Australian Broker 11.04

MARCH 2014 ISSUE 11.04

$4.95 POST APPROVED PP255003/06906

+INSIDE + NEWS A look at what’s been making headlines P4

+ ANALYSIS TRAIL TROUBLES Who’s holding back trail portability?

P10

+ SPECIAL SECTION COMMERCIAL SPOTLIGHT

A look at opportunities in commercial lending P14

+ BUSINESS

INTELLIGENCE

TRUE GRIT

Managing stress productively P22

Steve Kane:

BROKERS DELIVER ON QUALITY NAB Broker’s head of distribution says brokers are delivering banks a higher class of customer

S

teve Kane is an unabashed supporter of the broker channel. In his former roles as FAST CEO and MFAA president, Kane has experience advocating for the third party. Since taking the reins of NAB’s broker distribution, Kane hasn’t stopped stumping for the mortgage broking industry, and he’s vocal about the quality brokers bring to the table.

FULL STORY PAGE 18

+ SPOTLIGHT RIDING THE WAVE OF CHANGE

Finsure’s John Kolenda on acquiring LoanKit P26

+ CAUGHT ON CAMERA Highlights from the Australian Lending Awards P29

NEWS 2

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NUMBER CRUNCHING

GRABBING SHARE

AUCTIONS HEATING UP

Increase in personal banking customers 2009 to 2013

Auctions in February well outstripped the same period last year

NAB Group

Clearance rate 15 Feb 2014

81%

CBA Group

5.7%

ANZ Group

9.7%

18.2%

Bendigo

7.9%

14.6%

New home lending in the final quarter of 2013 was 14.6% higher than the previous corresponding period

Teachers Mutual 26.7% Macquarie

38.7%

DID YOU KNOW?

Westpac Group 4.8% ING Direct

20.4%

Brisbane

17.9%

ME Bank

18.4%

81%

62.5% Adelaide

68.8%

45.8%

Sydney

74.2% 64.3%

Source: ABS

Heritage

50%

Clearance rate 16 Feb 2013

Melbourne Source: Roy Morgan

Source: APM

WHAT THEY SAID...

GREG TANZER

“Enforcement is all about punishing wrongdoing and through that shaping the behaviour of the people we regulate” P6

TANYA SALE

“With some of the really big broker aggregator groups now they’re all just trying to attack each other’s books” P12

PHIL NAYLOR

“We’ve heard some pretty damning words from the treasurer about how he sees the economy going over the next year, but there’s some pretty good silver lining in those clouds” P8

JOHN KOLENDA

“We’re actively looking in the marketplace for any opportunities that come up for aggregation, and we’re even looking for any businesses that come up in the financial planning space” P26

NEWS 4

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EDITOR Adam Smith Bill Evans

BORROWERS MISSING THE BOAT ON FHS ACCOUNTS ■ CANSTAR chief commentator Steve Mickenbecker

Major bank economist sees further RBA cuts

says almost twice as many first home buyers purchased a property in 2013 as there are First Home Saver accounts in existence.

For struggling first home buyers in a booming market, those benefits could be the difference between getting a foothold in the property market, or not, says Mickenbecker.

“APRA statistics indicate that there are currently around 45,300 First Home Saver accounts in existence, yet in 2013 alone, ABS statistics indicate that more than 82,000 residential home loans were approved for first home buyers,” he said.

“For someone on an average tax rate and contributing $6,000 in savings each year, that equates to lost money of up to $5,100 in government handouts and $900 in tax savings over five years.

“Over 10 years, that amount is amplified. If just half of last year’s first home buyers had started a First Home Saver account when they were introduced – and saved regularly – their collective buying power may have been boosted by an extra $246m.”

■

While the majority of economists seem to be predicting a period of inactivity by the RBA, one major bank economist has forecast further cuts before the year’s end.

Bill Evans, Westpac’s chief economist, made the call at the Australian Property Institute’s annual Economic Indicators lunch in Brisbane – and admitted there may have been few other economists who shared his views.

“I’m probably the last drowning man who thinks that’s possible… but my view is that the dynamics that the Reserve Bank described today, describing why interest rates are on hold and why they’re likely to rise – I think they’re a little too optimistic around a flaccid world economy,” said Evans.

Evans also predicted the unemployment rate would rise to 6.5% and said the weak world economy was likely to affect business confidence and consumers through job insecurity.

While Evans’ prediction may be against the tide of economic opinion, he was the lone major bank economist to predict the RBA’s easing cycle back in 2011.

BY THE NUMBERS CANSTAR says First Home Saver (FHS) accounts show huge disparity in interest rates, an area that offers an opportunity for brokers to help guide borrowers. The company says the highest interest rate for an FHS in its database is 4.15%, while the lowest is 2.25%.

5 4 3

4.15%

2 1 0

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

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

INTEREST RATE

New software to join planner and broker data

Real estate giant launches into lending

■ Talk of financial services convergence has yet to go away, and a new

■ CBRE Group, Inc. has announced that

Martin Priestley, ex-director of Australian investment group Moss Capital, has joined CBRE’s expanding Capital Advisors team to launch debt origination and loan servicing across the Asia-Pacific.

“This is a hugely exciting opportunity to provide commercial property borrowers with real alternatives to bank financing,” said Priestley.

“In North America and Europe borrowers have greater options, including the matching of loan durations to tenancy lease terms or syndicate trust maturities for up to 10 years. CBRE will now be able to offer similar solutions to its clients across the Asia-Pacific region.”

2.25%

PUBLISHER Simon Kerslake

FAST FACT

$26.9bn CBRE’s global operations saw the company originate nearly US$26.9bn in loans during the 2013 calendar year

software venture seems to indicate the relationship between planners and brokers is only set to deepen. Rubik Financial has announced the launch of a new product designed to facilitate brokers and financial planners working closer together.

The company has released a new interface that integrates its wealth planning software, COIN, with Stargate Technologies’ loan management tool, SymmetryCRM, used by over 2,500 Australian mortgage brokers.

The interface will initially allow financial planners using COIN and mortgage brokers using Symmetry to push client information to each others’ respective platforms.

Brett Spencer, Stargate Technologies CEO, said the interface marked a big step in connecting two distinct segments of the financial services sector.

“We have worked effectively with the Rubik team to build a solution that brings together financial planning and mortgage broking through the sharing of critical information that would otherwise remain underutilised in siloes,” said Spencer.

NEWS

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6

ASIC defends enforcement times

WORLD NEWS

■ ASIC commissioner Greg Tanzer has defended the length of time

UNITED STATES OF AMERICA FORECLOSURES SEE UPSWING

Foreclosures are trending downward in the US but saw an uptick in January. According to RealtyTrac’s US Foreclosure Market Report, foreclosure filings were reported on 124,419 US properties in January. That’s up 8% from December but still 18% less than January 2013. One in every 1,058 US households had a foreclosure filing last month, according to RealtyTrac.

Although January marked the 40th consecutive month of year-over-year declines in foreclosure filings, the 18% annual decrease was the smallest yearly decrease since September of 2012. The 8% month-over-month increase, meanwhile, was the largest since May 2012.

AMERICANS FEELING BETTER ABOUT CREDIT

According to Fannie’s January National Housing Survey, consumer sentiment about the ease of obtaining a mortgage rose two percentage points in January, climbing to an all-time survey high of 52%. Meanwhile, the percentage of consumers who think it would be difficult to get a mortgage dropped three points to 45%.

Consumer sentiment about the economy as a whole also improved. The percentage of consumers who think the economy is on the right track spiked eight points to 39%, while those who believe it’s on the wrong track dropped to 54%. The share who believe their personal financial situation will improve in the next year also rose – to 44%.

CANADA CONSTRUCTION BOOM EASING OFF

Canada has been in the midst of a housing construction boom over the past two years, but it looks like the pace is set to slacken.

According to the Canada Mortgage and Housing Corporation (CMHC), housing starts are expected to stabilise in 2014, and drop off in 2015. The CMHC also forecast modest and gradual increases in mortgage rates, which it said would eat into demand, along with a slowdown in the growth in the pool of first home buyers.

DID YOU KNOW?

$4.27bn The half-year profit reported by Commonwealth Bank

it takes to carry out enforcement action, while emphasising that jail sentences are not always the preferred option.

“Enforcement is all about punishing wrongdoing and, through that, shaping the behaviour of the people we regulate,” said Tanzer.

“We strongly stress that enforcement is often a contentious process that takes time, and resolution is not always simple and swift. It requires evidence that, once tested, has to stand up in a court of law.”

Tanzer reiterated the regulator’s promise to crack down on brokers submitting fraudulent applications, as well as its focus on misleading advertising.

“Putting someone behind bars is the ultimate deterrent, but if we can change the market’s behaviour through other means, we certainly Greg Tanzer will,” he said.

