NEWS The RBA’s next move Where to for the cash rate? P2
OPINION Keeping it above-board Charting an ethical credit repair course P10
ANALYSIS Sydney shutdown Property slows in the Harbour City P12
OCTOBER 2015 ISSUE 12.20
BEST PRACTICE The power of brand Top tips for branding success P16
MARKET TALK Buyers being burnt Moves to safeguard off-the-plan buyers P22
LINO PELACCIA ME’s broker general manager on the bank’s ambitious plans for growth P20
PEOPLE From gold to pink Century 21 dons a new colour P28
2
NEWS
INSURANCE
ENFORCEMENT
HOME LOANS
Check your PI so you don’t get caught out P4
ASIC keeping busy with bans
Lenders fighting for broker affection P8
P6
BROKERNEWS.COM.AU
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7.25% 14.25% BRAZIL
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CORPORATE Chief Executive Officer Mike Shipley
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WILL THE CASH RATE FALL FURTHER? Australia is already in an environment of record-low interest rates. In spite of the low rates, the housing market appears to be cooling. But could rates head even lower? Economists from one major bank have predicted they could. ANZ’s chief economist Warren Hogan and senior economist Justin Fabo recently told Fairfax they believed worsening global conditions and weak growth in the non-mining economy would see the RBA trim rates all the way down to 1.5%. But any cash rate cut may not yield benefits for homeowners. UBS banking analyst Jonathan Mott recently told clients that regulatory changes to capital requirements could see banks hike rates, regardless of the direction the RBA heads in. Mott said funding costs could see significant rises, and banks could look to recoup this by hitting mortgage customers with higher rates. “Additional re-pricing may be necessary just to offset the additional funding costs the banks may face,” Mott said, according to Fairfax.
Key Media Pty Ltd Regional head office, Level 1O, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, Toronto, Manila This magazine is printed on paper produced from 1OO% sustainable forestry, grown and managed specifically for the paper pulp industry Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss. Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008. The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.
NEWS 4
BY THE NUMBERS
CHECK INSURANCE POLICIES SO YOU DON’T GET CAUGHT OUT
$20m
ARNECC recently told the MFAA that its proposed increase of professional indemnity insurance to $20m in the aggregate, from a current figure of $2m per claim and up to $6m in the aggregate, would not affect brokers Source: MFAA
The Australian Registrars’ National Electronic Conveyancing Council (ARNECC) caused a stir recently with proposed changes to PI cover. While the MFAA was able to confirm that the proposed changes wouldn’t impact on brokers, Gadens law firm partner Jon Denovan said brokers should check their PI and fidelity insurance policies to ensure they are covered under changes to verification of identity. “Each finance broker is going to have to check with their insurance broker that their policy covers the verification of identity [VOI], which it might not specifically. They will also need to check that their insurance covers fidelity insurance. If brokers do that, they will be eligible to conduct VOI within safe harbour,” he said. Denovan said it wasn’t likely to cost a broker any more money to update their insurance, as VOI has
DATES TO WATCH
A rundown of the next fortnight’s events
OCTOBER
13-14
Jon Denovan
always been a part of a broker’s job; however, brokers will need to ensure that their policies are amended to contain in writing a specific clause related to VOI.
What: Effective Online Recruitment Conference Where: Rydges Swanston, Melbourne The particulars: This case study forum explores how to engage employment candidates using online innovation, and features case studies from the Reserve Bank of Australia.
OCTOBER
WHAT THEY SAID...
Steve Kane “We want to help brokers reward their clients with a holiday or some extra cash to put towards some of those luxuries they may have missed out on” P8
Tim Lawless “What we are seeing at the moment is really the clearance rate in Sydney normalising from very high levels back to levels which you may describe as more normal” P12
Paul Liccione “Now could turn out to be the perfect time of the year for brokers to revisit their database and actively contact their dormant enquiry lists” P13
16 What: MFAA SA Golf Day Where: Mount Osmond Golf Club The particulars: The MFAA holds its annual SA golf day, with a BBQ breakfast, refreshments on course, and a carvery luncheon. The event also offers prizes for individual team placings, longest drive and nearest the pin competitions.
OCTOBER
21 What: Hot Topics in Residential Development Where: Gadens law firm, Sydney The particulars: This event discusses topics such as strata redevelopment, planning approvals and e-conveyancing.
NEWS 6
WORLD NEWS
ASIC TAKES ON LICENSEES
From 1 January to 30 June 2015
71%
9
192
UNITED STATES OF AMERICA NY CRACKING DOWN ON MORTGAGE FRAUDSTERS A mortgage broker and two lawyers have reached a settlement in their mortgage rescue scam case. New York Attorney General Eric T Schneiderman has been aggressively targeting mortgage fraudsters, and his most recent win will see alleged mortgage rescue scammers paying hefty settlements. “This shameful scam re-victimized families already suffering from the collapse of the housing market,” Schneiderman said in a statement. The state’s top prosecutor announced in midSeptember that his office had reached a more than $400,000 settlement in a mortgage rescue scam case that resulted in 14 New York homeowners losing their deeds and equity, according to Newsday. Empire Property Solutions allegedly targeted struggling homeowners by offering services to save their homes from foreclosure and help them repair credit. John Rutigliano and Kenneth Kiefer convinced homeowners to sign over the deeds to their homes through sales-leaseback agreements, according to Schneiderman, with the promise that the families could stay in their homes and rent while building credit. The company promised to turn the homes back over to them within a year. An investigation determined the funds were not used to pay down the mortgages, as promised, according to Newsday.
71% of approved AFSL applications were in a form other than as requested by the applicant
46% 46% of approved ACL applications were in a form other than as requested by the applicant
AFS licences were suspended
98
credit licences were cancelled
AFS licences were cancelled
Source: ASIC
ASIC KEEPS BUSY WITH BANNINGS ASIC enforcement actions continue to move along at a lightning pace. Over the past few weeks, the regulator has announced a bevy of bans. First, ASIC announced it had banned a NSW car loan broker for 10 years following an investigation that found he recklessly provided false documents to BMW. The watchdog said Fernando Morais of Carlingford, NSW, did not consider he was under any obligation to make enquiries or checks into the accuracy of documents he sent through
to BMW in support of credit applications. Next, ASIC said it had suspended the licence of a payday lender. Paid International had its licence suspended due to insolvency after being ordered to pay nearly $1m in refunds to customers. Finally, ASIC took aim at the life insurance sector, issuing a three-year ban to a life insurance financial adviser it said did not meet the standards expected of a financial adviser and failed to comply with financial services laws.
NEWS 8
COMMERCIAL IN HOT DEMAND
LENDER NEWS
A rundown of the fortnight’s policy and price changes
91.4%
Figures from Ray White Commercial reveal that investment auctions achieved an auction clearance rate of 91.4% in the six months to June 2015
Steve Kane
LENDERS SPARRING FOR BROKER ATTENTION Lenders have been making moves over the past weeks to gain brokers’ attention with broker-specific offers and new policies. NAB has offered a sweetener to broker clients, announcing that broker-introduced customers could be eligible for 250,000 Velocity Frequent Flyer Points when they take out an NAB home loan plus make NAB their main bank. “In today’s highly competitive housing market, broker clients are often making a lot of financial sacrifices to save for a deposit. We want to help brokers reward their clients with a holiday or some extra cash to put towards some of those luxuries they may have missed out on,” NAB Broker general manager Steve Kane said. Meanwhile, G&C Mutual Bank has announced a new partnership with GetCreditScore.com.au to offer consumers personalised discounts on home loans and credit cards based on their credit scores. G&C Mutual Bank CEO Dave Taylor said the lender was trying to be transparent in its approach to risk-based pricing. He said this kind of personalised pricing could become more common in the future. “One of the reasons I am positive this will become a trend is because the younger generations want to be in control. They primarily want to do things online; they want great service and they want to feel they are getting a good deal. I think this type of proposition is attractive to that type of demographic.”
