Australian Broker 12.17

NEWS Foolish to go it alone A franchise boss says consumers would be crazy to buy without a broker p4

ANALYSIS Cracking down on the crackdown How changes to investment lending will impact you p10

COALFACE Moving beyond mortgages A broker’s successful foray into planning p16

SEPTEMBER 2015 ISSUE 12.17

BIG IDEA Tinder for brokers?

A new networking app for the industry P21

MARKET TALK The million-dollar club

BRIAN HARTZER Westpac’s CEO on the value of brokers and the future of the channel P18

A staggering number of suburbs hit seven figures P22

FINANCIAL SERVICES ASIC hits 21st Century The controversial developer draws ASIC’s ire P24

2

NEWS

AT A GLANCE

WORLD

INDUSTRY

Dates to watch in the industry P4

Facebook friends could scuttle loans P6

A young broker tops $100m P8

BROKERNEWS.COM.AU

A GIFT FROM THE ATO

How Aussies will use their tax refunds

21% 19.2% 22.7% 20.8%

EDITORIAL

SALES & MARKETING

Editor Adam Smith

Sales Manager Simon Kerslake

News Editor Julia Corderoy

Holiday

Journalist Maya Breen Production Editor Roslyn Meredith

Renovations

ART & PRODUCTION Design Manager Daniel Williams Designer Lea Valenzuela

Mortgage reduction

Traffic Coordinator Lou Gonzales

Account Manager Rajan Khatak Marketing and Communications Manager Lisa Narroway

CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan

Invest/save

Human Resources Manager Julia Bookallil

EDITORIAL ENQUIRIES

21.9%

Adam Smith +61 2 8437 4792 adam.smith@keymedia.com.au

Other

SUBSCRIPTION ENQUIRIES

Source: Homeloans

POOR CULTURE IN THE FINANCE INDUSTRY?

Greg Tanzer

Is a poor culture of conduct driving mistrust in the finance industry?

That’s apparently what ASIC believes. In its half-yearly enforcement report, the industry watchdog claimed there needed to be a “fundamental shift” in the culture of the financial services industry, from “poor advice” and “mis-selling” to one that focused on achieving and rewarding good outcomes for consumers.

ASIC commissioner Greg Tanzer claimed this culture was driving bad conduct in the industry.

“Poor culture is a key driver of poor conduct in the financial services industry. Given the strong connection between the two, tackling poor culture will be a major priority for ASIC over the next six months and beyond. We’ll ensure that everyday Australians who suffer loss are remediated appropriately and as quickly as possible.”

Financial advice in particular seems to be in the regulator’s crosshairs of late. ASIC recently handed out a $20,000 fine to an adviser group over misleading claims about SMSFs, placed licensing restrictions on a Queensland firm found to have compliance deficiencies, and permanently banned an adviser found to have submitted false insurance policy proposals.

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ADVERTISING ENQUIRIES

Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak +61 2 8437 4772 rajan.khatak@keymedia.com.au Key Media Pty Ltd Regional head office, Level 1O, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, Toronto, Manila This magazine is printed on paper produced from 1OO% sustainable forestry, grown and managed specifically for the paper pulp industry 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 4

BY THE NUMBERS

CONSUMERS CRAZY TO GO IT ALONE

71%

Nearly three-quarters of Australians (71%) believe that recent major bank scandals over poor financial advice demonstrate that the banks’ boards are not working effectively

Source: UMR

The head of a major Australian mortgage broking franchise believes APRA’s push to keep growth in investment down has resulted in an increasingly complex lending market that is likely to cause more people to seek out the services of a broker.

“We have seen a number of banks make some sweeping changes to their policy and pricing in a bid to curb their level of investment lending growth,” Mortgage Choice CEO John Flavell said.

“These changes, which include modifications to servicing criteria, loan-to-value ratio restrictions and interest rate increases across select home loan products, have made the home loan market more confusing and complex,” he said.

“As a result, buyers increasingly need expert advice to help them navigate the home loan maze and

find the right product for their needs – which is where mortgage brokers come in.”

Flavell isn’t alone in his opinion.

Multifocus Properties & Finance CEO Philippe Brach believes people, especially investors, would be “crazy” to try to get a mortgage without a broker.

“To go to a lender on your own at the moment would be crazy; without the scope that a broker has there’s no way you could know the different requirements the banks have,” Brach said.

“It used to be that you could go to the big four banks and they would be pretty similar, but now if you’re an investor the requirements are different from bank to bankz and if you go in by yourself you don’t stand a chance because nobody at the bank is going to guide you through.”

WHAT THEY SAID...

Greg Tanzer “Poor culture is a key driver of poor conduct in the financial services industry” P4

Siobhan Hayden “The $30.5bn growth compared to last financial year indicates that customers continue to select brokers for their lending needs” P8

Ben Kingsley “There needs to be a reality check for people out there that property is not a given that you are going to get a guaranteed return” P12

DATES TO WATCH

A rundown of the next fortnight’s events

SEPTEMBER

2

What: MFAA NSW Commercial Lending Breakfast Where: Waterview, Homebush The particulars: A breakfast with former Wallaby, investigator and businessman Dan Crowley, CBA’s John Peters and the MFAA’s Rod Edge

SEPTEMBER

8

What: FBAA Qld Networking Lunch Where: Southport Sharks, Southport The particulars: This networking lunch will feature guest speakers from new FBAA partners Your Super 4 Life and Your Digital File, as well as the opportunity to catch up with fellow members and the Queensland state president

SEPTEMBER

9

What: ABS housing finance statistics The particulars: The ABS releases its monthly housing finance figures. The Bureau’s previous release indicated a slight cooling in investor demand following months of jockeying by regulators to curb investment lending.

Will this month follow suit?

NEWS 6

WORLD NEWS

ON THE JOB

A rundown on Australian employment Job vacancies rose by

The number of professionals actively seeking employment remained mainly flat year-on-year: a small decrease of

18%

year-on-year in Q2 2015 compared to Q2 2014

2%

from Q2 2014 to Q2 2015

UNITED STATES OF AMERICA FACEBOOK FRIENDS COULD SCUTTLE HOME LOANS Social media giant Facebook was recently granted a patent in the United States for a system that would allow lenders to use analysis of an individual’s friend list in determining whether they should be granted a loan or not.

In the US, lenders use an individual’s credit score, a statistical analysis of a person’s credit files, to determine whether they should be approved for a loan such as a mortgage.

Included in Facebook’s patent application was a hypothetical where a lender could use the average credit score of the individuals an applicant is friends with on the platform to determine whether to proceed with a loan application. “[The lender] examines the credit ratings of members of the individual’s social network who are connected to the individual through authorised nodes,” the application read.

“If the average credit rating of these members is at least a minimum credit score, the lender continues to process the loan application.

Otherwise, the loan application is rejected.”

According to Rebecca Hona, a mortgage broker at buyers’ agency wHeregroup, Australians can relax though, as the system’s use of credit scores means it is unlikely to ever be rolled out here.

“Our system of credit reporting is quite different to what happens in America; in fact it’s almost the opposite, so I can’t see a system like that happening here,” Hona said.

The number of professionals actively seeking employment was up

Job vacancies rose by

8%

5%

quarter-on-quarter from Q1 2015 to Q2 2015

quarter-onquarter from Q1 2015 to Q2 2015

Source: APAC Employment Monitor

BUYING OFF THE PLAN GETS HARDER Buying a block of land or house off the plan is set to become more difficult as Australia’s biggest bank makes changes to how it will finance people looking to do so.

The Australian Financial Review revealed that the Commonwealth Bank had provided a confidential presentation to mortgage brokers in which the bank said it would not provide finance to people looking to buy in new developments until all necessary work to make lots ready for development

had been completed.

According to the AFR, the confidential presentation told brokers that rather than relying on a development plan to assess whether or not it would commit to a loan, the bank would now wait until an external valuer physically inspected the lot.

“We believe a more accurate measurement in getting a valuation on unregistered land at an appropriate time should instead be based on the valuer having access to the estate and being able to physically identify

the allotment,” the bank’s presentation read.

The bank is likely to formally introduce the changes in the coming weeks, and in a statement to the AFR it defended the move as a means of practising responsible lending habits.

“In line with our responsible lending commitments, we constantly review and monitor our lending standards to ensure we are maintaining our prudent lending standards and meeting our customers’ financial needs,” the statement read.

NEWS 8

FACEBOOK AND THE FUTURE

Social media on the rise in Australia 80% of Australians use social media (up from 65% in 2012)

59% of Australians use social media on a daily basis

23%

51%

of Australians use social media more than three times a day

believe the time they spend interacting on social media is as valuable as time spent in person

36% list keeping up with current events as one of the top reasons for using social media Source: Deloitte

MAJOR MILESTONE FOR YOUNG BROKER

FAST FACT

Siobhan Hayden

BROKER MARKET SHARE HEADED NORTH The last two years have been banner ones for the mortgage broking channel, as broker market share finally cracked the 50% threshold. Now, new research shows brokers are continuing to make a major impact on the market.

