NEWS Industry vet’s new role Michael Russell lands board spot P4
ANALYSIS Interest-only draws interest Regulators are turning their attention to a new area P12
SPECIAL REPORT Brokers on Non-majors Brokers rank the challenger lenders P18
SEPTEMBER 2015 ISSUE 12.18
SPECIAL REPORT Diversification How it can work in your business P16
SPOTLIGHT Investment crackdown What APRA’s moves mean for the market
CYNTHIA GRISBROOK The MFAA’s incoming chairman on the association’s strategic direction P14
P26
FORUM APRA in the hot seat Brokers take aim at the regulator P27
2
NEWS
MOVERS AND SHAKERS Michael Russell’s new role P4
BANKING
REGULATION
Interest-only loans a concern P6
ASIC wants brokers to foot the bill P8
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AFFORDABILITY DRYING UP?
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APRA TAKES HEAT APRA has opened itself up to some serious criticisms from the mortgage broking industry in the past weeks. The banking regulator’s chairman, Wayne Byres, ruffled feathers when he suggested at an Australian Business Economists Lunchtime Briefing that banks should keep a close eye on the broker channel because of a higher risk of defaults. “Third party-originated loans tend to have a materially higher default rate compared to loans originated through proprietary channels. This does not mean third-party channels have lower underwriting standards, but simply that the new business that flows through these channels appears to be of higher risk, and must be managed with appropriate care,” Byres said. This has drawn harsh criticism from both the MFAA and the FBAA. MFAA chief Siobhan Hayden called Byres’ comments misguided, and urged APRA to release statistics backing up Byres’ assertions. FBAA president Peter White said any evidence of higher defaults in the broker channel were due to the higher volume of loans coming through the channel. While APRA has yet to produce data to back up Byres’ claims, the regulator has earned the ire of brokers.
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NEWS 4
BY THE NUMBERS
RUSSELL JOINS PROPERTY BUSINESS
84% According to a report by ASIC, the value of interest-only home loans issued in Australia increased by 84% from the March 2012 quarter ($18.9bn) to the March 2015 quarter ($34.8bn)
Source: ASIC
National Property Buyers recently tapped former Mortgage Choice chief executive Michael Russell as its newest board member. The property advice firm said the appointment was intended to send a message to the broker community about the company’s value proposition. “We presently deal with lots of mortgage brokers to help their customers, particularly their investor customers, find the right property and then manage it for them. Many of the properties we find for our customers are off-market and we are able to secure them at a fair and reasonable price and in so doing avoid a bidding frenzy,” National Property Buyers Queensland state manager Steve McGee said. Russell said he was looking forward to helping guide the company’s expansion plans in the years ahead, and urged brokers to utilise the service for their clients. “The alignment with mortgage
A rundown of the next fortnight’s events
SEPTEMBER
10
Michael Russell
brokers is also both seamless and logical. Brokers first and foremost want their customers to receive the same service excellence as they themselves provide and also want to refer them to an organisation where they can be insulated from competitive threats,” Russell said.
WHAT THEY SAID...
Greg Medcraft “An industry funding model is about ensuring that those industries that need the most regulation should pay for it, rather than taxpayers” P8
Peter White “We have to always look ahead and ensure we maintain responsible lending practices when there is uncertainty over future income streams” P13
DATES TO WATCH
Brendan Wright “While residential finance will always represent a strong revenue stream for many brokers, at FAST we are looking well beyond the traditional role of the mortgage broker” P22
What: MFAA SA PD Day Where: Adelaide Oval The particulars: MFAA chief Siobhan Hayden will present a general association update, while Adelaide Bank general manager of third party mortgages Damian Percy will speak on the impact of APRA’s crackdown on investment lending.
SEPTEMBER
18
What: House Economics Committee meeting Where: Canberra The particulars: RBA governor Glenn Stevens will front the House of Representatives Economics Committee to discuss the Reserve Bank’s Annual Report.
SEPTEMBER
23 What: FBAA Finance in Dealerships day Where: Stamford Grand Plaza, Glenelg, SA The particulars: The FBAA will hold a one-day conference exploring all areas of performing finance transactions in motor dealerships as part of its myFNI roadshow.
NEWS 6
WORLD NEWS
STRUGGLE STREET
Australia’s five worst postcodes for 30+ day arrears
3%
Kingston, Qld 4114
2.8% Petrie, Qld 4502
3.2% THE NETHERLANDS
2.6%
DUTCH HIGH-LVR LOANS COULD GO AWAY It seems not every country has learned the lessons of the GFC, as the Netherlands is still offering zero-down mortgages. The Dutch can borrow with an LVR of as much as 103% for their homes, but that could – finally – be about to change if the government listens to Dutch Central Bank president Klaas Knot. “High loan-to-value ratios make banks’ and household balance sheets vulnerable and go handin-hand with sharper fluctuations in house prices and the real economy,” Knot’s financial stability committee wrote. Knott is advising the government to limit mortgage loans to 90% LVR – not an insane suggestion, most would say. However, he is facing tough opposition from several industries and potential buyers. “The only direction house prices can go is down” if Knot is successful, said Frans Schilder, a senior researcher at the Amsterdam School of Real Estate. “I don’t see a need to use such a killor-cure remedy to mortgage debt without offering an alternative, particularly to first-time buyers.” Still, Knot is suggesting they slowly phase the rule in, asking the next cabinet to consider the plan. The Netherlands will select its next cabinet in 2017. Slack mortgage lending was a major contributor to the economic downturn in 2008, which the global economy is still continuing to bounce back from.
Budgewoi, NSW 2262
Greenacre, NSW 2190
2.7% Corio, Vic 3214 Source: Fitch
INTEREST-ONLY LOANS A ‘SCARY’ SITUATION The founder of a buyer’s agency has pointed to a troubling trend shown in a recent ASIC report. The report notes that the value of interest-only loans increased by 84% from the March 2012 quarter to the March 2015 quarter, while principal and interest loans rose only 20% over the same period. Todd Hunter, the founder of wHeregroup, says the data paints a frightening picture. “It’s stemming from Sydney and Melbourne and the prices that
we’re seeing in those two markets right now,” he said. “It’s just pure desperation on the behalf of people who want to get into those markets right now and they’re using interest-only loans as a way in. “It’s scary because people have gone to interest-only loans because they can afford to service them over the interestonly period, but the repayments are going to skyrocket when that ends.”
Hunter believes those people are banking on price growth in those markets to continue at current levels, which would allow them to sell their homes at the end of the interest-only period to cover the principal of their loans. “It’s very concerning; they’re doing it with no real intention of ever paying the loan off themselves. They’re just hoping they’ll be able to sell at the end of the interest-only period and cover the cost.”
NEWS 8
LENDER NEWS
ASIC WANTS BROKERS TO FOOT THE BILL Brokers generally have an uneasy relationship with ASIC. While everyone wants to see the industry rid of unscrupulous operators, brokers often complain that ASIC seems to overlook bad behaviour by the big players in favour of going after small operators. This relationship may not get any smoother if the watchdog has its wish to see its funding shift from taxpayer supported to industry supported. The government has released a consultation paper on a proposed
industry funding model for the organisation. The proposed funding model will be based on the government’s Cost Recovery Guidelines, where the cost of ASIC’s regulation will be recovered directly from sectors and entities that create the need for regulation. This will be via a system of industry levies and fees. “An industry funding model is about ensuring that those industries that need the most regulation should pay for it, rather than taxpayers,” ASIC chairman Greg Medcraft said.
