Australian Broker 11.22 by Key Media

NOVEMBER 2014 ISSUE 11.22

$4.95 POST APPROVED PP255003/06906

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

+ BIG IDEA THE CHANGING FACE OF AGGREGATOR TECH How CRMs are expanding beyond the broker P12

+ BUSINESS

INTELLIGENCE

TROUBLED WATERS Leading your staff through difficult times P14

+ SPECIAL REPORT MAJOR AGGREGATOR SPOTLIGHT

What the benefits of scale can do for your business P20

+ MARKET TALK

James Symond:

MACRO TOOLS, MICRO PROBLEM

Rhetoric about the RBA could be hot air P26

DIVERSIFYING DISTRIBUTION Aussie Home Loans’ executive director says the company’s success lies with its ability to cater to every broker’s need

ore than two decades after it launched, franchise giant Aussie Home Loans has made its brand a household name across the country with not only mobile brokers, but storefronts and even a wholesale channel. Executive director James Symond said it’s this diversity that is the hallmark of the company’s success. FULL STORY PAGE 16

+ CAUGHT ON CAMERA The industry’s night of nights at the Australian Mortgage Awards P34

NEWS 2

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NUMBER CRUNCHING SELLER’S MARKET?

KEEPING CUSTOMERS HAPPY: BANK CUSTOMERS ADVOCATING FOR THEIR BANK

YEAR-ON-YEAR CHANGE IN DWELLING TRANSACTIONS NT:

0.2%

WA:

15.7%

-1/5%

9.5%

11.7%

LOW ADVOCACY

11%

$300m The annual spend of each of the big four is projected to reach up to $300m on projects relating to imposed regulatory change

FAST FACT

NSW:

BY THE NUMBERS

ACT:

-1.1%

SA:

9.5%

Source: Deloitte

VICTORIA:

7.9%

TASMANIA:

26.4%

49%

TOTAL FOR ALL BANKS

QUEENSLAND:

33.7% MEDIUM ADVOCACY

Proportion of Australians who say they plan to sell their family home to fund their retirement Source: MLC

54.8% HIGH ADVOCACY

Source: RP Data

Source: Roy Morgan

WHAT THEY SAID...

GREG MEDCRAFT

GLENN LEES

PHIL QUIN-CONROY

MARIO REHAYEM

“In Australia we haven’t indexed penalties to inflation for 20 years. In many cases all we do is give a slap on the wrist and it’s not discouraging bad behaviour.” P8

“We have to be responsive to consumer behaviour. It’s either that or risk becoming irrelevant” P12

“We are an advocate for our brokers and we constantly strive to listen to our brokers and cater to their needs as best we can” P21

“[Acquisition is about] picking the right business from the outset, and that is ensuring we have the right business that fits the market we operate in” P28

NEWS 4

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Property lobby warns RBA on rates ‘ransom’ ■ The Reserve Bank of Australia must not hold the Australian

Raymond Xue

AUSTRALIA’S TOP BROKER SEES PROCESSING IMPROVEMENTS ■ The 13th annual Australian Mortgage

Awards, held recently at Sydney Town Hall, has seen Raymond Xue of ACA Home Loans named Australia’s top broker. In addition to being named Australian Broker of the Year, Xue also won the Broker of the Year – Independent award. He previously told sister publication MPA that his success was due to hard work, marketing within his community and improvements in his office’s processes. Xue said previously different staff members were assigned each stage in the home loan process. “Now each staff member handles a single file from the start to the end… they contact the client, collect the document, and submit the loan.” Xue also heavily uses Chinese social media to communicate with clients. He said the popular Chinese social network WeChat, reported by Xinhua last year to have 600 million users worldwide, allows Xue and his staff to leave voice and text messages for clients, which helps with the time difference. “Social media is a trend, it’s very powerful … many people all around the world can see it at the same time. And WeChat is free!”

public to ransom by using interest rates to curb high property prices, according to the Real Estate Institute of New South Wales. The property association’s president Malcolm Gunning has said they are “disappointed” with the bank’s constant back-andforth when it comes to the housing market. “We are very disappointed that RBA Governor Glenn Stevens is trying to restrict investment in property by sending out warnings about buying property,” he said. “Six months ago, Mr Stevens was encouraging investment in real estate. Now that the public is buying properties with confidence the RBA has changed its mind and is being critical, giving warnings about investing in an over inflated market.” Gunning said it is not the role of the Reserve Bank to give investment advice, especially not to single out property, which is a safe investment option for Australians. “The fact is that investors are more confident about putting their money in Australian property compared to the uncertainty of the share market and the underlying mistrust of this sector following on from the GFC,” he said. “While we admit that low loan-to-value ratios of 5% are dangerous, and that this practice should be curbed by the banks being asked to be more responsible with their lending, it is not the RBA’s place to use interest rates to restrict the property market.”

Gadens warns on dodgy cross-sell tactics ■ A leading law firm has warned that ASIC is

focusing on mis-selling add-on insurance. Gadens Lawyers has pointed to an investigation ASIC conducted into the sale of add-on insurance. While the regulator’s investigation focused on car finance, Gadens said the principles “are likely to apply to all consumer insurance cross sales”. “ASIC’s preliminary investigation identified that consumers often feel pressured when sold add-on insurance. Consumers were also being mis-sold insurance products that excluded or limited substantial numbers of situations and amounts of coverage,” the law firm said. Gadens said the ASIC investigation had uncovered unscrupulous sales techniques. “ASIC claimed that frequently tactics such as stringing out the sales process, making the consumer feel obliged, heavy sales tactics, and bombarding the consumer with paperwork have been used in the vehicle industry to sell add-on insurance. The products are not necessarily suitable for the individual consumer’s needs.”

FAST FACT

Average number of days on market for homes across Australian capital cities Source: RP Data

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Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss. Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008. The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.

NEWS

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Top brokers weigh in on new MFAA chief ■ Top brokers have said they are pleased with the MFAA’s announcement that Siobhan

WORLD NEWS UNITED STATES OF AMERICA

MYSTERY BIDDER SNAPS UP THOUSANDS OF FORECLOSED HOMES Three million dollars will barely buy you a place in Manhattan, but in Detroit it will get you more than 6,000 foreclosed homes. In a Wayne County auction last week, an unidentified buyer placed a $3.2m bid for the dilapidated homes, roughly the minimum allowable bid of $500 per property. According to David Szymanski, chief deputy treasurer of Wayne County, the bidder is not likely to turn a profit from the properties. In a Bloomberg interview, Szymanski said, “I can’t imagine that you are going to make money on this.” A lot of work will have to go into the properties. The bundle includes 3,000 properties that need to be torn down, plus some 2,000 empty lots and about 1,000 homes that are believed to hold some value. Wayne County has become one of the biggest owners of foreclosed homes since the GFC. This year alone, the county has started foreclosure proceedings on 56,000 properties with about 20,000 of them headed for auction. In 2015, county officials expect to foreclose on an additional 75,000 parcels.

Hayden has been named the association’s new chief executive. Katherine Stewart, mortgage and finance broker at Five Star Mortgage Solutions, told Australian Broker she was very pleased with the announcement. “I was very happy when I saw the news. I think she is someone who is truly authentic and I believe will lead the MFAA with integrity and innovation into a new and fresh approach to broking.” Stewart said she would like to see the MFAA further invest into supporting new-to-industry brokers. “I would like to see the MFAA invest more in new blood and offer some more support to new people in the industry. It costs a lot to start in broking and you don’t make money straight away, so more support for new brokers would be welcome.” Jeremy Fisher, director of 1st Street Home Loans, says Hayden will be a breath of fresh air to the industry. “I feel a change of face is always positive and I am looking forward to seeing what new initiatives and plans are introduced to help show further value of the MFAA to its members. I wish Siobhan all the best in her new role and as an MFAA member I would welcome the opportunity to provide any support and feedback as required.” Siobhan Hayden

DID YOU KNOW?

