Australian Broker 13.06

NEWS ASIC targets independence claims The regulator takes businesses to task P6

ANALYSIS The affordability crisis Why Sydney and Melbourne prices need to be addressed P12

BEST PRACTICE Holding onto Gen Y Why millennial talent leaves P18

MARCH 2016 ISSUE 13.6

SPECIAL REPORT Navigating the SMSF market Top tips for self-managed super borrowing P20

MARKET TALK Offshore pundits off base Ignoring overseas property doomsayers P22

STEVEN DEGETTO Suncorp’s head of intermediaries on the importance of transparency P16

FINANCIAL SERVICES A job seeker’s market The job market for financial services looks bright P24

BORROWER SNAPSHOT 2

NEWS

ASSOCIATIONS

REGULATION

LENDERS

Beware NCCP review P4

Don’t blame regulators for tight US credit P6

Value drop for home loans P8

BROKERNEWS.COM.AU

LAND GETTING DEARER

Vacant land prices across capitals

EDITORIAL

SALES & MARKETING

Editor Adam Smith

Sales Manager Simon Kerslake

News Editor Julia Corderoy Journalist Maya Breen Production Editors Roslyn Meredith, Moira Daniels

$230,000 2.9% Brisbane

Sydney

$299,000 10.7%

Melbourne

$410,000 20.2%

Design Manager Daniel Williams

Chief Operating Officer George Walmsley

Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

EDITORIAL ENQUIRIES

Hobart

$265,000 23.5%

$150,000 20% 12-month change

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tel: +61 2 8O11 4992 fax: +61 2 9439 4599 subscriptions@keymedia.com.au

ADVERTISING ENQUIRIES

Source: CoreLogic RP Data

INVESTORS MOVING AWAY FROM RESIDENTIAL? While Sydney’s residential real estate market may have been the darling of property investors in recent years, the head of one real estate agency believes another section of the city’s property market is set to shine.

Malcolm Gunning, principal at Gunning Real Estate, believes suburban commercial and retail properties are soon to become the target of choice for investors in Sydney.

“These are not the fancy properties you see in the property sections; they are solid commercial and retail properties that give good return on investment,” Gunning said.

“We believe properties like this will continue to see a lot of attention throughout 2016 and believe this is a direct flow-on from the changes to zoning, and banks’ preference for lending more to commercial investors,

Managing Director Justin Kennedy

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

$205,000 2.5%

Median price

CORPORATE Chief Executive Officer Mike Shipley

Traffic Coordinator Lou Gonzales Adelaide

Marketing and Communications Manager Lisa Narroway

ART & PRODUCTION

Designer Lea Valenzuela

Perth

Account Manager Rajan Khatak

in particular for property within Sydney’s 20km ring,” he said.

The zoning changes, which allow for greater mixed use in areas that have traditionally been commercial or retail only, will provide investors with better returns and improved development options.

“These properties have been a sleeper in comparison to residential properties, and their appeal has activated due to rezoning of areas like Rockdale, Kingsgrove, Revesby and Bankstown to B4 Mixed Use that allows retail, office and residential development.

As a result, sites have been amalgamated for groundfloor retail business and upper-level residential,” Gunning said.

“Buyers are looking for properties with a 4% yield and potential growth.”

Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak +61 2 8437 4772 rajan.khatak@keymedia.com.au Key Media Pty Ltd Regional head office, Level 1O, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, London, Manila, Toronto 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.

ASSOCIATION HAPPENINGS 4

DATES TO WATCH

NCCP REVIEW COULD BE PANDORA’S BOX

Australian Broker recently ignited a firestorm of debate with an online poll asking if it was time for the NCCP to be reviewed. By an overwhelming margin (82%), brokers said the NCCP needed to undergo further scrutiny.

The poll came following an open letter from former Australian Institute of Professional Brokers head Maria

Rigoni demanding a “frank conversation” about the NCCP Act and the role of the regulators.

But another association head, the FBAA’s Peter White, has said a review of the Act could carry unintended consequences.

“The thing that would always concern me if we got to bullish on this is caveat emptor – or buyer beware. The screws could get tighter. You don’t want to turn around and do a big call to action and then for things to get worse,” White said.

According to White, the NCCP is already being reviewed on a regular basis – including the forthcoming interest-only and commission reviews – and White says he does agree with brokers that regular and thorough reviews do need to happen.

“There have been multiple reports that have been reviews on the NCCP which have already happened.

It doesn’t necessarily mean those reviews have been focused where we believe they should be focused – and that’s why I am saying I agree there should be reviews done but the big questions become what and then why.”

WHAT THEY SAID...

Peter Kell “Consumers must not be misled into believing that an adviser is independent and free from influence by commissions or other benefits or associations when that is not the case” P6

A rundown of the next fortnight’s events

MARCH

30 What: Social Media for Lead Generation webinar Where: Online The particulars: The MFAA’s digital and social media manager, Emily Watson, will team up with Suncorp’s WA BDM, Dino Pacella, to offer practical tips on the best use of social media for growing your business.

MARCH

John Flavell “If the issue of housing affordability is to be properly addressed, the government needs to take a more consistent and efficient approach to planning and investment in infrastructure” P12

John McGrath “With continued population growth and a low interest rate environment, I believe all the factors that support a healthy property market are well and truly in place” P22

30 What: Gender Equality in Super Where: State Library of Victoria, Melbourne The particulars: This Women in Finance event will explore the challenges of the gender gap in super, as well as ways to strengthen the options for women planning for retirement.

APRIL

5 What: FBAA Geelong Roundtable Where: TBA Geelong The particulars: New FBAA Victorian state president Brendon Kurtz, along with the new Victorian state council members, will offer updates on the association’s work for brokers, as well as industry matters impacting on brokers’ businesses.

REGULATORY ROUNDUP 6

WORLD NEWS

THE SQUEAKY WHEEL

Complaints to the Financial Ombudsman Service (Oct–Dec 2015)

Life insurance 308 4.0%

Investments 339 4.4%

Outside our jurisdiction 33 0.4%

Deposit-taking 670 8.8%

Traditional trustee services 9 0.1%

Payment systems 652 8.5%

UNITED STATES OF AMERICA

116 1.5%

2,214 29%

MORTGAGE CREDIT STILL TOO TIGHT, SAYS REGULATOR Mortgage credit in the United States is still too tight, according to the head of the Consumer Financial Protection Bureau (CFPB) – but don’t blame regulations.

In a speech for the Consumer Bankers Association, CFPB director Richard Cordray said that, while credit was too tight, concerns that the agency’s ‘qualified mortgage’ rule would be too onerous have proven unfounded.

“Credit is still too tight, at least in my view, but we can now look in the rear-view mirror and see that some of the undue fears people had about legal liability under the QM rule, or market paralysis due to streamlining the mortgage disclosure forms, can be put in healthier perspective,” Cordray said.

“There is ample opportunity in the mortgage market as it continues to heal, and you should be doing what you do best: serving your customers through great deals and great customer service.

Homeownership still remains the most effective engine of wealth accumulation for the American middle class, and you are the ones who are making that happen and rebuilding a key marketplace that failed this country so brutally less than a decade ago.”

Not yet determined

General insurance Credit 3,300 43.2% NUMBER

Total

%

7,641 100%

Source: FOS

ASIC TARGETS AFS LICENSEES OVER ‘INDEPENDENCE’ CLAIMS One of the value propositions of mortgage brokers is their independent advice, but ASIC has been wary of financial service providers touting this particular claim. To that end, the regulator has said it is targeting financial services licensees who use the term ‘independent’.

ASIC said Wilson HTM Ltd, iSelect Life Pty Ltd and Citywide Insurance Brokers and Financial Planners Pty Ltd had taken steps to remove or amend claims made about the independence of their services following concerns raised by ASIC. ASIC said that under the Corporations Act a person who carries a financial services business cannot use terms such as ‘independent’,

‘impartial’ or ‘unbiased’ in relation to the business or service provided unless they receive no commissions, volume-based payments or any other gifts or benefits, and operate without any conflict of interest.

