Australian Broker magazine Issue 8.14

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ISSUE 8.14 July 2011

Bank wars could see commissions rise

Gerald Foley

 Brokers could see a reversal of commission cuts as banks compete for market share

After an erosion of commission income since the global financial crisis, third party brokers may begin to see some upward movement on their remuneration as banks shake up commissions.

National Mortgage Brokers managing director Gerald Foley said the competitive price war being waged between major banks could soon potentially spread to the mortgage broking arena.

The well-publicised mortgage

price war between the big four has seen a series of initiatives and price discounting designed to boost market share in a lower credit growth environment.

As the majors head towards an increasingly dominant share of the mortgage market, Foley said the big four will fight amongst themselves to wrest customers from each other. Though he believes banks can cut interest rates more without sacrificing their margins, Foley said the majors will eventually reach a place where the only way to increase volumes will be to make their proposition to brokers more attractive – and this may turn attention to commissions.

“I think the banks will work through the process to get to market dominance, then they will start to say, ‘OK, the banks have gotten to 95%. How can we go from 15% of that to 25%?’ That stuff will be the next level. The only way to do that without corrupting their whole book will be to bring a better proposition into the broker space,” Foley commented.

Possibly heralding such moves, St.George recently announced a streamlining of its commission structure to revive year-one trail, which the bank had scrapped in November of last year. The commission changes are both give and take, with the bank now applying a 15bp trail for the life of the loan, rather than its previous structure in which trail increased to 25bps by year five.

Foley said the move could bring more brokers into the St.George fold. “St.George and Westpac have been trying to get more business off less people, but they’ve gotten to the point where they’re writing all they can. For those lenders to get more business you need more people writing,” he said.

While Foley believes the banks will continue to fight to win over both borrowers and brokers, he commented that any changes to the big four’s value proposition could be temporary.

“The banks have come down a bit on their margins. Once they’ve gotten to that market dominating position, though, they will begin to sneak them back up.”

Carbon crunch Warnings over carbon tax impact on mortgage payments Page 4

‘No-go’ canned Mortgage Choice reversal over potential ‘no-go’ client fee Page 6

Comms clarity CBA to review commission bonuses to improve transparency Page 12

Inside this issue Analysis 20 The consolidation squeeze Opinion 22 Century 21 on the market Viewpoint 23 Are FBC clawbacks viable?

Market talk Brokers on Queensland

24

Insight The BDM sales ABC

26

People 27 PLAN, ING Direct people moves Caught on camera 28 NAB Broker business lunches

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News St.George resurrects year-one trail St.George has announced a streamlining of its commission structure and the revival of year-one trail, less than a year after introducing its previous commission pricing.

The changes, which will take effect from 1 September, include 15bps year one trail which will extend to the life of the loan, and a 15bps upfront incentive for brokers who have a conversion rate of 80% or better in addition to the 50bps upfront currently on offer.

The bank last year announced changes to its commission structure to do away with trail commissions in year one, when it introduced a ramped trail and upfront conversion structure. St. George general manager Steven Heavey said the upcoming change was decided upon because of broker feedback on the importance of year-one trails.

“At St.George we strongly value our relationships with brokers and listen closely to their feedback.

We’ve heard from our broker

partners that trail in year one was an important aspect to the overall commission structure and these changes are in response to that feedback,” he commented.

While Heavey said the bank did not see any reduction in broker volumes as a result of its previous commission structure, he said the new commission structure was decided upon as a way to urge more brokers to consider using the lender.

“We have a mandate for growth in St.George. Part of that is brokers, and every bit of research we did with brokers was to try to get them to consider St.George again; the feedback we were getting was the importance of trail in year one. We have been building momentum in the market and we think this is going to take that to the next level,” he commented.

Heavey said the structure has been streamlined from the bank’s previous three-tier commission structure and emphasised the importance of rewarding brokers for application quality, saying the

80% conversion rate benchmark was a realistic one. Heavey commented that he expected the commission restructure to direct more brokers towards St.George in what was becoming a tight lending market.

