Australian Broker magazine Issue 9.21 by Key Media

OCTOBER 2012 ISSUE 9.21

$4.95 POST APPROVED PP255003/06906

+INSIDE + NEWS I’M A SCAPEGOAT Banned broker speaks out P4

BROKERS ARE SALES REPS

An analyst sparks outrage P6

BEST OF THE BEST

The new Brokerage of the Year Passion and resolve have thrust Tiffen & Co into the limelight, and as Gerard Tiffen explains, winning comes from loving what you do

he winners of the highly coveted Brokerage of the Year Award at this year’s AMAs, the team at Tiffen & Co, have a unique way of reminding themselves that their continued success is a reality. “We have this theory: when you’re a kid and you breathe against glass, you know you’re alive because of the condensation that appears. We do the same thing here, metaphorically,” says managing director and long-time industry leader, Gerard Tiffen. The team’s powerful resolve and success, spearheaded by Tiffen, comes down to one thing. “Be passionate about what you do. Love what you do, and enjoy it. I enjoy what I do every day.” FULL STORY PAGE 10

+ ANALYSIS Are white labels putting the broker proposition at risk? P14

+ CAUGHT ON CAMERA The who’s who of broking at this year’s AMAs P18

+ OPINION Commercial brokers need a dose of reality P13

NEWS

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WHAT THEY SAID...

NUMBER CRUNCHING

MARK DE MARTINO

1.73%

“Great brokers will provide great service, no matter whether they’re charging a fee or not.”

The amount Australia’s population will grow in the next three years

DID YOU KNOW?

LISA CLAES

$675,000

4.99%

The level to which Advantedge has dropped it’s one and two-year fixed rates

“I can say that the funding mix today is influenced by a variety of factors beyond the RBA cash rate.”

The amount an insurance broker allegedly stole from clients

The number of basis points variable rates are tipped to fall by in 2013

28%

The proportion of Queensland borrowers taking up fixed rate loans

$50m

The value of John Symond’s Point Piper mansion, according to reports

MARTIN NORTH

“Brokers feel very disempowered today because the volumes aren’t great.” P14

$444 The average rent per week in Australia Source: C???

COLIN SHEPPARD

“More and more these days, Gen Y wants to feel an affiliation with a brand or consultant they are dealing with.” P20

NEWS

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CBA’s requirements could ‘delay approvals’ ■ A leading broker has criticised CBA’s new loan submission requirements, labelling them a “barrier” which could delay approval times. His comments were in response to CBA’s announcement that all brokers submitting loan applications must obtain and check a client’s most recent transaction account statement for “any commitments that may not have been disclosed at the time of the application.” Broker Benjamin Campbell told Australian Broker it would significantly increase workload, despite the requirement to check accounts being widespread

throughout the industry. “It is not hard to see a result where brokers will simply have to request all statements for every non-debt account from the customer just to satisfy the assessment, and have it fully assessed the first time which will increase workload and customer management in the process.” While he acknowledged the new rules would improve risk assessment for CBA, it risked “decreasing the experience for the customer” and could delay approvals “and [increase] the chance of decline.” “Considering how many customers have multiple

accounts with multiple institutions the exercise could simply become a barrier to entry,” he said. “Further to that, the CBA already requires broker submissions to provide debt statements which are above and beyond the majority of other lenders’ requirements that are on my panel. “Seeing that the lender already punishes brokers via reduced commissions for applications that do not pass quality submissions metrics, there is further risk of reduced commissions as a result of this requirement.”

Banned broker fights to ‘set the record straight’ ■ A banned Sydney broker is

furiously denying fraud allegations made against him by ASIC, telling Australian Broker he is a “scapegoat.” Athol Halvorsen was handed a six-year ban from the watchdog earlier this month, and had the credit licence of his company, Gearing.com cancelled, after a year-long investigation into fraud allegations. ASIC claimed he submitted nine loan applications to St. George and Perpetual containing false and misleading statements regarding the borrowers’ income and employment. However, Halvorsen claimed the borrowers themselves signed the documents to say all information provided “was correct and true,” and the banks accepted it.

“These clients received an electronic copy of the application forms from St. George as part of their mortgage documents, and they have to read it and sign it to authorise that everything in the application form is true,” he said. Furthermore, he claimed the information was provided by a financial planner, who was, incidentally, banned earlier this year for his role in the loan application. “When I’m with a client and also liaising with their financial planner – at their request – I trust, and they trust, the actions of the financial planner.” “I wasn’t acting for them [as a financial advisor]. I was doing my job as a mortgage broker.” He admitted that the ATHOL HALVORSEN loans were low documentation for a property investment.

INFORMATION PROVIDED ‘WAS CORRECT AND TRUE’ –

EDITOR Ben Abbott COPY & FEATURES 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 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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Housing supply trails below decade average

Brokers defy a tough market with stellar awards night ■ The 2012 Australian Mortgage

Awards (AMAs) wowed guests with a bigger turnout, glamorous hosts and an extremely high level of competition. The mood was defiantly upbeat, despite brokers suffering from a tough climate, said Young Gun of the Year winner Josh Bartlett. “It’s definitely tough out there, but a lot of financial reward can be found in broking. We need more young blood,” Bartlett told Australian Broker. He said Generation Y presented an exciting new direction for the broking industry, although he admitted there was still a lot his

m the Simon Elwig fro Bank with Josh Commonwealth n of the Year Gu ng You tt, rtle Ba

generation could learn from “Gen X and the Baby Boomers.” The prestigious Broker of the Year award went to Mark Davis of Australian Lending and Investment Centre for a second year running. He claimed a “specialist focus” is now crucial for success. “I believe in specialisation. I believe in being great at what you do, knowing where your limits are and bringing specialists in around you,” he said. Melbourne-based Loan Studio took out New Brokerage of the Year. Director Colin Sheppard told Australian Broker he’d just completed an office re-design, which was part of his strategy to “create ‘wow’ factor” in both the physical space and his business. “The uniqueness of the space creates a great talking point with clients and acts as a great ice-breaker at the start of any appointment,” he said. “We’re very dedicated to giving the client exactly what they need and attracting those tricky Gen Y clients.”

‘Sales reps’ taunts spark outrage ■ A financial industry analyst’s

comments on how brokers look like sales reps if they don’t charge a fee for service has sparked widespread outrage. Max Franchitto initially told Australian Broker the existing commission model was a perilous one, and that the bread and butter of the future lies in the fee-for-service model instead. His comments, which garnered considerable response on the reader forum, also attracted the ire of Loan Market’s director of sales Mark de Martino.

“It almost reads that we have to create legitimacy in our industry, in our business, by charging a fee for service. Now I think the industry has a hell of a lot more legitimacy than that,” he said. “If you look like a sales rep for a bank, it’s because you’re not providing great customer service, and you’re not being impartial.” “Great brokers will provide great service, no matter whether they’re charging a fee or not. That’s playing out in the figures, in the market share, that the broker figures are going up.”