SWELLING DEPOSITS DRIVE MAJOR PROFITS ■

Tight lending criteria and soaring house prices have left first home buyers with no choice but to save up hefty deposits – and Commonwealth Bank is reaping the benefits.

The hard push to save for down payments has been a major driver behind the $40bn in new deposits picked up by the bank in the last year, CBA fund manager John Abernethy told The Australian. “The first home buyer is struggling to get a loan so they’ve got to get their deposit up,’’ he said.

Retirement and SMSF savings also accounted for a significant proportion of the increase in deposits, he said. “There’s an expectation of about $100bn of increase in self-managed super funds over the last 12 to 18 months.”

COSL to handle privacy complaints ■ With sweeping Privacy Act changes now in effect, Credit Ombudsman Service Ltd (COSL) has announced that it has been appointed to handle privacy and credit reporting complaints.

Raj Venga, credit ombudsman, says the Privacy Act 1988, as amended, requires all credit providers to be members of a recognised external dispute resolution (EDR) scheme, such as COSL, if they wish to disclose credit information to a credit reporting body, or access such information.

“Credit providers who are already members of COSL will therefore not need to join another EDR scheme in order to meet the new legislative requirements,” said Venga.

“If a person is dissatisfied with the decision of a credit reporting body or a credit provider about their complaint, or about the outcome of an access or correction request, they can complain to COSL about this as long as the credit reporting body or credit provider is a member of COSL. These complaints are often part of a broader complaint about financial services and so can be effectively dealt with by a scheme whose purpose is to resolve complaints between financial services providers and consumers.”

NEWS

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8

Southeast Queensland set to surge?

■ While the area may have underperformed in

recent years, one broker has predicted that the Southeast Queensland market is due for a resurgence.

Nathan Swain, CEO of Australian Property Finance, told Australian Broker the company was seeing encouraging activity through its aggregator Vow Financial’s affiliation with real estate company RE/MAX. “It’s no secret that Southeast Queensland has been a bit behind in recent times compared to other markets, but we’re certainly seeing a lot of good signs in terms of our activity and the numbers coming through open homes. That has a flow-on effect for our guys as well. The more people they see, the more people we see,” he said.

Swain said APF had recently launched a recruitment drive to onboard new brokers, and the response had been “fantastic”. He put the surge of interest down to a growing property market.

“The feedback we’re getting is that the Southeast Queensland market is ripe for the picking, and partnering with a young business like ours that has the RE/MAX network would be beneficial,” he said.

FAST FACT

39%

In November, Macquarie reported a 39% rise in interim net profit to $501m.

Analysts expect the bank’s full-year result for the year ended 31 March, to be its highest since 2008

MACQUARIE LOOKING TO DEEPEN BROKER TIES ■

Off the back of strong growth in Macquarie’s mortgage portfolio, the bank has announced plans to bolster its relationships with brokers and intermediaries.

COO Nicholas Moore said at a recent operational briefing that the bank’s mortgage portfolio growth was up 8% on the September 2013 quarter.

Macquarie now holds 1% of the Australian mortgage market, with a portfolio worth $15.8bn.

Moore said the bank would look to “build on successful intermediary partnerships to continue growing third-party distribution in personal banking and wealth management”.

“Since our result announcement for the first half of the 2014 financial year, market conditions continued to show signs of improvement; however, client activity remains subdued for some capital markets facing businesses,” said Moore.

Silver lining for brokers in economic storm clouds ■ MFAA CEO Phil Naylor has predicted a good year for brokers

despite a grim economic outlook. Referring to treasurer Joe Hockey’s Economic and Fiscal Outlook in late 2013, which revealed a $17bn budget blow-out and the need for fiscal reform, Naylor said brokers could still see sunny days ahead.

“We’ve heard some pretty damning words from the treasurer about how he sees the economy going over the next year, and there are some pretty grey clouds,” said Naylor, “but there’s some pretty good silver lining in those clouds.”

While Naylor acknowledged rising unemployment as an issue, continued low interest rates and the possibility of these falling even further was good news for the industry, he said.

“That environment, although from a general economy point of view is not crash-hot, it is a good environment for the value proposition of a credit adviser to be operating.”

Firstfolio loses interim CEO ■ Firstfolio has announced that the company’s interim CEO has

agreed to stand down from his position following recent issues with the firm’s recapitalisation proposal.

Mark Flack was appointed to the position of CEO in July last year until completion of the company’s $50.2m recapitalisation proposal, following which he was to be appointed managing director of Firstfolio.

He was appointed as nominee of IZN Investments Ace Management, the company that has agreed to invest a minimum of $39.5m of equity capital in Firstfolio.

The mortgage company announced last month that IZN had missed the January 20 deadline and was unable to confirm when the funds would be transferred.

The board has appointed Greg Pynt, an executive director of the company, to oversee the activities of Firstfolio until the recapitalisation proposal proceeds or a permanent new CEO is appointed.

Mark Flack

ANALYSIS 10

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Trail travails

Trail portability is a major barrier for brokers looking to switch aggregators, but is the barrier artificial?

Two aggregator heads debate the feasibility of portable trail books. Will trail portability alienate lenders, or liberate brokers?

ANALYSIS 11

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mortgage brokers advisers, they call them introducers. The subtlety is as an introducer, once you have introduced the client the banks say ‘They’re our client, not yours’, and that’s an absolute and total myth. In my experience in the

FOR ANY AGGREGATOR OUT THERE: GO AND BE INNOVATIVE AND THINK OF OTHER WAYS OF GETTING NEW PEOPLE INTO THE MARKET INSTEAD OF PILLAGING EACH OTHER’S DATABASES - T ANYA SALE industry, which goes back to 1997, the reason why people come to a broker is because they don’t get any service from the banks, particularly after the fact.”

McMenamin is currently with aggregator Connective, and said he moved to the aggregator because it is the only one which offers the option of trail portability.

“That’s the reason why I moved to Connective, and I still have three or four books with other aggregators that I can’t move, and that’s an issue because in a number of cases I’m being charged much higher fees than what Connective charge me and I’m not getting any services whatsoever – they’re just taking money and all they do is put what’s leftover into my bank account.”

Though McMenamin supports Connective’s policy, he points out that trail portability with the aggregator is still subject to lender consent.

“Connective has said that, but I’ve said that

TANYA SALE, CEO, OUTSOURCE FINANCIAL

B

y and large, brokers seem pretty satisfied with their aggregators. In MPA’s most recent Brokers on Aggregators survey, the majority of brokers rated the likelihood of switching aggregators in the next 12 months as “extremely unlikely”. But for brokers who do find themselves wanting to switch, the barriers in place may find them feeling stuck. Nearly a quarter of brokers surveyed by MPA said contractual obligations were the number one barrier to switching. An issue which seems to be raised time and again by brokers is the lack of trail portability from one aggregator to another.

Outsource Financial CEO Tanya Sale said brokers questioning the lack of portability are failing to see the bigger picture.

“I know the lenders get hammered all the time, but at the end of the day we want those divisions to be profitable for the lenders,” said Sale. “Some of these people are just mouthing off, going off like a firecracker without thinking of the complications and implications of such a thing.

“Now, we don’t want to get to a situation where the lenders start reviewing the profitability of the division. It’s happened before – Westpac came out years ago and they were the first to change their commissions to 0.5 and 0.15, then the CBAs and the NABs brought in no trail for the first year – all that was done to ensure that the third party division or channel of that bank is kept efficient and profitable.”

But Patrick McMenamin, director of Common Cents Financial Services, disagrees. He argued that the very same lenders who refuse to allow trail portability for mortgage brokers are happy to do so for financial planners, and he said it comes down to nothing more than semantics.

“I believe the subtlety is that lenders don’t call

FAST FACT

4.71

In MPA’s Brokers on Aggregators survey, brokers rated their aggregators a 4.71 out of five for paying commissions accurately and on time

MURRAY LEES, DIRECTOR, CONNECTIVE

ANALYSIS 12

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particularly the majors won’t have a bar of it; they just say it’s all too much paperwork, we’re not going to do that – and the funny thing about it is these same lenders are the ones that will do it for the financial planners!”

Sale, however, said the financial planning sector would be better off following the mortgage broking model.

“It’s an absolute disaster! It’s just too much of a drama to change all the trail over because under the wealth side every single one of those clients has to be contacted and provided a letter and the list goes on.

It’s really not an efficient way to do things and there’s no reason why the trail book cannot stay with the aggregator that the loan was written under.