RATES ING Direct Increases variable rates on existing investment property loans by 0.37% pa, effective 5 November 2015. Existing customers of owner-occupier and residential investment loans will not be subject to this interest rate change. Heritage Bank Cuts its discount variable rate for owneroccupier loans. The new rate of 4.08%, down from 4.14%, applies to new owner-occupier home loans of more than $150,000.
PRODUCT
Source: Ray White Commercial
FAST FACT
Mortgage Ezy Unveils its Reduce Home Loan Combo range. The new product range will offer consumers rates as low as 2.5% on owner-occupier loans when they settle their investment loan with the non-bank as well. Economizer owner-occupier loans will have a rate of 2.5%, while the non-bank’s Prime owner-occupier loans will have a rate of 2.99%. However, the Economizer product will be subject to an establishment fee of 0.6%, which will be waived on the Prime product. The commission structures will also vary for the two products. Brokers will receive upfront commission on Economizer owner-occupier loans of 0.6%, and 0.9% for the Prime owner-occupier loans.
POLICY
30.8%
Proportion of June quarter home resales that earned a doubling in profits for owners Source: CoreLogic RP Data
Thinktank Commercial Accepts certain specialised properties as security, including purpose-built childcare, hostels and backpacker accommodation, hotels, motels, function centres and fast-food franchise outlets. LVRs vary depending on the type of property, which will be valued on a freehold basis. Heritage Bank Waives application fees on new standard variable, discount variable and fixed rate home loans until 30 November 2015.
10
OPINION CONSUMERS AND CREDIT
Veda’s Quarterly Consumer Credit Demand index, June 2015
IS ETHICAL CREDIT REPAIR A MYTH? Credit Repair Clinic director Mary Trimarchi discusses how not all credit repair is created equal
10.7% Overall consumer demand up 10.7% from June 2014
15% Credit card applications up 15% from June 2014
6.4% Personal loans up 6.4% from June 2014 Source: Veda
THE LAST four to five years have seen the birth of credit repair and companies that profess to be experts in this field. What started with a few companies offering this service has grown to numerous organisations targeting consumers and finance professionals in an attempt to ply their trade. This article is written for the benefit of mortgage professionals and their clients, to assist them in identifying credit repair organisations that are ethical and service-driven as opposed to those that simply seek to profit at the expense of the client. The art of repairing a credit file is simple. The organisation attempting to repair a credit file must establish that the adverse listing was made in error; if this cannot be established, the adverse listing cannot be removed. If a credit repair company suggests that they have the means of removing a listing, which does include the requirement to establish the listing was made in error, they are being less than truthful and your clients should be spared the misfortune of having to deal with this type of unethical organisation. Further, the reality is that no credit repair company can forecast with any precision that a default listing can be removed unless the company launches a detailed investigation in order to establish what occurred prior to the listing being made. Accordingly, percentage rates of success should not be misunderstood for being indicia of a credit repair company’s success, as no company can predict whether a removal is achievable without launching an investigation into the case. My organisation receives complaints on a weekly basis, from mortgage professionals and their clients, about the antics employed by credit repair companies that seek to exploit the consumer. Mortgage professionals owe it to their clients to warn them that there are unethical credit repair companies out there. The following list has been compiled to assist finance professionals in identifying rogue credit repair companies by observing their modus operandi. Companies like these: • Charge an administration fee (upfront fee) which is payable irrespective of an adverse listing being removed. • Rate their services based on percentage of removals achieved.
• Guarantee the removal of an adverse listing can be achieved. • Mislead consumers into believing they can assist with a removal when they know that removal of the listing is impossible. (A good example is the removal of bankruptcies or the removal of validly made enquiries). • Fail to put consumers’ needs first, and simply seek to maximise the fees charged. • Fail to warn consumers who present with multiple listings that, even if some of the listings are removed and only one remains, this may still prevent them from obtaining credit. • Fail to take into consideration the client’s particular situation and offer a free assessment as to how best to approach the matter. • Do not look at all (three) credit reporting agencies
Finance professionals should only refer their clients to credit repair organisations that do not charge a fee unless they are successful when advising clients and seeking the removal of an adverse listing. • Have little regard to the laws surrounding credit reporting. The traits referred to above are listed purely as a guide and are by no means exhaustive. What is certain is that finance professionals should only refer their clients to credit repair organisations that do not charge a fee unless they are successful. Finance professionals must take up the fight on behalf of their clients and report unethical credit repair companies and their unethical practices to ASIC and/or the department of Fair Trading. If chosen well, credit repair companies and the service they provide can serve finance professionals and their clients well. It is the responsibility of such professionals to refer their clients to organisations that can deliver the promise to serve their clients well.
KNOW YOUR SCORE The FBAA recently announced a partnership with credit reporting company Veda which it says will make it easier for brokers to meet compliance requirements under the NCCP. The partnership will allow FBAA members to access credit scores through VedaScore Apply, and credit reports for borrowers at a discounted rate. FBAA members will also be able to view credit reports on behalf of their customers and match the resulting profile with an appropriate credit product. FBAA chief executive Peter White says access to credit reporting data will assist brokers in making an improved preliminary assessment of a consumer’s suitability, and help meet compliance requirements under NCCP regulations. It will also help streamline the application process to save money and time, he says. “If you write four loans a week, that’s around six to eight credit checks as couples make up most borrowers. These upfront costs come out of the broker’s pocket,” White said.
12
ANALYSIS WHERE DID ALL THE HEAT GO? The most obvious explanation behind Sydney’s unseasonably cool spring would be the consequences of APRA’s tightening of residential investment – and CoreLogic RP Data’s head of research Tim Lawless says that assumption wouldn’t be wrong. However, he told Australian Broker that there are more factors at play. “APRA’s moves to slow investor lending would absolutely be having an effect. Obtaining finance for investment purposes is becoming harder, so investors need to demonstrate a larger deposit generally. “They are also paying premiums on their interest rates, which also comes back to APRA’s decision to raise the capital requirements for residential mortgages. “However, there is also the fact that yields are really being pushed very low in Sydney and in Melbourne – they are down to record lows of around about the 3% growth mark, which is another disincentive to investors. Interest rates are so low it implies rents and values are out of balance in the market. “New supply is again another factor. Sydney is moving through record highs of new dwelling approvals, particularly in the apartment space. So we are seeing the effect of larger supply levels putting a cap on the rate of capital gains. “The final factor would be distinctly affordability. With house prices well above $900,000 across Sydney, more and more segments of the marketplace are simply being blocked from buying due to affordability and budgetary constraints.”
WHAT DOES THIS MEAN FOR THE CASH RATE? The Reserve Bank, which has been vocal about Sydney’s heated housing market, will take comfort in a housing market slowdown, says Lawless, but we shouldn’t expect a cash rate drop as a result. “The RBA will be given some comfort by the fact that the Sydney market is starting to moderate. Every statement they make about the housing market generally does single out Sydney, and to a certain extent Melbourne, as being the markets that warrant close watch and where the rates of growth have been unsustainable. “The Reserve Bank will certainly be very comforted to see the pace of investment slow down in the Sydney marketplace, which has been very speculative. Secondly, it will be comfortable to see if it does transpire in the rate of capital gain slowing down in the market as well. “If we do see the pace for housing price growth slowing down, it would give the Reserve Bank a little bit more room to lower interest rates if they saw the need to do so. “However, I think the RBA has other factors that would be driving their interest rates decision, with inflation obviously being one of them. If we do see the Aussie dollar moving higher, then potentially that could be a factor that could drive rates down.”
SYDNEY’S FALL FROM GRACE?
