Australian Broker magazine Issue 7.18

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ISSUE 7.18 September 2010

ACL applicants stranded by aggregators

Lesley Wood

 Lack of support

leaves ACL applicants out in the cold Prospective Australian Credit Licence (ACL) applicants are at risk of contravening National Consumer Credit Protection legislation due to some aggregators abandoning these brokers or playing “catch-up” on compliance under the new legislation.

Australian Loan Company (ALCo) general manager Lesley Wood claims in many cases lacklustre aggregator support is leaving brokers ill-informed about their ACL obligations, which could see them made an example of by credit industry watchdog ASIC. Wood said some brokers even now are not compliant with the NCCP Act, as they are “often” not using preliminary assessment forms – the one document ASIC has required since 1 July this year

and which can be requested at any time by a consumer. “I and my BDMs have been speaking to a lot of brokers, and I say to them, ‘are you using these documents now?

Are you using this one document [preliminary assessment form] and has your aggregator given you it?’

And the answer is often ‘no, my aggregator has given me nothing’.”

Under the NCCP regime, ACL applicants are required to have a series of documents, policies and processes in place prior to application lodgement before 1 January 2011. According to QED Risk Services, this falls under ‘general conduct obligations’, under which ASIC can request proof the documents and policies are embedded in applicants’ business processes.

“ASIC requires – not today, but by the end of this year – a number of documents to be completed and placed on every single file,” Wood said. “These brokers are not putting them on files because they do not know and they are not being provided it by their aggregator.”

LoanKit head Kym Rampal, who recently launched a LoanKitmanaged ACL offering, argues some aggregators are “washing their hands” of ACL applicants, as these brokers will be placing deals outside that aggregator’s lender panel. “That’s why I think aggregators are not supporting their ACLs as it is enabling them to place deals outside the panel, and not earn a dollar from it.”

Page 16 cont.

>>

Second ACL option

Reactions to the industry’s new way to obtain an ACL

Page 6

>>

Commission rise?

Largest broker predicts competition and commission rise Page 8

>>

Low-doc return

Advantedge enters “neglected” low-doc market Page 16

Inside this issue Viewpoint Diversify or die?

Opinion Avoid NCCP misconceptions Insight Ramping up referrals Market talk Clearance rates explained Toolkit Referral agreements Caught on camera

>>

20 22 24 26 28 33

Loan Market meets Insider Lexicon ‘moving forward’

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News

ASIC plans to go undercover ASIC will undertake ‘verification surveillances’ to ensure the information in licence applications is accurate, the credit regulator’s chairman Tony D’Aloisio has warned.

Outlining a string of measures the regulator would implement over the next 12 months to enforce its new powers, D’Aloisio told an American Chamber of Commerce luncheon in early September that the regulator’s focus was on “smoothly transitioning the industry to the new credit regime and ensuring our oversight of the industry is effective”.

As well as surveillances, D’Aloisio said ASIC would be policing the boundaries to ensure people aren’t operating outside the licence system, either intentionally or inadvertently, as well as reviewing practices “at the fringe of the market” to ensure compliance with the new responsible lending obligations when they come into force.

The measures will see ASIC undertaking risk-based compliance reviews of credit businesses, and the watchdog has also committed

Tony D’Aloisio

to working with industry on the application of responsible lending obligations to credit card applications and limit increases.

Following up on its recent consultation paper on mortgage early exit fees, D’Aloisio said ASIC would finalise its guidance on the issue, and work with the industry to ensure compliance.

Since the introduction of the Financial Services Reform Act, the financial planning industry has faced a number of rounds of ‘shadow shops’ from the regulator – often with damning results for the industry – with the intention of

ensuring the compliance of the industry. At time of going to press, ASIC had issued 132 licences under the regime, and had received over 400 credit licence applications.

14,700 credit businesses have registered with ASIC. “In preparing for credit regulation, our ear has been to the ground,” D’Aloisio said. “We have worked with industry and other stakeholders, sought feedback and worked hard to make the registry and licensing system relevant and practical. We’ve issued 11 regulatory guides and nine information sheets to help businesses understand their obligations,” he added.

He did acknowledge, however, that there would be situations in which brokers holding their own ACL would be more appropriate, such as if there is a financial planning practice tied to the brokerage, or if the business model is built around using lenders not on Advantedge’s platform.

Weston made the comments as he unveiled Advantedge’s support services for brokers under the new licensing regimes. Brokers operating under its aggregation groups PLAN Australia, Choice Aggregation Services and FAST will be offered the option to obtain

EDITOR Ben Abbott COPY & FEATURES JOURNALIST Kevin Eddy EDITORIAL INTERN Laura Carew PRODUCTION EDITORS Jennifer Cross, Moira Daniels, Carolin Wun ART & PRODUCTION DESIGN MANAGER Jacqui Alexander DESIGNER Lucila Lamas SALES & MARKETING SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak MARKETING EXECUTIVE Kerry Buckley MARKETING COORDINATOR Anna Keane TRAFFIC MANAGER Stacey Rudd CORPORATE DIRECTORS Mike Shipley, Claire Preen MANAGING EDITOR George Walmsley PUBLISHING DIRECTOR Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan

ASIC’s resolutions: • ‘Verification surveillances’ of licence applicants • Ensure none are operating outside the licensing regime • Apply responsible lending to credit cards • Issue guidance on mortgage early exit fees

‘Cut and paste’ compliance not enough The head of Advantedge’s broker operations is warning brokers that the compliance burden under the new regime is likely to be even more significant than previously suggested. Steve Weston, Advantedge’s general manager for broker platforms, argues there are ‘significant’ risk management and IT compliance requirements that licence holders will need to fulfil, which will add to the ongoing ‘implicit’ costs of maintaining a licence. “It is likely that most brokers will find the credit representative model most suitable for them,” added Weston.

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and trade under their own credit licences, or to apply to become a credit representative under Advantedge’s ACL. Becoming a credit representative will cost $139 plus GST per month per person.

According to a recent Advantedge survey, up to 50% of brokers affiliated with its companies are considering taking up the credit representative option, with more still undecided. Eventually, Weston expects around 80% of brokers to operate as credit representatives – similar to brokers in the UK, where brokers already operate under an equivalent licensing regime.

HUMAN RESOURCES MANAGER Julia Bookallil

Editorial enquiries Ben Abbott tel: +61 2 8437 4716 ben.abbott@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 8437 4731 • fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media www.keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Singapore, Hong Kong, Toronto www.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.

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Suncorp recommits FirstRock acquired

by KeyInvest to broker channel Suncorp Banking CEO David Foster has reaffirmed the company commitment to the broker channel as it prepares to grow its business.

Foster said that key aims for the bank for the coming year was to grow its business by “1 to 1.3 times system growth” over the next year.

“We’ve got ambitious but realistic plans for the next few months, and the feedback from the broker community is that the market is keen for a strong alternative – especially since Bankwest, St. George and RAMS are essentially majors now,” he said.

Foster added that working with brokers would be a key part of the bank’s plans. “Before the GFC, 50% of our mortgage balance sheet originated from brokers,” he said.

“Over the last couple of years, while we’ve been sorting out our funding position, that’s dipped to under 30%; however, we have been conscious to maintain those relationships, and flows are back up to the 50% figure.

Foster added that Suncorp had been taking the time to work on its service model, particularly delivery and turnaround times. “Our objective is to be able to turn around approvals in 24 hours,” he commented. “However, just as important is consistency: I’m sure many brokers will concur that things change when there’s a blip or movement in volume. So, we’ve built a scalable model that allows both consistency and efficiency – and we’ve also streamlined our processing guidelines to make life

simpler for customers, brokers and staff.”

The bank will also be expanding its network of BDMs and franchises, added Foster. It is looking to add an extra 30 BDMs nationwide, with more branches in NSW and WA, and “extra resources” planned for Victoria. He stressed, however, that Suncorp is keen to avoid channel conflict.

“We want the brand network to complement the broker offering, and to work in concert: we recognise the importance of the broker channel, and value those relationships,” he said.

While no new products are on the horizon, Foster maintained that Suncorp’s products will remain competitive, and lauded its ‘Back to Basics’ variable loan as a favourite with brokers and customers alike.

Foster’s comments followed solid end-of-year results for the Suncorp Group, with group after-tax profit of $780m – almost double its 2009 figure.

Suncorp’s plans: • Working to increase broking business by 1–1.3 times system growth • Aims to turn around loan approvals in 24 hours • Expanding network of BDMs and franchises nationwide • ‘Back to Basics’ variable loan product remains a favourite

Ian Campbell

Boutique aggregator FirstRock has been acquired by Adelaidebased financial services group KeyInvest, creating a combined finance broking business that will now trade as KeyInvest Lending Services.

With a combined loan book in excess of $2bn, the new group will have 90 consultants – 50 of which come from FirstRock’s stable – and distribution in every state in Australia.

KeyInvest managing director Ian Campbell said growth in KeyInvest’s geographic spread was a key goal of the acquisition, having previously been represented only in SA and Queensland. “This acquisition is a key step forward in KeyInvest’s national expansion strategy,” he said. The move propels KeyInvest’s lending services business into the upper echelon

of broking groups by distribution numbers, and the group will offer a full range of finance options for owner-occupiers and investors, as well as capabilities in commercial transactions and leasing.

KeyInvest has grown since its entry into the mortgage market in 2005, when it acquired South Australian business Key Home Loans. It followed up by adding the much larger Money Advisers in 2008.

Campbell said the group – which will roll the Money Advisers brand into KeyInvest Lending Services – would target further growth in broker numbers, and put a representative office in each state. “We aim to grow our existing operations in the NT and Queensland and add to our footprint in NSW, Victoria and WA while building on our strong presence in SA,” he said.

The current chief executive officer of Money Advisers, Chris Burns, will lead the combined group out of Adelaide.

KeyInvest’s other businesses include retirement living and long-term savings (investment bonds), with acquisition growing the group’s capabilities around financial “life events”.

“FirstRock brokers and clients now have the backing of highly experienced management, strong business networks and a team of dedicated mortgage consultants across Australia,” Campbell added.

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News I-Financial proposes licensing ‘third option’  Aggregators react Steve Kane, managing director, FAST It makes sense for someone to offer a service like this, and from a legislative perspective I don’t see an issue. My only comment would be that any broker looking at using such a service should make sure they’re completely satisfied that the licensee has the technology, the systems, the experience and the capital to sustain that business.

Brokers who do not wish to become a credit representative of their aggregator may not have to obtain their own credit licence, according to a financial services company.

Craig Morgan, managing director of the I-Financial Group, told Broker News that there is a ‘third option’ for brokers which “combines the benefits of both of the other options and removes the downsides of the other alternatives”: essentially, considering becoming a credit representative of a company other than their aggregator.

“Brokers should select their aggregator based on business need and what the aggregator brings to the table by way of products, commissions, training and support,” said Morgan. “On the other hand, their licensee should be selected on the basis of being able to provide a compliant regime that is operationallyfocused and does not unduly hinder the broker’s business nor restrict their access to a wide range of products and services.”

Morgan added that the I-Financial Group is planning to launch a ‘centralised licensing model’, which will allow brokers, financial planners and accountants to access an ACL and/or an AFSL in this way without changing their current

aggregator. He continued that pursuing this strategy could also see the broking industry avoid some of the issues that have beset the financial services industry.