“When you’ve got a market that’s growing the slowest in 30 years, all the lenders have got to ensure everything lines up. For us that was one area that was missing,” he said

non-compliant brokers was part of a “natural progression in our role as the regulator of this industry”.

She said ASIC would continue its “proactive surveillance activities” in order to weed out noncompliance. The result of these surveillance activities, Bell said, could well be “further deterrence actions”.

In its release relating to the infringement notice handed to the Sydney broker, ASIC said it would seek infringement penalties as a first recourse in some cases rather than proceeding directly to civil action. ASIC stated that the notice was issued because the company advertised credit services on its website, but was not registered, authorised or licensed to provide credit services. Bell said ASIC

EDITOR Ben Abbott COPY & FEATURES NEWS EDITOR Adam Smith PRODUCTION EDITORS Carolin Wun, Sushil Suresh ART & PRODUCTION DESIGN PRODUCTION MANAGER Angie Gillies DESIGNER Ivee Caburian

SALES & MARKETING SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak

Happy trails: St.George’s commission shake-up Changes to the St.George commission structure include: • 15bps trail commission in year one and for the rest of the life of the loan • 15bps upfront conversion incentive for brokers who have a conversion ratio of 80% or better, in addition to the current 50bps upfront base commission on settled loans

ASIC on the prowl with fines, bans ASIC has turned up the heat on its monitoring activities, and expects to be taking more deterrence action in the months ahead.

In June, ASIC handed out its first infringement notice, slapping an unnamed Sydney broker with a $27,500 fine. In July, the watchdog issued a permanent ban issued to Victorian broker Kristy Ann Lake after she pleaded guilty to fraudulently obtaining finance by using another person’s name on loan applications. ASIC has commented that it expects to see further action taken against non-compliance as it moves from its focus on licensing and registration into its role as industry regulator.

Acting senior executive leader of Real Economy Rosanne Bell said ASIC’s recent action against

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would take several factors into account before deciding whether to pursue infringement penalties or civil penalties.

ASIC action timeline, 2011 • 5 July 2011 – ASIC issues permanent ban to Victorian broker Kristy Ann Lake • 28 June 2011 – Unnamed Sydney broker issued infringement notice • 29 March 2011 – ASIC issues permanent ban to NSW broker Yan Li, its first permanent ban • 14 March 2011 – ASIC suspends credit registration of Sydney-based broker Dark Blue Fire Source: ASIC

SENIOR MARKETING EXECUTIVE Kerry Buckley MARKETING EXECUTIVE Anna Keane COMMUNICATIONS EXECUTIVE Lisa Narroway TRAFFIC MANAGER Abby Cayanan CORPORATE DIRECTORS Mike Shipley, Claire Preen MANAGING EDITOR George Walmsley PUBLISHING DIRECTOR Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil

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News

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

Industry emits outrage at carbon tax proposal Industry has slammed the federal government’s proposed carbon tax, claiming it will add nearly $500 to mortgage payments.

The government’s proposal set a $23 per tonne price on carbon.

The tax would also include a compensation scheme for households to offset increases in energy charges.

Master Builders Australia and the REIA, however, have claimed the compensation package will not cover increases in the cost of new housing.

Master Builders claimed the cost of new housing will rise by at least $5,000, adding $480 a year to mortgage payments. The association also forecast that building and construction output will be reduced by 2.5%, amounting to $5bn

per annum. Master Builders CEO Wilhelm Harnisch claimed the effects of the tax would impact on every part of the housing market.

“There is nothing in it for homeowners, small business and the building industry. It is a cascading tax that will flow through the supply chain, adding cost at each point that will hit homebuyers and small business.

Renters will also be caught in due course,” he commented.

The REIA echoed Master Builders’ assessment, and added that the cost of renovations will also increase under the proposal.

REIA acting president Pam Bennett claimed the average kitchen and bathroom renovation would increase in

cost by around 2%.

“This will impact adversely on housing affordability which is already at low levels. The current state of affordability has seen the number of first homebuyers decline to only 15% of all purchases, compared to the long-run average of nearly 20%.

