Australian Broker 12.19

NEWS ASIC keeping busy The regulator has been handing out bans P2

OPINION Too late for second chances?

When a discontinuance doesn’t help credit P10

ANALYSIS The super debate continues Should homebuyers have access to their super? P12

SEPTEMBER 2015 ISSUE 12.19

BUSINESS PROFILE Home Loan Experts Otto Dargan’s team spans the globe P14

MARKET TALK All about the info How data can alter the market P22

TONY MACRAE Westpac’s broker head on his new role P20

PEOPLE Aussie’s new digs The brokerage touts its new HQ P28

2

NEWS

HOUSING

WORLD

INDUSTRY

Investors are still active despite regulators’ efforts P4

Wall Street execs are in prosecutors’ crosshairs P6

ING Direct launches commercial team P6

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FORECASTING THE YEAR AHEAD

World economic growth forecasts

EDITORIAL

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Editor Adam Smith

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5.8% 5.7%

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3.4% 2.8%

2.9%

2.7%

1.6%

1.8%

1.9%

1.7% 1.3% 1.0%

CORPORATE Chief Executive Officer Mike Shipley

Design Manager Daniel Williams

Chief Operating Officer George Walmsley

Traffic Coordinator Lou Gonzales

2.6%

Marketing and Communications Manager Lisa Narroway

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Designer Lea Valenzuela

3.1%

Account Manager Rajan Khatak

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ASIC KEEPING BUSY

Peter Kell

Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak +61 2 8437 4772 rajan.khatak@keymedia.com.au

ASIC has been particularly busy in the last few weeks, handing out bans for bad behaviour.

First, the regulator announced it had banned a New South Wales broker for assisting in the falsifying of loan documents worth more than $3m. The broker in question, Raghwa Nand Prasad of Chipping Norton, NSW, was found to have assisted his former wife in falsifying loan documents. Prasad’s former wife, Shashi Kanta Prasad, was convicted in September 2014.

ASIC also took action in the financial advice industry, hitting former adviser Michael Kolody with a five-and-a-half year ban for providing inappropriate and misleading advice and failing to maintain adequate records.

“Financial advisers must provide appropriate advice, and they must keep adequate records that set out the basis on which the advice is given,” ASIC deputy chairman Peter Kell said.

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.

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NEWS 4

BY THE NUMBERS

DATES TO WATCH

INVESTORS STILL KEEN

884%

An ASIC study recently found that the cost for consumer leases for household goods can be as high as 884%

Source: ASIC

Despite changes by lenders and a fair amount of jawboning by APRA, investors seem undeterred. That’s what the latest housing finance figures from the Australian Bureau of Statistics seem to indicate. According to ABS data, the value of lending to investors constructing new homes jumped by 11.7% in the month of July, reaching a new all-time high.

This comes as lenders have hiked investment rates by an average of 30bps, a move described as unfair by the Property Investment Professionals of Australia (PIPA).

“Increasing borrowing costs for investors, and in some cases owner occupiers, who bought into the market some time ago, seems unfair and detracts from what should be the common goal of creating a balanced property market,” PIPA chair Ben Kingsley said.

But NAB head of personal banking Gavin Slater said the hikes were

A rundown of the next fortnight’s events

SEPTEMBER

30 Ben Kingsley

necessary in the current economic climate.

“From a property investor point of view, conditions are, particularly in recent times, very favourable,” Slater said in an interview with Fairfax media outlets. “Our perspective is that you look to the future, at some point interest rates will go up, and [we are] recognising that now is a really appropriate time to adjust our pricing to reflect what we believe is the underlying risk in that book.”

WHAT THEY SAID...

Peter Kell “Financial advisers must provide appropriate advice, and they must keep adequate records that set out the basis on which the advice is given” P2

John Flavell “Any measures that seek to help first home buyers get their foot onto the property ladder sooner rather than later should be applauded” P12

Stephen Moore “Brokers are in a unique position to take away any confusion and anxiety around the [home loan] process” P28

What: Women in Banking and Finance Closing the Confidence Gap breakfast Where: Clayton Utz, Sydney The particulars: Author and workplace wellbeing expert Michelle McQuaid discusses how women in the workplace can use positive psychology to defeat self-doubt.

OCTOBER

1

What: ABS survey release Where: Online The particulars: The Australian Bureau of Statistics releases its information paper Census of Population and Housing Proposed Products and Services, 2016.

OCTOBER

7

What: Mergers and Acquisitions Webinar Where: Online The particulars: This MFAA webinar will discuss what not to do when looking to merge businesses. Jeff Zulman will share lessons learnt from assisting brokers in mergers and acquisitions.

NEWS 6

WORLD NEWS

TAKING THE MARKET’S TEMPERATURE

Seasonally adjusted finance figures for July

UNITED STATES OF AMERICA WALL STREET EXECS IN THE CROSSHAIRS New rules, which state that individuals – and not just corporations – should be prosecuted, were sent in a memo to federal prosecutors across the country, according to The New York Times.

“Corporations can only commit crimes through flesh-and-blood people,” Sally Yates, the deputy attorney general and the author of the memo, told the Times. “It’s only fair that the people who are responsible for committing those crimes be held accountable. The public needs to have confidence that there is one system of justice and it applies equally regardless of whether that crime occurs on a street corner or in a boardroom.”

According to The New York Times, which was furnished with a copy of the memo, investigators are being advised to focus on individual employees in the beginning of a prosecution.

Cooperating could save companies billions in fines and could mean the difference between a civil settlement and a criminal charge.

The new rules are the first major policy announcement by Attorney General Loretta Lynch, who took office in April of this year.

And while many will revel in the fact that those big bank bigwigs at the centres of the economic crisis may finally be held accountable, the initiative has its sceptics.

“It’s a good memo, but it states what should have been the policy for years,” Brandon L. Garrett, a University of Virginia law professor and the author of the book Too Big to Jail: How Prosecutors Compromise With Corporations, told the Times. “And without more resources, how are prosecutors going to know whether companies are still burying information about their employees?”

2.2% Owner occupier finance

-2.6%

-2.7%

60.2%

Personal finance

Commercial finance

Lease finance Source: ABS

LENDER LOOKS TO TAKE THE GUESSWORK OUT OF COMMERCIAL

Mark Woolnough

Commercial lending can be an intimidating sector for brokers who have been primarily versed in residential lending, but nonmajor lender ING Direct recently launched an initiative it says will help brokers navigate the market.

The lender has established a dedicated commercial property team it says will help brokers looking to diversify into commercial. ING Direct head of third party distribution Mark Woolnough said the sector represented an opportunity

as APRA tightens residential investment.

“With investors increasingly turning to commercial property there will likely be a complementary surge in demand for professional support to help navigate the market and negotiate on commercial loans,” he said.

“There is huge scope for brokers to meet this demand – they have relationships with lenders, access to market insights and are knowledgeable about the nuances of commercial loans.”

NEWS 8

DID YOU KNOW?

LENDER NEWS

A rundown of the fortnight’s policy and price changes

RATES

0.7% CoreLogic RP Data has revealed that over August, the combined capital city annual rate of rental growth fell to 0.7%, a new record low

Source: CoreLogic RP Data

ING Direct Cuts variable rates to 3.99% on its Orange Advantage product (comparison rate 4.19%) for applications received September 1st to October 31st. This promotional rate applies to new owner occupier lending with LVR less than or equal to 80% and principal & interest repayment.

Suncorp Increases interest rates to 5.23% (from 4.96% and comparison rate 5.24%) on Investment Back to Basics variable loans and 5.81% (from 5.54% and comparison rate 5.97%) on Investment Standard variable loans, effective 31 August 2015.

Westpac Applies rate discounts to Flexi First home loan products with a 4.19% interest rate on the Flexi First Options Home Loan and 4.46% on the Flexi First Investment Loan, representing a 0.64% life of loan discount and effective 1 September 2015 (comparison rate not provided). The spring-time offer will also waive the $600 establishment fee. Also announces a $1250 refinance rebate offer for both owner-occupied and investment loans, available to full applications conditionally approved by 30 November 2015 and settled by 29 February 2016.