“The independence of financial system gatekeepers such as financial advisers is an important issue for consumers and investors and may sway their decisions about their investments or their choice of adviser. Consumers must not be misled into believing that an adviser is independent and free from influence by commissions or other benefits or associations when that is not the case,” ASIC deputy chair Peter Kell said.

LENDER UPDATE 8

ww FACT FAST

LENDER ROUNDUP

A rundown of the fortnight’s policy and price changes

PRODUCT

71.8%

Advantedge Has reduced rates by up to 23 basis points on interest-only investor and owner-occupier loans available under the brands of its private-label aggregation partners. The rate reduction was made effective on Saturday 5 March, and comes as Advantedge restructures its pricing by loan purpose (investor and owner-occupier) and repayment type (principal and interest and interest only). Under the new structure, owner-occupier interest-only variable rates will be reduced by up to 0.23%, owner-occupier interest-only fixed rates will be cut by 0.09%, and investor interestonly variable rates will be reduced by up to 0.03%.

Major bank home loan market share for February 2016

Suncorp Bank Has reduced its three-year fixed rate to 3.99% for both owner-occupier and investment loans.

The new rate will be available with the lender’s Home Package Plus product, for new owner-occupier or investment loans of at least $150,000 with maximum LVR of 90%.

POLICY

FALL IN VALUE OF HOME LOANS New ABS figures show the value of investor loans fell 1.6% to $11.36bn in January, while the value of owner-occupier loans fell 4.3% to $31.89 bn.

The value of investment loans over January is now well below the $14bn peak seen in April 2015 and is a significant 14.8% lower than it was in January 2015. Over the same 12-month period, the value of loans to owner-occupiers has increased by 15.9%.

Housing Industry Association economist Geordan Murray said the fall in value of investment loans was driven by a decline in investors financing the purchase of existing dwellings.

“Investor lending continued to ease back after the strong growth in that part of the market over the last few years. The decline in the total value of lending to investors was driven by a fall in lending to those purchasing established dwellings,” Murray said.

Savanth Sebastian, economist at Commonwealth Bank, said the fall in investor lending had likely been prompted by a number of factors and could indicate that property has lost some of the shine that made it a popular investment target in recent years.

“The run-up in house prices, tighter home lending criteria by the banking sector, and recent consolidation in the housing sector are prompting more households to focus on alternative asset classes to property,” Sebastian said.

Source: AFG

Suncorp Bank Effective 7 March 2016, Suncorp Bank has announced changes to its Home Package Plus variable product and Back to Basics. The Home Package Plus owner-occupier standard variable rate has been changed to 4.15% for loans of $150,000 or more with a maximum LVR of 90%.

The investment standard variable rate for the Home Package Plus product has been changed to 4.42%.

The Back to Basics investment loan will now have an interest rate of 4.23% for loans of $150,000 or more with a maximum LVR of 90%.

BY THE NUMBERS

$35bn According to an ABC report, in the past six months more than $35bn worth of investor loans have been reclassified as owner-occupier loans, including another $1.4bn in January Source: ABC

10

BUSINESS INTELLIGENCE MANAGING THROUGH TOUGH TIMES

Four business lessons drawn from riots, robberies and mob threats BUSINESS CAN lead to cutthroat competition – in more ways than one – but Tom Nix learned that the darkest moments also can lead to the greatest triumphs.

“It’s the worst experiences that sometimes teach us the most important lessons,” says Nix, a successful businessman and author of “Nixland: My Wild Ride in the Inner City Check Cashing Industry” (nixland.net).

The incredible rise of his multimilliondollar enterprise, Nix Check Cashing, is a case in point. Nix encountered turbulent times in the inner city of Los Angeles as he built his company into a trusted institution among underserved communities.

He and his employees faced harrowing experiences, such as armed robberies and threats from the mob, which hoped to block some of his expansion plans.

The 1992 riots that erupted after a jury acquitted police officers in the beating of Rodney King proved especially distressing. Many businesses were looted or burned to the ground, and Nix scrambled to protect his chequecashing locations.

He was gratified to learn that loyal customers prevented some branches from being torched.

“We even had a gang member call us,” Nix says.

“He said he had always been treated with respect at Nix, and his gang decided not to burn Nix because we were part of the community.”

Nix says his experiences taught him valuable lessons that relate both to business and life, such as: Take responsibility. This applies to everything that happens, including things

you can’t control. Once when an economic downturn left him unable to pay bills, Nix contacted each creditor to explain his predicament and work out a plan. That upfront approach helped the business avoid bankruptcy.

Never play the victim role or blame game. Avoid replaying misfortunes over and over in your mind. Accept setbacks gracefully and concentrate on getting back on track. In the 1990s, a business deal that went awry nearly forced Nix to sell his company, but he focused on solving the problem and persevered.

Be courageous. The most debilitating human emotion is fear. Learn to keep it in perspective, minimise it when applicable and harness it to your benefit when need be. Nix says standing up to bullies as a child set the stage for standing up to the mob.

Maintain integrity. Operating with fair play and compassion is important in building trust. “The way community members protected some of our branches during the riots was a reflection of this,” Nix says.

“Treating people fairly and supporting community programs paid off.”

Good times may be more enjoyable, but challenging times provide more opportunity for growth, he says.

“Realise that bad people, tough times and mistakes are your teachers,” Nix says. “Always ask yourself, ‘What do I need to do to capitalise on these events?’ ”

AGILITY IN CHALLENGING TIMES Leadership agility is the key to navigating difficult times in business. According to new research by Development Dimensions International (DDI), the benefits of having agile leaders include shorter times to high performance among new leaders, faster company growth and improved financial performance.

However, the research has also shown that just 18% of leaders are high in agility.

Because of the importance of having agile leaders within today’s organisations, DDI have outlined precisely what makes an agile leader: the capability to meet VUCA (volatile, uncertain, complex and ambiguous) challenges, and critical skills.

The capability to meet VUCA challenges involves: • Anticipating and reacting to the nature and speed of change • Acting decisively without always having clear direction and certainty • Navigating through complexity, chaos and confusion • Maintaining effectiveness despite constant surprises and a lack of predictability The critical skills that are required alongside these capabilities are: • Communicating and interacting with others • Managing and successfully introducing change • Inspiring others toward a challenging future vision • Fostering employee creativity and innovation DDI also outlined some key tips for employers looking to improve their existing leaders’ agility.

• If agility is key to the future of your company, hire and promote leaders high in agility.

• Avoid the agility mismatch; claiming to be agile but failing to back it up with decisive action and rapid decisions will push your most agility-capable leaders elsewhere.

• Some agility skills can be learned.

One is learning how to introduce and manage constant change.

Make sure your leaders are “change masters”.

12

ANALYSIS INFRASTRUCTURE KEY TO AFFORDABILITY The CEO of Mortgage Choice, John Flavell, has publicly backed the Australian Population Research Institute’s report on housing affordability in Sydney and Melbourne. He says more needs to be done from a state planning perspective to ensure the right type of properties are being built, particularly in regard to transport.

“In Australia, we are wedded to the idea of the family home being three bedrooms and several bathrooms all sitting on its own block of land.

For supply to keep pace with demand, what we need to see is a huge influx of three-bedroom homes with their own backyards.

“Of course, we cannot manufacture more open space in the inner-city suburbs. As such, any houses currently being built are constructed on the outer fringes – far from the city and where public transport linkages aren’t great.

“Our transportation systems do not provide quick and easy access to jobs and services in the city. If the issue of housing affordability is to be properly addressed, the government needs to take a more consistent and efficient approach to planning and investment in infrastructure.

Rail links in particular need to be given special attention so that people can easily access jobs and services.”

However, unlike the report’s dire prediction of plummeting house prices, Flavell says we are unlikely to see a widespread market collapse.

“But while I agree with the report in so far as I believe the right type of supply isn’t being built, I do not agree that property prices will collapse as a result.