First homebuyers will bear the brunt of the government’s inaction on compensation for the increased costs associated with a carbon tax,” Bennett said.

Bennett commented that at the introduction of GST in 2000, first homebuyers were compensated with the introduction of the FHOG, and said a similar scheme should have been introduced with the carbon tax proposal.

Refis breathing life into flat market The MFAA has claimed refinancing is still alive in spite of a flat mortgage market.

The association’s newest Home Finance Index has indicated a rise in the proportion of respondents who had refinanced their mortgage. The survey, which polled 1,139 homeowners, found 24.7% had refinanced their loan in the past two years, and 14.2% had refinanced in the last year. The result is an increase on the previous Home Finance Index.

MFAA CEO Phil Naylor said mortgage brokers can take advantage of refinancing activity.

“Even with a flat property market, there’s plenty of work for brokers who are talking to their clients. In times of economic uncertainty, people with

mortgages are looking at ways to make their loans more affordable,” Naylor commented.

The survey also found that of those respondents planning on borrowing or refinancing in the next three months, 45% would most likely select a variable rate loan. Fixed-rate loan popularity increased slightly, with 16.3% of respondents indicating they would seek to fix their mortgage, up from 15.5% in January. Close to one in five respondents said they would fix part of their loan.

Australian Finance Group has also reported a rise in refinancing activity, with the aggregator’s June Mortgage Index showing refinances accounted for two out of every five loans processed. Most of this flow went to the major banks,

which wrote 82.1% of AFG’s loans in June. General manager of sales and operations Mark Hewitt attributed the spike in major bank activity to competitive moves by the majors to grab market share from one another. Hewitt commented that AFG had “never seen the major lenders as hungry for business as they are right now”, due to competitive offers on rates, fees and switching incentives.

As a result, non-major market share – which includes second tier and other lenders – decreased from 19.6% to 17.9% of loans.

“Where we get concerned is that non-majors don’t necessarily have the balance sheets to compete,” Hewitt said. “The official ending of exit fees will only further damage

Mark Hewitt

the prospects of creating an open market contested by a variety of different players.’

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‘No-go’ fee a no-go Mortgage Choice has reversed its previous position on discussions surrounding fee-for-service, and has said consumer research has proved the model is not yet commercially viable.

CEO Michael Russell had previously told Australian Broker the company was examining models for a “no-go” fee, and that fee-for-service was commercially inevitable. However, following consumer research conducted by the company, Russell has said fee-for-service may be a long way from being accepted by consumers.

The company’s 2011 Fee for Service Survey has found 61% of respondents would not pay a fee to use a mortgage broker. Twentyfour per cent indicated they would not even consider paying a fee which was fully refundable upon settlement. Russell said the results indicate the mortgage broking industry is not yet “sufficiently mature” to introduce fees without seeing volumes significantly decline. He stated that the findings mean Mortgage Choice will not move towards any kind of fee-for-service model until at least the next financial year. He commented that the survey indicated the need for the mortgage broking industry to make its value proposition to consumers more apparent.

“The overwhelming response was not a surprise, but the

percentage of respondents who were not yet willing to pay a fee-for-service was higher than we had hoped for.

Michael Russell The results of this survey and another we completed recently clearly demonstrate the need for our industry to raise its profile as a consumer-centric sector that provides exceptional and necessary service to all Australians looking for property finance,” he said.

As the sector educates consumers on its value proposition, Russell said he hopes to see consumer resistance to fee-forservice diminish. He said the company would commission another survey at the end of the financial year.

Smartline has also previously indicated it was mulling a no-go fee. Managing director Chris Acret said the company still discussed the issue internally, but that it is “not high on our agenda”. He said consumer acceptance of a no-go fee would largely depend on the quality of advice being offered by brokers, as well as their relationship with the client. Acret commented that he did not find the idea of a no-go fee “unreasonable”, but that he did not believe there was currently a commercial imperative to introduce such a fee.