■ The ABS recently released figures which detailed

DID YOU KNOW? One in two (47%) households with a mortgage are ahead with their loan repayments, while 63% of credit card holders are paying their card balance off in full each month

an 11.4% fall in the total number of dwelling commencements over the year to June 2012. RP Data’s national research director Tim Lawless said this put the number of housing starts at 13.4% lower than the 10-year average. “The results highlight just how weak the housing construction sector has been since building activity started to fall in early 2010,” Lawless said. Detached houses were the weakest performers, with the ABS data showing construction began on a seasonally adjusted count of 20,786 houses over the June quarter of 2012. Lawless said this was 21% lower than the decade average of 26,189 starts. However, the trend could be about to turn around. The HIA’s latest residential land update signals that new housing starts should begin to recover modestly by early 2013. The = Data Residential Land Report shows a significant improvement in residential land sales in the June 2012 quarter. “The June 2012 quarter saw residential land sales rise by 23.3% to be up by 29.7% when compared to the same period in 2011,” the HIA’s chief economist Harley Dale said. “Growth is from a low base and the result is exaggerated by a policy-induced pull-forward in land sales in NSW and Victoria. Nevertheless, land sales did rise in all six state capitals and in a majority of regional areas and that is an encouraging result.” Dale said residential land sales signal the prospect of a turnaround in new housing starts from the December 2012/March 2013 quarters.

10 MOST EXPENSIVE REGIONAL LAND SALES MARKETS REGION

MEDIAN LOT PRICE

Sunshine Coast (Qld)

$249,500

Richmond-Tweed (NSW)

$245,000

Gold Coast (Qld)

$224,840

Illawarra (NSW)

$205,000

Mackay (Qld)

$190,000

Barwon (Vic)

$181,000

Hunter (NSW)

$179,000

Mid-North Coast (NSW)

$177,500

South West (WA)

$164,000

Northern (Qld)

$160,000

Source: Housing Industry Association

NEWS

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Bank’s record loss ‘not due to property market’

THE STRANGER SIDE OF NEWS

■ The Bank of Queensland

FAST FACT

FAST FASHION

■ McDonald’s is suing the City of Milan after it

was bumped from a historic shopping arcade, where it has been for 20 years, to make way for a Prada store. The fast food chain is asking for $30.5m in damages for losing its spot at the Galleria Vittorio Emanuele II, which is next door to the Duomo cathedral.

SCRAMBLED OR FRIED?

■ According to UK researchers, your egg

choice could make or break that job interview. The British Egg Industry Council has advised HR workers across the UK to test potential employees’ personalities by asking how they like their eggs. According to its research, scrambled-egg lovers are likely to be managerial, boiled egg fans are careless and impulsive, while fried egg devotees are young, male and highly skilled. No word on poached eggs, though.

RISE AND SHINE

■ It’s something every good Australian

knows: don’t skip your vegemite on toast in the morning. Neuroscientists in London have released a study that shows people who skip breakfast are biologically drawn to fatty foods at lunch. “That makes evolutionary sense if you’re in a negative energy-balance situation. You’re not going to waste your time going for lettuce,” said a consultant endocrinologist.

75.8% of Australians believe that house prices will grow or remain stable for the rest of this year Source: MFAA Home Finance Index

was the first lender in 20 years to post a full-year loss earlier this month. Initial media reports suggested the loss was due to the struggling South East Queensland property market, however a spokesperson for the bank was quick to dismiss the claims. “It is important to note that the decision to increase our provisioning is not because we have had an increase in bad debts, we are simply protecting ourselves for the future. “This is a responsible and prudent approach to doing business,” she told Australian Broker.

Furthermore, she said there has been “no material deterioration in the portfolio in the second half.” “There have been no significant new impaired assets identified in the second half in the commercial and property finance portfolios.” The spokesperson speculated things would gradually improve in South East Queensland due to the presence of both rate cuts and a strengthening economy. “We have seen tentative signs of recovery in the residential and commercial property markets.” BoQ has already posted a $90.6m loss in the first half of the year.

Majors suffer further market share loss ■ New data this month revealed

the majors’ share of the broker market has dropped to a five-year low, while ‘aggressive’ regionals reap the rewards. The report, from Market Intelligence Strategy Centre (MISC) found the percentage had dropped from 64% in Q2 2011 to 59.8% in Q2 2012, which is the lowest level since 2007. A spokesperson for MISC told Australian Broker the results were not surprising given the jump in popularity of regional banks. “To a certain extent, regional banks have grown share. This could be to do with the less aggressive nature of the major banks’ activity,” he said. “Regionals and second-tiers are discounting… The RBA cuts were not passed on.” The report claimed a “major structural change in the broker originated market” was underway, although the popularity of the majors varied greatly from state to state.

There was a modest increase in broker usage of the majors in Western Australia and South Australia, with 2.5% and 8.3% growth, respectively. However, the MISC spokesperson claimed that the “most significant negative change” this quarter was a 10% drop in usage of the majors in NSW. MAJORS VS NON-MAJORS Q2 2012

Majors

59.8%

40.2%

Regionals and non-majors Source: Market Intelligence Strategy Centre (MISC)

NEWS

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CONTINUED FROM PAGE 1

Best of the best: The new Brokerage of the Year

erard Tiffen – who has himself scooped no less than seven annual awards since 2005 – does not take all the credit for the brokerage’s success over the years. Instead, the Canberra-based broker puts his success down to his “exceptional staff”. “Everyone works very hard, we have an awesome team and work with lovely people,” he says. His brokerage, Tiffen& Co, was launched in 1995 and has since blazed a trail for the boutique model of mortgage broking. The stats are pretty impressive: the brokerage wrote over $367m in home loans last financial year, which represented a 20% year-on-year increase. Between 2011 and 2012, the company smashed its own records with 1,307 lodgements – with only seven staff at the helm.

TOUGH TRANSITIONS

However, it’s not been entirely smooth sailing for the brokerage in recent times. Earlier this year its aggregator, National Mortgage Brokers, was acquired by Aussie. At the time, Tiffen was optimistic about its implications. “From a broker’s perspective, you hear about the things the AFG guys do for their top 20 brokers, and I think, ‘Wow, how awesome is that? How do we get some of that?’ I think that’s another thing that might change. The level of opportunities will get better,” he told Australian Broker at the time.

A DAY IN THE LIFE OF GERARD TIFFEN 5am I have three kids, all under six, and the baby is 12 months old so I’m normally up with my wife (not by choice) at about 5am. I take advantage of it and either run, ride or go to the gym.

7am Home,shower, brekky, kids, chat, dance, sing, laugh as much as possible when they or I am not crying.

8am I catch up with my PA. She runs through our work-in-progress and goes through the files I have for the day. She also provides me a list of clients that have either a birthday or an anniversary of a loan, or a fixed rate expiring, so I can say hey to them.

9am Meet with my office manager Alice (not to be confused with Alison). She brings the coffee and we run through bills, cheques or any office matters that may have arisen the previous day.

10am onwards The rest of the day is normally filled with appointments. I try and do appointments on the hour, every hour, whether they are doc sign-ups, new appointments or reviews of clients.

12pm I have about 30 minutes for lunch, which is normally a sandwich and a yoghurt.

2pm I try have about five coffees a day: I know it’s terrible, however I don’t smoke, drink or swear! At the end of every appointment, Alison comes in and we discuss, take file notes, or create a new file.

6pm I get out of the office most days around 5.30pm, and get home to see the kids and my beautiful wife. I’m normally in bed by 9pm, and so it goes from Monday to Friday!