“If we were going to see a massive slump in house prices, not only would we need everybody to sell their properties at the same time, but we would need to see a significant oversupply of properties. I do not expect this to happen.”

TIME OF RECKONI SYDNEY AND MELBOURNE’S AFFORDABILITY CRISIS A new research report by the Australian Population Research Institute has warned “a time of reckoning” approaches if housing affordability issues in Sydney and Melbourne are not properly addressed A REPORT by the Australian Population Research Institute titled Sydney and Melbourne’s Housing Affordability Crisis: No End in Sight claims low interest rates and high migration have sent demand and prices surging in the two Eastern seaboard cities, but the government is failing to meet demand with relevant, family-friendly supply.

“The central hypothesis in the current report is that the housing affordability crisis is going to get worse because the planning authorities in NSW and Victoria are ignoring the need for family friendly housing,” stated the report authored by Bob Birrell and David McCloskey of the Centre for Population and Urban Research at

Monash University.

“Instead, through their zoning and planning guidelines they have facilitated a massive increase in the stock of high-rise apartments.”

A serious problem According to the 12th Annual International Demographia International Housing Affordability Survey, Sydney and Melbourne are among the most unaffordable locations in the world. By the third quarter of 2015, the median price for a house in Sydney was 12.2 times the median household income and in Melbourne it was 9.7 times the median income.

Out of the 86 major markets surveyed, Sydney was the second least affordable

location and Melbourne was the fourth least affordable.

According to Birrell and McCloskey, Sydney and Melbourne are in an asset price bubble facilitated by low interest rates and increasing overseas migration.

“Low interest rates have made investors desperate to find alternative higheryielding assets. In this context the prospect of capital gains from the purchase of housing has been irresistible. The banks have competed amongst each other to deliver the required mortgage-based loans.

“Finally the Commonwealth Government has provided an implied guarantee that demand for housing will continue strongly by promising to maintain net

DID YOU KNOW?

12.2

The median house price in Sydney is 12.2 times the median income

Sydney

13

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in Sydney and Melbourne, according to the report, but this number will increase to around 22,000 in both cities in 2016 and in 2017.

ING:

overseas migration near the record high level attained during the resources investment boom from 2003 to 2012.”

The latest population projections by the Victorian and NSW Governments, according to the report, assume that high net overseas migration of 240,000 per year will continue for decades and, as a consequence, Melbourne and Sydney will both reach between six and seven million by 2050.

However, instead of responding to rising demand with more supply, the report claims the government has had “its head in the sand”.

By failing to encourage the purchase of new housing to drive supply and by failing to invest in the supply of larger, family-friendly homes, the government has left Sydney and Melbourne with a boom in high-rise apartments that are “largely irrelevant” to resolving the housing affordability crisis.

“To the extent the Commonwealth

9.7

Government’s policies have promoted dwelling construction it has mainly been in the form of high-rise apartments.

“These planning policies are based on the assumption that most of the demand for new housing in Sydney and Melbourne will come from one- and two-person households who will welcome the new opportunities to locate in inner city apartments or infill in established suburbia.

“These assumptions are wrong. Most of the growth in the need for extra dwellings in Sydney and Melbourne will come from young resident households entering the family formation phase of their lives and from new migrant households who for the most part will also be entering the same phase. Their priority is family friendly two or three bedroom dwellings with some protected external space.”

In 2014 and 2015, there were 13,000 to 14,000 highrise apartment completions

A time of reckoning The impending glut of high-rise apartments will disrupt the housing market and have profound wider economic implications, according to Birrell and McCloskey, which will come in the form of a crisis for off-the-plan investment.

When prices drop due to the surplus of “largely irrelevant” high-rise apartments, it will burst the property bubble, cripple the Australian economy jacked up on $1.4trn worth of mortgage debt, and undermine the strength of and reliance on the housing market.

“While we don’t want to put a date on it, the fact is that thousands of off-the-plan investors will soon be confronted with a market replete with surplus apartments,” the report states.

“When it does, it will create a wave of uncertainty that will ripple across the residential property industry. As we have argued, the investor housing bubble has been driven by the expectation of endless increases in the capital value of dwellings. A downturn in the high-rise apartment market will undermine this assumption and in so doing is likely to take some of the heat out of the detached housing market.”

When this happens, according to Birrell and McCloskey, it will remove a crucial prop to the housing bubble – the belief that house prices can only go up in value.

Melbourne

The median house price in Melbourne is 9.7 times the median income Source: International Demographia International Housing Affordability Survey

14

ANALYSIS TIME FOR A FRANK CONVERSATION A Melbourne-based broker and former CEO of the Australian Institute of Professional Brokers penned an open letter to the regulators, government and central bank demanding a “frank conversation” about the NCCP. In the open letter, Maria Rigoni, founder and owner of Universal Wealth Management, said ASIC’s recent crackdown on interest-only lending was the last straw for her, especially when she was not able to refinance a responsible client into an interest-only loan for their benefit.

“Lenders have said ASIC has approached them and ASIC’s opinion is if people want interest-only loans to keep their repayments low then the lender should not accommodate them. The client’s requirements and objectives which make [an interest-only] loan a ‘not unsuitable’ loan have been ignored. ASIC have turned around and said it should be an unsuitable loan,” she told Australian Broker.

“ASIC are just open-slather going to lenders and saying this is what we believe and it is just nonsense. My client now can’t refinance from his current lender to a new lender at a cheaper interest rate. His not unsuitable loan has been turned into an unsuitable loan, but where does he go to get that fixed?”

According to Rigoni, this illustrates the lack of protection the current consumer protection laws offer and the need for a complete overhaul of the NCCP. “The NCCP is nonsensical consumer protection. The consumer protection laws are not protecting the consumer and they are not protecting me either.

“What I would like to see is a total overhaul of the NCCP. The whole focus of the NCCP does not give any power for a borrower to be a responsible borrower. It is all about the lender having the power and control.”

TIME FOR THE NCCP TO BE REVIEWED?

After seven years and a lot of change in the industry, is it time for the NCCP to be reviewed?

THE CORPORATE regulator, ASIC, has recently wrapped up its initial industry roundtables to consult on its interest-only lending and remuneration reviews into the mortgage broking sector. But as the regulator gears up to review brokers, does the regulation need a review itself? In a recent online poll conducted

by Australian Broker, 83% of brokers said they agreed it is time for the National Consumer Credit Protection Act (NCCP) to be reviewed.

A case for review Peter White, the CEO of the FBAA, says he is not surprised that so many brokers are demanding a review. According to White, the NCCP is already being reviewed on a regular basis – including the forthcoming interestonly and commission reviews – but he did admit that better focused reviews do need to happen.

“There have been multiple reports that have been reviews on the NCCP which have already happened. It doesn’t necessarily mean those reviews have been focused where we believe they should be focused – and that’s why I am saying I agree there should be

not replicating processes unnecessarily. By doing so we are creating a barrier to write business.

“That replication of data or unnecessary replication of information that really doesn’t make sense in the process are things we need to look closer at and work with the regulator to

something else or that the lender goes back and says we need to do this.

“It should be one or the other does it, or one does it to a certain point and the other does a complementary check that doesn’t impede on the actual borrower because that becomes

“In essence the act isn’t the issue, there just needs to be clarity around a lot of things. There needs to be clarity about where responsibility starts and stops” Rael Bricker, House & Home Loans reviews done but the big questions become what and then why.”

When asked if there were specific areas the FBAA would like to see reviewed, White said he would like to see the duplication of processes removed.

“The only thing we need to make sure is we are

remove, because that will create greater fluidity in the marketplace.

“You have got to have that interaction but there is nothing worse than sitting down with a person and going through a whole ream of paper to find out you have to go back again and get

an annoyance and a frustration.”

Rael Bricker, a broker and managing director of House & Home Loans, says he thinks the NCCP is still relevant overall, however the problems come down to interpretation.

“I think the majority of brokers think it is an

15

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interpretation thing,” Bricker told Australian Broker.