For what it’s worth: The amounts the 39% of respondents willing to pay a fee-for-service would pay 10% 8%

Between $1 and $250

50% 32%

Source: Mortgage Choice

Between $251 and $500 Between $501 and $750 More than $750

Bank of Melbourne to ramp up broker pitch Mortgage brokers in Victoria are set to receive a stream of communication from Westpac’s Bank of Melbourne operations in coming weeks as the new brand is officially launched.

Previously, Westpac announced that it would rebrand St.George Bank’s Victorian business under the previously defunct Bank of Melbourne brand, to create a more “regional” player.

In the lead up to the launch, St. George head of intermediary distribution Steven Heavey said the bank had a communications plan that would take brokers on an “exciting journey”.

“We’ll be undertaking a whole range of activities around the Bank of Melbourne launch over the next four to six weeks,” Heavey said in July ahead of the launch.

“It will be about bringing brokers on a journey in terms of the brand and its history, as well as showing how it will operate, and how it will operate in relation to St.George.”

Heavey said the bank had made investments in first party branch infrastructure and call centre resources specifically, and that it would be outlining aspects of the launch – including product pricing and policy – as its broker communication plan progresses.

While Bank of Melbourne will focus on building market share via an increased first party presence, Heavey said that the business is not looking to write less through third party networks. Instead, the bank is hoping to boost overall market share via first party gains.

“We are not changing our strategy around dealing with intermediaries in Victoria,” Heavey said.

There are great opportunities in the marketplace for a regional brand, Heavey stated. He cited research which found that 50% of

Steven Heavey

Victorian customers want to deal with a major bank brand, while the other 50% would be open to dealing with regionally branded players.

“We have clear goals for Victoria, both this year and next year, and within the broking industry it will be a positive thing,” he continued. “If we can play in that space, and provide customers with what they need, brokers will be the beneficiaries in being able to sell that brand.”

Bank of Melbourne CEO Scott Tanner previously stated the bank would seek to triple the impact of its brand in Victoria, on the back of branch, ATM and call centre investment.

State of play: BoM’s Victorian pitch • Local leadership team to decide on product, pricing and policy • $90m investment for new infrastructure and launch • 100 branches and 300 ATMs within five years • A separate, Victoria-based call centre

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News

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Thin margins spell trouble for non-banks: Aussie Non-bank margins may be unviable as a result of the government’s ban on exit fees, Aussie CEO Stephen Porges has claimed.

Porges said he expected a blow to volumes as Aussie and other non-bank lenders are forced to increase upfront fees as a result of the ban, and questioned how some smaller lenders would survive.

“We’re probably the most competitive of the non-banks at the moment, and we’re doing that on a very thin margin, so I think others will struggle,” Porges said.

Porges said Aussie has yet to make any moves in response to the

ban, but conceded that clawbacks may have to be instituted in the future. As many non-banks and mortgage managers have already introduced clawbacks, Porges predicted the rest would eventually follow suit.

“I would be astounded if people don’t bring in increased clawbacks as a result. Logic dictates that we’ll have to at some time,” he commented.

In spite of some other non-banks now espousing the benefits of the ban, Porges said he does not see a silver lining in the legislation.

“I do not see a single benefit in this,” he commented.

Ryan calls for ‘cando’ attitude amid non-bank negativity

Paul Ryan

Intouch CEO Paul Ryan has criticised pessimism in the nonbank sector, and says non-banks should adopt a “can-do” attitude.

In light of widespread industry speculation that the non-bank sector would struggle following the DEF ban, including claims from the MFAA that the sector was “on its knees”, Ryan commented that the industry must stop espousing negativity.

“I don’t understand. Here we are meant to be saying we’re creating competition against the major banks, and non-banks keep running down the sector. We want to bring competition back down to the marketplace. The only way you can do that is if you have a positive, can-do attitude. We can’t

Porges also refuted claims recent fee increases on Aussie’s Optimizer product line are a reaction to the exit fee ban.

Media reports have drawn parallels between the introduction of the government’s exit fee ban and increases in upfront fees for some lenders, including Aussie Home Loans. However, Aussie CEO Stephen Porges said the fee increase, which brings application fees on the products from between $250 and $500 to a flat $600, was not related to the regulation.

