Australian Broker 12.02

JANUARY 2015 ISSUE 12.02

$4.95 POST APPROVED PP255003/06906

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

+ OPINION SAVING YOUR CLIENTS THOUSANDS

How credit repair could save your clients money P10

+ SPECIAL REPORT COMMERCIAL LENDING SPOTLIGHT A look at the market for 2015 P12

+ BEST PRACTICE ACES IN THEIR PLACES

Utilising your brokers’ unique talents P17

Mario Rehayem: PRIME PRODUCTS PAY OFF Pepper’s director of sales and distribution says brokers have embraced the prime products now offered by the traditionally specialist lender

P

epper has expanded significantly over the last few years, particularly with its move into prime lending.

But Pepper’s Mario Rehayem says opportunity still exists in the non-conforming market. He says that, since its inception back in 2000, Pepper has seen the non-conforming market and the industry itself evolve, and the customer and broker demands evolve with it.

FULL STORY PAGE 16

+ MARKET TALK HOW HIGH CAN NSW GO? What’s ahead for the high-flying state?

P18

+ BUSINESS PROFILE SHORE FINANCIAL The young brokerage takes off P20

NEWS 2

brokernews.com.au

NUMBER CRUNCHING MORTGAGE MARKET SHARE

CREDIT DEMAND SLOWING

SHARE OF THE FIXED RATE MARKET, DECEMBER 2014

YEAR-ON-YEAR CHANGE IN CREDIT DEMAND, DECEMBER QUARTER 2014

WESTPAC

14.6% 10

FAST FACT

ANZ

DID YOU KNOW?

11.8%

8 6

CBA

51%

ING DIRECT ME BANK

Proportion of small and medium business owners who say they feel positive about the year ahead

11.1% 10.1%

7.5%

BANKWEST

6.8% 5.4% 4.7% 4.3%

Foreign buyers accounted for 14.8% of total demand for new property in Q4, down from 16.8% in Q3

Source: Sensis

OTHER

8.3%

4

MORTGAGES

2

2.8%

0

9%

NAB BROKER

ST.GEORGE SUNCORP AFG HOME LOANS

14.8%

CREDIT CARD

-2 -4 -6

-5.8% PERSONAL LOANS

Source: NAB

14.6% Source: AFG

Source: Veda

WHAT THEY SAID...

JAMES SYMOND

CORY BANNISTER

HARLEY DALE

THEO CHAMBERS

“We are on track to achieve our first $2bn settlement month, which I believe we will hit before the end of this financial year P6

“By adding commercial lending to your repertoire, brokers are likely to attract more clientele to their business, covering the needs of more consumers” P13

“The recovery in new housing is spreading to commercial construction as well” P18

“We are the first broker-owned business that aligned ourselves to a whole real estate network, rather than the other way around” P20

LIBERTY DELIVERS ^ WITH NO APP FEE ON SWIFT!

With the perfect approach, our Swift Home Loan delivers LVR’s up to 95%, a capped LMP fee and no requirement for LMI credit scoring. Plus, the $995 App Fee is waived!^ Try the Liberty Swift Home Loan today! Contact your Liberty BDM or visit us at www.liberty.com.au and search ‘Swift’ for more.

Approved applicants only. Lending criteria apply. Other fees and charges are payable. ˆOn applications received by 28 February 2015 and settle by 30 April 2015. Liberty Financial Pty Ltd (ABN 55 077 248 983) (Australian Credit Licence 286596).

NEWS 4

brokernews.com.au brokernews.com.au

Renovation spike means opportunity for brokers ■ More Australian home owners are choosing to renovate

FAST FACT Aaron Milburn

MILBURN HEADS TO ST.GEORGE

$47,984 Average amount Australians are spending on home renovations Source: Westpac

■ St.George has announced

the appointment of former Citibank broker head Aaron Milburn as its new NSW state manager in its mortgage broking business.

In a letter obtained by Australian Broker, St.George general manager of mortgage broking Clive Kirkpatrick says Milburn has a strong reputation across the industry for driving performance and delivering success.

“Aaron brings a real depth of experience and solid leadership skills to the role,” he said. “Key to his success will be Aaron’s focus on delivering outstanding support for brokers and aggregators and providing a consistently exceptional service.”

Milburn has more than 15 years’ experience in financial services. Most recently, he held the position of head of broker distribution at Citibank. Prior to that, he was the head of commercial sales at Bankwest.

than to move, providing increased opportunities for brokers to help clients through refinancing options.

The Westpac Renovation Report has found that Aussie home owners are choosing to spend an average of $47,984 on renovations to their current homes, as opposed to packing up and moving.

The top motivations for renovating revealed by the report are to make their home more comfortable (64%), update the style of their property (55%) and to increase the value of their property (41%).

Renovators are making sure they do their due diligence though, with the report citing that 80% thoroughly plan and prepare for their renovation.

Westpac’s general manager for broker distribution, Tony MacRae, said this gives brokers an opportunity to help renovators plan and prepare, particularly through providing refinancing options.

“Over the last decade renovating has become a more viable option for home owners to have the home that they truly desire,” he said.

“While many people perceive timelines and budgets as some of the most challenging aspects of a renovation, these can actually be simplified during the planning process. Talking to a mortgage broker about refinancing options before making any hard and fast decisions is a smart move. [Brokers] can ensure that there is enough equity in the home to comfortably finance any home improvements.”

UNEMPLOYMENT RATE RECORDS SURPRISE DROP

■ Australia’s unemployment rate has unexpectedly – but welcomely – fallen to 6.1% in December, according to the latest Australian Bureau of Statistics labour force figures.

Economists were predicting the unemployment rate would remain steady at its 12year high of 6.3% in the lead up to the release of the official figures, however it dropped 0.1% from a downwardly revised 6.2% in November.

The number of jobs added in December was 37,400 – significantly higher than the market prediction of 5,000. Full-time jobs rose by 41,600 while part-time jobs fell by 4,100.

However, CommSec’s chief economist Craig James says it’s important to remember that the monthly data on employment and unemployment is backwardlooking before celebrating the surprise result.

“The outcomes reflect decisions made by businesses up to 5–6 months ago. So the fact that more than 80,000 jobs have been created in two months is encouraging, however we have doubts about the strength of recent job gains. Still, the data does line up with taxation data suggesting more people are in work and paying tax.”

However, forward-looking indicators, said James, are showing healthy signs of growth for the labour market – which is what really matters.

“More important for investors and policymakers is what lies ahead. Job vacancies are at two-year highs and job ads have lifted for seven straight months, so the outlook is positive.”

EDITOR Adam Smith PUBLISHER Simon Kerslake COPY & FEATURES JOURNALISTS Julia Corderoy Maya Breen PRODUCTION EDITORS Roslyn Meredith, Moira Daniels, Clare Alexander ART & PRODUCTION DESIGN MANAGER Daniel Williams DESIGNER Lea Valenzuela SALES & MARKETING SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak MARKETING & COMMUNICATIONS MANAGER Lisa Narroway TRAFFIC MANAGER Abby Cayanan CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Adam Smith tel: +61 2 8437 4792 adam.smith@keymedia.com.au Advertising sales Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak tel: +61 2 8437 4772 rajan.khatak@keymedia.com.au Subscriptions tel: +61 2 8011 4992 fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Auckland, Toronto, Denver, Manila brokernews.com.au

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

brokernews.com.au

6

Aussie sets sights on $2bn month ■ Aussie Home Loans has said it set a new monthly settlement

record in December, smashing its previous record set in May 2014.

Home loan settlements for Aussie and its wholesale aggregator, National Mortgage Brokers, reached a record just shy of $1.8bn for the last month of the year – over $150m above the previous Group record set in May. Aussie’s executive director James Symond says ending the year James Symond with their best settlement result in almost 23 years of business is a great reward. Now, the franchise has its sight on the $2bn mark.

“We are on track to achieve our first $2bn settlement month which I believe we will hit before the end of this financial year,” he said.

“Both Aussie’s retail and mobile broker channels topped their previous records, with the retail channel in particular performing exceptionally well at almost 10% higher than its previous best month. It’s exciting when I think how much the Aussie Group has grown in the short amount of time since we expanded into retail and acquired nMB.” Symond also said December was the company’s best month for conversions since January 2014.

“This tells me that we are on the right path and making the right moves by continuing to focus on working smarter and investing in the things that will deliver real results for our franchisees and brokers,” he said.

St.George launches new SMSF platform

UNITED STATES OF AMERICA

JPMORGAN HEAD CRIES FOUL OVER REGULATION

■ St.George has unveiled an industry-first online SMSF loan process

platform which promises easier and faster SMSF loan lodgement for brokers.

The new system enhancements include a new online super fund calculator, data automation, online supporting document enhancements and tailored assessment metrics.