“Most brokers’ understanding of the NCCP is driven by their aggregator. Given the fact that a couple of the aggregators are big bank owned, culturally they have gone the big bank over-compliance route.

However, some of the smaller, more nimble aggregators have taken a more pragmatic approach to compliance.

“I think you will probably find that the commentary about the NCCP needing to be changed is probably more about the interpretation at the various aggregator and licensee levels. So if I had to ask myself why brokers are demanding the NCCP needs to be changed, it really comes down to clarity. In essence the act isn’t the issue, there just needs to be clarity around a lot of things.

There needs to be clarity about where responsibility starts and stops.”

Be careful what you wish for While White agrees the

NCCP could be adapted to create efficiencies, he is also warning brokers to think about the consequences before demanding a review.

“The thing that would always concern me if we got too bullish on this is caveat emptor – or buyer beware. The screws could get tighter. You don’t want to turn around and do a big call to action and then for things to get worse,” White told Australian Broker.

“What we have to really look at is what the reason is for it, why does it need to be reviewed and what are the specific areas that need to be looked at.”

Bricker is also reminding brokers to not get ahead of themselves amid the increasing regulatory scrutiny.

“I remember some quite heated arguments between the legal teams of the lenders in 2009 when the NCCP was just about to be launched. There was a knee-jerk reaction of the world is going to end and the regulator is going to come down on everybody.

“I think certain aspects of the NCCP need to be reviewed but I also think that overall it is not bad.

I think the way ASIC has implemented it is a much better thing.

“ASIC could be basically fining every single broker for technical breaches such as they didn’t sign a privacy act or a privacy act has expired, but ASIC are not interested in that. ASIC are interested in, was a consumer prejudiced any way and/or was there fraud?

“At the end of the day, I am a firm believer in going back to the basics.

ASIC are not looking for technical breaches, they are looking for major breaches. If I can sleep at night because I’ve done the right thing for my clients and my client has had a material benefit then that is what ASIC are concerned about.”

TECHNOLOGY UPDATE

NEXTGEN.NET SMART SOLUTIONS PLEDGE DELIVERS NEW APPLYONLINE APP

The development of an ‘ApplyOnline App’ was tabled to senior industry executives late last year as part of NextGen.Net’s pledge to deliver “Smarter Solutions for now… and what’s next”. The response was one of overwhelming support from brokers and lenders alike, and a question of “how soon can we have this?”.

NextGen.Net has now delivered on their promise with the ApplyOnline App launched in early March. With the objective of supporting brokers on the go, the App provides visibility to the broker of their entire application pipeline.

“The App has been really well received by the industry,” declares NextGen.Net Sales Director Tony Carn. “We piloted the App for three months before its recent launch and the response has been a unanimous ‘thumbs-up’, and the mortgage industry can rest assured that the vast majority or brokers are definitely tech-savvy”.

NextGen.Net’s reputation rides on its smart solutions mission statement, and a commitment to providing innovative technological advancements and services that drive efficiencies and reduce costs for brokers and lenders.

The current method of SMS messaging for status updates of loans is generally deemed unsatisfactory because it provides limited information to the broker. The unveiling of the ApplyOnline App will render the need for SMS messaging obsolete.

The ApplyOnline App provides brokers with a consolidated, comprehensive view of their entire loan pipelines, across all ApplyOnline lenders with whom they deal.

Designed for brokers on the move, the App gives one-tap access to a broker’s business.

Carn refers to it as “essentially a

visibility tool”, a “new service that’s part of the ApplyOnline offering”.

It allows brokers to register all logins to the one mobile device so they see their entire portfolio. The ApplyOnline App retrieves live data from ApplyOnline and also provides a live feed of all status updates for loans.

Brokers can ‘favourite’ an application from the ‘Loan Portfolio’ or ‘Activity Timeline’ screens, simply by tapping on the ‘star’ next to the application.

“Brokers and lenders are both seeing the benefits”, says Carn. “Besides looking slick, it’s got some great features; I show people at BBQs and it clearly demonstrates I am a cutting edge member of the fintech revolution.”

“The first version of the App empowers brokers to keep an up-tothe-second eye on their pipeline through their mobile device 24 hours a day, which in turn serves lenders who traditionally have needed to accommodate a high level of traffic from brokers making inquiries about the status of loans.

“It also eliminates the need for brokers to chase after the status of a loan because they receive a ‘push’ notification as soon as an update occurs. Plus they can filter it via customer or loan types.”

Carn reveals that the App will be constantly evolving and that version 1.5 is already underway and soon to be released.

“We’ve got some really exciting enhancements coming up in the near future, one of which will enable brokers to use their mobile device to photograph and upload customer documents,” he says.

Carn maintains that NextGen.Net will continue to progressively roll out new features on the ApplyOnline App, forging ahead with delivering smart solutions for brokers and lenders.

16

COVER STORY THE IMPORTANCE OF TRANSPARENCY Suncorp’s Steven Degetto on how transparency in service has led to success with brokers FAST FIGURES

3% Suncorp’s home loan portfolio grew 3% to $43 billion in the six months to December 2015, according to the bank’s first half year results

8.2% The bank’s home loans grew by 8.2% over the 2015 calendar year

60% 60% of new business originated outside of the traditional Queensland market

63% Mortgage brokers are responsible for 63% of Suncorp’s $43 billion mortgage book

2.9% Suncorp holds 2.9% of the total Australian mortgage lending market, which is now worth $1.4 trillion Source: Suncorp

SEGMENTATION PROGRAMS for brokers can be a somewhat contentious issue. While top tier brokers enjoy better service and quicker turnaround times, the programs can leave smaller brokers feeling left out in the cold. This, according to Suncorp head of intermediaries Steven Degetto, is where the non-major lender’s newly announced program differs.

The bank recently unveiled its Elevate program to reward broker loyalty and quality. And Degetto argued that the program differs significantly from other segmentation schemes in both its structure and its transparency.

“We prefer to think of it as a rewards and recognition program because that’s really what it is,” he said. “Two things are different. Firstly is that it’s transparent, so it actually explains what you need to do to be involved in it, as well as being accessible.”

This means that brokers don’t have to be running large businesses and settling nine figures per year in order to be involved, Degetto suggested.

“We know from MFAA research that the average broker settles below $1.2m a month. Therefore, a lot of brokers can’t access rewards programs. What we’ve decided to do is to be the first in the industry that actually has different tiers where brokers of all different volume levels can actually be involved,” he said.

To do this, Degetto said the program would seek to reward both volume and submission quality rather than just focusing on high dollar performers.

“The other thing we’re doing is focusing on both volume and business quality. We’re looking at things like arrears rates, growth rates and submission quality when we look at brokers being able to access those rewards programs,” he said.

The importance of transparency Transparency is one of the characteristics Degetto flagged as being of high importance for the bank’s Elevate program. And it’s transparency, he argued, that has seen the lender perform well with brokers. Degetto pointed to Suncorp’s decision to make public its service levels and turnaround times. He said this produced strong results through the broker channel.

“It’s really been about focusing on building strong fundamentals, so that’s around service and being reliable and transparent about service. Around 15 months ago we actually put all our service levels at every stage through the processing timeframe right through to documents being returned ready for settlement transparent for every broker to see on our website.

They can make a decision on whether that timeframe meets their customers’ needs,” he said.

And this transparency has paid off in demonstrating the bank’s high levels of service, Degetto suggested.

“Over the last three years, we’ve aimed to have two-day turnarounds for every broker. We’ve delivered on that 95% of the time. I’d love it to be 100% and that’s what we’re aiming

toward, but 95% of the time we’ve been able to do that,” Degetto said.

A reliance on brokers Transparency and service is of utmost importance when a lender relies heavily on the broker channel for its new business.

Recent first-half results showed that Suncorp saw nearly twothirds of its new business coming from the broker channel.

Degetto said this fit well with the bank’s identity.

“We’re actually an intermediaries business overall. The Suncorp Group has a strong intermediary business in general insurance, and we deal with general insurance brokers all around the country as well as financial advisers with Asteron Life. Asteron Life and Vero Insurance are very big intermediaries businesses,” he said.