The research, conducted by Comparator and commissioned by the MFAA, showed that brokers were responsible for 66.3% of new mortgage growth in the 2015 financial year. Out of the $46bn total increase in mortgage lending recorded by the ABS, brokers originated $30.5bn.

“The $30.5bn growth compared to last financial year indicates that customers continue to select brokers for their lending needs,” MFAA CEO Siobhan Hayden said.

Among the impressive results for brokers were a 6% year-on-year increase in the dollar value of residential loans to $47.2bn, and a rise in market share to 51.3% from 48.3%.

And Mortgage Choice chief John Flavell has predicted that bank moves to slow investor lending could actually end up delivering even greater market share to brokers.

“Buyers increasingly need expert advice to help them navigate the home loan maze and find the right product for their needs – which is where mortgage brokers come in,” Flavell said.

$15,000

Average personal loan amount used for home renovation Source: CUA

DID YOU KNOW?

Shore Financial has made some big waves in the industry since launching two years ago, writing more than $1bn in home loans in its second financial year. The group has also doubled its staff in 2015, and has seen its individual brokers earning accolades.

One of those brokers, Thomas Hawley, recently hit $100m in loans for the 2015 financial year. Hawley has only been in the industry for two and a half years, and said a friendly competition led him to set his sights on the milestone.

“Originally I set my goal at $85m. I thought that was a big stretch at the time,” he said.

But Hawley and two other colleagues decided to compete to see who could lodge the most applications in a month, and Hawley ended up writing $33m in 30 days.

He said the result convinced him to raise his goal to $100m.

$9.06bn Commonwealth Bank reported a statutory net profit after tax of $9.06bn for 2015. The result came despite below-system home loan and broker growth Source: Commonwealth Bank Thomas Hawley

10

ANALYSIS

CRACKING DOWN ON THE INVESTMENT CRACKDOWN Changes to investment lending policies have been happening so fast they can leave your head spinning. But what are the broader ramifications of these changes in the mortgage market, how can they affect your business and your clients, and how can you adapt?

WHEN BANKING regulator APRA announced it would be keeping an eye on the strong growth in investor lending in December last year, warning Australian banks to keep annual growth under 10%, aggregate year-on-year growth was tracking at 11%.

Since then, a raft of lenders have responded, announcing a range of restrictions on their investment lending policies, from tightening credit assessment policies to decreasing maximum LVRs on investment loans and increasing interest rates for investors – each lender citing support for the prudential regulator’s actions to ensure lending practices remain sustainable.

But according to the latest monthly banking statistics released by APRA, aggregate year-on-year growth in loans to investors has continued to rise, with growth of 12% over the 12 months to June. So as the market waits for the tougher lending policies to filter through into the investor segment, Australian Broker has analysed how the mortgage world has reacted to the clampdown and what it might mean for the future.

Unintended consequences Looking at APRA’s investment lending statistics, it is hard to argue that investment lending hasn’t seen significant growth, especially when you compare growth of the investor segment to that of the owner-occupied segment. According to APRA’s figures for over the 12 months to June, the growth in lending to investors doubled growth in lending to owner-occupiers, which recorded moderate year-on-year

11

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growth of 6%. On the surface, you can understand APRA’s motivations and actions: lending to investors needs to be slowed; the market must restore balance and sustainability.

However, upon deeper inspection, the f laws of such a blunt blanket approach to curbing investment lending becomes more and more apparent. James Symond, chief executive of Aussie Home Loans, explains some of the unintended consequences of APRA’s crackdown, which has had negative side effects on the Australian mortgage and real estate markets.

“The positive effect is [the restrictions] will curb investor lending. The negative effect is [the restrictions] will curb investor lending. It certainly will have an effect on investors,” he told Australian Broker.

“But many of the investors

out there today are ‘mum and dad’ investors, who may have an investment property already or may own their own home and are looking at purchasing another property to negatively gear as part of their assets or portfolio moving forward. It is those investors who will be particularly hurt.”

While Symond says the hikes in interest rates are unlikely to be the major deterrent – considering rates are at all-time lows – the tightened regulation around credit assessments and LVRs will. “… that’s what will slow and/or stop the mum and dad investors from purchasing. But it won’t stop foreign buyers; it won’t stop international purchases – particularly in Sydney where it is very strong in terms of international purchases from China in particular. It is also particularly strong where these purchasers are using cash; these

James Symond

“Many of the investors out there today are ‘mum and dad’ investors ... It is those investors who will be particularly hurt” James Symond, Aussie Home Loans

ANALYSIS 12

parts of the country; however, this is a trend I can see that will continue as it mirrors the lifestyle demographic desires of Gen Y. “It’s tough enough for [first home owners] as it is, let alone paying higher interest rates and now needing bigger deposits.”

In fact, according to Manciameli, the clampdown on investment lending will likely only have a minor effect in the short term and only at the margins, affecting those who would benefit from investing the most.

Ben Kingsley

“There needs to be a real open conversation around the benefits of property and who is appropriate to be investing in property” Ben Kingsley, PIPA purchasers are not borrowing money. They are a bit off the radar from an APRA or finance perspective.”

A mind-boggling approach John Manciameli, mortgage broker and principal of Hunterwood Solutions, which specialises in providing investment advice and finance, says the amped-up surveillance of growth in the investment market is a short-sighted move by APRA. “This boom in prices is largely a Sydney story and to a lesser extent Melbourne. If you ask anyone in Perth, Darwin or Hobart if there is a price boom, they will tell you that prices are actually dropping.

Hence APRA is curtailing the one bright spot of the economy, such as construction and its multiplier effect,” he told Australian Broker.

“Just when there is an armada of tradespeople leaving the mines looking for work, APRA is putting

the reins on construction.

“The whole of the country is suffering because of what is happening in Sydney. It boggles my mind!”

Manciameli also pointed to the sinister effects such regulations could have on the already dwindling first home buyer market. According to figures from the ABS, first home buyers accounted for 15.9% of all home loans financed in June, well below the long-run average of 19.8%.

“The other point to bring up is the detrimental effect on first home owners. There has been a seismic shift in the way first home owners are entering the market that I am not sure the regulators have caught on to just yet,” he said.

“That is, most first home owners in Sydney are renting in their preferred suburbs and getting on the property ladder as investors.

This may not be the case in other

Is there an alternative?

It is safe to say that the mortgage industry hasn’t welcomed the increased regulation with open arms. But with the strong growth in investment lending causing an imbalance in the market, are there any other alternatives?

Ben Kingsley, chair of Property Investment Professionals of Australia (PIPA), told Australian Broker that there are.

“I think the best thing that APRA could have done is to coordinate an approach through consumer affairs around the states to say that property investment carries risk.

“We believe that consumer awareness campaign should talk about people who have lost money investing in property. There needs to be a reality check for people out there that property is not a given that you are going to get a guaranteed return. It is just not the case.

“There are people who are investing in property currently in heated marketplaces who are experiencing losses ... as we have seen happen when we have had other boom stages in the Melbourne and Sydney markets. Just putting that fear into the marketplace or that conservatism in the marketplace could have done a lot of heavy lifting that APRA and the RBA are looking for in order to prevent a price bubble.”

On top of an education piece, Kingsley says speculative investment and property spruiking could be avoided without the negative side effects if the government “had the guts”.

“Shares and superannuation are dwarfed in comparison to what residential property is worth to this nation. There needs to be a real open conversation around the benefits of property and who

is appropriate to be investing in property,” he said.

“This comes back to our biggest point around regulation around property investment.

If the government had the guts to regulate property, then we wouldn’t see speculation in property and we wouldn’t see this overweighting or full access to property investment which is unsustainable in certain markets at the moment.”

What does this mean for brokers?

Despite the backlash, APRA has defended recent efforts to slow down lending to investors.

Speaking at the House of Representatives Standing Committee on Economics Inquiry into Home Ownership, APRA chairman Wayne Byres said the steps taken by banks to keep year-on-year investment lending growth below 10%, and to hold more capital against their mortgage books, were “common sense.

“We have requested banks to take a prudent view of borrower income, ensure they are not underestimating a borrower’s living expenses, and allow for the fact that interest rates will not always be as low as they are today.

“None of this should be seen as anything other than common sense.”

So what does this mean for brokers going forward? According to Manciameli, brokers have a big opportunity to place themselves in a position to add real value.

“Brokers should expect more change to credit policies and more changes to rates and more confusion for the end consumer.

But I can’t think of a better time to add value as a broker. Each lender is going to be reacting differently, and this where a broker is going to shine. By being on top of which lender has an appetite for investment lending, a broker will provide solutions to their clients’ investment property aspirations,” he said.

“Credit advice will become a lot more multifaceted across interest rates, LVR restrictions, an understanding of a lender’s investment book growth, and so forth. The key is communicating this to their clients and to be seen as someone who is on top of these fast changes.”