Advantedge Financial Services Lowers variable rate to 3.99% p.a. for owner-occupier home loans across PLAN Lending, ChoiceLend and FASTLend products plus Advantedge white label partnership brands. Applicable to owner-occupier principal & interest loans with an LVR of 80% or less and a loan value of $200,000 or more, effective 10 September 2015.

FAST FACT

POLICY

Thinktank Lifts its maximum loan term for Lease Doc loans from 25 years to 30 years.

Introduces change to its Mid Doc product with self-certification of income now able to be supported by either one of: 2x BAS returns, six months trading bank account statements, or accountant’s letter. Extends its standard eligibility to residential properties, including NCCP regulated loans.

MORTGAGE CHOICE SHUTTERS HELP ME CHOOSE Mortgage Choice’s FY15 financial results presentation should have given a strong indication about the future of the franchise’s beleaguered comparison site, Help Me Choose.

The franchise brokerage’s CEO John Flavell was forthright about the division’s struggles at the results meeting, saying Mortgage Choice would look to address Help Me Choose’s underperformance “as a matter of urgency”.

This urgent action culminated in the company recently announcing it would shutter the division. Flavell said a comprehensive operational review led to the decision.

“The less than favourable financial result of the Help Me Choose business prompted a comprehensive review of the operation and a decision has been made to close it down in its current form,” Flavell said.

$3.7bn Size of the reverse mortgage market as of December 2014

Source: Mortgage Choice

ME Offers $1,250 cashback to applicants of new owner-occupier home loans greater than $400,000. Applicable to all owner-occupiers who apply from 8 September to 2 October 2015 and settle before the 31 December 2015.

Heritage Bank Waives $600 application fee for variable and fixed rate mortgages (on discount and standard products) or the $350 first year’s package fee on Home Advantage fixed and Home Advantage variable loan products.

Effective immediately until 30 November 2015.

10

OPINION

BORROWERS DESERVE A SECOND CHANCE A discontinuance may no longer mean a discontinuance of credit, according to Clean Credit’s John Dickinson

RECENTLY VEDA Advantage made the controversial decision to stop removing court judgment listings, even when they have been discontinued with the court. When I first heard this news I didn’t believe it. How could it be possible for a court judgment to remain on a credit file

even after the plaintiff had agreed to formally discontinue the action?

Refusing to accept this, I called Veda and questioned what I thought must have been a misunderstanding.

To my amazement I was informed that they had made the decision not to remove court judgment listings after they have

been discontinued; instead they will update the status of the listing only. In other words a court judgment will be recorded for a period of five years even if the matter has been setaside by the court. I’m not often lost for words but in this case I was unsure how to respond, other than to express my displeasure.

Veda has done a tremendous amount of work improving credit reporting over the last few years, most notably being the introduction of positive reporting. I’m in favour of the majority of these changes and have openly applauded Veda for their efforts towards a fairer reporting platform.

However, the decision not to remove a court judgment from a credit file after the action has been discontinued seems like a step in the wrong direction.

Let me quickly cover how things used to work.

If a court judgment was found to be incorrect, the plaintiff could agree to have the matter set-aside with the court.

This process involved the plaintiff signing a Notice of Discontinuance and filing it with the court. In most cases the court would consent to the judgment being closed and they would produce an order reflecting this.

The order would then be provided to Veda who would in turn remove the judgment listing from the credit file.

This seemed fair to me as it is critical that only accurate data is recorded in a credit file. Once a judgment has been setaside the listing is no longer an accurate record of events and therefore should not be recorded.

To continue to list the judgment after it has been set-aside could mean that misleading information is being recorded and credit providers may be applying an incorrect risk profile to applicants.

I believe the reason Veda has made this decision is due to the fact they feel some court judgments were being set aside solely on the basis that the debt had been resolved and to remove a listing just because a debt was no longer outstanding, may inappropriately improve a person’s risk profile, potentially misleading a credit provider. I understand this and agree that a negative credit listing should not be removed based solely on payment.

My concern is court judgments that are entered against people wrongly. While you may think this situation is rare I can assure you it

SPECIALIST LENDING UPDATE John Dickinson is the director CLEAN CREDIT PTY LTD

happens regularly. It’s not uncommon for someone to commence legal proceedings for a debt that is not valid. This can happen for a number of reasons including incorrect information from an accounts department or even vindictive or vengeful behaviour from the plaintiff. The bottom line is just because there has been a court judgment recorded does not automatically mean it is correct.

be to have the matter discontinued and set-aside with the courts. It would seem a travesty of justice if in these circumstances people had to continue to suffer due to an inaccurate credit listing, even when they have proven their innocence in a court of law.

This recent change

by Veda is essentially throwing everyone in the same basket and treats everyone as guilty when in reality this is not the

“This recent change by Veda is essentially throwing everyone in the same basket and treats everyone as guilty” It’s quite common for people not to receive a Statement of Claim and a judgment be awarded against them without them even knowing. Often it’s not until they apply for credit that they are informed they have a court judgment recorded on their credit file.

Most people don’t understand the legal system and if they do receive a Statement of Clam for a debt they know is incorrect, they will often throw it away in disgust.

What they don’t realise is that their inaction will lead to the plaintiff often being awarded judgment, even if the debt was never valid.

The point is not all Court Judgments are a true record that monies were owed and unpaid and it’s these cases that warrant Veda’s attention. Veda will record a court judgment for a five year period. Fair enough if the judgment was an accurate record of events, but definitely not fair if the judgment should have never been awarded. If it was found that a court judgment was wrongly awarded, the normal legal remedy would

case. Veda no doubt considered this decision carefully and would not have implemented this unless they thought it was the correct approach, however I wonder how the people who made this decision would feel if they had a court judgment wrongly awarded against them and they were not able to secure credit for up the five years due to an inappropriate credit listing. Would such an event promote this decision to be revisited?

I’m sure Veda would acknowledge the current credit reporting platform is not perfect and I acknowledge it is very hard to develop a “one size fits all” approach without some situations falling between the cracks. My belief is that Veda has done a great job in addressing issues with the credit reporting system and has made many positive changes, however I feel they need to reconsider their stance on this subject and at least provide a mechanism to allow for the removal of court judgment listings that should have never been awarded in the first place.

PEPPER RESEARCH UNEARTHS OPPORTUNITIES FOR BROKERS 6 in 10 non-conforming customers are missing out on a home loan Escalating house prices and increasing competition in the property sector have shone a spotlight on the state of the current home loan market. Increasing pressure from regulators like APRA have seen many lenders tighten their lending criteria, making it harder for many Australians to qualify for a traditional home loan. At Pepper we often say ‘Prime is a moment in time’ as it’s becoming increasingly common for borrowers that would have qualified for a prime loan yesterday, to find today that they fall outside the ‘prime’ lending criteria.

In the latest series of our national education program, the Pepper Insights Roadshow, we shared the results of an independent year-long research study into the non-conforming market.

This research unearthed a plethora of insights into borrowers’ perceptions around home loans, and found a number of barriers to achieving home ownership, presenting a significant opportunity for Australian brokers.

The research found six in 10 potential non-conforming borrowers don’t end up getting a loan – and that’s not because of credit impairment, because typically only 35 per cent of borrowers fall into this category. It’s often because people aren’t aware of the options available outside of traditional lenders.

It also found around 39 per cent of non-conforming borrowers apply through a traditional lender and are not approved, and almost a quarter do not apply for a home loan at all because they think, or have been told, they will be knocked back.

What’s concerning about these statistics is as a non-bank lender specialising in flexible loan solutions and individual credit assessment, we know that nonconforming borrowers are really no different to traditional borrowers. They could be self-employed, have unusual income or been gifted their deposit. They may have endured a life event such as a divorce, illness or a bad business decision in the past making them unable to fit into the traditional lending category.