WOMEN TRIMMING THE SUPER GAP
A rundown of the next fortnight’s price and policy changes
RATES
Homeloans Ltd reduces rates on FlexiChoice Prime products by up to 0.30% p.a., making available owner-occupier loans from 4.19% per annum (comparison rate 4.54% p.a.). Bendigo Bank increases interest rate by 0.20% to 5.76% p.a. on residential investment standard variable loans, effective 1 September 2015 for new business and 1 October for existing residential investment loans.
Greg Medcraft
FAST FACT
Women are closing the gap on men for superannuation balances
$15.8bn Turnover in debtor finance for the June quarter
$26.7K $62.9K
Source: DIFA
MEN DID YOU KNOW?
76%
$11.8K (44.2%)
$35.2K
Three-quarters of Australians who purchased an investment property said they did so to secure their financial future
(56%)
WOMEN 2005 median balance 2015 median balance
Source: Deloitte
Source: Mortgage Choice
AMP Bank drops variable interest rate for new business applications to 4.09% p.a. (comparison rate 4.11%) for its Essential variable rate home loan and 4.19% p.a. (comparison rate 4.23%) for its Basic Package variable loan, and drops its 2 Year Basic fixed rate to 4.18% p.a. (comparison rate 4.23%). All are effective from 31 August to 30 November 2015, applicable to owner-occupier loan applications only. ME increases interest rate by 40 basis points to 4.69% p.a. for its Basic Variable home loan and by 36bp to 4.89% p.a. for its Flexible home loan, for new investors, effective 15 September 2015. Rates across existing investor loans will also rise by 41bp. ME’s fixed rates for new owneroccupier borrowers will fall between 0.09% and 0.50% across its 3- to 7-year terms, including its 3-year fixed rate falling 0.09% to 4.19% p.a.
POLICY
Homeloans Ltd wipes establishment fees from standard loan applications and will cover legal and settlement fees and the cost of one valuation itself.
10
OPINION POSITIVE CREDIT REPORTING IS HERE! Credit Repair Clinic director Mary Trimarchi gives a rundown of what the new regime means for consumers
IT WOULD be useful to discover the impact comprehensive credit reporting (positive credit reporting) has had on credit reporting and indeed the credit repair industry since it was introduced. As most people are aware, our previous credit reporting system only allowed for the publication of negative information on a credit file. The new system of Comprehensive Credit Reporting empowers lenders to list borrowers’ good qualities, not just the bad. The question is, has positive credit reporting achieved its objective? By way of background, as part of the 2007 election policies the government announced it would give serious consideration to recommendations made by the Australia Law Reform Commission as to privacy, and credit reporting in particular. The reforms were significant and now form part of the new Australian Privacy Principles. From March 2014, a large volume of information is being captured by a credit file.
Essentially, the main feature of comprehensive credit reporting is the additional information that can now be recorded on a credit file. The five pieces of information that have been added are: 1. The type of account. 2. The date the account was opened. 3. The date the account was closed. 4. The credit limit placed on the account. 5. The repayment history. There has been little comment as to the accuracy of information recorded
compile statistics which relate to the accuracy of information contained on a credit file, and as such there is an inherent assumption that all is well. Those who work in the credit repair industry know all too well that there are a percentage of people who are adversely affected by information that is incorrect and misleading. The creditors and regulators alike view the consumer with contempt and make it difficult to have an incorrect listing rectified. Further, the same organisations that view the consumer with
The creditors and regulators alike view the consumer with contempt and make it difficult to have an incorrect listing rectified on a credit file. The regulators and the lending institutions do little to
contempt display similar animosity towards credit repair firms that seek
to advocate for consumers’ rights. The integrity of the credit reporting system is paramount for proper financial governance. However, at what cost? Positive credit reporting has done little to assist consumers who are aggrieved by information that appears inaccurately on their credit file. In fact, the last year has seen credit providers listing defaults and entering judgments with more aggression and less emphasis on getting it right, and more emphasis on making life difficult for credit repair firms that seek to advocate against their mistakes. Even the regulators have jumped on the bandwagon and joined the chorus of organisations that advocate against credit repair companies, going so far as to say there is no place for them in the current financial scene. If it were not for the advent of credit repair companies, consumers would be left high and dry and at the mercy of credit providers who rarely admit any wrongdoing. Credit repair companies have levelled the playing field and given the consumer a voice, and as such should be celebrated not castigated. Finance professionals have understood the need for ethical ‘no win no fee’ based credit repair services for some time now. In fact, our organisation receives input from professionals on a daily basis, which legitimises the service we provide and makes us strive to assist as many consumers as we can. The need for ethical credit repair is high. If done correctly it enriches the lives of people who were once banished to a financial wilderness as a result of a blemish on their credit file. In recent times, the largest credit reporting agency, Veda, has stopped removing judgments which are removed by way of discontinuance. This in itself has brought challenges as a large number of affectations on a credit file are court judgments. Further, Experian is now in the credit reporting market. A good credit repairer will look at all three agencies and ensure information across the board is correct, up to date and accurate. Finance professionals should be confident that there are credit repair firms operating which are ethical, service-driven, and do not charge a fee unless they are successful. Credit repair firms are here to stay as they serve as a valuable tool for consumers who have been mistreated by credit providers.
12
ANALYSIS
INTEREST TURNS TO INTERESTONLY LOANS First it was investment loans, but now interest-only loans have been cast under the spotlight as regulators crack down to ensure responsible lending in a low interest rate environment
A GROWING MARKET
84%
The demand for interest-only loans has increased by 84% over the three years to March 2015
42%
Interest-only loans made up 42% of new home lending in the March 2015 quarter
37%
Interest-only loans formed 37% of total housing debt in the March 2015 quarter
57%
Brokers were responsible for 57% of total interest-only loans sold in the December 2014 quarter Source: ASIC
INTEREST-ONLY home loans have grown substantially since 2012. According to ASIC, the demand for interest-only loans has increased 84% over the three-year period from March 2012 to March 2015. In comparison, principal and interest home lending only increased by about 20%. In the December 2014 quarter, the total value of new interestonly home loans issued by banks, credit unions and building societies climbed by 10%, reaching $40.1bn. Interest-only home loans accounted for 43% of all new home loans issued in that quarter. This surge in demand has ASIC concerned. A cost comparison by the regulator found that a consumer could fork out approximately $32,000 more in interest repayments if they took out a five-year interestonly loan, compared to a principal and interest loan. Extrapolate that to 10 years, and a consumer could be approximately $81,000 out of pocket. In response to growing concern, ASIC announced in December that it would be conducting an investigation into the interest-only home loan market, to assess how lenders and brokers were complying with responsible lending laws in a low interest rate environment. Since ASIC announced the review, the demand for interestonly home loans has not slowed.
In the March 2015 quarter, interest-only home lending had increased almost 20% from the previous year, and made up around 42% of all new home loans issued in that quarter. By value, interestonly home lending now forms over a third (37%) of total housing debt. Confronting results ASIC’s probe into interest-only lending, released in late August, analysed the practices of 11 lenders through an extensive review of over 140 individual interest-only loan files – and it revealed some confronting results. According to the report, in 40% of the files reviewed the affordability calculations assumed the borrower had longer to repay the principal on the loan than they actually did. In over 30% of files there was no evidence that the lender had considered whether the interestonly home loan met the borrower’s requirements. In over 20% of files lenders had not considered the borrower’s actual living expenses when approving the loan, relying instead on expense benchmarks. Further, while the majority of interest-only home loans were extended to investors, close to half (41%) were for owner-occupiers. ASIC’s review also revealed that
brokers were the major driver behind the increase in interestonly home loans. According to the regulator’s report, a greater proportion of interest-only home loans were sold through third-party channels. In the December 2014 quarter, 57% of the total number of interest-only home loans were sold through the third-party channel, up from 49% in the March 2012 quarter. In comparison, approximately a third of all principal and interest home loans were sold through the third-party channel, with the majority of principal and interest loans (64%) sold through direct channels. Is commission to blame? With a high proportion of interestonly lending originated through the broker channel, ASIC has called broker commissions into question. According to the final report, responses from the surveyed lenders show that there are no incentive disparities, with commissions paid to third-party mortgage brokers being consistent for both interest-only and principal and interest home loans. However, ASIC has expressed concern that the unique structure of an interest-only loan could still cause commission incentives for some brokers.