Government must walk the walk on bank competition: Heritage ■ Heritage Bank chairman, Kerry Betros, told the Heritage Bank Annual

8.4% Quarterly residential land sales were up 8.4% over the June quarter, foreshadowing a healthy year for new housing construction Source: HIA

General Meeting that millions of Australians were being shut out of a better deal on their banking because the big banks could sidestep hurdles that customer-owned competitors had to jump over. If the government is serious about making banking more competitive, then it needs to start walking the walk, says Betros. “Governments have talked up the benefits of competition for years. Now is the time to deliver real reform. The current Financial System Inquiry is the perfect opportunity to tackle the inequities,” he said. “The big banks enjoy a huge advantage because they are authorised to use the internal ratings-based (IRB) approach to measuring the riskiness of their assets, which significantly reduces the amount of regulatory capital they have to hold. They also enjoy ‘too big to fail’ status, with the implicit guarantee that the Federal Government would bail them out if any of them got into trouble. Those factors give the big banks huge funding advantages that tilt the playing field against smaller customer-owned competitors such as Heritage.”

NEWS

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Risky mortgages on the rise, claims Fitch ■ According to global credit ratings and

DID YOU KNOW? Greg Medcraft

AUSTRALIA A HAVEN FOR WHITE-COLLAR CRIME: ASIC

7.9%

■ ASIC’s chair has slammed

Australia’s penalties for white-collar crime, saying lax repercussions make the country a “paradise for whitecollar criminals”. Speaking at a business journalism awards lunch held by the Walkley Foundation, Greg Medcraft said that Australia was behind its international peers when it came to sentencing for white-collar offences, News Ltd has reported. “Civil penalties for white-collar offences are just not strong enough,” he said. Medcraft said civil penalties had not kept pace with inflation. “In Australia we haven’t indexed penalties to inflation for 20 years. I mean, hello. In many cases all we do is give a slap on the wrist and it’s not discouraging bad behaviour.” Medcraft also told the public to be “extremely careful” dealing with financial planners, News Ltd reported.

Job advertisements rose 0.9% in September and are now 7.9% higher than the same time last year Source: ANZ

research group, Fitch, there has been strong growth in investor and interest-only loans, as well as indications that owner-occupiers are also increasingly opting for interest-only terms. The ratings agency said this may increase the risk profile of banks’ mortgage assets in the event of adverse market movements, such as higher interest rates and a general macroeconomic slowdown. Fitch’s analysis indicates that the risk for investment mortgages is higher than in the case of owner-occupied mortgages, which suggests a speculative element to recent rises in house prices and a riskier credit profile for the banks. Meanwhile, the rise in interest-only loans – for both investors and owner-occupiers – also raises the susceptibility of borrowers in the event of an economic downturn, due to the slower accumulation of borrowers’ equity relative to more traditional principal-andinterest loans. However, the ratings agency maintains that the risks of unmanageable losses in the mortgage portfolios of major banks are low. Since the introduction of the NCCP, lowdocumentation and other non-standard loans have decreased significantly, and high loan-to-value lending has remained stable as a proportion of the total, despite the rise in prices.

BDMs need to be more proactive, broker says ■ What is the secret behind banks keeping brokers happy? For Terry Shoesmith,

director of East Coast Finance, it is all about the BDM. Shoesmith told Australian Broker that the most important thing a lender can do to support brokers and sustain relationships with brokers is have a proactive BDM. “If there are two banks that have identical or very similar products and terms, but one bank had a BDM which I knew face-to-face because they had bothered to come and meet with me, I would be more likely to want to refer business to that bank. What banks need to remember is that their BDM is the face of their company for brokers.” There is definitely room for improvement in the quality of BDMs in the industry as a whole, according to Shoesmith. “I do believe that BDMs are stretched too thin. “It is too difficult a job for many of them to sustain relationships with all their brokers because they have too many they have to look after. I would like to see banks investing more in their BDMs and getting more BDMs on board. I know people who used to work as BDMs for banks but have quit because it just got too hard.” Shoesmith said he would ideally like to see BDMs meet face-to-face with brokers about once a month.

BEST PRACTICE 10

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TRAINING TO RETAIN

Training and retaining new brokers Top brokers share their tips for training new staff

he support and training of new brokers is vital for the health and future of the broking industry. It is also an issue that many brokers are passionate about improving. When the MFAA announced the appointment of its new CEO last week, the one resounding issue which was highlighted by brokers when asked “what would you like to see the MFAA invest more in” was the support and training of new to industry brokers. Graeme Salt, mortgage consultant at Origin Finance, say the biggest challenge for new to industry brokers is confidence. “I believe the biggest challenge for new brokers entering the industry is the confidence to get out there and generate new business. It can be quite daunting to go out there and have the courage to ask for new business.” Origin Finance offers an intensive 100 day mentoring program which focuses on building confidence for its new recruits, says Salt. “A big part of the 100 day plan is sitting down with new brokers and giving them different ‘customer scenarios’ – where they will have to figure out the best way to approach the particular situation and recommend the most suitable product for each ‘customer’. It is all about preparing them so when they meet potential clients, they are confident and they know what they are talking about.” Scott McCartney, general manager at Let’s Finance, says they are about to take in their first round of new brokers for their new fourweek cadetship. “We have decided to run these four-week cadetships for new brokers because we found that there was not much structured training out there. Even when new recruits are making the

switch from a bank to being a broker, there is still a large skill gap, especially from the compliance side. “In the first week of the cadetship, we will run through the background and foundations of the finance industry. In the second week, new brokers will do their Certificate IV which our aggregator Vow facilitates. In the third week, we will do a lot of scenario-based training and in the fourth week we will get some lenders in who will do presentations and training on their products.” McCartney says he believes the MFAA and FBAA provide a lot of support for brokers, however the industry would benefit from a more uniform approach to training. “I think both the MFAA and FBAA do a lot to support their brokers, but because there are so many lenders, aggregators and associations, I think that everyone needs to be more on the same with training. At the moment, we are all responsible for training our own staff, but it would be nice to see a more uniform and guided approach across the industry and for someone to really take control over regulating it.” Simone Ryan, director of Moneybag Finance, says she offers an in-depth three month training program followed by two years of on-the-job mentoring after they complete their relevant educational qualifications. When it comes to what the industry can do to support new brokers, she would like to see the associations take a more consistent approach to aligning new brokers with mentors. “I feel the industry bodies can strengthen their support network by aligning new to industry brokers with a mentor and network so that they are supported in their new business and career. It’s providing a network of support that is regular, consistent and educational that is imperative.”

Want to hold on to staff? Offer them career progression opportunities. According to a survey by specialist recruitment consultancy Robert Walters, 58% of professionals felt the career opportunities available to them were inadequate and 92% were either likely or very likely to leave their jobs due to that lack of progression. When asked what kind of progression they wanted, secondments to other departments or regions was the most popular option, followed by training, study and work experience placements. “Career progression is consistently ranked by employees as their number one priority, over and above remuneration,” said Robert Walters director Erica Lindberg. “In order to retain staff and attract future talent, organisations may therefore need to evaluate their internal career training and development offerings. Is there a structure in place that employees aren’t taking advantage of due to a lack of internal communication, or is this a gap within the business that needs to be addressed?” Lindberg said that employees would often stay in their roles rather than look elsewhere if they had the chance to increase their skill set. Employers could offer opportunities like short courses, training in other departments, direct career paths within the business and access to internal positions overseas. “We find that job seekers are asking questions about training and career progression and are measuring the offerings from various companies to decide which company to join,” she said.

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THE COALFACE 11

BIG IDEA 12

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The shifting focus of aggregator tech The future of technology offerings from aggregators could broaden the horizons of what CRMs can do

OUR GOAL IS TO CHANGE THE FACE OF AGGREGATOR SOFTWARE TO EXTEND ALL THE WAY OUT TO THE CONSUMER - G LENN LEES

DID YOU KNOW?