An opportunity for brokers The market for specialist loans is growing rapidly in Australia, with approximately 12 per cent of all loans now fitting this category.

Brokers need the confidence and knowledge to be able to write specialist loans, particularly as this is what the present home loan market requires.

These findings demonstrate that if brokers can offer a range of solutions to meet a customer’s specific circumstance, in particular those who don’t meet the

Mario Rehayem Director of sales & distribution, Pepper Australia

requirements of traditional credit scoring and who may have unique circumstances, they will have more opportunities to tap into the current borrowing landscape.

Engaging in a referral network as well as strategic partnerships, not only demonstrates a broker’s ability to understand their client’s needs and values, it cultivates mutually beneficial relationships, in which brokers can refer their clients to their services and vice versa. By partnering with an accountant or real estate agent for example, brokers have access to a broader pool of potential clients. Referrals help brokers build their database, grow brand awareness, reputation and relationships. For example, if a potential accounting partner has a client who is self-employed or has a high level of ATO debt, making it hard to apply for a prime home loan, through a referral partnership, brokers can provide the solution required, such as alt doc loans, cash out for business purposes or debt consolidation loans.

Pepper’s Better Business “e-learning hub” is designed to help brokers capitalise on the non-conforming loan segment and includes a Specialist Lending module, a key resource for brokers looking to service and provide options to the growing group of non-conforming borrowers.

Providing opportunities and making education available to brokers is a significant priority for Pepper. With almost 15 years’ experience in the nonconforming market, Pepper not only works with brokers every single day, we also know our customers extremely well.

We are passionate about supporting our network and providing the support needed to brokers who are looking to service this market. At Pepper, we believe brokers play a critical role in helping more and more Australians achieve home loan help and achieve their home ownership goals.

Pepperonline.com.au/specialist

12

ANALYSIS

THE ‘SUPER’ DEBATE REIGNITES The debate over whether first home buyers should be allowed to access their superannuation to help purchase a home has been reignited after a new economic report examined the economic impacts of Australia’s ageing population and decreasing housing affordability DID YOU KNOW?

84% 84% of older households are home owners, almost 10 percentage points above the OECD average, but the overall poverty rate of older people in Australia is three times the OECD average

40% The average superannuation balance for renters at 65 is about 40% of that of homeowners Source: CEDA

A NEW report published by the Committee for Economic Development of Australia (CEDA) is urging the government to give first home buyers access to their superannuation to help purchase property.

The report, titled The super challenge of retirement income policy, argues that the impact of sustained housing affordability issues keeping people from owning their own home represent a significant problem for retirement policy.

“Two key trends, our ageing population and decreasing housing affordability, mean Australia’s retirement system structure needs a significant rethink,” CEDA chief executive, Professor the Hon. Stephen Martin said.

According to CEDA, between 1 and 1.5 million Australians live in poverty and the elderly, particularly those who do not own their home, are a major at-risk group. In fact, the overall poverty rate of older people in Australia is three times the OECD average, and one of the highest in the world.

“Without a significant policy overhaul, that number is likely to significantly rise over the next 40 years,” Martin said.

“There has been a lot of talk and tweaking of retirement policy aimed at reducing the burden on government, but what Australia needs is a robust discussion on all the options to ensure long term Australians

can retire comfortably.”

According to the report, the robust discussion could start with allowing first home buyers to access their superannuation to purchase owner-occupied housing.

“The system should better recognise the extent to which owner-occupied housing contributes to household wealth and retirement liveability.

People who do not own homes are exposed to the high-cost rental market and risk poverty in retirement.

Home ownership continues to decline among young Australians, more of whom are expected to retire without owning a home,” the report states.

“Home ownership rates continue to decline among younger households aged 25 to 44 years, partly due to a fall in housing affordability that hits first home buyers the hardest.

This will have a flow-on effect and the number of people retiring without the security of their own home will only increase.”

Just do it The head of major mortgage franchise, Mortgage Choice, has backed CEDA’s recommendations to open up superannuation to first home buyers. According to chief executive John Flavell, any measures to address housing affordability and home ownership should be applauded.

“At Mortgage Choice, we agree that first home buyers should be able to access their super in order to fund their first home purchase.

“The reality is, it is becoming harder for first home buyers to purchase property, especially in some of the capital cities where property values are rising at a significant rate. As such, any measures that seek to help first home buyers get their foot onto the property ladder sooner rather than later should be applauded.”

Flavell says he has long supported the idea of allowing first home buyers to use their super as a way

to fund their first home purchase.

“Super helps Australians get financially ready for retirement, so why shouldn’t we allow first home buyers to use their super to buy an asset that will make them money and ultimately help them in retirement?

“Older Australians are allowed to use their super to invest in property, so shouldn’t younger Australians, particularly first home buyers, be able to do the same?

“Furthermore, first home buyers, particularly those trying to buy in the metro areas, often don’t qualify for other assistance or government help when buying property. As such, they have to do it on their own. If they are able to access their super, which is their money anyway, they would be able to raise a deposit faster and get onto the property ladder sooner.”

A leading real estate association has also added its voice to the support backing first home buyer access to superannuation.

The president of the Real Estate Institute of Australia Neville Sanders says, like Flavell, this is something he has long been a supporter of.

“The report makes a number of recommendations that are aimed at ensuring a prosperous and dignified retirement for all Australians and calls on government to recognise the role of housing in contributing to a decent retirement,” he said.

“One of the ways that can contribute to this is to allow first home buyers access to their superannuation funds to purchase owneroccupied housing. This is something that REIA has long advocated.”

According to Sanders, it needs to be recognised that superannuation and home ownership are both components of a retiree’s nest egg and not competing products.

“By buying earlier in life retirees have every prospect of having a higher equity on retirement and a larger nest egg on downsizing.

13

CONNECT WITH US Got a story, suggestion, or just want to find out some more information?

FAST FACTS ON FIRST HOME BUYERS

8737

15.9%

The number of homes financed for first home buyers in June 2015

The percentage of total homes financed in June 2015 that were for first home buyers

19.8%

$340,200

The long-run average percentage of total homes financed for first home buyers

The average first home buyer loan size at June 2015 Source: Australian bureau of Statistics

“The CEDA report details that for more than 30 years, there have been significant reductions in home ownership rates among successive cohorts of younger households with consequences in their retirement.

“Providing first home buyers with access to superannuation will help reverse the trend of falling home ownership and address the looming large policy problem of large numbers of long-term renters approaching retirement.

“Using retirement savings towards buying a home has already proven to be successful in Canada, New Zealand and Singapore.”

A word of caution Meanwhile, the FBAA has said that allowing first home buyers to access their super to purchase property would help “enormously”, however only if it is regulated cautiously.

The CEO of the FBAA, Peter White, says that while he acknowledges property as an excellent long-term investment, he is concerned those who use the scheme may not have enough liquidity to retire.

“This is not new; it is happening in New Zealand and Canada but there are different rules regarding how much is compulsory superannuation and also at what age you can access your super,” he said.

“Getting into the property market is a goal for most

young people and to get a helping hand through accessing super would help enormously but there might be a cost down the track.”

If superannuation is opened up to first home buyers, White says it would need to be done so with a lot of smart regulation.

“If it came in, I would like to see an age cap where for instance, it is only applicable to those under the age of 30. Furthermore, the scheme could only be available as a once-in-alifetime offer,” he said.

According to the FBAA, figures show that an average Australian 30-year-old couple has around $45,000– 50,000 in their super fund, which White says may only be just enough to cover the stamp duty with so many wanting to buy in prime residential areas.

“Let us do all we can to get young people into their first homes, but as finance brokers we have to help direct potential customers towards suitable property options they can afford, and that means sometimes having to purchase in cheaper areas.”

While CEDA’s chief executive admits these policy recommendations come with their own issues, such as concerns that it may contribute to pushing house prices up, the “right combination of policy levers and checks and balances” will ensure they are genuine options to solve a growing problem.