Clive Kirkpatrick, general manager of mortgage broking at St.George, told Australian Broker that they have spent months working with tech company NextGen to develop the system for brokers.

“The new platform will have huge benefits for our brokers. It integrates our policy and business rules into the application, so it means that we get more complete information about each applicant – helping us make better decisions, reduce errors and the need to rework, meaning a faster turnaround time.”

Kirkpatrick also told Australian Broker that St.George has replaced the burdensome Financial Advice Certificate with a simpler Trustee Certificate.

“We still need new borrowers to fully understand all risks and satisfy suitability when applying for this type of borrowing to invest within a super fund, and acknowledge this through the completion of this form [the Trustee Certificate]. Essentially, from 19 January we have made it more straightforward for trustees. We will require them to complete a Trustee’s Certificate and remove the need for the Financial Advice Certificate.”

WORLD NEWS

FAST FACT

24% The number of people renting has fallen from 36% in 2007 to 24% last year Source: Citibank

JPMorgan Chase & Co. has had its fair share of legal issues and CEO Jamie Dimon said the overlapping efforts

by US regulators have placed banks “under assault”.

“We have five or six regulators or people coming after us on every different issue,” Dimon told reporters after New York-based JPMorgan reported fourth-quarter results.

“It’s a hard thing to deal with.”

JPMorgan reported net income for the fourth quarter of 2014 at $4.9bn compared to $5.3bn in the fourth quarter of 2013. Legal fees of $990m, mostly related to the sales of shoddy mortgage bonds, weighed down the bank.

“In the old days,” Dimon told The Huffington Post, “you dealt with one regulator when you had an issue, maybe two. Now it’s five or six. It makes it very difficult and very complicated.”

NEWS

brokernews.com.au

8

Ray White thanks brokers for milestone ■ Ray White says a “milestone” was reached for the mortgage broking industry in 2014 – a

Andrew Littleford

SHORT-TERM LENDER LAUNCHES WHITE LABEL OFFERING

milestone that helped it reach a “record-breaking” month.

The Ray White Group, which has a partnership with broking franchise Loan Market, recorded a “record-breaking” December which culminated in the Group reporting a result of $3.37bn for the month – a result that would be an “outstanding month at any other time of the year let alone one dominated by vacation and family time”, said Ray White Group’s joint chairman Brian White in his monthly White Paper.

White said the record result was largely buoyed by the success of the mortgage broking industry and, by extension, its sister company, Loan Market.

“In 2014, a milestone was reached for the mortgage broking industry. Brokers were responsible for 51.5% of all residential loans in the September quarter. The trend toward customers engaging with brokers has been growing consistently over the past 12 months, and shows positive indicators for 2015.

“In December, Loan Market recorded its highest settled loans in all states bar one, with 15% growth on average results for this financial year,” he said.

Non-major cuts rates, announces cash-back offer

■ Short-term finance lender Interim Finance has

announced the launch of a new white-label shortterm lending product for brokers, which it says will help brokers easily diversify their offering.

The generic white label package will enable brokers’ complete autonomy throughout the loan process, through branding all documentation with their own company brand. It will include all essential documents, templates and guidelines needed to process a streamlined and compliant short-term loan.

Interim’s managing director Andrew Littleford says this will enable brokers to execute a loan independently with confidence and help them diversify their offering.

“White label solutions improve brokers’ value proposition in an increasingly competitive market, and provide a competitive advantage without the risk or investment in a niche market,” he said.

“The decision to develop our white label product is a natural progression of the company’s back-end support service. This approach has the dual benefit of increasing the brokers’ profile whilst retaining the confidence of a watertight, streamlined and compliant loan.”

Brokers will also be able to continue to access Interim Finance’s full-service back-end support division, where they can elect to have the loan written and managed on their behalf at no cost.

■ ME Bank has undercut the DID YOU KNOW?

2.9% The median house price in Sydney is $1.8m and returns an average rental yield of 2.9% Source: finder.com.au

major banks, slashing its five-year fixed home loan rate by 25 basis points to 4.69%.

With ME Bank’s three-year rate also sitting at 4.59%, the non-major says it is now offering the lowest three- and five-year fixed home loan rates in the market.

ME Bank CEO Jamie McPhee said the bank was able to reduce the rate as a direct result of cheaper funding costs – which the major banks won’t do.

“The cost at which ME Bank borrows in the fixed rate market has been falling. In turn, we can pass on these savings to customers,” he said.

“Unlike the majors, we’re keen to pass these opportunities on to customers and continue our aggressive position in the home loan market.”

The bank also announced a $1,000 cash-back offer for brokers’ clients. The offer applies to new home loan applications when refinancing from another financial institution.

The $1,000 cash-back offer will be available on any ME Bank refinance application submitted by 28 February 2015 and settled before 31 May 2015.

Customers will be paid $1,000 within 30 days of settlement. The offer excludes top ups, refinances of existing ME Bank home loans or brand new home loans.

OPINION 10

brokernews.com.au

Want to save at least $6,000 a year in interest? Here’s how Merri Mansfield of Princeville Credit Advocates on how poor credit history could be costing your clients thousands

I

think every broker has had this experience at one time or another. The scenario goes something like this: A prospective client is sitting across the table from you, and you ask, “So, have you got any problems with your credit file?” The client says no, but in such a way that your gut tells you the answer is really yes. And if you don’t trust that gut instinct and ask the client for permission to check his or her credit file, it is very likely you will be disappointed when the loan application is rejected.

As I travel around Australia attending professional develop­ment days for aggregators, I hear this story time and time again. My advice to brokers is to always to check a client’s credit file first, before putting in a loan application. And if there is an impairment on the credit file, have it checked and verified by a reputable credit repair company before placing the loan with a second-tier lender, or telling the client you can’t help them get a loan.

The reason I give this advice is that in my experience, more than 80% of adverse listings are placed incorrectly on credit files. Yes, you heard me. In more than 80% of cases we work on, the credit provider (who placed the adverse listing) has not followed the rules that relate to credit reporting. If they don’t follow the rules, the incorrect listing must be erased, as if it was never there in the first place.

And I hear you say: It’s only fair, isn’t it?

Now, I have done a few sums lately to calculate what all these incorrect listings are costing credit-impaired Australian consumers. If you have a shiny, gold-plated prospect, they will currently be able to get a variable mortgage rate of about 4.64%. But if you have a rusty, jaded type of prospect with a default or judgment on his or her credit file, and you decide to refer this client to a second-tier lender like Pepper, La Trobe or Liberty, the interest rate will jump to 6.19%.

If your clients are Mr and Mrs Average, their home loan will be about $380,000. If they are the gold-plated prospect, they will pay about $17,632 per annum in

IF YOU DON’T TRUST THAT GUT INSTINCT AND ASK THE CLIENT FOR PERMISSION TO CHECK THEIR CREDIT FILE, IT IS VERY LIKELY THAT YOU WILL BE DISAPPOINTED WHEN THE LOAN APPLICATION IS REJECTED

interest, based on a 4.64% interest rate. But if they are the rusty, jaded type of prospect, they will pay $23,522 per annum, based on a 6.19% interest rate.

That’s a difference of $5,890 in interest every year for the life of the loan.

And of course, to add just a bit more sting to the deal, the rusty, jaded prospect also will pay a high application fee for that highinterest loan. In other words, a poor credit history is Costing. Your. Client. Big. Time. Just think about this staggering information for a minute. If 80% of listings on credit files are incorrect, and 15% of Australians have defaults or judgments on their credit files, what is this costing the credit-impaired? The answer is: an absolute fortune.

In my opinion, it’s a no-brainer to encourage your client to verify that his or her credit report is correct, if you discover defaults and judgments on it. It would be much better for them to spend their money on things they enjoy – like holidays, eating out, gifts for the family, giving to charity or wakeboarding – than on excessive interest.

Dr Merrilyn Mansfield is a consumer advocate and the lead adjudicator and researcher for Princeville Credit Advocates, a Sydney- and London-based credit repair company. She is fascinated with consumer laws that relate to credit reporting and is an advocate for a consumer’s right to a correct credit report. For more information, please fill in the online form at www.wemend.com.au

SPECIAL REPORT

brokernews.com.au

12

Commercial lending: A window of opportunity Regulatory rumblings mean brokers have a unique window of opportunity in the commercial market LA TROBE’S OFFERING

“There are a number of reasons brokers are turning to La Trobe Financial for their commercial lending needs: ■ Broad product suite: We have

commercial loans available on a full-, lite-doc and lease-doc basis; can lend to individuals, companies, trusts and SMSFs; and can cater for all non-specialised commercial properties, including retail shops, offices, light industrial and rural.

■ Ease of dealing: Our process

and document requirements for commercial lending are the same as for our residential products, therefore brokers who can write residential with us can certainly write commercial transactions. This is great for new brokers or those looking to try their hand at commercial.

