy form of lead generation. “You have to work hard at it. It’s not just about throwing money at it; I am in the chat room for an hour a day.”

Jeff is the man! A real pleasure to deal with and I would not hesitate in recommending him to anyone looking for finance – in fact we have already recommended him to two friends! Thanks again, Jeff! MX_DEWD (65) THU 02 AUG Jeff was very patient with my ever-changing requirements which was very much appreciated. Positive results, so can now just sit back and not think about my mortgage for 12 months. DRFRANKENSTEIN (25) TUE 10 JUL Wow, wished I had gone to Jeff in the first place, he knew exactly the right solution for my requirements, highly recommended, will most definitely be using again, thank you Jeff for making buying a house as easy as it should be. The banks could learn a lot from you. PEGASUS30 (67) FRI 03 AUG

TRADE ME IS NEW ZEALAND’S NUMBER ONE ONLINE TRADE SITE, WHICH HAS OVER 2.5 MILLION USERS AND 5.5 MILLION AUCTIONS LISTED PER MONTH

I’VE HAD THREE CALLS THIS MORNING FROM PEOPLE WHO HAVE READ THE REVIEWS, WHO HAVE SAID ‘YOU SEEM TO BE THE GUY WHO CAN HELP US OUT’ – J EFF ROYALE

FROM THE BACK OF A BOAT Aside from Trade Me, Jeff Royale is building his business for the future exclusively online, allowing him to spend time on the other things he loves doing – like fishing. Royale says he only sees about 10% of his clients face-to-face, interacting with them and lending institutions online and over the phone. He has even built himself an iPad app, which allows him to submit fully electronic loan submissions from wherever he may be at the time. “Like the other day, I was sitting in the car park at the Marina with my iPad when a loan application came through, and I still had 30 minutes,” he says. Putting all the relevant documentation through from his car, the response from the bank was then ready the next morning. “You are fine as long as you have phone coverage,” he says.

MARKET TALK 24

A state of flux

Mortgage arrears are increasing in Australia, but it seems not all states are created equal. AB looks at how it’s affecting brokers on the ground in some of the worst and best regions

SA:  1.50% ADELAIDE, SA Cathy Anderson, Smartline

WA:  1.59% PERTH, WA Warren Dworcan, Rate Detective Home Loans

ZEITGEIST

HAVE YOU WITNESSED AN INCREASE IN MORTGAGE ARREARS FROM YOUR CLIENTS?

75%

17% MAYBE

YES

Source: Australian Broker Online

“Thankfully it hasn’t really had a major effect on my business or my book, and hopefully it’s not going to in the future either. WA has performed very well on the back of the mining boom. Employment is, within this state, quite robust. There are a lot of businesses competing for people to come and work for them and that’s pushed incomes up. On the back of that, with interest rates coming down, it means people can make mortgage payments comfortably here in WA. The few areas where we’ve seen delinquencies are usually outlying suburbs. They’re not areas that are close to the city centre, or areas that are more towards the higher end of the price range, or even the medium end.”

“Adelaide has a very strong broker market. A lot of people in mortgages [here] have had really good advice, to make sure affordability was worked out properly. I think by nature the state could be considered conservative. So, people tend to be very mindful of what they’re doing. It’s a bit of ‘slow and steady wins the race’ here. We’ve never had great big dips in our property values, I believe, but we don’t spike as high as some areas, too. It seems to be a nice, gradual growth. I think that has contributed to our moderate arrears rate. I think nationally, there’s too much pressure on people to have things that they really, really don’t need. There is definitely an element of wasting money here as well, but maybe not at quite the extreme level of other states. There’s not so much pressure of ‘keeping up with the Joneses’.”

MARKET TALK 25

OBVIOUSLY YOU DON’T GET PAID TRAIL IF A MORTGAGE IS IN ARREARS, WHICH IS A BIG PROBLEM FOR BROKERS - B EN EICK, HUNTER HOME LOAN SOLUTIONS

QLD QLD:  1.86% GOLD COAST, QLD Donna Emerson, Loan Market

“Quite often, real estate agents will refer people to us, and they’re from interstate looking for an investment property. It’s a tourist region – that’s what it is. There’s another thing about the Gold Coast; it’s a large population of self-employed people. The way the economy is at the moment, it’s tough for the self-employed and small business owners. Businesses are closing their doors left, right and centre! However, personally, I haven’t seen any arrears in my clients. Responsible lending is so important to me. We do go through a vigorous application and checking process and it’s something that we’ve been doing well before the legislation tightened after the GFC. When I came into broking, in 2007, the market had started to dip very quickly. It’s been a hard slog, but having said that, arrears are not something I see.”