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A LOT OF THE MAJOR BANKS ARE TRYING TO GET IN FRONT OF OUR FACE MORE OFTEN THAN NOT, AND DICTATE THE TERMS

On reflection, Tiffen acknowledges it was more challenging than he anticipated. “The period during, and after, we sold to Aussie was tricky, simply because of the transitional period,” he admits. “It was temporarily a bit of an upheaval. But ultimately, if that’s the only challenge we faced then it’s been a very good year.”

FUTURE CHALLENGES

Being a boutique brokerage has its setbacks, particularly when it comes to the might of the majors. “A lot of the major banks are trying to get in front of our face more often than not, and dictate the terms,” he says. It’s something that doesn’t sit well with Tiffen, who prides himself on independence and objectivity – two qualities he believes every successful broker should foster. “Choice, for the client’s sake is essential, rather than becoming just an agent for one particular lender. We need to ensure we do stay diligent in making sure we’re giving people choice. Offering people opportunity and diversification is essential. We need to be totally impartial in what we do.”

YOUNG BLOOD

Tiffen is one of a growing number of industry figures who believes the future lies with young brokers. “Getting young blood in is so important to the industry. It’s not enough to turn bank managers into brokers, when they’re in their 50s. “We need young, enthusiastic people who bring something different to it as well.” Tiffen is so keen to recruit fresh talent, he’s in talks with universities and TAFE in Australia to provide education and awareness of the broking industry. “We need to let people know what a great industry we’re in, so yes, there are plans to recruit and get into these [institutions].” When asked what kind of young brokers he looks out for, his answer is clear. “I look out for brokers that are dynamic, young, and passionate.” “Look, it’s a tough industry to find new talent out there, and hopefully the MFAA, in the next one to two years, will also work hard to get fresh blood in.”

FORUM

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The pot-stirrer returns

BEST ONLINE PSEUDONYM OF THE MONTH

Diversification in broking is a bit like sex: everyone is talking about it but very few are getting any...

SanityPrevails

Scopher on 16 Oct

is it possible for brokers to be truly independent? Lenders control the product – brokers don’t,” said a thoughtful Derek Miles. Country Broker was simply exasperated by Franchitto. “Oh dear, another analyst who is giving out advice and has no idea, really. Please can we have commentators who are given to well-reasoned commentary – this is not!” However, not all were out to attack. Glen shook things up by siding with the controversial financial analyst. “Free service, you know what your advice is worth? Nothing! People are happy to pay for a service and advice the banks are not able to give.”

I’m a scapegoat, get me out of here!

WORST ONLINE PSEUDONYM OF THE MONTH Broker

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

Australian Broker’s favourite pot-stirrer Max Franchitto was at it again this month, claiming brokers who didn’t consider charging a fee for service would risk looking like “mere sales reps for their favourite banks”. Unsurprisingly, the reader forum exploded with indignant brokers eager to put their two cents in, and have a go at Max in the process. “Max who? Never heard of him – but he’s dishing out the advice,” said John Robbo. Others took a more pragmatic approach. “Even if you charge a fee to remove the commission problem, brokers are still faced with minimum volume hurdles. So how

It will soon become mandatory to live with your customer for a month prior to submitting the loan application, to make sure we get the FULL picture! Billy Bob Blogg on 12 Oct

When banned broker Athol Halvorsen spoke exclusively to AB to protest his innocence, readers were surprisingly supportive – and nervous. The Sydney local was accused by ASIC of committing fraud, after loan applications from clients were found to contain ‘misleading and incorrect’ statements. “This story, if true, highlights the need for advisors to keep thorough notes and have extraneous notes and all pages of the loan application, at the minimum, initialled by the borrower so that these allegations cannot be left in any doubt as to their falsehood,” said Greg. Ssmith3104 was entertainingly blunt. “Good example of why I left the industry when the new rules plus licensing regime came in. All too hard,” he said.

However, Mary stirred things up by asking the question, “what was he? An order taker?” Peter leapt to Halvorsen’s defence. “Bit rough Mary! The broker says he was advised the numbers (income, profitability, living expenses), from the planner as he trusted them at the behest of the clients. How often have you received information from an accountant and accepted it as gospel?”

What do you think? Leave your comments at brokernews.com.au

OPINION

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Banks back in business Commercial brokers can learn a lot from bank attitudes to development finance

e can no longer blame the banks for not getting projects off the ground; they’re all well and truly back in business. So much so that when I recently asked senior property credit managers how the market is treating them, they sighingly said we just can’t get clients to borrow money.

THE BLUE-SKY PROBLEM

One of the difficulties that banks still have is with clients presenting blue-sky feasibilities. In their eagerness to try and convince lenders about a project’s worthiness, clients often only present the best-case scenario. Ultimately credit applications end up on the desk of a senior credit risk manager who has seen it all before and probably

spent the last five years helping the bank get out of the blue-sky deals of the last decade. Good credit risk managers know what the risks are so there is no point pretending it won’t happen with your project. Instead, you are far better off presenting a realistic feasibility, acknowledging the risk areas to the feasibility and identifying how you would handle that scenario should it arise. You don’t have to prove that even in a worst-case scenario you make a handsome profit. By assessing a worst-case scenario and satisfying yourself – as well as your banker – that you have a plan in place to avoid financial Armageddon, you can sleep well at night. Remember that credit risk managers are assessing the client’s ability as much as the project’s feasibility.

ONE OF THE DIFFICULTIES THAT BANKS STILL HAVE IS WITH CLIENTS PRESENTING BLUE-SKY FEASIBILITIES GREG CAMPBELL, HARMONY PROPERTY GROUP

ANALYSIS

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WHITE LABELLING: GREY AREA Industry pundits say the push from some aggregators to sell white label products is putting the broker proposition at risk. Andrea Cornish investigates what’s driving this market and how brokers can ensure they stay on the right side of ASIC

s it turns out, white labelling is a great money-spinner. While not new to the mortgage industry, it has certainly taken a while for white label products to rival other lender products in brokers’ top three, a position many aggregators are starting to report. Its massive growth in popularity among brokers and customers can be put down to several reasons – greater service, faster turnaround, sharper price points, to name a few. But some industry pundits say broker incentives may also be playing a part, and that puts white labelling in a grey area when it comes to ASIC. “The bottom line is there is a lot of money to be made by aggregators through the sale of their white label products and I think that the aggregators have to make sure they are not pushing the brokers to sell these products and they are sticking to disclosure guidelines to ensure that neither they nor the brokers are in a conflict of interest,” says Connective’s Mark Haron.