13
CONNECT WITH US Got a story, suggestion, or just want to find out some more information?
WHO IS TAKING OUT INTEREST-ONLY LOANS?
25-44
70%
81%
is the most common age group for owner-occupiers taking out interest-only home loans
of owner-occupiers who take out interest-only loans earn over $100,000
of investors who take out interest-only loans earn over $100,000
“There may be some incentive for a broker to recommend an interestonly home loan, as the principal will not initially be paid down and the trail commission will be paid for a number of years on a higher balance,” the review states. “On average, consumers borrow more under an interest-only home loan – possibly because of the lower initial repayment figure under this type of loan and the effect of ‘present bias’. This may be an incentive for brokers to recommend an interest-only home loan. Conflicts of interest could be generated because of the higher commissions paid to brokers in line with greater loan amounts.” According to ASIC, the average value of interest-only home loans approved to owner-occupiers in the December 2014 quarter was almost 40% higher than that of principal and interest home loans. For investors, the average value of interest-only home loans was over 20% higher than principal and interest home loans. Not all bad news The chief executive of the FBAA, Peter White, doesn’t believe it is all bad news for brokers though. White described the review into interest-only home loans by ASIC as a “pretty good result for brokers and the industry”. “Human nature sometimes leads you to expect the worst, but ASIC’s findings about owner-occupier interest-only home loans paints a positive view of brokers and the way they look after customers,” he said. “We know we have been doing terrific work looking after the interests of our clients, and that shows with more than half of all housing loans now written by brokers, and ASIC’s findings show nothing to suggest otherwise.” ASIC’s review does challenge
Source: ASIC
and critique the role of mortgage brokers, but the report also points out a significant amount of evidence that is favourable towards the broker industry. According to the review, the average value of an interest-only home loan originated through the broker channel did increase over the December 2014 quarter, with interest-only owner-occupier loans approximately $75,000 more than principal and interest owneroccupier home loans. However, through the proprietary channel, the average value of an interest-only home loan increased substantially faster, more than doubling that of the broker channel. Interest-only owner-occupier loans originated through direct channels were $160,000 more than principal and interest owner-occupier home loans. Further, interest-only home loans that originated through third-party channels consistently had lower delinquency rates than principal and interest home loans from the proprietary channel, indicating that brokers are ensuring they maintain responsible lending in a low rate environment. However, White agreed with ASIC’s findings that better documented proof of evidence to support serviceability calculations was needed. “This is a bit of a wake-up call for everyone to be on their game and to think big picture when it comes to assessing the ability of a customer to repay, not just for now but in the future,” says White. “Brokers have to ask questions and keep digging and take into account the possible change in a customer’s circumstance. We have to always look ahead and ensure we maintain responsible lending practices when there is uncertainty over future income streams.”
FEATURES 14
COVER STORY
A NEW DAY FOR THE MFAA Incoming MFAA chairman Cynthia Grisbrook represents a new chapter for the association
THE PAST year has been one of massive change for the MFAA. It has seen the association undergo a board restructure that vested more power in its membership, as well as new CEO Siobhan Hayden renewing the organisation’s focus on member engagement. Now the association has embarked on another new chapter with the appointment of Cynthia Grisbrook as MFAA chairman. Grisbrook will replace current chair Tim Brown when he steps down in November, reflecting the continued shift in the MFAA’s power structure towards brokers. Grisbrook is a finance broker and business owner. She has over 15 years’ experience in the broking industry since co-founding her own broking business, DLV Finance Solutions, in 2000. She has been a director of the MFAA board since 2011. While Grisbrook may not be the first broker to hold the role of chairman, she’s the first in quite a while. “I think Vicky Edema and Mark Lewis were both brokers and both were past presidents, but it is fair to say it has been a long time between drinks,” Grisbrook said. And she believes the association has a wealth of talented brokers who also understand corporate governance. She said both her current role as a broker and former roles in the corporate world give her the perspective necessary to represent brokers’ interests. “But I do think that there are many brokers in the MFAA like me who had significant corporate and industry experience before coming to broking. In my case I was a money market dealer with ANZ before starting my broking business 14 years ago. I think that adds a depth and breadth of knowledge which adds to the diversity of thought needed on today’s boards. My capacity to see the big picture but also understand the needs of brokers keeps me grounded and is a constant reminder to me that the purpose of the MFAA is to support and
promote the profession of mortgage and financial services intermediaries,” Grisbrook said. Grisbrook said her first priority in the role was clear. “Finalising the changeover from a representative board to a skills-based board and getting straight
community, is a core activity of the MFAA, and you can expect a continued emphasis on providing leading education and vocational resources for brokers and their businesses.”
Charting the course ahead Grisbrook said the path ahead for brokers could bring both challenges and opportunities. “I think there is too much reliance on presuming every shiny new thing is the next big thing; from a distance a bottle top can look like a gold nugget. And there are lots of shiny new things out there – technology, competitors, processes and practices, even legislation and regulatory changes, can all be disruptors. But they can also be enablers and opportunities to do things differently,” she said. The MFAA’s role in facing these disruptors and opportunities, Grisbrook said, was to “continually assess the value and relevance of the broker proposition to consumers, and how new technology, competitors and processes enhance or diminish that proposition”. “The MFAA is on top of the issues that potentially could be in play, and we are far enough along the knowledge curve to know which challenges are becoming more likely. Our role then is to provide information and guidance for members on how these issues could impact on their business,” she said. In saying this, however, Grisbrook acknowledged that part of the association’s broker focus was the
“You can expect a continued emphasis on providing leading education and vocational resources for brokers and their businesses” down to business will be the first priority,” she said. This change in board structure has seen the association become more broker-centric, with new rules stating the majority of the board must be comprised of brokers. “The change in board structure and governance to a member-elected board will ensure the MFAA performs for its members and drive the MFAA forward to shape the discussion with government and communicate the value and relevance of brokers to consumers,” Grisbrook said. Also high on the board’s list of priorities will be continuing its review of the association’s strategic direction, Grisbrook indicated. Much of the review has been informed by this year’s member roadshows which solicited broker feedback. “These are currently being evaluated and will inform the board in advancing the strategic direction for the next three to five years,” she said. “What I can say is that continually improving and enhancing the professionalism and image of brokers to government, within the industry and to the broader
recognition that all broker businesses are unique. “The MFAA must also respect that our members have a wide variety of business models, and that is their choice to make, not ours.”