And the bank’s smaller retail footprint outside its home state of Queensland has helped to drive this reliance on intermediaries.

“We have a big branch network in Queensland, but not as large outside of that. So we think about how we engage customers digitally, over the phone and through a retail presence, but more and more customers have chosen brokers as a channel of choice. That’s a strategic decision for us to have mortgage brokers as the key introducer of new customers.”

Ultimately, though, the reliance on brokers is reflective of consumer preference.

“If you think about it, we’re really reflecting how customers choose to engage financial services. We know that customers seeking home and investment loans primarily choose to deal with mortgage brokers,” Degetto said.

“Of our existing customers, the majority have been introduced by mortgage brokers.

We don’t see any change to that, and that’s why we’re building our business as we have done over the past few years.”

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BEST PRACTICE 5 STEPS TO BUILDING AN ATTRACTIVE WORK CULTURE FOR MILLENNIAL TALENT “Culture makes the difference between organisations that are able to sustain themselves and those who will give way to their competitors,” says Debora McLaughlin, CEO of The Renegade Leader Coaching and Consulting Group (www.TheRenegadeLeader.com), and author of The Renegade Leader, 9 Success Strategies Driven Leaders Use to Ignite People, Performance & Profits.

“Many organisations are talking about culture, but few are aware of the perception of their current culture or how to change it.”

Business leaders face a special challenge with millennials, who have high expectations of work-life balance, professional development and leadership opportunities, and a personal requirement that your business provides goods and services proven to make a positive difference in people’s lives.

“Yes, good pay and the ability to receive and provide feedback, including providing their manager with timely performance reviews, makes the list too,” McLaughlin says.

McLaughlin offers these tips for creating an attractive, innovative and employer-of-choice culture:

Assess your current culture.

How does your workforce view your culture? Look at your current online reviews and conduct a cultural assessment with all employees.

Research and design the culture you need to have – one that positions you for top talent, retains employees, and distinguishes you in the marketplace.

Create a road map, including definitions, stories and a core statement that identifies and describes the culture.

Begin the journey; cascade the road map throughout your organisation through leadership, action groups and communication.

Build in a review process to reassess, define and cultivate your distinct culture.

HOLDING ON TO GEN Y Why millennial talent leave, and how to make them stay IN JUST 10 years, millennials will comprise a full 75% of the modern workforce, replacing many of the baby boomers now set to retire in the wake of global economic recovery.

While this generation will inject new lifeblood and energy into struggling industries, they are known to engage in considerable ‘job hopping’. The costs of this practice can quickly

a similar career track into senior leadership positions. Managers should be trained in communicating these opportunities and explaining how a new hire’s role fits into a larger professional development structure walking employees through an exercise that demonstrates what their retirement contributions

fast-paced work with a deadline-driven role encouraging employees to develop expertise and become a source of knowledge for colleagues and supervisors. Tie this in with performance appraisals so employees understand how assessments can lead to further growth and development opportunities

A transparent culture is top of the list for most millennials, and employees become disengaged when they feel managers aren’t being honest or open become substantial – it requires an estimated $15,000–$25,000 to replace just one millennial, according to the Chicago Tribune.

For this reason, it is imperative that companies understand the mindset of a Gen Y worker and offer incentives that invoke the long-term appeal of their companies. These include: demonstrating how past employees have followed

today mean for their standard of living down the line establishing a mentorship program, since this generation grew up surrounded by supportive role models such as parents, coaches, and teachers aligning millennials’ strengths with job positions, such as pairing someone who enjoys

“If we are serious about being responsible businesses and looking after our greatest asset, we need to come up with ways to give people that instant gratification when the actual pay-off might not happen until the future,” said Amanda Schaake, senior communications leader. “Any education or engagement campaign will need to be well thought out and take time.”

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millennials to find out what they want to bring to the table. If they think they can offer something extra, then that’s only of benefit to you and your company.

Why they leave A recent survey by Gallup found that almost a third of millennials are disengaged or ready to jump ship. So, why do millennials often leave companies?

They don’t feel challenged According to the survey, 30% of millennials think the greatest benefit of job hopping is gaining new skills, so it’s imperative that employers encourage development.

“Let them know they can be challenged where they are,” Beverly Kaye, founder of Career Systems International, told TINYhr. “For example, asking a young employee, ‘What do you hope you’ll get to do in this new project?’ can help the manager and the employee focus on career goals and the specific skills being developed through various assignments,” she says.

They don’t feel like they’re using their skills According to Kaye, managers should conduct a constant conversation with

They don’t get continual feedback It’s not because they want to be showered with praise; it’s that millennials want to know exactly how they can grow and improve, insists Kaye.

“Offer one to two minutes’ worth of feedback,” she suggests.

“By having ongoing conversations – instead of just a formal review once a year – employees are continually reminded they are being developed.”

They don’t like being in the dark A transparent culture is top of the list for most millennials, and employees become disengaged when they feel managers aren’t being honest or open.

Help them understand how various events and trends affect both the industry and their jobs, and they’ll feel more in control and more connected to the company.

They think they don’t have options Take note of what your millennial employees really don’t like, says Kaye. “You might mention you saw someone grimace when a subject was mentioned” – initiating these conversations will help managers identify what young workers are really interested in so you can assign them the right tasks in the future.

“These aren’t just things that young workers want, but keep in mind that if millennials feel underused, overused, or abused – then they’re out of there,” Kaye concluded.

20

SPECIAL REPORT SMSFS MORE DIVERSIFIED Analysis by CommSec recently found SMSF investors trade twice as often and hold more diverse portfolios than retail investors. The data found SMSFs hold an average of 14 securities in their portfolio, compared to seven for the average retail equities investors.

“SMSF accounts tend to be far more diversified than those of retail investors, recognising that diversification is an important part of reducing risks and managing a robust portfolio over the long term,” Commonwealth Bank head of SMSF customers Marcus Evans said.

SMSFs also hold equities across a broad range of industries, representing more than 20 sectors.

Bank holdings are the most popular, representing more than 30% of SMSF holdings. This is followed by materials at 10%, telecommunications services at 7.3%, diversified financials at 5.8% and food and staples at 5.7%.

KEEPING ALERT WITH SMSF DEALS Peter Vala, Thinktank

How to navigate the complex world of SMSFs A LOOK AT THE NUMBERS BROKERS HAVE heard over and over that

The number of SMSFs in Australia as of 31 December was 566,735, up from 560,998 as of the end of September

30%

SMSF funds represent 30% of the total superannuation pool SMSFs’ holdings of cash and term deposits hit a new high of $155.4bn in the December quarter, up from $154.5bn in the previous quarter

6.3%

Australian share holdings jumped 6.3% to $178.4bn for the December quarter

Source: OnMarket BookBuilds

SMSF borrowing presents the next big opportunity.

But for brokers unfamiliar with self-managed super and limited recourse borrowing arrangements, the SMSF market can seem incredibly byzantine.

Thinktank head of sales and distribution Peter Vala shared some of the most important things to keep in mind when approaching the SMSF market.

“The year ahead should be insulated from any material regulatory changes, however the government made it clear post the Murray FSI, SMSF lending will be closely monitored and reviewed in three years so the industry is on notice and must ensure it exhibits high standards of compliance, credit quality and product appropriateness to clients at all times.”

Safe from change?

The SMSF industry breathed a sigh of relief late last year when the Turnbull Government rejected a recommendation from the Financial Systems Inquiry to prohibit limited recourse borrowing arrangements by SMSFs. It was the only one of the FSI’s 44 recommendations not to gain acceptance by the government, and Vala said the safeguarding of SMSF borrowing should lead to an upswing in the practice.

“The federal government gave SMSF lending the green light last year and we’ve seen a significant uptrend in activity in the period since which we fully expect will continue or even increase through 2016,” he said.

But the industry can expect tighter credit standards, Vala forecast.