33% Connective saw a 33% year-onyear increase in settlements in August Source: Connective

ggregators often see their broker CRM systems as their primary offering. This generally entails offering a broker tools to meet with clients, keep track of their database and submit deals, as well as some marketing help. But Connective principal Glenn Lees believes the future of aggregator technology offerings could extend far beyond this. Lees believes that aggregator technology must first and foremost be driven by the way brokers work, and be flexible to adjust to feedback from on-the-ground brokers. “We’re really trying to make sure we give brokers the freedom to work in the way they want and not in the way we think they should,” he said. But another factor that must be considered, he said, is the way consumers interact with the mortgage process. “Everything is driven by consumer behaviour. We have to be responsive to consumer behaviour. It’s either that or

risk becoming irrelevant,” Lees said. And consumer behaviour is shifting, Lees suggested. The way consumers interact with the mortgage process is changing as technology changes borrower expectations. For starters, consumers have greater access to information. Lees said consumers have often done 70% of their research on home loan options before ever setting foot in a broker’s office. And this proclivity for information gathering could eventually evolve even further, Lees said. “Technology is changing the way people source information and ultimately, once they’re comfortable with the information, the way they source the product itself. There need only be a small tipping point of confidence for that to happen, and the most important thing is to place yourself at the forefront of that change when it happens,” he said. With this in mind, Lees said Connective is developing its Mercury software to stay ahead of such changes.

“Our goal is to change the face of aggregator software to extend all the way out to the consumer, so the broker has elements of Mercury on their website,” he said. One of these developments has been rewriting the platform’s entire frontend to make it adaptable to the way brokers work, as well as the way clients want to interact. “We’ve had a really big project in the last 12 months to rewrite the whole front end of Mercury into HTML5. That gives us the ability to deploy on any platform. It gives it functionality on all platforms, and adaptability so that the interface will change to suit where you’re working. It adapts to the environment and adapts to what you’re doing at the time,” he said. This means brokers working at their desktop will see the full-featured Mercury platform, but can seamlessly transition to a tablet version or mobile platform when meeting with clients, Lees said. These versions of the software will utilise the unique functionality of mobile devices to provide brokers with tools that desktop computers can’t, and will also integrate seamlessly with the broker’s home office, he said. By way of example, Lees said the aggregator’s mobile platform will enable brokers to deal with supporting documents in a new way. “If you have the customer’s driver’s licence you can take a picture of it and upload it into the Mercury environment in real time. From a compliance point of view, it date and time stamps and geo codes it when you take the photo,” he said. Of course, for all the software enhancements aggregators can offer, some brokers simply aren’t comfortable with new technology. Lees concedes this, and says Connective realises it’s dealing with brokers from a variety of backgrounds in terms of their tech skills. “Ultimately we’re dealing with brokers with a broad spectrum of experience in terms of technology, and even in terms of belief as to what the market will do,” he said. But Lees contends that brokers don’t have to be naturally tech savvy in order to utilise technology. He said it is the role of the technology provider to work to the user’s needs. “If you’re spending a lot of time teaching brokers how to use the software, then the software is broken. You reduce barriers to use by making the software better,” he said. While he said Connective is proactive in training brokers and providing ongoing education in its technology platform, Lees said the key to helping brokers utilise technology is to provide easy-to-use, intuitive software. “You don’t look to improve the broker, but to improve the product.”

BUSINESS INTELLIGENCE 14

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Motivating your workers through tough times It’s easy to stay on task when times are good, but how do you keep your employees engaged during a downturn? Oracle’s Aaron Green shares his tips among the workforce. Learning opportunities don’t always need to be expensive training programs. A simple internal knowledge-sharing session can spark an idea or learning in another employee that leads to great things. These are some great strategies for helping to motivate your employees as individuals during challenging times, but how do you engineer a highly motivated workforce, so they are acting and performing as one highly motivated unit on a continual basis? An authentic and open leadership team is crucial to strong employee engagement and commitment. An employee who feels appreciated and trusted is more likely to be productive and performing at their best. High-quality, regular conversations between employees and managers regarding performance and expectations are essential.

DEVELOP INDIVIDUAL GOALS TO ALIGN WITH THE OVERALL BUSINESS STRATEGY

t’s no secret that keeping employees motivated is one of the primary keys to business success. It’s something the most effective business leaders are always aware of and they act quickly if an issue starts to emerge. When times are good, the economy is positive and business is prospering, it’s not such a task to keep people motivated. But when the economy is difficult or the business is challenged financially, it becomes a significantly more serious issue. Below are a few tactics to keep in mind when times get tough and motivated employees mean make or break for the business.

ENSURE GOALS ARE ALIGNED WITH THE BUSINESS MISSION

Staying focused on the organisation’s mission is key to helping push through difficult times successfully. Aligning team goals and any social strategies or guidelines to the mission of the company helps to keep everyone’s eyes focused on the same target and headed in the right direction.

TAILOR REWARDS TO SUIT DIFFERENT PARTS OF THE BUSINESS

Some roles and departments will benefit from flexible telecommuting options, while others may gain an advantage by having their home internet bill covered by the business. Providing benefits most relevant to an employee’s role helps reinforce to them

that their contribution is valuable to the business.

SEEK FEEDBACK, LISTEN ACTIVELY AND ACT ON CONCERNS Actions speak much louder than words, so by showing your people that their worries are also your worries, they will feel heard and more satisfied in their roles.

PLAN AHEAD, SHARE THOSE PLANS, AND BRING YOUR EMPLOYEES INTO THE DECISIONMAKING PROCESS WHEREVER POSSIBLE This will help to increase employee engagement and make them feel like they have a genuine say in what’s happening, generating a feeling of, “We’re all in this together.”

GET OUT OF THE OFFICE

It’s so easy to get caught up in the routine. Taking the team out to do some charity activity or volunteer work provides a fresh perspective and a change of scenery that may help people more clearly recognise the positives. It also helps them realise that you are putting in the effort to help them remain motivated.

OFFER OPPORTUNITIES FOR DEVELOPMENT

Even when times are tough, people want to learn and grow. It’s important to challenge people to challenge themselves in difficult times, to help maintain motivation and instil a feeling of achievement and growth

This means everyone, no matter their personal KPIs, is working toward the same objective. This approach allows employees to see the value they’ve added to the business and nurtures within each person a feeling of ownership and responsibility for the company.

INITIATE, ENCOURAGE AND ENABLE COLLABORATION

When information is available to a wider audience, knowledge is shared more freely, people learn more, become interested in new areas, further develop existing skills and are encouraged to do the same in return. This is also a great way to solve new challenges and initiate thinking on new, creative strategies and concepts. A motivated and engaged employee is a productive and profitable one, in good times and tough times. Mark Green from Performance Dynamics says there are three key areas central to motivating people:

1) Help them find meaning in what they’re doing

2) Strengthen their personal qualities 3) Foster a commitment beyond the job If the results on the latest consumer confidence surveys ring true, it will be an important time for businesses to engage and motivate employees to maintain workplace confidence and in turn, business success. Aaron Green is the vice president of applications at Oracle

NEWS 16

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JAMES SYMOND: Diversifying distribution Aussie Home Loans’ executive director says the company’s success lies with its ability to cater to every broker’s need

ymond said when the company launched its broker force, it relied on mobile brokers. It gave them leads, support and a commission structure commensurate with that. But Symond said this model didn’t fit everyone, and the business had to adapt to continue to grow. “Just over 10 years ago, what I was keen to see us running with was this whole diversity in distribution piece. It was a matter of bespoking our sales channels not only to meet the consumer’s needs, but to meet the broker’s needs,” he said. This strategy saw the group moving into retail storefronts. Symond pointed to the growth of the channel since its inception as proof of the diversified distribution model. “The big change for us was launching our first storefront 10 years ago. Now, 10 years later we have 165 stores and growing. Our retail channel alone will have its first billion dollar month in settlements within the next few months. This is a channel that didn’t exist 10 years ago,” Symond said. As a business, Symond said Aussie will see its first $2bn settlement month “within the next few months”. He said this success came as a result of the diversified distribution model, and the realisation that different brokers fit within different models. “We worked out a long time ago that the customer wasn’t simply the consumer on the street. The customer was equally the mortgage broker. The mortgage broker has a whole bunch of needs, and if we didn’t listen to the customer we’d be dead in the water.” Listening to the customer meant that the company also saw the value in the wholesale aggregation space. Symond said this led Aussie to purchase National Mortgage Brokers in 2012. In spite of its role as a franchise brokerage, Symond argued that the wholesale aggregation market was one Aussie couldn’t ignore. “I was really keen personally to get involved and to understand that space, and I thought the best way to do that was to buy a high-quality, smaller aggregation firm,” he said.