15
16
SPECIAL REPORT
HOW DO YOU DIVERSIFY? Two brokers tell us how they’ve managed to add new revenue streams to their businesses
SPONSOR MESSAGE Over the past few years, brokers have successfully grown their share of the home loan market to more than 50%, as consumers recognise the value a broker can bring. At FAST, we see a sizable opportunity for brokers to add to this success by meeting the growing needs of their clients, beyond just residential home loans. From commercial finance, to leasing and equipment finance and business loans, being able to meet more of a client’s needs strengthens the broker-client relationship and supports brokers to build a more sustainable business. As many of the brokers in the following feature will attest, diversifying into new areas of business can take a lot of hard work, and new areas of finance can seem daunting at first, but diversification represents an extraordinary opportunity for brokers ready to take the leap and look beyond home loans. While residential finance will always represent a strong revenue stream for many brokers, at FAST we are looking well beyond the traditional role of the mortgage broker, and the results that many of our brokers are enjoying are compelling. I hope you enjoy this dedicated look at diversification in practice.
Brendan Wright CEO, FAST
KEL SMITH, SMITH FINANCE GROUP What areas have you diversified into, and why did you choose them? What [Smith Finance Group] specialises in is commercial finance, so we have diversified into all other types of lending that our clients would require, such as their home loans, their leasing finance and their overdraft requirements. We want to capture all the business that our clients require. We want to meet all their needs. We’ve been commercial finance specific from the beginning, but since FAST intervened and opened up other doors, and through some other gentle prodding from FAST, we have reversed the trend and gone more back into the role of the old-fashioned bank manager where we look at all our clients’ needs. What advice would you give to brokers looking to diversify beyond residential mortgages? I would tell them to consult with someone who has been there and done it before, whether it be a fellow broker or more importantly the direct contact at their aggregator, like what we have done with FAST. We have gone to FAST and said we have this deal or we have this style of client, can you recommend where we would take that deal and where we would take that client? I found that FAST were the best advocates for us to find the lender that would suit the client the best or the lender that would have the path of least resistance to get the deal approved. Brokers should talk to their aggregator BDM and suggest what areas they may wish to diversify into or where they think there may be opportunities for them, and get some guidance. How has your aggregator aided your efforts to diversify your business? FAST spend their whole time developing relationships with lenders; time that I don’t have to do that. So I can go to my FAST BDM – and every one of them has been excellent – right from the beginning and tell them I have this specific type of deal and I don’t know where to place it and they invariably come up with two or three options, and not only with the lender but also the contact at that lender. They will marry me up, they will specifically tell me who to speak to and they will make that introduction. It saves me a lot of bother with trying to shop the deal around town. It is also not good for the client when you shop a deal around town. They help me to target a lender that is specifically capable of doing the deal. FAST has also helped me develop the skills I need to diversify – anything from coming out themselves and showing us how to enter a deal or what specific requirements we need to understand when writing a different type of loan, to bringing the lender’s BDM out and allowing us to workshop different deals together, the three of us. Why is revenue diversification important? There are two main reasons. I think we need to grow and expand as the business opportunities arise from our existing client base. But also, as the economy goes through different cycles. There are cycles where, as we know now, residential lending is strong. That won’t last forever. There are cycles where commercial lending is strong. There are cycles where equipment finance is strong. There are many cycles in a broker’s life and if you can capture all your clients’ needs then you will be able to survive the lulls in residential lending, the lulls in commercial lending, and the lulls in equipment finance lending. It allows you to be more resilient to the economic highs and lows.
17
DAVID LIPSCHITZ, MANAGING DIRECTOR, LOGIC WEALTH GROUP What areas have you diversified into? My business has been running for about 10 years now, and we started off originally in residential and a little bit of commercial finance. Over the years we diversified within the finance space initially, so we built up a specific commercial division and equipment finance division. However, in the last three years or so, we’ve incorporated a finance planning arm and investment property arm. We are currently in the process of diversifying our demographic as well. We are looking to set up an office interstate. Why is this important? There are a few reasons. First reason was I saw where the industry was going, much like where anyone operating in financial services is going. Anyone who doesn’t have strategic alliances or have diversified will be left behind. You look at any of the larger finance firms out there, they have all diversified because the focus these days is on advisers. If you are an adviser, generally you are the nucleus that glues together a number of the other professionals. You either do it or get left behind. The second reason was so I could provide diverse income streams. I saw after the GFC that certain areas started really hurting. I am lucky as we aren’t based in Sydney, because I know some areas in Western Sydney were just really hurting at that time. So, I learnt pretty quickly it was useful to diversify your income stream. When one area is performing poorly, others might be able to fill in that void. I also acknowledge that I had a database that had a value, not just to my finance arm, but also had a value to be mined for other purposes. Being able to mine that database and crosspollinate it with the other businesses has worked really well. Obviously we build trust with our clients and we are only going to do the right thing by them. We are only going to offer them something that is genuinely in their best interests, so it is never a cold call, it is a very warm database. I also felt that much like a lot of the big banks do, as soon as they have more than one product with the client, they secure their client far more. If we have three or more products – those products might be a commercial finance loan, a residential equipment loan, financial planning advice and an investment property – it makes the client far more sticky. We have had a lot more touch points with the client, so we could firstly know if there was ever an issue and secondly, if they were ever looking to purchase another property, increase their portfolio or gain additional finance, the financial planning arm would know and would be able to inform the other arm to remain on top of it. Finally, it has also limited exposure to our competitors. It is all about competitors. If we were only focused on credit and so the client went to another financial planner, they could have alliances with other finance brokers or other investment property arms and there would be far more of a chance that we could lose that client. How has your aggregator helped you to diversify? When I first joined FAST in the early 2000s, they had a very limited equipment panel and also a very limited commercial finance panel. Since then – and I believe they now have a specialist to focus on growing these channels – their commercial panel is strong, as is their equipment finance panel. This has made diversifying my finance services very easy. What are they doing outside of just being a panel of lenders? Initially when we were looking to set up our financial planning arm, we looked at a few different models. I had a lady working with me who had all the qualifications for financial planning
and I wanted to grow that side of the business so we worked with FAST and they were happy to assist us with marketing and we had a period where we didn’t have to pay a licence fee as we were setting up the business. That was useful but it didn’t work for me in the end because I work predominantly with high-end professionals. It wasn’t really going to work with having a new, young financial planner. I needed to work with someone who had more experience and was very savvy. So FAST helped me with another model which they also offer, where they essentially link in financial planners with me and they will pay us a referral fee or we could actually own part of the book. We knew our clients were safe and that we could have some ownership of the book but the other key issue for me was that I wouldn’t have another arm that is growing the business for me. They were never going to refer me new business. So, in the end, I went with another model. I essentially entered into a joint venture with an experienced financial planner and that has worked really well for me. We jointly own the book but he also brings in business. He comes under my brand; brand recognition is important to me. Suffice to say, that was just for my business, there were many models that FAST offer that would suit what other brokers need. What advice would you give other brokers? There are a few considerations I would give to other brokers considering diversifying their business. The first one is whether to go organic growth versus acquisitions. They both have their pros and cons. The second thing is whether you establish a brand new arm and try and set up all the systems and processes from scratch or you enter into a joint venture. A joint venture made more sense for me, as I was wanting to grow interstate. My final word of advice would be a word of caution. If you are going to diversify your income stream, there are risks to your referral stream. For example, if you are setting up an investment property arm and you had a number of real estate agents who brought you business, that may put those referrals at jeopardy. There are those risks and you have to weigh up those risks with the rewards. But for me and my business, the benefits outweigh those risks.
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SPECIAL REPORT
BROKERS ON NONMAJORS Are the non-majors giving the big four a run for their money?