“There has, though, been a tightening in credit standards by some lenders, particularly when it comes to residential property, while some have stepped away from the market altogether for their own reasons, but largely we feel due to the difficulties faced in offering a well-informed, efficient and consistent SMSF product, something Thinktank has been able to reliably demonstrate over the last three years,” he said.

And while regulatory change is unlikely to be on the horizon, the sector will be closely scrutinised, Vala said.

Understanding the SMSF borrower Even if brokers know they should be looking into opportunities to serve SMSF borrowers, the question remains: who precisely is the SMSF borrower? Are the everyday “Mum and Dad” investors? SME owners and operators? Are they more sophisticated investors?

“In our opinion, it is definitely the latter two,” Vala said.

“Small and medium size business owners with their operations situated in a commercial property are ideal candidates to give serious thought to the benefits of borrowing within an SMSF, especially if they view themselves as long term operators of the business and likely to maintain ownership of the property through to retirement. The opportunity is similar for a sophisticated investor with the same underlying intention of retaining the commercial or residential property for the longer term as the most significant benefits are not really available to the fund until one or more members reach the pension phase,” he said.

So, while there are amazing opportunities for both brokers and their clients in the realm of SMSFs, the investment isn’t for everyone, Vala said.

“SMSF borrowing is not readily suited to highly flexible or shorter term property investment objectives as the most substantial tax advantages are inaccessible pre-retirement. The underpinning

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We are seeing a lot of high quality lending opportunities arise where the business already owns the premises in personal names, a company or a trust and it is being sold and re-structured into the super fund. There are also many business owners who have been renting now moving to take advantage of the low interest rate environment to avail of the long-term wealth creating benefits of holding property in an SMSF. With monthly loan repayments similar to or in some cases less than the lease payments which increase every year, they are positioning themselves to reach retirement owning the property with little or no debt, potentially tax free income being received into their super fund from the ongoing tenant and no capital gains tax when they eventually sell,” Vala said.

Many of these clients may never have even considered the SMSF market. Vala said brokers can make their clients aware of these opportunities in a number of ways.

“It is a compelling discussion to open up with that group of clients and it can start with an offer of a financial health check, giving it a prominent mention in regular network newsletters or just in casual conversation when connecting with clients.”

of a successful SMSF borrowing strategy is to build wealth over the period from the commencement of the loan in the fund to reaching retirement, however long or short that might be, and use the income generated from the property in between to service and amortise the debt. In a period of sustained low interest rates this wealth building strategy is currently proving very popular.”

Prospecting for clients Once brokers understand the profile of those most suited to SMSF deals, the challenge is finding these clients. The place to start is often with the broker’s existing database.

“A great place to start is identifying clients who either own or are renting commercial property.

Staying away from the spruikers One of the pitfalls of the SMSF industry is that it has had the tendency to draw out unscrupulous property spruikers looking to cash in on Australians’ retirement savings. Recent weeks have seen a New South Wales investment property spruiker who promised investors returns of up to 30% per annum from property development projects in Queensland convicted of fraud. One of the ways to steer clear of such unethical operators is to involve an accountant or solicitor, Vala said.

“The way for consumers and brokers to avoid situations that may turn out to be less than above board is to make sure they involve informed and trusted accounting and legal advisors from an early stage. An experienced accountant or solicitor with good knowledge of the SMSF area will spot anything untoward long before a transaction can

progress very far,” he said.

Vala said brokers and their clients should also look out for package deals that seem to over-promise.

“It is advisable to be especially alert where there is a package offer incorporating a property purchase and SMSF advice that includes setting up a self-managed super fund.”

While enhanced scrutiny from regulators has helped to clean the industry up considerably, Vala said it still pays to be cautious.

“There is no doubt issues like property spruiking and inappropriate advice are being actively targeted by ASIC so there is less of it around these days, but it still goes on and the more unscrupulous operators will continually find ways to push or go beyond the edges of the envelope.”

Putting it all together Vala said the most important thing for brokers and their clients to keep in mind when exploring the SMSF market is to engage with trusted experts to guide them through the process.

“Without experienced and skilled legal, accounting and wealth management advisers involved, it will only invite frustration, delays and extra costs. Complex federal legislation regulates SMSF borrowing so there is a long list of things that can and can’t be done but brokers and clients need to be primarily cognisant of the types of property that are eligible and ineligible to hold and borrow against in a super fund while also taking note of the up front and ongoing compliance requirements which involve a level of discipline and awareness to avoid possible fines and loss of tax benefits,” he said.

While SMSF borrowing isn’t for everyone, Vala said it can provide an excellent path for wealth creation for the borrowers who are suited to the market.

“Having experienced professional advisers involved from the start and working with a knowledgeable and efficient lender will always make for the best outcome for all involved.”

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MARKET WRAP FAST FACT

MARKET TALK

MCGRATH RUBBISHES OFFSHORE REAL ESTATE COMMENTARY John McGrath has dismissed offshore pundits who claim Australia’s market is headed for a crash THE HEAD of a major real estate franchise has warned buyers and sellers to ignore doom and gloom predictions about Australia’s property market from overseas commentators.

Chief executive and founder of McGrath Real Estate, John McGrath, believes the strength shown by auction markets across Australia, in particular Sydney, in early 2016 shows that predictions by commentators such as the US-based Jonathan Tepper of catastrophic price corrections in Australia are wide of the mark.

“It seems every year an offshore expert takes a look at our property market and decides it’s headed for Armageddon. The fact is you cannot bring an American mindset into any analysis of the Australian property market,” McGrath said.

“It ignores the high level of prudential oversight applied by the banks in Australia which are amongst the best in the world and the fact that we do not have questionable financial products such as the non-recourse loans that allowed irresponsible lending practices in America,” he said.

While he doesn’t believe house prices are set to fall off a cliff, McGrath said a price growth slowdown that had to happen is currently unfolding.

“We are talking about a market that has been undersupplied for many years, and that has been one of the key drivers behind the increase in house prices,” he said.

“Now, thankfully we are beginning to see supply meet demand, and we can expect a slowing down in the rate of growth. Not a bust but a slow-down. This is something that had to happen if we want a sustainable real estate market and to see the next generation of home buyers have a chance of owning property.”

While price growth may be slowing over the near future, McGrath said there are still plenty of signs that those who view real estate as a long-term investment path will come out ahead.

“Real estate should always be considered a mid- to long-term investment,” he said.

“If you follow the movements monthly, you may well see extreme highs and lows but over the course of two to seven years the graph evens out and it has proven to be Australians’ most consistent and reliable path to wealth and security. With continued population growth and a low interest rate environment, I believe all the factors that support a healthy property market are well and truly in place.”

32.4%

The proportion of median family income required to meet average loan repayments

Source: Adelaide Bank/REIA

HOUSING AFFORDABILITY A ‘NATIONAL TRAGEDY’ The current state of housing affordability in a number of Australian real estate markets has been labelled a “national tragedy.”

According to the latest Housing Affordability Report, compiled by Adelaide Bank and the Real Estate Institute of Australia (REIA), housing affordability in Australia hit its worst point in three years over the December 2015 quarter, with households requiring just under a third of their median income to meet loan repayments.

“The latest Adelaide Bank/REIA Housing Affordability Report shows that the proportion of median family income required to meet average loan repayments was 32.4%, which is the worst level since the December quarter of 2012,” REIA president Neville Sanders said.

“Marginally lower interest rates did not curb the deterioration in affordability driven by rising loans and only modest increases in income,” Sanders said.

Affordability declined in all states except Queensland and the Northern Territory over the quarter, with NSW and Victoria the least affordable states.

The proportion of income required to meet loan repayments in New South Wales increased by 1.4% over the December quarter of 2015, to 39.4%, 7% above the national average.

The proportion of income required to meet loan repayments in Victoria rose 0.6% in the December quarter, to 34.6%.

The Australian Capital Territory remained the most affordable state or territory to buy a house in the December quarter, with the proportion of income required to meet loan repayments sitting at 19.9%.

Adelaide Bank general manager Damian Percy echoed Sanders’ points on the state of affordability.