■ No specific accreditation

requirement: Once accredited with La Trobe Financial (which is often automatic via the major aggregators), brokers are free to use all of our products without any extra accreditation required.”

L

ast year was a big year for commercial property.

The market hit new heights, according to numbers from CBRE research. The industrial market drove demand, with commercial property sales swelling to $26.8bn in 2014.

Thinktank’s Jonathan Street says 2015 is shaping up to be another strong year for the commercial market.

“The property market itself should remain reasonably sound, with the outlook for interest rates still accommodative and the financial fundamentals of owning a

commercial property as a business operator or investor still stacking up strongly, particularly should the residential market level off or retrace somewhat,” he says.

La Trobe Financial vice president and head of distribution Cory Bannister agrees, and says demand for commercial property could continue to grow as more investors shift their focus towards the market.

“We … expect property investors to increase their activity in the commercial sector, chasing higher yields than those generated by residential property. Currently, residential yields are at extremely

Cory Bannister, La Trobe

SPECIAL REPORT brokernews.com.au

DID YOU KNOW?

55% Industrial property sales grew 55% year-on-year in 2014 Source: CBRE

low levels, and with a significant amount of residential stock due to hit the market over the next two years, commercial property will become the preferred choice for many property investors,” Bannister says.

AFM managing director Iain Forbes says the lender intends to take a similar approach to the commercial market in 2015 as it did in 2014. For the company, this means welcoming new business while keeping credit standards conservative.

“We do not expect to see any major changes in the way we do business.

LVRs will be conservative, and lending requirements will be rigid.

We do not expect to see no-doc lending returning to the market.”

A WINDOW OF OPPORTUNITY

While 2015 may be shaping up to be similar to 2014 in many ways, Bannister says some changes on the horizon could pull forward commercial demand.

“We expect owner-occupier SMEs to take advantage of the current low

13

AFM’S OFFERING

“The AFM commercial division offers a number of options for borrowers to choose from, such as full-doc, lo-doc, SMSF and construction. It offers borrowers competitive pricing and a selection of lenders who are looking to write good-quality business.

Commercial lending offers attractive commissions. Brokers who focus primarily on residential lending could consider commercial lending for the following reasons: ■ Attractive commission ■ AFM handles the application from

enquiry to settlement

■ Introducer provides AFM with required

documentation. In summary, AFM does it all for the introducer”

interest rate environment to secure their own business premises; many will look to take advantage of the ability to utilise their SMSFs to complete the transaction whilst it is

Iain Forbes, AFM

available. The Murray inquiry’s recommendation to ban borrowing via SMSFs has prompted many to take advantage of this window of opportunity whilst it remains open,

SPECIAL REPORT

brokernews.com.au

14

FAST FACT 6% Year-on-year growth in commercial property sales for 2014 Source: CBRE

which in itself has created activity,” he says.

Street says such changes could eventually curtail some commercial demand.

“Anecdotally, around 80% of commercial property purchases under $5m over the past few years have gone into self-managed super funds. If the government follows the recommendation of the Murray inquiry into financial services and prohibits SMSFs from borrowing, we may well see a marked drop-off in market activity for a period as would-be purchasers reconsider the balance of financial incentives in proceeding under a different, less tax-effective structure.”

But Street argues this is unlikely to come to pass.

“Our view is that the government is unlikely to impose a blanket ban

THINKTANK’S OFFERING

“The three primary factors that set Thinktank apart from other commercial lenders involve: ■ The nature of our set-and-forget

loan structuring options up to 75% LVR and 25 years, without annual reviews, recurring fees or regular property revaluations; ■ The way our highly experienced

sales team members offer relationship brokers transactional support, deal-workshopping expertise, CPD compliant training, a willingness to be accessible beyond the normal 9 to 5, and even assistance on getting deals set elsewhere that don’t fit within our own lending criteria; and ■ The fact that we specialise in

commercial property, which allows us to add value to each and every party in the transaction chain”

and, at least as far as commercial property is concerned, borrowing within a SMSF will continue, albeit possibly with some tighter regulation in place,” he says.

In any case, Bannister says it’s important for brokers to seize the window of opportunity provided by the current SMSF lending environment. He predicts that more brokers will be drawn to the commercial market in the year ahead.

“The activity above will create some great opportunities from a mortgage broking perspective, and we expect to see more brokers try their hand at commercial lending as the industry buzzword for the past two years – diversification – begins to take hold,” he says.

ISSUES TO AVOID

Jonathan Street, Thinktank

Commercial lending can seem daunting to brokers who have only focused on residential deals. Forbes says brokers should ensure that any potential deals are worth the time investment.

“Some commercial transactions can become complicated and time-consuming. There is an earnings upside to this, but before investing in the time and effort of the deal, brokers should determine for themselves that the economics of the deal stack up. Simply ask themselves two questions: is this a viable proposition, and can the borrower afford the repayments?” he says.

Bannister says La Trobe seldom sees issues that delay or prevent settlements. But he warns that inexperienced brokers should be careful about taking on complex transactions too quickly.

“Issues can occur when brokers attempt very large, complex transactions, such as multi-unit construction and development lending, before they have gained the necessary experience to deal with such transactions. We suggest brokers new to commercial lending start slowly with non-complex transactions with a lender that can help them with the transaction, and build up to the larger ones over time.”

Street agrees with Forbes that brokers should look at commercial deals as an analysis of cost versus benefits.

“For brokers and commercial lending, it is all about managing probabilities and how they correlate with the revenue a transaction will produce versus the cost of getting it across the line,” he says.

Street says this means assessing three main factors of each deal.

“First, assess whether it is a transaction that you can get funded and on terms acceptable to the client.

Many loan opportunities, especially some of the larger ones, either don’t go anywhere at the end of the day or are best left to a specialist broker or financier because of the difficulty of getting it set.

“Second, identify which lender or

SPECIAL REPORT

brokernews.com.au

15

COMMERCIAL SALES CLIMBING Commercial property sales for 2014 Office property:

$14.5bn

One stop shop!

|Retail assets:

$7.3bn Industrial sales: $4.9bn

$4.9bn Source: CBRE

lenders will be able to approve the transaction and on what terms. Get as much detail as possible on the deal so you can be sure of having one or more lenders who will support it.

“Finally, consider how much time may need to be spent on getting the loan submission together and managing the client through the process. The revenue from the commission and the value of the relationship need to outweigh the costs of pursuing it,” he says.

TIPS OF THE TRADE

Street says for brokers looking to get involved in commercial lending there are several sources of education on the market and its intricacies.

“Brokers can get started with their existing knowledge of residential finance, and extend their skills with experience working with lenders and/or support from the commercial specialist offered by their aggregator. Our relationship managers provide direct support and training, while the MFAA is also great in periodically running commercial courses and workshops.

We also recommend the SMSF course and regular webinars offered

by MFAA as a very good way of broadening skills and getting positioned to take advantage of new opportunities,” he says.

Bannister says La Trobe’s products cater to brokers who may not have had previous commercial lending experience.

“La Trobe Financial caters really well for new entrants to the commercial space as our products are designed to look and feel like standard residential transactions; we keep the process very simple, in that if a broker can write a residential loan with us, then they can write our commercial loans also; and our credit analysts and sales staff are keen to help brokers unfamiliar with commercial, adopting an educative approach, so there is a not a lot brokers need to know in order to write a commercial transaction with us.”

He recommends that brokers who may still be uncertain about commercial lending seek assistance from their aggregator or BDM. Similarly, Forbes says AFM is able to walk brokers through the commercial lending process.

“Brokers do not need an in-depth knowledge of the commercial market when handling a commercial application, as the AFM commercial staff will guide them through the process; however, we think brokers should have an idea of the economic drivers that make up a commercial transaction, and we suggest that they familiarise themselves with the AFM products on offer,” he says.

“All of this is available on the AFM website for convenience. In addition, the AFM commercial staff are only a phone call away. Brokers are also able to find support from the state business managers.”

Homeloans is focussed on making your life easy, with industry leading BDMs and the ability for you to speak directly to credit assessors. Plus, with products to suit the full spectrum of borrower types available via the one application form, Homeloans truly is a one stop shop!

For more information talk to your BDM.

13 38 39 homeloans.com.au/broker

*Taken from broker survey results collected upon finalisation of all applications.

Homeloans Limited ABN 55 095 034 003. Australian Credit Licence Number 247829.

NEWS 16

brokernews.com.au

CONTINUED FROM PAGE 1

Pepper’s director of sales and distribution says brokers have embraced the prime products now offered by the traditionally specialist lender

P

epper’s decision to launch into prime products, says Mario Rehayem, was heavily influenced by the united voice of brokers themselves.