“The amount of times direct writers changed aggregators – I think on average it’s a minimum of two, some of them are three and four – can you

IF YOU’RE AT RISK OF LOSING THAT TRAIL BOOK MAYBE IT’LL CHANGE THE WAY YOU BEHAVE AS AN AGGREGATOR TOWARDS THOSE CUSTOMERS - M URRAY LEES imagine? The banks would say ‘Go get stuffed!’ For the lenders it would be an administrative nightmare!”

Sale also adds that clawbacks further complicate the issue, and said provided aggregators are not charging additional fees or double-dipping, and are still paying trail as per the original agreement, trail should remain with the original aggregator.

She also refutes the idea that the inability to transfer trail limits brokers’ ability to negotiate with aggregators and therefore restricts competition.

“It should be on a level playing field. Why should someone with a big trail book be able to do it while someone with a small trail book couldn’t?... We should keep ticking along with what we have now – as long as the aggregators don’t get greedy and start piling on all these other unnecessary and stupid fees – that’s just plain greedy.

“With some of the really big broker aggregator groups now they’re all just trying to attack each other’s book, so to talk about competition I’ve got one great big slice of advice for any aggregator out there: go and be innovative and think of other ways of getting new people into the market instead of pillaging each other’s databases!”

PORTABILITY A POSSIBILITY

DID YOU KNOW?

Not all aggregators agree. Connective principal Murray Lees has argued that trail portability is entirely feasible.

“To say it’s not possible is simply not true, even to the point where we have transferred trail to some of those aggregators who say it’s impossible,” said Lees.

By volume, around 70% of lenders will agree to have trail transferred, said Lees.

“What you’re seeing here in some ways is differing views of lenders’ legal departments, essentially. Some see no barriers to this happening and so will do it and others see a barrier and so it doesn’t happen. But the key here is that none of these things are insurmountable.

“Just look at the financial planning industry which, with respect to trailing, is completely analogous.”

It is in fact in lenders’ interests to allow trail portability, as it reduces the likelihood of churn, said Lees.

“If a broker changes aggregator and is unable to transfer their trail there is an inherent incentive for that broker to re-write the loans on their old

MAIN BARRIERS TO SWITCHING AGGREGATORS

1.75

Brokers rated the likelihood of leaving their aggregator a 1.75 out of five, or ‘extremely unlikely’

MAIN REASON FOR LEAVING CURRENT AGGREGATOR Poor training and education No reason given Poor white label offering

Upfront commission issues

% 3.4

Loss of back-office services

6.2%

20%

Poor quality of lending panel

2.9 % 2 .8 %

Clawbacks/trail issues

Loss of marketing services

Contractual obligations Poor marketing support

7.2%

Poor accuracy and timeliness of commission payments

12.2%

4.1% 9.2%

3.3%

24.4%

8.4%

Poor BDM support

17.9%

Licensing issues

30.3%

8.1%% 20.1%

4%

Poor lead generation

Poor additional income stream offerings

14.9%

Poor communication with brokers

Data migration/IT issues Poor IT and CRM support

Poor compliance support

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13

TECHONOLOGY UPDATE

ApplyOnline delivers Teachers Mutual Bank broker promise book to in effect bring them across to their new aggregator.”

Portability removes this incentive, said Lees, and the benefits of a longer loan life and reduced churn will far outweigh the cost involved in transferring trail.

But in order for the issue of trail portability to progress, aggregators need to stop making excuses and address the issue head-on, said Lees.

“It has to start with there being a change in attitude from aggregators to say ‘Yes it’s OK’. Now we’re not even at that point and aggregators are not saying whether it should or shouldn’t happen, they’re just saying it can’t.

“If they start off and say ‘Yes it should be’, then everything else should follow because aggregators as a group are quite powerful, but it seems that no one actually wants to answer that question.”

The reason why trail portability has not become commonplace in the industry is clear, said Lees.

“Loss of revenue, plain and simple.

“The responses you get are what you’d expect from people who want to maintain the status quo.”

If all aggregators agreed to allow trail portability, the onus would be on the aggregators to ensure they provide quality service, said Lees.

“This whole lack of trail portability is really an argument about retention. Every aggregator should ask themselves ‘Why do my brokers want to leave in the first place? ’ “If your brokers don’t want to leave then this whole problem goes away… If you’re at risk of losing that trail book maybe it’ll change the way you behave as an aggregator towards those customers.

“Everyone’s saying it can’t – which is ridiculous; it’s patently incorrect, and it’s dodging the real issue. Our firm position is it absolutely should be allowed, and then retention becomes an issue about quality of service and value of relationships.”

ARE YOU HAPPY WITH YOUR AGGREGATOR’S FEES/COMMISSION SPLIT?

YES 76% NO 24%

Newcomer to the broker market, Teachers Mutual Bank, one of Australia’s largest mutual banks, has a clear objective: satisfy the needs and requests of brokers.

When Teachers Mutual Bank entered the third party space in November 2013 it stated that listening to brokers and accommodating their requirements was a top priority.

High on the agenda was electronic lodgement and this was put in place ready for Teachers Mutual Bank’s entry to the broker channel, rolling out to the market on day one with the leading electronic lodgement tool, NextGen.Net’s ApplyOnline.

“We engaged in comprehensive research into electronic lodgement systems, protocols and providers before choosing NextGen.Net,” Mark Middleton, National Manager, Third Party Distribution at Teachers Mutual Bank maintains.

“NextGen.Net was the front-runner in all the criteria we were looking for.

“Ease of use was paramount. But the big thing was NextGen.Net’s professionalism and communication.

Their team clearly explained the system’s capabilities, which let us arrive at solutions. They also asked questions, which facilitated us articulating our long-term strategic plans and achieving the right solutions moving forward,” Middleton said.

NextGen.Net Sales Director, Tony Carn, congratulates Teachers Mutual Bank on making a “significant strategic decision to make broker distribution a key channel”.

“We were pleased to be able to provide an easy, quick, deliverable program to enable Teachers Mutual Bank to kick-start their relationship with broker groups,” Carn said.

The advantages of ApplyOnline and its capabilities are already proving highly beneficial.

Middleton talks of ApplyOnline allowing assessment metrics used by Teachers Mutual Bank to identify any potential hitches with data entry.

“One major benefit is that it will be very clear to brokers what our deal requirements are, which means they can weed out ones that won’t fly,” he said.

“Brokers will potentially have a higher conversion rate than our mobile lenders. So that’s a saving to us right there.”

MARK MIDDLETON

TONY CARN Straight-Through Processing will mean a far greater portion of loans ready for assessment at the time of lodgement, which will radically reduce rework rates.

The implementation of ApplyOnline is prompting the mutual bank to take a critical look at the way it is currently doing loan processing.

“We’re using this as an opportunity to observe the benefits of electronic lodgement and assess how we can originate loans for our mobile lenders workforce and our business development teams,” Middleton said.

“By using this as a tool for our third party, we get the teaching; so we’re benefiting two-fold. While it’s serving our brokers, it’s permitting us to look at over-arching it for our first party.”

“A big issue has always been missing information requests (MIR),” Middleton admits.

“ApplyOnline displays green ticks when information has been completed.

Our credit assessors love this part because when they see submissions coming through with lots of green ticks, they’ll know they’ve got all the required information. Our existing system doesn’t have that capability.”

NextGen.Net has also been able to deliver an all-of-market solution for Teachers Mutual Bank through a recently established service that allows receipt of applications from brokers that don’t use ApplyOnline.

“It allows this small number of brokers to lodge deals directly with Teachers Mutual Bank. It’s one more very effective solution that NextGen. Net provides,” said Carn.

SPECIAL REPORT 14

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Commercial C matters Commercial lending is an area brokers often leave to specialists, but ING Direct’s Mark Woolnough and ThinkTank Finance’s Jonathan Street say brokers should give the sector another look

ommercial lending is often put in the toohard basket by brokers.

A few brokers in the market specialise in commercial deals, and many residentially-focused brokers are content to let the specialists play in the space. But commercial lenders say brokers are missing a major opportunity by overlooking commercial.

They argue that commercial deals can help brokers better utilise their database, and create stickier customers.

ING Direct third party distribution head Mark Woolnough said that offering commercial lending solutions leaves brokers well-placed to not only better serve their existing client base, but to have a leg up on the competition when it comes to acquiring new clients.

“Brokers work very hard to acquire customers. Acquisition is as important as retention. A

broker that offers – or at least has a network that they can confidently refer or talk to customers around – commercial lending really builds their brand and promotes their brand in the community,” he said.

ThinkTank Finance CEO Jonathan Street agrees, and said brokers should take advantage of their existing client base to seek out existing commercial lending demand.

“The opportunities for brokers really are many and varied. For those brokers who mainly focus on resi, within their existing client base or networks they are bound to have small business owners and professionals with an interest in commercial property as an investment. It can be simply a case of asking the question in their next call, meeting or email contact with their clients if they can offer assistance with any commercial property enquiry or needs.”