“The fear that remains for many brokers around becoming a credit representative is a repeat of what has happened within the financial planning sector under the FSR regime,” he said. “Where product aggregation and licensing are centralised we have seen clear evidence of constraint of advice and ‘product pushing’ by licensees and advisors. In fact, this has caused so much concern for consumer groups and the government alike that financial planners will now be banned from receiving commissions on investment products.”

Morgan stressed that the initiative is not an attempt to move into the world of aggregation.

“Our goal is to work with all the aggregators, and to offer a different option to those brokers for whom the current options are not attractive,” he added. “In short, a broker has perhaps a one-time opportunity to select the aggregator that best suits their business and the licensee that best suits their needs – even if they are two entirely separate organisations,” he added.

Ray Hair, CEO, PLAN We are providing support to our members irrespective of whichever solution they choose with respect to licensing.

Craig’s ‘third option’ further separates aggregation and licensing services which may suit some brokers. Ultimately brokers who choose to become a credit representative need to have confidence in the infrastructure, competence and resources of their licensee. I’m confident Craig will establish a very credible and professional solution which may be very attractive to brokers who are unsure about their aggregator’s capacity to provide a credit representative solution.

Mark Haron, principal, Connective Fundamentally, lenders and aggregators want to know that they are dealing either with someone who is licensed or someone who is a credit representative. As long as the licensee is legal from an ASIC operational perspective, it shouldn’t present any problems.

Dean Rushton, chief operating officer, Loan Market This isn’t a model we would pursue. Our view is that the aggregator assumes responsibility for the conduct of its broker team, and it’s very difficult to carve parts of that out. At the end of the day, we can deliver the credit representative model most effectively through our compliance team, and we already have the resources and relationships in place to do that.

Jeff Zulman, CEO, Vow Financial I welcome the creative thinking around alternative approaches to the licensing regime. It’s certainly not necessary to have just two paradigms, and I’m aware of groups in the financial services space that have successfully outsourced the compliance role. However, I think until people know the extent and complexity of what ASIC is proposing, it’s very difficult to know what needs to be provided – and to price such a service. We would also need to make sure we’re happy with the compliance program in place – ‘what’s in it for the broker?’ Ultimately, it must be good in a tangible way, and not just imposing another intermediary.

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News

For all the latest mortgage industry news, visit www.brokernews.com.au

Trail could rise as competition returns

Mortgage Choice’s CEO has speculated that trail commissions could increase as competition returns to the mortgage market.

Michael Russell suggested at the release of Mortgage Choice’s end-of-year results for 2010 that there is “no indication” of further pressure on commission rates from lenders, despite a worsening

wholesale funding picture. The last commission cuts came in the depths of the GFC, when the wholesale funding situation was significantly worse than it is now,” he said.

“The industry has also done a tremendous job to work with lenders to reduce origination costs, particularly around e-lodgment and quality of submissions. As a result, there should be less pressure on commission structures.”

Russell suggested that the opposite could happen as competition increases. “We have three majors who are keen to write mortgages, as well as new players coming onto or returning to the scene in the second tier,” he commented. “I can see lenders looking at rewarding brokers as the market begins to return to previous levels of competitiveness.”

The return of a more competitive market was signalled by the changing makeup of the company’s settlements by lender: while the Big Four held 67% of the market

share coming through Mortgage Choice at the end of the year, NAB and ANZ had seen resurgence towards the end of the financial year – with NAB broker brand Homeside accounting for 21% of loans written in July.

However, Russell nixed any idea that upfront commissions could be hiked. “If we see commission increases, it will be focused on loan life and trail commissions – probably based around years four and five of loans and beyond.”

He predicted a bright future for

mortgage brokers at the results announcement, commenting that lenders continue to rely on brokers for the introduction of new customers, and said that the new regime would be beneficial.

Mortgage Choice posted “solid” after-tax cash profits of $14.8m – a 14% increase on 2009. While revenue fell slightly, operational savings offset some of this.

Revenue from non-core products such as insurance and commercial mortgages also doubled to over $2m during 2010.

How the numbers stack up 2010

2009

Change

Net profit after tax

$14.8m

$13m

$1.8m

Residential commission revenue

$135.1m

$138m

 $2.9m

Residential loan book (not including LoanKit)

$39.1bn

$36bn

$3.1bn

Operating expenses

$27.9m

$30.6m

 $2.7m

Non-core revenue

$2m

$1m

$1m

Number of franchises

322

326

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News

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Loan Market outlines vision Loan Market executive director Sam White has detailed his vision for the group’s next 12 months, with plans to put “more brokers in more offices”, increase diversification, and focus more on clients. Speaking at the group’s annual conference in Sydney, White said Loan Market would target continued growth in market share, in a challenge to Australia’s top two players Mortgage Choice and Aussie.

White said Loan Market has overtaken Aussie as the largest retail broking group in the state of Victoria. The group will target increased profitability, after a year that saw productivity rise from $1m to $1.18m per broker per month – an increase of 12% on the previous 12-month period, according to White.

Diversification would be a key driver of growth, with White arguing brokers should be a client’s “private banker”, and that brokers have “a moral duty of care to provide insurance”. Loan Market will offer ALI Group’s mortgage protection products, as well as offer life insurance via online broker Lifebroker.

Chief operating officer Dean Rushton said the group is continuing to build a specialised commercial lending business, in an effort to keep these leads in-house, rather than risk losing clients through external referrals.

Brokers were also urged by White to focus more on clients, including seeing all clients face-to-face,

Sam White

rather than using prequalifications to screen out those where it was obvious they could not afford a loan. He said the “deals will come”, if brokers don’t only chase business that can be closed immediately.

In an effort to stay closer to clients, Rushton said the group is in the prototype phase of upgrading its Symmetry CRM software, to ensure its use in tandem with other systems such as Microsoft Outlook. Customer satisfaction data would also be published regularly online.

In conclusion, White said brokers were “forced to do more for less” over the past year, when a lot was asked of the channel, including dealing with regulatory changes due to NCCP legislation, managing their lender mix due to minimum volume requirements, and having to write more loans at better quality.

However, he said Loan Market “individuals stepped up”, with the group having risen in CBA’s internal rankings of growth, measured by mortgage group, and having come second in the bank’s overall measure of conversion rates and submission quality.

White’s market outlook was also upbeat, believing the industry had passed a low point. He said current conditions were reminiscent of the early 1990s that gave birth to non-bank lenders, and that ex-RBA interest rate increases could increase margins and bring in more competition.

Ross McEwan

Rates will definitely rise: CBA The Commonwealth Bank’s head of retail banking told Loan Market brokers at the group’s annual conference in Sydney in August that interest rates will definitely rise over the next 12–15 months, and that brokers’ cross-selling of product could be improved.

Ross McEwan, a keynote speaker at the conference, said the average cost of funding is rising by 3–4 basis points per month for banks in Australia and New Zealand, and will continue rising at this rate for the next 12–15 months, pushing rates up.

The cost of funds will rise due to “very cheap money” dropping off the bank’s funding sources during the period, which will be replaced with money “at far higher prices”, changing the bank’s average cost.

Banks typically fund mortgages at an average cost of funding, unlike business lending, which goes to market at an expected future cost to the bank.

McEwan went so far as to say banks have been “trapped” into the Reserve Bank’s standard variable rate, which he said is “no longer standard or variable”. McEwan said expectations of banks hiking or dropping rates based on the Reserve Bank cash rate needed to change, as at the moment the RBA rate has very little to do with the cost pressures banks are facing.

McEwan also urged brokers to improve their cross-sell of life and home and contents insurance in tandem with home loan products, as current cross-sell rates for the bank were “pathetic” and did not go far enough to meet broader customer needs.

He said all the third party broker channel has is client service to offer, and that brokers needed to broaden their outlook and take a holistic approach to providing services for home loan customers.

“We are not there to ram and jam a home loan, we need to make sure that their needs are looked after,” McEwan said.

“That means making sure they can pay that home loan off, and that if something goes wrong, you’ll be there for them to make sure that you’ve put those protections in place.”

“One of my biggest fears in running a retail bank is that we have a pathetic cross-sell against the home loan which is one of the most vital things that any customer has – and we’re not doing enough about it,” he said.

What Ross McEwan told Loan Market • Interest rates will definitely rise over the next 12–15 months, as bank funding costs over that period increase by 3–4 basis points per month • The Reserve Bank cash rate is not reflective of the cost pressures banks are facing now, and expectations by the market that banks should follow the RBA should change • Brokers should improve their cross-selling rates of life and home and contents insurance with the bank, as they were not meeting broader customer needs

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News

For all the latest mortgage industry news, visit www.brokernews.com.au

Growth will push rates to 9%: BIS Shrapnel

‘Serious’ inflationary pressures are expected to challenge any new government before an election if held in late 2013, and could push housing interest rates out to 9%.

BIS Shrapnel’s Long Term Forecasts 2010–2025 posits that economic growth will accelerate by an average of 3.8% pa over the next three years, while the unemployment rate will drop to below 4% by early 2013. The combination of tightening labour markets and accelerating

household spending will lead to higher inflation, pushing cash rates up towards 6.5%.

The report from BIS argues the current housing shortage is a “major problem”, as it has the effect of inflating mortgage debt – which increases household sensitivity to rising interest rates and unemployment – while widening the current account deficit. A housing shortage also places upward pressure on Consumer Price Inflation due to

an upward impact on rents.

Weaker population growth will take some pressure off short-term growth in demand for housing, BIS said, although the current undersupply problem is not likely to be addressed through the current cycle because mortgage rates remain at what BIS calls neutral levels.

The combination of significant pent-up demand, strong rents and yields, rising incomes and an easing in funding for property developers is expected to drive a recovery in building activity over the next two to three years.

However, BIS Shrapnel senior economist Richard Robinson said relief on capacity constraints will not last. “Minimal slack in labour markets, a recovery in consumer spending and, subsequently, business investment, will quickly see the re-emergence of capacity constraints from 2011/12,” Robinson said.

Due to ongoing labour shortages and a synchronisation of construction cycles, BIS expects inflationary pressures to build

over 2011/12 and 2012/13, forcing the Reserve Bank to push up rates and the market to enter into a “controlled downturn” over the 2013/14 period.

Robinson added that the recent federal election campaign only gave “cursory consideration” to real policy issues for the economy and for housing, or put them squarely “in the too-hard basket”.

“We still have a number of critical policy issues which need to be addressed, including a serious housing shortage, ongoing infrastructure deficiencies and bottlenecks and, of course, a skills shortage,” Robinson said.

Looking long-term: BIS Shrapnel forecasts • Economy faces ‘serious’ inflationary pressures • Cash rates could rise to 6.5% by 2013 • Housing rates could blow out to 9% • Controlled downturn in 2013/14

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Macquarie pleased with product take-up The take-up of Macquarie’s new packaged product suite has been “more than encouraging”, according to one of the bank’s executive directors. Frank Ganis said that there’s a “real buzz” around the bank’s retail operations, and the statistics the bank has seen in the weeks since the large-scale launch of its Mortgage Solutions products were “very good”. Ganis added that the rollout of the suite had been successful, with “all major broking houses” signed on to distribute the packaged mortgages, which include options such as platinum credit cards and mortgage insurance.