DIFFERENT MODELS, DIFFERENT BROKERS

But Aussie’s different channels shouldn’t necessarily be viewed as a

graduated career progression, Symond said. He argued that different brokers suited different models, and that a move to a wholesale aggregator wasn’t always indicative of a step up for a franchisee. “Moving to an NMB is not an upscale or a downscale. I’ve got retail brokers who are earning themselves two commas a year and keep on going. They’ve got an Aussie storefront – or in some cases up to seven Aussie storefronts – and they’re doing exceptionally well. They’re having in some cases up to 10 walk-ins a day due to the brand on the shingle. Go and try to tell these guys to upgrade to be a wholesale aggregator. They’d say, ‘You’re kidding me’,” he said. Instead, Symond sees the different channels as appealing to different personalities and playing to different strengths. And he rejects the idea that a franchise storefront is a stepping stone to an independent brokerage, pointing to the brand recognition delivered by Aussie. “There isn’t another mortgage brand out there that is as loved or that generates as much activity as Aussie. You cannot put another one of my competitor’s brands out there and have the same activity,” he said. Moreover, Symond said the company offers continuing training and development to its franchisees. And should this mean that some brokers want to move to a different distribution channel, Symond said the company’s model caters to them. “We took the view very early on that either you don’t train your people and they stay with you and they stay ordinary, or you train your people and potentially they may leave. It’s up to me and the business to make sure that we have catcher’s mitts to offer options so they don’t have to leave. That’s why diversity in distribution was really important.”

CUTTING THROUGH THE MISCONCEPTIONS

Of course, Symond concedes one can hardly mention Aussie Home Loans without mentioning its acquisition by Commonwealth Bank. Lenders are also looking to diversify their distribution, and mortgage brokers are an attractive acquisition target. But Symond said the company has remained true to its ideals following CBA’s involvement. Moreover,

DID YOU KNOW?

200

Aussie Home Loans has launched a recruitment drive it says aims to add 200 brokers to its network over the next year

he argues that this is exactly what CBA wanted. “Commonwealth Bank looked at Aussie’s success, and they’re there where they can help. Ian Narev made it upfront to John and I that they are buying into a successful formula. If they can help – which they’ve done in areas of funding, and in areas of risk and compliance – then great. But in terms of helping them flog mortgages, no. And have they stood in front of us and had a single discussion about whether we can help them flog more Commonwealth Bank mortgages? Zero. And they know what the answer would be if they did,” he said. “When they bought into Aussie, their market share within the panel was far greater than what it is today, and they haven’t blinked once.” And as for any critics of the move, or of the company’s overall strategy, Symond said he can only point to the brokerage’s achievements. “All I can do is focus on our strengths of having the most diversified distribution strategy in the industry, of having the leading consumer brand in the industry full-stop, of having arguably the most profitable business model in the industry full stop and having attrition rates that are – across the globe for a commission-only sales team – excellent. Our numbers today speak for themselves, and if you ask any of our panel lenders, our panel lenders would agree.”

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THE COALFACE 18

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Angling for a broker revolution John Manciameli wants to empower brokers to move beyond common perceptions

BROKERS DON’T JUST FLOG PRODUCTS OR RATES ANYMORE; WE HELP AUSTRALIANS WITH THEIR PROPERTY ASPIRATIONS

ohn Manciameli, principal of Hunterwood Solutions, is an avid fisherman. But his obsession at the moment is angling for a different sort of catch. Manciamelli said he wants to catch the attention of his fellow brokers, and help change the way they interact with their clients. “I want my industry that I love to step up. I want to change my industry. I want to be known as the person who really got involved. I want to change the perception that brokers are just here for finance. “Brokers don’t just flog products or rates anymore; we help Australians with their property aspirations. But the challenge is that most brokers don’t realise what a wonderful position they are in to be able to help their client with their property aspirations. Brokers have become incredibly powerful in terms of the influence they have in their client’s lives and they need to make the most of it. It’s a new era.” Manciameli’s drive to innovate the broking model started back in his days at Mortgage Choice, after he realised that brokers could help investors make smarter investment decisions as well as organise finance. “I could see that a lot of my clients were investing in areas that did not have good capital growth or rental yields. Due to being time poor or other various constraints, they ended up listening to their local real estate agent to try and buy investment properties, rather than seeking expert advice.

“I am very passionate about investing in property and I thought that this was getting ridiculous, so I decided to do something about it. Although, I knew as a small broker I wasn’t going to have the clout to change a publicly listed company and how they deal with their clients. “On my own initiative, I flew to Melbourne, Brisbane and Sydney to talk to the serious brokers and larger franchises. I knew if I could get brokers and franchises on board who had a lot of clout with the board of Mortgage Choice then I could get some traction.” This is when his idea became a reality. Winning by one vote, the board of Mortgage Choice finally gave him the thumbs up. “The whole idea was for brokers from Mortgage Choice franchisees to be able to refer a client interested in investing in property to real, legitimate, research based investment property companies – which would act as buyer’s agents for them on behalf of their investment property. “It was really hard to get this idea through the board, as some were worried we would end up on Today Tonight with Mortgage Choice seen as promoting investment properties and profiting from it. But it isn’t like that at all. We wouldn’t be selling investment properties, we would be referring clients to investment property companies who would do all the research on behalf of the client – so the client can make more informed decisions about where they would

like to invest their money.” Manciameli then went through the rigorous process to find the two investment property companies that the board approved to be on their panel – the Aviate Group and Blue Wealth Property. “The difference with these two companies and buyer’s agents is that they fit the broker model because they don’t charge clients directly. Instead, they are paid by the builder.” Investment properties bought through the Aviate Group or Blue Wealth Property are always new developments. While many investors may be concerned about buying off-the-plan, Manciameli says they are in good hands. “These companies will go into those areas which research reveals are going to experience a growth phase. They will approach the builder of any new developments which fit the criteria and tell them that they have interested investors. “Eight out of 10 properties get rejected by Aviate or Blue Wealth because the developer is asking too much money or the design is incorrect, for example, the second bedroom doesn’t have a window which will impact on resale. “Their job is to ensure that these properties are attractive to the emotional owner-occupier market, not the investor market. They look at all sorts of things on a macro and micro level and inform the client, so they can become really empowered with the information and can make informed decisions about their investment.” Recently, Manciameli decided to break away from Mortgage Choice and launched Hunterwood Solutions in May – a full service financial services company. But that isn’t all from him yet. Still holding a deep passion for helping Australians achieve their property aspirations, he plans to launch a b2b business, Slipstream, to help other brokers help their clients invest in property, while also being able to add another income stream to their business. “Brokers can earn 2% on every referral, so if they did one investment property referral which turns into a $500,000 sale, then that is $10,000 they are making. “The first person I mentored did 22 referrals in six months and he made $220,000. Brokers are really missing out if they are just doing refinances and not saying to their client, ‘hey, can I help you with your property aspirations?’ ” Currently, Manciameli is working with getting this up and running for Connective brokers, however when he officially launches Slipstream in the new year, he hopes he can partner with many other aggregators and brokers.

SPECIAL REPORT 20

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Is bigger better? A look at major aggregators Major aggregators can offer scale and investment, but can they maintain a personal touch?

FAST FACT 84.6% Proportion of respondents to MPA’s Brokers on Aggregators survey who said they were satisfied with their aggregator’s fee or commission split structure

or some brokers, aggregators are a necessary evil. But for most, they’re a valued business partner. While there’s been some serious consolidation in the aggregation market over the last few years, several major aggregators are still moving from strength to strength in terms of broker numbers and settlement volumes. But is bigger actually better, and can brokers belong to a major aggregator without getting lost in the shuffle?

THE BENEFITS OF SCALE

While many brokers may like the culture or personal touch of a smaller aggregator, scale can deliver some significant benefits as well. Connective principal Murray Lees said the advantages of scale are myriad.