SPECIAL REPORT 15

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All it takes, Woolnough said, is for brokers to broach the subject with their clients.

“I don’t think you need a major change in skillset so much as it comes down to a change in mindset. Brokers need to be confident and courageous to put themselves into the space. Take yourself out of your comfort zone and I think you’ll be surprised by the opportunity that exists not only in the existing customer space, but in attracting new customers to your business model,” Woolnough said.

Another major boon of operating in the commercial sector is client retention, Woolnough said.

“We believe the broker should be the single point of contact.

It goes to retention. If the customer has split banking arrangements, the broker is always at risk of losing the core product and service, which is the mortgage. Brokers need to add to their platforms or pillars rather than risk losing their customer,” he said.

GROWING DEMAND

Demand in the commercial market is heating up as well, according to Street. Street conceded that the sector had been battered by the GFC, and had seriously lagged behind the residential market in recent years.

“The commercial property market can still be generally characterised as fragmented and patchy however, as the nonmining parts of the economy recover slowly from the GFC and deal with ongoing structural change. You don’t have to look far in most areas to identify vacant shops, offices and factories but it seems as though for the most part, we are beginning to lift off the bottom of the cycle,” he said.

But Street said the uplift in the residential market is having a flow-on effect for commercial lending, putting brokers in a good position to take advantage of the recovering sector.

I DON’T THINK YOU NEED A MAJOR CHANGE IN SKILLSET SO MUCH AS IT COMES DOWN TO A CHANGE IN MINDSET. BROKERS NEED TO BE CONFIDENT AND COURAGEOUS TO PUT THEMSELVES INTO THE SPACE - M ARK WOOLNOUGH, ING DIRECT

FAST FACT

$39.3bn The total value of commercial finance for December 2013 (seasonally adjusted) Source: ABS

“Conditions have been progressively improving over the last year and the outlook is certainly positive. With residential property pretty hot, it tends to roll through into SME commercial property to some extent as owner occupiers and investors get more comfortable with their net property exposure.

It is similar to the wealth effect as people are more inclined to spend on, invest in or expand their business when they feel their financial position is sound or improving,” he said.

Woolnough said all one needs to do to verify the growing interest in the commercial market is look to lenders.

“We’re experiencing a growing appetite among lenders for investment in that space. That’s a good indication. If lenders are looking to grow their share, or at least grow their visibility in the space, it’s seen as an indication of a trend.”

Another factor feeding a potential upswing in commercial demand is the low interest rate environment. Street said many small business owners now find it more feasible to own their premises.

“With the outlook for interest rates remaining soft across this year, conditions are favourable for well-located commercial properties as they are capable of producing investment returns in excess of 7%. For SMEs looking to buy instead of continuing to rent, the affordability has rarely been better as they can end up owning the property after 12 or

BY THE NUMBERS

$243.1bn The total value of outstanding small business loans at the end of FY13 Source: Australian Bankers’ Association

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IT CAN BE SIMPLY A CASE OF ASKING THE QUESTION IN THEIR NEXT CALL, MEETING OR EMAIL CONTACT WITH THEIR CLIENTS IF THEY CAN OFFER ASSISTANCE WITH ANY COMMERCIAL PROPERTY ENQUIRY OR NEEDS - J ONATHAN STREET, THINKTANK

THREE KEY AREAS TO LOOK FOR IN A COMMERCIAL DEAL

The details and characteristics of the security property – what is it, where is it, condition, occupancy, rental income.

The parties (borrowers and guarantors) to the loan – who they are, how they relate to one another, what their backgrounds are, what industry they are in, what their financial position is.

Serviceability – understand where the income is to come from to service the loan in addition to the other finance commitments of those who will be associated with the loan.

so years for much the same outlay as renting. At Thinktank, we have seen continuing levels of demand for finance on the back of a solid 2013 and we expect this year to build on that,” Street said.

And the massive surge in SMSF popularity also has a flow-on effect for commercial demand, Street argued.

“The other major area of opportunity at the moment is in the shift of SME owners to using Self-Managed Super Funds to acquire commercial property.

Because of the significant tax advantages of owning the business property in a super fund, there has been a quantum shift in the industry over the past few years and we only see this as the beginning of a substantial trend in the nature of commercial property ownership going forward. In this area, brokers with affiliations with accountants and financial planners will be able to source and foster lending opportunities,” he said.

HOW TO GET STARTED

For brokers looking to enter the commercial lending sector, the task can seem daunting. But Woolnough argued that some commercial deals differ very little from the residential deals to which brokers are already accustomed.

“ING Direct intentionally focuses on less complex commercial lending up to $3m.

Any broker accredited to write a residential loan with us also has accreditation to write

DID YOU KNOW?

4.7% Commercial lending saw a 4.7% seasonally adjusted rise from November 2013 to December 2013 Source: ABS

BY THE NUMBERS

2.1% The December 2013 seasonally adjusted rise in lending for the purchase of dwellings for rent or resale Source: ABS

commercial loans. It’s the same accreditation, the same loan applications and the same servicing calculator.”

Street agreed, and said that small commercial deals were well within the grasp of brokers who only had residential experience.

“Any experienced home loan broker is sufficiently skilled already to pick up a commercial property up to about $2m and run with it. With the right lender providing the support, it can be a lot easier than a lot of people imagine,” he said.

And for deals where brokers do require additional knowledge, Street said lenders and associations can provide training.

“Brokers can get started with their existing knowledge of residential finance and extend their skills with experience working with lenders and/or support from the commercial specialist offered by their aggregator. Our relationship managers provide direct support and training while the MFAA is also great in periodically running commercial courses and workshops. We also recommend the SMSF course and regular webinars offered by MFAA as a very good way of broadening skills and getting positioned to take advantage of new opportunities,” Street said.

For complex deals, Street conceded that more specialised knowledge is required. Such deals may be better left to brokers who have chosen to specialise in commercial finance, though residential brokers could still benefit from building referral relationships. But rather than focusing on the deals they deem too hard, Street said brokers looking to get into commercial finance should ultimately look for the opportunities they can take advantage of.

“It is really a case of recognising and categorising opportunities.”

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Steve Kane: T BROKERS DELIVER ON QUALITY NAB Broker’s head of distribution says brokers are delivering banks a higher class of customer

here seems to be a perception among some lenders and industry pundits that brokers deliver a lower calibre of client; that knowledgeable, sophisticated clients would source their home loans directly from a retail network while uninformed housing finance virgins or those locked out of traditional credit would seek out brokers. But Kane said NAB’s internal surveying has found that this is far from the case.

According to Kane, a survey of broker and retail customers

undertaken by the bank found that brokers are dealing with an interesting – and perhaps unexpected – demographic.

“The educational standards of customers are interesting. With broker introduced customers, 57% were degree educated. In the first part channel it’s 48%.

So brokers are getting a different type of more sophisticated customer,” Kane told the RFi Australian Mortgage Conference in Sydney.

Kane said this also extended to the professional lives of broker customers.

“Full-time employment was 74% through the broker channel versus 65% through the retail channel. Personal income was higher in the broker channel, and family income was higher through the broker channel,” he said.

Brokers also seem to be dealing with a younger, more tech savvy demographic of clients, Kane suggested.

“We found 56% of customers coming through the broker channel are under 40 years of age, whereas is we look at the retail channel it’s 48%. If you look at the male/female split it’s exactly the same, so there’s no gender bias. Another interesting statistic is 30% of the customers coming in through the broker channel are migrants, and in the retail channel that’s 24%.”

And far from being a riskier venture, broker customers are actually of higher quality than retail customers, he said.

“The reality is the average loan size is higher, the tenure of loan is longer. If you look at the quality of the customer from a delinquency perspective, in the main broker introduced customers are better than or at least equal to the retail or direct channel.”

All this adds up to an attractive customer demographic for lenders, Kane said. And in the era of financial convergence and share-of-wallet, brokerintroduced customers present a profound opportunity.

“Interestingly enough, because we’re all focused on providing multiple products to the customer, the cross-sell opportunity for broker customers

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is significant, because generally speaking brokers are getting new-to-bank customers,” he said.

AHEAD OF THE GAME

The third-party channel is set to continue to thrive, Kane predicted.

“Our belief is that it will continue to grow and that the loser, if you like – the channel that will diminish the most – is the retail store network, and that digital will continue to come into play. Digital in and of itself will become a major competitor in the market.”

Whereas the retail branch channel may find digital serving as a strong competitor, Kane said brokers have the opportunity to harness it as a tool.

“I think for the broker channel, what it needs to do is harness the value that digital will bring to it. That’s the value of efficiency, the value in terms of customer acquisition, customer management, lead generation and all those types of things.”

But this is an area where Kane is confident brokers will excel.