Ganis also told AB that Macquarie was “very pleased” with the final outcome of its recent RMBS issue, which was increased from $500m to $750m due to demand.

“The market was very keen to see us issue,” he said.

“We’d been planning it for some time, and it was certainly the right time. There was a lot of investor interest, possibly because our previous issues were starting to pay down a little.”

Over two-thirds of the securities were bought by a mix of institutions and financial houses, with the remaining $247.5m purchased by the Australian Office of Financial Management. The securitisation was Macquarie’s first since July 2008, and was collateralised by a pool of mortgage loans with a weighted average current LVR of 65% and a weighted average loan life of 65 months. The issue was carried out through Macquarie Securitisation’s PUMA program, which has raised a total of $41.1 bn in 45 separate issues since 1993.

Ganis was also positive about the state of the RMBS market in general. “While we’re not at the levels we were seeing a few years ago, there is a good, healthy stream of deals coming onto the market, and it’s encouraging that there’s been a number of issuances in the calendar year which have all been well-supported.”

No level playing field with lenders Brokers are in the uncertain position of being unable to recommend loans under NCCP legislation that lenders are still permitted to offer, due to a six-month gap between their respective compliance deadlines. Kon Avramidis, director of operations at National Mortgage Brokers, said the phased introduction means brokers and lenders are operating under a different set of rules until lenders come into line on 1 January 2011, with obligations faced by brokers since 1 July.

Avramidis said while brokers are now coming to terms with their responsible lending obligations, which includes the ‘not unsuitable’ test, lenders have until 1 January to implement required changes. This has led to a disadvantage for third party brokers, with lenders having the ability to “approve loans that, under legislation, brokers are unable to submit”. Avramidis said with legislation requiring brokers to make reasonable enquiries about a client’s financial situation and verify their circumstances, a “broker’s ability to apply the criteria against today’s low-doc and no-doc loans is not achievable”.

FBAA president Peter White reassured brokers that as long as they are fulfilling their responsible lending obligations, including the ‘not unsuitable test’, then they are “ticking all the boxes”. He said despite the phased introduction lenders did not have a “free ticket to write their own rules”, and still had to meet their obligations in lending responsibly. Avramidis said the legislation could spell the end of low-doc, particularly no-doc loans.

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News

For all the latest mortgage industry news, visit www.brokernews.com.au

White-label products could drive competition

The growth of white-label products could help boost competition in the marketplace over the coming months.

Kym Rampal, Head of LoanKit, commented in the latest Broker News TV panel discussion that the increase in aggregators launching white-label products was a symbol of competition and confidence returning to the marketplace.

“There is a push for competition – a push to move away from the

major banks,” he said. “The reason for the shift is because consumer confidence in non-banks is rising.

There is confidence that product can be sold: there is no sense in launching a product if the consumer won’t be taking it up.”

Andrew Russell, general manager for third party and product distribution for Firstfolio – which has recently announced white-label deals with LJ Hooker and Once – agreed that the

provision of white-label products is “a big growth area”.

“Firstfolio is certainly moving into that area,” he revealed. “There are two types of firms who want to offer financial services products within their business but don’t want to operate with a heavy cost structure, and other branded organisations whose customers are saying they would like to have exposure to mortgages in particular.

However, Kim Cannon, managing director of FirstMac, queried the motivation behind the growth of white-label products – suggesting it might be fuelled by a drive to replace falling commissions with an alternative income stream, rather than a desire to boost competition.

“It’s an interesting question as to why an aggregator may not be able to sell a FirstMac product because of lack of product and brand awareness, but can suddenly sell their own,” he commented.

Cannon did admit, however that FirstMac has itself been involved in white-labelling for over a decade, and that it does assist in “breaking down the brand barriers”.

Resi CEO Lisa Montgomery added that the impetus to sell a white-label product may simply come down to higher commissions – and added that service will have a key role to play.

The panel was also positive about the return of competition to the market: while they acknowledged that the environment is “still tough”, competition and innovation is “bubbling under”. They also commented that intra-Big Four competition – particularly in terms of NAB and ANZ trying to increase market share – could be a key theme of the coming months. For more from this Broker News TV panel, see Viewpoint on page 20

Bankwest woos rateconscious borrowers

Residex expands MarketFacts service

Bankwest has released a new home loan where applied interest rates “get better with age”.

Starting with a 0.4% discount off the average standard variable rate of the Big Four banks, the Bankwest interest rate will decrease the longer the customer remains with the product – by 0.1% pa for the next four years to a maximum discount of 0.8%. The maximum discount will then apply for the remaining life of the loan, according to the bank.

Bankwest head of mortgages Dean Gillespie said the new product – dubbed the ‘Rate Cutter Home Loan’ – would appeal to a wide range of prospective borrowers. “If you are looking for a lower interest rate, buying your first or second home, or even investing in property, this home loan will be the perfect choice,” Gillespie said in tandem with the product’s release.

However, Gillespie said the new product would have a “natural appeal” for first homebuyers in particular, while refinancers looking for a better deal would also benefit from the choice. The move comes as Bankwest seeks to drive business growth along the East Coast, backing up branch offices

Residex has enhanced its broker-specific MarketFacts subscription service with a new ‘Gold’ subscription level.

“With the way the market is changing at the moment, we see brokers under pressure, especially in terms of coping with regulation and running their businesses,” said Residex’s general marketing manager, Kim Davis. “We’re hoping to take some of that pressure off in terms of how they market their businesses.”

The Gold level of service includes all the services in Residex’s existing Bronze and Silver Broker Business Packs, and adds: an affordability calculator to assist brokers to identify how much their client can borrow; a ‘where can I afford to buy?’ calculator to allow brokers to show their buyers the suburbs in which they can afford to purchase; links to current listings; and access to Residex’s sales database.

Marketing materials including posters, leaflets, gift vouchers and website advertisements are also provided with the Gold pack.

and its broker distribution with products that will lure new customers.

Feedback from customers showed affordability was an increasingly “strong” concern, according to Gillespie, while other banks were “almost penalising” borrowers over time.

Gillespie said although many borrowers felt they would not be with the same bank after three or four years, the reality was that many remained with a provider after that time period.

The bank will continue to review its product set, particularly in relation to affordability, although Gillespie said he is happy with the product choice of the bank at present. The new loan is being offered at Bankwest’s standard commission structure.

Bankwest’s Rate Cutter Home Loan • 0.4% starting discount off the average Big Four std variable rate • Additional 0.1% off every year for four years • Maximum 0.8% discount to apply for life of loan

The existing Bronze Business Pack gives brokers access to Residex’s comparative market analysis reports which provide Residex’s price estimate for individual properties. The Silver Business Pack also allows brokers to access Market Reports at state, LGA, postcode and suburb levels, which can be used in marketing newsletters and on broker websites.

“It’s about helping brokers communicate with existing and potential clients, as well as boosting their profile as professionals and property experts – and driving more sales,” continued Davis.

Mary Sartinas, principal of Verix Finance, has been using the top level of MarketFacts for several months. She said that it is a “fantastic tool”.

“It’s a good resource to gauge the potential value of a property before extending finance,” Sartinas said.

“Investors in particular source information from various areas, but the Residex service brings it together and is comprehensive.

It enables me to offer my clients complimentary property reports as a value-add.”

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First homebuyers are back: Aussie

bringing this product to market so that our mortgage manager partners can reinvigorate their lending to the self-employed sector – which has been a traditional target market for the non-banks.”

The low-doc loan will be available via Advantedge’s mortgage manager partners, and Halliwell predicts “strong demand”.

“This is a product that is much needed across Australia’s selfemployed sector and I’d expect our partners to see strong demand among their clients,” he commented. “We’re confident of considerable pick-up.”

The low-doc market has been somewhat quiet in recent years, as lenders tightened policies in the wake of the GFC. Major lenders have typically required applications to be accompanied by 12 months’ worth of BAS. The last significant announcement of a new low-doc product came in February this year, when Collins Securities launched its Aurora Low Doc Refinance mortgage.

Mortgage broker Aussie reported a surge in first homebuyer activity in August. The number of first homebuyers requesting appointments with Aussie brokers via the group’s consumer website more than doubled since March, according to data from the group.

First homebuyer appointments jumped to 50% of total enquiries via the website in August, which also handles refinance, investor, and refinance to move enquiries from borrowers.

In March, first homebuyers only accounted for 36% of requested appointments, while from January to March, first homebuyers made up an average of 38% of activity.

Aussie is putting the surge down to cooling property markets, an improved economy, and increased job security, spurring first-time buyers back into the game.

The after-effects of the federal government’s First Home Owners Grant Boost appear to be wearing off. “The market was white-hot last year due to the federal government’s boost to the First Homebuyer’s Grant,” Aussie’s chief executive Stephen Porges said.

“Many first homebuyers would have paid a premium for their properties during that hectic time.”

Porges said now the market has cooled off, those first homebuyers who didn’t buy a home in late 2009 and early 2010 are ready to step

onto the property ladder.

Co-owner of Aussie’s Parramatta store, Ross LeQuesne, said over the last three months, out of 56 purchases through the business, 19 have been first homebuyers.

Meanwhile, LeQuesne’s real estate referral partner in the area, Starr Partners, has said that during the same period, 45 out of 90 properties purchased were first-timer buyers.

LeQuesne’s said the activity “has started to pick up again”, after first-timers largely “disappeared” during the first three months of the year, due to decreased government stimulus. Having had three to six months to generate savings, LeQuesne said these buyers are coming back in.

Parramatta is a prime location for first homebuyers in Sydney, due to the high percentage of renters in the area, and housing being more affordable than in other in-demand locations.

ACL applications, with ASIC making calls to brokers who have already submitted to see if they would be comfortable to have ASIC visit and check that their documents are in place.

Wood said “anything to do with the consumer, they’ll be tough”, while matters that concern business policy may be given “a bit of latitude”. “But the vast majority [of requirements] are consumerrelated, so when the consumer is not being supported in the way they should, they will ask, ‘what are you doing for the consumer?

You are supposed to have had these documents and you haven’t’ – and I hope that broker will not be made an example of.”

With the main portion of responsibility for ACL applications falling to individual broking businesses, Wood also argues they are not ready for what is required.

“I just don’t think they are realising the extent of what is required of them by ASIC,” she

said. “I believe they need help and they are not going to the right place for it. I’m in the industry, and I happen to think it’s a great industry, but I worry about the brokers not being ready for the knock on the door by ASIC – that bothers me,” she said.

ALCo recently launched a compliance offering that will give brokers an option of accessing pure compliance services – through segmentation of its website – though they may aggregate with another provider.

Commenting on whether brokers were ready for the incoming NCCP regulations, Choice Home Loans chief executive officer Brendan O’Donnell said Choice brokers are “up to speed” with legislation, and they are getting to the point where they are ready for 1 January.

“Brokers are very resilient – they do step up to the game when it’s required – and so from an industry point of view, I think you’ve got those pundits that tend

to look at the low road, but we tend to look at the high road. I do believe that those brokers who are genuinely good brokers out there see this as a welcome change and they are doing a good job,” O’Donnell said.