“Confidence in an established business. Community. Access to more extensive and established services. Larger support teams. Support on the ground in all states. Confidence in aligning your business with a large company and brand. Direct access to our compliance team. Benefits of commission increase when we meet and exceed targets with lender partners,” he said. Choice Aggregation Services CEO Stephen Moore agreed, and said that scale didn’t have be a trade-off. “Ideally a larger aggregator can provide the best of both worlds. The financial strength of a strong balance sheet and ability to invest in the business as well as maintaining the personal and tailored support of a smaller group,” Moore said. For PLAN CEO Phil Quin-Conroy, one of the major benefits of scale is the

ability to invest in technology. QuinConroy said the company had poured more than $20m into its Podium 2.0 software, an investment that would not have been possible without scale. “As a large aggregator, we have size, scale and the resources to invest in the highest standards of systems and support and this resonates with our brokers. Our IT solutions in particular are now second to none and brokers who partner with us have access to efficient, easy to use software that supports them to excel in their business,” Quin-Conroy said. And FAST CEO Brendan Wright said the company’s scale meant it was able to build relationships with a diverse panel of lenders, offering its brokers and their clients more choice. “Scale means that FAST has some of the most diverse and far reaching lender relationships in the market,

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SPECIAL REPORT 21

enabling broker partners to deliver product and services tailored specifically to meet their clients’ needs. Scale has also enabled FAST to refine its support systems and worldclass software platform, and invest in a professional development program

SCALE MEANS THAT FAST HAS SOME OF THE MOST DIVERSE AND FAR-REACHING LENDER RELATIONSHIPS IN THE MARKET - B RENDAN WRIGHT, FAST that is relevant and supports broker partners to build capability and sustainable business models. But it’s not just scale that a larger aggregator brings. FAST’s size is due in no small part to its extensive years in the market and that brings with it an established reputation, with recognised support systems and healthy lender relationships. We have very established relationships with lenders across residential, commercial and asset finance, so our brokers can access a wide range of products, from business loans to cash flow finance and asset finance,” Wright said.

DID YOU KNOW?

MURRAY LEES

ONE SIZE DOESN’T FIT ALL

But size doesn’t necessarily equate to similarity. While major aggregators may have scale in common, they argue that they each have a unique offering that seeks to appeal to an equally unique demographic of brokers. “Our focus is on attracting premium

STEPHEN MOORE

Respondents to MPA’s Brokers on Aggregators survey ranked ‘Accuracy and timeliness of commission payments’ as the most important service delivered by their aggregator

SPECIAL REPORT

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FAST FACT 68.1%

Proportion of respondents to MPA’s Brokers on Aggregators survey who said they were extremely unlikely to change aggregators in the next 12 months

brokers – quality, rather than quantity – and we’ve certainly built a network of over 1,300 impressive, dedicated, business-focused brokers. We work hard to support our brokers to evolve their businesses and take advantage of new opportunities as they emerge. Brokers need to constantly evolve their businesses to remain both competitive and profitable and this has been the key focus for us,” Quin-Conroy said. “The development of Podium 2.0 has been a major highlight for PLAN Australia. We have moved to take the lead in technology, viewing our IT platform as the cornerstone of our broker service offering.” Moore said Choice’s point of difference was its ability to serve as either a wholesale aggregator or franchisor. “Choice is the only full-service aggregator in the Australian market. We offer brokers the choice to either run their business under their own brand, with the support of great services like our technology platform and white label products, or take up our retail brand, Choice Home Loans, which offers national advertising presence, a top-ranked website and specialised practice management assistance,” he said. Moore said the aggregator can even offer a mix of the two models. “Some of our brokers have even incorporated both the wholesale and retail sides of the business, which has allowed them to expand and grow entirely new sources of revenue. When a broker comes on board with us we look at their business and goals on an individual basis and decide which components will best work for them.” Lees argued that Connective’s unique proposition was in the way its broker agreements were crafted. He pointed to the company’s policy of non-exclusive relationships. “Member brokers can choose to deal with lenders through our panel, or maintain their own direct agreements, whereas most other aggregators insist on exclusivity,” he said. Lees said the aggregator also didn’t handcuff brokers. “Member brokers own their own trail book. That means there is no restriction on them leaving should they choose to do so. This places the onus firmly upon us to provide them with excellence in support and service so that they continue to remain with us into the future.” Lees said transparency was also an important part of the aggregator’s relationship with its brokers. “The role of an aggregator as a relationship facilitator between lender and broker is key. We provide a straight-through interface between our brokers and lenders. We withhold

no information, and this ensures our relationships are of the highest integrity. We aim to foster greater trust and loyalty between all parties, which leads to closer, more sustainable interaction between broker and lender,” Lees said. Wright said he sees FAST as a home for “entrepreneurial, businessminded brokers”. “Our business model provides a broad suite of products, services and people to respond rapidly to brokers’ needs and help them excel in a changing marketplace.

THE ROLE OF AN AGGREGATOR AS A RELATIONSHIP FACILITATOR BETWEEN LENDER AND BROKER IS KEY. WE PROVIDE A STRAIGHT-THROUGH INTERFACE BETWEEN OUR BROKERS AND LENDERS - MURRAY LEES, CONNECTIVE In particular, our focus on supporting brokers to diversify their business and venture into the commercial market has been a big drawcard for us, as brokers look for an aggregator with a range of opportunities to build a strong revenue stream. Our commercial and asset finance division is a cornerstone of our business and it is what sets us apart from our competitors. At the same time, we’re very established in residential so we can help those brokers who have previously focused on commercial move into meeting the personal housing and investment needs of their business owner clients,” he said.

KEEPING THE PERSONAL TOUCH

While large aggregators may be better resourced and able to deliver more investment, the fear may be that their size means brokers get lost in the shuffle. But large aggregators contend that this doesn’t have to be the case. “At Choice our motto is ‘better advice through better listening’, so we consider it the defining characteristic of our business that we listen to each broker’s needs and come up with a strategy for growth that suits them, whether their goals are big or small. Anecdotally we’ve received similar feedback from members switching across to join us that their aggregators in the past haven’t listened to them on that intimate,

tailored level, so we’ve made it our mission to become the aggregator that provides specialist business support,” Moore said. Wright said FAST has made a conscious effort to staff its business in such a way as to provide a high level of personal support to its members. “Although FAST is large in size, we have invested significantly in building our two-tiered support system to ensure our brokers have that personal touch when they need it. Each broker has access to a Partnership Manager (PM) and Partnership Support Officer (PSO), ensuring not only that their daily back office needs are met, but that they are given specialist support to drive business success.” Quin-Conroy said PLAN had employed a similar strategy, and was focused on the continued professional development of its brokers. “We’ve built a team of passionate, best-of-breed staff to support our brokers to be the best they can be. For PLAN Australia, professional development is very much high on the agenda and we follow a busy calendar of professional development activities that ensure we have ongoing touch points and interaction with our brokers. In addition to group training events such as PD days and our conference, our BDMs visit brokers to provide them with one-on-one sessions; working closely to help them create improved efficiencies,” he said. “We are an advocate for our brokers and we constantly strive to listen to our brokers and cater to their needs as best we can.” Lees said he rejected the idea that large aggregators aren’t able to provide personal support, and said that Connective had centred its business on this kind of support. “Glenn and I were once mortgage brokers ourselves so we understand what is impacting on our members and can provide the personalised solutions to help them overcome these challenges. At Connective we work hard to ensure all of our members have a ‘personal touch’. All our support staff are visible to our brokers, so they know who they are talking to when they have a query. We have an extensive CRM where all our communications, emails, phone calls and events with brokers are recorded. We use this system to set tasks and follow ups to ensure our brokers are engaged at all times,” he said. Beyond this, Lees said he and the company’s other two directors, Glenn Lees and Mark Haron, remained “very visible and accessible”. “Glenn, Mark and I go to as many of our learning events as possible, and our brokers contact directly all the time. We enjoy working on and in the IAIN FORBES business, with our members.”

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SPECIAL REPORT 23

DID YOU KNOW?