Kane said brokers have long been ahead of the curve when it comes to adding value to consumers. Upon moving into his role at FAST, Kane said he had been surprised to see how advanced the third-party channel was in the way it interacted with customers.

“What really surprised me is the development that brokers and aggregators had around technology around customer management, and how they serviced customers. And how they had managed to do that to a far greater degree than we in the banking industry had done. We were still very transactionally focused in the retail space, whereas broker had moved on to a customer relationship model,” he said.

TREATING BROKERS RIGHT

With the revelation that brokers are introducing lenders to the class of customer most attractive to them, Kane said it’s important lenders work to keep the relationship with the channel sound. All lenders try to focus on service to customers, but Kane said they would also be well-

EVERYONE WANTS TO BE FOCUSED ON DELIVERING SUPERIOR SERVICE TO THE CUSTOMER SO THE CUSTOMER COMES BACK. IT’S VERY IMPORTANT THAT WE’RE ALSO DELIVERING THAT SERVICE TO THE MORTGAGE BROKING CHANNEL

FAST FACT

57% 57% of brokerintroduced customers are degree educated, versus 48% for the retail channel Source: NAB

served by treating their relationship with the third-party channel with the same degree of importance.

“Everyone wants to be focused on delivering superior service to the customer so the customer comes back. It’s very important that we’re also delivering that service to the mortgage broking channel. If we’re going to be sourcing new customers and new business from the mortgage broking channel we need to be very cognisant of the service we provide,” he said. “It’s a critical channel. The reality is new-tobank mortgage customers for all banks, more of them come through this channel. It’s very important that we recognise that this is the channel that is currently around 50% of all the mortgage business we’re doing, and in our view that will grow to 55%. If we’re not in the game in this channel, we’re missing out on half of the mortgage customers in Australia.”

For Kane, a good relationship with the broker channel hinges on helping them deliver for their end customer.

“I often get asked, what do I think a broker requires in terms of their relationship with a lender? It’s really very basic.

They require a consistent and professional level of service.

They’re making commitments to their end customer. If their commitment to their end customer is, ‘I will give you an unconditional answer in five days’, and a lending institution is committing to giving them that answer in five days, that’s exactly what we have to be driving to do. It’s commitment to a consistent level of service. It’s the pillar that underpins their relationship with the customer, it

underpins their personal brand and their business brand and it underpins their repeat referral business,” Kane said.

Recognising this, Kane said, is recognising the importance brokers place on their business and brand reputation.

“Like all things in business, you’re only as good as the last thing you did for the customer.

So reputation, personal brand and business brand is very important. As [brokers] build that personal brand and as they build their business brand, if you talk to any successful brokers they may have started off getting referrals from accountants and solicitors and real estate agents, but now they get the bulk of their referrals from their existing customer bases. They’ve built their personal brand among their existing customer base. They’ve built trust and loyalty, and built a strong referral business,” he said.

That means lenders have to be incredibly proactive in their approach to the channel, Kane said. In addition to delivering consistent service, Kane said lenders needed to add value to brokers’ businesses.

“We need to supply a service beyond product, beyond price and beyond commission around risk management. We need to talk to and encourage development of very high professional standards in the industry. It’s imperative upon us as bankers to provide service, training and skills and the opportunity to grow their business and grow it in a way that is going to conform to the regulatory environment,” Kane said.

Regardless of how lenders choose to lift their game in the third-party space, Kane argued that the one thing they cannot afford to do is ignore it. Kane contended that broker market share would continue to thrive, and that banks overlooked the channel at their own peril.

“From our perspective, our house view is that this business is continuing to grow and their market share will continue to grow. If we’re not supporting it and we’re not understanding it, we’re going to be missing out on a large part of the marketplace.”

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Feel the fear and GO FOR IT Mortgage industry stalwart Kathy Cummings on her new adventures and her continuing passion for the mortgage broking industry

“F

eel the fear and go for it!”

That’s what was going through my head when I rang in 2014 – unofficially known as Kathy’s Gap Year – as a free agent. A woman in flats and shorts, stilettos stowed, and hair all salty from the surf.

Don’t be too fooled. I still have a copy of the AFR on my iPad. And because I don’t want to miss you all too much, I’m staying in touch. If I’m not across the lunch table from you, you can find me right here. Every month, I’ll be popping in to say “Hi” and give you a rundown of what I’ve been up to, who I’ve caught up with in the broking world, and what’s on their minds.

In my 30 years in finance, I’ve kicked plenty of business and career goals. This is my time to kick some personal ones – the ones that kept slipping through to my “wish list” each year.

I don’t know what’s on your wish list, but mine includes some biggies. As sales guru Jack Daly says, “make sure you share your goals and have someone keep you honest”. Well, I’ll be sharing mine here and I trust you’ll help keep me focused!

My Gap Year began with a splash at my place, where I held a pool party mid-January for my former leadership team, friends and family. It was a chance to say thank you to them and, importantly, to their better halves, for sharing them over so many years. They are all outstanding people who I am already missing.

I’ve just returned from three weeks on the beautiful NSW North Coast with my daughter, Larissa, and my two gorgeous grandsons, Nicholas, 3, and Oscar, 10 months, which was to be the start of my rejuvenation – code for get fit and drop 10kg!

I seriously underestimated the toddler factor, specifically the urgent need for a daiquiri come 5PM each day, so that goal is very much a work in progress.

While up north, I caught up with James Hasselle from Mortgage Choice in Burleigh Heads and Miami, and Anthony Muir from Mortgage Choice Bundall. Exciting news for Anthony, who has just moved to his new office in Bundall. The big productivity focus for both his office and James’ is ensuring clients come fully prepared for the interview. That’s it, eliminate waste and watch that bottom line lift! By eliminating rework, the most common cause of waste, you: • create additional time for you and your team to reinvest in further income producing activities such as database marketing • create a better customer experience for your client and possibly your referral source A simple practice to embed in your process is to have your admin assistant call each client 24 hours before their interview to ensure they

have all the documents you need to submit their application, guaranteeing a straight through approval.

Is this part of your current process?

Both James’ and Anthony’s franchises are firing as the Gold Coast property market leaps forward with low interest rates and increased investor activity.

Katrina and John Rowlands, who were in the area for a short break at their lovely Alstonville property, came over for champagne on my balcony before dinner at Fins. Katrina and John have spread their business wings, opening a new Aussie Home Loans franchise at Dapto to complement Katrina’s highly successful Wollongong-based firm, Mortgage Success, part of the AFG family. I have known and respected Katrina for many years and she has always had a passion for sharing her knowledge and skills, so it came as no surprise that her main focus for the Dapto store will be to coach and mentor the staff to build a successful retail presence that is not reliant on her personally interviewing the clients. When I asked Katrina what keeps her awake at night, she said “succession planning.”

I don’t think she is alone on that one! It appears to be a hot topic for the mortgage broking industry.

Identifying what stage your business is at and your strategies to exit should be part of any business that is mature.

Finding the right person or organisation to carry on your legacy is not always easy. Many broker businesses have been built on the principal’s personality and knowledge over many years, so a successful succession plan may involve

transitioning the business over several years. What stage is your business at and do you have an exit horizon?

Back on the balcony, we hosted AMB national manager Nathan Kerr with the gorgeous Josie and their cute bub Zac for a lunch of chilli crab linguine.

Nathan was very positive about the market, with his brokers focused on looking after the “whole of clients’ financial needs, not just the mortgage”. You’re speaking to the converted on that one Nathan!

One of the “win/win” benefits to come from the regulation of the mortgage broking industry has been the emphasis it places on ensuring a broker takes into consideration a customer’s total financial needs, not just their housing loan. Understanding if there is likely to be a change in their circumstances in coming years, for example, when are they looking to update their cars? (Opportunity for Leasing) And how are they protecting their assets (Insurance referral?), especially their income stream?

Do you have a process or the skills within your business to look after every opportunity?

If not, your client will satisfy that need elsewhere and your home loan/relationship could be at risk.

Does succession planning keep you awake at night? What are some of your goals for this year and who have you shared them with?

Let’s keep the conversation going. You know I’ve never been the silent type!

Kathy

To join the conversation, email Kathy at kathy. cummings@keymedia.com.au

MARKET TALK brokernews.com.au

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Medium density in high demand Australian buyers are showing an affinity for medium density dwellings

F

orget the traditional Australian fondness for a stand-alone house on a decent block of land… It seems that these days your average punter is more likely to buy a unit or a townhouse.

According to the latest Bankwest Housing Density Report, a record 43.4% of total new home approvals were for medium density dwellings (units, apartments or semidetached housing) in the year to October 2013.

This was an increase of 22.9% on the previous year – which was considerably higher than the 6.5% increase in stand-alone home approvals over the same time period.