NSW:  1.73% NELSON BAY, NSW Ben Eick, Hunter Home Loans “[Arrears] are not from the local owner-occupied market here. The properties are bought by people coming up here on holiday, liking the area, seeing an apartment or unit that looks fantastic, and investing. We had a bit of a pre-GFC boom in 2005 and 2006, and people thought ‘this is good value for money and these places will keep appreciating’ and of course what they’ve done since then is depreciate. And that’s where they’ve come unstuck. “Also, if the holiday market isn’t crash hot for whatever reason, and people aren’t travelling, it can really affect the rental market here and can have a direct effect on whether these investors can pay their mortgages.”

 1.04% ARREARS RATES: THE FACTS • QUEENSLAND is now the worst-performing state, with 30+ days arrears rising to 1.86% at end March

TAS

 1.55%

• VICTORIA remains the BEST-PERFORMING STATE in Australia • WA has improved ABOVE AVERAGE and increased less than other states, exhibiting an overall downward trend • Low-doc loans are rising in delinquency rates, which was at 5.72% in July and rising • Standard & Poor’s has reported an increase in what it calls ‘sub-prime’ residential mortgage-backed security arrears, to 10.89% in June

Mortgage arrear rates for March quarter 2012 *Source: Fitch Ratings

BEN EICK, HUNTER HOME LOANS “Obviously you don’t get paid trail if a mortgage is in arrears. Depending on which lender it is, they may or may not let you know… so unless you really track your trail correctly you won’t even know if you’re not getting paid trail for that particular deal… and you mightn’t even have an opportunity to get in touch with your client. So it’s really important to track your trail correctly to know whether or not someone is in arrears; you can then contact the client to work on a strategy to help them.” WARREN DWORCAN, RATE DETECTIVE HOME LOANS “If you’re monitoring your book extremely well, then you should be able to get on the phone, call the client and see how you can help them and potentially try and put them in touch with the bank to see if they can apply for a hardship provision, or something similar to try and restrict the delinquencies and the arrears.”

NSW

VIC

ASK THE EXPERTS

*Sources: Fitch Ratings, Moody’s and Standard & Poor’s

KIM NARAYAN, MORTGAGE CHOICE “I ask questions like, are they paying rent? How much are they paying? If they are paying rent, then I look at how much they’re actually saving on top of that rent. I’d also look closely at all the other costs associated with the property – water, council rates etc – and see what is realistically within their price range.”

TOP 5 BESTPERFORMING AREAS FOR ARREARS

TOP 5 WORST-HIT AREAS FOR ARREARS

1. Lower Northern Sydney, NSW

1. Nelson Bay, NSW

2. Boroondara City, VIC

2. Hoxton Park, NSW

3. Canberra, ACT

3. Surfers Paradise, QLD

4. Northern middle Melbourne, VIC

4. Eagle Vale, NSW

5. Central Perth, WA

5. Budgewoi, NSW

COLUMN 26

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The outlook for the regions What does John McGrath have to say about NSW and Queensland regional markets? Here’s the top trends

ower mortgage rates are having a strong effect, inspiring new confidence among buyers and giving them greater borrowing power. There seems to be a general consensus among buyers that the market has bottomed-out and now is the time to upgrade and take advantage of the next market upswing.

Buyers in Port Macquarie are acting quickly to exchange and properties are selling prior to auction. We’re seeing a lot of purchasers from inland areas such as Dubbo and Tamworth, who are being transferred to Port Macquarie as the local economy grows. Officeworks and JB Hi-Fi have just opened and Coles has undertaken a major redevelopment. These are all positive signs for the local property market.

Savvy Hunter Basin investors are an increasing force in the Newcastle market. Over the past quarter, we’ve also seen a significant spike in sea change buyers from Sydney, particularly young couples, families and first homebuyers, who are relocating to Newcastle for work opportunities, lower cost of living and exceptional value.