MOTIVATION

To better understand what’s driving the white label “rush”, industry analyst Martin North says you need to look at what’s in it for all parties. According to North, banks are keen on white labelling because it gives them access to a share of the market that they might not

otherwise reach – possibly because some customers have an aversion to their brand, or the end customer is looking for sharper pricing. The other factor is that white labelling allows banks to potentially differentiate their service proposition to aggregators and brokers. And when it comes to the individual broker, North says, many are looking at white labelling as a means of empowerment. “Brokers feel very disempowered today because the volumes aren’t great, the commissions are getting squeezed, and it’s harder to differentiate. So this is a way of potentially differentiating,” North says. As for the appeal of white labelling for aggregators, its rise in popularity is indicative of an industry in transition – particularly when it comes to the role of the “aggregator”, says Futurology’s Kym Dalton. “Wholesale aggregators formerly didn’t seek any brand equity or brand recognition – but with ‘white label’ products they’re able to achieve both some brand identity and employ this to attract new broker members and engender a degree of customer loyalty. Rather than handing off the customer to a lender with all of the tension around customer

OF T LO E EL A S MAD LAB ON I RE BE ITE K HAR E TH TO WH– M AR EY UGH TS N MOHRO DUC T RO P

AB’S INDUSTRY PUNDITS

MARK HARON CONNECTIVE

MARTIN NORTH FUJITSU

KYM DALTON FUTUROLOGY

BELINDA WILLIAMSON MORTGAGE CHOICE

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ownership, with a white label product both the broker and the aggregator are able to forge a monoline relationship with the customer.” According to Dalton, offering brokers the ability to take greater ownership of their client is an attractive recruitment tool for aggregators. “All brokers will have experienced the frustration of the ‘hand off’ of a client to a lender, only to have that client poorly serviced by the lender during the settlement process or in the aftercare phase of the relationship. This impacts the broker/customer relationship and the individual brand equity of their broker business. If an aggregator ‘does white label right’, with an efficient back-office customer service culture, the broker’s relationship with the client has the potential to be enhanced, and the aggregator’s bond with their broker members will also be enhanced accordingly.” In addition, Dalton says white labelling allows for flexibility in pricing, which gives aggregators opportunity to improve margins and pass on some of the extra to brokers in the form of higher commissions and trails, which in turn improves broker loyalty. Given the advantages that white labelling offers aggregators and brokers, it’s no surprise that these products have increased in popularity. However, industry stakeholders warn pushing these products too aggressively could put brokers on the wrong side of ASIC regulations.

DID YOU KNOW?

90%

of Connective brokers who choose to use its white label product are making use of its flexible pricing option to adjust interest rates and commissions Source: Connective

INCENTIVES

A number of aggregators offer brokers incentives to sell white label products. Such incentives include reduced aggregator fees, better commissions, and better access to BDMs. But under the NCCP Act, are these incentives

creating a conflict of interest? According to an ASIC media spokesperson, “licensees must have in place adequate arrangements to ensure that clients of the licensee are not disadvantaged by any conflict of interest in relation to credit activities of the licensee (s47 NCCP Act).” Furthermore, ASIC notes: “a conflict of interest may occur where the broker is acting on behalf of a consumer (where they must act in the best interests of the customer) and the broker is provided with incentives by an aggregator to sell more of the aggregator’s product. Where such a conflict arises, a broker has to ensure that the consumer is not disadvantaged by that conflict. Such a disadvantage may arise where, for example, the aggregator’s product is more expensive to the client than an equivalent suitable product.” To be on the safe side, industry experts argue brokers should be disclosing any incentives to customers. “Brokers should be disclosing this as part of the conversation with the customer because ultimately the customer could come back and say they weren’t actually given full and fair information and therefore it could be an unsuitable loan,” North says. “There is an enduring responsibility that the loan is not unsuitable and anything that might impact that could come up later, so this is important at the start of the conversation.” As long as the credit offered to a customer is not unsuitable and meets their needs and objectives, incentives such as higher commissions are fine, Dalton says.

AGGREGATORS ON INCENTIVISATION Mortgage Choice, which pays the same commission rate to brokers regardless of the loan product on offer, indicates that incentivising brokers to recommend white label product could pose a problem. “Varying commissions or other ‘incentives’ paid to financial services providers for specific products can encourage bias,” says head of corporate affairs Belinda Williamson. “Mortgage Choice stands apart by cementing its loyalty to providing customers with a service that is not swayed by one lender over another.” She adds, that an ASIC investigation into white label incentives would not come as a surprise. “It is possible that the industry may see a crackdown, especially if a growing number of borrowers complain that they were not offered the most financially beneficial product for their circumstances.” According to Connective’s Mark Haron, the aggregator does not incentivise its brokers to offer its white label product. “I think it’s very important from an industry perspective that when or if ASIC takes a look at this they see that brokers are doing the right thing, and they are disclosing these incentives and making sure that any potential conflicts of interest are disclosed properly to the customers that they’re giving advice to.”

PEOPLE

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Winners’ special What does it take to become one of the top players in the industry? Australian Broker quizzes two of this year’s AMA award winners for the inside scoop

oung Gun of the Year, Josh Bartlett, swapped working at a local gym for mortgage broking in 2010. He’s since won a host of awards, including Loan Market’s International Rookie of the Year, and attributes his success to making over “100 phone calls a day”.

DID YOU EXPECT TO WIN?

I didn’t go to the AMAs for any accolades. It was more about coming away for the weekend knowing that I work really hard, and I was a finalist. I looked at it and thought, whoever wins, I’ve got to shake their hand, because I know how hard I work, so you’ve got to be pretty impressive if you’re up there, and even to be a finalist is fantastic.

WHAT DOES THIS AWARD MEAN TO YOU?

Just recognition, of all the hard work, and it’s good to show your referrers that hey, I am good at what I do and the hard work I put in, hopefully you guys can see that it’s all worth it. It’s hopefully another opportunity to bring more people on board the business.

IT’S A TOUGH INDUSTRY OUT THERE. WILL WE SEE MORE OR LESS YOUNG BROKERS JOIN IN THE COMING MONTHS?

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

I think it’s all about new blood. When I started, 16 or 17 months ago, I looked around and there were a lot of Gen X and Baby Boomers around. A lot of people have a nice little trail that’s going along, so I guess they start

YOUNG BROKERS NEED TO FIGURE OUT THAT WORKING HARD REAPS REWARDS

slowing down their activity, so I saw that as a bit of a bonus about getting into the industry. Then NCCP came in, so that was another thing that pushed a few people out. And they’re opportunities – instead of seeing them as a negative, it was more of a positive to jump in. I think young people are what it’s all about.

WHAT ARE THE BARRIERS TO YOUNG PEOPLE JUMPING INTO BROKING?

There’s always the Gen Y [versus] Gen X issue. The question ‘why do I have to work so hard?’ gets asked by a younger generation. A lot of young brokers need to figure out that working hard reaps rewards, and in this industry you can reap good rewards. However, it is all about doing all the right things all the time, but under the right guidance and the right people. I think it’s definitely doable.

SO YOU CAN LEARN A LOT FROM GEN X?

Baby Boomers have a lot to learn from Gen X, and Gen X has a lot to learn from Gen Y, so it goes both ways. You can learn a lot from every generation, I think.