What could Sydney’s tepid start to the spring selling season mean for Australia’s premier harbour city, the economy, consumers and brokers? SPRING HASN’T been kind to Sydney’s property market. In what would traditionally be the strongest selling season of the year, Australia’s premiere property market has slumped. According to figures from CoreLogic RP Data, Sydney’s auction clearance rate dropped by almost 4% in the second week of September, as the spring selling market was meant to kick off, recording an auction clearance rate of 73.1%.
The clearance rate then continued to drop, hitting 70.7% towards the end of the month. This resulted in the lowest clearance rate for the harbour city since December last. Could this recent run of lacklustre auction results mean Sydney’s property boom is finally over? Restoring the balance The sudden and unusual decline may seem lacklustre, says CoreLogic RP Data’s head of research
Tim Lawless, but he told Australian Broker that it is all about context. “To put the recent results into context, clearance rates are coming down from a peak of about 90% in Sydney back in late April. However, historically, you would expect clearance rates to be around the mid-60 to 70% mark. So what we are seeing at the moment is really the clearance rate in Sydney normalising from very high levels back to levels
SYDNEY HOUSING MARKET SNAPSHOT
17.6%
$660,000
12.6%
Year-on-year growth in Sydney house prices
Sydney’s median unit price
Year-on-year growth in Sydney unit prices
13
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positive from that economic stability perspective.”
“While lower price growth would be a positive thing, prices aren’t going backwards and affordability isn’t improving for first homebuyers. It is still going to be quite a difficult segment,” Lawless said.
which you may describe as more normal,” he said. “The rebalancing of the Sydney market is good for economic stability, which is a key factor that the Reserve Bank works towards. When you see the nation’s largest asset class increasing in value by an unsustainable rate for a long period of time, it just increases the chances that the housing market could be overvalued and subject to a larger correction. “The fact we are now starting to see the first sign that growth rates are slowing, I think it is a
There will be challenges Whilst Lawless maintains that a more balanced market should be welcomed, there are going to be some challenges as Australia’s biggest housing market slows down. “From a broader stimulatory or economic expansion sense, the slowdown of the housing market may create some challenges for economic growth because there are so many industries that flow off housing, such as higher retail spending. When you see more dwelling construction, you see more sales of appliances, white goods and building materials. You’ll also see an increase in consumer confidence due to the wealth creation factor. High rates of capital gains make consumers more willing to spend,” he told Australian Broker. “If we do start to see a consistent slowdown in the rate of growth then it implies that we might start to see a slowdown in dwelling construction which has been one of the mainstays of the new economy post the mining downturn.” And unfortunately, a market rebalancing also doesn’t mean that first homebuyers will finally be offered some relief. First homebuyers made up just 15.4% of total owner-occupied housing commitments in July 2015, well below the long-run average of 19.8%.
49.6%
$920,000
4.1%
Total price growth in the Sydney housing market over the growth cycle to date
Sydney’s median house price
Gross rental yield for Sydney units
3.1% Gross rental yiel d for Sydney houses
Brokers need to adapt Brokers will need to re-think their approach to new business in the wake of the lacklustre property market performance in what would usually be the busiest property season of the year, says eChoice’s general manager of sales and distribution, Paul Liccione. “Spring activity usually sustains brokers through that quieter Christmas/ New Year period, however, this year as buyer sentiment appears weaker, prices in some markets plateau and the effects of the investorlending squeeze begin to influence buyer and seller behaviour – spring may very well become the new winter,” he said. “Therefore, given that the regular pattern of the property market this year has changed, brokers need to re-think their approach to new business. Now could turn out to be the perfect time of the year for brokers to revisit their database and actively contact their dormant enquiry lists,” he said. “With so much air time being given to changes in lending requirements, speculation about offthe-plan purchases and opinion about the direction of property prices, there is plenty to discuss with existing and potential clients – and of course new business and potential referral opportunities.”
Source: CoreLogic RP Data August Home Value Index
14
OPINION
Dr. Merrilyn Mansfield is a consumer advocate with PRINCEVILLE CREDIT ADVOCATES
PENALISED FOR YOUR SUBURB Merrilyn Mansfield of Princeville Credit Associates on how new postcode restrictions divide the haves and have-nots WHERE YOU live may now be as costly as adverse information on a credit report if a note received by mortgage brokers recently is anything to go by. A major bank sent the note listing more than 80 “restricted postcodes” across the country where it is now capping the loan-to-value ratio at 70% of a property’s purchase price – meaning new borrowers will need a deposit of at least 30% to get into the housing market. This bank has also ear-marked a second group of postcodes that have the potential for problems and has capped the LVR in those suburbs at 80%. These are “areas which are exhibiting characteristics which may indicate future deterioration in credit risk” the bank said, alerting brokers that their postcode policy would apply to all new loan applications received after 18 September, 2015. The bank says that they “continually review our risk settings to ensure we’re lending responsibly and sustainably” and that “this is a very normal practice for any bank”. Well it may be, but I am unsure, and quite uncomfortable, about the message this is sending to people who live in these suburbs. It tars them with a ‘less-than’ brush, further dividing the haves from the have-nots and putting additional hurdles in the way of good people who are working and saving towards financial independence and growth. I have seen first-hand in the UK the impact that this type of categorisation can have, where credit reporting data now labels 57% of the population as credit-impaired. This has opened up vast opportunities to second-tier lenders who use the data to ensure that this large percentage of the population are barred from the best interest rate deals, always having to pay more for finance.
This is the consequence of so-called ‘positive’ credit reporting. Having also assisted many consumers who have paid rent for housing in Australia over many years, but with the intention of buying their own home eventually, this use of data might also put that dream out of reach. The continuing growth in the property market, along with the rising costs of raising a family, and now these increases in deposit amounts, might just put home ownership out of reach for those who are ready, willing and able to proceed. Based on history, economies do not thrive in an environment of oppression and burdens. When
“The economy will slow with these types of burdens and will rise when leaders are just and fair to all” Napoleon ruled France he lifted three burdens that were crippling the French people – the chaotic laws were replaced with the Napoleonic Code: which provided access to justice for all; the price of food was reduced which stopped people starving; and freedom of religion was introduced which broke centuries of religious oppression. After Napoleon released the French people from these burdens, France’s economy began to rise, and it entered a golden age. This major bank, as well as any other credit providers who are thinking about marginalising particular people in these suburbs, could perhaps take a lesson from French history 200 years ago. The economy will slow with these types of burdens and will rise when leaders are just and fair to all, not just those living in favourable postcodes.
LENDING TO TIGHTEN Martin North, principal of Digital Finance Analytics, believes that major lenders will soon be introducing different lending criteria and stricter servicing requirements as they look to reduce the amount of risk that they carry on their mortgage books. “I think what we’re seeing is a general drift towards the end of the more sporty loans we were seeing. The dial has been turned up in terms of the capital requirements banks are facing, and the risk dial has been turned up as APRA says, ‘These are the things we want to see happen’, ” North said. “We’re not going to see ghettos where you can’t get a loan, but LVRs are going to be dialled back. It’s going to be harder to get interest-only loans and there could be changes to terms and conditions so we may see things such as risk premiums on loans for certain areas,” he said.
AUSTRALIA’S ‘RISKIEST’ POSTCODES
Arrears don’t seem to have come into play with a major bank decision to cap LVRs by postcode, but the suburbs below have seen the worst 30+ day arrears in the country
Postcode
State
Suburb
30+ day arrears
2262
NSW
Budgewoi
3.2%
4114
QLD
Kingston
3.0%
4502
QLD
Petrie
2.8%
3214
VIC
Corio
2.7%
2190
NSW
Greenacre
2.6%
16
BEST PRACTICE 2
Have a clear plan
3
Get to the message
Get your business plan in order and have a clear point of difference in the market that you can defend and consistently deliver. Branding is about sending the right signals about your business to your audiences. If you don’t have a core idea that differentiates you in the market, you are on a rudderless boat. Without a core idea it is hard to know what your brand stands for. You can tell this is the case when a brand resorts to gimmicks or purely competes on cost.