BRENDAN WRIGHT

PHIL QUIN-CONROY

Respondents to MPA’s Brokers on Aggregators survey ranked ‘Quality of lending panel’ as the area in which aggregators perform best

FINANCIAL SERVICES 24

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Ditching life insurance commissions could lead to chronic un-insurance

national wealth and accounting group continues to call for greater transparency and tighter regulation within the life insurance industry, but said removing commissions would result in many Australians being “chronically underinsured”. These concerns come on the heels of an ASIC investigation into life insurance advice, finding that more than a third (37%) of the advice consumers received failed to comply with regulation governing a consumer’s best interest. The review suggested commission and remuneration structures may be the catalyst, citing that high upfront commissions are more strongly correlated with non-compliant advice. David Hasib, a partner at Chan & Naylor Wealth Planning, said that vested interests must clearly be addressed, but removing commissions was not the answer. “However, the existing framework is robust enough to prevent risk advisers churning policies, and if commissions were removed altogether in lieu of a service fee then this would not correlate to a one-to-one premium saving for the client.” Hasib said commissions justify the work that risk advisers undertake to investigate the features and benefits of policy definitions, which can set one insurer ahead of another despite the premium being similar. Although he agrees with an industry-wide review on standards, he fears that replacing commission with a fee-for-service structure will discourage Australians from protecting themselves. “Australians already don’t invest enough in their financial wellbeing, so why would they do so if they are expected to pay more for advice?”

OVERSEAS INVESTMENT IMPORTANT TO BUOY ECONOMY The latest ANZ/Property Council Survey shows that foreign investment in the Victorian property industry has driven business sentiment higher in the December 2014 quarter. Property Council Victorian executive director, Jennifer Cunich, said Victorian sentiment had steadily risen eight points over the past 12 months as a result of improving industry confidence. “Foreign property investors are helping lift industry buoyancy by playing an active part in the local market.” Cunich said 37%, 33% and 30% of responders in the residential, commercial and retail sectors respectively reported 10–50% of their sales were to foreign buyers during the quarter. “The importance of foreign investment in driving residential, retail and office capital growth expectations should not be underestimated. The recent influx is boosting construction activity, job creation and government tax revenue.”

CONSUMER PESSIMISM ISN’T ALL BAD NEWS

FAST FACT 11.2% The Westpac Melbourne Institute House Price Expectations Index fell by 11.2% in October, now sitting at 12.8% below its level of a year ago. The proportion of respondents expecting house prices to rise fell from 66% to 53.8%. Source: Westpac/ Melbourne Institute

Even though October marks the eighth month that the Westpac Melbourne Institute of Consumer Sentiment scored below 100 – which indicates that pessimists outnumbered optimists – it isn’t all bad news. Bill Evans, chief economist at Westpac, said the index rose by 0.8% from 94.0 in September to 94.8 in October. “The current reading for the index is 1.2% below the average for those eight months indicating that while the index seems to be ‘stuck’ in a pessimistic range there is no sign, at this stage, of ongoing deterioration. “Although we are observing this ongoing pessimism the result of this particular month is probably better than might have been expected given the violent moves in global financial markets that might have further unnerved respondents.” Consumers’ attitudes towards purchasing property improved in October, with the component “whether now is a good time to purchase a dwelling” increasing by 2.3%. However, sentiment is still 12.4% below its level of a year ago and 18.5% below its level two years ago.

‘HORIZONTAL INTEGRATION’ COULD LEAD TO CONFLICT Horizontal integration – where mortgage advice and financial advice are integrated – creates a risk of “conflicted remuneration”, according to a submission to the Financial Services Inquiry. Mortgage contest site, flongle, said in its second-round submission to the Inquiry that although there may be compelling reasons for both consumers and advice professionals to integrate the two, mortgage broker businesses will reintroduce “conflicted remuneration” to financial planning advice – which has been scorned under FoFA reforms after the recent financial planning crisis. “Horizontal integration of conventional mortgage broker businesses with any financial advice practice creates a situation whereby conflicted remuneration has again been reintroduced by companies and individual licences or authorised representatives of an Australian Financial Services Licence.” Mortgage Choice, which was specifically named in the submission by flongle, recently diversified into financial services about 18 months ago. Australian Broker spoke with Jessica Darnbrough, Mortgage Choice spokesperson, who said if the two are kept separate then it doesn’t cause an issue. “At Mortgage Choice, we believe it makes sense for mortgage brokers and financial advisers to work closely together, especially considering that mortgage broking customers are often making their biggest financial commitment and they need to ensure both their new asset and their personal risks are protected,” she said.

MARKET TALK

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The media has raised a fuss over the possible use of macroprudential tools by the RBA and APRA, but the concern may be overblown

THE LAST THING THE RESERVE BANK WANTS TO DO WITH THESE MACRO TOOLS IS TO CURB NEW DEVELOPMENT - S AVANTH SEBASTIAN

here’s been a lot of talk of late over the use of macro-prudential tools to cool the housing market. Both the RBA and APRA have hinted that they could use new methods to take some of the heat out of property. For the Reserve Bank, this means using strategies other than the cash rate to control the market. But how would the RBA and APRA go about this? In New Zealand, the RBNZ took the step of putting limits on high-LVR loans, and media pundits have pointed to a similar move by the RBA and APRA as a kind of doomsday scenario. But CommSec economist Savanth Sebastian said the Reserve Bank will be hesitant to take any drastic measures. “They’re not about collapsing the market. They’re about cooling the market. You wouldn’t want to read too much into it. I think the Reserve Bank is going to tread very, very softly on this one,” he said. The idea, Sebastian said, is to slow speculative investment rather than impact first home buyers or owner-occupiers. “The key here is that it will provide investors with a degree of caution in investing in the Australian property market. That’s really the area the Reserve Bank is looking to try to create a little more caution in across the housing sector. These macroprudential tools are not the end all and be all. I think the Reserve Bank is really going to be skirting around the edges,” he said.

DRIVING THE ECONOMY: NEW BUILDING ACTIVITY March quarter to June quarter

June quarter 2013 to June quarter 2014

New residential building

13.9%

11.2%

Alterations and additions

-0.1%

1.4%

Non-residential building

-0.5%

1.1% Source: ABS

And a bit of caution may be in order, Sebastian indicated. “I think one risk we’re seeing at the moment is the majority of loans coming through that are interest only and effectively are not paying down any capital. Investors are banking on growth after growth, and that’s not really a sustainable longer-term outcome,” he said.

NO DRASTIC ACTION

For their part, APRA and the Reserve Bank don’t appear to be looking at any drastic strategies comparable to those enacted by New Zealand’s central bank. Speaking before the Senate Standing Committee on Economics recently, APRA’s chairman Wayne Byres said they would focus on encouraging sensible lending standards. “We use the regulatory capital framework to create incentives for prudent lending and to ensure that while institutions remain free to decide their lending parameters, those undertaking higher risk activities do so with commensurately higher capital requirements,” Byres said, according to the ABC. This means that the most likely course of action may be to raise the requirements on how much capital a bank has to put aside for money loaned out. But even this strategy has been a point of contention for many in the industry. Nick Proud, executive director of the Residential Development Council, said that any caps to LVR could have perverse outcomes. “Arbitrarily increasing lending measures runs the risk of shutting more first home owners out of the property market. Macro-prudential controls should only be introduced where there is systemic risk. The RBA needs to be careful if changing borrowing practices applied to fix presumed problems in pricing in some localised mainland centres which may have an adverse impact on cities such as Hobart, Adelaide, Canberra and regional Australia,” he said. And banks haven’t welcomed any discussion around raising capital ratios, arguing that stricter capital rules shouldn’t have to apply to them, as

MARKET TALK brokernews.com.au

Australian banks have shown more resilience in the face of economic downturn than European and American banks. But Sebastian said concerns that the RBA would take drastic enough action to hamper the owneroccupier market are entirely overblown. “The Reserve Bank was in front of the Senate Hearing Committee recently, and I think it’s pretty clear they want to make sure that home building remains one of the key drivers of the Australian economy. We’ve got population growth which is going to continue to increase. In New South Wales alone population growth is 34% above its decade average, so we need a much bigger supply of homes to hit the market. The last thing the Reserve Bank wants to do with these macro tools is to curb new development. Any new tools that come in will be purely around trying to curtail some of that euphoria in the investment housing market,” he said. Whether or not the property market even requires policy intervention has also been questioned by some in the industry. Dr Andrew Wilson, senior economist at the Domain Group, said the market has been experiencing the lowest growth it has seen for some time, which may curb the need for the Reserve Bank to step in at all. “Without a sustained revival in economic activity, housing markets will continue to soften, ending the debate about macro-prudential tools or changes to property taxation policy designed to offset local and foreign investor activity.”