“Brokers were very happy with the level of service that we deliver to them day in, day out with our specialist business, but were asking us to be able to come out with a prime product with an edge, and that’s exactly what we’ve done,” he says.

That edge is adopting Pepper’s specialist lending credit assessment into their prime product, manually assessing each deal and determining the borrower’s circumstance from that, so tailoring to the needs of the client rather than the one-size-fits-all approach, Rehayem explains.

“Every lender is different – the non-bank sector should be distinguished for its service, its ability to be nimble and ability to cater to a customer’s individual needs rather than be slow to act and bound by red tape. But very few non-bank lenders are pushing the envelope or daring to be different. Most non-banks have been consumed by the big banks, which leaves very few ‘real’ non-banks in the market.”

Pepper noticed that many of their clients who originally started on a specialist loan had no choice but to move elsewhere once their credit scores qualified them for a prime mortgage.

“In today’s market, a non-conforming lender should be able to assist the borrower when they become eligible for a prime loan.

It’s a much better experience for the borrower to stay with one lender as opposed to refinancing, as long as the borrower has access to fairly competitive rates,” Rehayem says.

Pepper launched its ‘Pepper Essential’ suite of products in 2014, and Rehayem says the response from brokers was phenomenal.

Although expected, since the product was

developed from direct feedback from both brokers and borrowers, there is no doubt that these are exciting times for Pepper, who spotted a gap in the market and successfully acted upon it.

LOOKING BACK TO MOVE FORWARD

2014 was a year of significant growth for Pepper, with the company growing to more than 1,200 employees. Pepper’s mortgage originations in Australia experienced 90% growth last year compared to 2013, thanks to their prime products, and 35% growth within their core specialist products.

“The beauty of the way Pepper has evolved as a business is that not only has it grown by acquisition but it has successfully been

IN TODAY’S MARKET, A NON-CONFORMING LENDER SHOULD BE ABLE TO ASSIST THE BORROWER WHEN THEY BECOME ELIGIBLE FOR A PRIME LOAN – M ARIO REHAYEM able to grow organically through its core products being the specialist loans, being our new prime product that’s come out and also as a business as a whole,” Rehayem says. “We continue to lead the pack as far as being the market leaders in our space and in the specialist market. You can’t fathom the size of the opportunity, because even though we have grown year-on-year, the actual market itself – the non–conforming market – is probably the largest underserved

market in our industry.”

Rehayem says many brokers still do not include non-conforming products in their offering to a client, or are unaware of their potential, which can result in the client missing out on the most suitable loan for their situation or waiting until they can reapply, which may take as long as five years.

“There are now brokers out there that were brokers who did not utilise [non-conforming products] but today have taken that on board and now have become advocates of the products because they’ve seen first-hand what the experience was about, and most importantly how the customers have reacted, because they understood that that broker went the extra mile.”

NOWHERE TO GO BUT UP

The future of the non-conforming market is looking bright, says Rehayem, with the need for specialist lending only increasing.

“The non-conforming market will continue to grow on a very fast trajectory, just like we have in the past four years. Demand is at an all-time high, and there are more players entering the market, which means greater competition.”

He’s says that already this year brokers, mortgage managers and aggregators have approached Pepper to make clear they are focusing on increasing the segment of specialist loans within their product offerings.

“They’re still noticing the gap they are having between lodgments and the actual settlements. So their conversion ratio is still at a level that they know they can capture more business, and they’re realising the actual true potential of a non-conforming product or a specialist product.”

No matter the state of the market, says Rehayem, “at the end of the day there’s always business to be written in the mortgage market, there’s always someone that’s buying, there’s always someone that’s selling, and there’s always someone that’s refinancing”.

“If all goes to plan, 2015 will be the year of product innovation and enhancements for Pepper – we have been working round the clock to lead the way in 2015 with regard to filling more voids in the market.

“Innovation these days is loosely used, and, to be honest, it’s very hard to innovate a commodity. Innovation in my eyes is meeting customer demand, and we will continue to do this with new additions to our extensive suite of products.”

BEST PRACTICE

brokernews.com.au

17

Are your brokers underutilised? How to tap into their full potential

1st Street Home Loans director Jeremy Fisher talks about how brokers can get the most out of the talent in their office “one-stop-shop” and are experts in all types of loans, the reality is they are probably not – and that’s okay.

“It’s a big world out there, and there’s a lot to know. I don’t claim to be an expert in everything, and I don’t expect my staff to be an expert in everything. With the abundance of regulation, policies and information, it is impossible to be.”

Instead, it’s about finding out what you’re an expert in and what your staff are experts in, says Fisher. Every broker will come from a different background

“…IN THE MAJORITY OF INSTANCES, THE BROKER WILL SEE THE DEAL ALL THE WAY THROUGH, BUT IT IS ABOUT CAPITALISING ON OUR BROKERS AND UTILISING THEIR UNIQUE SKILLS AS BEST AS WE CAN. IT IS ULTIMATELY SO THE CLIENT IS GETTING THE BEST INFORMATION AND THE BEST DEAL

A

ny business owner knows that the not-sosecret secret to running a successful business is the staff.

However, are brokerages really making the most of the talent in their office? According to an award-winning broker and entre­­­preneur, brokerages could be better capitalising on the unique skill sets of their brokers.

Jeremy Fisher, founder and director of 1st Street Home Loans, says that as much as brokers all like to say they are a

made up of different experiences and unique skill sets. Fisher says you just have to identify these and capitalise on that expertise.

In Fisher’s case, 1st Street Home Loans’ main business comes from residential loans; however, each of his brokers has been chosen to specialise in, or be the ‘go-to’ person for, a different area or type of loan – depending on their background, skills and knowledge.

“It just came to me that there are brokers here with skills that are quite unique. So, if there is a deal that sits outside of one of our brokers’ comfort zones or skill

sets, we could utilise the other brokers here in the office who may have the experience or interest in that type of loan.

“It still means that the individual broker who has the client will still write the loan in most cases, but they know who the expert is on – let’s say construction as an example – due to their experience and their unique skill set for that type of loan. They have kept up-to-date with all the changes within the construction industry and the bank policies and regulations in that industry. It means that we have recognised the vast skill set we’ve got in our office, and we are taking advantage of it.”

No broker is fenced into writing only one particular type of loan, says Fisher, but having a go-to person makes the management structure and lines of communication clearer – which in turn makes the business more efficient and provides better outcomes for clients.

“In the majority of instances, the broker will see the deal all the way through,” Fisher says, “but it is about capitalising on our brokers and utilising their unique skills as best as we can.

It is ultimately so the client is getting the best information and the best deal.

“We won’t just take over a client from someone else; we will make sure that we skill them up at the same time.”

Fisher says paying attention to your brokers’ experiences and skills will not only increase business efficiency and ensure clients are getting the best service, but it also will boost staff morale because they will get to specialise in what they are interested in.

“The last thing I want to do is an SMSF loan, but at the same time, I’ve got a broker here who has a client who’s got multiple trusts and companies, and to me, that’s easy. That’s what I like doing and that’s where my skill set lies. So, it is also about letting brokers specialise in what they are passionate about.”

While the strategy at 1st Street might not work for every business, particularly smaller brokerages, Fisher urges all brokers to take a deeper look at the talent in their office and try and utilise it in the best way for their business.

“If you are a brokerage that has a varied pool of certain skill sets in your office, then you should absolutely be honing in on them and utilising those skills.

The benefit is ultimately for the client.”

DID YOU KNOW?

85% percentage of workers who feel they could be more efficient at work, but because of skill underutilisation, do not live up to their full potential

$23,600 the average amount under­ utilisation costs a company in lost productivity per employee per year Source: Chandler Macleod

MARKET TALK

brokernews.com.au

18

How high can NSW go?

New South Wales – and Sydney in particular – has been the growth market lately. What can we expect from the state in 2015?

T

FAST FACT 18.9% Capital growth for Sydney as of 30 September 2014 – all dwellings (houses & units) Source: CoreLogic RP Data

he magic number is 14.3%.

That’s the massive amount by which Sydney dwelling prices have grown over the past year, according to CoreLogic RP Data Home Value Index results.

The next highest, Melbourne, is way back at 8.1%, and poor Canberra is bringing up the rear at 1.7%.

Moreover, Sydney was also the best performing capital city in the September 2014 quarter at 4.1%.

All this growth has helped Sydney’s median dwelling price creep up to $655,000. Not only is this more than double that of Hobart, but the NSW capital city also remains the only one to boast a median dwelling above $600,000.

A big factor in the price growth has been the low interest rates, so things might start to get interesting if rates start to go up in 2015.

CURRENT STATE OF THE MARKET

NSW has rocketed to top of the rankings as the nation’s leading state economy, according to CommSec’s most recent State of the States report.