Once you have a core idea to centre your thinking, it becomes easier to start shaping your key messages.
5 KEYS TO A KILLER BRAND How to develop a brand that connects with clients THE WORLD’S MOST VALUABLE BRANDS
$145.3bn $69.3bn $65.6bn $56bn $49.8bn $39.5bn $37.9bn $37.8bn $37.5bn $36.5bn Source: Forbes
BETWEEN THE years 2009 and 2013, Indeed.com saw a 300% rise in job postings for the position of brand manager, evidence of an increasing emphasis on the role within organisations worldwide. Monitoring your brand image ensures your business remains competitive inside and out, attracting top talent and maintaining a favourable reputation with your clients. “It is clear that with the increasing talent shortages around the world, we will begin to see many more follow the lead of companies such as Google, IBM, Marriott, 3M, and EY in recruiting
• What does your brand stand for? • What benefit do you provide? • Is there a process that makes you unique? These are good starting points. Once you know the messages you want to communicate, you then need to be consistent and single-minded in staying on brand.
4
Think about the entire experience
Gone are the days when a brand was considered just a logo, or a clever catchline. You need to start thinking about every way you are signalling your brand to your clients. For a service business, brand signals can be broadly broken into visual, behavioural, physical and communication perspectives. • The visual perspective covers your visual identity – including your brandmark, visual style, typeface and colour palette. • The behavioural perspective covers the way you interact with clients – your attitude, your turnaround times and how you handle problems. • The physical perspective covers anything tangible your client may interact with –
Without a core idea it is hard to know what your brand stands for. You can tell this is the case when a brand resorts to gimmicks or purely competes on cost leaders to leverage the value an employer brand strategy has on profitability and sustainability,” said Brett Minchington, chairman/CEO of Employer Brand International. With that in mind, here are five tips to consider when refining your brand architecture:
1
including your office space, wayfinding signage and furniture. • The communications perspective covers the content and channels you use to interact – be they in press, online, print or in person. • Think about all the ways your clients interact with you – from the application forms they use to the chairs they sit in. Everything communicates your brand.
What are your clients thinking?
You must get closer to your clients. Talk to them. Get someone else to talk to them. Interview them. Survey them. Understand them. Truly uncovering why your clients decided to use your services can easily get lost in the day-to-day grind. Make it your job to find out what they are thinking. It will often lead to a core idea for your business that may have been there all along, hidden from view.
5
The hard part
Once you have a core idea and your team are behind it, then consistency becomes critical. You need to consistently reinforce your messages internally so your team can live the brand with your clients.
18
ANALYSIS A NEW PM, A NEW FOCUS Will Australia’s new Prime Minister Malcolm Turnbull bring a fresh focus to the mortgage, finance and property industries? Industry leaders think so… WHEN MALCOLM Turnbull toppled former Prime Minister Tony Abbott in the Liberal Party leadership coup on 14 September, to become Australia’s 29th prime minister, he quickly became the most popular Prime Minister that Australia has had in more than five years. According to a news poll conducted by The Australian after Turnbull was sworn in to the top position, 55% of voters rated him as the preferred prime minister – the highest rating since Julia Gillard in July 2010 and 18 points greater than Abbott’s last measure. By the end of Turnbull’s first week in the job, ANZRoy Morgan’s confidence index saw consumer confidence soar 8.7%, more than recovering the 7.1%
decline over the previous two weeks and leaving confidence above long-run average levels. In particular, views on economic conditions over the next year jumped 25.8%, the second largest one-week gain since the weekly series began back in 2008. Elevated consumer confidence is likely to have a positive flow-on effect to the mortgage and finance industries; however, industry leaders are saying Turnbull’s appointment as PM is going to be a boon for the industry in more ways than just happier consumers. A new focus Siobhan Hayden, the chief executive of the MFAA told Australian Broker that Turnbull’s “consultative approach”
will be advantageous for the finance industry. “The MFAA welcomes the appointment of Malcolm Turnbull as Australia’s 29th Prime Minister. Malcolm identified in his opening speech that he will provide a clear vision and will adopt a consultative approach to his leadership which will further enhance any future debates on the financial services industry. “I also believe his previous experience as an investment banker and venture capitalist demonstrates a deeper understanding of our sector which will be advantageous,” Hayden said, referring to Turnbull’s career in investment banking where he established an investment banking firm, Whitlam Turnbull
& Co (later Turnbull & Partners) before moving to become a managing director and later a partner of multinational investment banking firm Goldman Sachs. Peter White, the chief executive of the FBAA, said he hopes Turnbull’s appointment will bring a
WHERE DID ALL THE HEAT GO? The Stockbrokers Association has praised the reshuffle, with CEO Andrew Green saying the appointments of O’Dwyer and Morrison “complete the trifecta”. “Not only do we have a PM with deep experience in investment management, but a treasurer with a demonstrable ability to deliver reform, and assistant treasurer with a nimble and agile mind which will equip her well to understand the cost to Australia of compliance and red tape in a global marketplace,” Green said. The Insurance Council of Australia (ICA) has welcomed the Turnbull Government’s changes to the Treasury team. The ICA is hopeful that the department, now led by Scott Morrison, will continue to develop insurance legislation. ICA CEO, Rob Whelan, said that the changes bring in an experienced team and the insurance industry is looking forward to working alongside the newcomers. “The ICA is pleased the new Treasury team, consisting of Scott Morrison, Kelly O’Dwyer and Alex Hawke, has strong policy experience and will be well equipped for the
economic challenges ahead,” Whelan said. “This is an energetic team, and the insurance industry is encouraged that these ministers have the drive and ambition to complete some of the necessary reforms started in the first two years of this government.” The decision by Prime Minister Malcolm Turnbull to include a minister for cities and the built environment in his reshuffled cabinet has also been praised by a number of property lobby groups. Urban Taskforce Australia said the creation of the ministry, which has been filled by South Australian MP Jamie Briggs, should result in public transport and other amenities in Australia’s cities receiving the level of funding they need to adequately support their growing populations. “[It’s] pleasing to see the appointment of Jamie Briggs as minister for cities and the built environment. The major role the Federal Government has in cities is in relation to the funding of urban infrastructure projects,” Urban Taskforce Australia chief executive officer Chris Johnson said.
new “economic focus”. “The FBAA has been lobbying MPs from across the political spectrum on a continual basis to promote the needs and interests of the finance broking sector, so we have relationships with MPs in both the leadership camps,” he told Australian Broker.
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CONNECT WITH US Got a story, suggestion, or just want to find out some more information?
JOURNEY TO THE TOP
1975-1979 Worked as a political journalist 1980 Graduated from Oxford University, England with a Bachelor of Civil Law and admitted to the bar in Sydney 1983 Left the bar to become general counsel and secretary for Australian Consolidated Press Holdings Group, the Packer family’s media group
“We’ve also been speaking to Mr Turnbull’s office and lobbying prime ministers for the past eight years. Our hope is that the elevation of Malcolm Turnbull to Prime Minister will bring a new economic focus and stimulus which will be good for our industry.”