BY THE NUMBERS

Regardless of the eventual course of action, doomsday rhetoric surrounding the use of macroprudential tools isn’t helpful, Sebastian said. “I think the media certainly has overplayed the macro tools to a great degree. Not only has it hurt confidence domestically, but we’ve seen it impact even on share markets from a foreign perspective as well. Couple that with the falling Australian dollar, and we could see foreign investors selling out of our market.”

1.2%

CAPITAL CITY ANNUAL HOME VALUE CHANGES

The national median house price increased 1.2% last quarter, the lowest quarterly growth rate since March last year Source: APM

Source: RP Data

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ONE YEAR ON 28

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, November 2013

ASIC calls for tougher penalties

In a submission to the Senate last year, ASIC called for tougher penalties for white-collar criminals. The watchdog said it believed sentences handed down by judges in high-profile cases had been “out of step” with public expectations, and that there should be a minimum sentencing guide for crimes such as insider trading and corporate fraud. The submission came after ASIC appealed court judgments involving criminals the regulator believed were given light sentences.

What’s happened since? ASIC hasn’t changed its tune on the penalties for white-collar crime. ASIC chair Greg Medcraft recently claimed Australia was behind its international peers when it came to sentencing. He said such lax sentences made the country “a paradise for white-collar criminals”, and argued that penalties had not kept pace with inflation.

Aussies feel it’s a good time to buy Last year nearly three-quarters of Australians felt the time was right to buy property. RP Data’s Nine Rewards Survey of housing market sentiment found 74% believed it was a good time to buy. While the figure was encouraging, it was down from 80% six months prior, and 76% from a year prior. Results also varied dramatically from state to state, with not a single respondent in the Northern Territory tipping a buyer’s market.

What’s happened since? A run-up in property prices has somewhat dampened consumers’ outlook. With prices levelling off, the latest Westpac Melbourne Institute Index of Consumer Sentiment found the number of people who thought it was good time to buy fell 12.4% from the previous year. This doesn’t mean respondents expect prices to continue to climb. The proportion of respondents expecting house prices to rise fell from 66% to 53.8%.

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Planning the key to strong growth

epper recently hit a milestone, hiring its 1,100th employee. The lender’s director of sales and distribution, Mario Rehayem, told Australian Broker TV the company’s growth strategy was a twopronged approach. “The Pepper growth has been organic growth within the Australian business, and offshore we’ve acquired a number of businesses as well. The twoprong is organic and acquisition growth,” he said. Rehayem said this growth has come quickly for the lender. “In 2011, Pepper would have had just shy of 70 employees in Australia running the servicing business and the origination business. That today represents just shy of 400 staff in Australia, and we also operate in four other countries.” And as the company has acquired other businesses, those businesses have seen growth as well, Rehayem indicated. “The growth story has been a really exciting time for the business, and the great thing is it’s turning acquisitions into organic growth which is unheard of in today’s market,” he said. Rehayem emphasised the importance of having a growth strategy. “It has been controlled and planned from day one. In 2011 all the execs got together and the business got together and put a very strategic three-year plan [in place]. At the time, people thought we were too ambitious putting these plans together, but when a plan comes together and it all starts to come to fruition you start building a really good vibe in the business. That’s probably another area we are very proud of, is the culture we embed both in Australia and the other four companies we operate in,” he said. To enact a successful acquisition strategy, Rehayem said there is one key factor to keep in mind. “I think it’s picking the right business from the outset, and that is ensuring we have the right business that fits the market we operate in,” he said. Rehayem added that it was important in acquiring a new business to take on a strong management team. . For the full interview, head to www.brokernews.com.au/tv

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FORUM 30

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BDMs need to be more proactive Brokers believe BDMs need to make more of an effort

PROPERTY LOBBY WARNS RBA ON RATE RANSOM The Reserve Bank of Australia must not hold the Australian public to ransom by using interest rates to curb high property prices, according to the Real Estate Institute of New South Wales. The property association’s president, Malcolm Gunning, has said they are “disappointed” with the bank’s constant back-and-forth when it comes to the housing market. Commenter Grahame Hale agreed wholeheartedly.

“The Reserve Bank is acting like a school teacher threatening to cane all the property investors. What they should be tackling are the promoters who want investors to take interest-only loans and in property they are promoting so they can get their 20% commission. Property is not going up forever as supply and demand will cut in. Currently people can afford the loan but as prices go up they will drop out. Greed is taking over. How about getting a Reserve Bank Governor who know what he is doing? Look at the way they moved interest rates in the past. That control has gone now as banks move away from the Reserve Bank.” Grahame Hale on 23/10/2014 at 9:16AM

here’s no doubt that there are some great BDMs out there, but for Terry Shoesmith, director of East Coast Finance, BDMs on the whole need to be more proactive in reaching out to brokers. Part of the problem, Shoesmith said, is that BDMs are stretched too thin. Andrew Edwards suggested he wasn’t impressed by many BDMs, but that a good BDM could make all the difference. “We never get a visit from most BDMs. The ones that do come in to present promise the world and never deliver. Try getting a BDM from one of the majors to return your call. It takes five calls and messages before they respond sometimes two days later. We put most of our business through one lender and they don’t have the lowest rates. It’s because the BDM is a real relationship manager, as in he really knows how to grow the relationship and we can count on him 100% of the time. That’s what we want from a BDM: someone who we can get on the phone to in an emergency and rely on them to push deals through when they stall.”

“WE PUT MOST OF OUR BUSINESS THROUGH ONE LENDER AND THEY DON’T HAVE THE LOWEST RATES. IT’S BECAUSE THE BDM IS A REAL RELATIONSHIP MANAGER” Papery, however, said he doesn’t want over-attentive BDMs. “I don’t want 23 smiling BDMs in my office each month (or on the phone for that matter!). I’d rather 23 clients and an excellent broker website.” SanityPrevails argued that brokers were expecting too much.

FORUM LENDING STANDARDS STRETCHED APRA recently warned that banks’ lending standards are being stretched as competition increases. Brado on 23/10/2014 at 9:22AM If anything lending standards are tighter. Less lenders are doing 95% LVRs. More of them are looking for under 80% lends with pricing discounts in that area. These APRA people are alarmists, nothing more.

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

“So let me get this straight Terry. You want sub 4.5% rates, no fees, 0.7% upfront, 0.25% trail from day one AND more BDMs. Please, is there another expense lenders can help you with? Oh yeah, unconditional approvals under 24 hours and if they can’t do that, get more staff. How about, you know the products, rates and credit policy and submit accordingly rather than someone coming out buying you coffee or lunch as well as providing the above? It seems like it’s a constant putting your hand out for more.” But Rob pointed out that the comment sounded a bit suspicious. “Maybe I didn’t read Terry’s article as well as you but I didn’t see any reference or complaints about interest rates, commissions, trails, expenses or 24 hour approvals. He didn’t want a free coffee or lunch and I didn’t see his hand out for anything in particular other than a personal visit from a BDM, which I thought would benefit both parties. So SP, I recommend ‘a Bex, a cup of tea and a nice lie down’. You actually sound like an unhappy bank BDM.”

Andrew Edwards on 24/10/2014 at 8:58AM I don’t think it is the banks tightening up. It is the mortgage insurers. Some of the reasons I have had for declines lately are ridiculous, i.e. the house is within 50 metres of high tension power lines!