Australian Young Gun of the Year award winner, Josh Bartlett

THE PICK OF THE PACK AWARD

WINNER

GOLDEN MORGIE FOR LIFETIME ACHIEVEMENT IN THE MORTGAGE INDUSTRY

Kevin Matthews from AFG

AUSTRALIAN BROKERAGE OF THE YEAR

Tiffen & Co. Accepted by Gerard Tiffen

AUSTRALIAN BDM OF THE YEAR

Stefania Riotto from Advantedge

AUSTRALIAN YOUNG GUN OF THE YEAR

Josh Bartlett of Loan Market

AUSTRALIAN BROKER OF THE YEAR

Mark Davis from The Australian Lending & Investment Centre

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Hard work turns BDM into industry’s best

good BDM, who knows a broker’s business to the very core, is worth their weight in gold, says Advantedge’s Stefania Riotto. For Riotto, being a great BDM comes down to “really, really hard work” as well as all the “stuff you hear sales people do”, she says. The Advantedge BDM scooped the coveted BDM of the Year award at this year’s star-studded AMAs, and on the night was understandably lost for words. “It was tough competition. I’ve done something the judges like, in what I do, and how I work, so I’m just really proud and pleased,” she confessed. Post-awards, she is more reflective on her success. “It’s all about the people in the end who need the loans, and the brokers just need us to help make those things happen. Riotto believes building trust, and more importantly, managing expectations, are key. “It’s a tough job trying to manage all the expectations, but

as long as brokers know they can rely on you, it’s fine. “You might not have to be in front of them all the time, but once you’ve built that trust it takes care of itself.” Being everything to everyone is a pitfall of the BDMs she tries to manage. “We try to split ourselves up amongst all the brokers we look after, and try to do the right job for everyone, with a consistent approach.” Getting to the heart of a broker’s business model is also crucial. “Understanding the broker’s business is really key, and knowing what role they play in their customer’s dream.” “One of the first things I try to do is build trust with the brokers. I try to work with them and meet with them individually. Find out what sort of business they run, how they operate. “I do the usual rapportbuilding, the stuff you hear sales people do – but number one, I really like to show them who I am, and find out who they are.”

NUMBER ONE, I REALLY LIKE TO SHOW THEM WHO I AM, AND FIND OUT WHO THEY ARE”

Peter Heinrich, National Finance Institute, with Australian BDM of the Year, Stefania Riotto from Advantedge

CAUGHT ON CAMERA 20

IN FOCUS

he 2012 Australian Mortgage Awards (AMAs) saw 620 guests, in all their dazzling finery, descend on Sydney’s Town Hall earlier this month. MC and music industry veteran Ian ‘Dicko’ Dickson kept the crowd entertained with his droll take on the finance industry, with a few scintillating celebrity anecdotes thrown in. Winners were grinning, the wine kept flowing and musical entertainment was provided by runner-up from The Voice, Darren Percival. “I didn’t come here to win, but to have a weekend away in Sydney and an awesome night out with the bestof-the-best,” confessed Young Gun of the Year, Josh Bartlett. After several glasses of champagne and gourmet treats from chef Sean Connolly, we couldn’t have agreed more.

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PEOPLE 22

Broking by design Melbourne-based Loan Studio is making a concerted effort to appeal to Gen Y with its office re-design, says owner Colin Sheppard Q: WHY DOES YOUR OFFICE APPEAL TO GEN Y?

A: The design is all about creating a real ‘wow’ factor and breaking away from the traditional and somewhat boring financial offices of the past. More and more these days, Gen Y wants to feel an affiliation with a brand or consultant they are dealing with. The unique office design, incorporation of social media as our primary communication method and use of the latest gadgets, coupled with advice from leading finance consultants means we leave a lasting impression.

Q: WHAT ARE SOME OF THE MOST EXCITING FEATURES? A: The design incorporates polished concrete floors, timber walls, high end lighting, opened staircase, funky kids play area, Nespresso machines, fully

functional boardroom and bar, recycled cardboard props and artificial grass weaving its way through the ground floor! Add to that the incorporation of 27-inch MACs, iPads, large plasma TVs and you have an office that would rival any major lender in the country.

Q: IS THIS AN EXAMPLE OF THE ‘MORTGAGE BROKING OFFICE OF THE FUTURE’?

A: That’s a very subjective question. There is a reason why every major lender in this country is looking at ways to appeal to a young demographic, and as far as state-of-the-art goes, I believe we are well equipped. We think that every brand should have a unique identity and, moreover, better understand their target market. Our offices are just a further extension of our brand vision.

THE LOAN STUDIO STORY • Loan Studio is the vision of Colin Sheppard and Sonia Rohlf, both of whom originated from Choice Home Loans (Berwick) • Sheppard says he wanted to create a brokerage that not only provided long-term, relationshipbased lending solutions, but also industry-leading service to clients and referral partners • Loan Studio was formally launched in January 2011, and has grown in both staff numbers and sales volumes, with current average sales of $20m-plus per month • Initially Loan Studio operated out of a commercial office space, with the founders taking the time to locate an ideal retail space to fulfill the vision of their brand • The move and subsequent design of the new office space was an extension of the vision of the brand and views on the changes required in mortgage broking, to appeal to a younger client base, not just to bring expertise and professionalism • The new Loan Studio head office in Berwick has been open for a little under 12 months

NEW DIGS Connective 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

Bankwest

Loan Studio isn’t the only business in the mortgage space proud of its new, ultramodern digs. Both Connective and Bankwest have new sleek office designs to show off.

ONE YEAR ON brokernews.com.au

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 8.21

Beware Refund model, buyers warned

Kolenda launches aggregator Finsure

Connective white label allows ‘mates rates’

The potential suitors of Refund Home Loans, which had entered voluntary administration, were warned that they should be careful of buying into what was labelled as ‘an inherently flawed business model’. One broker said that franchisees who were mounting a bid to buy the company should be “extremely cautious in putting more good money after bad into such a model that’s proven to be unviable”. Commission refunds on such slim margins were panned.

John Kolenda announced his new aggregation venture, following on from the launch of 1300 Home Loans, which had got quite a lot of interest in the industry from brokers wishing to buy lead generation from their local post code. Finsure was said to be the aggregation arm of 1300’s venture, providing the full service and “most comprehensive value and commission proposition in the industry”, he said.

Connective finally launched its white label proposition with the help of servicer National Mortgage Company, more of a mortgage management proposition than a pure badging of product. With the ability for brokers to deliver ‘mates rates’ by dialling commission up and down, Connective claimed the product would allow more control over pricing and would benefit the end consumer, with the ability to even build in a fee-for-service.

What’s happened since?

The decision by Homeloans Ltd to make an acquisition of the business meant that many Refund brokers were offered the opportunity to move across to work as Homeloans brokers. However, though 135 broker agreements were offered, only 54 franchisees made the decision to join. Homeloans labelled the acquisition a ‘win’.

Kolenda has certainly not been shy of media attention in an effort to promote 1300 Home Loans, but has been a bit quieter when it comes to Finsure. However, the business has been demonstrating strong early growth, considering the difficulty aggregators face in convincing brokers to part company with their current provider. Finsure now has close to 100 brokers in total, with more due to join in the near future.

The last two months in particular have seen strong growth for Connective Home Loans, with brokers responding to the product control push rather than a particular pricing offer in competition with the majors. Connective’s Mark Haron says the product has enabled some brokers to manage their relationships with clients a lot closer, and that the product has strong niches in construction lending and also in SMSF lending.