Low-doc returns to the table A new low-doc product intended to inject ‘much-needed competition’ into that part of the market has been launched by Advantedge Financial Services.

The Advantedge Self-Employed Lite Program features “sharp pricing”, as well as Advantedge picking up the tab on lenders mortgage insurance (LMI) for loans with LVRs of between 60% and 70%. The wholesale lender has also removed the requirement for six months’ worth of business activity statements (BAS) as a form of verification, in a move to assist clients who may not be up-to-date with company financials to secure funding for property.

Brett Halliwell, Advantedge’s general manager of lending distribution, said that the new loan will empower mortgage managers to service a market segment that has been neglected by lenders. “As the global financial crisis hit and funds became tighter, low-doc lending was one of the first casualties,” said Halliwell.

“We’ve been working hard on cont. from cover

>>

Rampal said leaving them to their own devices in terms of compliance is “crazy”, as those businesses applying for ACLs would be the “bigger players”, and as such would be providing the most revenue for those aggregators. “That’s just asking for trouble,” he said.

Wood said the situation will improve. “I think the vast majority of aggregators will be ready by the end of the year, it’s right now there is this wash of not knowing what’s happening, and they don’t realise the documents they should be using today,” she said.

ASIC chairman Tony D’Aloisio recently warned the regulator would be conducting verification surveillances of licence applicants, to ensure they are compliant.

Australian Broker can confirm ASIC has already begun checking on brokers who have submitted

 Aussie caters for first homebuyer return • FHB web-based enquiries have

doubled since March • FHB enquiries up to 50% of

overall interest in August • FHB accounted for 36% of

interest back in March

 Ten policies ACL applicants must have: 1 Compliance plan 2 Risk management system 3 Financial resources policy 4 Human resources policy 5 Information technology resources policy 6 Conflict management arrangements and systems 7 Outsourcing process 8 Supervision and training arrangements 9 Complaints resolution 10 Compensation arrangements Source: National Finance Institute/QED Risk Services

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Yellow Brick Road surmounts savings hurdle Borrowers will be able to acquire a home without having to demonstrate a genuine savings history, following the launch of Yellow Brick Road’s ‘First Step’ home loan.

The product, a result of the group’s partnership with Gateway Credit Union, allows borrowers to garner a deposit from a range of options, rather than genuine savings, with the origin of a buyer’s deposit not a factor in determining suitability for the loan.

Options open to buyers include gifts from parents or other family members, an inheritance, windfall gains and tax returns, to help first homebuyers to enter the market more quickly.

Yellow Brick Road chairman Mark Bouris accused the big banks of squeezing first homebuyers out of the market, by not providing adequate funding options.

“The big banks often require a borrower to show that their deposit is the result of a long-term savings plan, which can make it much harder for people to buy their first home,” Bouris said. “I don’t believe this is an indicator of their ability to make their mortgage payments in the future.”

Bouris said he believed that more critical considerations were income and credit history, rather than the deposit origin, and that banks were benefitting from perpetuating their current policies.

“In reality, this policy by the banks of insisting on a savings record benefits the

banks’ profits by boosting their deposit base. It does nothing to help first-time buyers.”

Bouris said that the Yellow Brick Road release could be a sign of things to come.

“My experience in these things is that once somebody starts making a bit of noise about what’s going on, everybody starts making a bit of noise,” he said. “I don’t want to put it down to what we’ve done, but this could be a bit of a watershed move.”

The new home loan will be offered at a professional pack rate of 6.59%, or a home-based low rate of 6.34%, which is a discounted rate offered by the group for the first two years.

Bouris used the product launch to attack the dearth of independence in the current lending market, saying Yellow Brick Road was now one of the few large, independent financial services organisations remaining. “All the major non-bank lenders from the pre-GFC era have either been acquired by one of the Big Four banks or are brokering home loans for them – they just recycle what the banks give Mark Bouris them,” he said.

SMEs hesitant to take on more debt Small-to-medium businesses have been reluctant to take on credit throughout 2010, according to Veda Advantage’s Business Credit Demand Index, which shows demand was down 5.6% between April and June this year when compared to the same quarter in 2009.

Business credit demand dropped by 4.4% in April and 1.3% in May year-onyear, while June experienced the largest drop in credit demand in six months, falling by 10% compared with the same month last year. More recently, July saw a drop of 2.1% year-on-year.

While the index for the 2009/10 financial year as a whole is still higher than a 2008/09 trough, Hamish Osborn, head of commercial risk products at Veda Advantage, said the recent figures demonstrate “that the market remains cautious and small business seems to be hesitant in the post-global financial crisis economy.” Osborn says a drop-off in

year-on-year demand was expected following the government stimulus activity of last year that could have bolstered the market artificially, but admitted that the group did not expect the large drop-off that was experienced in June.

As well as a drop in demand, small businesses have found it increasingly difficult to obtain credit after the tougher lending practices and higher interest rates of recent months. Research released by advisory firm East & Partners recently showed reluctance on the part of banks to back their SME clients, with loyalty to the sector described as “extremely low.”

Osborn claims “with the GFC, the whole market is taking it down a notch, everyone is tightening up.”

As a result, banks have required credit applications put forward by SMEs to be a lot more detailed and comprehensive, as “tough lending practices have not been relaxed since the GFC.”

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Comment VIEWPOINT

Diversification may be the broking industry’s latest buzzword, but is it all it’s cracked up to be? Our talking heads discuss the issue at a recent Broker News TV panel discussion

Kym Rampal

Lisa Montgomery

Andrew Russell

Kim Cannon

Head, LoanKit

CEO, Resi

Managing director, Firstmac

Brokers already sell diversified products, whether or not they realise it. After all, mortgage insurance and bonds are just that.

We see diversification as very important at Mortgage Choice and LoanKit: we’ve doubled our revenue from $1m in 2009 to $2m in 2010 for diversification products.

We’re seeing reduced profits from trailing commissions, and that is driving us and our brokers to sell a wider range of products in order to diversify our income sources, and ultimately not be so reliant on mortgage-based income.

It’s our view, too, that it’s the duty of the broker when selling a mortgage to make the client aware that there are other secondary products which could be beneficial to them. Competition from the banks is another good reason for brokers to cross-sell: as the first to see the client, brokers have an opportunity to sell diversified products before the banks do.

I think there’s potential to make money from other products.

However, I think it’s really important for brokers and lenders to first and foremost be really good at the core product: selling a mortgage product on price and on service. The customer’s priority at that point is to purchase a home. There’s a lot to think about within that purchase, and if there are extra products coming at them at that time, it could cloud the waters.

Afterwards, however – that’s where the relationship with the client begins, and you can give them the tools that will enhance their financial landscape. Then other products can definitely be sold as part of that relationship, as long as you’re willing to put in the time and establish trust.

However, you need to be good at the primary reason the person is there to see you in the first place – to get that loan settled.

General manager for third party and product distribution, Firstfolio

Diversification comes back to a fundamental question which is relevant for all kinds of people – regardless of whether they’re running big businesses or small businesses. That question is: how am I going to compete tomorrow?

From our experience, some brokers can certainly diversify their revenue streams by crossselling other products, and they do it very well. Others talk about it, want to do it but haven’t yet – and will give a number of different reasons why. There are others still who want to concentrate on their core business: providing a home loan solution to their customer. Yes, there’s a great opportunity to cross-sell and diversify revenue streams – however, you have to be able to do that job well: if so, that strategy will work.

Once, many moons ago, I was a broker. What I learnt about being a broker is that to be successful, you’ve got to focus on one thing and be very good at it. I’ve dealt with many people over the years, including people that have worked for me, who thought they could do everything: home loans, $50m developments, commercial loans, insurance. However, I never saw any of those people become really successful.

Sure, diversification is a great idea in theory: but can the average broker do it? Some may be able to, others may not. I’ve never really seen it work. My view is that, if you’re going to do something, specialise in that one thing and do it very well. That’s how you become successful.

To view the discussion, visit www.brokernews.com.au/tv

FORUM LICENSING THE THIRD WAY, AND SHOULD BROKERS EDUCATE CONSUMERS? Licensing always stokes debate, and I-Financial’s recent pitch to brokers to outsource their compliance to a thirdparty provider other than their aggregator met with a large degree of interest. Here’s what you said – on this and other issues – on the Broker News forum

authorisation for you to seek additional ACR status on the grounds of your agreement with the primary ACL holder, if that agreement has non-external panel clauses etc. My biggest concern about individuals seeking multiple ACR status is the crossover of responsibilities of the ACL holders.

Commented by: VisionMortgageSolutions at 02 Sep 2010 10:50 AM

The NCCP regime regulates activities, not business entities, so it is difficult to see how this proposal can work given the obligation is on anyone who provides credit assistance (brokers) to be either licensed or appointed as a credit rep of an ACL holder. Brokers need to be very careful of ‘alternative’ approaches.

Commented by: Kate Keating at 01 Sep 2010 11:49 AM

The Money Institute’s MD David Hayward met with a strong reaction after recommending brokers enquire about clients’ spending patterns – or put themselves at risk

Excellent article. On the money. If you are a rep to an aggregator, they hold the licence. If you’re an experienced broker, you will be subject to the rules the aggregator sets which will be to the lowest common denominator – new entrants. With respect, there are parallels in the credit rep role to that of a mobile lender of a franchisee who is servant to the all-powerful franchisor. Don’t risk it.

Commented by: Spinner at 01 Sep 2010 11:24 PM We’re a sub-aggregation group and our biggest concerns with becoming a credit rep of our aggregator were: 1. The cost; and 2.

Restriction of the lending panel. We’ve elected to get our own licence and authorise our members as credit reps. My understanding has always been that once you’re a credit rep, the primary ACL holder can withhold

Good advice. Enquiring about spending patterns is not necessarily financial advice, it’s getting to know who the client is and being able to recommend a suitable product. That includes understanding spending and saving patterns. What worries me is the irresponsible setting of credit card limits. Dealing with first homebuyers who have card limits above $10,000 is not uncommon for me; it isn’t needed and irresponsible.

Commented by: Country broker at 31 Aug 2010 09:53 AM I’m sorry, but I’m a broker, not a nanny – how and how much my clients choose to spend is really not my business! This is what credit assessment areas are for, is it not?

Commented by: Broker at 31 Aug 2010 10:21 AM To join the debate, go to www.brokernews.com.au/forum

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INDUSTRY NEWS IN BRIEF Developer GST should go: Bouris

Mark Bouris has called for a GST exemption for developers on home sales, to help first homebuyers crack the housing market. Bouris said by cutting GST out of the sale price, developers could sell properties 10% cheaper, negating any need for housing grants. “I’m sure a borrower would rather forget the grant and decrease the purchase price,” he said.

While not passing on GST, developers build the tax into their price. “If you want to make property more affordable, you’ve got to reduce the price, and the way you reduce the price is take it out of the costs of the developer. The developer has always got to meet the market, so you know he’ll drop his price.” Bouris said with the grant, prices are only pushed up.

NAB and ANZ see July surge

NAB and ANZ saw the biggest increase in mortgage market share in July of the major banks.