NON-MAJOR LENDERS represent what’s at the heart of the broker proposition: choice and independence. As smaller, more nimble companies, they have the opportunity to be market disrupters and to introduce innovation more quickly than their big bank counterparts. But are non-majors rising to the challenge? We examine how the lenders are performing in our annual Brokers on Non-majors survey
METHODOLOGY
We surveyed brokers on the importance of different aspects of lender service, and then asked them to rank Australia’s individual nonmajor lenders across these areas. We then averaged the scores to find the overall service performance among the non-major lenders. The areas we examined were: • • • • • • • • • •
Turnaround times BDM support Commission structure Communications, training and development Online platform and services Interest rates Product range Overall service to brokers Credit policy Product diversification opportunities
TURNAROUND TIMES With brokers trying to meet customer expectations for a smooth and worry-free home loan process, it’s no wonder turnaround times have consistently ranked as the most important aspect of non-major lenders’ service proposition. Lenders slipped in this category compared to last year, but Macquarie came out on top, followed by ING Direct and Bankwest. Suncorp, Citibank and Adelaide also received high marks. 1. Macquarie 3.48/5 2. ING Direct 3.12/5 3. Bankwest 3.00/5 4. Non-major average 2.74/5 Highly recommended: Suncorp, Citibank, Adelaide
BDM SUPPORT BDM support was one of the categories brokers rated as highly important in their choice of a non-major. And with brand awareness often key to a non-major’s success in the channel, there’s little doubt that good BDMs are vital. ME Bank topped the category, followed by Macquarie and Heritage Bank. Brokers also highly rated ING Direct and AMP. 1. ME Bank 3.90/5 2. Macquarie 3.90/5 3. Heritage Bank 3.56/5 4. Non-major average 3.32/5 Highly recommended: ING Direct, AMP
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COMMISSION STRUCTURE
COMMUNICATIONS, TRAINING AND DEVELOPMENT With rates and policies changing rapidly due to APRA’s crackdown on investment, clear communication from lenders is vital. Lenders also add value by offering ongoing training opportunities for brokers. Macquarie was head and shoulders above other lenders in this category, followed by ING Direct and Suncorp. ME Bank and St.George also received recognition. 1. Macquarie 3.44/5 2. ING Direct 3.12/5 3. Suncorp 3.07/5 4. Non-major average 2.79/5 Highly recommended: ME Bank, St.George
For all the talk of remuneration causing a conflict of interest for brokers, brokers showed it’s low on their list of priorities when choosing a lender. Survey respondents ranked commissions second to last in importance. Nevertheless, fair remuneration speaks highly of a lender’s commitment to the channel. Macquarie led the category, followed by Suncorp and AMP. Brokers also gave a nod to ING Direct, ME Bank and Citibank. 1. Macquarie
3.47/5
2. Suncorp
3.39/5
3. AMP
3.23/5
INTEREST RATES At the end of the day, it’s all about getting the best deal for your client. And while price isn’t everything, it’s an extremely important consideration in choosing a lender. ME Bank topped this category, followed by Suncorp and Adelaide Bank. Brokers also rated Heritage Bank, ING Direct and Bankwest highly. 1. ME Bank 3.97/5 2. Suncorp 3.87/5 3. Adelaide Bank 3.86/5 4. Non-major average
4. Non-major average
3.17/5
3.48/5
Highly recommended: Heritage Bank, ING Direct, Bankwest
Highly recommended: ING Direct, ME Bank, Citibank
PRODUCT RANGE In an increasingly commoditised market, a unique or broad product range can go a long way toward setting a lender apart from the competition. Brokers gave non-majors reasonably high marks in the category. St.George led the way, followed by Bankwest and Macquarie. Brokers also praised the product range on offer from Adelaide Bank, ING Direct and ME Bank. 1. St.George 3.56/5 2. Bankwest 3.50/5 3. Suncorp 3.51/5 4. Non-major average 3.31/5 Highly recommended: Adelaide Bank, ING Direct, ME Bank
ONLINE PLATFORM AND SERVICES Technology is becoming more and more crucial in connecting with customers. A sharp online offering can help speed applications through and get clients to approval faster. Macquarie topped this category handily, followed by ING Direct and Suncorp. St.George and ME Bank also earned praise from brokers. 1. Macquarie
3.42/5
2. ING Direct
3.22/5
3. Suncorp
3.09/5
CREDIT POLICY Brokers ranked credit policy as the number one barrier to choosing a non-major. While many non-major lenders have a specific target demographic for their home loan clients, a credit policy that’s seen as too restrictive can put brokers off entirely. But some non-majors received praise for their flexible credit policies. ME Bank topped the category, followed by Macquarie and Bankwest. Citibank, St.George and Adelaide Bank were also rated highly. 1. ME Bank 3.19/5 2. Macquarie 3.16/5 3. Bankwest 3.08/5 4. Non-major average
Highly recommended: Citibank, St.George, Adelaide
4. Non-major average
2.82/5
2.93/5 Highly recommended: St.George, ME Bank
FEATURES 20
HOW MUCH WOULD BROKERS LIKE TO USE NON-MAJORS?
What non-major brand has the highest profile with consumers?
0%
0-20
12%
20%
81-100
BROKERS RESPOND
21-40
The percentage of loans brokers say they would like to direct through non-majors
ING Direct 23%
25%
61-80
43%
BARRIERS TO BUSINESS
18% Nearly one in five brokers tipped credit policy as the biggest barrier to placing deals with non-majors
41-60
HOW MUCH DO BROKERS USE NON-MAJORS?
81-100
0-20
14% 23%
13%
The percentage of loans brokers say they directed through non-majors in the last 12 months
61-80
Suncorp 23%
31%
19% Bankwest 19%
ARE YOU HAPPY WITH THE OVERALL SERVICE LEVELS PROVIDED BY NON-MAJORS?
21-40
41-60 Bank of Melbourne 7%
WHAT BROKERS WANT Brokers ranked the areas of service that they find most important when considering a non-major lender, giving each a rating out of 5.
St.George 7%
Average Turnaround times Overall service to brokers
4.60 4.58
BDM support
4.51
Credit policy Interest rates Online platform and services Product range Communications, training and development Commission structure
4.39 4.26 3.92 3.88 3.77 3.61
Product diversification opportunities
3.08
74% YES
Macquarie 7% ME Bank 6% Citibank 4% Bank of Queensland 2% BankSA 足足1% Adelaide 1%
26% NO
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PRODUCT DIVERSIFICATION OPPORTUNITIES Adding new revenue streams can be a major asset to a broker’s business. Lenders that make the process easy go a long way toward helping brokers diversify. ING Direct earned top marks in this category, followed by St.George and Suncorp. Macquarie, ME Bank, Heritage Bank and Bankwest also received praise. 1. Macquarie 3.08/5 2. Suncorp 2.96/5 3. Adelaide 2.95/5 4. Non-major average 2.76/5
Highly recommended: St.George, Suncorp, Macquarie, ME Bank, Heritage Bank, Bankwest
OVERALL SERVICE TO BROKERS Perception is important when choosing a non-major lender. While averaging categories gives a good indication of performance, another good indicator is the broker channel’s overall impression of a lender’s proposition. Macquarie topped this category, followed by ING Direct and ME Bank. Adelaide Bank, Heritage Bank and Suncorp also enjoyed strong reputations with brokers. 1. Macquarie 3.64/5 2. ING Direct 3.49/5 3. ME Bank 3.44/5 4. Non-major average 3.07/5
Highly recommended: Adelaide Bank, Heritage Bank, Suncorp
THE WINNERS For the third year running, Macquarie took the top spot. ING Direct moved up a spot from last year, while ME Bank stormed into the ratings at number three. Suncorp and Bankwest also scored highly. Overall, non-majors scored higher across the board than in last year’s survey. 1. Macquarie 3.43/5 2. ING Direct 3.27/5 3. ME Bank 3.26/5 4. Non-major average 3.05/5
Highly recommended: Suncorp, Bankwest
FEATURES 22
SPONSOR MESSAGE
BEST PRACTICE
PROSPECTING AND SELLING Peter Vala on how to identify and make the most of commercial opportunities
Thinktank Property Finance is Australia’s leading specialist commercial lender. Established 10 years ago, Thinktank has lent approaching $750m for the purchase, equity release and refinance of commercial properties around the country. With an emphasis on set and forget loan structures with up front interest only periods but without ongoing fees, annual reviews or regular revaluations, Thinktank offers Full, Mid and Quick Doc options on typical retail, office and industrial properties located in cities and regions with populations greater than 20,000. We can also provide finance for residential, mixed use and a variety of specialised properties including child care, hostels, reception centres and hotels. Lending up to $3m per property and 75% LVR for Full Doc and SMSF loans, Thinktank will also lend up to $2m and 70% LVR under alternate verification and to 65% LVR on selfcertified income. Whether owneroccupied or for investment purposes, we have a range of options to suit all situations. Up front commissions of up to 1.0% and trail of 0.50% can be selected on all loans. With practically 100% of our loans introduced via the broker channel, we pride ourselves on giving back to the industry as best we can through ongoing delivery of deal workshopping, training and mentoring while also offering CPD points at accredited educational seminars. We are also now running “How to Prospect Effectively” sessions on a regular basis and for more information on when these are on in your area, please contact Peter Vala, Head of Sales and Distribution on 0468 989 555 or pvala@ thinktank.net.au.