MARKET TALK 24

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Healthy, wealthy and wise Two leading experts on financial wellbeing have painted a very positive picture of Australian households, with less debt, better savings and confidence making a welcome return

fter a considerably touch-and-go market over the past two years, things may be improving within the walls of Australian households. Mortgage insurer Genworth’s bi-annual Homebuyer Confidence Index showed a 2.2% increase in positive sentiment from March 2012, bringing it to 98.4%. More than half of those surveyed believe now is a good time to buy. It was a very positive assessment of Australia’s homebuyer market, defying several negative assessments by analysts, including BIS Shrapnel, over the past few months. “Cost of living pressures remain but today’s interest rates are lowering the cost of mortgages, allowing people to save more and in turn improving sentiment and a perception of being more financially secure in the year ahead,” said Genworth CEO Ellie Comerford. ING Direct’s latest Financial

TODAY’S INTEREST RATES ARE LOWERING THE COST OF MORTGAGES, ALLOWING PEOPLE TO SAVE MORE AND IN TURN IMPROVING SENTIMENT – ELLIE COMERFORD

Wellbeing Index also showed confidence levels at a two-year high, despite “well-publicised rises in living costs”, said CEO Vaughn Richtor. The quarterly report showed an index increase from 105.6 in the June quarter, to 109 in the September quarter. “This is the highest Index reading since Q2 2010, and much of the increase in financial wellbeing can be attributed to ongoing efforts by households to reduce debt and increase personal savings,” said Richtor. “As a guide, almost one in two (47%) households with a mortgage are ahead with their repayments and 63% of credit card holders are paying their balance off in full each month.” Interestingly, a surprising number of graduate property investors are flooding the market, according to Genworth. This group is historically fickle and debt-ridden, with property investment the last thing on their minds – or so was thought. “In Australia, we have a very debt-conscious society. In the UK, especially pre-GFC, lenders and borrowers were a lot more gung-ho. Lenders here don’t have a big appetite for lending at greater risk,” researcher Alan Shields told Australian Broker. Shields said the rise in graduates owning an investment property was one of the most surprising results for Genworth. “[We looked at] recent

ELLIE COMERFORD

graduates, and the proportion of them that don’t own their own home, but have an investment property is 12%. Compare that to the general population, which is around 5%,” he said. CEO Ellie Comerford added Australia had the second-highest rate of younger homeowners, or potential first home buyers, “living with mum and dad.” What a perfectly modern way to be healthy, wealthy and wise.

TALKING HEADS: AMA WINNERS’ SPECIAL

Q WHAT KEY FACTORS CONTRIBUTED TO YOUR SUCCESS AT THE AMAs?

JUSTIN DOOBOV BROKERAGE OF THE YEAR (<5 STAFF) “We know that if every single client is happy, they'll refer more people, and effectively it will turn into more business. In the end, that'll be profitable.”

MARK DAVIS BROKER OF THE YEAR

“Having a focus, and living and breathing what I've been doing for 10 to 15 years. Improving, and trying to improve every day. I'm probably a little bit too driven. But when you love something, it's fantastic.”

RANJIT THAMBYRAJAH BROKER OF THE YEAR, COMMERCIAL

“Understanding the needs of the client, and truly understanding what options there are in the marketplace, and structuring a solution.”

CATHY ANDERSON BROKER OF THE YEAR, FRANCHISE

“Hard work – lots and lots of hard work! A joy for what I do, and a love of what I do. I suppose every day is a different day, but I have the ability to change people's lives with what I do.”

MARKET TALK 25

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WHY YOUR RENTAL RETURN IS BAD Are your clients feeling the bite of mortgage payments on their property investments? It could be that they’re getting much less rental income than they should and there are some likely reasons why

SLOPPY LOOKING PROPERTY

Good presentation is the key to maximising return on investment. A well-presented property attracts interest and creates increased competition among prospective tenants, enhancing the prospects of a higher rental return.

02 03 best rent.

A fresh, clean and cheery property arouses interest and creates the conditions for the

FAILING TO LOOK AT A PROPERTY FROM THE TENANT’S PERSPECTIVE

LACK OF REPAIRS, MAINTENANCE

It is important to make sure appliances, electrical fittings and hot water services are safe and functioning efficiently. Dripping taps, broken doors, loose window locks and cracked glass must be repaired. The outside shouldn’t be overlooked either, since that’s what the prospective tenant sees first. It also makes good sense to maintain properties in tip-top condition throughout a tenancy in order to retain good tenants. This will optimise the likelihood of success with rent reviews and lessen the chances of having to outlay large sums of money to bring the premises up to scratch when it is vacated.

OUTLANDISH CHOICES

If improvements such as new carpets or painting are considered necessary, it’s preferable to use neutral colours that will fit with most people’s taste rather than bold fashion statements that may be off-putting to some would-be tenants.

BOTCHED RENOVATIONS

It isn’t necessary to spend thousands of dollars to make a rental property attractive. An internal laundry is a relatively simple and inexpensive improvement for landlords to make, and it can pay significant dividends in terms of higher rental revenue. It will make the property more appealing to prospective tenants. Before spending a substantial amount of money on renovations, it is advisable to seek professional advice about the likely benefit, both in terms of increased rental and the property’s potential to provide greater capital growth in the future.

ING Direct’s latest Financial Wellbeing Index showed financial confidence has crept back into households across all Australian states. Here’s a snapshot of the state of Australia’s financial psyche

FIRST IMPRESSIONS ARE CRITICAL

When a rental property becomes vacant it pays dividends to look at it through the eyes of a tenant and note anything that requires attention. Nothing turns prospective tenants off a property more quickly than scuffed or dirty paintwork, stained carpets or a door hanging by one hinge.

Confidence makes a welcome return

NOT PAYING ATTENTION TO THE MARKET

Above all, investors need to be realistic about rents and understand exactly where their property fits into the marketplace. Just as vendors often have an inflated idea of the worth of their home, landlords can have unrealistic expectations that can sour the property investment experience for them.

FINANCIAL WELLBEING – STATE BY STATE SNAPSHOT ASPECT OF FINANCIAL WELLBEING

NATIONAL

NSW & ACT

VIC

QLD

CREDIT CARD DEBT Comfort level / 7

5.02

5.03

5.32

5.23

5.45

5.06

Average no. of credit cards per household

1.8

2.0

1.8

1.5

1.8

Median card balance

$1,470

$1,867

$1,311

$1,357

$581

$1,230

62%

63%

62%

66%

Pay off card in full 63% each month

LONG TERM DEBT INCL MORTGAGES Comfort level / 7

5.62

5.63

5.66

5.64

5.51

5.45

Paying extra on mortgage

47%

44%

48%

30%

50%

48%

Median mortgage balance

$203,155

$225,751 $178,185

$207,764 $165,580 $179,513

HOUSEHOLD INCOME Comfort level / 7

4.09

4.08

4.09

4.07

4.17

Average income

$80,579

$86,194

$82,132

$72,534

$66,371

$85,299

Comfort level / 7

3.63

3.64

3.71

3.63

3.38

3.52

Household savings below $1,674

26%

25%

27%

26%

30%

20%

Comfort level / 7

3.55

3.43

3.74

3.59

3.30

3.52

Rental property ownership

15%

16%

11%

15%

Share ownership

25%

27%

23%

16%

27%

4.06

3.94

4.14

4.22

3.98

4.0

Would consider moving interstate to save money

31%

34%

26%

32%

35%

30%

OVERALL COMFORT LEVEL

4.36

4.29

4.44

4.4

4.31

INDEX SCORE

109.0

107.3

111.1

109.9

107.7

107.9

SAVINGS

INVESTMENTS

MANAGING HOUSEHOLD BILLS Comfort level / 7 RELOCATION

Source: ING Direct

SPOTLIGHT

brokernews.com.au

on-banks dealing with N panel pain

t can be hard for a non-bank lender to thrive in a post-NCCP lending market – especially when they are not granted access to much of the broking market. As Iden Group’s Barrie Gaubert says: “If we are not on the panel, we can’t deal. “If you have got an aggregator that has a whole bunch of credit representatives, and you are not on their panel, you can’t deal with those credit reps. We knocked one back just yesterday, for example, for that same reason. So it is an important thing.” The difficulty in gaining panel representation hampers the ability of non-banks to grow. “It puts a cap on our capacity to grow the business,” Gaubert says. “Because you go to any aggregator, and they will have the top five or six or seven banks on there automatically. But would they have the top five or six non-bank lenders automatically? No is the answer.” Connective’s Mark Haron says aggregators have to think carefully about adding new panel lenders, especially to ensure they have the ability to handle the distribution. “An aggregator spends a lot of money building up a network of brokers to utilise, and then for a