“The further decline in housing affordability reported in December’s Adelaide Bank/REIA Housing Affordability Report is deeply disappointing and of great concern, particularly given the current low interest rate environment,” Percy said.

“The fact that many young families, particularly those in Melbourne and Sydney, now see home ownership as something their parents achieved but they likely never will, is a national tragedy,” he said.

While affordability for home owners may have declined over the quarter, there was some good news for renters, with the proportion of the median family income required to meet median rents remaining at 24.6%.

Rental affordability in New South Wales recorded a slight improvement in the quarter, falling 0.2%to 27.9%.

However, rental affordability in Victoria also worsened over the quarter with the proportion of income required to meet median rents increasing by 0.5% to 23.5%.

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AVERAGE LEVEL OF HOME EQUITY

National and state view in percentage and dollar value terms

National

$242,642

WA

TAS SA QLD NT

38.5%

$178,794

VIC

48.4%

$248,875

49.3%

32.7%

$96,427

39.9%

$165,456

$178,680

THE DIFFERING conditions experienced across

36.9%

56.6% $358,763

NSW ACT

$203,813

42.8%

Capital city view in percentage and dollar value terms 60.1%

National WA

TAS

$443,900

39.0% $184,738

VIC

50.7% $276,845 35.5% $115,718

SA QLD NT NSW ACT

AUSSIES HOLDING HIGH LEVELS OF EQUITY Average Aussie homeowners hold high levels of equity in their homes

39.4%

$136,918

MARKET TALK

37.0% $179,993 41.4% $180,692 39.4% $140,195 42.8% $2203,813

Source: Aussie/CoreLogic

Australian real estate markets in recent years have again been illustrated thanks to new research into the level of equity held by home owners.

By subtracting the amount borrowers on the loan book of mortgage broking franchise Aussie Home Loans owe from the current CoreLogic RP Data valuations, the two companies claim that on average Australian home owners hold 48.4% equity in their home.

Home owners in New South Wales currently enjoy the highest equity levels at 56.6%, followed

by Victorian home owners at 49.3%.

Northern Territory and Tasmanian home owners hold the lowest levels of equity at 36.9% and 32.7% respectively.

When looking at local government areas, equity distribution is even more lopsided, with 18 of the top 20 LGAs located in Sydney, and the remaining two located in Melbourne.

For LGAs with the lowest equity levels, 11 are located in Queensland, four in Western Australia, three in Tasmania and one each in NSW and South Australia.

For those owners fortunate enough to be located in areas where equity levels are high, Michael Beresford, director investment services at real estate investment advisory firm OpenCorp, encourages them to at the very least look at what opportunities are available to them.

“People should be aware of what their property is worth and how it’s changed in value. Property doesn’t always increase in value at a rapid rate.

Most of the time it’s steady growth so at a time like this where some areas have seen strong growth people can be surprised by how much it’s actually worth,” Beresford said.

“The first step people should take is talk to their bank and get a valuation to find out how much their value has increased and what they might be able to access and then go from there,” he said.

While some homeowners may be reluctant to pull out some of the equity they have built up, either thanks to capital growth or by taking advantage of low interest rates to pay down their mortgage faster, Beresford said there needs to be a better understanding of the difference between good and bad debt.

“A lot of it comes down to how people are educated. They’re taught all debt is bad and you should avoid it. In some ways that might apply to the debt you have from an owner-occupier loan, but debt you take on for investment has other benefits.

“If you pull out equity to buy a rental property you get the advantage that comes with another cash flow to help you service that debt that isn’t coming out of your pocket and you get the tax benefits that investment loans have but owneroccupier loans don’t,” Beresford explained.

Philippe Brach, chief executive officer of Multifocus Properties & Finance, also recommends that home owners at least consider taking advantage of the possible positive position they might find themselves in.

“You’ve got that equity building up in your home, but it’s money that doesn’t really work for you, but you can make it work harder for you by drawing it out and investing elsewhere. It could be shares or property or whatever,” Brach said.

“If you’ve got equity and provided that you do it responsibly and don’t over stretch yourself, then certainly, I would use it,” he said.

But Brach recommends home owners don’t sink all available equity into additional purchases.

“From time to time we see people who really want to push it and we have to tell them to slow down. If you use 100% of your equity to invest then where’s your buffer? The first thing to do is to create the buffer, so make sure you don’t use all of your equity.

“Say you have $250,000 in equity; you pull out and you use $160,000 to buy two properties, you keep the difference as your buffer in case interest rates go up or you lose your job. The criteria should be, are you comfortable and can you sleep at night?”

While he is a proponent of making the most of the equity available, there is one method Brach doesn’t recommend.

“Unless there is a drastic reason, you need $100,000 for an operation or something like that, I wouldn’t recommend selling.

“By the time you pay stamp duty and things like that you’re going to lose out on a lot of money, plus you’ve taken yourself out of the market. If you’re not ready to pull out the equity now, then hold on and wait for the next boom and consider it then.”

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MARKET WRAP ASIC DEALS FIVE-YEAR BAN TO BANK ADVISER ASIC announced that following an investigation and hearing, it has banned Gerard McCormack of South Melbourne from providing financial services. The ban comes after ASIC found McCormack contravened financial services laws while employed by NAB. ASIC alleges McCormack engaged in misleading and deceptive conduct by: phoning an industry superannuation fund falsely representing that he was a member of the superannuation fund in order to obtain information on that fund member’s superannuation account when not authorised to do so; witnessing his client phone and falsely represent he was the same member of the superannuation fund to gain further personal superannuation account information about, as it transpired, a third party; and assisting his client to complete and lodge false withdrawal forms, using the information previously obtained relating to that member’s superannuation account, so that all funds were improperly transferred to his client.

“When acting on behalf of their clients, financial advisers must not engage in behaviour that is misleading or deceptive.

As this case shows, conduct that breaches financial services laws will result in action

by ASIC to remove them from the financial services industry,” ASIC deputy chair Peter Kell said.

McCormack has applied to the Administrative Appeals Tribunal for a review of ASIC’s decision.

ROLES IN DEMAND

According to the Marks Sattin survey, the 10 financial services roles most in demand for 2016 were: 1. Fund Accountants

6. Advisors

2. Unit Pricing Professionals

7. Injury Management Advisors

3. Claims Specialists

8. Accountants skilled in Business Partnering

4. Investment Operations

9. Allied Health Professionals

5. Paraplanners

10. Underwriters Source: Marks Sattin

FINANCIAL SERVICES

BULL MARKET FOR FINANCIAL SERVICES JOBSEEKERS 2016 is set to be a year that favours jobseekers in the financial services industry A recruitment agency has predicted a “candidate-driven market” for financial services in 2016.

A new survey by specialist financial recruitment agency Marks Sattin has found a growing shortage of specialist skills within financial services. The agency has predicted this will see an increase in rates and remuneration as in-demand candidates for roles understand they can wait for the right opportunity.

Marks Sattin director Ieuan Williams said employers will have to be more proactive in attracting and retaining top talent.

“As we move into a candidate-driven market, employers should be looking to set themselves apart by executing on workforce engagement strategies that attract and retain top talent,” he said.

Marks Sattin said the survey found the number of active job-seekers had decreased significantly, falling from 42% in 2015 to 29%. And job-seekers were more optimistic about the state of

the economy and more secure in their roles, the agency said.

The survey also found candidates were most likely to be enticed to either stay with their current employer or move to a new one if they were offered flexible work options.

Career development was the second-highest rated benefit that attracted or retained candidates.

Sattin found that gender inequity is still a major issue in the sector.

In a survey of more than 1,300 Australian finance and accounting professionals, 76% of respondents said females compose only less than half of their company’s leadership team. Only 6% of women surveyed were senior executives, compared with 12% of men.

Employers should be looking to set themselves apart by executing on workforce engagement strategies that attract and retain top talent “With candidates having the upper hand in the Australian financial services and accounting market, and with increased pressure on remuneration budgets, employers must look at how they formulate and execute attraction and retention strategies to differentiate themselves,” Williams said.