Symond agrees, adding that

13

“Just when there is an armada of tradespeople leaving the mines looking for work, APRA is putting the reins on construction” John Manciameli, Hunterwood Solutions

John Manciameli

despite the negative reaction to the investment clampdown, the overall mortgage market is still booming and full of opportunity.

“Mortgage brokers are still only 51% of the share of the f low, so mortgage broking in itself still has a long way to go and a large lump of share which they can acquire,” he told Australian Broker.

“Customers today more than ever need more information and need the strength of that relationship which mortgage brokers can provide.

“Brokers should focus on the broader marketplace, on the various segments – first home buyer, second home buyer, mum and dad investor, professional investor, renovator, etc. There is a broad market out there.

“The investor market no doubt has been a significant amount of f lows, in particular the last few years, but the marketplace presents itself with massive opportunity for any professional lender or mortgage broker writing mortgages.”

14

ANALYSIS

SELF-MANAGED SUPER FUNDS: TO BE OR NOT TO BE? Self-managed super funds have come under the scrutiny of David Murray’s Financial System Inquiry, and more recently ASIC. What does this mean for the future of SMSFs and SMSF borrowing?

FAST FACTS

534,176

The total number of SMSFs at June 2014

1,011,686

The total number of SMSF members at June 2014

29%

The growth in the number of SMSFs from 2009 to 2014

9%

SMSF members as a percentage of the total Australian superannuation system

51%

Percentage of total LRBAs through SMSFs which relate to residential property

Source: ATO

ADVISERS FOR self-managed super funds (SMSFs) would argue that, for the right person, an SMSF can offer a consumer greater flexibility and increased control over how their investments can work for their retirement. And in a world where consumers have more and more power over how they interact with financial products and services, it seems they are finding the increased control of SMSFs very appealing.

According to a report released by the ATO, Self-Managed Superannuaton Funds: A Statistical Overview 2012–13, the number of SMSFs ballooned by 29% to 534,000 in the five years to June 2014. SMSFs now make up 99% of the number of funds and 30% of the $1.9trn in total superannuation assets. The more than one million SMSF members now represent 9% of the approximately 11.6 million total members in Australian super funds. SMSFs are growing at lightning speed.

However, as the number of SMSFs continues to grow, so too does the scrutiny around SMSF establishment and advice, and the concern over ‘risky’ direct borrowing arrangements by superannuation funds.

Advisers under close watch After an ASIC review of the sector found there was “significant room for improvement” in the quality of SMSF advice received by clients, the regulator announced it would be a priority surveillance area.

In July, ASIC released two information sheets to improve the quality of advice

provided by advisers on SMSFs. The information sheets are intended to assist advisers in complying with their conduct and disclosure obligations under the Corporations Act, as well as outline what ASIC looks at when undertaking surveillance in this area.

According to ASIC, the information sheets specify the types of risks and costs that an adviser should consider, discuss and then disclose to clients when providing advice on establishing, or switching to, an SMSF. They also deal with the costeffectiveness of this type of superannuation arrangement, making clear ASIC’s view that an SMSF with a starting balance of $200,000 or below is unlikely to be in the client’s best interests, and that advice to establish one below that threshold is more likely to be scrutinised by the regulator.

“Setting up an SMSF is a significant financial step for consumers, and many factors can impact their decision. It is therefore important that consumers receive good-quality advice that will assist them in making informed decisions about their retirement savings,” ASIC deputy chairman Peter Kell said of the release of the information sheets.

“ASIC wants to ensure that only those investors for whom an SMSF is suitable are advised to establish an SMSF, and that our expectations around the standards of advice are clear.”

Unwarranted concern However, a Sydney-based law firm has claimed that ASIC’s newly released SMSF guidance is “simply naïve”.

Townsends Business & Corporate Lawyers has described the regulator’s information sheets as “completely incorrect, arbitrary and deeply ill-informed”.

In a statement on their website, the law firm claims there are a number of reasons why the idea of a minimum balance of $200,000 to establish an SMSF is unnecessary, and could potentially harm consumers.

“Given the current very strict rules about how much money you can contribute to super, there are certain strategies that are not available via public offer funds that can give a massive boost to long-term retirement income such as LRBAs [limited recourse borrowing arrangements] to buy direct shares and property, even where the starting balance is well under $200,000 since that is just the deposit,” the statement read.

“Only via a SMSF can the client take advantage of certain strategies that are not practically available via a public offer fund, such as the ability to jointly invest in an asset portfolio with a related party … the starting balance again is not relevant.

“ASIC’s focus on short terms costs is simply naïve – it effectively says it is better to pay 2% fees in a public offer fund that yields a 5% return in the long run compared to say 7% fees in a SMSF that yields 20% returns over the same period.”

What about SMSF borrowing?

Peter Kell isn’t the only one to express concern over the growing SMSF sector.

In his Financial System Inquiry, David Murray scrutinised the emerging trend

15

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of SMSFs using direct borrowing arrangements to purchase assets for their portfolios. The final report recommended that the government should restore the general prohibition on direct borrowing for LRBAs by superannuation funds.

“Borrowing, even with LRBAs, magnifies the gains and losses from fluctuations in the prices of assets held in funds and increases the probability of large losses within a fund. Because of the higher risks associated with limited recourse lending, lenders can charge higher interest rates and frequently require personal guarantees from trustees,” the FSI stated.

According to the ATO report, the majority of SMSFs are in “accumulation phase”, which means members are working to amass their superannuation investment portfolios, such as by investing in property using LRBA arrangements.

Of those SMSFs with assets held under LRBA arrangements, the ATO statistics reveal that the majority acquired assets in residential real property (51%) and non-residential real property (28%).

In terms of value, real property assets collectively made up 89% or $7.4bn of investments in LBRAs by SMSFs. However, a major SMSF association says there is unlikely to be a complete ban placed on SMSF borrowing.

The director of technical and professional standards at the SMSF Association, Graeme Colley, says there are “positive signals” coming from the government, suggesting that it is unlikely that SMSF borrowing will be forbidden. “… LRBAs, as a percentage of total SMSF assets, are still a small percentage of the total pool. They are increasing, but not to a position where they are a threat to the system,” he said, speaking at the Sydney State Technical Conference held recently.

“In light of this evidence, the Association’s view is that by implementing some measures to mitigate risk, then LRBAs have a viable role to play in SMSFs.” Such measures, according to Colley, may include the licensing of LRBA advice, greater resourcing of ASIC to crack down on spruikers, limiting the use of personal guarantees, and establishing best practice guidelines.

However, LRBAs aside, Colley said the SMSF sector was entitled to take a vote of confidence from the final FSI report, which made no other recommendations to curtail their activity.

“The lack of comment about our sector, especially in light of some of the issues raised in its interim report, can only suggest that David Murray and his fellow members of the inquiry were relaxed about the state of play with SMSFs. “Perhaps we shouldn’t be surprised. In 2010, the Cooper Review came to a similar positive view about the SMSF sector.”

Cosi DeAngelis General Manager of Commercial Origination, ANZ

Greg Phillips Sales Executive, NextGen.Net

Brokers score leading-edge ANZ commercial electronic lodgement It was only a matter of time before ANZ’s flourishing partnership in its home loan space with Australia’s principal technology provider, NextGen.Net, expanded into its commercial division.

NextGen.Net’s renowned system, ApplyOnline, and ‘Supporting Documents’ service, appreciably the mortgage industry’s pre-eminent choice for electronic lodgement, are currently in development for ANZ’s asset finance arm.

The instigator of this gamechanging move is Cosi De Angelis, general manager of commercial origination at ANZ. The winners will be ANZ’s commercial broker channel.

“I’ve been aware for some time that we need to make submitting transactions to ANZ easier and more streamlined for our commercial brokers,” De Angelis said.

“Brokers hate double and triplekeying transactions; and they don’t like the fact that lenders have their own unique systems, given they have to deal with so many different lenders.

“I thought, it has to be a simple process to use data they’ve submitted in a home loan, data they already have in their own CRM systems, in a commercial or an asset finance application.”

Conscious that taking the deal off the market quickly was critical for a commercial broker, De Angelis’ focus was on achieving a faster turnaround time.

“Brokers have to deliver a value proposition to their customer, and if I can help them do that by having a seamless process that gets them an approval in market-leading speed, that will sit well with the broker space,” he said.

A conversation between De Angelis and NextGen.Net at an MFAA conference a couple of years ago started the ball rolling.

Traditionally, car leasing has been a paper-based operation. ANZ Commercial’s commitment to provide a best-in-class solution for its broker channel through ApplyOnline will add sophistication and efficiency to the application lodgement process,

which will work both ways.

It will expedite application processing, which will reduce the lender’s operational costs, facilitate sales volumes, and leverage technology to attain a competitive advantage for brokers.