1987 Established investment banking firm, Whitlam Turnbull & Co 2004 Won preselection for seat of Wentworth, defeating Peter King
2007 Appointed as minister for the environment and water resources
2008 Became opposition leader, beating Brendan Nelson
2013 Became communications minister in Abbott government
1978 Graduated from the University of Sydney with a Bachelor of Arts and a Bachelor of Laws degree
1981 Lost preselection for seat of Wentworth to Peter Coleman
1986 Established law firm, Turnbull McWilliam
1997 Became chair and managing director of Goldman Sachs Australia 2006 Appointed parliamentary secretary for water by John Howard 2007 Lost Liberal Party leadership to Brendan Nelson and became Shadow Treasurer
2009 Lost Liberal Party leadership to Tony Abbott in a leadership spill
2015 Became Australia’s 29th Prime Minister
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COVER STORY
EVOLVING IDENTITY ME recently launched its new brand identity, complete with a renewed approach to product 9mm innovation to support the ongoing growth of the bank. Major changes included a contemporary black-andwhite logo and an official name change that embraces how the majority of customers were instinctively referencing the bank – ‘ME’, pronounced like the pronoun ‘me’. ME brand and digital director Ingrid Purcell said the brand refresh has carried through to the bank’s design of products and services for customers. “Our belief is that banking has been made too complicated and complex – customers want to get ahead and want a bank that helps them achieve this simply and easily in a digital world − that’s our aim,” she said. As a part of the nonmajor’s new brand identity and renewed approach to product innovation, ME also simplified its home loan offerings into two products − Basic and Flexible. The Basic Home Loan is a new variable rate product, offering an interest rate of 4.29% (comparison rate 4.30%) with a free redraw facility. Last August, ME opened up access to its discounted home loan rates to all Australians and removed the requirement to be a member of a union or industry super fund.
AN AMBITIOUS PLAN FOR GROWTH ME’s Lino Pelaccia on how the brand has opened to all Australians, and is looking to grow its broker settlements WHEN LINO Pelaccia joined ME Bank in April this year, he brought with him more than 25 years of experience in the mortgage broking industry, including senior positions with NAB Broker, Macquarie Bank, St George Bank and Colonial Wholesale Services. Pelaccia’s role as general manager of broker services was newly created. The bank’s group executive sales, Angela Middleton, said Pelaccia would be responsible for developing and executing ME’s mortgage broker strategy. For Pelaccia, that strategy comes down to increasing settlements through the channel. “Brokers are a critical sales channel for ME. We don’t operate a branch network and up to half our target market seeks out brokers because of the expertise and advice they provide. Brokers also underpin our ambitious growth plans
Gaining traction The lender is already seeing success in the channel. ME Bank took the third overall spot in this year’s Australian Broker Brokers on Non-majors survey. The result was especially impressive considering it saw the lender move up four spots from the previous year’s survey. Pelaccia said the results came down both to new initiatives and existing traits. “I attribute the strong results to our product range, commissions and our policy of treating different channels equally – simple propositions that garner respect from our customers and brokers. We’ve also improved our organisational structure. We’ve introduced two new regional managers and four business development
“Brokers are a critical sales channel for ME. We don’t operate a branch network and up to half our target market seeks out brokers because of the expertise and advice they provide. Brokers also underpin our ambitious growth plans for the 2016 financial year” for the 2016 financial year. ME is aiming for a substantial increase in settlements through brokers this year, which represents 55% of the mortgage business for ME,” he said. Pelaccia also said the lender would look to grow its business from brokers through some of its new initiatives. “We plan to achieve that growth through a combination of new products, improved broker services, a new brand and marketing campaign – which has just commenced across TV, radio, online, social and outdoor – and by expanding our broker network. In terms of new products and services, ME has already released a new basic home loan and are also providing a new discount on its Member Package, and increased our commissions to brokers. We will continue to launch new initiatives in the year ahead,” he said.
managers who have assisted us with accreditation and relationship management,” Pelaccia said. Pelaccia said ME had also introduced a number of other service improvements that were catching the attention of brokers. “ME has added a number of service offerings recently. Our recently completed technology transformation program has enabled us to offer more competitive home loans as well as efficient systems such as conditional approval within minutes. We have also introduced a stand-alone ‘rate lock’, which allows a customer to buy a rate prior to submitting an application, somewhat unique in the market, and increased the upfront commission we pay brokers from 0.60% to 0.65% (excluding GST). Furthermore,
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brokers can now facilitate applications for industry super fund members who are seeking exclusive discounts on home loans,” he said. Along with some of the shifts has also come the response to regulatory moves by APRA to cool the investment market. While the bank lifted rates on its investment products, Pelaccia said the move was counter-balanced in a way he feels benefits homeowners. “ME recently announced changes across a range of loans, not just investment loans, including decreasing a range of rates on selected owner-occupied home loans. We made these rate adjustments after a major shift in home loan market conditions that was started by APRA’s new requirement that investor lending growth be no more than 10% p.a. This requirement has had flow-on effects. The decision to increase investment rates was a difficult one, but after careful consideration we believe that combined with rate cuts across selected owneroccupied home loans, it strikes the right balance across our portfolio,” he said. Perhaps the biggest development for the bank has been expanding the scope of its client base. While ME had typically been open only to industry super fund members, Pelaccia said the bank had broadened its focus. “Last year, ME opened up access to its discounted home loan rates to all Australians and removed the requirement to be a member of a union or industry super fund to access exclusive discounts,” he said. As Pelaccia settles into his role and strives to drive further growth through the bank’s broker channel, he said he was helped by the bank’s already-strong reputation with brokers, as well as his industry experience. “ME’s broker channel has developed an excellent reputation since entering the mortgage broker channel in November 2011 – its fairer ethos, record low home loan rates and professional service is striking a chord with brokers, and I’m excited to build on this and accelerate ME’s broker strategy,” Pelaccia said. “With over 25 years’ experience in the mortgage broking industry including senior positions with major lenders, I have developed valued relationships with many brokers and aggregator groups. I’m looking forward to extending on these long-term relationships with ME.”
TAKING HOME ACCOLADES
ME saw a strong performance in this year’s Brokers on Nonmajors survey. The bank took the third spot overall. Brokers rated ME highly across a number of categories, and the bank outright won categories such as:
BDM support – 3.90/5
Interest rates – 3.97/5
Credit policy – 3.19/5
ME also took a top three ranking in overall service to brokers.
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MARKET WRAP CALLS FOR NSW TO STREAMLINE HOUSING APPROVALS
MARKET TALK
WORRIES OVER OFF-THEPLAN BUYING Moves are being made to stop buyers being burnt WHILE THE NSW government is taking steps to stop people from being burnt by offthe-plan developers, a high level official from one of Australia’s major banks has warned of other dangers that off-the-plan buyers face. Speaking at the HIA-Cordell construction outlook breakfast in Sydney recently, Westpac chief economist Bill Evans said the APRA-led clampdown on investor lending was presenting huge challenges for those with off-the-plan purchase agreements. Evans believes APRA’s mandate that investor lending levels should not grow by more than 10% each year means that many off-the-plan buyers could be left high and dry when it comes time to settle. “The issues about pre-sales is [sic] a real worry,” Evans said. “Someone commits to a pre-sale and in two years they go to the bank and say, ‘Can I have my money now?’ and the bank has no obligation to give them the money,” he said. Evans is not the first to air concerns about the future of off-the-plan sales, with Todd Hunter, founder of mortgage brokers and
buyer’s agency wHeregroup, expressing a similar opinion last month. “I think we’re going to see a glut of people in the near future for who it will come time to settle and they’re going to get caught out,” Hunter said at the time. “With what the banks are doing with changing LVRs from around 90% to 80%, somebody who put down a 10% deposit on a $1-million dollar unit is going to have to come up with another $100,000 when it comes to settlement time,” he said. Hunter also believes that there could be more people caught out after they rushed into agreements in the hope of cashing in on the booming Sydney market. “With the way Sydney’s prices have been going, there’s definitely going to be a cooling off over the next year or two, and if that happens when it’s time to settle there will be trouble,” he said. “If that happens and the bank values the property at less than the price you agreed to buy it for, then they’ll only finance that lower amount and you’ll be hit with making up the shortfall.”