LENDING STANDARDS PROPERTY INVESTMENT EXPERT BUSTS NEGATIVE GEARING ‘MYTHS’

Ben Kingsley, chair of Property Investment Professionals Australia and chief executive of Empower Wealth Advisory, has rubbished the argument that negative gearing favours the wealthy. Bottom Line on 22/10/2014 at 10:04AM See how the property market goes without negative gearing. It would send us back to government built housing to house our citizens, and this requires more taxation to build and upkeep. It was the reason they had to bring negative gearing in in the first place. EF on 22/10/2014 at 12:36PM Negative gear should only be applied to new properties, or else how can it increase the dwelling supply?

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Let’s Get Loud NextGen.Net participated in Loud Shirt Day to support deaf children develop spoken language and transition into mainstream schooling

n Friday 17 October, the staff at leading technology provider NextGen.Net let their shirts do all the talking when they participated in Loud Shirt Day – a fundraising campaign to raise money and awareness to help give the gift of sound and speech to deaf children around Australia. The money raised by NextGen went to The Shepherd Centre, an organisation dedicated to helping children who are deaf and hearingimpaired to develop spoken language, allowing them to fully participate in their communities. Tony Carn, NextGen’s sales director said it is the first time they have participated in Loud Shirt Day and supported The Shepherd Centre, but it was special to help out a great organisation that doesn’t have as much awareness around it as other causes. “Loud Shirt Day is a fantastic cause. The money raised helps kids who are deaf to be able to transition into normal schooling, and it has a really high success rate in being able to do that with the therapy they provide. “It’s also a cause that doesn’t have a lot of media around it, so it was really special to be able to help raise money and awareness. The Shepherd Centre has been around almost 45 years. It started off with just five families and now it supports over 350 children and families. But the organisation isn’t that big or high profile so it often does get overlooked in the bigger picture. “It doesn’t have the marketing dollars like other larger and more well-known organisations, but it certainly has a great cause. It doesn’t raise a huge amount of money each year, so it was good to focus on a charity that doesn’t get focused on by a lot of other companies.”

Not surprisingly, there were a lot of Hawaiian shirts that made an appearance. But surprisingly, for Carn, was that not many people went out to buy a shirt just for the occasion. “I was pretty impressed with how many bad shirts were actually lurking in people’s closets anyway. I thought I was going to do pretty well myself because I went out of my way to get a legitimate ‘Made in Hawaii’ Hawaiian shirt. But, it was actually a bright orange shirt with a front and back picture of Elvis Presley on it which took the cake.

IT’S ALSO A CAUSE THAT DOESN’T HAVE A LOT OF MEDIA AROUND IT, SO IT WAS REALLY SPECIAL TO BE ABLE TO HELP RAISE MONEY AND AWARENESS – T ONY CARN “The guy who wore it can’t even remember how he ended up with it; he just woke up after a big night at a bowling alley with the shirt. I kept making offers to buy it and the price went higher after each drink, but he wouldn’t give it up.” NextGen raised about $500 from the 60 staff who participated in Loud Shirt Day, which the company matched dollar for dollar. It also made a corporate donation. However, Carn says there is more to it than just raising money. “It’s about awareness and getting involved. Days like this also provide a great opportunity for companies to tie it in with team bonding activities. We tied it in with a staff team building

DID YOU KNOW?

11.2% On average, one Australian child is identified with impaired hearing every day It costs The Shepherd Centre approximately $18,000 a year to provide each child with the essential therapy they need to learn to listen and speak 90% of children who graduate from The Shepherd Centre enter mainstream schooling Source: Royal Institute for Deaf and Blind Children & The Shepherd Centre

afternoon where we did a great race in The Rocks in Sydney. The staff had a great day, it was a great cause, everyone enjoyed getting involved and donating, plus we got to raise awareness for a really good organisation.” Carn said it is important for businesses – big and small – to get involved in community organisations and activities whenever they can. “To be a good corporate citizen, it is important to engage in things in your community and support causes where you can. It is not only important for companies as a whole to support charitable organisations, but also to endeavour to get staff involved as well. “I think the most important message for all businesses is to not just get involved because you want to raise your public profile, but because it is a good thing to do. It doesn’t matter what size your company is – whether you are a broker, brokerage, aggregator or bank, it’s just important for everyone to get involved because every little bit helps.”

INSIDER 33

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How much would you pay for a ghost town? An auction site in the United States is offering an entire town for sale

uction.com is selling a ghost town in the US state of Connecticut for less than $1m. Johnsonville Village, in a section of East Haddam, will go for $800,000 on 28 October, according to Auction. com. Not too bad for your very own Connecticut village. The 62-acre property comes with eight 19th century structures, a pond, a covered bridge, wooden dam, waterfall and the possibility of a restless spirit or two, the release said. In the 1960s, a man named Raymond Schmitt purchased the property with the intention of turning it into a tourist attraction. However, Schmitt had a feud with local officials and eventually closed down the village and sold it, according to the Boston Globe. The Hartford Courant reported that MJABC LLC has owned the property since 2001, though it has been deserted for years. The brokers at RM Bradley are hoping that the village’s dilapidated condition, the result of years of neglect, will be a selling point. The

spooky connotations of an abandoned old New England village are precisely why Jim Kelly, senior vice president of RM Bradley, put the ghost town on the market just before Halloween. Of course, once you move into the abandoned town, you’ll need some protection from the inevitable zombie hordes. That’s why a company in the UK has developed a zombieproof log cabin. Tiger Log Cabins’ Zombie Fortification Cabin, the ZFC-1, comes complete with an escape hatch, reinforced slit windows, walls and doors, surrounding barbed wire, an arsenal and optional add-ons such as water cannons and flame throwers. But the zombie apocalypse shouldn’t keep you from enjoying life. That’s why the cabins also include living area with TV, a sound system and an Xbox (presumably so you can practise slaying digital zombies before moving onto the flesh-and-blood variety). The cabin retails for around $129,000, but you can’t put a price on safety. The ZFC-1 should make a welcome addition to any abandoned 19th century village.

DIRECTORY AGGREGATOR / WHOLESALE BROKER

Choice Home Loans 1800 188 288 www.choicehomeloans.com.au Page 17 Connective 1800 188 288 www.choicehomeloans.com.au Page 25 FAST 02 9233 8222 www.fastgroup.com.au Page 13 PLAN Australia 1300 78 78 14 www.planaustralia.com.au Page 11

BANK

ANZ 13 13 14 www.anz.com.au Page 9 Bankwest 13 17 19 www.bankwest.com.au Page 29

FINANCE

Rhino Money www.rhinomoney.com.au 1300 654 355 Page 8

Semper Capital Pty Ltd 1 800 SEMPER (1 800 736737) www.semper.com.au enquiries@semper.com.au Page 21

INSURANCE

Swiss Re Corporate Solutions +61 2 8295 9500 www.swissre.com/ corporatesolutions Page 15

LENDER

Homeloans Ltd 13 38 39 www.homeloans.com.au Page 23 Liberty Financial 13 11 33 www.liberty.com.au Page 3 Macquarie 13 62 27 macquarie.com.au/mortgages Page 36 ME Bank (03) 9708 3994 mebank.com.au Page 19

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

National Australia Bank www.nabbroker.com.au Page 5 and 7

MORTGAGE BROKERAGE Aussie 02 8297 0000 www.aussie.com.au Page 31

SHORT-TERM LENDER

Eastwood Securities 08 8408 0800 eastwoodsecurities.com.au admin@eastwoodsecurities.com.au Page 4 Interim Finance 1300 731 317 www.interimfinance.com.au Page 2 Mango Credit 02 9555 7073 www.mangocredit.com.au Page 1

OTHER SERVICES

Deposit Power 1800 678 979 www.depositpower.com.au Page 6 Trailerhomes 0417 392 132 Page 28

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IN FOCUS

he 13th annual Australian Mortgage Awards, sponsored by Westpac, was recently held at Sydneyâ&#x20AC;&#x2122;s Town Hall. The event was emceed by cricketing legend Michael Slater, and honoured brokers and industry service providers in a variety of categories. The 650-strong crowd was treated to live entertainment by internationally renowned singing groups The Diamonds and Boys in the Band, while a live auction at the event raised much-needed funds for the Westpac Life Saver Rescue Helicopter Service. Photography by Simon Kerslake & Peter Secheny

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