The same principals in ApplyOnline apply across multiple broking channels, and while NextGen.Net is now an established name in the commercial, insurance and credit card space, it is most well known in the residential mortgage sector.

“We’re widely acknowledged as the industry standard for electronic lodgement in residential and thirdparty distribution through the broker channel,” said NextGen.Net sales executive Greg Phillips.

“And while we’ve been in this [commercial] space for some time, the fact ApplyOnline is being taken up by a key player such as ANZ will, I’m sure, elevate our profile in this sector.”

Phillips notes that a big plus for brokers will be that through ApplyOnline they will be able to connect via their aggregator’s platform. Previously, they had to go directly to ANZ. For ANZ, the plus is that ApplyOnline will unlock a broader network of brokers from whom they can receive applications.

“The basic ApplyOnline functionality is electronic lodgement,” explained Phillips. “But ANZ will also be implementing the Supporting Documents service and building in a ‘Serviceability (Quote) Calculator’.

“So it’s a comprehensive service which will give brokers a richer and more satisfying experience, and enable them to efficiently fast-track their work and avoid previously time-wasting processes.”

Importantly for De Angelis, this will build on ANZ’s ‘whole of wallet’ focus.

“If the application is done by a car dealer, it’s never long before that dealer is talking to the customer about other financial needs,” he said.

“ApplyOnline will ensure that brokers have a ‘whole of wallet’ relationship with their client and, in turn, that it’s with ANZ.”

FEATURES 16

COALFACE

MOVING BEYOND MORTGAGES Mortgage Choice Newtown’s Owun Taylor describes its successful expansion into financial planning within 12 short months TALKING TO Mortgage Choice Newtown’s owner/partner and broker, Owun Taylor, an impression quickly forms that there is a lot going on at this brokerage. There is an energy and innovative spirit that has no doubt been a catalyst behind the brokerage’s plethora of awards for business excellence and financial planning, catapulting it to join the elite ranks of the franchise’s network.

Taylor has run the NSW branch for 15 years with business partner and broker Suzanne Taylor, who transitioned to broking from state managerial roles in IT software sales.

Taylor himself led a career for 16 years as an aircraft engineer, drawing parallels to his current profession in that both deal with numbers and logical paths to find a solution.

“The one thing I missed was the fact that I wasn’t dealing with

different people all the time,” he says, and so he turned to broking soon after Suzanne opened the Mortgage Choice branch.

“We thought it was a great option then, and happy to say it still is,” he says of the franchise. “It’s certainly grown with the market and adapted.”

creation – it’s adapting and moving with them,” says Taylor, explaining that over 80% of their business has consistently been won through referral year-on-year for the past decade.

The branch was most recently welcomed into the prestigious ‘High Flyer’ category at Mortgage Choice’s

“You can’t expect when a client walks in that they always know what they want” And 15 years in the industry has resulted in many long-term clients.

“We now have these clients who when we first sat down with them they were maybe single, and we’ve seen them get married and have kids and now we’re planning the wealth

national conference, which recognises its top franchise owners nationally in terms of settled loan amount and loan numbers.

The brokerage’s young financial planning arm, launched just 12 months ago, has already been

acknowledged by CEO John Flavell as one of the most successful within the Mortgage Choice network.

“We’ve always had the attitude of project managing the entire process, which was then the logical step to us starting the financial planning business as well.”

The move has expanded their team to eight, with dedicated financial planners and brokers to provide the two different services.

“They are two very separate crafts,” says Taylor, emphasising the time and specific skill set involved in each. “I think anybody that tries to say they’re going to do both is either really clever or they’ve got no home life. “[Financial planning] is a vitally important thing to look at, quite honestly, because the space of the broker I think has changed dramatically over the last five years.

You can’t expect when a client walks in that they always know what they want. And I do believe that the customer is not always right; they don’t always know what they want.”

This is where their passion for further educating their clients comes in. Taylor is a key speaker at their regularly hosted, free in-house seminars covering everything from buying your first property and property investing to financial planning and mock auctions; it attracts up to 45 people at a time.

“Suzanne and I are very focused on the education behind everything, especially with finance. And I think that’s part of what has put us in good stead with people – taking the time, and we want people to understand what we’re doing. We might put things on hold, give them a bit more education, and then take it from there, and they end up appreciating it more and become long-term clients.”

But beyond the day-to-day and educating their clients, the Newtown team also organise events outside the brokerage (among them is booking a cinema for 160 clients; “it’s just a cool night to catch up with people”), and they are very active in the community and with charities.

Part of every loan they settle goes to Ronald McDonald House, and in 2014 they were the largest corporate fundraiser for children’s charity Camp Quality. This year they aim to beat their total and host an Italian-themed sit-down dinner to raise $15,000.

With such a dynamic and busy professional life it’s a wonder Taylor still has time to exercise his improv comedy skills, play football for the Marrickville Red Devils, and enjoy his passion for motorcycling. But it’s safe to say this is a brokerage that will continue to garner well-deserved recognition.

“It’s a classic case of a little bit of absolutely everything,” says Taylor.

“There are no hidden secrets to any of it – it’s just doing the right thing.”

FEATURES 18

COVER STORY

THINKING LIKE A START-UP Westpac CEO Brian Hartzer on navigating change, staying innovative, and focusing on the customer

WESTPAC ISN’T just the country’s oldest bank. It’s Australia’s oldest company, full stop.

The combination of being a storied institution as well as a large and profitable organisation could seem like a recipe for stagnation, but chief executive Brian Hartzer recently told the Aussie Home Loans Sales Conference in Melbourne that the trick to remaining nimble was to think like entrepreneurs.

“We have a saying internally which is that we need to think and act like a 200-year-old start-up, which is essentially what we are,” Hartzer told the conference.

Hartzer told the brokers assembled that the current environment was seeing one of the biggest shifts in financial services in decades.

Therefore banks and brokers alike had to remain nimble, he said. And the key to this was to think about how to add value to clients.

“I think that if you think that you have a God-given right to a particular role and operating with particular processes and being paid in a particular way, then you are asking for trouble. But if you are constantly challenging yourself to think about ‘How do I add value, and how do I use technology to make my offering better?’, then I think there’s no reason you can’t continue to compete.”

Rather than innovating for the sake of innovation, or leveraging technology merely for the sake of keeping up with the times, Hartzer urged brokers to first focus on how to make their clients more successful. With this focus, Hartzer suggested innovation would naturally follow.

“We have this unique position, being Australia’s oldest company, that we can say to our people, ‘If Australia doesn’t do well, we don’t do well’. What we want to do is think about how do we help our customers be more successful? How do we help people grow their

businesses? If you get people in a big company thinking that way, they actually like it. They don’t want to come to work to grow shareholder value. In reality, that doesn’t get people out of bed. But helping your customers do something great, that gets people out of bed. If you combine that with access to technology and encouragement from management to go ahead and try things, lo and behold you find they innovate,” he said.

Get ahead of the changes Hartzer was bullish on the broker market, praising Aussie brokers for both innovation and the quality of business they brought to the bank. He said he did not see brokers as a source of competition, but rather as a source of high-quality customers.

“There’s a segment of the market who want to go to brokers and who will always want to go to brokers. When we have the discussion internally – and it does come up where people say brokers are a big part of our business – I say it’s not about brokers. It’s about we need to do better in first-party. At the same time, I’ve always taken the view that brokers are a channel to bring us new, high-quality customers.

“My hope would be that your experience with onboarding a customer with Westpac would be better than you would have anywhere else and that customer will then be looked after better than they’d be looked after anywhere else,” he said.

But Hartzer did say that brokers had to prepare themselves to deal with shifting market dynamics, some of which is being wrought by the current crackdown on investor lending.

“You cannot assume that the current economics and volumes will continue the way they are, because we have had a significant increase in the amount of capital we have to

hold for mortgages in particular. That capital increase leads to material increases that may affect different parts of the business, including mortgages. At the same time, APRA is trying to tap the brakes on growth in investment property. The concern there is about responsible lending. They are concerned that consumers don’t take on more debt than they can service in a situation where interest rates rise at some point in the future or house prices fall. They’re wanting to make sure that we are managing our business in a responsible way. We all acknowledge that we’re on the same page,” Hartzer said.

And Hartzer warned that brokers could begin to see the regulatory spotlight shift toward the industry.

“There’s been a lot of scrutiny about financial advice in the last few years, with good reason.

Mortgage broking is probably next. I would say to you, don’t assume that the current model is just going to keep motoring,” he said.

Hartzer pointed to the UK market and regulatory changes that have shifted the way brokers operate in that country.

“In the UK where I worked for a couple

19

“I’ve always taken the view that brokers are a channel to bring us new, high-quality customers”

of years, interest-only loans are now effectively only a fully advised product.

A fully advised product means you’ve got to be able to demonstrate that you’ve assessed the customer’s ability to pay, that the product is suitable, that you’ve got evidence for that and have considered different scenarios.