Indeed, it is now boasting the fastest annual economic growth rate in the nation, which is up by 6.3% on a year ago, compared to WA (3.3%) and Victoria (1.7%). Further­more, annual population growth in NSW is the fastest it has been in five years.

“Sydney is the main location for overseas migrants, and migration has been running strong for the last couple of years,” says BIS Shrapnel’s Angie Zigomanis.

Another high point for the NSW economy is housing construction,

which is being fuelled by low interest rates and high investor demand.

In fact, dwelling starts are up 36% above decade averages, and in the June quarter, the number of dwellings started was 7.3% higher than the previous year.

“NSW is currently ‘playing catchup’ after years of under-building – where demand for homes exceeded supply, pushing the rental vacancy rate to record lows,” says the State of the States report.

Indeed, the revival of the NSW economy at the moment is really because it is enjoying a housing-led recovery, says Harley Dale of HIA. “The recovery in new housing is spreading to commercial construction

KEY STRENGTHS ■ NSW has the nation’s leading economy. Its

strengths include population growth, dwelling starts, retail trade, business investment and unemployment. It also does not heavily rely on the waning resources sector.

■ Regional NSW is poised for price growth,

following the leaps and bounds in Sydney.

■ Sydney has the lowest vacancy rates of

anywhere in Australia.

■ Excellent transport infrastructure projects

are on the horizon.

KEY WEAKNESSES

■ Pockets of Sydney have become

unaffordable, and it’s also perceived as such.

■ Rental yields have fallen due to solid price

growth.

■ Sydney has grown so much that it may be

time for other capital cities to play catch up.

as well, and there are more mixed-use developments going on in Sydney than there have been for some time,” says Dale.

“It’s only been in the last six to eight months that it has actually got to a volume of new housing supply that is commensurate with the needs of its growing and ageing population.”

Indeed, the strong demand for property that’s happening in Sydney is made clear by the fact that the NSW capital city has vacancy rates of just 1.8% (according to the REIA), says AMP’s Shane Oliver. This is the lowest in the nation, and low vacancy rates are indicative of an overall shortage of property.

WILL THE GROWTH CONTINUE?

The NSW capital city is obviously growing very strongly in a median sense, says Dale.

“The price growth in Sydney is probably going to continue for a while,” Dale says. “It comes off a decade where Sydney was one of the worst performing capital city price markets in Australia – behind only Hobart – so it’s playing catch-up, if you like. There is more short-term gain to be had in the Sydney market.”

The QBE Housing Outlook report predicts Sydney house price growth totalling 13% for 2014/15 and 2015/16; however, the rate of growth is expected to begin slowing through 2015/16. Accordingly, Sydney’s median house price is expected to peak at $915,000 by June 2016.

“NSW’s stock deficiency is expected to ease over 2015/16, while affordability constraints are also expected to come to the fore as interest rate policy is tightened and variable rates rise,” says the report.

Zigomanis also believes that the NSW economy will, in fact, be the ‘star economy’ of the states over the next few years. This is significant because the thriving NSW economy has been a major factor in helping push prices up, according to Wilson.

MARKET TALK brokernews.com.au

19

House prices to moderate, but affordability still an issue While house price growth is expected to slow in 2015, median prices still remain beyond the reach of many potential buyers

H

ouse price growth is expected to almost halve across Australia in 2015, according to a global ratings agency, but affordability pressures will remain in Australia’s largest cities.

National house prices are forecast to rise 4% in 2015, down from 7% in 2014, according to Fitch Ratings’ latest Global Housing and Mortgage Outlook.

House price growth in Sydney and Melbourne – the two cities that led the growth last year – are expected to slow to 3–4% this year, as they approach an “affordability ceiling”.

However, the report says that despite the moderation in price growth, affordability pressures will remain in Australia’s largest cities as price rises continue to “outstrip income growth”.

Australian homes are the third most expensive of the 22 countries the 2015 Global Housing and Mortgage Outlook report analyses.

The report also predicts lending volumes to continue to grow, as investment is expected to continue to account for 50% of new lending.

However, as rental yields drop to less than 3.5%, Fitch stresses that housing investors’ buying sentiment could be vulnerable to weakening if other asset classes offer better returns.

The report comes as a new housing survey ranks Sydney as

the third least affordable city in the world, and names Australia “severely unaffordable”.

The Demographia International Housing Affordability Survey put Sydney at number three in a list of the world’s least affordable housing markets.

The survey ranks markets by using a house-price-to-income ratio; Sydney’s median house prices was 9.8 times median income.

While the figure may give potential homebuyers pause, Vancouver and Hong Kong both ranked as less affordable than Sydney. Buyers in Vancouver face prices 10.6 times median incomes, while Hong Kong median house prices were 17 times median income, the survey claimed.

In addiiton, all five major markets across Australia were rated as severely unaffordable.

Demographia claimed the median house price across major markets was 5.5 times the median income.

The United States ranked as the most affordable housing market in the Demographia survey, with 37 major markets rated as affordable or moderately affordable, and only nine markets rated as severely unaffordable.

BY THE NUMBERS

90.7% According to CoreLogic RP Data’s Pain and Gain report, 90.7% of resales in the September 2014 quarter recorded a gross profit. Of those, 30.1% sold for double the price they were originally bought Source: CoreLogic RP Data

PROPERTY INVESTORS SHOULD THINK OUTSIDE THE SQUARE Property investors should look beyond the beaten path when buying an investment property, according to new research, which found that popular tourist hubs don’t necessarily return the best rental yields or capital growth.

According to the research conducted by comparison website Finder.com. au, those buzzing hot spots don’t guarantee healthy returns, due to their already inflated price tags.

In New South Wales, the research revealed, Sydney’s CBD recorded the lowest house rental yield. The best house rental yield was recorded by the state’s fourth most-visited destination – Cessnock, located in the Hunter region north of Sydney.

The median house price in Sydney is $1.8 million and returns an average rental yield of 2.9%. In contrast, Cessnock’s median house price is $260,000, and investors can expect an average rental yield of 6.15%.

The highest three-year capital growth for houses was Adelaide’s CBD at 31.39%, with a median house price of $536,500. Alice Springs had the highest rental yield for houses at 7.49%, with a median house price of $404,500.

Michelle Hutchison, money expert at Finder.com.au, says the research shows that “there’s a big difference between the costs and projected returns” for the top tourist areas of Australia. Just because the area is a popular doesn’t mean it’s going to give you the best return.

AUSSIES AHEAD ON MORTGAGE PAYMENTS Australians are keeping well ahead of their mortgage repayments, utilising consistently low interest rates to pay loans off faster.

Results from Citibank’s 2014 financial survey show that a quarter of the population are mortgage-free homeowners, up 9% from 2007.

News Ltd spoke to Citibank’s head of banking solutions and wealth management, Dierdre Wroth, who noted that Australians are remaining financially astute since the global financial crisis, focussing on saving up or lowering debt.

Banks are still offering interest rates below 5%, which are predicted to hold throughout the new year.

News Ltd reports the “long stretch of low interest rates since the global financial crisis is expected to continue well into 2015”.

The study shows more are choosing to take up home loans – the number of people renting has fallen from 36% in 2007 to 24% last year.

Australian Finance Group figures show that on average, new mortgages in December amounted to $444,000.

“In NSW, the average size was the highest at $544,000, followed by Victoria ($439,000), WA ($428,000), NT ($375,000), Qld ($374,000) and SA ($349,000),” News Ltd reported.

BROKER BUSINESS PROFILE 20

brokernews.com.au

Shore Financial: W Young and hungry At two years old, Shore Financial has settled over $1bn in mortgages. But that’s just the beginning for this dynamite brokerage

hen you arrive at the office of Shore Financial in North Sydney, you walk straight into the ‘engine room’ – a bright, open-plan office buzzing with energy and filled with the sound of chatter; everyone is on the phone with clients.

One broker paces up and down the hall on his mobile phone, talking about financial goals.

Alex Nochar, managing director and co-founder of Shore Financial, says this is the normal, everyday office atmosphere.

“We are very proactive in our approach, which is a core part of our business. We’ve got a younger team that are a lot hungrier and are out there chasing business all the time.”

Shore Financial was co-founded by Alex Nochar and Theo Chambers in February 2013. In April that year they signed an exclusive partnership with Richardson & Wrench real estate group and by August 2013 they were settling over $60m in home loans.

Nochar and Chambers met when they worked together at Oxygen Home Loans. It was through Oxygen, which is owned by the McGrath real estate network, that they discovered a niche within real estate that they could tap into – and that is how Shore was born.

“A lot of brokers didn’t see the opportunity within the real estate market,” Chambers says. “We developed a formula where we could integrate a real estate business into our mortgage broking business. We are the first broker-owned business that aligned ourselves to a whole real estate network, rather than the other way around where a real estate network aligns itself to a broker or owns a broker network.”