The Blue Mountains and Southern Highlands markets continue to be largely

powered by Sydney purchasers. We’re seeing Sydney buyers looking for weekenders in Bowral for the first time in many years.

Investor activity continues on the Central Coast due to strong rental returns. Stock levels of homes for sale are about 40% tighter than this time last year as falling mortgage rates ease the pressure on families to sell. Prices under $1m are firm and buyer interest is strong. There is still price sensitivity above $1m but we have seen some excellent results with semi-rural properties in the $1m–2m range in recent months.

The Gold Coast is turning a corner, with buyer confidence returning and the oversupply reducing significantly. The $300,000 to $600,000 segment is the healthiest sector, however properties upwards to $1m are still attracting strong buyer numbers. Executive rentals at $1,000–2,000/week have been more popular this year due to a migration from the southern capitals. Excellent value remains on offer but new demand is stirring up some competition on good quality homes.

Market activity continues to improve in the Northern Rivers region, with days on market falling dramatically as buyer activity increases in Byron Bay, Ballina and the Tweed. A lot of locals are coming off the sidelines, particularly second and third home buyers looking to upgrade.

WHAT’S IN STORE FOR SPRING?

ANDREW WILSON AUSTRALIAN PROPERTY MONITORS

TONY HAYEK BLUE WEALTH PROPERTY

“I think the expectations from investors are that we have reached the bottom of the price cycle and that it is a good time to enter the market and that we will start seeing capital gains over the next 12 to 18 months in most markets.”

“I think it’s fair to say that it’s a safe statement to make that we are in a relatively flat market and we are not going to see in the next couple of years extraordinary amounts of growth or a massive increase in capital growth anywhere.”

FINANCIAL SERVICES 27

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Brokers mull solution to perception crisis

hree leading insurance brokers have suggested ways the industry can tackle a public perception they simply can’t be trusted – and mortgage brokers can take note. Public polls have placed insurance broking as one of the least trusted professions, while research into the benefits of using a broker prove it is the best means of gaining insurance. Paul George, general manager of MGA Insurance Brokers, agrees there is “the ongoing question of the public perception of insurance brokers”. “Through our own advertising, we have always found the best method to communicate to customers is through another customer’s testimonials,” said George. “Most brokers promote the industry well and we know that our clients place significant value on the right advice.” Adrian Kitchin, managing director of Insurance Advisernet Australia, said the industry peak bodies need to understand the value of the broker compared to direct insurers.

FINANCIAL PLANNERS BUCK RECRUITMENT TREND Financial planners are finding their skills in big demand, despite the knock-on effect that the mining slowdown is having on financial service jobs. eFinancialCareers’ evaluation of the Brisbane job market found the city’s finance employment has been heavily dependent on the mining and public service sectors. However, financial planners still remain in big demand, along with paraplanners and brokers, among others. This is thanks to a residual demand for businesscritical or revenue-generating roles, suggested eFinancialCareers MD, Asia Pacific, George McFerran. “While things are certainly tight right now in Brisbane’s financial services hiring, it’s not all doom and gloom, and we expect that pending state government announcements about project spending in resources, construction and infrastructure may help revitalise the market,” he added.

“Those bodies need to focus on ensuring the broader community understands the benefits of dealing with a broker,” said Kitchin. “And the value brokers have by being part of the local, state and national community. Then it’s up to individual brokerages to position themselves within an educated environment that isn’t so focused on price.” Craig Olofinsky, GM of Brookvale Insurance Brokers, also hopes there is an improvement in consumer perceptions. “I think we’re getting better at dealing with the press and telling the good stories.”  Seek customer testimonials  Engage industry bodies to spread the word  Tell the ‘good stories’, to combat the bad

WHAT THE...? INSURANCE BROKER BEHIND ANTI-MUSLIM FILM SPARKING RIOTS A US insurance broker was recently revealed as a driving force behind an antiMuslim film which resulted in the killing of the US ambassador in Libya and caused riots across the world, including in Sydney. The controversial film titled Innocence of Muslims – which sent the film-maker Nakoula Basseley Nakoula into hiding, and film promoter Steve Klein to centre-stage to defend the film – enraged Muslims across the world. Klein works with his wife as an insurance broker out of a small office on the second floor of a business complex in Hemet, a small city about 90 miles southeast of Los Angeles. He describes himself as a ‘failed real estate investor’ who lost 20 properties in the recession. In 2002, he was the American Independent Party’s candidate for state insurance commissioner, receiving 2% of the vote.