“The increase in fees is not really a response, and it wasn’t really an increase. Some went up,

some went down, so we’re basically just aligning them. The application fee is waived right now anyway,” Porges said.

have big broking firms out there creating the perception that the non-bank sector can’t survive,” he commented.

Ryan said non-banks and mortgage managers could see viable margins if their businesses are correctly structured, and lambasted big overheads and expensive management structures in some lenders’ businesses.

“We build the business in and around the margins available, and the margins allow us to build a profitable business. Any business is viable on the basis that it’s built around the margins. Go and look at your own management structure before you bring the whole sector down,” Ryan said.

With the DEF ban coming into effect at the beginning of the month, Ryan commented that the sector should capitalise on the benefits of the legislation, and better position itself to consumers.

In spite of industry criticism of the ban, Ryan said he sees opportunity in the development.

“The non-bank sector has a great opportunity. It’s a level playing field. There’s no longer any deterrent for any customer,” he remarked.

“If you’ve chosen to be in the non-bank sector, you talk it up.

You don’t see the coach of a rugby league team at the beginning of the season say that the team can’t win,” Ryan added.

Stephen Porges

Flashback: Ryan breaks with industry on exit fee fight Intouch CEO Paul Ryan last month broke with the industry over its efforts to fight the government’s unilateral ban on exit fees through an MFAAled ad campaign. He argued that, while the ban was “poor government policy”, the fight to see it overturned would alienate consumers.

“The problem I saw with the ad campaign and the reason I didn’t want to be involved in it is the government had too much traction with consumers,” he said.

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Banks woo fixed-rate borrowers in reaction to exit fee ban Fixed rate popularity is again on the rise even as the looming spectre of RBA rate hikes subsides, and a bank play for stickier mortgage portfolios may be behind the spike.

Mortgage Choice has stated that demand for fixed rate loans has reached its highest level since January, accounting for 12.33% of all approvals for the company.

Mortgage Choice spokesperson Kristy Sheppard said continued worries over RBA rate hikes have convinced a growing number of borrowers to seek interest rate security.

“Perhaps the constant speculation about interest rate rises in the latter half of 2011 and beyond convinced a higher number of borrowers to simply lock in their rate rather than feel their stomach churn with each piece of speculation,” Sheppard commented.

Sheppard commented that the gap between fixed and variable

products is narrowing.

“July’s figures will be interesting because over the past month we’ve seen several lenders reduce their fixed rates on home loans. Now, there’s one-tenth of a percentage point between the average threeyear fixed rate, traditionally the most popular with borrowers, and the average basic variable rate.

We haven’t seen that close a comparison in some time,” she said.

With lenders slashing the products’ pricing, fixed rates have reached their lowest level since 2009, comparison site RateCity

said. Data compiled by the company put the average threeyear fixed rate at 7.38%, just 8bps above the average standard variable rate. From 1 June to 1 July, RateCity said it recorded 18 lenders that cut their threeyear fixed rate products by as much as 60bps.

The aggressive pricing moves on fixed rates may be a reaction by lenders to the advent of the exit fee ban as many try to secure stability in their mortgage portfolios, RateCity CEO Damian Smith said. Regardless of its motives, Smith said borrowers

are still set to benefit from the moves.

“The ban on excessive early fees does not include break Kristy Sheppard costs for fixed rate home loans so it’s a better deal for lenders to increase their customer base for fixed loans while borrowers could save on interest.

For instance, we’ve found threeyear fixed rates as low as 7.14% which is better than most standard variable rates currently on offer,” he said.

The gap narrows: SVR and fixed rates move closer together Date

Avg SVR

Avg 3-year fixed

Difference

March 2010

6.31%

7.63%

1.32%

July 2010

7.05%

7.71%

0.66%

January 2011

7.34%

7.45%

0.11%

July 2011

7.30%

7.38%

0.08%

Source: RateCity

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News

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Compliance forum aims for ‘cultural shift’ A new online compliance forum will help provide guidance to brokers struggling to come to terms with the NCCP regime, and aims to produce a “cultural shift” in the way brokers approach compliance issues.