But another study by Marks

The survey also found that women’s attitudes towards female managers may be preventing their succession to leadership roles.

Of the female respondents, 21% preferred male managers for being less emotional and temperamental and more rational than women. Seen as more empathetic and compassionate, female managers were cited for

25

AUSSIE BANK APPS HIT BY MALWARE ATTACK

having stronger team focus and greater understanding of family needs.

The survey noted that employers must raise awareness of unconscious bias in the hiring process and promote flexible workplace options to attract top female talent.

“The finance sector can make gender diversity a priority by reviewing existing policies and culture to ensure there are no barriers for women either explicit or understated,” it said. “This would involve reviewing current hiring procedures to ensure females are on the interview panel, and looking internally to understand current barriers to hiring women.”

Providing flexible working options that enable employees to balance work and child care will also create gender equality, according to the survey. It found that 14% of women will be attracted and remain in a job that has flexible work options, compared with only 7% of men.

“Enabling female employees to balance work and home care needs will help to keep women in the workforce longer. But support and greater flexibility within roles needs to be a commitment that comes from the top if we want to truly address the gender imbalance,” said Suzanne Gerrard, Marks Sattin general manager.

Australia’s largest banks have been the target of a sophisticated Android attack, stealing customers’ banking details and breaking past two-factor authentication security, according to The Sydney Morning Herald.

Commonwealth Bank, Westpac, National Australia Bank and ANZ Bank customers are all at risk from the malware, which superimposes a bogus login screen over the top of the legitimate banking apps to obtain usernames and passwords.

The malware is able to mimic the appearance of 20 different mobile banking apps from Australia, New Zealand and Turkey, as well as login screens for PayPal, eBay, Skype, WhatsApp and several Google services.

Apart from Australia’s Big Four banks it targets a range of other financial institutions including Bendigo Bank, St. George Bank, Bankwest, ME Bank, ASB Bank, Bank of New Zealand, Kiwibank, Wells Fargo, Halkbank, Yapı Kredi Bank, VakıfBank, Garanti Bank, Akbank, Finansbank, Türkiye Is Bankası and Ziraat Bankası.

“This is a significant attack on the banking sector in Australia and New Zealand, and shouldn’t be taken lightly,” says ESET senior research fellow Nick FitzGerald.

“While 20 banking apps have been targeted so far, there’s a high possibility the e-criminals involved will further develop this malware to attack more banking apps in the future.”

WEALTH MANAGER ANNOUNCES DIRECT TO CONSUMER OFFERING A leading wealth manager has announced a new direct-to-consumer solution to launch in May. Infocus Wealth Management has said it will launch a new direct-to-consumer offering incorporating the Morningstar Wealth Forecasting Engine and investment management services from Ibbotson Associates Australia.

Due to launch in May, the company’s Wealth Forecasting Engine projects an investor’s future wealth and provides savings rate, retirement age and asset allocation recommendations for all life stages.

“This initiative is a continuation of our innovative approach, delivering financial advice that helps improve the lives of Australians from all walks of life. In addition to outcomes from consumer-driven inputs that can be provided anywhere, anytime, Infocus’ direct advice solution will be part of our overall offer supporting consumers seeking financial advice.

Our direct advice solution will reduce barriers to taking action, delivering the freedom of a better financial life with just a few clicks,” Infocus managing director Rod Bristow said.

Bristow said the engine works based on user inputs, and enables clients to choose to manage their own investments or seek out advisers.

“This not only gives clients flexibility about how they want to engage with financial advice, it also means Infocus advisers will benefit from direct consumers who may also need more personalised financial advice at some point in the future,” Bristow said.

26

SPOTLIGHT VIDEO SPOTLIGHT

ONE YEAR ON

NEGATIVE GEARING RHETORIC CONTINUES What a difference a year makes – or not.

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

1 APRIL 2015

In response to a government discussion paper, HomeStart CEO John Oliver argues that scrapping negative gearing would be detrimental to the property market 17 JULY 2015

Following RBA comments questioning the tax break, Mortgage Choice CEO John Flavell says negative gearing plays an important role in sustaining the strength of the Australian economy 16 FEBRUARY 2016

The Labor Party pledges that under a Labor government negative gearing on property investments will be limited to new housing from 1 July 2017

Andrew Morello

17 APRIL 2015

The Australian Council of Social Service urges the government to restrict tax deductions for negatively geared property investments, saying these tax breaks are “feeding a fire which the Reserve Bank and APRA are trying to put out” 7 MARCH 2016

Antony Bucello, Victorian state manager for National Property Buyers, says concerns about negative gearing changes are overblown, and that the government is unlikely to tinker with the tax break

NAVIGATING THE INVESTOR MARKET IN 2016 The recent tightening of investment lending policies has driven a great deal of change in the property market. With all this change, brokers must adapt to new sources of demand. Yellow Brick Road’s Andrew Morello recently told Australian Broker TV that the most notable change had been in the types of people investing in property.

“What I’ve seen is the mum-and-dad suburban investor has dropped off. And the positive to that is, number one, it’s brought some first home buyer that was just getting blown out of the market by the mum-and-dad suburban investor, and the second thing it’s brought out in the market is the astute investor,” he said.

Morello said the exit of these mum-and-dad investors was a positive for the market, with less competition leading to more stability.

“Stability means longevity. The reality is that the best market you want is a stable market with good yields,” he said.

Morello said brokers should be proactive rather than reactive when addressing this change in the market.

“I would personally be going back to my old investors. I reckon the gold is in the people you were doing the financing for two or three years ago who got fed up with the market. This is a real positive conversation for you to be having with your past clients,” he said.

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30

PEOPLE HOT SEAT

OTTO DARGAN Home Loan Experts’ Otto Dargan on the value of seeing others’ points of view What has been your most rewarding client experience?

There’s nothing that brings more job satisfaction to our brokers A than helping someone who’s been rejected by their bank and several other brokers. When you call them and let them know that they are approved, and that they’re going to be a homeowner, they often start crying or are in disbelief.

Brokers shouldn’t underestimate the effect that they can have on their clients’ lives. When finance is used responsibly it is the great enabler. It helps people to live their dreams, be it to buy a home, start a business or build wealth.

Q

What do you think will be the biggest innovation in the mortgage industry in 2016?

The digital mortgage is coming! Behind the scenes the banks A are figuring out how to get rid of all the process pain points that have been holding us back. This year we’ll see digital signatures, advanced methods of identifying customers, and potentially the verification of income and liabilities from customers’ internet banking rather than relying on documents.

A digital process doesn’t mean the end of the mortgage broker.

It’s just a better process. Customers love brokers; they want a personal service and so a digital process is just going to add to that.

Q

If you were the head of the MFAA or FBAA, what would be your first priority?

We’re MFAA members and so I can’t really comment on the A activities of the FBAA. However, I am very impressed with what the MFAA has been doing. They’ve engaged the community with Global Money Week, engaged the media when they’ve attacked our industry, consulted with the government about broker commissions, and they’re gearing up for the Broker 2020 series, which I’m sure will be a big hit.

What I’d like to see in the future is the standardisation of many of the news, calculators, forms and processes that brokers deal with.

As a branch lender you just have to know one bank. Us brokers have to know 20 or 30. We all want to have an efficient industry with few reworks, and that just won’t happen unless someone brings the lenders together and agrees on standards.

Q

What is the most memorable piece of advice you have received in your life?

If you want to do something well then just find someone who is A amazing at that thing, take them for lunch, ask them what they do, swallow your pride and just do what they say. It’s that simple.

Home Loan Experts is built on the advice of people much smarter than me. It’s the curse of smart people that they don’t listen to the advice of others because they’re used to other people having confidence without substance. The key is to find the right people to listen to.

Q

If you could have one superpower, what would it be and why?

To enable people to see the point of view of others and to think A selflessly. You could solve wars, hunger and climate change.

Flying or being invisible would be fun, but it’s not going to do anything of real value.

Q

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