Further, the data showed the increase is a long-term trend.

Medium density housing approvals grew by 45.9% over the last five years. Approvals for stand-alone homes fell by 8.5% over the same period.

Bankwest’s Mark Reid said that smaller housing options continue to increase in popularity as Australia’s population grows and consolidates around the capital cities.

It was likely that the trend was being driven by first home buyers (FHBs) who found it difficult to afford a stand-alone house, he said.

“Units are a considerably more affordable option. It takes first time buyers 3.4 years to save for a 20% deposit on a median-priced unit compared to 4.2 years to save for a standalone home.”

Propertybuyers.com.au CEO Rich Harvey said the main reasons for the growing popularity of medium density housing were affordability and maintenance.

“Not only is it significantly cheaper to buy medium density housing in proximity to attractive locations, like the CBD or the beach, but the maintenance requirements involved are much lower.”

These features were particularly attractive to two demographic groups – FHBs and downsizers.

Harvey also felt that high demand from Asian buyers, along with a lack of available land, was influencing the trend towards

medium density housing in particular areas – like Sydney.

Going some way to back this suspicion up was the fact that over half of the total dwelling approvals were for medium density homes in five of Australia’s capital cities.

Sydney (68.3%) measured the highest proportion followed by Canberra (68.0%), Darwin (67.9%), Melbourne (54.6%) and Brisbane (53.4%).

Perth was the only capital city to buck the national trend.

In Western Australia, standalone homes continue to be more popular than medium density housing.

Reid said this was probably because it only took six months longer to save for a house deposit, as opposed to a unit deposit, in Perth.

It’s possible that buyers are simply holding out for the additional six months in order to save for a stand-alone home instead of a medium density property.”

INCREASES IN MEDIUM DENSITY APPROVALS 2012-13 NSW: 34%

WA: 18.2%

Vic: -1.5%

Tas: -19.1%

Qld: 53.5%

NT: 21.8%

SA: 43.4%

ACT: 82.7% Australia: 23.5%

Source: Bankwest

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BUILDING RESILIENCE

through challenging times Mortgage broking can be a stressful industry. Sentis GM of health and wellbeing Kellie Lewis shares how you can productively deal with pressure

T

Kellie Lewis, BSc (Psych & Human Biology), BPsych (Hons), MPsych, MBA; GM – Wellbeing, Sentis

he constant and rapid pace of change, economic uncertainty, restructures, redundancies, demanding performance targets and competing priorities, cost pressures, increased competition, commuting, and being constantly connected or wired in are just some of the pressures and challenges facing leaders and employees in the modern workplace. The result of this high-pressure environment is rising stress levels for mortgage brokers across the industry.

The impact of workplace stress is increasingly psychologically unhealthy and unhappy employees. In fact, it is estimated to cost Australian businesses approximately $30bn each year in lost productivity and stress/ psychological injury claims.

The challenge for businesses today is what to do about it.

The answer is to build resilience.

Resilience is an individual’s capacity to respond constructively to change, challenge and other stressors and to learn from that adversity in order to become even stronger and more capable than before. In other words, it’s our ability to withstand stress and recover quickly from life’s challenges.

Building resilience, together with organisational strategy such as effective change management practices, realistic job design, and providing role autonomy and flexibility, is fundamental to lowering workplace stress.

Building resilience is becoming increasingly important to businesses because of the direct commercial benefits of having employees who deal effectively with change and other challenges and stress.

Individuals who are resilient are happier, less stressed, and report higher overall wellbeing than those who are not. The improved performance outcomes of increased employee resilience and overall wellbeing are increased engagement, improved productivity, and decreased stress/psychological injury claims. In essence, investing in employees’ capacity to be resilient is good for the individual and good for business.

Importantly, what we know is that resilience is a skill. The most recent advances in applied psychological science tell us that while some of us are naturally more resilient than others, resilience is a defined set of characteristics and behaviours that can be learnt. If we can understand and embrace these qualities, we will deal with change more effectively and respond to change and stress in our lives in ways that are helpful.

BUILDING RESILIENCE

There are three key dimensions to resilience. They are what we call Active Self-management, Taking Control, and Meaning and Purpose. These dimensions form the foundation of the qualities and characteristics of resilience. They empower us when facing challenges, and

allow us to feel happier and healthier in life and to perform at our best.

ACTIVE SELF-MANAGEMENT

Active Self-management refers to managing our initial response to stress and how we can proactively establish helpful choices around what we call the big four lifestyle factors of resilience: sleep, nutrition, exercise and positive relationships.

One of the most scientifically established and simple ways to manage your initial reaction to a stressful situation is conscious and controlled breathing. There are a number of ways this can be done. One tool is called ‘5 x 5’. It allows us to take control of our automatic and biological stress response and minimise the many unhelpful stress responses we can sometimes display.

TRY THIS: Take a deep breath. Check that your abdomen is moving, not your shoulders.

Count slowly to 5. Hold for a count of 5. Breathe out for a count of 5. Hold for a count of 5.

Repeat this cycle 5 times and then return to breathing normally.

Getting enough sleep, eating well, exercising daily, and investing in building and maintaining supportive relationships all help us deal with life’s ups and downs more effectively. It’s not easy in today’s busy world and it takes discipline. It is also one of the cornerstones of resilience. Ask yourself, “What is just one thing I can do to improve one thing in the big four lifestyle factors?”

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TAKING CONTROL

Taking Control focuses on consciously choosing our thoughts, feelings and behaviours in response to any situation by taking control of our thinking and the results we get in life. Individuals who believe they are in control of their lives are more resilient, and no matter what happens it is our choice how to think, feel and behave.

One of the ways we can do this is reframing – a very powerful way to look at difficulties in a fresh and positive way.

TO HELP US REFRAME A CHALLENGE, WE CAN ASK OURSELVES: What is the outcome I am trying to achieve?

What is my current response to this situation? What am I currently thinking, feeling and doing? Is this getting me the result that I want?

What is a more helpful response to this situation? How do I need to be thinking, feeling and behaving? Will this get me the outcome I want to achieve?

MEANING AND PURPOSE

Finding meaning and purpose is about the need to explore the value and opportunity in a situation in order to be able to embrace it positively so we can learn and grow. This is not about pretending everything is

rosy. It is about acknowledging that a situation is not easy and experiencing the emotions associated with this while knowing that the circumstances can be overcome. It is a process of consciously thinking – which helps us consider what opportunities a change or challenge presents – and searching for where we can find meaning, wherever that meaning and purpose lies for us.

One of the most powerful tools to help us search for that meaning and purpose in a situation are questions. The brain has an automatic response of searching for the answers to questions it receives. This means the strategic use of questions can be a powerful tool to influence both our own thinking and that of others. Questions we ask ourselves determine what our brain focuses on, and they strongly influence how we approach a challenge. Consider the individual who asks themselves, “Why does this always happen to me?” compared to the individual who asks, “What do I need to do to meet this challenge?” We would suggest that the second individual is going to achieve a better result and show greater resilience in facing the challenge.

When feeling stressed about a situation, we can ask ourselves: “How am I going to constructively overcome this challenge/respond to this change/deal with this situation?”

While some people seem to naturally display more resilience than others, we can all improve our resilience by investing energy in the three dimensions of the Resilience Model. And in the simple, yet deeply insightful words of Khalil Gibran: “Your living is determined not so much by what life brings to you as by the attitude you bring to life; not so much by what happens to you as by the way your mind looks at what happens.”

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‘Free’ SMSF services in the firing line

AFA REFUTES GENERAL ADVICE RUMOURS

T

he old adage ‘If it seems too good to be true, it probably is’ seems to apply to a number of online SMSF provider advertisements.

Both the ATO and ASIC are cracking down on SMSF service providers that offer ‘free’ services but trap consumers into long-term contracts with hidden costs.

ATO director of SMSF regulatory and income tax products Nathan Burgess warned those at the recent Financial Advice in Super Symposium in Melbourne about the dangers of signing up to these services, often advertised on the internet.

Burgess said the ATO would become more proactive in its monitoring of the SMSF sector, paying attention to seminars, conferences, and posts on internet bulletin boards.

David Storm, head of platform strategy, sales and service at online SMSF administrative solutions provider Onevue, said his company was increasingly noticing this issue.

Some SMSF companies are advertising free services, but the “devil is in the detail”, he said.

“They are putting something out there to attract clients, such as free establishment fee or annual cost, but there are vastly reduced levels of service or the client is locked into multi-year contracts.”

BY THE NUMBERS

$57,665 Australians seeking a “comfortable” retirement will need to spend 0.8% more as a result of price changes in the December quarter, with the annual expenditure rising to $57,665 for couples and $42,158 for singles

The Association of Financial Advisers (AFA) says it is untrue the general advice exemption proposed under the FOFA amendments will mean conflicted remuneration will be paid to financial advisers.