APRA’s banking statistics revealed NAB’s lending increased by $1.7bn in July, cementing its position as the third-biggest mortgage lender in the country. ANZ, meanwhile, saw its mortgage book grow by $1.6bn. In contrast, market leaders CBA and Westpac only saw their loan books increase by $833m and $1.3bn respectively – although between them they control over half of the mortgage market. NAB holds a 15.2% market share, with ANZ close behind at a 15.1% share. The figures corroborate those of Mortgage Choice, which has seen a resurgence from NAB and ANZ, with Homeside accounting for 21% of loans in July.

CBA, NFC detail spring offers

Commonwealth Bank and National Finance Club started spring with fresh offers on fees and commissions.

CBA waived the establishment fee on one of its ‘no-frills’ mortgages, available on its 6.68% three-year Rate Saver Home Loan until 31 October.

The bank’s changes represent a saving of $600 upfront, which comes in conjunction with the $0 loan service fee for the life of the loan, equating to a saving of $96 per year. Meanwhile, mortgage manager National Finance Club offered a ‘Spring Carnival Special’ on its LowDoc 60 product, with what it says is an “unparalleled” upfront commission of 1%. The offer to increase the commission by 0.3% will be available until Melbourne Cup day on 2 November.

Brokers told to educate consumers

Brokers may be putting themselves at risk if they do not enquire about clients’ spending patterns. David Hayward from money management firm The Money Institute said brokers may not be fulfilling their duties under responsible lending criteria if they simply carry out credit assessments in a ‘tick-box’ fashion.

Instead, he argued brokers have a responsibility to help clients manage debt and spending behaviour.

“Reducing a credit card debt to ensure a client can meet serviceability requirements and so qualify for a loan is a common practice,” said Hayward.

“However, if the client simply reinstates the card after the approval and then spends accordingly, the broker could be faced with implications if the impact of effective personal debt management is not discussed based on clients’ past behavioural patterns.”

Pepper tweaks product suite

Pepper Homeloans reduced the rates on its Flexi and Self-Employed Advantage products in August. Flexi Advantage rates dropped by 0.25% to 8.49% for loans up to 70% LVR, while loans between 80% and 85% LVR are being offered at 8.99%. LVRs between 70% and 80% continue to be priced at 8.74%. Meanwhile, the Self-Employed Advantage rates have dropped 0.5% to 8.74% on loans up to 70% LVR, and 0.25% (to 8.99%) on borrowings with an LVR of between 70% and 80%. The group also made policy changes, including increasing the maximum loan amount for customers borrowing with an LVR up to 80% to $1m.

Bibby beefs up sales team

Forty per cent growth in Bibby Financial Services’ debtor finance business over the past 12 months has led to a string of new sales appointments. To head up the sales push, Gary Green has been promoted to national head of sales after two years as WA state manager for business development, where he grew the state’s books by 40%. In NSW, the group appointed Rob Daunoras as NSW state manager of business development on the basis of his commercial finance and banking experience at GE Commercial, Volkswagen Finance, ANZ and NAB. Bibby’s WA and NSW operations added new BDM-level staffers, with Rick Twist joining as a BDM in NSW, and Nigel Thayer becoming a senior BDM in WA.

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Comment OPINION CHANGE IS HERE, BUT ARE BROKERS READY FOR REGULATION? A ‘wait-and-see’ attitude to regulation just won’t cut it, argues Danielle Linegar, and there are four misconceptions that should be avoided The National Consumer Credit Protection regime is making waves throughout the credit industry, yet many brokers face the prospect of not being ready to meet their ongoing compliance obligations under the new licensing system. Whether this is due to misunderstanding, incorrect guidance or simple disregard of the reforms, brokers must be aware of their obligations, what they need to do, where to find assistance and what they risk for non-compliance.

A wait-and-see approach may well lead to being excluded from the industry. Below are four common misconceptions held by brokers.

“We just need to ‘tick the boxes’ ” The Australian Credit Licence application form is rather deceptive – the application is far more than simply a matter of ‘ticking the boxes’. The questions on the form relate to many different aspects of the business and its operational policies and procedures. Being able to tick ‘yes’ to a question can involve the creation and documentation of policies, the implementation of procedures, the creation of registers, memberships and insurances, risk assessment, auditing, reporting and reviewing.

Brokers must be clear on the structure of their business, the agreements they have in place with others in the credit industry, their responsibilities to consumers and what, as brokers, they actually do.

They also have the additional responsibility of ensuring that they have an adequate number and variety of products available to the consumer.

All of these factors can, understandably, be extremely time-consuming. Brokers should be weighing up their options and obligations now, in order to be ready for the 31 December 2010 deadline for licensing applications.

“It’s the lender’s responsibility” Brokers primarily play the role of ‘intermediary’ between lender and consumer, paving the way for finance to occur. In the past, they have often relied on lenders’ systems, policies and procedures to ensure that the finance meets the legal requirements.

The new regime requires brokers to take responsibility for what they do. The broker must be able to demonstrate that his/her own systems, policies and procedures meet the NCCP licensing and operational requirements. Compliance cannot be outsourced to the lender.

“Responsible lending doesn’t affect us” As the name suggests, the National Consumer Credit Protection regime aims to protect consumers in credit arrangements. To do this, substantial obligations have been placed on all licensees and representatives to lend responsibly. Brokers fall into this category.

Responsible lending obligations include such things as directing consumers towards products which are not unsuitable, adequate enquiries (and documenting) of the consumer’s requirements and objectives and the giving of Credit Guides, quotes and proposals.

Brokers should already be making the preliminary credit assessment, documenting the customer’s requirements and objectives, ensuring there is sufficient capacity to repay with a reasonable financial buffer between income and expenditure and ensuring the product is not unsuitable.

This is now a broker obligation, quite separate from whatever policies and processes the lenders have in place. Reliance on the lender’s criteria will not meet the broker’s responsible lending obligations under the NCCP regime.

Brokers who are not aware of the specific details of these obligations may already be failing to meet their compliance obligations. It is in their interests to get their compliance regimes in place now.

“It’s a one-off requirement” Many in the industry are under the assumption that once they have met the requirements for the licensing application, they are compliant – that it is a temporary hurdle to overcome. In fact, it is the opposite. The obligations that brokers must comply with (whether they are licensees or credit representatives of another licensee) are ongoing and dynamic.

As a business grows, so does the scale of the compliance obligations. Brokers must be proactive in ensuring that they continue to meet their NCCP compliance obligations by undertaking compliance reviews of policies, processes, customer documentation, insurance cover and other obligations on a regular basis.

A certificate of compliance must be lodged every year with ASIC. It is time to ‘start and do’ Brokers need to understand that they must meet the obligations regardless of whether they choose to become licensees or credit representatives.

There are heavy penalties for non-compliance and unlicensed trading. These include fines and gaol terms of up to two years for those who breach particular aspects of the regime, particularly the responsible lending obligations.

So where to now? To fully understand what is required, brokers ought to consult the relevant member associations, view ASIC guidance on their obligations and seek personalised legal advice. In doing so, they need to determine whether to become a licensee or credit representative.

Once brokers are aware of which direction they wish to take and what they need to do, they will need to allocate adequate time and resources towards developing and implementing the compliance framework.

There are deadlines to meet. Brokers need to start taking steps now to meet their compliance obligations.

If it is left too late, then they won’t be able to legally carry on consumer credit business. The deadline for Australian Credit Licensing applications is 31 December 2010.

The changes to the finance industry are not only coming – some of them are already here. They will affect almost every aspect of consumer credit business and will have a significant impact on how brokers carry out their business.

Now is not the time to be unclear on what broker obligations are – now is the time for action. It’s no longer ‘wait and see’. It’s now ‘start and do’.

Danielle Linegar is a finance lawyer at compliance and training provider Credit Wise

Reliance on the lender’s criteria will not meet the broker’s lending obligations under the NCCP regime

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OPINION

CAUTION SHOULD BE EXERCISED WHEN ENGAGING CREDIT REPAIR COMPANIES Credit repair may seem like an easy way to help your client achieve their financial goals, but as Joe Trimarchi explains, brokers should be wary of just where they refer their clients Credit repair or credit restoration is a recent phenomenon that has been gathering momentum in Australia in the last two years. During this period a number of organisations have emerged offering their services as credit repair specialists or experts.

The truth is not many organisations are competent and have the requisite expertise to repair a credit file. It should be noted there are credit repair companies operating in Australia that are good at what they do. However, this article is aimed at cautioning finance professionals that there are credit repair organisations that are less than reputable and as such should be avoided at all costs. As a broker, the retention of a client by adding value to the service you provide is important, hence a referral to an organisation which is not reputable may in some instances see you lose face with the client and even lose the client completely.

Prior to referring a client to a credit repair company as a broker, you should ask the following questions: • What fees are charged upfront?

• Has the company assessed the client’s matter prior to charging a fee?

• Does the company have a sufficient grasp of the legislation governing credit reporting in Australia?

• Does the company conduct their own credit report, thereby leaving further footprints on the client’s credit file?

• Does the company have professional indemnity insurance?

Reputable companies do not charge upfront fees; they treat the client’s interest as paramount to the retainer and are committed to ethical practice.

The process of credit repair by way of deleting information appearing on a

consumer credit file is delicate, requiring an understanding of the prevailing legislation – the Privacy Act 1988 (Commonwealth). In some instances other state- or federal-based legislation is utilised in order to assist the client, together with negotiation skills.

Should the credit repair company attempting this work not possess the requisite expertise in this field, damage may be caused to the client’s credit file. Such damage may not be discovered until many years later.

A good analogy would be to compare these less-than-reputable credit repair companies to companies which sold asbestos some 40 years ago, in that the poor consumer was sold the product with all the bells and whistles only to be poisoned many years later.

Using asbestos and the carnage left in its aftermath may seem to be in poor taste, but it does show by way of an extreme example what can go wrong if insufficient thought is given to solving a client’s problem.

Mortgage and finance professionals may benefit both themselves and their clients by utilising the services of credit repair organisations, as the benefits far outweigh the negatives.

However, as a professional you must ensure any organisation you work with in assisting your client is transparent, ethical and possesses all the skills to get the job done. If these attributes are established, your clients will benefit from the introduction.

Joseph Trimarchi is the principal of Joseph Trimarchi and Associates law firm, which specialises in Australian credit reporting law. He can be contacted on joe@josephtrimarchi.com.au

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Insight EXECUTIVE COUNSEL

Gino Marra

Carrington National’s Gino Marra values loyalty above all else in business relationships. He tells Australian Broker it is relationships and hard work that lead to success

Name a business leader you admire and why.

Giovanni Agnelli, founder of Fiat. In 50 years he turned the business into one of Europe’s largest conglomerates. At one stage he owned three of the top five car companies in Europe.

What main goal/s got you to where you are?

My main goal when I started was to ensure that I built a business that would provide me with a living more than if I stayed with the bank. Today’s is to give me the time I want to spend with my wife and kids.

Is success due to talent, hard work, or luck?

I am a firm believer in the idea that hard work gets you anywhere. You make your own luck in life.

What character trait has helped you the most in business?

Loyalty. I still have staff, suppliers and funders from the early days of the business. The business was built around relationships. Some of that goes back to 1998 when I started out from my mother’s kitchen table!

What is the key to great business relationships?

Loyalty. Pricing leaders come and go, but building your relationship around your suppliers allows you long-term growth and stability. When things go bad in economic cycles your funders and suppliers stand by you and that has been proven.