Peter Vala, head of sales, Think Tank
FEATURES 23
WHERE TO START? Most brokers will have a number of selfemployed and small to medium enterprise (SME) clients in their database. Whether or not you have current, or arranged recent loans for these clients, the majority of them will have a need for finance in one form or another at some point in the future and so it is all about getting to know them and working to understand their needs. This can be a much more effective path than turning to third party professionals you may have been introduced to such as accountants, financial planners or real estate agents where it is mostly a case of asking for, or waiting on, referrals. As you already have a rapport with your own client base, we can show you just how easy it is to generate more business just by becoming a little more involved in their life and world.
SO, JUST HOW DO YOU GO ABOUT PROSPECTING? Approach this process with a long term view and don’t be put off if it doesn’t yield immediate results. What you are seeking is to be your client’s first preference when they do need something in the future. Here are the “how to” steps to get underway: • Short list 5-10 self-employed clients you know well who ideally have a positive approach to keeping on top of their finances and wealth management planning. Start with one or two you are comfortable with and vice-versa. • Review your past dealings to get on top of their previous finance requirements and refresh your knowledge about them, their business and their plans. • Have a reason to catch up with them. Everyone is busy so offer something of value by sharing some knowledge you know they will be interested in or leave something that will remind them of you. • Arrange to go and see them at their place of business. This is important as it can be a great prompt when you look around and see what their needs might include. Bigger premises, replacement equipment, more trucks, forklifts, IT equipment, a refurbishment? • Offer to take a look at how you can help them or add value by reviewing their financial position and, if possible, obtain their most recent financial statements.
obvious areas to save your client cost, time, or both? • Do they have capacity to borrow more against property or other assets? If they can readily raise more debt, what purposes might they put that capital to so as to help their business and/or improve their personal wealth prospects? • Are they experiencing any challenges, problems or difficulties with their current arrangements? Will an efficient debt consolidation package help ease cash flow? Are annual reviews and lender compliance taking up too much time that can be relieved by taking out a set and forget term loan?
FINANCIAL STATEMENTS. Interest paid: Is there a refinancing opportunity?
What to look for in a Profit & Loss statement. • Interest expense: What is the breakdown? Is it for existing commercial property loans, an unsecured overdraft, equipment finance, operating leases? Be sure to find out the actual repayments on these finance arrangements which will usually be significantly greater than the interest component alone depending on the loan term.
Look for refinance opportunities to reduce costs or improve terms.
A refinance or loan increase can release equity to repay internal loans.
Buying can make more sense than renting, especially for long term wealth creation.
• Rent paid to a third party: How much is it and how does it compare to loan payments on buying their own premises? Many small business owners are now acquiring their business properties within an SMSF for long term wealth creation. • Rent paid to an associated entity: Are there other special purpose companies or trusts controlled by your client which have finance facilities in place? What are the terms, when do they expire? Is there a refinance opportunity? What to look for on a Balance Sheet. • Current loans: These are liabilities maturing in less than 12 months and may include things like overdrafts or short term loans. Are there savings to be gained by refinancing into more efficient and appropriate structures? Is there a hard core debt to be addressed?
WHAT YOU ARE NOW LOOKING FOR Once you have put yourself in a position to have a financial discussion with your client, these are the things you are on the lookout for: • Review all of their personal and business loans. How do the rates, fees and terms compare to what else might be available with the same or another lender? Are there any
It is best if you can get hold of the financial statements (Profit & Loss and Balance Sheet) of the business and, if you can, here are a few tips:
• Loans to directors: Are there short or long term debts owing to directors or shareholders? Is the business able to repay them from current cash or near future profits? Would your client like to repay or reduce them if funds could be accessed?
Convert expensive or hard core debt into easy longer term loans.
FEATURES 24
Borrowing capacity. When reviewing financial statements at a high level, you are essentially aiming to get a picture of what the client’s current net income looks like in context with their asset versus financial liability position. From here you can determine what their maximum borrowing capacity will be. Have they reached a peak level or is there “headroom” to release capital? View business finances and personal finances side by side. Be sure to get an up to date understanding of your client’s combined financial position between their business, as shown in the financial statements, and their personal asset and liability statement. This is necessary so you can see what range of options are available to positively structure their financial situation.
Is your client aware of how much extra they can borrow if they want, or need to?
WHAT SORT OF PRODUCT OPTIONS ARE AVAILABLE TO YOU?
Get a full financial picture by also obtaining an up to date personal statement of assets and liabilities.
WHO CAN YOU TURN TO? Talk to lenders with relationship managers experienced across the range of financing options and able to workshop situations with brokers alongside their clients without the risk of them taking over the relationship. They should also have the necessary skills and experience to work with other professionals including accountants, tax specialists, financial planners and legal advisers. Your aggregator is also likely to offer specialist support and expertise for most commercial lending needs and these skills and services can prove very beneficial in developing your own knowledge and ability to deliver.
HOW TO SELL Having developed an understanding of the wider financial position, the next step is to get a good feel for their key financial objectives (eg. improve cash flow), desires (buy their own commercial property), worries (loss of income through ill health) and concerns (maybe a downturn in business conditions). The answers to these questions can introduce other considerations such as life insurance or income protection policies, looking into a debtor finance facility, or talking to an accountant or financial planner about an SMSF. Ask open ended questions to extract this information and to guide the conversation like a residential loan Fact Find: • “If interest rates were to rise, how would you manage the impact on your cash flow?”
Think broadly. What will help improve your client’s situation, give peace of mind or create wealth?
Questions you might also think of putting to your client could include: • “Your current repayments are $5,000pm; if we can reduce these repayments to $3,500 would that be of interest to you?” • “If I could show you a way to purchase a commercial property through an SMSF and keep repayments around the current rent, would that be of interest?” Ask for your client’s consent to do some preliminary work to present some solutions that can improve their present position, financial outlook, cash flow and peace of mind.
Ask questions that will get your client thinking about what they want now and in the future.
The key is to find a commercial relationship manager who will invest the time and protect your client relationship.