“These claims are totally misconceived,” said AFA CEO Brad Fox. “The interpretation of the FOFA amendments relating to general advice has been reported as meaning that financial advisers will provide general advice in order to be able to receive conflicted remuneration. These claims are a misinterpretation of the purpose of the draft FOFA amendments.”

The AFA said the general advice amendments were drafted to facilitate the general advice services provided by banks and call centres, for example, and will have no relevance to the activities of financial advisers who provide personal advice and have ongoing relationships with their clients.

The exemption for general advice was part of the Coalition’s policy position on FOFA and dates back to their dissenting report to the Parliamentary Joint Committee inquiry into FOFA in February 2012.

“The AFA has, however, never advocated for this exemption on behalf of financial advisers,” Fox said.

Source: MLC

INSURER MULLS GLOBAL JOB CUTS’ IMPACT ON AUSTRALIA

FPA BASHES ‘SCAREMONGERING’ FOR POLITICAL GAIN Flimsy rhetoric fuelling the fires of public fear that advisers will no longer act in their clients’ best interests is simply misleading, the Financial Planning Association has said.

Australian consumers have “nothing to fear” from proposed changes to remove the catch-all provision – Section 961(B)(2)(g) – of the FOFA best interests duty, said FPA CEO Mark Rantall.

Instead, it is “unnecessary scaremongering” that is distorting the facts for political gain, he said.

“We are witnessing an extraordinary effort by product providers and those who represent them to build a political position – based on flimsy arguments – in defence of a redundant section of

FOFA pertaining to the best interests duty.”

Industry Super Australia CEO David Whiteley said the country would be worse off than before FOFA came in, with clients’ best interests no longer top priority if the amendments were passed.

In its regulation impact statement, released in January, the government said removing the catch-all provision from the best interests duty would be beneficial for the financial services industry. “[The industry] has expressed concerns that the current provision is unclear due to its open-ended nature and has created significant legal uncertainty on how advisers can actually satisfy the best interests duty.”

FAST FACT

3.5% Only 3.5% of Australians expect to have more than enough money to maintain their lifestyle after retirement Source: MLC

AIG has said it will ensure any changes to the Australian operations as a result of the group’s plan to cut its global workforce by 3% are made with “respect, transparency and fairness”.

However, it says it is too early to discuss how the group’s plan to cut 3% of the global workforce will affect Australia.

AIG is pursuing a number of initiatives to reduce expenses and improve efficiencies, including centralising work streams into lower-cost locations and creating a more streamlined organisation.

The insurer incurred a pre-tax severance charge of $239m associated with these initiatives, primarily related to AIG Property Casualty, in the fourth quarter of 2013.

AIG group CEO and president Robert Benmosche said: “Our fourth-quarter severance charge represents another step in AIG’s continued transformation. We are increasingly a more agile, focused, and sustainable company.

As we think about the long-term future of our company, we must be able to more efficiently meet and exceed the evolving expectations of our global customer base.”

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ONE YEAR ON 26

ONE YEAR ON What a difference a year makes … or not. Australian Broker reflects on the punditry, news and trends that made headlines 12 months ago Australian Broker Online, March 2013

Non-major dangles commission sweetener ME Bank last year announced it would offer a commission bonus to brokers with settlements greater than $1m accumulated. The bank’s national manager of brokers, Stewart Saunders, said the move was designed to generate excitement among brokers.

“We’re also hoping to create a buzz in the industry, highlighting how fairer banking resonates with customers and can help brokers win more business,” he said.

What’s happened since?

More lenders have pulled the commission lever in the past year. Westpac launched a volume-based commission incentive last year, which it has since put in place permanently. AMP Bank also launched its own promotion, ramping their upfronts by an additional 20bps.

MFAA applauds strict broker discipline

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Managing change for success

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insure’s acquisition last year of LoanKit made headlines. Australian Broker TV caught up with Finsure CEO John Kolenda to talk about the transition, and Kolenda said an important focus was making LoanKit brokers feel welcome to the new aggregation group.

“Post-settlement we worked really hard to make all our brokers really feel part of the team. We held joint PD days and training days, and we wanted all our brokers to mix together. We felt it was important that they all got to know one another and felt part of the bigger team. We also took a lot of time and effort to make sure they felt valued and that the relationship was important on an individual level, and they knew they had people behind the scenes to help them,” Kolenda said.

Kolenda said that following the acquisition, the company was optimistic about the year ahead.

“We’ve had strong months of hitting record settlements for November and December, and we’re very upbeat for what’s going to happen for 2014,” he said.

And Kolenda said he isn’t discounting the possibility of further acquisitions in the future.

“We’re actively looking in the marketplace for any opportunities that come up for aggregation, and we’re even looking for any businesses that come up in the financial planning space.”

But Kolenda said Finsure’s focus is on its own business.

“We’re very focused on growing organically,” he said.

Firstfolio chairman, Eric Dodd, last year said he would ‘set the record straight’ on poor financial results. Dodd told Australian Broker a swarm of negative publicity surrounding the release – particularly that surrounding a potential default on CBA funding – which he claimed likely stemmed from competitors aiming to stir up business, was largely false or, at the very least, misleading.

What’s happened since?

Firstfolio has continued to face difficulties. The company announced in January that it had missed the deadline on a $39.5m capital raising project, and was unable to confirm when it would be completed. Soon after, they parted ways with interim CEO Mark Flack. The board has appointed Greg Pynt, an executive director of the company, to oversee the activities of Firstfolio until the recapitalisation proposal proceeds or a permanent new CEO is appointed.

JOHN KOLENDA

For the full interview, head to www.brokernews.com.au/tv

FORUM 27

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Aggregator aggravation Portability of trail between aggregators remains a major sore point for brokers

The issue of trail portability has reared its ugly head again, with Outsource Financial CEO Tanya Sale claiming that allowing trail to be transferred between aggregators would only lead to increased costs for the lenders and potentially commission cuts.

We received a selection of great comments on this topic, but in the end reader Dave Robinson won out. Dave not only proposed the option of fees payable to the lender on transfer as a solution, but also called on the lenders to weigh in on the debate.

What do you think?

Leave your comments at brokernews. com.au

“I can’t believe it would be that difficult for a lender to transfer a trail book. Sure it might involve some cost upfront for the IT department to write the program but if they can do it for planners it shows that they CAN DO IT...if they choose,” said Robinson.

“I for one would be more than happy to pay a fee (reasonable) to move my old trail books, however as you can see from the above I think the sticking point is aggregators not lenders.

I would love to hear from some of the 3rd Party Managers from the lenders in relation to their position. Something on the record would always be an interesting conversation starter.”

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utsource Financial CEO Tanya Sale has argued that trail portability between aggregators could sour brokers’ relationships with banks.

Brokers, by and large, see the issue differently.

Old Broker argued that brokers and lenders should be able to cut out the middle man.

“The current situation where the aggregator and lender have the contractual relationship is unjust and flawed. The relationship should be between the ACL holder and the lender.

This will allow trail portability and direct payment to the ACL. The only issue is clawbacks and the legality of these needs to be challenged in court. Brokers cannot continue to be the only professionals to pay back commission upon early discharge.

This flawed policy is a direct result of the current aggregator/ lender relationship to which Ms Sale is the benefactor, not the brokers.”

Patrick McMenamin agreed, and said financial advisers already have leverage in their product provider relationships.

“If I were to have an AFSL I could deal direct with most wealth product providers, even as

a single adviser practice.

However, lenders will not deal direct, even those still paying me direct with respect to older trail books. Some lenders are paying me part direct and part through several aggregators. How can this be efficient?”

Tony shared some personal experience in moving aggregators.

I was with a small aggregator for a period of time until this aggregator was bought out by another larger aggregator. I did not want to stay with the new aggregator and had my existing trail book moved to Connective.

At the time, from what I understand, it wasn’t the lenders that didn’t want to do it, it was the aggregators.

Brado, meanwhile, offered an alternative point of view on the issue.

“I don’t understand why the commissions you earned in good faith with one aggregator should be handed to a new one. I cannot see how it is fair that if your aggregator was receiving trail as well, earned while you were a team, that you, the broker, can take that away. I am happy with the trail I still receive from my old aggregators and am not concerned that it isn’t all with my current one.”

NEW LENDER TO BREAK BANK STRANGLEHOLD

into the sunset in a blaze of glory (not) never to be seen or heard of again!”

Keith of the West on 10/02/2014 10:11AM “I have heard this story many times before and it always ends up the same! Faded

MCC on 10/02/2014 9:39AM “Commercial brokers deal with a large diversified base inclusive of a big component of SMEs. They require strong ‘cash flow’ lending support & are always chasing capital. I don’t see CBRE playing in that space but correct me if I’m wrong?”