Establishing partnerships with real estate agents is becoming a trend within the mortgage broking industry.

For brokers wanting to partner with their local real estate agent, Nochar says the biggest mistake you can make is trying to sell yourself.

BROKER BUSINESS PROFILE brokernews.com.au

“Creating a referral relationship with a real estate agency is about being front of market. It takes time.

You need to get out there and be proactive and work on that relationship and build it. People want to refer to people who they trust.

“Don’t try and sell yourself to them.

You don’t have to sell your value proposition; you just have to be good at what you do. A real estate agent doesn’t care about referrals or getting a kickback from referring to you.

What they care about the most is that when they pass their client on to you to get their finances sorted, that you are an extension of their business and that you are going to do a good job and be a good reflection of their business.”

INVESTING IN THE NEXT GENERATION

Another philosophy that Shore was founded upon was supporting and investing in young, new-to-industry brokers. Nochar and Chambers are open and fierce advocates of bringing up the next generation of brokers. The average age of their brokers is 26.

“Young people really suit this industry. When people want to buy a home and get a loan, they want

21

OUR BIGGEST DRIVER COMES DOWN TO ATTITUDE. YOU CAN TEACH ALMOST ANYTHING, BUT YOU HAVE TO HAVE THE RIGHT ATTITUDE TO LEARN AND SURVIVE IN THIS INDUSTRY – A LEX NOCHAR someone who is energetic and passionate and who wants to bend over backwards to offer them a good service,” Chambers says.

“A mature person who has been in the industry for 30 years won’t be as hungry or proactive; they can be a little more complacent. Older brokers also have more of a price on their time, whereas younger people want to really prove themselves. There is a ‘no all tools down at 5pm’ type of mentality – it is long hours and hard work. But they are in an industry where they are their own business, and the sky is the limit.”

Paris Galombik, an associate credit adviser at Shore, joined the team in April 2014 as a new-to-industry broker, coming from a background in accounting. The complete opposite of

complacent, Galombik says she loves going out there and getting in front of clients.

“The first thing I will do with a new client is go and meet them for coffee. Building a rapport is the most important thing, and it is so much easier to build that with someone face-to-face than over the phone or via email.

“At coffee, I will explain how the mortgage process works and how a mortgage broker works, and I will discuss their needs, interests and goals and my recommendations. But straight away I will always go and meet them; it breaks down the barriers and builds trust.

“After we have developed a plan and a strategy, I will be there and be contactable at all times throughout

BROKER BUSINESS PROFILE 22

the process. It’s an emotional time for people to buy a house, so having someone who is reliable and trustworthy is the most important thing, and part of our value proposition at Shore.”

When asked how Shore invested in her as a new-to-industry broker, Galombik says the “support at Shore Financial is the centre of its culture”.

That support, she says, is evident in how successful the business is when no one – except Nochar and Chambers – has joined the team with a background in mortgage broking.

Aside from the obvious time and money spent technically training and upskilling new brokers, Nochar and Chambers believe supporting new brokers is also about trusting them with responsibility within the business.

Thomas Hawley, an associate credit adviser at Shore who joined the team as a new-to-industry broker in April 2013 – just after its doors opened – says Shore’s flat management structure teaches new brokers not only how to take responsibility in a business, but also how to run a successful business.

“Shore has a very flat management structure, so everyone is equal and we are all encouraged to help each other.

Everyone can have a say and have an input into the business. This sort of free and lateral thinking isn’t something you can get everywhere else.

“When I joined Shore it had just

started up, and the opportunity of being on the ground level at a business and seeing it grow from the ground up was exciting. It has been great to be able to throw my hat in the ring and be able to have my input in the business growing and the business culture.”

brokernews.com.au

FAST FACTS Shore Financial opened its doors in February 2013

HITTING MILESTONES

This young, new brokerage reached a milestone at the end of 2014, writing over $1bn in mortgages that year.

The team is now hoping to crack $1.5bn by the end of 2015. These are huge milestones and huge aspirations for a brokerage that is only two years old, but they have invested heavily into their business efficiencies so they can focus on this growth.

Aleisha Kerslake, sales support manager and assistant to Nochar, says part of Shore’s investment in increasing efficiency means all brokers have a sales support assistant.

“The assistant will run all the back-office processes of the broker’s business while the broker is the face of the business. I am Alex’s assistant so I will help with all the behind-the-scenes processing, which frees him up to go out there and meet clients, chase leads and get referrals.

“I will gather supporting documents, work on compliance, communicate with the lenders, and lodge applications.

I also do a lot of correspondence with the client throughout the process.

FEB ’13 The team settled over $1bn in mortgages in 2014

$1BN

The average age of its brokers is 26

26 Y/O

brokernews.com.au

BROKER BUSINESS PROFILE 23

When property is your client’s greatest asset, we can be yours RP Data is now CoreLogic, the largest property data and analytics provider in the world. Our long history in Australia combined with managing virtually every mortgage-related valuation in the country makes our data deeper and our insights more enlightening. Worldwide, we help more than a million finance and property professionals grow their businesses.

Unleash the power of data.

Visit corelogic.com.au or call 1300 734 318.

“This makes it so much easier for a broker to be the face of the business and to get out there and meet with clients and generate leads and referrals. It is also a much better service if a client gets to meet the team who is working with them instead of just a person who is on the other end of the phone.”

Talking about their billion-dollar year, Nochar and Chambers say there are no secrets behind the company’s success, just long hours and hard work.

Although, no matter how long and hard the hours are, it is always important for brokers to take time out.

“We try to make sure everyone in our office keeps a healthy headspace. We did group training every Tuesday last year at 6am. Keeping fit and healthy is so important because you need a release. Broking can be a stressful job, so we wanted to make sure people had that release,” Chambers says.

“When you’re stressed you can easily fall into an unhealthy lifestyle. Even if it was only one training session a week, we wanted to make sure they had that release and motivation to stay healthy.

The interesting thing is that the day we train we are all so productive. There is always so much energy in the office on that day because everyone is feeling fresh. There is a quote of Alex’s that I love, and it is ‘You feel good in your clothes’ – which means you are feeling healthy; you are feeling confident.”

Group training sessions are also great for team bonding, which Nochar says is a hugely important part of the culture at Shore and a major reason why they can survive the long hours.

“We are big about making the company feel like a family. When you feel like you are a part of a family, you will enjoy coming into work every day and you will have the right attitude,” he says.

“Our biggest driver comes down to attitude. You can teach almost anything, but you have to have the right attitude to learn and survive in this industry.”

Reaching $1.5bn in mortgages isn’t the only thing these young guns have planned. A big recruitment drive, a diversification strategy and a new office are a few of things Nochar says we can expect from Shore over the coming year.

“We settle in the office next door very soon and we will be knocking the wall down, which will facilitate another 15–20 desks. There are already six brokers, an operations manager and other staff lined up waiting for those desks.

“We are also looking at diversifying into financial planning and conveyancing. Eventually, we will be looking to hire an accountant too.”

Plans to open a Brisbane branch are also in the works after securing a third real estate partnership. Shore Financial made its first move interstate last year when it secured its second exclusive real estate partnership with Fletchers Real Estate and opened a Melbourne office.

It may be lightning speed on the road to success for the team at Shore Financial, but Hawley sums them up perfectly when he says, “We’re just a bunch of mates.”

FINANCIAL SERVICES 24

brokernews.com.au

Firm highlights biggest risks of 2015

UNEMPLOYMENT SEES UNEXPECTED FALL

F

alling oil prices, geopolitical tensions and separatist movements are some of the biggest international risks facing businesses in 2015, according to a new study released

by Marsh.

The 2015 Political Risk Map and Report uses data from Business Monitor International to rank each country with an overall risk score based on political risk, macroeconomic risk and operational risk.

Australia ranks alongside the UK, Western Europe and the US as a very stable nation, with Canada and Scandinavia topping the list for stability.

Falling crude oil prices, which are approaching a six-year low, according to Reuters, will have a major effect on global stability and will be particularly damaging to oil-reliant nations, while geopolitical tensions in Europe, the Middle East and North Africa will also have an adverse effect.

Marsh’s Global Credit & Political Risk Practice leader, Evan Freely, stressed that the global outlook requires multinational businesses to have a thorough, all-encompassing risk profile.

“2015 is likely to bring a continuation of heightened political risk in many parts of the world. As such, multinational organizations need to stay ahead of the key issues impacting the countries and regions in which they operate and have broad, multi-hazard plans in place to protect their strategic interests.”

The report notes that the coming years represent a time of upheaval, and it highlighted 2017 as a year of change, thanks to a new US president taking office, a possible EU referendum in the UK, and elections in France, Germany and Australia.