You’ve gotten confirmation that the customer understands. I think you’ll find that the regulators are going to increasingly ask questions about sales practices in mortgages,” he said.

He warned brokers that, in discussions with regulators, the attention was beginning to turn towards the thirdparty channel.

“They’re worried about us from a responsible lending point of view, and they’re already saying to us, ‘So, the broker is your agent in this transaction. How have you assured yourself that what the broker is telling you is correct?’”

But Hartzer said brokers could face any potential regulatory changes if they planned for the future.

“My advice is to just get ahead of this a bit.

Don’t wait for them to come asking. Start thinking now about how you’re going to manage that.”

FEATURES 20

BEST PRACTICE

BUILDING THE NEXT GENERATION Nathan Swain, CEO of Australian Property Finance and APF Academy mentor, comments on attracting and retaining the next generation of brokers

OUR INDUSTRY needs good new people to sustain itself, but attracting new brokers is only part of the solution. We have to focus on keeping them.

But again, that’s only part of the story. We must facilitate their growth in a profession they will view as attractive and having long-term business opportunities. Australian Property Finance (APF) wants brokers in business growth mode not business maintenance mode throughout their professional careers.

Having a business growth model means being proactive. It means being prepared to prospect and continuing to prospect on a regular basis. Brokers stuck in business maintenance mode will simply

bring together his two loves of teaching and finance by becoming an MFAA Certified Mentor.

Generally, 12 brokers come together every second Thursday for a formal 1.5-hour mentoring session, which is quite structured, includes presentations and role plays, and sets up ‘champions’ in finance areas.

The Academy has led to ‘champions’ in SMSFs, foreign loans and ‘green’ loans from responsible lenders, for example.

It is a forum for learning and, through the role plays in particular, negotiating and managing the tricky situations that can occur during that first two-year period.

“Tailoring support applies irrespective of where members are in their business, whether they’re just starting out, all the way through to national groups” Nathan Swain manage their databases rather than adding to them. They are, at best, reactive.

The industry already requires brokers with less than two years of experience to be mentored. In response, we developed the APF Academy, which we launched last September, as an in-house service to our brokers to take them through the two-year ‘apprenticeship’ period.

Ian Cook, who was one of APF’s founding brokers, is the other half of the mentoring team.

He has a teaching background, and found a way to

The current participants say it is improving their knowledge and confidence, and significantly helping their bottom-line business. They are getting to where they want to be faster.

MFAA research suggests that up to one quarter of new brokers quit the industry in their first 12 months.

The most common triggers for early broker exit are lack of planning, not having the capacity to fund themselves until they gain traction, and lacking the right support structures.

Some come to the role without a clear vision, or with a vision that does not match reality. They may have unrealistic expectations about how easy it’s going to be, and especially how easy it is going to be to make good money.

When we recruit people, be they for the Academy or otherwise, we spend a lot of time talking about how they will fund themselves.

We marry the ambition and capacity of the broker with the opportunities that lie within our APF-RE/MAX network. Once we identify the right mix, we plan and review regularly.

However, if a broker enters the industry without adequate financial fallback, and with no business plan and support structures, the unfortunate truth is that they may be gone in less than a year.

A fourth necessity: brokers getting their business up and running need systems.

Those of us experienced in the industry need to be constantly talking to our brokers about what they want their businesses to look like in two years’, five years’ and 10 years’ time.

Concepts and strategies such as continuing to prospect when you are already busy, and keeping the focus wholly on income-producing activities, are key learnings that can be particularly foreign to new brokers. It is one of the reasons why we set up the APF Processing business, which is a virtual PA service. The user-pays system allows the brokers to remain focused on the income-producing activities, thus leaving the ‘back end’ for someone else.

With that financial safety net in place, planning, structures and systems are the best path forward for success and longevity in the industry.

Arthur Brown, who works in Brisbane’s northern suburbs, has been part of the Academy since it began.

He says there are beneficial outcomes in having people new to finance broking together and working as one, citing the sharing of experiences and ideas, and the support, which will be ongoing.

The Academy is playing an important role in helping bring together his already established personal and business goals.

The APF Academy is open to all APF brokers, not just the sub-two-year brokers. They come to share, refresh and learn, and that has included APF’s top-performing broker for 2014, Anish Prasad.

APF does not profess to be a training ground for raw recruits, particularly young people with no prior experience in the industry. That is not its mission.

However, the Academy does have a role to play with people who are immature in a business sense, despite their chronological age. These are most likely to be people who are new to being self-employed but not always new to broking, and those coming to APF from a banking background are a good example.

So, too, are loan writers who may come from a very prescriptive field where their function was purely to write the deal. Most discover that finding the client in the first place is more difficult than the writing of the loan itself.

By bringing these people through the Academy, we empower them for self-employment, where they are operating a growing business and developing business opportunities.

The Academy plays an important role in integrating brokers into the APF culture.

APF also sees it as a platform to promote the industry as dynamic, fast-paced and rewarding, and highlight finance broking career opportunities.

Meeting the industry requirement for mentoring new brokers may have been the launching pad for the APF Academy, but filtering and retention have proved to be a valuable outcome.

FEATURES 21

BIG IDEA

TINDER FOR BROKERS? An award-winning young broker has created an app to help young business and finance professionals network and develop professional relationships EDWENA DIXON, director of Melbourne-based brokerage Pinpoint Finance, is the brains behind N3 – an initiative that is to Tinder what LinkedIn is to Facebook.

Just as Tinder cultivates personal relationships, the N3 app will allow users to discover and connect with like-minded professionals and form business relationships.

N3 members will be able to check in at professional events or conferences on the app, which will then allow them to see other N3 members in attendance and identify and connect with their most suitable networks.

“N3 is the perfect forum; everyone is there looking for opportunities to work together, refer business or partner up, and they are all the young, energetic, forward-looking, innovative

professionals who will shape this industry for the next few decades,” Dixon told Australian Broker.

N3 is targeted towards young finance professionals up to 38 years of age, including accountants, finance brokers, financial planners, and insurance brokers.

Dixon, who was the winner of the National Rising Star Award at the MFAA’s 2015 Excellence Awards, says the inspiration behind N3 came from her own difficult experiences establishing professional networks as a new broker.

“I recognised early in my broking career that finance broking is an industry dominated by older, established players, and I discovered through my own efforts at networking that this older, established clique can be very hard to break into and make it very hard for ‘newcomers’ or even

younger finance professionals who are experienced to establish the business and referral networks they need to survive and thrive.

“There was a risk that some greatly talented professionals were going to leave the industry or not reach their full potential simply due to a lack of opportunity to develop the networks they needed.”

On top of that, Dixon says the difficulties of ‘breaking in’ and establishing professional networks is only compounded by how time-poor new-to-industry finance professionals are.

“New-to-industry professionals are often time-poor, as they are scrambling to establish their business and brand, develop internal procedures, market, and still find time to ‘do their job’ for the clients they are able to find.

“After all that, many new-to-industry professionals feel they don’t have time to be meeting others purely on the speculation that they might, maybe, at some point in the future, be a valuable partnership,” she said.

“In the end, many new-to-industry professionals end up toiling away in isolation, largely giving up on referral relationships and partners.”

But N3 won’t just be about a networking app.

Dixon said she would also be organising and running N3 networking events for members.

The expected launch date of the app and inaugural event isn’t slated until the fourth quarter of this year, pending sponsorship, but Dixon told Australian Broker that she had already received overwhelmingly positive feedback from her target audience.

“Feedback has been overwhelmingly positive, with almost every young professional I’ve spoken to in person saying they would ‘definitely’ want to come along,” she said.

“All the people I’ve spoken to instantly understand the value of the app, and the power of mixing the digital, professional, and personal spaces in our N3 events.

“There is no doubt that the first N3 event will be fully subscribed, and we are revising our structure to ensure we will be able to accommodate the demand for membership and attendance at N3 events once we launch.”

The membership and pricing structure is still being finalised, but Dixon has revealed that there will be an annual membership, which will provide complete access to the N3 members database to facilitate business networking, both at and away from N3 events, as well as ‘members discounts’ for each event.

Dixon says casual attendance will also be permitted at events, providing the event is not already fully subscribed by members. However, causal attendance will only allow access to the database of attendees at the time of the event, and only for the duration of the event.

22

MARKET WRAP RENTAL GROWTH SLOWING ACROSS CAPITALS

MARKET TALK

HUNDREDS OF SUBURBS HIT MILLIONDOLLAR MARK

Growth for 12 months to July 2.5%

2.3%

2.1% 1.1%

0.5% Darwin

Perth

Sydney Melbourne Brisbane Canberra

Hobart

-5.6%

More than 400 suburbs across Australia have seen median prices hit the $1m or above mark -9.3% THERE ARE now more than 400 suburbs across Australia where residential properties carry a $1m median price tag.