Global real estate giant CBRE has announced its entry into the Australian lending market. They may face a battle to win over brokers.

REAL ESTATE INDUSTRY QUESTIONS ONLINE VALS

Real estate industry pundits have questioned the validity of online valuations available to buyers. Brokers seemed to believe they were a useful tool.

Geoffrey-WA on 12/02/2014 10:33AM “The real estate industry crying foul again.

So pathetic. The fact is buyers have significant access to online information

now. This helps them pick an individual feeding them questionable information at 10 paces.”

Papery on 12/02/2014 10:22AM “Hey real estate industry, welcome to the 21st Century. We have something called the internet, and you would be surprised that just about every average punter has access to it and knows how to use it and basically doesn’t accept the BS you guys spin when driving up sales prices.”

PEOPLE 28

Drought stricken brokers welcome relief

A broker whose community has been hit by drought has welcomed the proposal for relief funding

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rokers affected by the Big Dry have welcomed the government’s proposal to extend funding to drought-stricken farmers.

Malcolm Leggat, farmer and director of Mainland Finance in Gunnedah, says brokers in the area are finding the going tough.

“The last thing farmers want to do is borrow through the crisis period,” Leggat said. “It’s hitting brokers very hard too.”

Leggat said the best thing brokers who have farmer clients living in the drought areas can do is to support them.

“There are a lot of suicides happening at the moment. Don’t let it get to the situation where your clients are talking to banks themselves. Act as mediators, and understand and know what’s going on.

“The last thing farmers need is banks putting pressure on them. That’s the broker’s job – to talk to the bank. You have to be 100% behind your clients.”

Agriculture Minister and Nationals deputy leader Barnaby Joyce recently proposed that an additional $280m of loans to be made available to droughtstricken farmers, taking the $420m Farm Finance package approved last year to $700m.

The proposal will also make larger loans available, allowing farmers to refinance up to $2m of debt, up from the current cap of $650,000. It will also lower interest rates from 5% to less than 4.5%, and the maximum loan term will be extended to 10 years from five.

LEGGAT WELCOMED THE ANNOUNCEMENT

“It’s wonderful what the Abbott government is doing, and particularly Barnaby Joyce. It’s a huge relief for farmers. A lot of my customers are doing it tough at the moment.

Many Australians, especially those living in cities, do not understand the extent of the problem, said Leggat.

“To put it bluntly, people in regional areas and the cities are only going to notice when their meat prices skyrocket, when their bread prices go up. We produce the food bowl of Australia.”

But while farmers are grateful for the assistance package, they do not want people to feel sorry for them, he said.

“People who live in country areas are a resilient mob. We bounce back.”

brokernews.com.au

MOVERS AND SHAKERS AFM SNAGS EX-CONNECTIVE MANAGEMENT Non-bank lender Australian First Mortgage has announced the appointment of Marcell Midolo to its management team.

Midolo, who spent the last five-and-a-half years at aggregator group Connective, will take up the position of state sales manager – Victoria.

Midolo was once a broker himself, before taking up a post at Connective in the broker support division, looking after broker members. Then in the last three years he was active in broker acquisition, driving the recruiting and sales side of the aggregator’s business.

Midolo says the key thing he wants to achieve in the new role

is to increase the relationship footprint AFM has with brokers in the Victoria region.

“One of the things I am looking forward to doing is catching up with brokers from the other groups,” he said.

“Taking that relationship to the next level, working with them to increase business.”

AFM’s managing director David White said Midolo’s appointment fits in well with the Group’s growth plans for the future.

“Marcell will feature prominently as we continue our organic growth plans and work on new products to release to the market,” said White.

NEW LENDER ANNOUNCES BROKER HEAD Following CBRE’s announcement to enter Australia’s commercial lending market, the real estate giant has appointed a new national director, brokerage.

Jason Edge, based in CBRE’s Western Sydney office, has been promoted to the role as part of a restructure of the business’ Pacific Industrial & Logistics Services division.

The brokerage team will focus on generating occupier related transactions, including leasing, vacant possession building sales, development consultancy and land sales, said a statement

by CBRE regional director Matt Haddon.

Meanwhile, Chris O’Brien has been appointed as national director, investments, based out of CBRE’s Melbourne office.

The investments team will focus on capital markets transactions, providing industrial property investors with acquisition and divestment services, in addition to packaging the sale & leaseback of industrial property assets for corporate clients.

Haddon said the business line “had been more clearly delineated to recognise the specialised capabilities and skill sets of agents in the fields of brokerage and investments”.

AGGREGATOR HIRES NEW STATE MANAGER Vow Financial has announced a key appointment as part of the aggregator’s expansion plans in NSW. The aggregator announced yesterday the appointment of Dawn Inanli to the role of state manager NSW/ACT. Inanli has had a successful career in the mortgage and finance industry spanning back to 2001 working in both the lending and aggregation

markets with tenure at BankWest of over nine years.

Inanli says joining Vow will allow her to help brokers build and think outside the square within their own business practices.

“The Vow Financial aggregation model offers brokers a fantastic service proposition that’s more attuned to provide the support and service they require,” said Inanli.

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IN FOCUS

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he Australian Lending Awards were held recently at the Four Seasons Hotel in Sydney. The event celebrated quality operators in the lending sector, as well as acknowledging specialist providers, leading professionals and thought leaders.

CAUGHT ON CAMERA 29

INSIDER 30

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Bruce Lee

PUNCHES procrastination The motivational martial arts guru’s guide to productivity

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ruce Lee is an international icon for kung fu devotees, but he’s also a guru for discipline, productivity and multitasking. He was far more than just a film star and martial artist, so it makes sense to look towards the late Enter The Dragon star for tips on how to get the most out of work.

Lifehacker assembled Bruce Lee’s top productivity tips – at Australian Broker we’ve boiled it down to Lee’s three five-finger death punches for procrastination.

BE FLEXIBLE

“Empty your mind: be formless, shapeless, like water. If you put water into a cup, it becomes the cup. You put water into a bottle, and it becomes the bottle. You put it in a teapot, it becomes the teapot. That water can flow, or it can crash. Be water, my friend.”

One of Lee’s most famous quotes, the philosophical musing points towards a need to be flexible. Brokers can learn a lot from this idea – the

corporate world is forever changing, and organisations need to change with it. If a broker can be flexible, they can help steer their workforce in the same way.

BE AWARE OF YOUR INTERACTIONS

“Awareness is without choice, without demand, without anxiety. In that state of mind, there is perception. To know oneself is to study oneself in action with another person.”

Something brokers should be most aware of is interacting with people. Understanding and learning from your interactions with people can help you grow in your profession, but it can also ensure you act with consistency – become aware of how you communicate with colleagues, clients and suppliers to ensure all staff are given equal and fair treatment.

THINK AND DO IN EQUAL AMOUNTS

“When our mind is tranquil, there will be an occasional pause to its feverish activities, there will be a let-go, and it is only then in the interval between two thoughts that a flash of understanding – understanding, which is not thought – can take place. Balance your thoughts with action. If you spend too much time thinking about a thing, you’ll never get it done.”

While Lee is certainly not knocking thinking and pondering on an initiative, failure to act on it when necessary can mean it becomes obsolete. Brokers should remain acutely aware of the changing nature of the workforce, actioning initiatives as soon as they are viable. It is also important to communicate this effectively.

DIRECTORY AGGREGATOR / WHOLESALE BROKER

PLAN Australia 1300 78 78 14 www.planaustralia.com.au Front Cover

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FINANCE Semper Capital Pty Ltd 1 800 SEMPER (1 800 736737) www.semper.com.au enquiries@semper.com.au Page 8

LENDER

Homeloans Ltd 13 38 39 www.homeloans.com.au Page 23 ING DIRECT 1300 656 226 introducer.ingdirect.com.au Page 5

Liberty Financial 13 11 33 www.liberty.com.au Page 3

National Australia Bank www.nabbroker.com.au Page 7 Pepper Homeloans 1800 737 737 www.pepperonline.com.au Page 31

SHORT-TERM LENDER

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

Mango Credit 02 9555 7073 www.mangocredit.com.au Page 1

TECHNOLOGY PROVIDER NextGen.Net 02 9929 5999 sales@nextgen.net www.nextgen.net Page 13

To advertise in Australian Broker, call Simon Kerslake on 02 8437 4786

WHOLESALE

Resimac 1300 764 447 www.resimac.com.au Page 17

OTHER SERVICES

Deposit Power 1800 678 979 www.depositpower.com.au Page 6 RP Data 1300 734 318 Page 21 Trailerhomes 0417 392 132 Page 26

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