The NSW Government’s target for 90% of housing approvals to be done within 40 days is welcomed, but will only be met with a better planning system, according to a leading property association. According to the Property Council of Australia, the target is contained within a new accountability framework, which was outlined by the government this week. “The concept of reduced approval times for new housing should help cut the time and cost of projects,” NSW executive director Glenn Byres said. “The target should shape a renewed focus on streamlining the approvals process and eliminating needless red tape that strangles housing projects. “Reaching the 40-day target will require a quantum leap forwards in culture, process and practice, particularly for multi-unit residential projects now common in the market.” The government’s own data, said Byres, makes clear the average determination time for residential development applications is currently 65 days. “We know Sydney is forecast to have a housing supply deficit of 190,000 by 2024 without action – and reducing the time and cost of bringing new homes to market is part of the fix. “This requires swifter pathways for all housing but there needs to be a particular emphasis on multi-unit residential, given the urban renewal occurring in Sydney. “Too often these projects get stuck in the slow lane and yet they are increasingly going to provide the bulk of housing across Sydney.”
FAST FACT
80% Proportion of Australians who believe the property market is overvalued
Source: Genworth
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REAL ESTATE AGENTS TAKING ON UNDERQUOTING
REAL ESTATE DIRECTOR AVOIDS JAIL OVER FRAUD A director of a south coast real estate agency has avoided jail after pleading guilty to defrauding clients of almost $800,000. Appearing in Parramatta District Court, Megan Ann Harrod, a director and company secretary of Warilla-based J &M Harrod Pty Ltd trading as Harrods Real Estate was sentenced to imprisonment for a period of two years to be served by way of an Intensive Corrections Order commencing on Friday 25 September 2015. In December 2013, Harrod pleaded guilty to two charges of fraudulently converting money as a licensee, relating to $789,000 taken from both the company’s rent trust account and sales trust account. An examination of the licensee’s accounts by the NSW Office of Fair Trading found numerous deficiencies in Harrods Real Estate’s rent and sales trust accounts and uncovered falsified corporate book keeping records created to disguise and hide the fraud. Investigators also established that Harrod had engaged in a type of ‘kite flying’ – manipulating the monthly rental trust account reconciliation by drawing cheques for the payment of fictitious disbursements at the end of each calendar month in order to give the false appearance the account was balanced – to cover up for her unauthorised withdrawals. The court heard that Harrod appeared to suffer from a gambling problem, based on poker machine activity statements obtained from the Western Suburbs Leagues Club Illawarra and Shellharbour Workers Club. In sentencing, the court took into account the fact the Harrod family had repaid money to the NSW Property Services Compensation Fund. Fair Trading commissioner Rod Stowe said the consumer protection agency would continue to crack down on real estate agents who commit serious fraud such as trust account misappropriation. “Landlords, tenants and homeowners are entitled to feel confident the significant sums of money they rely real estate agents to hold in trust for them are kept securely in designated trust accounts and the money used for the intended purposes,” Stowe said. Harrod was permanently banned from working in the real estate industry in 2013.
Two Sydney-based real estate agents have taken it upon themselves to clean up the image of their industry. As the NSW state government moves to stamp out underquoting with stricter legislation, Laing + Simmons Double Bay and Bondi principal Danny Doff and sales and investment manager Caleb Jarvis are making their own changes in an effort to increase transparency around sales. The agents believe they are likely the first in the country to introduce a policy of openly sharing vendor agreements with prospective buyers, something they believe will reduce any allegations of underquoting. “We just thought the best way to approach it was to be straight forward and transparent and say to buyers, ‘here is the agreement and the
price that the vendor will accept’, ” Doff said. “I think a lot of people think the agreement is something the buyer shouldn’t be privy to, but there’s no reason they shouldn’t be; you don’t have to show them the commission details or any details about the owners. It’s just being open about the price.” Doff said agents and vendors also shouldn’t be worried that disclosing the agreement will impact their back pocket. “Showing people the vendor agreement won’t stop those forces, and if you do have a sale where the price exceeds the valuation, then people can’t go and accuse you of underquoting.” Doff said he and Jarvis hope other agents adopt the policy, however, he doesn’t believe underquoting will ever be fully eradicated.
FAST FACT
6% Vacant land selling prices increased by 6% across the combined capital cities over the year. In comparison, vacant land prices across regional markets have fallen by 3.4% over the same period Source: SQM Research
VACANCY RATES DECLINING … MOSTLY
DID YOU KNOW?
4.3%
The number of listed properties in Australia fell to 333,923 in August, down 4.3% on July’s figures and 3.9% from the same time last year
Source: CoreLogic RP Data
Vacancy rates have continued to fall across the nation, with some notable exceptions. New figures from SQM Research show vacancies fell slightly in August, with a nationwide vacancy rate of 2.3%. The vacancy rate dropped slightly in most capital cities, excluding Adelaide, Brisbane and Darwin where the vacancy rate remained steady. Year-on-year vacancy rates have continued to climb in Darwin, however, with a 2% jump from the same time last year. Asking rents have also dropped steeply in Darwin. The city has seen a 21.3% decline in asking rents for houses over the last 12 months, and a 17.8% drop for units. Asking rents also fell in Perth, down 8.1% for houses and 5.5% for units. In contrast, asking prices have posted a strong yearly rise in Hobart. Prices are up 6.7% for houses and 8.3% for units. Asking rents in Adelaide, Melbourne and Sydney have also seen modest rises for the year.
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MARKET WRAP STOCKBROKERS PRAISE PM’S CABINET RESHUFFLE
FINANCIAL SERVICES
SMSFs HEAVY ON CASH A new report shows SMSFs are overlooking some investment classes SMSFs are placing a record amount into cash investments, in spite of falling interest rates, new figures show. Figures from the Australian Taxation Office show SMSFs held $157.7bn in cash and term deposits for the June 2015 quarter, representing around 27% of all SMSF assets. The figure was up from $155.7bn in the March quarter. In contrast, SMSFs invested less than 1% of their portfolios – to the tune of $1.8bn – in international shares. Another $533m was in offshore managed investments and $329m in offshore property. Brokerage firm Invast Financial Services claimed the trend was exposing SMSFs to huge risks. “SMSF portfolios often lack any basic degree of diversification into overseas assets, given their huge concentration on Australian equity and cash investments. The problems with this are twofold. First, investors are missing out on often superior returns offered by offshore
financial markets, with the S&P/ASX 200 well underperforming the US stock market, and underperforming most European markets over the past year,” Invast Australia Investment Committee chair Gavin White said. White said SMSFs were missing out on sectors such as healthcare and technology which weren’t well represented in the ASX/S&P 200, while being weighted too heavily towards bank and resources shares. “The second problem with not diversifying offshore is that Australian SMSF investors are missing out on currency depreciation benefits. If SMSFs have offshore investments denominated in offshore currencies such as the US dollar, to the extent that the Australian dollar falls, investors will gain some returns back on their unhedged international investments, which works to offset losses on their Australian investments if the local share market falls,” White said.
Stockbrokers have praised the Cabinet reshuffle by new PM Malcolm Turnbull. Turnbull dramatically changed his Cabinet ministry following his ousting of Tony Abbott, promoting Scott Morrison to Treasurer and Kelly O’Dwyer to Assistant Treasurer. Former Treasurer Joe Hockey left his Cabinet post, and looks set to leave Parliament entirely. The Stockbrokers Association has praised the reshuffle, with CEO Andrew Green saying the appointments of O’Dwyer and Morrison “complete the trifecta”. “Not only do we have a PM with deep experience in investment management but a treasurer with a demonstrable ability to deliver reform, and assistant treasurer with a nimble and agile mind which will equip her well to understand the cost to Australia of compliance and red tape in a global marketplace,” Green said. Matthias Corman will retain his position as Finance Minister, and Andrew Robb remains in his position as Trade Minister.