BY THE NUMBERS

80%

Sydney and Melbourne accounted for 80% of national turnover for office sales in 2014 Source: CBRE

INDUSTRIAL SALES BUOY COMMERCIAL MARKET

Australia’s commercial property market rose to new heights in 2014, with the industrial market a key driver underpinning the $26.8bn in property sales during the year.

According to CBRE Research, commercial property sales increased 6% in 2014 from the year prior, with $14.5bn in office property and $7.3bn in retail assets transacting during the 12-month period.

Industrial sales accounted for $5bn worth of transactions, surpassing the previous record level of $4.9bn set in 2006 and representing a 55% jump on 2013’s total.

CBRE’s head of research for Australia, Stephen McNabb, attributed the strength of the market in 2014 to a flurry of transactions in Q4, as well as to continued growth in the industrial market.

“Industrial sales grew by 55% year-on-year, driven by a number of large portfolio sales,” he said.

“Activity is being prompted by divergence of opinion as to the degree to which yield compression can continue. Strong yield compression in the super prime sector (80–90bp in Sydney/Melbourne) through 2014 prompted selling from some owners, in an environment where new sources of demand are looking for income yield combined with an expectation that the risk of yield softening is low.”

Australia’s unemployment rate has unexpectedly – but welcomely – fallen to 6.1% in December, according to the latest ABS labour force figures.

Economists were predicting the unemployment rate would remain steady at its 12-year high of 6.3% in the lead-up to the release of the official figures; however, it dropped 0.1% from a downwardly revised 6.2% in November.

The number of jobs added in December was 37,400 – significantly higher than the market prediction of 5,000. Full-time jobs rose by 41,600, while part-time jobs fell by 4,100.

However, CommSec chief economist Craig James says before celebrating the surprise result it’s important to remember that the monthly data on employment and backward-looking.

“The outcomes reflect decisions made by businesses up to five to six months ago. So the fact that more than 80,000 jobs have been created in two months is encouraging; however, we have doubts about the strength of recent job gains. Still, the data does line up with taxation data, suggesting more people are in work and paying tax.”

James says forward-looking indicators are showing healthy signs of growth for the labour market, which is what really matters.

“More important for investors and policymakers is what lies ahead. Job vacancies are at two-year highs and job ads have lifted for seven straight months, so the outlook is positive.

“Add in the fact that home building is continuing to lift, with building approvals at record highs. And lower petrol prices will reduce business costs and lift spending – both positive for jobs,” he said.

a

CONSUMER CONFIDENCE CAUSE FOR CONCERN The ANZ consumer confidence index rose a mere 0.3% to 112 in the week ending 11 January. The ANZ figure follows another modest rise of 1.4% last week, but leaves confidence tracking just below the long-run average of 112.8.

ANZ chief economist Warren Hogan said the waning confidence levels are unusual for this time of year when there is usually a Christmas seasonal uplift.

“The lack of momentum in consumer confidence remains disappointing, especially given lower petrol prices and the usual seasonal uplift in January,” he said.

“Subdued levels of confidence, combined with soft retail sales in November and mixed anecdotes about December sales, suggest that households may be saving rather than spending the real income boost from lower petrol prices.”

ONE YEAR ON 26

ONE YEAR ON What a difference a year makes … or not. Australian Broker reflects on the punditry, news and trends that made headlines 12 months ago Australian Broker Online, January 2014

ASIC starts year with broker bans

ASIC kicked off 2014 by handing a three-year ban to a former Sydney broker and real estate agent after an investigation revealed he was involved in submitting false loan documents. The regulator claimed the number of credit providers it had been forced to take action against was “unacceptably high”.

What’s happened since?

This year began in much the same way, with ASIC announcing the arrest of two Melbourne brokers over an alleged $110m fraud scheme. This time, the regulator faced criticism from the media and politicians for the time it took to move against the alleged fraudsters. ASIC returned fire, saying criticisms of its handling of the case were “inaccurate and speculative”.

Major bank announces commission changes Westpac surprised the market a year ago when it put in place commission incentives that could see brokers earn up to 65bps of upfront commission. The incentives were based on volume and conversion hurdles. The bank’s broker head, Tony MacRae, said these volume and conversion targets were ones many brokers had already attained.

brokernews.com.au

The game-changing trends of 2015

T

he past year has been one of challenges and changes for the mortgage broking industry, and 2015 looks set to continue keeping brokers on their toes. Australian Broker TV recently spoke to Connective principal Mark Haron, who said he expected a few key issues to dominate discussion this year.

“One of the challenges that seems to have popped up rather rapidly in the last six to 12 months in mortgage broking has been very much around the digital space, especially in terms of data, data management and big data. I guess for the broking industry the challenge there is that we have a lot of that data; we control and manage that data but it’s all very fragmented. The major banks and other major players such as Google, PayPal and various other large entities have a better assimilation of that data,” he said.

Haron said the challenge for brokers would be to avoid being distracted by this trend. He said Connective would do work to help brokers better manage and utilise the data they have. Haron believes the game changers for the industry will be the users of this data.

“The opportunities are around how do brokers use the data they collect from their customers more effectively?” he said.

Haron said a more immediate challenge in 2015 could be changes to SMSF lending that may come out of the Murray Financial System Inquiry.

“The Murray report made some recommendations, some of them really curtailing the lending options in self-managed super funds. If that does play out, that will certainly change a lot of businesses within the mortgage broking space and the strategy of a lot of the banks in respect to what types of business they’re chasing,” he said.

What’s happened since?

Last year saw a raft of commission changes from lenders. In addition to Westpac’s proposition, NAB reinstated year-one trail commission, and its move was closely followed by Commonwealth Bank. Bankwest, AMP and ME Bank also announced commission incentives in a bid to grab more broker market share.

For the full interview, head to www.brokernews.com.au/tv

FORUM 27

brokernews.com.au

LOTS OF EXPLAINING TO DO

ASIC’s handling of a fraud case saw it come under fire, but one commenter argued that the watchdog shouldn’t be the only target of criticism.

ASIC called on the carpet ASIC has faced criticism over its handling of a fraud case

A

SIC recently faced the ire of Labor senator Sam Dastyari for its handling of an alleged $110m mortgage fraud case. Dastyari accused the regulator of failing in its duty to weed dodgy operators out of the industry.

The Sage accused Dastyari of using his criticisms to cover his own party’s failure.

“The alleged fraud occurred under Labor’s watch, so Dastyari is doing what all good politicians do and deflecting attention by blaming someone else.”

No Bite, however, said Dastyari was spot on in his attack on the regulator.

“Dastyari was right! More politicians should follow his lead and find out what ASIC has not been doing that it should. ASIC’s lack of regulation and prosecution has allowed Australia to become a haven for white collar crime as fraud goes unpunished. ASIC’s ‘no action’ policy is the fundamental reason that there is no consumer or business confidence in the credit market anymore. If any of you brokers out there are wondering why so few people and businesses are borrowing, it’s because so many have been burnt and ASIC

has done nothing to lock up the offenders. People just don’t trust the lending industry at all.”

Goodo said ASIC had fallen down in its duty, but more attention should be paid to its dealings with lenders.

“If you want to be critical of ASIC, then let’s point the finger where the criticism belongs! Why has ASIC not investigated the lenders that allowed a systemic failure of the system to occur for three years totalling $110m?

Why is ASIC not forcing these lenders to address their failures?

Are any of the lenders or their staff complicit in this matter?

What damages have been caused to the clients and what redress do they have for the systemic failures of the lenders’ compliance checking? As per normal, ASIC stops its investigation too short and is just after the sensational headline to justify its own existence!”

Johnno argued that fraud ran the risk of creating an unhealthy property market.

“It is these frauds which continue to feed the lust for property and the exponential rise in the cost of housing. If house prices continue up then there won’t be any problems and most of the fraudulent activity will go unnoticed. If they fall, it will just be another Ponzi scheme that the banks will be bailed out from.”

And Incognito cheekily recommended that ASIC call for the aid of forum commenters.

“ASIC should employ brokers to help weed out the shonks. We seem to have plenty of advice for them. ASIC had its funding cut by $120m over five years in the last budget, which seems illogical.”

“True, ASIC did take time to act, but the question also has to be asked: How long ago did the lenders know about these two? Why weren’t their accreditations cancelled?

Were they reported to their aggregator and the MFAA/ FBAA? We heard last year about a broker whose accreditation was cancelled without any explanation by a major bank even though he was not accused of any wrong doing and claimed he had not committed any and yet these two have been known to be crooked for some time and yet one of them was still allowed to operate as a broker up till last Tuesday. There appears to be a lot of explaining to be done here.”

Tim on 9/01/2015 at 10:31AM

FRANCHISE SETS SIGHTS ON $2BN Aussie Home Loans recently hit a new record for settlements, at just shy of $1.8bn for the month of December.