What’s the first thing to look at when growing a business?

Don’t grow faster than your cash flow permits. Make sure that you have used your current resources to capacity before you move or get extra staff.

What’s the best piece of advice you’ve ever received?

Customer is always right! Without loyal customers the rest means nothing.

What trend are you currently watching?

Online presence. I believe that more and more loans will be sold online. At the moment the Internet is mostly an information gathering exercise for consumers. Once the decision is made they then go and see the lender or broker of their choice. I believe more and more will happen online without going face to face.

What is your next big ambition?

My son’s Go Kart. Never buy something that comes in a box!

Retaining your clients Do you know the true cost of acquiring a new client and just how vital it is for you to retain them? Byron Gray shows you the top 10 ways to keep them coming back

A

dding up all of the expenses involved, it is quickly apparent that the cost of acquiring a new client can be as high as $1,500.

The key to making a profit is to RETAIN clients for life, while adding new clients, so that your overall income increases exponentially. So what are the top 10 ways to retain a client?

1Have a plan

As a broker your plan for retention should include a range of simple measures and goals for your whole business, and then individual clients, including run-off rate, number of referrals, amount of repeat business and number of products per client.

Creating this plan won’t take long and it’ll keep you focused on what’s important.

Here’s some possible goals to consider: • Obtain three referrals a year per client • Increase the percentage of clients with at least two products with you, eg home loan, insurance, car loan • Contact clients a minimum of four times a year

Keeping in touch with your clients will ensure that when they next need a loan they’ll most likely call you first

2Provide more services

Ever heard of the triple play? This is a key strategy you’ll recognise that telcos and banks use to retain clients. Telcos have a strategy aimed at gaining your fixed, mobile and internet business because they know that by having at least two products with them you’re 70% more likely to remain a client.

From your perspective, the key here is for you to cross-sell as many products and services you can to a client. Don’t just provide them with their home mortgage but also provide income protection, life insurance, car loans, budgeting assistance or an annual review of their mortgage statement.

3 Get feedback

Getting feedback from your clients will help you understand their current and future needs, identify ways in which you can improve your service and, importantly, make them feel wanted.

Survey all of your clients at least once a year and supplement this with one-to-one surveys or feedback at key points in your relationship, such as just after settlement of their loan.

There are several ways to conduct a survey, including phone or mail, however the most cost-effective and simplest for you and your clients is to use a free online tool such as Survey Monkey. When doing a survey, keep it short and offer an incentive to participate.

4 Use your database

Your customer database should be used for two key purposes – to collect client information and to market to clients using this information.

Collect key information about your clients such as demographics, products purchased, loan details, etc.

Some of this information will obviously also come from your survey results. You can then segment clients into groups, such as first homebuyers, owner-occupiers and

Byron Gray is general manger, sales & marketing at training provider Peter Heinrich Intellitrain

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investors, or even break them down by life stage, location, family status and number of children. After segmenting your clients you can then develop targeted marketing communications that will directly appeal to their needs.

25

MY WAY

5 Be easy to deal with

The easier you are to deal with the more likely a client will want to stay with you.

A key aspect of this is to understand how each client prefers to communicate, be it by phone, face to face or email. Each client will be different but it’s important to communicate with them in the way that they feel most comfortable and of course will best gain their attention.

6 Stay in touch

Keeping in touch with your clients will ensure that when they next need a loan they’ll most likely call you first. This also gives you a chance to tell them about new products or services you’re offering, and may uncover a need that the client was not conscious of before your contact.

How you contact them is directly related to how they want to deal with you. The most common and easiest way is to send a regular newsletter either by post or email.

7 Build loyalty

Loyalty is crucial to client retention. Research indicates that 60% of loans don’t go back to the originating broker.

Loyalty will result from following these tips but also through implementing a planned program of rewards, eg providing a client a gift upon settlement or when they refer someone to you. These programs can be ad-hoc or more formal depending upon your needs.

Another way to build loyalty while keeping in touch is to contact the client just after loan settlement, three and 12 months into their loan then ideally just prior to a key milestone such as completion of their fixed-term loan.

8 Under-promise and over-deliver

You can build fantastic client relationships and loyalty based upon underpromising and over-delivering – a simple, yet extremely powerful concept.

If, for example, you promise to follow up with the bank for a client and get back to them within two days, do it today or at the latest tomorrow. Remember how important this is to the client. They’ll be waiting for your call, so surprise them and call them before you promised.

On the flip-side, never make a promise that you doubt you’ll be able to keep. There’s nothing like a broken promise to send a client to your competitor.

9 Educate and empower

By keeping clients educated you will become a trusted advisor, so whenever they are looking for finance information they’ll contact you instead of your competitor.

Two key ways to educate clients is through providing valuable information in your regular newsletter and by inviting them to attend free information seminars. These seminars are another opportunity to stay in touch, communicate, make clients feel important and obviously sell new products.

10

Do the unexpected

Surprise valued clients with unexpected gifts or rewards. For example, if you don’t have a formal loyalty program and a client provides a referral, send them a special gift such as a hamper, gold-class movie tickets or a voucher. Some brokers actually send their top 10 clients a gift during the year simply to thank them for being a client. These ‘out of the blue’ rewards can have a powerful impact on client retention.

The many costs of acquiring a new client Studies show that on average, it costs 5–7 times more to get a new client compared with retaining existing ones. On an average loan of $300,000, the upfront is around $1,500, and research indicates that the cost for a broker to obtain a new client is between $1,000 and $1,500. This in effect means you’re simply covering your costs.

The costs of acquiring a new client include: • Your own cost, ie your expertise and the value you create for the business • Any marketing expenditure • Time on the phone handling the initial enquiry • Your travel time to the appointment • A percentage of your car costs (fuel, maintenance) • Time at the interview • Time chasing clients for any other required information • Cost of the technology – software licensing, laptop • Telecommunications cost – landline/mobile phone • Preparing and monitoring submissions • Compliance costs

Tracey Gilbert, Julie Ryburn and Rose De Rossi (pictured above) from Diversifi in WA are a united team that can’t be separated from their quest for professionalism What is your greatest business achievement?

Being recognised as WA best business (year-on-year growth) of the year from Choice Aggregation Services in our second year of operation.

What’s the key to getting business through the door?

Consistency and persistence with marketing, advertising, and business referral relationships to get our brand out there and attract new business. Our genuine concern for looking after our clients and improving their life is a major component of our service offering. Our team is dedicated to making all clients feel wonderful. The clients enjoy the experience and therefore refer customers to us!

What goals have got you to where you are?

Committing to everything, doing it well and then next time doing it better. And also having fun while doing it!

Also, providing excellent customer service and being honest and loyal.

Who has helped you the most, and how?

Our aggregator, Choice Aggregation Services, has assisted immensely, in particular Brett Foster – WA state manager.

What character trait do you most value in yourself?

Professionalism!

How do you stand out from the crowd/competition?

We are a young, vibrant business that embraces change.

Via our diverse service offering we can make a difference to the lives of our valued resource… our clients.

What do you tell yourself when the going gets tough?

If we can do well in tough times we will kick ass in the good times!

What is one thing you want to improve in your business?

Everything. You must look at ways to make every aspect of your business better continuously.

What piece of advice would you give to an ambitious broker?

Persistence and patience. Oh, and the ‘C’ word – communication. Be prepared to work hard while having fun. Don’t give up when things get tough; stick at it and you will succeed.

What’s your next greatest ambition?

To strengthen our brand to become recognised in Perth, then nationally. More awards would be sensational too!

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Market talk

Going once, going twice...

Auction clearance rates are reported on with gusto by the mainstream press, but do they actually mean anything?

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nyone with even a remote connection to the Australian housing industry will be very familiar with the reporting of auction clearance rates.

The weekly figures are often held up by media and industry commentators as harbingers of the state of the market. Falls in clearance rates from 80% to around 60% earlier this year produced howls of dismay from some quarters.

However, auctions make up less than 20% of Australian house sales, and are largely restricted to Sydney and Melbourne. Are they really that useful?

RP Data’s research director, Tim Lawless, thinks that they are.

“It has been suggested that reporting on auction clearance rates is a waste of time: we want to dispel this myth once and for all,” he wrote in a recent blog.

“Historically, Sydney and Melbourne have been the leaders of the national property market, so by measuring their auction markets we gain a good insight into the overall health of the Australian property sector.

“The collection of auction clearance rates is one of the most timely lead indicators and a good measure of the

balance between vendor and buyer sentiment. As a property market analyst, it provides quality insight into what is happening in the market before we can confirm our suspicions with a complete data set.”

A good example of this occurred earlier in the year, Lawless says. Clearance rates had been easing in Sydney since late March, and in Melbourne since mid-April. In March, the most up-to-date external property data available only measured sales until the end of January 2010, and indicated that the market was still going strong. However, the clearance rates indicated that the market was slowing – a finding that was confirmed later by property value growth for April of 0.2%, compared with 1.3% in March.

Louis Christopher, managing director of SQM Research, agrees that auction figures can be useful as a market outlier. However, he argues that they are not flawless.

“Overall, they are a useful indicator in determining turning points in the property cycle; however, I would question their accuracy,” he says. “Each outfit that reports on them has a different methodology, and the reporting process isn’t necessarily very transparent.”

Another common criticism is that, other than the Sydney and Melbourne figures, the sample sizes are so small as to be meaningless. Christopher is not so sure about this.

“Adelaide and Brisbane have reasonable auction markets, so the figures coming out of those markets can be useful,” he comments. “However, the figures from elsewhere are typically too small to be of any use.”

Another point worth bearing in mind, too, is that clearance rates themselves are only an expression of the number of properties sold out of those for auction: a low clearance rate does not necessarily mean fewer sales, just more stock on the market.

By the same token, a high clearance rate may simply mean it is a slow weekend, with very few auctions that mostly result in a sale.

The graph opposite shows the trend of total sales in Melbourne and Sydney. While there are large dips and spikes during slow and busy periods, the overall trend is relatively steady, even following the fall in clearance rates from around 80% to 60%.

So while auction rates may not be a perfect measure of the market, they work well as a general leading indicator of where the market is going – and as such are quite useful.

However, you would be well advised to take them with a healthy pinch of salt, and to look at the methodology and the other numbers involved, as well as the headline rate.

www.brokernews.com.au

NUMBER CRUNCHING

MARKET NEWS IN BRIEF Australia boasts strong growth rate

Total auction sales, August 2009–August 2010 (Sydney and Melbourne) 1000

27

Sydney

Melbourne

900

800

Australia’s growth rate is one of the best in the developed economic world.

The national accounts figures reveal an annual growth rate of 3.3%, ahead of Treasury’s 3% growth forecast for this year. The numbers were boosted by a 1.2% jump in the June quarter and revisions to earlier quarters.

Australians also appear to be experiencing increased economic confidence. Recent figures from the Australian Bureau of Statistics reveal better than expected retail spending and building approval rates, both of which are a barometer of economic confidence.

700

House prices stable in July

Home values stabilised in the month of July, recording a moderate seasonally adjusted increase of 0.4%, according to the RP Data–Rismark Hedonic Home Value Index.