DID YOU KNOW?
80%
A new report shows more than 80% of advisers in the country use and recommend exchange traded funds (ETFs) for clients. This is up from 40% in 2006
Source: U.S. Financial Planning Association
ASIC HANDS FIVE-YEAR BAN TO FORMER ADVISER ASIC has banned a former financial adviser for five years. The regulator announced it had banned Alfie Chong, a financial adviser and former authorised representative of Meritum Financial Group following a review. The ASIC review found Chong had provided inappropriate advice; failed to determine clients’ relevant personal circumstances or failed to conduct reasonable investigations into the subject matter of his advice; engaged in misleading or deceptive conduct in relation to a client signature that was copied and pasted on to an authority to proceed form; provided personal advice without giving clients a statement of advice (SOA); failed to provide sufficient detail about the basis on which the advice was given; and arranged for clients to implement advice and transactions before providing clients with an SOA. Chong has a right to appeal to the Administrative Appeals Tribunal for a review of ASIC’s decision.
EMERGING MARKETS NOT FOR THE FAINTHEARTED Investors looking at emerging markets should adopt a measured approach, according to a new report. Lonsec has released its annual Global Emerging Markets and Regional Equities Sector Review, showing that emerging markets outperformed Australian equities for the year to June 2015, the first time this has occurred since 2010. Asian equities delivered 15% in 2014 and 27% for the year to 30 June 2015. Indian equities also saw strong returns, delivering 35% in 2014 and 27% for the year to 30 June 2015. But Brazil and Russia saw weakness in
the commodity cycle, falling currencies and political tension. “Sentiment for emerging markets is weak due to concerns about the impact of predicted rate rises in the US, broad currency volatility thanks to a rising Greenback, and concerns about China’s ability to manage its economic slowdown,” Lonsec senior investment analyst and principal report author Steven Sweeney said. “Retail investors and their financial advisers should consider a measured allocation to emerging markets with exposure to higher performing economies, such as Asia, from a long-term perspective,” he said.
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SPOTLIGHT ONE YEAR ON
CONNECTIVE’S BIG YEAR What a difference a year makes ... or not. Australian Broker reflects on the punditry, news and trends that made headlines 12 months ago
VIDEO SPOTLIGHT
Mark Woolnough
16 OCTOBER 2014
At the aggregator’s conference in Fiji, Connective principal Mark Haron tells attendees the group added more than 500 new brokers in the past year
12 JANUARY 2015
Connective taps industry veteran Steven Heavey to take the role of general manager of strategy, distribution and digital
28 JANUARY 2015
The company announces its members hit a new monthly milestone by achieving $3.14bn in settlements 11 SEPTEMBER 2015
Connective unveils its iConnect Financial platform, a franchise model that offers members branding, leads and digital platforms
14 APRIL 2015
Connective unveils a new white label partnership with Macquarie and Advantedge as part of the relaunch of its Connective Home Loans product range
COMMERCIAL DEMAND EQUALS BROKER OPPORTUNITY Figures from APRA show that banks’ exposure to commercial property grew by 6% in the 2015 financial year. Consumer demand is expected to grow as APRA and lenders clamp down on residential property investment. ING Direct’s head of third party distribution Mark Woolnough recently told Australian Broker TV that the lender had formed a specialist commercial property team to help brokers capitalise on the growing opportunity. “We’ve seen continued growth in our commercial book over the last couple of years, and that appetite from brokers continues to grow,” he said. Woolnough said the demand for commercial property was set to increase, and that it was important for brokers and lenders to find ways to meet the demand. “Whether you’re a broker or a bank, diversification plays a key role in any business, so we’re there to capitalise on that. More than $28bn was spent on commercial real estate in Australia last year, and that trajectory is expected to increase,” he said. Woolnough said tighter rules for residential investment meant consumers were looking at other areas. “Consumer demand for commercial property is growing. You’ve seen quite a lot of activity in the residential investor lending market, which has been slowed considerably over the last couple months; therefore, consumers are looking for other asset classes. ING Direct – together with brokers – wants to be there to partner with them and help customers get ahead with their investments in the commercial space,” he said.
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FORUM
TURNING A BLIND EYE? ASIC has brokers seeing red after claiming it found no evidence of bank misconduct in commercial lending
ASIC RECENTLY rejected claims of bank misconduct in commercial lending, telling a parliamentary inquiry into banks’ customer default powers that there is not enough evidence to take legal action. The claim came after a number of consumers made complaints to the inquiry over banks’ unfair ability to default borrowers who have not missed a repayment. After absolving the banks from wrongdoing, ASIC has found itself the target of brokers, who claim the regulator has proven itself to be powerless. Harold Spencer said that bank misconduct not only existed, but that it was the biggest issue facing the industry. “This is the single greatest issue facing our industry. ASIC needs to provide a level playing field for all stakeholders and by not (being able) doing this they are letting all Australians down. ASIC wants more power and more funding, yet the argument to support their wants is diminished every time by their inaction to handle what they have at the moment. If a broker were to act in any way near what the lenders do, the broker business would be
prosecuted; however, when it’s a lender, ASIC seems to fall over itself offering excuses.” In two separate comments, Spencer Murray called for a Royal Commission into criminal banking activity. “How very convenient to say that ASIC has not got the power to prosecute criminal bank behaviour. What a cop out. Why has the government got this useless department if their hands are so tied? The government should redraft the Act so that Australian citizens can get some truth. Call a Royal Commission into banking criminal activity. We will then see how useless Medcraft & Co. have been. It needs to be extended to include the actions of receivers and the legal firms acting for these corrupt banks also.” But GC said a Royal Commission could end up having unintended consequences. “Be careful what you wish for, gentlemen. It would be incredibly dangerous to have a Royal Commission into the banks as they effectively run the country and are too big to be pulled down. Probably smarter to work with them and just ensure you are acting honestly.”
BEST FORUM COMMENT BANKS BEING BULLIES? After rejecting claims of bank misconduct in commercial lending, ASIC found itself facing the ire of brokers. One commenter on Australian Broker Online said that, while banks may act within the law, they often don’t act in the best interest of clients.
“This response from Mr Medcraft highlights the question so many brokers are asking: What just is the purpose of ASIC in the lending industry? They say they are there to police the industry, but when it comes to actually carrying out that function there appears to be some major issues on what they can do and to whom. I have seen documentation regarding a number of the commercial lending cases where Bankwest and CBA were involved, and while the banks acted within their rights under the loan contract, the actions of the bank certainly were bullish and bullying in the extreme and brought a lot of good people to their knees unnecessarily. The documents I read also brought in to question the actions of the solicitors and receivers appointed by the banks and the outrageous fees charged by these people. Again, their conduct could be described as bullish and bullying in the extreme. The sledge hammer approach against brokers compared to the wet lettuce leaf action of ASIC against the major banks over recent times is just laughable.” Tim H on 16/09/2015 at 10:03AM
NEW PM COULD HELP MORTGAGE INDUSTRY Industry associations have welcomed a change in leadership that saw Malcolm Turnbull wrest the Prime Ministership from Tony Abbott. One commenter said Turnbull needs to look at banking and finance regulators as his first order of business.
“Turnbull needs to look seriously at the actions of APRA and ASIC before any changes take place. The problem is that these two groups have the complete backing of the RBA. I seriously doubt any change will come about, therefore I won’t be holding my breath.” GC on 16/09/2015 at 9:08AM CHECK YOUR PI Gadens Lawyers’ Jon Denovan has urged brokers to check their PI policies to make sure they’re covered under changes to verification of identity (VOI).