Gary Busey on 15/01/2015 at 12:49PM “The money to be made in home loans is staggering. Do the maths on what Aussie must be making and they are getting closer and closer to the $9bn a year CBA is making.

I am getting severely ripped off settling $4m a month and getting paid $75k a year from my greedy employer! Aussie franchise here I come!”

Mitch on 14/01/2015 at 9:08AM “Banger result, and finally a major player actually reporting on settlements!

Aggregators take note.”

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

THE COALFACE 28

brokernews.com.au

Bringing home the big deals Savvy broker Jayden Vecchio has settled a $77m commercial deal within two years of starting out

A

young QLD broker has already been making waves during his brief time in the industry, establishing an internationally applauded brokerage and closing rare deals within the commercial finance sphere.

Jayden Vecchio, director of Discovery Finance Group in Brisbane, took his trove of experience with him as he made the leap from banking to brokering.

“I worked with Bankwest for about three and a half years in private and commercial banking,” he says. “Prior to that, I was with Macquarie Bank in

THE ONLY THING THAT CAN LIMIT YOU IS YOURSELF, SO SET YOUR TARGETS PRETTY HIGH AND GO FOR IT

their wholesale funding team – so funding mortgage managers and more in the product side of things, but still in mortgages. I always wanted to work for myself and really liked the industry.

There’s lots of opportunity for everyone, and it was a logical next step.”

Vecchio enjoys the potential in broking and the ‘sky’s the limit’ factor, something he’s certainly proved in quick time. Starting his own business from the get go, rather than working for an existing brokerage, he has continued to win awards since its first year – among them, the MPA Top 10 Commercial Brokers of 2014, the Broker Partner of the Year at the Vow Financial Altitude Awards 2014 and the Young Gun of the Year at the Vow National Conference in Vietnam last year.

“You get out what you put in,” Vecchio says modestly. “Getting to where I want to be, running my own business and creating a brand from nothing is pretty exciting. There are really no limits, and it’s quite a dynamic industry.”

Discovery Finance Group’s team of four specialises in residential and commercial loans, a space Vecchio decided held the most opportunity based on his skill set. He’s also delved into the development finance side, taking advantage of Brisbane’s construction boom and focussing on multi-residential dwellings with 10 to 100 units in a complex.

When asked what the key is to Discovery Finance Group rolling down awards lane, he says it is just that – specialisation. But having the contacts within each niche and outstanding customer service are also important, he adds – things like returning client calls within two business hours, clear communication and always keeping clients in the loop. “[Having a niche] sets you apart; otherwise you’re relying on the banks to provide you differentiations in their rates and products or whatever else.

Whereas this way, you’ve got something you can actually provide the clients – insights into the industry, even contacts within the sectors that you specialise in that other brokers might not have. I suppose it’s just a different way of adding value to your client.”

One of Vecchio’s biggest achieve­ ments last year was settling his largest deal with BankWest.

“It was a $77 million deal across about eight commercial assets. I suppose like you do for a residential deal, you tender it across a couple of

different banks and go back to your client with a similar kind of process.

But it’s just harder to find those sorts of deals. It was exciting but tough work; we were working on that one for about eight months to get it done.”

Although Vecchio says traditional word of mouth is still a great way to make contacts, he stresses the importance of having an effective digital strategy and utilising social media outlets best suited to your client base.

“I think it depends on your business. For me in commercial, a lot of my clients might be in their 40s, 50s or 60s and not necessarily spend hours on end on Facebook and want to even promote that sort of stuff on there. So for me, it doesn’t work. But for a home loan, if you’ve got a first home buyer who just bought a property and wants to tell all their friends, it’s probably terrific.

“When I was at uni, I studied IT and business, so I’m pretty well across it and did most of [the website] myself,” he continues, “but I think you have to have a digital strategy in your business these days; otherwise you’ll get left behind. The banks are spending a lot of money on this, and it’s the way the world is going.”

In Discovery Finance’s first year, Vecchio set himself a personal target of settling $60m in nine months and hit it. Last year, he aimed to reach $150m in settlements – and you guessed it, he hit it. For new brokers in the process of deciding an achievable starting target, Vecchio recommends doing your research.

“You can look at what other people have done in the industry, which always helps – the magazines are interesting because it’s a reasonably transparent industry in terms of the volumes people write and what’s achievable. So you can always use that as a bit of a litmus test. It’s the kind of industry where you can call up people, and they’ll be happy to have a chat.

I’ve spoken to other brokers across different states, and they’re all very open and friendly. The only thing that can limit you is yourself, so set your targets pretty high and go for it.”

On his plans for Discovery Finance Group in 2015, Vecchio says they’re happy to keep doing what they’ve been doing and perhaps bring another broker on board.

“That’s probably the secret as well you know – once you have a winning formula, just stick to it; you don’t need to go too crazy!”

CAUGHT ON CAMERA 29

brokernews.com.au

IN FOCUS

T

he FBAA recently held its annual conference at Sea World on the Gold Coast. The conference featured wellknown speakers such as Martin Grunstein and Deena Janes as well as international guest speaker Dr Koichi Saito.

INSIDER 30

brokernews.com.au

No booze, you lose New research says non-drinkers may feel like outsiders at work functions

T

he mortgage broking industry likes a good party, but for those who choose not to imbibe, things can get awkward.

New research has warned employers to be aware of the pressure some employees feel when attending work parties, as studies show teetotal staff are more likely to deceive their colleagues rather than come clean.

“Drinking can be a big part of workplace culture, and being viewed as an outsider for any reason can hurt you professionally,” said the study’s lead author, Dr Lynsey Romo of North Carolina State University.

Research showed that non-drinkers resort to a variety of little white lies to hide the fact that they don’t drink, often out of fear that they’d be seen as judgmental by their co-workers.

The study found that non-drinkers developed a variety of strategies to attend social events without making themselves, their co-workers or their clients feel ‘uncomfortable’.

From volunteering as designated driver to pretending to be on a diet, the survey found that many employees avoid admitting they’re tee­totallers at all costs.

According to Romo, one professional who didn’t drink because he wanted to set a good example for his children told co-workers that he didn’t drink because he was trying to lose weight, while others bought alcoholic drinks but didn’t consume them.

If colleagues commented on an employee’s choice not to drink, non-drinkers often tried to prove they weren’t judgmental by offering to be the designated driver or buying a round of drinks.

Researchers say the study proves many employees feel under pressure to conform to social norms in the workplace and say HR departments who worry about people over-drinking at parties should also consider the needs of employees who don’t want to drink.

“If employers want their employees to achieve their full potential, they need to foster an environment that encourages their employees to be themselves,” said Dr Roma.

She suggests employers make sure non-alcoholic beverages are available at happy hours and host social activities that don’t centre on drinking.

MILLIONAIRE’S LAMENT A Hong Kong-based millionaire was absolutely horrified a few years ago when he learned that his Malibu mansion was not 15,000 square feet like he thought when he paid $12.25 million in cash for it – so horrified, in fact, that he’s taking his agent and the brokerage to court. Again.

Hiroshi Horiike purchased the property – which he believed was the largest in Malibu – in 2007 after dismissing more than 80 other inferior properties.

In reality, though, the oceanfront estate measures just 10,000 square feet – how embarrassing! Horiike took the agent – Realtor to the stars Chris Cortazzo – and his brokerage to court in 2012. He lost that case, but has successfully appealed. He’s asking for $5 million in damages.

Here’s the ironic part: Because Horiike, like a majority of Malibu homeowners, paid for his home in cash, no bank-ordered appraisal, which would have caught the discrepancy in square footage, was completed. If only Horiike wasn’t so rich, maybe then his heart wouldn’t have been broken by this house of lies. Yes, he’s absolutely torn apart over those 5,000 square feet. “I don’t love my house,” he says. “It has become a bad dream. It has broken my heart and broke my dream about American people. Before, I thought everything here is beautiful and perfect.”

THE MARKET IS A DRUNKEN PSYCHO When it comes to investing, billionaire Warren Buffett knows a thing or two. That’s why when he says the stock market is like an imaginary person who is “kind of a drunken psycho,” you should take his word for it.

The owner of Berkshire Hathaway sat down last month with Quicken Loans chairman and founder Dan Gilbert, along with president and chief marketing officer Jay Farner, for an hour-long chat on investing best practices.

In the interview, Buffett said, “This imaginary person out there – Mr Market – he’s kind of a drunken psycho.

Some days he gets very enthused; some days he gets very depressed. And when he get really enthused, you sell to him, and if he gets depressed, you buy from him. There’s no moral taint attached to that.”

Buffett owns Berkshire Hathaway, which runs HomeServices of America and the new Berkshire Hathaway HomeServices residential real estate brand.

DIRECTORY brokernews.com.au

31