The forum, launched by Holley Nethercote Commercial Lawyers, will provide a platform for brokers to seek legal advice and compliance assistance from experts, as well as communicate with industry peers. Holley Nethercote solicitor Sonnie Bailey said the law firm will be active on the forum to provide advice.

“Our core business is providing specialist legal advice, so if we get the same question from different clients we might de-identify our answer, and post the Q&A online,” Bailey commented.

In addition to posts by specialist compliance lawyers, Bailey said the law firm has sought out other compliance experts to take part in the forum and offer guidance to brokers.

“We have an insurance broker who will post a Q&A monthly, and are in discussions with RG 146 providers as well as compliance consultants who will post

regularly. So you will have lawyers and compliance professionals taking part in the discussions. We invite advisors from outside of our firms to contribute and showcase their knowledge, too,” Bailey said.

Holley Nethercote solicitor Kathryn Wardrobe said most of the law firm’s ACL-holder clients are financial planning businesses, for whom the task of compliance is “not a new concept”. However, the online forum will cater to those still wrestling with enacting compliance procedures on an ongoing basis. Wardrobe said this changeover was proving difficult for some in the mortgage broking industry.

“Mortgage brokers, pay day lenders and even some accountants have struggled with not only having the required policies and procedures in place, but ensuring that those policies and procedures are followed on an ongoing basis. There is, in some cases, a reluctance to accept compliance as part of the day-today operations of the business. It is achieving this cultural shift which is proving most challenging,” she commented.

Run-off cover at risk as brokers exit

Brokers who fail to notify their PI insurer when they require activation of their policy’s run-off cover provision could be leaving themselves at risk of client claims.

IHG Surety & General business development manager Phil Metcalfe said many brokers are unaware that they need to notify their insurer in writing to activate their run-off cover when they exit the industry.

“When someone leaves the broking industry, they can apply in writing for run-off, and that must be done prior to their policy expiring,” Metcalfe said. “In our case, that then affords them with seven years’ additional coverage for any prior claims they’ve had during their policy period.”

Metcalfe said there is a misconception the run-off is

automatic. “In going out and seeing lots of aggregators and brokers, there seems to be a misunderstanding of this run-off – a lot of people just think it’s automatic, but the broker has to actually apply in writing to obtain the run-off,” he said.

Metcalfe said brokers who forget to notify their insurer prior to the expiration date of their policy are being left exposed, and with many brokers leaving the industry as the NCCP comes into force, they should ensure they enact these free provisions.

Under the NCCP, ASIC requires insurers to provide run-off cover as part of the PI coverage they provide to the mortgage broking industry. Metcalfe said there is also a requirement that PI cover be “continuous”, causing problems should brokers not activate their run-off.

IHG Surety & General is also updating its policy to ensure brokers are able to enact their run-off cover even while receiving trail commission income.

Previously, this was not the case.

“We’ve tried to listen to our clients and we thought it was important to vary our policy to allow trail commission,” he said.

Choice launches business masterclass Choice Aggregation Services has launched a new business skills class for its members.

The aggregator’s PartnerPlus Masterclass is a structured program which will include workshops and day sessions to help brokers assess their businesses, develop strategic action plans and attract new business. Choice CEO Stephen Moore said the workshop would cover seven “key ingredients” to develop a successful finance broking business.

Moore said the initial workshops, rolling out across each state in July, are invitation-only, and were limited to 120 members the company believed had “great growth potential” in their businesses. However, Moore said future classes would be open to all Choice members. He said interest levels in the classes were high among Choice members, and that the aggregator had received

overwhelmingly positive feedback on the program thus far. “[The classes are] for those members who are genuinely interested in taking their business to the next level. That’s really the test. We’d be keen to work with each and every member, but they’ve got to want to grow their business,” Moore said.

Moore commented that the workshops will teach fundamental business skills, and aim to help brokers develop structured plans for the future of their businesses. He said Choice has received feedback from its members that many do not have a clear plan for the direction of their businesses, and very few have documented a business strategy, corporate vision or goals.