“I would expect that if aggregators aren’t already suggesting a preferred insurer, it’s only a matter of time before it must be a panel-approved PI solicitor to ensure that it meets a minimum standard.” Scott Beattie on 28/09/2015 at 9:29
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PEOPLE CENTURY 21 TRADES GOLD JACKETS FOR PINK The real estate giant takes on cancer
MOVERS AND SHAKERS LA TROBE FINANCIAL La Trobe Financial has expanded its team by a further 25 staff, in a move which it says bolsters its commitment to brokers. La Trobe announced its expanded operations after securing a second floor at its head office location in the heart of the Melbourne CBD. Of the 25 new appointments, 14 are experienced senior credit analysts, boosting the company’s national credit team to 46 dedicated loan writers. The remaining new hires are BDMs and administrative support staff. Cory Bannister, vice president and head of distribution at La Trobe, says this now makes La Trobe one of the largest specialist credit teams in Australia. “These new staff will further bolster our commitment to brokers by continuing to deliver Australia’s broadest product suite in the specialist market, currently originating in excess of $300m in loan applications per month,” he said.
NEW FACES
New-to-industry brokers on where they’ve come from and where they hope to go. Matthew Moriarty “I spent the last 12 years with entertainment specialist Sanity Music, living the ethos ‘It’s about the customer, always’. I joined Aussie with a genuine desire to help people with the most important financial decisions of their lives.” CENTURY 21 is famous for its gold jackets. The real estate giant’s sartorial branding has made its way into film and television and even been parodied on The Simpsons. But as iconic as the colour choice is, the company will switch its palette in October in an aim to raise awareness for the Cancer Council’s Pink Ribbon campaign. The campaign will see Century 21 agents across Australia and New Zealand don limited edition pink jackets, scarves and ties at auctions, open homes and in their communities. Century 21 chairman and owner Charles Tarbey said the company wanted to do its part in aiding the Cancer Council’s campaign. “Sadly, every day in Australia around 50 women are told they have a breast or gynaecological cancer. Cancer affects the Australian real estate industry like all other segments of society and Century 21 wanted to play a small part in raising awareness and funds for the campaign,” Tarbey said. Tarbey said the company had success with the initiative last year, and was hoping to see
more creative efforts this year. “Our network’s efforts last year garnered global attention and I was extremely proud of the way our people rallied behind the cause in their local communities. This year we even have an agent who has changed the colour of his car to pink. It will be exciting to see what other initiatives are planned,” he said. Century 21 agents raised $138,770 for the Cancer Council last year, and Tarbey said they hoped to better the result this year. He said many agents would be taking donation boxes to auctions and open homes, displaying pink merchandise in their offices and hosting fundraisers in their local communities. In addition, the company will be holding state-based events such as charity golf days, auctions and awards dinners. Many offices will also donate money from their successful real estate transactions during the month. “It’s fantastic to have the world’s largest real estate sales organisation supporting the Cancer Council in such a unique and visible way,” Cancer Council Australia COO Catherine Sullivan said.
John Manca “[I have] extensive financial experience gained over 30 years in senior accounting and commercial roles in textiles, media and FMCG industries. Following redundancy in November 2014, I saw this as an opportunity to reassess my career and look at new opportunities, including working for myself. In the end, it was an advertisement from Aussie asking, ‘Have you considered a career in mortgage broking?’ that got my attention.” Dilip Srivastava “I worked in the banking industry from 1984 until 2000 and then I moved my career to the IT industry until 2015. I love dealing with the many BDMs, especially if it involves contacting a number of banks and lenders. I am a people person and this industry provides me an opportunity to meet people, listen to their needs and work to get an appropriate deal.”
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CAUGHT ON CAMERA AFG continued its state-based awards recently in NSW. The aggregator honoured its top performers at a luncheon at Sydney’s Ivy Ballroom.
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ODDITIES WHAT ANNOYS FINANCE PROS? Finance pros name some of their top pet peeves LAWYER EVICTS UNBORN DAUGHTER A Washington, DC, real estate attorney has issued his unborn daughter with a written notice of eviction. Jake Kempton drafted the notice – titled “Notice to quit premises” – after daughter Pepper was eight days past her due date, according to the Legal Cheek website. The document demanded that Pepper vacate Kempton’s wife’s tummy within 12 hours, explaining that the unborn baby was occupying the premises illegally and that “judicial proceedings” would follow if she failed to leave the womb. The notice was written on the official headed paper of Jake Kempton’s Washington-based firm, Kempton Legal, and signed by the lawyer’s wife, Ellisha Kempton, in her capacity as owner/landlord of the property. And, surprisingly, Pepper listened, vacating the womb only three hours after the notice was served. The DC lawyer confirmed to legal website Above the Law that both landlord and evictee were doing well. “If I could figure out a way to ethically market a ‘baby eviction’ service, I would probably be able to put my kids through college and retire early,” he said.
HERE’S THE good news: a recent report on the U.S. News & World Report website includes the job of financial adviser among the 100 Best for 2015. Bad news: that does nothing to change the few bad things that make advisers want to call it a day – if only occasionally. Probably the biggest thorn in the side of financial advisers in Canada and the US is the amount of administrative work that goes into running a financial planning business. With regulatory initiatives keeping industry participants on their toes, the burdens placed on advisers and their staff are at an all-time high. “There are lots of things that are irritating, some more than others,” said adviser Mike Gentile in Kitchener, Ont. “The significantly increasing downloading of administration, of regulatory requirements. It’s very timeconsuming and expensive.” In the US, Maryland financial planner Lyle Benson echoes the very same sentiment about running a business. “Trying to stay on top of the myriad issues related to compliance, technology, etc., that it takes to run a successful practice [is a full-time job in itself ],” Benson told the InvestmentNews website recently. In the Canadian Maritimes, Assante Financial Management adviser Glen Rankin
is less annoyed about the paperwork involved and more concerned about the unrealistic expectations some clients have regarding their investments – even after you’ve explained to them on many occasions what they should expect in terms of returns. “You can do the right thing and look wrong, while others [advisers] can do the wrong thing and look right,” Rankin said. “Clients and prospects sometimes like the unrealistic projections of others better than the conservative projections that I use.” Life’s not always fair, is it? However, if you think Rankin can’t stand his job, you couldn’t be further from the truth. He loves being a financial adviser, but the posers out there that take shortcuts to career success do get under his skin. “Every time someone in our industry does something unethical, the rest of us get saddled with more paperwork,” said Rankin. While we could go on ad infinitum listing all the little things that annoy advisers, let’s finish with an observation by Gentile on time management. “I have a thing about no-shows. People book appointments; you’ve committed time to that and they just don’t show up, or cancel with very short notice,” he said. “You lose that opportunity, that time that you could have committed to someone else.”
PRICEY SHACK Think Sydney’s property market is out of control? At least the Harbour City isn’t the only place where prices have gone a bit insane. In the US, San Francisco real estate is also becoming increasingly out of reach for would-be buyers, as evidenced by the cheapest property currently listed in the city: a US$350,000 rundown shack. “It’s the cheapest property in San Francisco, and it’s a great buy,” the agent selling the property told VICE website. As VICE reports, the building is so dilapidated no lender will provide financing for it, meaning that whoever the … lucky … buyer is will have to front up the entire $350,000. But is this all that shocking? The average apartment in San Fran now rents for US$3,458 per month. The median price, meanwhile, is US$1.2m. “I went out to the property to see it for myself, and noticed immediately that half of the house’s foundation is cement; the other half is collapsing into rotted underground posts,” Jules Suzdaltsev wrote in his VICE column. “The bathtub has clearly collapsed through the floor into the foundation. One potential buyer, who was touring the house with me, said he thought he could sink ‘a buck fifty’ into the property after buying it and turn it into a cute little Airbnb.” Two offers have apparently been made on the property.
FINAL CALL FOR TABLE BOOKINGS FRIDAY 30TH OCTOBER 2015 THE STAR, SYDNEY www.australianmortgageawards.com.au
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