PRESENT A WELL LAID OUT PROPOSAL When you go back to your client, be sure to have put together a solid and appropriate summary of recommendations that is easy to follow and which clearly demonstrates the various benefits available. Describe how they can be achieved, what is involved and your role in overseeing it.
YOU BECOME YOUR CLIENT’S FINANCIAL RELATIONSHIP MANAGER
• “What would you do in the event of serious ill health affecting you or your business partner?” This is not supposed to be a hard conversation though; the intention is to raise your client’s awareness around possible solutions to issues they’ve identified while also prompting thoughts on other things they may not have known about or considered until now.
Depending on your client’s preferences and circumstances, there are a number of alternatives to consider. In commercial property, lenders with longer loan terms can help improve cash flow by reducing monthly loan commitments. For other finance requirements, there are excellent specialist options in the areas of debtor and inventory finance, cash flow (unsecured) finance and equipment finance. A specialist lender is often best placed to produce an efficient, high quality solution by possessing the expertise and taking the time to fit the product outcome to the client.
Identify the products and providers which provide the best solution.
At the end of the process, whether your client proceeds at this time or not, you should have positioned yourself as their financial relationship manager. Maintaining this position does mean being proactive, but such an approach to commercial prospecting will at the very least help to strengthen and secure your long term client relationships.
Provide a comprehensive solution and say how you can make it happen.
SUMMARY With the Christmas/New Year period approaching when many businesses slow down, it can be an ideal time to start planning and getting into a prospecting program. As you try this approach once and then again for a second and third time, it will become an increasingly comfortable exercise and you will fine tune it for your different clients. Before long, it will become second nature. How good will it feel to have prospected for an opportunity, helped a client out, produced some new business for yourself and then been referred to the client’s professional advisors who in turn have numerous clients with similar needs? In turn, it will help to expand your network and introduce further business opportunities.
Ask your client if you can work with their professional advisers. You never know where that can lead…
BOOK YOUR TABLE NOW FRIDAY 30TH OCTOBER 2015 THE STAR, SYDNEY www.australianmortgageawards.com.au
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SPOTLIGHT VIDEO SPOTLIGHT
ONE YEAR ON
INTERESTONLY LOANS UNDER SCRUTINY What a difference a year makes ... or not. Australian Broker reflects on the punditry, new and trends that made headlines 12 months ago
SEPTEMBER 2014
Moody’s warns that interest-only loans could carry a high risk for Australian banks after APRA figures showed the loans made up 43.2% of all new loans during the quarter
DECEMBER 2014
Mortgage broker Ray Weir sends a letter to ASIC and APRA in defence of interest-only loans, saying there are logical and safe reasons borrowers choose the loans
AUGUST 2015
ASIC warns lenders to lift their standards in providing interestonly loans, in order to meet consumer protection laws
APRIL 2015
NAB’s Quarterly Residential Property Survey reveals a growing trend of first home buyers entering the property market as investors rather than owner-occupiers
AUGUST 2015
Moody’s praises ASIC’s crackdown on interest-only loans as “credit positive” for the mortgage market
Tim Brown
WHAT ARE THE CONSEQUENCES OF THE INVESTMENT LENDING CRACKDOWN? APRA, ASIC and lenders have been tightening the reins on investors of late. The regulators, along with the RBA, have warned lenders to be careful of relying too heavily on investment lending, and the banks have responded by hiking investor rates, or – in some cases – pulling out of the market entirely. But what does the clampdown mean for brokers and borrowers? Australian Broker TV recently spoke to Vow Financial CEO Tim Brown, who said the moves could have unintended consequences and see some borrowers struggling to get approvals. “For me the unintended consequences of APRA’s decision to force the banks to reduce not only LVRs but debt service ratios, as well as also backdating and looking back across loans that were approved at different levels, is obviously going to be making it very difficult for people to get approvals,” Brown said. Brown said this would be the case especially for borrowers given conditional approvals. “You’re going to have for us, I think, potentially around 19,000 borrowers who are exposed to losing up to $50,000 based on the average median price of off-the-plan sales. They potentially could lose their whole deposit, simply because the LVRs changed or the consequence of their actions actually starts to reduce the market so the valuation actually also might change,” Brown said. Brown urged brokers to go back through their files and speak to clients about what the changes mean and how they could impact on borrowers.
27
Want more? Have an opinion? www.brokernews.com.au
BEST FORUM COMMENT
FORUM
APRA DRAWS BROKERS’ FURY The regulator has found itself in the firing line following comments about the broker channel
APRA CHAIR Wayne Byres caused a firestorm recently when he suggested that banks should be careful about their use of brokers, claiming that the channel was riskier. Needless to say, brokers were not impressed. Robert said brokers were held to a much higher standard than banks’ proprietary channels. “I dispute the fact that default rates are higher from broker referred deals. The investigation completed by brokers prior to lodgement and subsequently signed off and checked by the lender seems to be significantly higher than loans completed in house. To get a preapproval from one of the majors you merely provide a privacy act form and minimal information. We have to jump through hoops to get the same outcome, not to mention all the NCCP paperwork we do but the banks don’t. Maybe this gentleman needs to work in broker land to see exactly what we do.” Peter said brokers should be wary of Wayne Byres. “Brokers issue a warning. Be aware of Wayne Byers. A constant threat to third party operations. From the old school of proprietary lenders. Anything not written in a branch may be suspect. Tendency to make anecdotal statements on matters he appears to know little about. Unfortunately appears to have great influence on the four majors who
willingly kowtow to his utterances. Poses a real and positive threat to brokers everywhere. His life mission is to destroy them.” But John Nelson said some brokers were willing to go too far to get deals through. “I tend to agree with him and I am a broker myself. I have had five occasions this year alone where I could not help clients due to servicing. On each occasion the client found a broker willing to lie about number of dependents, credit card limits and monthly repayments on personal debt to get the deal across the line. Let’s face it, it’s easy to do and get away with and there are plenty and I mean PLENTY of brokers willing to ‘massage the deal’ to get it through.” And QEDRisk said brokers should take a deep breath. “Come on guys. I have been pretty critical of Mr Byers’ last musings but you’re getting worked up over nothing with these comments. He is saying two things: Firstly, that banks (not brokers) need to take care when considering a loan from a consumer they’ve never met; and secondly he is (cautiously this time) quoting APRA’s serious amounts of data that demonstrates that loans that are introduced through the third party channel actually do have higher default rates. He’s not saying we’re all bad people or any other form of judgement. Just saying what his data proves, whether we like it or not.”
WHY THE WITCH-HUNT? APRA chair Wayne Byres has certainly got on the wrong side of brokers with his comments about the risk the channel presents. One commenter said brokers were being punished for their own success.