TECHNOLOGY UPDATE

BROKERS’ VOICES BEING HEARD: AGGREGATORS HAIL NEXTGEN.NET TECHNOLOGY WORKSHOP

Tony Carn Sales director, NextGen.Net

“There are times when it works in our favour to collaborate,” said Aussie Home Loans’ Head of Projects Richard Hilliard, reflecting on the recent NextGen.Net instigated Broker ‘Executive Technology Workshop’.

“I found it enormously beneficial to be in a room with industry peers,” continued Hilliard.

“It became clear that we face similar challenges and we’re all after similar outcomes from technology.

“Sure we’re competitive across our offerings. But when it comes to technology and making the lodgement process more efficient, we can get much better outcomes by working together and sharing experiences.”

In February NextGen.Net facilitated the first biannual roundtable workshop with technology owners from broker groups.

The aim was to bring together some of the best minds and lateral thinkers in the business and prompt conversations that would leverage the collective knowledge of the attendees.

Hilliard was so impressed he has urged NextGen.Net to hold the workshops more regularly.

“We need these forums more frequently because there’s a lot of detailed content that requires time to get into the meat of it. We need to engage beyond high-level discussions.

“It’s great that our input is being sought,” he said. “The majority of ideas generally come from discussion with lenders, which we’re not party to.”

From NextGen.Net’s perspective, these industry technology gatherings, which Sales Director Tony Carn says are purposely designed to be informal, are an opportunity to listen as well as contribute.

“We want to understand common grassroot issues from the viewpoint of the broker and aggregator and devise our technology roadmap accordingly,” said Carn, echoing Hilliard’s sentiment that too often ideas come from discussion with lenders only.

“We’re thrilled with the feedback on these workshops and are happy to be able

Technology workshop community

to help to create a sense of community in the industry,” he said.

The concept is to establish an open forum with SMEs from each broker group to discuss current and upcoming industry challenges and proposed solutions.

Participating in the second ‘Executive Technology Workshop’, held over lunch, early August, were Aussie, Mortgage Choice, AFG, Smartline, Connective, FAST and Finsure.

Included on the agenda at the last gettogether was the Anti-Money Laundering and Counter-Terrorism Financing Act (AML) and its potential impact on brokers.

Carn noted: “These AML changes are coming in and we want to ensure we approach data capture and broker experience in a standardised way.”

Adopting a standardised approach is at the core of NextGen.Net’s intent to make the process easy and smooth for everyone – lenders, brokers and aggregators – to undertake.

NextGen.Net technological innovations are now across the majority of lenders and an increasing number of broker groups; and ensuring that protocols are on track is critical prior to release. So from Carn’s viewpoint, these workshops are invaluable.

“Getting feedback from broker groups regarding our innovations to ensure we haven’t missed anything, or under or over-estimated some aspect, is critical if we want to play our role properly and service all our clients,” Carn said.

NextGen.Net also took the opportunity to seek feedback on its recently rolled out tool, that accommodates online resubmissions of loan applications; and advise that online equipment finance applications is now an ApplyOnline option.

But essentially Carn said he enjoyed the “think-tank” element.

“The second workshop was even better than the first because we’d established the platform for discussion and were able to build on that,” he said.

“It’s something that the industry’s needed and has been missing,” said Hilliard. “It’s definitely been a welcome addition to my calendar.”

14

BUSINESS PROFILE

HOME LOAN EXPERTS: GROWING BEYOND THE BORDERS Otto Dargan, managing director of Home Loan Experts, talks about his award-winning brokerage and how offshoring has helped his business grow OTTO DARGAN founded the Sydney-based brokerage Home Loan Experts in 2006. It may now be an award-winning firm – winning a spot in MPA’s latest Top 10 Independent Brokerages in 2014 and more recently being named as a finalist in four Australian Mortgage Awards categories – but the company started on a couch in a share house in the inner-west suburb of Leichhardt.

Dargan told Australian Broker that he always aspired to be a mortgage broker, but when he finally entered the industry as a bright-eyed 18-year-old, he quickly became disenfranchised.

“I feel like I’m one of the few people in this industry who actually wanted to be a mortgage broker. It was actually what I wanted to do. So as soon as I could, I went and started... But I kind of became disillusioned with a lot of the businesses which were running and I felt like a lot of them didn’t give brokers a fair go and a lot of them weren’t looking after the interests of their clients either. I wanted to start my own business so then I could hold myself accountable to my own standard of ethics.

“I started Home Loan Experts in 2006 and it started on the couch of a share house in Leichhardt then moved to a share house in Enfield... I had two housemates, one of which had a heavy metal band, the other one was constantly working on his motor bike and was up to all sorts of mischief. At one stage we even had pet chickens in the office, so we had a very interesting beginning. But the one thing we always did well was that we looked after our clients and we had a great service offering – so we grew and we grew. We built up a good reputation in the industry and good people started to find us and begin to work for us.

“We then found ourselves with 18 people in a house and had to go find ourselves an office. So we

moved and continued to grow and grow again until we filled out that office. We have now just recently moved to an even larger office, where we are ready to reach where I see the finishing point of where our business should be.”

The Home Loan Experts headquarters now resides in another inner-west suburb of Sydney, Rhodes, where Dargan manages a team of 22 brokers. However, he admits that the journey getting here has been a tough one.

“I’d love to say we have had minimum growth pains but that is not entirely true. Growing fast is always a struggle and I look at how companies like Google have done it and I am really impressed with what they have done,” he told Australian Broker.

“But really what it comes down to is just having a solid plan, and for me, I am always trying to look and see what the maximum is that we can do. It tends to be my staff then saying slow down so we can plan this properly and figure out what we can do to make sure it is sustainable growth.”

The path of growth less travelled

Speak to any broker or aggregator and they will tell you that diversification is the key to growing your business. But Dargan has taken an entirely different approach to growing Home Loan Experts – and with the brokerage settling almost $500m in the financial year ended June 2015, the results speak for themselves.

In 2012, Dargan took part of his business offshore and set up a support team in Nepal. He told Australian Broker that the decision was a very broker-centric one. It was about streamlining the process for brokers and freeing them up to do what they do best – getting in front of clients.

“A broker should not be spending time doing

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“Going offshore is not something to be taken lightly. It is a lot harder than hiring in Australia�

FEATURES 16

FAST FACTS

2009

The total number of staff – made up of 22 brokers, 27 broker support, 13 marketing, 10 managers, 9 management support

83 $477m Connective first home owners grants, discharges, things like that. It is a waste of their time. They should be speaking to customers, they should be building referral networks, they should be talking to credit [providers] and they should be assessing deals.

That’s it. Anything else a broker does is not a dollar productive activity.

“You’ve got to also play to your strengths – often salesmen are not good at doing paperwork. Or often they are not good at doing data entry. You want the people who are good with dealing with people and good with dealing with banks and get them talking to customers.”

Admittedly, Nepal wasn’t the first time Dargan attempted to head offshore. He had previously, and unsuccessfully, attempted to head offshore to both the Philippines and India – a lesson which taught him that the decision to set up operations outside of Australia should not be taken lightly.

“Going offshore is not something to be taken lightly; it is a lot harder than hiring in Australia.

You are going to have cultural challenges, you might have a time difference, you might have technology issues as far as the internet connection, they may have trouble calling Australia, they may have trouble hiring and it is going to be difficult to manage as well. You are going to have to travel a lot.

“What I would recommend is that you set it up when you are deciding to go for scale – and you allow a minimum of two years for it to be up and running properly. The key to making it successful is to bring them to Australia. When they have come to

Australia then they will understand [our industry] and they can take a higher level of ownership.”

Managing your offshore business Fast-forward three years and Home Loan Experts now has a team of 50 support staff based in Kathmandu, Nepal. Finding the right team for your business can be a difficult task, but Dargan has some advice for hiring the top talent overseas.