The July figures follow a 1% seasonally adjusted drop in the month of June, which was the first negative movement in capital city home values in 17 months. The best performing capital city in July was Darwin, with home values up 1.1% in the three-month period to the end of July. Sydney and Adelaide were the only other capital cities to record increases in house values, at 0.3% and 0.2% respectively.

600

500

400

300

200

100

“What undersupply?” asks analyst 8-Aug-10

22-Aug-10

25-Jul-10

11-Jul-10

27-Jun-10

13-Jun-10

30-May-10

2-May-10

16-May-10

4-Apr-10

18-Apr-10

7-Mar-10

21-Mar-10

21-Feb-10

7-Feb-10

24-Jan-10

6-Dec-09

22-Dec-09

8-Nov-09

22-Nov-09

11-Oct-09

25-Oct-09

27-Sep-09

13-Sep-09

30-Aug-09

0

Auction clearance rates: Week ending 22 August Clearance rate

Number of auctions

Sold

Sydney

64.6%

240

155

Melbourne

69.8%

308

215

Brisbane

20.2%

104

21

Adelaide

56%

50

28

Darwin

n/a

= 4

0

Perth

53.3%

15

8

Canberra

75.0%

12

9

Hobart

 7.7%

13

1

Auction clearance rates: Week ending 29 August Clearance rate

Number of auctions

Sold

Sydney

60.4%

498

301

Melbourne

65.1%

705

459

Brisbane

18.3%

93

17

Adelaide

54.8%

62

34 =0

Darwin

n/a

10

Perth

25%

32

=8

Canberra

68.2%

22

15

Hobart

46.7%

15

7

Election weekend unsurprisingly brought an across-the-board drop in the number of houses going under the hammer. The picture looks better for the following week, though, with the best sales week for both Sydney and Melbourne in two months. Is this due to pent-up demand from the previous weekend, or a sign of things to come?

All information supplied by RP Data

Property analyst Michael Matusik has challenged claims that Australia has a chronic housing shortage.

“Disbelieve anyone whose sales pitch is largely based around how much the market is undersupplied,” said Matusik, who runs the Matusik Property Insights consultancy. Matusik argued that the situation was, in fact, the exact opposite – heading towards oversupply.

He suggested that the impact of overseas migrants had been overestimated and the effect of growing household sizes underestimated.

All-round growth boosts RP Data

Property research firm RP Data has posted full-year profits of $7.7m.

The figure represents a 38% increase on 2009 figures, which RP Data attributed to “a strong underlying operational performance across all areas of the business”.

The company reported that it had seen solid growth in its core data business, with the number of average monthly customers up 9% and the average monthly spend per customer increasing to $335. Subscriptions from real estate agents, brokers and valuers also increased.

New home sales fall prompts call for action

A third consecutive fall in new home sales has spurred the Housing Industry Association to call on the new government to take action.

The latest HIA-Jeld Wen New Home Sales Report revealed that the number of new homes sold fell by 7% in July 2010. Sales were down by 8% over the three months to July, to end 2% lower when compared to the same period in 2009.

The HIA is asking the government to adopt a threepoint action plan: a new housing cost reduction program, a housing and development ministry, and recognition and support for small business. Detached house sales fell by 7.3% in July 2010, while sales in the multi-unit sector fell by 4.1%.

28

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Toolkit • The referrer isn’t banned from engaging in credit activities • Various conditions are fulfilled during the referral process.

Any engagement in credit activities over and above this level will require the referrer to become a credit representative or a licensee in his or her own right.

There is also a requirement for referrals to be ‘incidental’ to the main business of the referring organisation.

Therefore, if a company’s main business is to gather contact details for the express reason of referring those details on – such as a lead generation company – then they may need to obtain their own licence, as ASIC could view them as providing credit assistance as an intermediary.

Websites

Referrals: step-by-step From 1 October 2010, lenders and brokers will need to have agreements in place with business associates such as real estate agents, accountants, financial planners and lawyers who refer customers to them.

But what exactly does this entail?

When do you need an agreement?

Occasional referrals by customers, friends, or relations do not amount to ‘credit activities’, and will not require an agreement. Business-related referrers who do not provide

customer contact details are also exempt, as long as they fulfil certain requirements.

It is a different matter for business-related referrers who do provide customer contact details. From 1 October, a referrer may provide the contact details of the customer to a lender or broker provided that: • The lender/broker has an agreement with the referrer that specifies the conduct in which the referrer can engage.

This agreement can be created by a written offer and acceptance by conduct, such as by referring a loan.

There are also rules relating to websites. Where a website features a link to a licensee’s website, no agreement is required. However, a website that collects data about customers, which is then passed to a licensee or credit representative, will need to be covered by a referral agreement.

Operators of websites that collect data and provide some other information or assistance in relation to credit may need to be licensed or appointed as a credit representative.

If you refer potential borrowers to us [name of lender/broker], you will be deemed to have agreed to the terms set out in this document.

You must: • only engage in credit activities as a referrer incidentally to another business you are carrying on; • not charge a fee to the consumer for the referral; • only inform the consumer that we are able to arrange loans and leases but not specify any particular product, and not provide any recommendations or advice concerning loans or leases; • inform the consumer of any commissions or other benefits you may receive; • obtain the consent of the consumer to pass their name, contact details and a short description of the purpose for which the consumer may want the credit or lease; and • pass the consumer’s contact details to us within five business days of informing the consumer that we are able to arrange loans and leases, but not any specified particular product.

Sample agreement provided by Gadens Lawyers

Register of referrers

The licensee must keep a register of referrers, including the date and the means by which the agreement with the referrer was entered into, and the date of commencement of the referrals. It will be sufficient if the licensee has access to the register – so an aggregator’s credit representative may each maintain their own register.

Non-standard business premises

The referrer must not conduct business by contacting people face-to-face from ‘non-standard business premises’ (such as a stall in a shopping mall). This

The referral process Referrer takes customer details and gains consent to refer; advises of any commission or benefits. The referrer must not charge a fee.

Sample referral agreement

has caused some confusion over property ‘open house’ situations.

The rule of thumb in this situation is that if the situation is a display or exhibition village, then it can be classed as a standard business premise – especially if there is an office on site. If it is just an open house, then it is not a standard business premise, and referrals cannot take place.

However, if the referrer gets in touch with clients who have given their consent to be contacted once the referrer gets back to the office after the open house, and seeks their consent at that point, that would satisfy the law.

Penalties Referrer passes customer’s name, contact details and a short description of the purpose for which the customer may want the credit or lease to lender/broker within five business days.

Lender/broker contacts customer within ten business days of referral, names the referrer and advises customer again of any commissions to be paid to referrer.

The penalties that may be imposed upon licensees for breaches of the regulations are significant. They include a maximum civil penalty of up to $1.1m and a criminal penalty of up to $22,000 or two years’ imprisonment.

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29

One year on What a difference a year makes… or not. Australian Broker reflects on the punditry, breaking news and influential trends that made headlines in the magazine 12 months ago

Issue: Australian Broker issue 6.18 Headline: Suncorp’s annus horribilis (page 4) What we reported: Suncorp’s acting CEO Chris Skilton described FY09 as “the most difficult ever” for Suncorp: the group recorded a 40% fall in net profit after tax and minority interests. The profit figure was $348m, a significant drop when compared with its FY2008 figure of $583m.

In its banking division, Suncorp produced an 81.5% drop in profit before tax to just $117m in FY09, compared with $633m in 2008.

What has happened since?

Suncorp announced a group after-tax profit of $780m in August this year – double its 2009 figure. $215m of the group’s pre-tax profit was produced by the sale of LJ Hooker, along with Suncorp’s joint venture interests in RACQ Insurance and RAA Insurance. Suncorp Bank’s after-tax profit was $268m. CEO Patrick Snowball said Suncorp was making ‘good progress’ following the shocks of the GFC. Snowball commented that lending had been constrained in the first half of the year as the bank rebalanced its funding mix, but lending across the core portfolio grew 2.5% over the second half of the financial year.

Patrick Snowball

Headline: Brokers keeping ING customers happy (page 8) What we reported: ING Direct had reached the top of customer satisfaction ratings, a survey found last year. Nielsen Financial Services Monitor’s June quarter 2009 results found that more than 75% of ING Direct’s 1.4m customers were satisfied, while over 70% would have recommended the bank to others. Bendigo Bank came in second on the list with 75% of customers satisfied, followed by BankWest, which recorded a satisfaction level of 66%.

ANZ was the best performer of the major banks with a rating of 62%, followed by Westpac (57%), NAB (54%) and CBA (53%).

ING Direct’s executive director of mortgages, Lisa Claes, praised brokers for the role they played in helping the company achieve its high rating.

What has happened since?

ING Direct received Canstar Blue’s 2010 award for Most Satisfied Customers, Challenger Banks. The award shows that ING Direct has maintained its very strong customer satisfaction levels over the past year and has maintained its competitiveness in the banking market. The award, based on the results of a Canstar Blue-commissioned survey by market researchers Colmar Brunton, is a result of surveyed customers indicating they are very happy with ING Direct’s banking products and services.

Customers also gave the challenger bank high ratings in the supporting categories of call centre, problem solving, innovation and ‘wow factor’. Bendigo Bank was awarded second place overall, with BankSA, Suncorp, Bank of Queensland, St.George Bank and BankWest all receiving third-tier ranking for overall customer satisfaction.

Headline: Westpac reaches $100bn deposits milestone (page 23) What we reported: Westpac reached $100bn in deposits from retail banking customers in July 2009, according to APRA. Westpac, along with its subsidiary St.George and rival ANZ, was one of the fastest growing deposit takers in the month of July. ANZ topped the list, adding $1.3bn, taking its retail deposit base to $59.3bn. Westpac took in just over $1bn, while another $587m went into St.George. Deposits at both Westpac and ANZ were growing by more than 15% pa in July 2009, almost twice as fast as CBA and NAB. NAB took in $986m, bringing its total to $55.8bn. CBA took in only $816m, though it remained way ahead with $139bn in retail deposits.

What has happened since?

Westpac has continued to grow its deposit base over the past year. The bank received $900m in retail deposits in June 2010, taking its total to just under $109bn, according to APRA. CBA topped the list for monthly growth in June, recording $1.3bn in retail deposits and taking its total deposit base to $130bn. ANZ had growth of $800m over the period, taking its total figure to $64.5bn. NAB was the worst performer of the Big Four, receiving only $400m for a total deposit base of $61.8bn.

30

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Feature

Ben Abbott, editor of Australian Broker

OFF THE CUFF

AFTERWORD MAKE SURE YOU CLEAR THE FINAL HURDLE

Andrew Clouston Managing director, National Finance Club

What was the last book you read?

A Prisoner of Birth, by Jeffrey Archer.

If you did not live in Australia, where would you live?

Monterey, California for the weather, seaside villages and golf.

If you could sit down to lunch with anyone you like, who would it be?

Sir Richard Branson, for his genius, energy and sense of fun.

What was the first job you ever had?

Actuarial clerk with Norwich Union Life Insurance.

What do you do to unwind?

Cook/eat and exercise – enjoying one requires the other!

What’s the most extravagant gift you ever bought yourself?

A holiday house by the beach.

What CD is currently playing in your car stereo?

Jet – Shaka Rock.

If you could give anyone starting out in business one piece of advice, what would it be?