small lender to come in and get access to quite a large distribution portal it requires it to have a lot of structure in place,” Haron says. Connective for one does allow off-panel deals. That is, if the broker has ticked all the boxes. “We allow brokers full flexibility to go off-panel and use lenders directly – our agreements with the companies that use our services is nonexclusive,” Haron says. “That being said if they are a credit representative with Connective, they are required to use our panel of lenders, however they can use outside lenders and we do allow for it from time to time but we have some guidelines on how they provide us details of those particular deals.” Gaubert agrees that mortgage managers do need the scale in place to cope with panel appointments. Getting on the panel is not the whole battle after all. “Even if you are on the panel, you still have a lot of homework to do. It doesn’t give you a licence to print money,” Gaubert says. “We are not a manager that has 50 BDMs around the country; as much as I’d love to have that sort of staff and resourcing to back it up, we are not competing in the same territory as the big four banks,” he says.

PUNDITS ON... PANELS

MARK HARON CONNECTIVE

BARRIE GAUBERT IDEN GROUP

“An aggregator spends a lot of money building up a network of brokers to utilise, and then for a small lender to come in and get access to quite a large distribution portal it requires it to have a lot of structure in place.”

“Even if you are on the panel, you still have a lot of homework to do. It doesn’t give you a licence to print money.”

FINANCIAL SERVICES 27

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Offshore threat to job security increases

PLANNERS ‘PIGGYBACK’ BROKERS

According to Mortgage Choice financial planning general manager Tania Milnes, financial planning franchises will “piggyback” off the organisation’s mortgage broking franchises in terms of leads, but the two roles will remain independent. “They’re not wearing two hats,” she told Australian Broker. “So the person that’s providing [the advice] is a specialist in their individual area. “We do believe that we are offering a one-stop shop under the Mortgage Choice brand,” she added. “Where we believe our model is different is that the person providing the advice – whether it’s for a home loan or for financial planning – will be a specialist in their individual area. “This emphasis on specialist over generalist advice means that any of the company’s brokers who wish to cross over into financial planning will need to fulfil the company’s recruitment criteria – including providing evidence of financial planning experience.”

inance workers – including brokers – are facing increased threats to their job security, as the rise in offshore sourcing continues. These are the findings of the Off-shore and Off Work report by the National Institute of Economic and Industry Research. The report notes that finance managers and financial investment advisers sit in 10th place on the list of jobs most at

The stranger species Australian Broker readers’ favourite contrarian, analyst Max Franchitto, turned his ire on insurance brokers earlier this month, claiming they were a “species unto themselves” when it came to how they opted to charge their clients. His comments, to sister publication Insurance Business, come straight after he invoked outrage by suggesting mortgage brokers run the risk of looking like sales reps if they don’t charge a fee for service. “General insurance brokers are a species unto themselves, so commissions are there to stay unless actuaries can improve premium competitiveness by deleting them,” said Franchitto. “Fee for service would only apply to those brokers that are sophisticated enough to be risk advisors not just insurance placement services.”

GENERAL INSURANCE BROKERS ARE A SPECIES UNTO THEMSELVES - M AX FRANCHITTO

DID YOU KNOW?

75%

Accountants who want to move into financial advice, with 67% hoping to do so in-house

24% = 97,000 JOBS TO GO ‘OFFSHORE’ IN FINANCIAL PLANNING OVER THE NEXT 20 TO 30 YEARS Source: National Institute of Economic and Industry Research

IT’S A RACE TO THE BOTTOM THAT NO ONE WILL WIN - L EON CARTER

risk of being offshored over the next 20–30 years. The report estimated that as many as 10,000 jobs in this category are set to go overseas over the next two to three decades. Noting that the finance and insurance sector has high proportions of jobs ‘at risk’, the report predicted that the proportion of jobs ‘at risk’ in this sector is almost twice the rate for service industries as a whole. Finance Sector Union national secretary Leon Carter said employers were in a race to the bottom to cut costs. “It’s a race to the bottom that no one will win,” he said.

SUPER FUNDING IS SUPER-CHARGED Self-managed super funds continue to steam ahead as Australia’s fastest-growing superannuation sector, much to the delight of brokers already immersed in the sector. According to the Financial Services Council’s (FSC) inaugural report on the flow of funds into SMSFs, released yesterday, Australians contributed $24bn into SMSFs during the 2010/11 financial year – up 15% ($2.8bn) on the

previous year’s tally. “The rebound in growth in discretionary contributions into self-managed super funds in 2010-11 was triggered by the improvement in the economic growth and investor confidence following the financial crisis,” said FSC CEO John Brogden. “It is critical that investment appetite for discretionary super is retained across all segments of the superannuation industry.”

THE WORKSHOP

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Create a compelling value proposition to capture your clients

THE GURU

A mortgage broking value proposition is well worth taking time over, as it could win you more attention from your clients, writes Clifton Warren

o attract the attention of high potential prospects for your business you need to create a strong and compelling value proposition. A value proposition is a statement that translates what you do into something that is recognisable by the other person. Your value proposition should always be results-oriented and outcome-focused, stressing the value that you provide. This will serve as a foundation for all of your marketing and sales activities. A value proposition is not an ‘elevator pitch’ speech, which describes what you do at networking events to stimulate conversation but is useless for prospecting. A strong value proposition answers the question in your prospect’s mind: “How can you help me? What difference do you make?”

SOME CONCRETE EXAMPLES Here is an example of a weak value proposition: “We are mortgage brokers with 13 years experience” Here’s a better value proposition: “We provide home loans” This is a great value proposition: “We help you with your home ownership goals”

Adelaide-based Wendy Higgins, who is one of the industry’s top producers, uses the following value proposition in her business: “We use our reputation and experience to work 24/7 on your behalf to achieve your goal of home ownership.” This also works nicely with her selling philosophy.

CRAFTING YOUR PROPOSITION

Here are three techniques for crafting your value proposition: Working backwards: Make a list of the services you offer –

refinancing, debt consolidation, first homebuyers, investment purchases, non-conforming. Examine the benefits your clients received, describe this in outcome-focused language. How is your client better off as a result of doing business with you? Remember the loan you arrange is simply a vehicle to achieve their goal.

STUART WEMYSS Q: What is the law of reciprocity? A: The law of reciprocity states that if I give first without any expectation of receiving something in return, that the person I give to will feel obligated to give something to me in return. So think about a situation where someone has done you a favour, out of the blue, and there is no ulterior motive for them helping you out. Did you feel obligated, did you feel like you wanted to help in return? That is the law of reciprocity.

Obtaining client testimonials: This should be a regular part of your business practice. Ask your clients for a testimonial describing the service you provided, the benefits, promises kept, etc. When you collect enough of these you will start to see some common language. Use this to craft your value proposition.