“We [travelled] to all the colleges in Nepal and

The year Home Loan Experts was founded

Total value of loans settled in the 2015 financial year

Home Loans Experts’ aggregator

management of your offshore staff is just as important as the hiring process.

“If you have offshore support they are only as good as their experience and training. They’re all very intelligent, that’s not a problem. But if you get them to come and do a tour of the banks and see an open for inspection, meet real estate agents, talk to conveyancers – they then really understand how the industry works,” Dargan said.

“They can contribute much more in terms of

“A broker should not be spending time doing first home owners grants, discharges, things like that. It is a waste of their time. They should be speaking to customers, they should be building referral networks, they should be talking to credit [providers] and they should be assessing deals” spoke to all the MBA and BBA classes, and we hired the top 1% of the population – so our support staff are phenomenal. We test them on policy, lender procedures and how to fill in different forms and they actually do better than our brokers in many cases. But what it means is that our brokers can have that confidence.”

However, the ongoing investment and

improving our processes and they can give a much better level of support to our brokers.”

Making a difference Taking your business offshore isn’t just about the benefits it can bring to your business at home, though. Dargan says it can give you a real sense of social responsibility and the ability to make a real

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difference to a community in need.

“A lot of brokerages in Australia give back to the community and look at different things they can do, but when we had a look at what we can do, we saw that we had this big advantage in Nepal. One dollar in Nepal goes a lot further than one dollar in Australia. Initially, we started off by sponsoring some children, so paying for their education. The government provides free education up until year eight, but after that it is out of reach for most people – so that is where we were filling that gap,” he told Australian Broker.

“That was fairly expensive per child so we looked to see what is more effective that we can do. Now we have just sponsored something called ‘The Good Oil Project’ where we actually give cooking oil to families, if their children get a high attendance rate at school.

“In a rural area, often they won’t send their daughter to school because they think she will get married, therefore doesn’t require formal education.

That then causes all sorts of problems down the track and keeps the poor, poor. By giving them that incentive to send their daughters to school in particular, that makes a huge difference.

“We are sponsoring one school there which has 180 children and the attendance rate is very high.

So what we are looking at now is that the quality of learning is good as well. We are looking to send college educated teachers there. In rural areas, it is often just whoever can read or write in the village who is the teacher. For a fairly small cost,

we can send a teacher from Kathmandu out to a rural area.”

All systems go With all its systems and support in place, Dargan says Home Loan Experts is now on a big recruitment drive.

“We are on a big recruitment drive over the next six to 12 months. We are looking to put on another 25 brokers and we have now laid the foundation for this – we have got our support team and they are really good, we’ve got our systems, we’ve got our marketing and we also have the data as well.

“Our brokers will have their own statistics and know exactly where they can improve. Now we are just looking for the right people.”

The right people, he told Australian Broker, will be smart, driven and resilient.

“In regards to how we hire and what we are looking for, we are looking for people who are smart – that is number one – because we want a compliant business, we want an efficient business and we want a really high level of service for our clients.

“Secondly, we look for a lot of drive. Some people really, really want to go for it and others don’t.

“Lastly, we want people who are resilient.

Being a broker is not easy. You are going to have customers that really challenge you and the banks won’t always help you out. You need someone who is strong and that can stand up to that.”

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says McConville. His career shifted him to Melbourne in 1995 with ANZ’s Originator Services Unit. This introduced him to the broker world and to providing wholesale mortgage solutions for white label suppliers as a partnership manager.

He then became a general manager, which involved sourcing new mortgage managers and brokers.

An opportunity then arose for McConville to join Homeloans as a business development manager, and within his first year he was nominated for Best Non-bank BDM at the 2011 Australian Mortgage Awards.

“So I’ve gone from credit to wholesale to mortgage manager, and now to a BDM talking to brokers again, getting back to the broker world,” says McConville.

He has been with Homeloans ever since, and went on to transition into a broking role.

COALFACE

BANKER, BDM, BROKER WA broker for Homeloans Ltd Paul McConville held a number of roles in finance, each one connecting him closer to the broking world before he chose to become a broker himself PAUL MCCONVILLE’S diverse background and more than 20 years in the mortgage industry have seen him go from credit manager into wholesale management and on to become a business

development manager before settling into a broker role two years ago.

As a branded broker for Homeloans based in Perth, McConville is balancing business across two states, jet-setting between the

east and west coasts each month as he also has clients in Melbourne.

Originally from Bendigo, he played AFL through his teenage years and then at age 20 was drafted nationally by Fitzroy (now

Brisbane Lions) and played a year in the reserves.

But at 21 he decided to pursue his interests in banking and joined ANZ as a credit analyst.

“I started off in credit and then got into wholesale,”

Homeloans and mobile broking A multi-award-winning non-bank lender/brokerage, Homeloans is in its 30th year and has been ASX listed since 2001. Its major shareholders include National Australia Bank and Macquarie Group.

Homeloans provides its customers with a one-application process and multiple loan options, and has satellite offices around the country.

“I’ve got a hotspot in St Georges Terrace, WA, and also in St Kilda, Melbourne,” says McConville.

This gives him a base in each state and access to all the support facilities, and business has never been better for him.

“The two years I’ve been doing it, it definitely hasn’t slowed down.”

Changing times McConville says now is a great time to be a broker as he recalls the days in

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HOMELOANS FAST FACTS

From its humble beginnings in 1985, Homeloans now has a presence in every state in Australia and is ASX listed.

In its full-year 2015 financial results, Homeloans reported: Strong H2 FY2015 settlements – positive trend for H1 FY2016

14.9%

Branded (managed) settlements of $1bn, an increase of 23.7% from FY2014

100

80

60

40

20

23.7% 0

A 14.9% increase in settlements totalling $1,792m, up from $1,559m in FY14

Reasons for increase: Investing in distribution staff and expanding through acquisition. By acquiring Barnes in February 2015, along with its $120m settlements p.a. and $0.5b FUM, Homeloans has grown the company’s presence on the east coast

Basic EPS of 5.3 cents NPAT of $5.6m Final dividend of 2 cents per share (fully franked)

the ’90s when brokers were finding their feet and may have just been doing broking on the side.

“The banks were seeing the opportunity of that broker market. So that market did open up, but [today] it’s regulated so much better – the brokers that are in the business [now], that’s their job; that’s their bread and butter. For me with that credit background, it’s been a pretty good transition.”

McConville says a positive customercentric attitude will take you a long way, and he

emphasises the importance of speedy response times for your clients.

“That quick response makes the customer feel like they’re the only customer I’ve got, and if you have that then you get a good referral channel.”

Although juggling clients in two states can be a challenge, especially when daylight savings comes into play, McConville says what he always strives for is a positive outcome for the client.

“What you put in is what you get out of it. It’s a good lifestyle if you learn to how to balance it.”

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COVER STORY

WESTPAC’S TAKE ON APRA TIGHTENING APRA has been vocal in asking the banks to tighten the home loan market, with the regulator saying earlier this year that it would increase the amount of capital banks needed to hold on residential lending.

Westpac says it is well placed to meet the new requirement.

According to the major bank, the change would require a further $3bn of capital to lift its CET1 to the top end of the bank’s preferred range of 8.75% to 9.25%.

However, Westpac’s chief financial officer, Peter King, says increasing capital requirements against mortgage lending will not benefit consumers.

“As we outlined in our submission to the FSI, there is no strong evidence that increasing mortgage risk weights for banks using advanced IRB will provide further benefits for consumers in an already competitive lending market.

“While Westpac is well placed to meet these changes, increased capital does come at a cost. The cost of holding higher capital will inevitably be borne by customers and shareholders.”

BIG BANK GROWTH

Change in personal banking customers 2011–15

15.7%

5.2% 2.7% ANZ

2.5% CBA

NAB

Westpac (including St.George, BoM, BankSA)

Source: Roy Morgan

STREAMLINING THE EXPERIENCE Westpac’s Tony MacRae says his new role is all about supporting customer needs

TONY MACRAE’S role at Westpac has recently been expanded. While MacRae has headed Westpac’s broker business since 2011, he was promoted in July to overseeing third party distribution for the entire group.