New research from CoreLogic RP Data shows there are a record 437 suburbs across the country in the million-dollar median club, an increase of 23.1% over the last 12 months.

NSW dominates the list, with a total of 302 out of the 437 suburbs, while Sydney has 17 of the list’s top 20 high-priced suburbs, including the entire top five.

CoreLogic head of research Tim Lawless said the figures showed just how far ahead Sydney is from the rest of the nation in terms of price growth.

“This data reflects the effect of strong capital growth rates which show that Sydney values are growing substantially faster than all other areas and the cost of housing in Sydney is much higher than elsewhere,” he said.

“Additionally, those that have owned a Sydney property for at least several years are likely to have built up a substantial level of equity in their home.”

Point Piper takes out the number one spot on the list with a median house price of $5,596,397, and Centennial Park, Vaucluse, Bellevue Hill and Tamarama round out the top five.

WA’s Peppermint Grove ($3,504,996) breaks

up Sydney’s run at number six, while Toorak in Victoria sits at nine and WA’s Dalkeith comes in at number 20.

Dawes Point in Sydney is the only suburb that cracks the top 20 based on median unit price, coming in at number 14 at $2,751,937.

While Sydney dominates the top, the list is almost entirely made up of suburbs in capital cities, with only 10 in regional areas.

The figures also show there has been a jump in the number of suburbs where the median price tag exceeds $2m, with 48 this year compared to 32 a year ago.

Sydney again leads the way, home to 40 of those 48 suburbs.

While the past 12 months have seen the number of million-dollar suburbs explode, a similar increase is not expected in the coming years.

“With dwelling values continuing to trend higher, particularly in Sydney and Melbourne, we anticipate that the number of suburbs with a median value of more than $1m will expand further over the coming year,” Lawless said.

“However, with growth levels potentially moderating over the coming year, we aren’t likely to see as substantial a jump in the number of suburbs as what has been seen over previous years.”

Source: CoreLogic RP Data RENTAL GROWTH CRAWLING Weekly rents across Australia’s capital cities are growing at the slowest pace on record, according to figures from CoreLogic RP Data.

Results of the July Rental Index show the annual growth rate of weekly rents across Australia has fallen to 0.9%, the slowest rate since the data was first collected in 1995.

The index has revealed that during July rents in all Australian capital cities fell, with the average decrease being 0.3%.

Darwin, Perth and Hobart saw the biggest falls over the month, with decreases of 0.9%, 0.8% and 0.6% respectively.

Over the past 12 months Sydney has seen the greatest rate of rental growth at 2.5%, followed by Hobart at 2.3% and Melbourne at 2.1%.

Darwin and Perth are the only two cities that have seen rents fall over the past 12 months, with decreases of 9.3% and 5.6% respectively.

Combined capital city rental rates now sit at $490 per week for houses and $462 per week for units.

According to the index report, the slow rate of rental growth has likely been caused by three main factors.

“Sluggish rental growth is most likely due to surging investment demand, record high levels of new housing construction, and a slowing rate of population growth nationally,” the report states.

“These factors are creating more rental accommodation and suppressing rental increases.”

The slowing pace of rent growth has also affected rental yields, with yields dropping over the last 12 months in all capital cities but Hobart and Canberra.

Yields in Sydney (3.3%) and Melbourne (3.1%) are the lowest on record.

The average yield for a capital city house sits at 3.4%, another record low.

23

MARKET TALK

HAS CAPITAL GROWTH KILLED OFF HOME OWNERSHIP? Two academics have argued that rising house prices have destroyed the Aussie model of home ownership

TWO ACADEMICS have argued that many Australian property owners have been left in an unstable financial position following the strong capital growth seen in markets across Australia in recent years.

In their submission to the federal government inquiry into home ownership, Emeritus Professor Gavin Wood from RMIT University’s Centre for Urban Research and Associate Professor Rachel Ong from Curtin University’s Bankwest Curtin Economics Centre said that many Australians had left their financial and housing futures in precarious state.

“The large capital gains that have accrued to most Australian home owners over the past two decades or so has prompted large scale withdrawals of housing equity, which leave some home owners with high levels of debt secured against the family home,” Wood and Ong said in their submission.

“These home owners are banking on rising house prices and increasing incomes, an increasingly risky proposition in the current financial and economic environment,” Wood and Ong said.

While many investors may have used withdrawn property equity to expand their portfolios, Wood

and Ong argue that, as government welfare initiatives, such as the pension, either stagnate or decrease, many people are leveraging their homes to cover immediate spending needs.

“In Australia the retreat of the welfare state has also been accompanied by an increased reliance on asset-based welfare that involves the leverage of housing and other personal assets to meet acute spending needs and unanticipated drops in income,” they wrote.

“The welfare role of housing wealth has grown and now reaches into earlier stages of the life course. Younger Australians, and particularly couples with children, have been using flexible mortgages to tap into housing equity to meet pressing spending needs.”

As this becomes more prevalent, the two professors argue that for many people the once-typical Australian model of home ownership is now defunct.

“This submission argues that the housing career featuring a smooth passageway from the parental home in youth to outright ownership in retirement is over for many Australians.

“Real house prices are being pushed up to levels which require buyers to take on large amounts of debt that are repaid later in the life course.”

RBA SAYS STABILITY IS MORE IMPORTANT THAN FHBS In a low interest rate environment, ensuring financial stability is more important than helping first home buyers into the property market, the RBA has claimed.

Speaking to the House of Representatives Standing Committee on Economics Inquiry into Home Ownership, the RBA’s head of its financial stability department, Luci Ellis, recognised the importance of home ownership.

“Outright home ownership is widely regarded as key to avoiding poverty in old age. Before that life stage, home ownership is also regarded as a way to obtain the security of tenure that is so important to the wellbeing of many households …” Ellis said.

However, she said maintaining prudent lending and financial stability in a low interest rate and high house price environment is what the regulators and banks should focus on, even to the detriment of first home buyers who are struggling to get onto the property ladder in such a competitive landscape.

“Nonetheless, while there has been much debate on this issue, from a financial stability point of view it is helpful that there has been no push to improve the position of first home buyers by easing lending standards,” Ellis said.

“As recent experiences in other countries have shown, such a step would probably be counterproductive in the longer run.”

Confirming the recent action by lenders to slow the growth in their investor home loan portfolios, Ellis said property investment had been a main factor in driving up house prices and subsequently locking out first home buyers.

“Investor interest in property has been especially strong in recent years, no doubt partly encouraged by low interest rates and the prospect of (concessionally taxed) capital gains … The result has been that the housing sales market has become unusually concentrated in investor activity, particularly in the larger cities.

“At the margin this has probably priced some aspiring first home buyers from properties they could otherwise acquire.”

FAST FACT

7%

Expected decline in new home building over 2015/16

Source: HIA

24

MARKET WRAP ASIC TAKES AIM AT 21ST CENTURY GROUP FINANCIAL SERVICES

PLANNER COPS PERMANENT BAN Alleged dodgy insurance dealings have seen a senior financial planner banned by ASIC

A senior financial planner has been permanently banned by ASIC thanks to a series of offences, it has been announced.

ASIC said Martin Hodgetts, a former Westpac employee “whose job included sourcing and submitting personal insurance business for Westpac in Victoria”, had been permanently banned from the financial services industry after submitting nine false policies between May and September 2014.

The false policies submitted by Hodgetts included “invented details” such as “imaginary conversations and false signatures, and none were either requested or approved by any existing or new Westpac customer”, the regulator said in a statement.

ASIC deputy chairman Peter Kell said Hodgett’s behaviour was financially motivated.

“Mr Hodgetts’ misleading and deceptive conduct was driven purely by the commissions he collected, which is completely contrary to the integrity required of a person in his position,” Kell said.

It was revealed that Hodgetts, who had been working for Westpac since 2010, used internal systems to “dishonestly alter certain details of two of the false policies after they were submitted in order to avoid detection”.

Hodgett’s has since repaid the commissions he received from the nine false policies, but Victoria Police have laid charges in relation to his conduct.

ASIC has launched legal action against those behind the marketing and sale of a number of land-banking schemes to investors.

ASIC announced that it had commenced legal action in the Federal Court of Australia against companies associated with Jamie McIntyre and the 21st Century Group in relation to five land-banking schemes in Queensland and Victoria.

ASIC alleges that the schemes are unregistered managed investment schemes and that 21st Century Group companies and McIntyre had been unlawfully providing unlicensed financial services business.

According to ASIC the schemes were promoted to investors, including through seminars, by entities associated with McIntyre’s 21st Century Group, and the development companies for each of the schemes are also associated with McIntyre and the 21st Century Group.

ASIC claims there are currently 100 investors who have committed to the schemes, and it is seeking orders to appoint a provisional liquidator or receiver and manager to each of the five schemes and the development companies behind them in order to take control of any assets and protect the interests of investors.