Q: How can brokers use it in their business? A: We can use the law of reciprocity to bring clients

closer to us. How I use this is that I try to be the first to share information and advice and help. Sometimes that is printing off an RP Data report for a client, sometimes that is referring them off to a good building inspector or a good buyer’s agent. Or helping them with some advice, a book and so forth. I look for opportunities early in the relationship to give first. It is not about putting all your intellectual property on the table and letting them take advantage of you.

Your business partner, friend or spouse: Brainstorm the different markets or types of people you’ve helped, self employed, sole traders, investors, and poor credit history. Obtain ideas from your lenders’ brochures and websites where they describe their products based on your areas of specialty. Liberty Financial, for example, does a good job of describing their product range. You could use some of this language to help craft your value proposition. You can also research the websites of top producers nationally and overseas – not to copy but to seek ideas for your own value proposition. The above techniques will provide you with the ingredients to create your own compelling value propositions, and in some cases it makes sense to create several to cater for the different markets you serve. A strong and compelling value proposition is the foundation for attracting and acquiring new business.

Q: Are brokers using the law effectively to date? A: The really interesting thing I find is that brokers

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

don’t tend to want to do that. Brokers tend to have a whole lot of intellectual property and they want to keep it really close to them. It is only when the client says yes we’ll do business with you and they lodge an application that the broker feels more comfortable letting that advice and information go. I argue that you should let the information and advice go before you win the client, because doing so will help you win the client. If you wait until you have won the client, well the value of sharing is really reduced, because you have already won the client. Stuart Wemyss is a former top business writer and owns finance and wealth business ProSolution Private Clients. He recently called for mortgage brokers to unite in taking more market share from the banks. For more information, visit brokerrevolution.com

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Holding on to your top players For any business owner, the risk of losing good staff is a constant worry. Stephanie Zillman outlines what can be done to avoid losing your top players

ew research has turned the well-worn line ‘employees leave managers, not companies’ on its head. According to the 2012 Retention Review by Insync Surveys, employees primarily leave due to the job itself and not for reasons such as pay and conditions, commissions or relationships with managers or peers. “If a job is inherently unfulfilling or unsatisfying, it’s highly likely that employees will look elsewhere for other opportunities, no matter what incentives are in place,” said Nicholas Barnett, Insync Survey’s CEO. Here is the company’s five-step guide to reduce staff turnover:

ANALYSE AND 1MEASURE, ROADMAP

Some turnover is okay, even necessary. However, when high-performing employees are leaving, you must understand the unique causes of staff turnover in your organisation and industry. Then a clear retention roadmap can be developed to set relevant and achievable retention targets.

ENRICHING AND 2CREATE MEANINGFUL JOBS

Meaningful work is strongly related to mission alignment, enables staff to make a noticeable difference and allows people to be matched with the right job for their skills and interests.

CHANGING 3ACCOMMODATE LIFE CIRCUMSTANCES

This is the second biggest contributor to staff turnover. It involves both matching job requirements with personal interests and circumstances and also being creative in the use of both short and long-term flexible work arrangements.

AN INCLUSIVE AND 4NURTURE POSITIVE WORKPLACE CULTURE Employers must help new employees make a strong connection with the organisation, keep the attention of leaders and line managers on maintaining good relationships with their people and build constructive norms and behaviours across the organisation. This should all be underpinned by a strong employee value proposition for both existing and potential employees.

80% OF STAFF TURNOVER IS IN THE EMPLOYER’S CONTROL Source: Insync Surveys

AND RECOGNISE 5ENABLE PERFORMANCE

Employers must not lose sight of the traditional importance of remuneration, incentives and reward and recognition to show employees that their contribution is recognised and valued. Employers must also regularly review and provide employees with the resources they need to do their jobs efficiently and effectively.

DO NOT LOSE SIGHT OF THE TRADITIONAL IMPORTANCE OF REMUNERATION, INCENTIVES AND REWARD AND RECOGNITION - N ICHOLAS BARNETT, CEO, INSYNC SURVEYS

INSIDER

brokernews.com.au

Lawyers: banks aren’t evil

leading law firm has spoken out against the media’s portrayal of banks as “evil”, claiming borrowers should be held responsible for any wrongdoing. Insider can’t help but think of the Simpsons, when lawyer Lionel Huts imagines a world without lawyers: full of rainbows and people holding hands. Gadens Lawyers partner, Jon Denovan, said in the vast majority of cases where borrowers lost investments or homes, or declared bankruptcy, it was “not the bank’s fault”. “It’s becoming increasingly incorrect to speak loudly and strongly in favour of lender’s

IT’S BECOMING INCREASINGLY INCORRECT TO SPEAK LOUDLY AND STRONGLY IN FAVOUR OF LENDER’S RIGHTS rights. That doesn’t mean that consumers don’t have rights and that they should be properly protected,” he said. “The law and EDR schemes are doing a great job of doing that. It’s just that the lenders aren’t the evil people so often claimed.” He paraphrased the judgement on a recent case brought before the courts.

“Except for NCCP regulated loans, the law does not recognise any duty upon a lender to assess whether a borrower is able to repay a loan. “Nor must the lender ascertain the viability of the loan or verify the details provided in the loan application. A lender is not a branch of a social services agency.” He called for a more “realistic” approach in tribunal hearings and courts where issues of lender responsibility were concerned. “The borrower gets what he or she wants. Borrowers are not victims and an attempt to portray themselves as such is simply at odds with commercial reality.”

A LUCKY CHARM

BROKING HOT! We’ve had a great response to our Broking Hot competition. Before we select a winner next issue, here are the two contestants.

GEORGE ANTONAS, INVEST LOAN

“I’ve never been a fan of diets but rather just sticking to a basic healthy eating plan. If I can eat well five to six days of the week then I normally have one where I indulge. Breakfast is usually oats and eggs, lunch is a salad with tuna or chicken and dinner is lean meat and vegetables. I love chocolate, coffee and ice cream so my eating isn’t all good! With summer coming up, it’s time to lose some of the winter ‘love’.”

REBEKAH GOULD, SMARTLINE

“I have a bad case of FOMO (fear of missing out) so the thought of not being able to eat something when I want to would just make me want it more. So if I really want it, then I have it but I don’t over-do it. Breakfast is untoasted muesli with lots of seeds and nuts with skim milk, and a cup of tea. I drink lots of tea – it’s my reward for completing jobs on my to-do list. Snacks are hummus with slices of raw carrot, cucumber, broccoli and capsicum. Lunch is a big colourful salad with Greek feta and a piece of protein like roo steak or chicken. Dinner is pretty much the same as lunch: I'm a meat-atarian. It’s addictive seeing how you react to the good eating and training – almost like watching an experiment.”

DID YOU KNOW? According to US researchers, you’re 2.5% more likely to die in the days after getting a bonus or big promotion.

We strongly recommend buying a house in sunny Ireland: the government is ‘encouraging’ banks to cut customers’ mortgage debt. The unprecedented move, aimed to reduce foreclosures and help thousands who are struggling, is being closely watched by the US to see if it is a viable preventative to a housing crash. Critics argue unscrupulous borrowers will simply take advantage of the bailout and stop making payments altogether. Before we get too excited, the government is merely making a suggestion: paying off or substantially reducing the debt will not be enforced.