This puts him across the bank’s multibrand strategy, overseeing broker distribution not just for Westpac but for St.George, BankSA and Bank of Melbourne as well.

MacRae said the decision to broaden the role was, first and foremost, customer focused.

“The old structure of Westpac business and retail banking and the St.George business served us really well for a long time and delivered lots of great things for us.

But as an organisation we sort of looked at things and went: We talk about customer value being at the centre

single points of accountability that own that, and have a very clear customer focus in driving that particular piece.

It made absolute logical sense in the broker space to do exactly the same. It will allow us to retain the uniqueness of the brands and what they stand for, but to be able to share best practice; to be able to line up our processes so we have less hand-offs and less disjointedness between the various parts of the process; to be able to ensure that going forward we’ve got a far more seamless process that customers can flow through regardless of whether they’re dealing with Westpac, St.George, Bank of Melbourne or South Australia, whilst not losing the uniqueness at the coalface of what those brands actually stand for,” he said.

While the back end of the businesses may be headed

“The brands are critical, and the differences between the brands in the way they relate to brokers and customers is critical, but behind the scenes once the deal comes in we should be able to be more streamlined and have far more consistency to be able to deliver the best of both worlds” of everything we do. Being customer-centric, customer focused. Yet our structures weren’t always aligning with that, and particularly our end-to-end processes weren’t lining up to be able to support the customer need. So to us it made sense that we had this end-to-end consumer bank that owns products and processes that are focused for a consumer, and then on the commercial and business side we bring all of the commercial and small business teams together, and then all of those customers together,” MacRae said.

He said his new role meant the bank was thinking strategically across the group about how its processes worked. For brokers and customers alike, MacRae said this would mean more streamlined processes.

“That just allows us to streamline our processes, have

towards greater unity, MacRae said it was important to keep each brand’s unique identity. He said this was the key to the group’s appeal and helped it cast a broader net for customers.

“The brands are critical, and the differences between the brands in the way they relate to brokers and customers is critical, but behind the scenes once the deal comes in we should be able to be more streamlined and have far more consistency to be able to deliver the best of both worlds,” MacRae said.

“I saw a really interesting stat recently which compared the majors and the sort of customer coverage of the brands. The multibrand strategy gives Westpac an 80-plus per cent coverage of customers. It gives us a real competitive advantage.”

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Another competitive advantage, MacRae said, was the ability to share knowledge and best practice across the brands.

“For me, it means I’ve got more people to look after.

In the short term, there’s probably a little bit more complexity because we still are on different systems and different processes, but it allows a single person to get a view across those and ask the questions of: we do it this way here; maybe there’s some sense in sharing that particular piece on the other sides,” he said.

At the moment, MacRae said he was still learning the complexities of the different brands and systems. Having a common point of oversight will allow them to operate more efficiently and strategically, he suggested.

“I’m spending a fair bit of time to be able to understand the differences, but then bring those differences to where we can get the wins in the back offices. I think it also allows us to be able to have a far more strategic view of the marketplace. Where does our one particular brand really resonate with a group of customers or a group of brokers? And we ensure that in a very coordinated way we go very strong there.

Another one may work slightly better somewhere else, and we can have a real strategic focus that allows us to have greater coverage of the marketplace than if we were always stepping on each other’s toes,” he said.

And the ultimate goal, MacRae indicated, is delivering on the bank’s mandate to better serve its customers.

“Ensuring that we do have a real customer focus around this is really critical and is the next phase of the service revolution that [CEO] Brian [Hartzer] kicked off 18 months ago.”

WESTPAC’S MARKET REACH

With its multibrand strategy, Westpac has a significant share of the home loan market 13.0% 10.8%

Westpac

Bank of Melbourne

BankSA

St.George

Total

3.1% 2.5%

0.9% 0.8%

8.0% 7.8%

25% 21.9%

Market share, August 2015 Investor share, August 2015 Source: Roy Morgan

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MARKET WRAP MARKET TALK

SYMMETRICAL INFORMATION IN REAL ESTATE MARKETS CoreLogic RP Data’s Chris Spanos on how information affects the market

they are selling, but buyers have no way of knowing that quality until after the car is bought?

What happens when markets have asymmetric information?

In Akerlof’s model, buyers only ever offer the average price for cars because they don’t know what sort of car they’re buying. This results in the owners of good cars, who know their cars are worth more than average, withdrawing from the market. In time all that remains is a market for lemons!

While this is a simplistic example, it is a useful tool when exploring the kinds of distortions that can occur in markets with asymmetric information. If one of the market participants, such as a seller or a buyer, has more information than others, a market failure can occur with unexpected consequences.

There are many real-world markets that are susceptible to the ills of asymmetric information.

Health insurance: Because people know more about their current health and risk factors than insurers, it makes it difficult for health insurers to set appropriate premiums. If an insurer attempts to set average premium prices, healthy people leave the market and only the sick remain. This, in part, explains why so many countries have public health systems and why Australia has a 30% government co-payment incentivising healthy people to take out a premium.

Insider trading: The stock market has always been susceptible to distortions due to asymmetric information, especially where directors and executives are concerned. Company staff generally know more about the performance of a company than investors, so they can make significant profits by trading shares at the right time. Beyond cheating investors, insider trading destroys confidence in the stock market, which hurts the ability of companies to raise capital in the long run. This is why so many countries have laws banning insider trading.

WORKING FOR a company like CoreLogic RP Data, where data is your professional life, you can forget that others do not appreciate how important data is to the healthy functioning of the real estate market. To better understand CoreLogic RP Data’s vision, we need to begin by asking a fundamental question: What role does information play in markets?

Information and competitive markets Competitive markets, of which both property auctions and private treaty sales are examples, need information to function. Both the buyer and seller need to know some things about the ‘goods’ or property they intend to trade, such as: • What are the property’s features (ie bedroom count, roof type, land area, etc)?

• What functions does the property serve (ie residential use, commercial use, mixed use, etc)?

• What price is the property (ie asking price, reserve price, offer price, etc)?

Of the information types above, price signals are one of the most elementary features of a free market economy. Asking price signals a seller’s information, while offer price signals a buyer’s information. For

example, a high asking price signals that a seller believes their property to be of high value with good features and functions.

Of course, asking prices and offer prices are also influenced by strategy, so an opening bid at an auction may tell us very little about a buyer’s true information. What helps mitigate strategy and direct pricing signals towards a better reflection of a property’s value? Information!

What is symmetric and asymmetric information?

In the context of economics and the analysis of markets, symmetric information means arming a seller and a buyer with the same information. This symmetry helps to guide negotiations towards an equilibrium where asking price and offer price align to a sale price that reflects true value.

It was the pioneering work of several economists, most notably George Akerlof and his example of the used-car market for ‘lemons’, that first explored markets with a lack of symmetric information (also known as asymmetric information). Akerlof asked a simple question: What happens if sellers know the quality of the car

Underquoting in real estate: When agents give guidance to potential bidders at an auction, they may offer low price guidance to entice an increased number of bidders to the auction – the theory being that a competitive auction with multiple bidders will push up the price. The practice of underquoting relies on an agent’s ability to exploit information asymmetries in order to maximise their client’s sale price. Like insider trading, this erodes confidence in the real estate industry and hurts long-term market activity, explaining why states like NSW are cracking down on underquoting.

How can markets be made more symmetrical?

Beyond increased regulation, there are many strategies market participants can use in order to mitigate the effects of asymmetric information. As you might imagine, chief among these is acquiring more information to make things more balanced.

This reality goes to the heart of CoreLogic RP Data’s vision to “deliver unique property-level insights that power the global real estate economy”.

By making property-level data and analytics available to as many participants as possible, a more symmetrical property market can emerge for all.