Advisers unlock insurance gold mine

DID YOU KNOW?

60%

The proportion of Americans who claim to have made ‘a really bad financial decision’! Source: The Consumer Federation of America

Poor investor sentiment and a cautious state of mind prompted by the GFC have created a real business opportunity for financial advisers that focuses on risk, it has been claimed. Simon Harris, head of the Guardian Advice, said more and more advisers are turning to insurance sales and distribution as a revenue stream for their business. “I think when we go through things like the GFC and customers do get a bit shy of investing in the market – and a lot of revenue from the wealth practices is derived from investments – there’s this automatic migration to insurance,” he said. “We’ve still got huge underinsurance levels in Australia, so there are tremendous opportunities.” Harris said that the fundamentals of financial planning suggest that wealth protection should be the basis of any good financial plan, and that market downturns usually encourage advisers to enter the space in more numbers. “If we looked at our revenue last year, we’re almost up to 70% of it as insurance sales rather than wealth management.” Ninetythree per cent of advisers now provide risk advice.

FEATURE 28

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To tape, or not to tape, while on the telephone? Legal expert Matthew Bransgrove explores the ramifications of brokers taping phone calls in order to protect their interests against clients

n a previous issue of Australian Broker (issue 9.17, page 22), I explained how you – mortgage brokers – can legally record face-to-face interviews with borrowers to save your business from potential ruin due to false allegations. But recording face-to-face is not the only option. What about over the phone? In this article, I will explain the circumstances in which it is legal to tape telephone calls with borrowers, lenders and solicitors, and how this simple act can prevent entanglement in costly legal proceedings and the consequent damage to your ability to obtain insurance. The usual state rules apply to recording a conversation (explained in my earlier article) but in addition, when the conversation is a phone or Skype call there is Federal legislation to consider. Section 7(1) of the Telecommunications (Interception and Access) Act (1979) prohibits the interception of a communication passing over a telecommunications system (this includes authorising another person to intercept or doing anything that will enable a person to intercept a communication). Interception is defined as: listening or recording, by any means, such a communication in its passage over that telecommunications system without the knowledge of

the person making the communication.

MAKING SECRET RECORDINGS

The case law indicates that a secret recording made by a party to the conversation is not an interception. In T v Medical Board (1992), Justice Matheson interpreted interception as meaning an intrusion by a third party into a communication from A (the caller) to B (the intended recipient) without the knowledge of the persons making the communication. This interpretation was applied in Green v The Queen (1996), where the court noted that there is nothing to be protected between the caller and intended recipient. The intended protection is against the third party invading the privacy of that communication. In short, if you are a party to the communication, you can legally make a recording without the need to inform the other party (i.e. the borrower). The other situation in which you can make a recording without informing the other party is where the employer of one party to the conversation makes the recording. In R v Evans (1999), Justice McDonald held that an employer’s recordings of conversations of employees in the course of their employment were not an interception because an employer is not a third party. Employees’ telephone

BORROWERS WILL NOT HESITATE TO DO ANYTHING THEY CAN TO KEEP THEIR HOUSE AND YOUR ONLY DEFENCE MAY BE YOUR RECORDS

conversations with clients are part of the transaction of business by the employer and as such there is no privacy in such a telephone conversation. Be warned though: this does not mean that it is legal to record all conversations, both workrelated and personal. The telephone conversation must be related to your work as a broker to be legal and admissible. This phrase may also be familiar to you: ‘This call may be monitored or recorded for quality and training purposes.” Another way to get around obtaining consent is to announce that the conversation is to be recorded at the start of the call. This is effective as the borrower has been informed that the conversation may be recorded and as such cannot object to its legality or admissibility if they choose to carry on with the phone conversation. It is a matter of precaution that we often hear the above phrase at the start of a telephone call.