“Can somebody please explain why the witch-hunt against the broking industry? These people in APRA and ASIC have clearly demonstrated over the last few weeks that they have absolutely no idea of how brokers do their work, how we interact with our clients and how its actually in our best interests to do the right thing for our clients. The fact that we now write the majority of finance in this country is testament to the fact we do it properly, legally and much better than the banks. This point can be proven as the banks are now actively chasing brokers to work for them directly as the banks realise their current lending managers are idiots, liars, lazy, belligerent, disingenuous, etc. The prime reason for our success is because the staff in the banks are untrained, don’t care and are utterly and completely incompetent. The banks know it and the general public know it. It’s the lending staff in the banks that should be investigated but APRA and ASIC don’t have the guts to really take on the banks. It’s much easier for these clowns to have the general public think that ASIC and APRA are looking after them by attacking the broking industry. APRA and ASIC, if you have any real proof that the broking industry is acting contrary to NCCP rules or any laws then state your case and prove it NOW. Your comments are libellous and need to be proven.” GC on 26/08/2015 at 4:08PM
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PEOPLE LEADERSHIP ON THE FIELD AND OFF
MOVERS AND SHAKERS
Finance broker Suresh Dewan makes dreams come true in the office and on the pitch AS AN AUSTRALIAN property finance specialist, Suresh Dewan covers north of Brisbane to the Sunshine Coast in Queensland, and lives in the beachside suburb of Yaroomba. However, the Fijian-born Dewan has a special place in many hearts for a reason other than securing property finance. He makes dreams come true on the playing field. Dewan coaches the Special Olympics Australia Sunshine Coast Club Soccer team, a group now playing in its third season with Special Olympics Australia, which aims to transform the lives of people with an intellectual disability through regular sport, competition and personal development, helping them reach their personal best, regardless of their skills. They play the winter season, from April to September, meeting every Wednesday and competing each month in a regional tournament somewhere in southeast Queensland. Members are as young as eight and age is no barrier. The regular group has grown from less than six to as many as 16 players, though Dewan would welcome more. Special Olympics Australia Sunshine Coast Club coordinator Shirley Hastings says the time and effort that volunteer Dewan willingly gives is not only about coaching but about mentoring and setting an example. “Suresh is a very modest person,” she said, “but he is the driving force behind this group.” Dewan has brought in friends Peter and Smithy to help out as coaches, and some youngsters as
trainee coaches, which is good because if numbers increase a 1:10 coach-to-player ratio is still required. All team equipment is donated and funds are raised by local community, business and sporting groups. Dewan, who grew up in New Zealand and moved to the Sunshine Coast in 2008, says soccer is in his blood. He has played competitively throughout most of his life, and still does.
New Zealand, and had eventually set me on a career path. “I appreciate the way we, the finance specialists and the real estate sales agents, have a business culture where we work together with the same standards of performance which align with the purpose, vision and mission of the overall business. And this is a client-driven culture, not agent or finance specialist focused,” he said.
“I think the time I spend with the Special Olympics Australia Sunshine Coast Club Soccer team is proving the most rewarding” Even in his younger days in New Zealand he reached out to the community, forming a local neighbourhood team out of concern at the obesity and lack of motivation he was seeing in children and teens. Originally working in the automotive industry, he gravitated from sales to finance, and this focus on finance eventually led him to gain a qualification and a position at Aussie Home Loans, which he says was a great grounding. “It let me develop the professional skills and experience I needed to win my position with Australian Property Finance, which I wanted because of the sales agent-broker relationship. “It reminded me of what I’d identified in the relationship between car sales and car financing at the start of my working life in
In 2013, Dewan took the Under 12 Buderim soccer team to Rome after winning the Volkswagen Junior Masters Tournament in Sydney. This was the first Under 12 Queensland team to be invited to the World Masters Tournament. He has just returned to coaching some of the same boys as under-14s. Dewan says coaching soccer has provided many highlights, including the Rome trip and seeing his team win at the Sunshine Coast Sporting Awards. “I have many great experiences and constantly meet wonderful people, but I think the time I spend with the Special Olympics Australia Sunshine Coast Club Soccer team is proving the most rewarding … and we have awards and chocolates at the end of each season,” said Dewan.
AFM APPOINTS NEW BROKER SALES MANAGER Following its recent merger with the National Mortgage Company, non-bank lender Australian First Mortgage (AFM) has boosted its broker sales team with the appointment of a new regional manager for Victoria, NSW and Queensland. Natasha Sultan joins the AFM team from her role as a business development manager at non-major bank Citibank. Prior to that, she held a national relationship manager role at Connective Home Loans and various management positions at other non-bank lenders. AFM’s general manager for distribution, David White, said the recent merger and Sultan’s appointment would provide the nonbank with an opportunity to build scale and drive increases in new business volumes. “Driving new business volume by looking after our broker channel and extensive aggregator relationships is our priority,” he said. “With Natasha’s experience, proven track record and passion for the industry, we are confident she will significantly strengthen our reach across the Eastern Region.”
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CAUGHT ON CAMERA Aussie Home Loans held its biennial sales conference in Melbourne in August, which culminated in the brokerage’s sales awards honouring high performers from across the franchise network.
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ODDITIES
FINACIAL SERVICES
TIME’S UP A new calculator claims to predict the probability that you’ll die within the next five years A NEW risk calculator which claims to predict the probability of death within the next five years by asking men how many cars they own or drive and women how many children they have could shake up the way underwriters and actuaries assess risk for life insurance. The Ubble tool is designed for those aged between 40 and 70 and simply asks you to answer between 11 and 13 questions, depending on whether you are male or female. While it is pitched at individuals, researchers and policymakers to provide incentives for either lifestyle changes or public health advice, the head of business development at Munich Re UK & Ireland, Lee Lovett, says the life insurance industry could learn a lot from Ubble. “Is this tool a bit of a gimmick? Certainly not,” Lovett said in online health insurance and protection market magazine Cover. “It uses a very large UK database and analyses numerous variables to assess how closely they are associated with mortality risk. “It many respects it works a bit like an automated underwriting rules engine that we see in use at most of the UK life insurers. “The main difference is that the outcome is a probability of death within five years, rather than a formal underwriting decision.”
Lovett said some of the questions asked, such as speed of walking, were surprising but turned out to be an accurate indicator of mortality. “Perhaps this will provide some food for thought for life insurers as they continually seek to fine-tune and improve their underwriting processes and the use of relevant information for risk assessment.” Lovett said that given most life insurance policies will run for typically 20–25 years, Ubble’s timeframe of five years is an obvious limitation. “There is some subjective assessment within the questions asked, for example a question for both genders that asks for a personal assessment of your own state of health – given the fairly obvious impact on the outcome (especially if the outcome were cheaper life cover), it’s easy to see a possible weakness in this type of question,” he said. “Having said that, other analyses have shown that the reliability of this type of question can be tested against various other answers given, and it can be more accurate than might be expected. “If the next Ubble update looks at survival probabilities for 10 years or more, then this will suddenly start to look far more significant,” he said. “Watch this space.”
IT TAKES A VILLAGE While Sydney’s median house price hovers around $1m, for about a third of that you could come away with an entire village in one European country. The village of O Penso in northwestern Spain is up for sale after becoming abandoned following the death of its last resident over a decade ago. The village carries an asking price of US$230,000 (A$320,000) and a buyer will definitely get value for money. The village is set on 40 hectares and consists of six houses, three large barns, a bakery, and a well providing free water. The largest house features hardwood floors and five bedrooms overlooking an orchard of peaches, figs, walnuts, apples and pears. It’s also just under 10km from the Spanish coastline. As older generations pass away, villages such as O Penso are left abandoned as younger generations move to larger cities in search of employment, but real estate agent Mark Adkinson, a British expat who now calls Spain home, said many people wish to see the villages be lived in. “When you talk to the old people, tears come into their eyes,” Adkinson told American media outlet NPR. “They say, ‘Oh, there were a lot of kids, this place was alive!’ They’d like to see these places picked up and turned around. They don’t want them to die.” Adkinson told NPR there were hundreds of abandoned villages in the Spanish countryside and plenty of interest in them from overseas buyers such as retirees from Britain or people looking to establish lifestyle retreats. “There’s also an American who already lives in Spain and wants to set up an English school here,” he said. “I’ve got lots of buyers who want to go back to nature – and let’s face it, there’s nothing more natural than this.”