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MARKET WRAP PLANNERS KEY TO INCREASING CHARITY

FINANCIAL SERVICES

ROBOPLANNERS ON THE CARDS FOR NAB The major bank plans to automate advice A major bank will launch automated financial advice in an effort to engage the 80% of the market that does not use financial planners.

According to The Australian, NAB has announced a foray into online, automated financial advice. The NAB Prosper offering will be rolled out to 40,000 customers on 7 October, The Australian said, focusing at first on superannuation and insurance before broadening its advice suite to include debt, cash flow, investments and estate planning.

NAB general manager of wealth

digital and direct services Anne Bennett said the platform was personalised to clients’ life circumstances through algorithms.

“I see NAB Prosper as more than robo advice. It’s much more personalised for the individual and less about flicking money b ­ etween different investment ­options,” Bennett told The Australian.

Bennett said the platform would also give customers the option to speak to advisers over the phone, and would not specify products but would offer general personalised advice.

Advisers play a key role in increasing philanthropy in Australia, according to a leading financial services firm.

Perpetual’s national manager of philanthropy and non-profit services, Caitriona Fay, says financial advisers play a key role in increasing charitable giving as Australia is set to experience its greatest ever intergenerational transfer of wealth over the next two decades.

“Over the coming years, baby boomers will be working increasingly closely with their trusted advisers to put estate plans in place, making it important for financial planners to know how to discover and guide their clients’ charitable intentions,” Fay said.

The comments coincided with Include a Charity Week, a joint initiative of more than 100 of the country’s leading charities aimed at encouraging Australians to include a charitable gift in their will. Fay said advisers had an important role to play in this effort.

“There is clearly an immense opportunity for trusted advisers to positively influence the levels of charitable giving in Australia, but they must know how to raise the issue with clients,” Fay said.

She said advisers should introduce the issue of charitable giving in conversations around estate planning.

“Helping clients to consider their philanthropic intentions can have significant advantages for advisers, by deepening their client relationships, allowing them to engage with the next generation, differentiating their service offering, and increasing client referrals,” Fay said.

LEAVING IT ALL BEHIND

87%

87% of Australians support a charity during their lifetime

29% say they’d be willing to leave a charitable donation in their will

7.5%

29%

7.5% end up doing so Source: Perpetual

BAN ON ADVISER COMMISSIONS HAS HURT UK CLIENTS UK pundits have said a ban on embedded commissions for advisers has hurt clients.

The UK’s Financial Conduct Authority (FCA) recently announced it was establishing the Financial Advice Market Review (FAMR) to examine how ditching embedded comp has limited access to advice for those most in need of it.

This “experiment (of eliminating embedded comp.) has inevitably resulted in rising advice costs, reduced adviser numbers and a significant reduction in the delivery of financial advice”, Richard Bishop, a practising financial adviser in the UK and Coventry University College lecturer writes in a scathing op-ed in the Financial Times. “The FCA has proven to be a very expensive way of delivering regulation in the UK; it may be the case that the implementation of the FAMR requires a new regulator, not a new regulatory approach.”

That desire to hold the regulator accountable for unintended consequences

of dropping embedded commissions is growing following an FCA postimplementation review of its commission reforms in December 2014. It found that the cost of advice had increased but the FCA had yet to comment on the total impact, including the value delivered as a result of the changes.

Regardless, opponents of the reforms believe there’s an “advice gap” that’s come to pass as a result of the various changes implemented 32 months ago, including the elimination of embedded commissions.

However, Toronto economist and former UK adviser Andrew Teasdale sees the UK reforms as having unfolded exactly as they should have.

“Access to ‘advice’ has never really been the major problem, in my opinion.

Access to cost effective simple solutions has been, especially for the many smaller investors,” Teasdale wrote in an email to Wealth Professional. “We have the technology and ability to deliver the RDR, this is just a natural progression, and history is littered with the revolts of those displaced by progress.”

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SPOTLIGHT VIDEO SPOTLIGHT

ONE YEAR ON

DIVISION OVER VERTICAL INTEGRATION What a difference a year makes ... or not.

Australian Broker reflects on the punditry, news and trends that made headlines 12 months ago

SEPTEMBER 2014

A Fairfax report indicates that banks doubled their ownership of mortgage broking businesses over the five years to 2013

SEPTEMBER 2014

Industry figures are divided over bank ownership of aggregators. While Homeloans’ Ray Hair says ownership does not guarantee broker support, Outsource CEO Tanya Sale argues that independence is paramount

OCTOBER 2014

An ASIC report warns about vertical integration in the financial planning industry, with major banks accounting for around 60% of total industry revenue in 2013/14

DECEMBER 2014

Non-major banks argue that the Murray Inquiry should have addressed transparency around bank ownership structures and vertical integration

MARCH 2015

The Customer Owned Banking Association calls on the government to act on FSI recommendations that would force broker businesses to disclose ownership structures to clients

Matt Lawler

BIG PLANS TO BOOST INDUSTRY GROWTH After a year focused on growth through acquisition and expansion, franchise network Yellow Brick Road recently announced it would be tripling its marketing spend and focusing on consumer awareness. YBR chief executive Matt Lawler explained to Australian Broker TV why the company had decided to narrow its focus.

“We’re still a fairly young brand. We’ve only been really around for four years. It’s important for us to get our message out there and get our brand out there so people know who we are and that we’re someone they can trust. That’s important for all our branches as they put forward the Yellow Brick Road name. That’s really why we’re spending this money,” Lawler said.

Lawler said the timing of the marketing spend came following a year of acquisitions. The marketing push also comes as the company has announced that its founder and executive chairman, Mark Bouris, will appear in another season of The Celebrity Apprentice.

“Last year we were very much involved in the acquisitions of Resi and Vow, so that took up a lot of our time last year. So the opportunity for The Celebrity Apprentice has come around again this year. We’ve also done a lot of work to grow the branch network. We’ve got good coverage in every state and every territory, and the transition of the Resi branches across to Yellow Brick Road also gives us an additional 19 branches that are there and ready to deal with customers as well,” Lawler said.

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BEST FORUM COMMENT

ARE INVESTOR RATE HIKES THE RIGHT MOVE? Following the recent efforts by APRA to slow down investor lending, NAB’s head of personal banking, Gavin Slater, said it made sense for investors to face higher interest costs than home owners due to their differing priorities.

“As a responsible lender, investment loans are now being assessed on a principal and interest basis at a much higher servicing rate. If the customer passes much tougher hurdles and the customer gives the bank additional security, why should they be penalized with a higher retail rate? If the customer is an existing customer with sound record of payment, why too are they also being penalized?

If you are behind in your repayments you are charged a higher rate until it is returned to order!

If they have concerns with certain demographic areas restrict loan to value ratios on those areas to 60/70% and put other areas on watch. If clients pass the tougher criteria they deserve the better rate.

If the bank has concerns about their 10% restriction in regards their loan book, they should put their hand up and say they have reached their quota and concentrate on other areas for business growth (of which there are many, particularly in business, corporate lending, and financial planning)!”

GC on 26/08/2015 at 4:08PM LOW-DOC LOANS MAKING A COMEBACK New figures from Canstar show a renewed interest in low-doc loans.

“Many of these loans are not genuine low-doc products and still require a degree of financial information, such as 12 months bank statements of BAS statements. Also LVRs are much lower than pre-GFC.” Regional Broker on 9/09/2015 at 8:52AM

“I hate doing low doc loans. The consumer still thinks it’s like the old days whereby if you had an ABN even for one day, it was a case of sign this one form and here’s your money! It’s far from being that easy and once you ask for a letter from their accountant, BAS statements, trading statements etc. many clients vanish.”

Vincent Moore on 9/09/2015 at 5:16PM

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PEOPLE NATIONAL FINANCE BROKERS DAY BOOKS A DATE

Peita Davies and Stephen Moore

BUILDING FINANCIAL CONFIDENCE

In July, Australian Broker first reported on the proposal for a National Finance Brokers Day. The concept was the brainchild of Suncorp Bank business development manager Dino Pacella and is endorsed by FBAA chief executive Peter White.