The development companies are Archery Road Pty Ltd, Bendigo Vineyard Estate Pty Ltd, Secret Valley Estate Pty Ltd, Kingsway South Holdings Pty Ltd and Melbourne Tarniet Estate Pty Ltd. ASIC is also taking action against the development companies and the following for being involved in an unlicensed financial services business: Jamie Neville McIntyre, Dennis McIntyre, Property Tuition Pty Ltd, Education Holdings Pty Ltd and Sourcing Property Pty Ltd. ASIC is also using the proceedings to seek orders that each of the defendants, including Jamie McIntyre, be restrained from promoting or operating any of the schemes and from operating a financial services business.

The legal proceedings are part of an ongoing investigation by ASIC into land-banking schemes.

PUTTING PRIVACY FIRST

How Australia’s industries rank in consumer privacy best practice 1. Government

7. Technology

2. Banking & finance

8. Energy

3. Social media

9. Travel & transport

4. Health & fitness

10. Telecommunications

5. Retail

11. Media

6. Insurance

Source: Deloitte

CRACKDOWN ON PAYDAY LENDING The Federal Government has announced a regulatory review into the controversial payday lending sector.

Assistant treasurer Josh Frydenberg said the government recognised the value of payday lenders; however, they wanted to ensure that vulnerable borrowers were protected.

“The Government recognises that small-amount lenders can play an important role in the economy by providing credit to consumers who are excluded from mainstream forms of finance,” he said.

“The Government wants to ensure that the regulatory framework strikes the right balance by protecting vulnerable consumers without imposing an undue regulatory burden on industry.”

The review will be chaired by Danielle Press, the CEO of Equipsuper, who will be joined by panel members Catherine Walter AM, deputy chair of Funds Management Victoria, and Stephen Cavanagh, partner at HWL Ebsworth.

Speaking to ABC’s AM program, Frydenberg agreed that the payday lending sector was suffering an image problem.

“There are certainly cases where people have been irresponsible with their lending, but there are also some restrictions; but we want to look at the overall regulatory framework here,” he said.

The announcement came just after Westpac confirmed it would no longer provide funding to the payday lending sector.

An ASIC review of payday lending, released earlier this year, claimed payday lenders needed to improve their compliance with key consumer protection laws.

The review found that payday lenders were “falling short” of meeting lending obligations.

Payday lending refers to loans that are generally less than $2,000, with a maximum term of 12 months.

26

PEOPLE SPORT CAN BUILD BUSINESS MUSCLES Jill Fraser explores the connection between sporting success and business success

Marius Grobbelaar

TODAY SAVVY employers routinely ask prospective job candidates, “What sport did you play in high school?”

The correlation between sporting prowess and business acumen is now widely accepted – from boardrooms to business management institutes – and this maxim is shaping a new corporate mindset.

The link between sport and career achievement ticks a broad range of boxes determined by individual scenarios. But a consensus prevails: the sport/business synergy is generally positive and the skills and behaviour codes are interchangeable.

Kevin Filo, senior lecturer at Griffith University’s Business School, maintains that the key aspect of the link relates to “intrinsic motivation”.

“To succeed in your job you need to be intrinsically motivated. If you’re only in your line of work for

financial gain, you might not set yourself up to succeed,” Filo told Australian Broker.

“Participation in sport activates intrinsic motivation, which has three components: autonomy, mastery and purpose. Autonomy means you want to be self-directed, mastery means you want to keep improving, and purpose means you want to serve something beyond the individual; you want to be part of something bigger than yourself.”

The mortgage industry has no shortage of sporting champions.

But it’s hard to go past Perth-based, specialised commercial short-term lender Quantum Credit as a standout example of the significance of sport in the management leadership equation.

Within the short-term finance organisation’s ranks, five of the senior management team are

athletes who possess impressive sporting credentials. This indicates, according to James Bailey, director of the World Executive MBA at the George Washington University School of Business, that they are “cognitively complex”, with thought processes capable of matching the demands of today’s fast-moving work environment.

In other words, the triathletes, marathon runners, cyclists, track stars, ironmen, swimmers and surfski paddlers that inhabit Quantum Credit’s executive offices are predisposed to being “natural leaders and problem solvers”.

Athletes, says Bailey, “grasp the dynamic flow of many interrelated variables, simultaneously played”, better than most.

Quantum Credit executive director Richard Eadie, who at age 52 competes at elite level in

surfski events on the open ocean with 20-year-olds, agrees that there are many parallels between sport and business.

Echoing Filo’s sentiment regarding “intrinsic motivation” superseding bottom-line motivation, Eadie says that while he enjoys co-steering Quantum Credit’s successful expansion, it’s not what drives him.

“My philosophy is, have fun and the results will come to you,” he says.

“One of the reasons I picked surfskiing is because it’s fun and I love doing it. The same with business; I love achieving and participating in a process that gets results.

“I’m not super motivated by the idea that I have to beat somebody.

It’s all about balance.”

Achieving balance is a common theme expressed by Quantum Credit’s sportsmen.

Operations and credit executive Rhode Truter, a fanatical cyclist, is the organiser of a cycling association that raises funds for charities such as beyondblue through its rides.

“In life everything is about balance, and everything in life has a price. If you work or train 20 hours a day you sacrifice family,” he says.

Truter was middle-aged when he started cycling.

“I couldn’t afford a Porsche so I bought a bicycle,” he laughs.

“I started doing 3km down to the beach and back and progressed from there.”

The motto of the club and biannual cycling events he organises is “redefine your limits”.

“The rationale behind that motto is the importance of encouraging ourselves and each other to step outside our comfort zones and accomplish something we often don’t think we’re capable of,” he says.

He admits that recently taking on the role of Quantum Credit’s operations and credit executive meant stepping outside his own traditional comfort zone.

Through sport Truter says he has learned to value what he would once have perceived as menial roles. In the case of cycling, he has acquired great respect for the ‘sweeper’, the person (now himself ) who always rides at the back of the pack and helps those who are struggling.

“And I’ve seen how this model is reflected in business,” he says.

David Rooney, professor of management in the Faculty of Business and Economics at Macquarie University, refers to Truter’s realisation as an illustration

27

of “the opportunities that sport presents to develop wisdom”.

One of Rooney’s fields of expertise is the role of wisdom in management.

Sport, he says, affords many opportunities to develop wisdom.

“Wisdom comes from learning from experience and reflecting deeply on what was gleaned through that,” he explains.

Quantum Credit’s loans manager, Jacques Meyer, an ultra-marathon runner, a consistent silver medal winner and the most decorated mature-age sportsman in the team, admits he acquires great insights into himself and life as he pounds the pavement.

“People sometimes say, ‘Isn’t running boring? What do you think about while you’re out there for three or four hours?’

“I’m constantly monitoring how I’m feeling and assessing my energy levels,” he says.

Introspection is inherent within the running experience for Meyer, but it’s ‘the zone’ that intrigues him.

“The meditative elements are immense,” he says. “You definitely get into a space that’s described as ‘the zone’.

“My wife tells me she’s going to yoga to meditate. I tell my colleagues

that everything I do now becomes a meditation. Sitting at my desk doing my job can even become a meditation. It’s about getting into that zone every day, and I attribute this to my experience when running.”

Another quality Meyer has taken from marathon running is patience.

“You have to pace yourself in a marathon,” he says. “You can’t go too fast too soon. Work is the same.

You can’t go flat out all the time. You need to strategise.”

Quantum Credit executive director John Broadway refers to himself as a “fish and chips runner” who appreciates the participation and camaraderie of triathlons and adventure races.

Broadway confesses that as he’s got older his urge to compete and super-achieve is diminishing.

He ascribes to the ‘healthy body, healthy mind’ tenet, along with the philosophy of achievement and goal-setting in sport, which he maintains is readily transferable to a business environment.

He notes that he and his colleagues at Quantum Credit are all solitary sportsmen who can play in a team when necessary.

“I think there is a distinction

Richard Eadie

Jacques Meyer

Rhode Truter

between a solitary sportsperson versus someone who is innately a team sportsperson,” he says.

“Everyone here is an entrepreneur, whereas a team person might more commonly be found in a corporate environment.”

Broadway shared his perspective on non-participants in sport.

“Having interviewed hundreds of people for jobs over the years I have seen that those who don’t participate in any form of sport, other than from a prostate position on the couch, can sometimes present as out of shape and unfocused. They don’t always turn out to be the employees who go furthest,” he says.

Quantum Credit co-founder (along with Richard Eadie) and executive director Marius Grobbelaar was a track star in his youth while at school in South Africa and at university in the US. He shifted to triathlons in his ’30s.

In 2009 he began scaling back and concedes that his current views may be contrary to those of some of his colleagues.

“One of the reasons I stopped competing at an elite level and participating in endurance events was because that was where my creative energies were flowing,” Grobbelaar says.

“We have a limited reservoir to use every day, and in many instances I feel that sport absorbs your creativity.