A CLEAR CASE WARNING RHG Mortgage Corporation v Baira (2011) involved a husband and wife who borrowed on their parents’ homes to obtain start-up capital for their joint business. When the business became insolvent and the mortgages went into default, the lender sought possession of the homes. The parents (on both sides) claimed they did not speak English and did not know what they were signing. Further, they accused the introducing broker of never having met them and also of falsely preparing the finance application forms. The broker produced insurmountable evidence of a meeting with the parents together with detailed file notes of the contents of the meeting. The case turned on the broker’s evidence, with the Judge stating that ‘the broker was an impressive witness whose testimony as to events and circumstances was persuasively compatible with the pattern of recorded activity and documentation.’ May this case serve as a warning that borrowers will not hesitate to do anything they can to keep their house and that your only defence may be your records and there is no better record than a recording.

INSIDER

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DO NOT PASS GO ASIC has been forced to publicly denounce an email claiming to be from the chairman of ASIC and the ATO. It claims recipients are entitled to receive a tax refund by clicking on a link provided. What’s more, it claimed to be from fictional ASIC chairman ‘Barbara DuFrene’

Fraud is like an unruly footballer…

…O

ROWDY DOES IT Insider overhears things got very lively at the AFG conference in the US last month, with one attendee getting a black eye. He told our source he was running up the downwards escalator and fell flat on his face, after attending a show in Vegas. We’re sure margaritas had nothing to do with it.

r so the saying goes, according to MKM Capital’s head of operations Michael Watson. Admittedly it’s not one we’ve heard before, but it certainly painted a visceral picture. Watson argued there was little difference between the current low-doc lending scandal rocking the banking world, and the Ben Cousins and Wayne Careys of this world, whose ‘rogue’ actions bring their entire teams into disrepute. He argued banks and brokerages were suffering a similar fate. “Listening to all the hoo-ha lately on low-doc lending, it sounds like pundits are writing off the entire industry,” he said. Watson said the NCCP has already “spear-tackled” brokers and lenders “who took it easy in the off-season”. “Brokers have been forced to

LENDERS ARE MOVING TOWARDS TERMINOLOGIES WHICH MIRROR THE FACT LOANS AREN’T JUST BEING DISHED OUT LIKE LUKEWARM PIES AT THE MCG accept uniform, higher standards. Private lenders and products have exited in droves and standards have increased at lenders that may have been a little too relaxed in their attitude to credit.” Watson said the GFC has also caused brokers to exit ‘en-masse’ leaving only the fittest in the industry to survive. “Do low-doc loans even exist anymore? No, not really,” he said. “Lenders are moving towards terminologies which mirror the fact loans aren’t just being dished out like lukewarm pies at the MCG anymore.”

PUTTING THE MYSTERY BACK IN Is it a plane? A bird? No, it’s a mystery mortgage! The latest consumer gimmick, launched by comparison site Mozo.com, sees borrowers sign for a loan based on a rate, with the lender’s identity remaining unknown until the last minute. The website claimed it was a win-win for the banks. “The banks get access to a new source of quality customers without having to broadcast cheap rates to the entire marketplace,” Mozo’s managing director Rohan Gamble told The Herald Sun. Borrowers plug in their details and apply for the 5.39% ‘mystery rate’, before receiving a call from a Mozo representative who reveals the identity of the bank. Gamble said a mix of the big four and second-tiers were involved, although when contacted by the paper, NAB, ANZ and Westpac denied being involved. CBA did not confirm or deny its involvement…

An underdog’s tale... There’s nothing like an underdog story to cleanse away a bit of Insider’s cynicism build-up. Earlier this month, ex-mutual bank Goldfields Money proudly announced it was aiming to write $91m of home loans over the next two years. Just to put it in perspective, ANZ’s loan book ‘shrank’ to $37.39bn over the last quarter. The Kalgoorlie bank has two branches but a full online service. It hopes to tap into Perth’s burgeoning upscale property market, signing loans of $500k and above. In an industry of overblown figures and, let’s admit it, meaningless sums, a two-branch bank with an earnest goal adds a nice dose of modesty. You’ve got to start somewhere.

COMPETITION! Australian Broker has received a number of entries for its recent competition, which asked brokers to send in photos to prove they were more ‘ripped’ than this insurance broker. This is your last chance to compete! Send your photos to ben.abbott@ keymedia.com. au to win!