Pacella, a 12-year industry specialist, told Australian Broker at the time that a day designed to highlight the advantages of broking and improve consumer awareness was long overdue.

Now, Pacella says the day has an official date. He says brokers can look forward to the third Wednesday in August each year as a day to raise awareness of the service provided by the industry.

“The organising committee, representing brokers, banks and industry heavyweights, got together last week and picked a date which we all can easily remember. The third Wednesday of every August is when we will hold NFBD, so in 2016 it will fall on August 17,” Pacella said.

Pacella said the initiative had seen strong support from the industry since its announcement.

“We have discussed video presentations, social media utilisation, online education and marketing, and all the great ways we can promote the benefits of the broker channel and maximise our customer reach,” he said.

Pacella said it was essential to get industry buy-in for the day to ensure it reflected the entire industry.

“What is most important is that we are all on the same page whether it be brokers, BDMs, aggregators and lenders. This ensures the industry owns NFBD and not any one person or group,” he said.

Social media has also played an important role in raising support for the day, Pacella said. He said the NFBD Facebook page had already reached nearly 600 Likes.

“What is even better is the comments we are getting from brokers on how to best make the day work. This is what it is all about, getting feedback and listening to ideas from those at the coalface who have first-hand experience,” he said.

AUSSIE UNVEILS NEW HQ

A national broker network partners with a women’s network to boost financial literacy CHOICE HOME LOANS recently joined forces with Mamamia Women’s Network to host a women in finance event covering a range of money matters.

The event was held at Melbourne’s Olsen Hotel and was presented by media personality and Mamamia TV presenter Shelly Horton. Horton was joined by a panel of speakers, including social researcher Rebecca Huntley, media personality Andrew Daddo and Choice Home Loans broker Peita Davies.

Speaking at the event, Huntley explained that while women were continuing to grow in confidence where financial matters were concerned, they tended to shy away from larger transactions such as home loans.

“Research confirms women are increasingly becoming more self-confident about money and typically they are terrific managers of a household’s day-to-day budget. But the bigger-ticket items sometimes still pose a degree of confusion and anxiety for them,” Huntley said.

Choice Home Loans chief executive Stephen Moore said the event was designed to provide an intimate forum for discussion, in which female guests could ask questions about housing finance, as well as gain a better understanding of how mortgage brokers could help them make more informed decisions.

“Buying a home can be one of the best ways to build wealth and work towards financial freedom. It’s important women feel confident and equipped to make educated decisions around home loans every step of the way,” Moore said.

Moore said brokers played an important role in helping to build financial confidence.

“Part of this engagement process is reinforcing the role a quality broker can play and the value they can bring when it comes to securing and managing a home loan. Brokers are in a unique position to take away any confusion and anxiety around the process,” he said.

James Symond

Aussie Home Loans has announced that its national headquarters and new customer service centre will move to the Grosvenor Place building in Sydney’s northern CBD. According to the franchise, more than 200 of its team members will move into the “state-of-the-art” Aussie headquarters in the second quarter of 2016, following a multimillion-dollar refurbishment of the landmark building to enhance its tenant and retail amenities.

Aussie CEO James Symond said they had designed the space to facilitate greater innovation, productivity and collaboration. “We are investing in new technology to support activity-based working and meeting spaces, empowering our team to work better together,” he said.

“Enhancing the work-life balance of our employees by building a truly world-class working environment that will allow us to attract and retain the best people is key, and the inclusion of our customer service centre will play a fundamental role in this,” he added.

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CAUGHT ON CAMERA Connective recently held meetings around Australia to announce their branded offering, iConnect. The Sydney event, held at Royal Randwick Racecourse, introduced brokers to the new model.

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ODDITIES

FINACIAL SERVICES

‘MISCHIEF’ LANDS I.T. BOSS IN HOT WATER Bitterness at his old company has seen a UK man imprisoned for hacking the phones of former clients A BITTER fallout with his business partners prompted a UK computer firm boss to put his IT knowledge to illegal use and take revenge by targeting one of his company’s clients, insurance company Aviva.

Richard Neale, former director at Esselar, a company he helped set up, claimed he intended just to “cause mischief ” when he hacked into 900 phones belonging to Aviva insurance employees and wiped them.

But now the 40-year-old dad of two has been imprisoned for 18 months after he admitted committing four cybercrimes against his former company.

The court heard how Neale timed the hacking of Aviva’s system for the same night that Esselar was giving a demonstration on its services at an IT showcasing event in May 2014.

This led to Aviva ending its relationship with Esselar, which meant they missed out on a contract worth nearly $180,000 and submitted a damages claim for $150,000.

In a separate offence, Neale also hacked into Esselar’s Twitter account and replaced the firm’s logo with one of a bleeding heart, to show it had been targeted by hackers, the UK’s Daily Mail reported.

The prosecuting lawyer told the court the “tangible” loss to Esselar had been over $1m, but in a statement read to the court the company said its brand was damaged “to the point we felt we needed to rebrand”.

The revenge act, which was carried out over a period of five months, was born of a festering resentment triggered by an insurance payment Neale had queried with the firm’s financier.

For the defence, the court heard that no data was actually lost or permanently compromised as a result of the offences and no personal information was lost, compromised or put in the public sphere, as is often the way with hacking offences.

Neale’s lawyer told the court his client had “paid deeply” for his actions in ruining the career he had spent 20 years building up.

While sentencing Neale to 18 months’ imprisonment, judge Neil Stewart said: “You parted on terms and in circumstances that left you nursing resentment.

“The prosecution describe these offences as revenge; you use the expression ‘causing mischief ’. What form of words you use is beside the point: it was plainly born of your resentment.”

SUPER MANSION STILL DEAR DESPITE $46M DISCOUNT Despite knocking more than US$40m off its asking price, a California super mansion still holds the title of America’s most expensive residential property listing.

The 12-bedroom, 23-bathroom Palazzo di Amore in the Los Angeles suburb of Beverly Hills was placed on the market last year with an asking price of US$195m, but after failing to sell, the property this week had its price guide reduced by a whopping US$46m.

The current vendor bought the property in 2007 for US$35m and in the following eight years expanded it to cover more than 4,900sqm.

Whether any property is worth US$149m, let alone US$195m, is debatable, but the Palazzo di Amore makes a good case for why a potential buyer should dig deep into their pockets.

The mansion is set on 10 hectares and includes a living space that spans 3,200sqm and an entertainment complex spanning another 1,700sqm.

Besides the 12 bedrooms and 23 bathrooms, the property comes with a theatre that can seat 50 people, a 250-person dining area and a private bowling alley.

A 10,000-bottle wine cellar means guests will never be thirsty, and they can even taste a local drop as the property includes its own vineyard.

The grapevines don’t take up all of the space outside – a tennis court, swimming pool and fountain all feature in the landscaped surrounds.

There’s no need to worry about parking either: the property has a 27-car garage and enough additional parking for another 150 cars.

WHAT’S IN A NAME? Properties with the word ‘lane’ in their address sell for significantly more than those with ‘street’, research by a UK residential property market specialist has revealed.

The research, conducted by Hometrack on homes across the UK, found that houses on lanes were fetching, on average, 22% more than the average UK house price, the Daily Mail has reported.

The average price of a UK house on a lane is £245,906, compared to the typical average of £201,246.

The second most expensive address is for homes situated on ‘ways’, where average property prices are £218,742, followed by ‘roads’ at £212,717.

Homes with ‘street’ or ‘drive’ in their addresses are the cheapest, with average prices of £142,374 and £191,675 respectively.

As the Daily Mail points out, this means that homes with ‘street’ in their addresses are more than £100,000 cheaper than those with ‘lane’.

Further, it reports that recent research by British property website Zoopla found that none of the top 10 most expensive streets in London were actually labelled ‘streets’. Instead, they were situated on ‘gardens’, ‘crescents’, ‘avenues’ or ‘places’.