Write a business plan, work with it, review it and update it regularly.

If I was not working in the mortgage industry, I would like to be...?

An international sports journalist so I could attend all of the world’s great sporting events and view them from within the ropes.

Where was the last place you went on holiday?

West Coast of the US, Napa, Pebble and LA.

If there is a theme to this issue of Australian Broker, it is getting ready for the reality of compliance – and particularly if you are a prospective ACL applicant. With only a few months to go for Australian Credit License applications to be lodged with the Australian Securities & Investments Commission before the 1 January deadline, time is fast running out for those brokers who wish to follow the path of independence to get their house in order.

So, is this likely to be a problem? Well, not at all – if you are informed, and ready. Professional mortgage and finance brokers will likely have little trouble with the application process (either via ASIC, or through a third party) or the ongoing compliance requirements – though this may end up taking more time, and costing more than expected. But being self-employed, and being a “resilient” bunch (as Choice Home Loans chief executive Brendan O’Donnell says in our cover story this issue) brokers have ridden the waves of this industry for a number of years, and as savvy business people will find little to challenge them in the move towards industry regulation.

But there are pitfalls, largely due to a lack of awareness of what an ACL will actually mean for a business. Many brokers are only now realising what is required – extensive documentation, systems and policies – and looking closely, are seeing a mountain to climb.

While this is an individual business responsibility, some aggregators are also choosing not to dedicate resources to helping ACL applicants through the process, and in leaving their brokers to their own devices, may end up losing them to their competition which is fast heating up.

Indeed, a number of aggregators have come to the table with fresh offers for ACL holders in relation to compliance, and likewise for credit reps, and brokers are taking notice.

Regardless, brokers should be on notice that ASIC is serious about its responsibilities. The regulator – thanks to stocking up on staff to enforce its credit compliance responsibilities – has already begun a program of checking on ACL applicants, either by phone or through “verification surveillance”. ASIC’s record is one of making examples – and the credit industry will be no different.

But this is a final hurdle, of sorts. If ACL applicants raise the bar, and meet the legislative requirements, this will yield great benefits for successful brokers. Estimates (from a variety of parties) argue the transition to licensing will see the industry drop in numbers dramatically – some even say as low as 7,000.

Who is going to fill this vacuum? Those that are left. Now is the time to face the challenge: reaping the rewards will be just around the corner.

NEWS AT YOUR FINGERTIPS

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AUSTRALIAN MORTGAGE AWARDS 2010 Book your table now so you don’t miss out!

September 24, 2010 The Westin Hotel, Sydney

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People Broker to have his say on national policy

A

reverse mortgage and equity release finance broker has been invited to participate in a prestigious annual economic growth summit taking place in Sydney in September.

Darren Moffatt, managing director of Seniors First, is one of 100 delegates selected from business and academia who will take part in the National Economic Review 2010.

The main goal of the high-level meeting is to develop a charter for growth of the national economy, with delegates to focus on how to boost Australia’s competitive advantage with the rest of the world and drive a new era of sustainable growth. Moffat said it is “a real honour and privilege” to be invited to participate in the forum. “I’m really excited, and I’m looking forward to making a contribution in any way possible,” he added.

Moffatt said he was invited to participate due to his experience working with senior Australians, which has given him a “deep, and perhaps unique understanding of the financial challenges facing this group”. “There are not a lot of people who do our kind of work, and make no mistake, the ageing of Australia’s population is the most profound demographic trend we’ll encounter in our lifetimes – it poses enormous challenges for policymakers,” he said.

As part of the Sydney gathering, Moffat said he hopes to provide insights into the issues and problems emerging from this demographic shift, and offer up

ideas for discussion. The event will be held on September 16-17.

The conference will involve a dinner with Federal Treasurer, Wayne Swan, which will be followed by a day of proposing and debating policy ideas on the floor of the NSW Parliament House.

Following the conclusion of the review, a report containing the agreed policy recommendations will be prepared and submitted to the Federal Government.

Moffatt said he has developed ideas for the summit encompassing retirement funding, financial literacy, ageing, and senior’s housing, but was open to further suggestions from brokers.

“This is a unique opportunity to possibly shape future public policy for Australia, and I reckon the more input the better,” he said.

‘If anyone has any good ideas that they think would improve the country in any way, I’d encourage them to get in touch. I’m happy to be a messenger for good ideas, regardless of their origin,” Moffat added.

Darren Moffat

Accolade in Adelaide for cancer-kid support

Greg Campbell (center), with Flynn Sullivan (left) and Leith Yelland (right)

S

outh Australian mortgage broker Greg Campbell has been recognised for his tireless charity work, taking out the state’s Franchisee Community Service Award at this year’s Franchising Council of Australia’s SA Excellence in Franchising Awards for the second year running. Campbell, a Mortgage Choice franchise owner based in Adelaide’s suburb of Unley, has been honoured with the award for his ongoing support and contribution to the cancer charity, Camp Quality, which supports children stricken by cancer as well as their families.

Having been a volunteer for over 10 years, Campbell is involved in all aspects of the charity – including reward programs and their charity ball - and uses his professional profile in broking to increase public awareness of the organisation and raise much-needed funds.

“This recognition will help me to further raise the profile of

Camp Quality and hopefully bring in more money for the wide range of activities this fantastic organisation accomplishes for families every year,” Campbell said after being presented with the award.

As well as volunteering, Campbell makes a monetary donation to the charity for every home loan his business settles and says that he “can only imagine what we could achieve if more small business operators got involved.” He said receiving the award is a privilege. “Being acknowledged at these awards is the ultimate accolade for the franchise sector.”

Campbell is aiming to come away with the top national award when he takes on the other state finalists at an awards night that will take place in Surfer’s Paradise on October 12. Send your people news to the editor, at ben.abbott@keymedia.com.au

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Caught on camera Loan Market brokers gathered at Sydney’s Hilton in August to celebrate success in tough times and gear up for the year. The result was ideassharing at a lineup of cutting-edge workshop sessions – as well as over a few after-hours drinks!

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Motivational speaker Amanda Gore Ross McEwan, CBA head of retail Loan Market brokers warm up to Amanda Gore’s pep talk Loan Market enjoys a return to the 80’s Tim Damien (Suncorp), Denise Distler (Loan Market), Ken Chng (Deposit Power) Dean Rushton, Loan Market chief operations officer Sam White, Loan Market executive chairman Loan Market’s Sam White, Sam Boer (CBA), Bruce Patten (Loan Market’s Top NZ Broker), Denise SisavanhChan (Top Australian Broker), with Brian White, Marc Oliver (ASB) Kylie Rodda and Brendan Rodda

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Insider

Got any juicy gossip, or a funny story that you’d like to share with Insider?

Drop us a line at insider@ausbroker.com

Coming behind in ‘moving forward’

T

he recent Federal election may have put observers to sleep prior to the vote, but thankfully managed to spark more interest afterwards.

However, with the decision essentially coming down to the whims of three independent MP’s from the country – and they themselves deciding to take their own time in choosing who to make a deal with – Julia Gillard could be forgiven some measure of frustration at things not ‘moving forward’ at a faster pace, considering that underwhelming phrase was the slogan Labor took to the polls in August.

However, Insider would like to commiserate with the business community, who were the unacknowledged and aggrieved victims of the result – not because companies had to wait so long for a decision, leaving markets to hover uncertainly in the leadership vacuum – but that thanks to Labor’s ‘moving forward’ slogan, they will have to reengineer their own lexicon.

Indeed, executives are fond of dropping the odd ‘moving forward’ or ‘going forward’ into speeches, presentations or even casual conversation over coffee, so much so that Insider has long cringed at media events, when the likelihood of the usage increases dramatically among individuals present. This is often to the point where Insider feels almost like telling the line of individuals sprouting the phrase to form up

in a conga line and get it over with.

Loan Market’s chief operating officer Dean Rushton was confronted with the new challenge at the group’s recent conference in Sydney. Having been told he would be presenting on the opening day some time prior, he shared his frustration with the audience that his main inspirational message – yes, about ‘moving forward’ – had to be turned into a joke, rather than a catch-cry. “Along came Julia Gillard, and now moving forward is a punchline – in fact, I think it’s a rap song,” Rushton said.

Admittedly though, Rushton did a good job of surmounting the new linguistic hurdle, by inserting some good election humor to fill the gap. “I’m told our four guys from the ACT are now officially independent,” he said.

“They may align with NSW, though it depends on their platform – and Queensland have already offered free flights to the Gold Coast”.

Insider hopes that other industry execs can do as well – and that Julia Gillard’s knifing of the phrase was in fact a blessing in disguise.

‘Yes Minister’ the wrong answer

A

“mortgage eliminator” that can easily and legally remove a homeowners’ name from their mortgage

and give them free and clear ownership of their home -– sounds too good to be true, doesn’t it? Well that’s because it is. Unfortunately for them, the residents of Maricopa County in the US state of Arizona never got the memo. It seems quite unbelievable to Insider that anyone would fall for such a con. Yet, for a handful of trusting, unsuspecting homeowners in Phoenix, the prospect of a quick-fix solution to their mortgage woes was simply too hard to resist. It also didn’t help that the man selling it to them was their local minister. Surely he could be trusted? Well, apparently not, with the residents of a town finding this out the hard way.

The minister, Edward L. Carpenter, used his religious influence to prey on the faithful members of his community.

Operating under the pretense of a mortgage “rescue” business, Carpenter managed to acquire $257,398 in illegal proceeds.

Using his knowledge of the mortgage system, Carpenter filed fraudulent foreclosure paperwork with the County Recorder’s Office. This paperwork was designed to cloud the title, confuse title companies and cause mortgage companies to fund loans.

Carpenter would siphon off portions of these loans for his own use. These funds were on top of the initial fee of $1,000 that Carpenter had already obtained from his flock. The law (or the Almighty?) finally caught up with him when he was found guilty of 10 charges relating to his fraudulent mortgage “rescue” business. He may be the one needing rescuing when he is sentenced in October this year. God may forgive him, but Insider feels the courts won’t.

A cautionary tale

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t the risk of overburdening the topic of fraud, Insider feels a cautionary tale from the UK is in order. Broker Ngozika Louise Ogboru, of Harrow-based mortgage broker JN Finance (UK) was banned for carrying out reckless business practices. But she wasn’t punished for what she did: she was punished for what she didn’t do.

The problem was, Ogboru was found to be running her business in an incompetent and irresponsible manner that allowed other advisers to commit mortgage fraud. That’s right, other advisers.

An investigation by the UK regulator, the Financial Services Authority found that Ogboru – the only approved person at the firm – had failed to ensure that adequate systems and controls were implemented to monitor staff and prevent mortgage fraud.

Other advisers at the firm were able to submit false mortgage applications under Ogboru’s nose using log-in details without her knowledge. One employee was still using her details five months after his employment was terminated at JN Finance.

The problem was only compounded by the fact that, despite warnings that the firm was being used to commit mortgage fraud, Ogboru continued to run her business in the same manner. The FSA took a dim view of this, and Ogboru was lucky to escape a £65,000 ($104,000) fine – ironically because it would cause her financial hardship.

The lesson for Australian brokers? Make sure your systems are robust enough to prevent similar problems, as it’s unlikely that ASIC will be any more lenient on offenders.

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