“I’m still active in sports, I still exercise and I’m still healthy, but I’m careful not to overtrain and retain a balance.

“I will always be in favour of participating in sport; it develops many skills that are useful in business.

“But I’ve noticed that when people take up extreme pursuits and ultra-endurance events their input and output can diminish because their passion for their sport is dominating.”

Grobbelaar turned 40 in 2009, the year he did the half-Ironman.

He says he found the physical demands of training in three disciplines too much.

“By 3 o’clock in the afternoon my body was shot and I wasn’t worth anything,” he confesses.

“There is a tipping point when it becomes physically too demanding and your creativity gets stunted.

“In summary, my take is that sport should stimulate and promote creativity but never get to the point where it absorbs it,” Grobbelaar maintains.

John Broadway

KEY LESSONS David Rooney, professor of management in the Faculty of Business and Economics at Macquarie University, outlined the following key lessons that emerge from sport and business and if applied will lead to success in both arenas.

A B

C

The ability to delay gratification The ability to regulate emotions, particularly under pressure The ability to execute and function under pressure

D Discipline E

F

An understanding of the importance of deep learning and the mastering of skills Resilience and the ability to bounce back from failure

G The ability to

understand the complex relationship between competition and collaboration

H

Sportsmanship and sporting values

I

Neither sport nor business success is born from the attitude of winning at any cost

28

PEOPLE

CAUGHT ON CAMERA AFG recently headed around Australia to honour its top achievers at state-based awards functions.

Here’s a look at the aggregator’s High Achievers gala dinner in WA.

29

SPOTLIGHT

BEST FORUM COMMENT

FORUM

CBA UNDERWEIGHT IN BROKER GROWTH The major bank’s results reveal slower growth in the broker channel

ACCORDING TO the major bank’s full-year results, CBA recorded home loan lending growth of 6.6% in the year to June 2015; however, this was comfortably behind system growth of 7.4%.

In its results presentation to the media, the major bank cited “underweight” performance in higher growth segments, such as “broker and investment lending”.

Brokers were not shy about sounding off on their feelings about the major.

Neil cited channel conflict as a problem in dealing with the bank.

“I could never understand how CBA gathered so much business from brokers.

They have been my lender of last resort for many years. Raise poaching with your BDM, and they just wave if off. Sorry CBA, you lost me years ago. And the arrogance is that not one BDM has called me to ask why.”

Jim raised his own concerns about the bank’s broker proposition.

“Why would you deal with them with their onerous documentary requirements plus the rampant branch poaching with no comeback or support by CBA management?”

Phil in Finance voiced displeasure at the lender’s volume requirements.

“I certainly hope the brokers who still use the CBA are correctly advising clients of their conflict of interest, as they are mandated to give the bank a minimum number of loans every six months or lose accreditation. This must be disclosed in the Preliminary Assessment form (of course).

Want more? Have an opinion? www.brokernews.com.au

When I explain this potential conflict to my clients they fully understand my reluctance to consider using them.”

Steve McClure urged brokers to look beyond bank-bashing, but said there could be areas of improvement for CBA. “Put any lender’s name up, people will bag it. The fact remains CBA are dominant.

However this should be a sign to them that they need to better appease the market.

One strategy might be to approach the investment loan dilemma in a more constructive manner. Increasing rates on existing loans without any beneficial offset to those loyal customers is unconscionable – and may increase loss of market share.”

And SEQ Broker said that, in spite of some drawbacks, CBA still filled important niches in the market.

“The Commbroker website is very good.

You can talk to an assessor, and they even provide their number on Commbroker. You can do land only in cat 3 and 4 postcodes and up until recently 95% + CAP LMI purchases in those postcodes where other lenders simply say it’s too risky. So while there is some to bag with the CBA, there are scenarios that they come out on top – and they are pretty open about where they do not intend to be the frontrunner. I definitely agree that it is unconscionable to raise interest rates on investors who already have a loan with CBA. If they had have known that, would they have placed their business there in the first place? They have no right of reply.”

APRA BOSS DEFENDS INVESTMENT CLAMPDOWN APRA’s Wayne Byres has defended the regulator’s move to slow investor lending, but some brokers think he’s out of touch.

“APRA’S approach is very much a blanket/Band-Aid approach, which is very much a government Captain’s Choice approach. They have failed to consult with one of the major players on the coalface of residential lenders (being the brokering arm) and their major bodies such as the MFAA where over 50% of the borrowing occurs. This is short-sighted and a total lack of respect by APRA and Wayne Byers.

“Does Wayne know that Australia does not just consist of Melbourne and Sydney? His equation and statement of common sense don’t add up. Some of the other capital cities require urgent stimulation in the residential lending/building construction. Also, they are encouraging lenders to go against the basic principles of paying of their owneroccupied property first instead going against investment advice reducing the principle on their investment property. Dumb.

“The government wishes for people to create their own retirement nest egg with the aging population and to reduce the burden on Government pensions.

At the same time they are continually putting spokes in the wheel in relation to superannuation changes and residential investment lending. Are APRA hoping to divert the average Mum and Dad into share investment and term deposits to create their wealth nest egg for later years?

“I believe APRA have got it wrong in the way they have gone about de-fuelling the investment market in certain areas to supposedly build up bank/lenders strength position. They have in certain areas created an adverse outcome for the mid to long term and let down the general public failing to consult the major players, aggregator’s and their industry bodies.”

Tony WA on 10/08/2015 at 9:14PM

30

ODDITIES

FINACIAL SERVICES

TWO FOR THE PRICE OF ONE A US homebuyer received an unexpected bonus when he found a second home hiding in the walls of his property SOMETIMES HOMEBUYERS get more than they bargained for, and sometimes that’s a good thing. Such was the case with a recent purchase in the US state of Texas. According to NBC, property developer Curtis Grant bought a home with the intention of tearing it down to build a 12-home development. But upon tearing into the walls Grant found a core of logs. Further investigation revealed a log structure that may be one of the area’s oldest-standing buildings.

The previous owner told Grant about finding a clipping from an early 1900s newspaper in the wall of the home’s living room. But further investigations have revealed that the log cabin hiding in the walls of the home far predates this era. Grant contacted Peggy Riddle of the Denton County Historic Museum with details about his find, and was shocked to

hear the building could date back to the mid-19th century.

“She said, ‘Curtis, that tells me it’s not an early 1900s structure or cabin, that it’s a mid-1800 structure,” Grant told NBC. A University of Arkansas geoscientist has since confirmed the claim, using tree-ring analysis to date the building back to at least the 1860s, and possibly as far back as the 1840s.

While the building doesn’t enjoy any protected status, Grant said he couldn’t bring himself to follow through on his plans to raze the structure.

“It’s just something that needs to be preserved, as difficult as that is on a developer,” he told NBC. Instead, Grant said he was planning to scale back his development while restoring the cabin to create a historic homestead for visitors.

BORING FERRARI SET ABLAZE Despite having 15 luxury cars already in his possession, the son of a Swiss multimillionaire was so intent on upgrading his collection that he devised a scam to claim another model on his insurance.

The unnamed 20-year-old, who was said to have become bored with his Ferrari, has been convicted of deliberately setting fire to the $317,000 car, along with three other accomplices.

The idea came about when the young man realised he would get a lot less for the car than he had hoped, after a valuation put it at just $261,900.

He was then advised by a local car dealer to commit insurance fraud, which prompted the pair to plot together, and the dealer recruited an accomplice from his garage to help.

In order to create an alibi, the car’s owner went with a friend to a massage parlour in Augsburg, Germany, where he lives part-time, leaving his accomplices to set fire to the car for a payment of around $20,000 each.

But unbeknown to them, security cameras recorded the crime and the plotters were arrested when they returned to Switzerland, the UK’s Daily Mail reported.

The Ferrari owner’s wealthy father, a businessman based in Zurich, paid his son’s bail, which was set at just under $300,000.

During the trial, the young driver also revealed he still received an allowance of between $6,700 and $13,700 per month from his father.

He also owned several properties totalling more than $35m and 15 cars, including a Lamborghini. All the vehicles were paid for by his father.

The young man told the court that at the time of the offence he was low on cash but did not have the courage to tell his father that he had become bored with the Ferrari.

SEE NO EVIL, BUY NO EVIL? Would you spend upwards of $1m on a house that you couldn’t even walk through before making an offer?

That’s the situation that was facing anybody looking to buy 313 Old Canterbury Road in Sydney’s Dulwich Hill after Marrickville Council forced the house to be sold at auction in an attempt to recover more than five years of unpaid rates. The three-bedroom, one-bathroom bungalow sitting on 440sqm of land went under the hammer on 27 August.

The house was expected to attract bids of up to $1.2m. Had the council forced the current occupant to allow inspections of the property, that price could have been significantly higher.

A spokeswoman from the council told Fairfax Media it had decided against that as they “did not want to add more stress to what was already a stressful situation”.

The property last sold in 2000 for $388,000.

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