“For many members it’s about having a clear view of where they’re headed as a business.

There’s that old adage, ‘prior planning prevents poor

Stephen Moore

performance’. It’s more than an adage, it’s a truth in business.

Many brokers will enter this space and fail to plan for the

future. It’s easy to drift along week to week, but if you have a structured plan it’s far easier to be successful,” he said.

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CBA promises to review Vow brokers embrace commission clarity insurance products The Commonwealth Bank has vowed to act on third party mortgage broker feedback indicating its commission structure is not transparent enough, according to CBA executive general manager of third party and mobile banking Kathy Cummings.

Speaking with Australian BrokerNewsTV following the bank’s recent across-the-board success in MPA’s Brokers on Banks Survey, Cummings said: “The feedback that I am taking on board is that our commission structure may not be transparent enough.”

“We do have a head group bonus that we pay to most of our partners, in our head group partners, and I’m not sure that that is being cascaded as transparently as it could be. That’s an area we are looking to refine and make more transparent for brokers, to understand the rewards that they do get when they are using CBA as their prime business partner,” she said.

In addition, CBA will continue to compete on service and price, rather than price alone, Cummings said. “We understand that we are not the cheapest in the market, and we are very much aware of the competitive environment around pricing. We will always be competitive around pricing, but our platform is to lead on service, so while I understand we may not lead on price, I think

we are in a good position.”

CBA landed a swathe of top ranking slots in MPA’s recent Brokers on Banks Kathy Cummings survey, across categories that included broker support, turnaround times, internet platform and satisfaction with credit policy. However, the bank did not rank on commission transparency.

Cummings said the bank could boast a “fairly unique proposition”, mentioning credit policy and BDM support as specific areas of success for the bank. “We really encourage brokers to ring our credit area – we really encourage that dialogue – so we can make a deal work,” she said. “In these days where credit policy has moved a lot post-GFC, it is important to have good quality dialogue, and I think that is an area that we really do excel in.”

Cummings added she was pleased with top rankings for BDM support, as well as the positive results overall. “We’ve invested a lot in our people, and it is lovely to see them recognised for the work that they do put into brokers. We are absolutely delighted at the results that have come out of MPA’s survey. This has been a goal for us for some years and we have really invested. To see it actually come through this year, we are absolutely delighted.”

Over 220 of Vow Financial’s brokers expressed interest in selling general insurance via new alliance partner, Allianz Australia, in the first four weeks after the groups struck a deal.

Under the terms of the agreement signed by Vow and Allianz Australia in May, the insurance group, which is a subsidiary of a global general insurance provider, will offer all housing-related insurance products to the clients of Vow’s brokers.

Vow CEO Tim Brown said in a statement announcing the deal that in a difficult economic climate for brokers at present, Vow Financial management thought it important to establish alternative sources of income for its broker constituents.

“Already a healthy percentage of our brokers are using Allianz, and we expect more to join up as they come to appreciate Allianz’s competitive offering in this market,” Brown said.

Michael Osborne, head of sales

and distribution at Vow Financial, said in the aggregator’s latest broker update that its broking network “appears to have shifted on mass from thinking about diversification to actual implementation of new products and services”.

He said this has been evidenced from “dozens” of brokers utilising the Vow Leasing service, expressions of interest in partnering with Vow Wealth Management – Vow’s financial planning joint venture with The Selector Group – and over $10m worth of investment properties exchanging through with the use of the Blue Wealth Property service.

Commenting on the deal, Allianz managing director Terry Towell said that insurance is an important consideration for clients who are taking out a home loan.

“It is in both the broker’s and borrower’s best interest to put in place an appropriate insurance solution and ensure protection is in place,” he said.

Vow Financial in 2011 • March: Launched new financing services Extended vehicle and equipment finance and leasing service options to brokers of former aggregators The Mortgage Professionals and The Brokerage.

• May: Launched Vow Wealth Management A JV with Sydney-based financial planning firm The Selector Group saw the creation of Vow Wealth Management, as a first step towards a fullyfledged planning arm.

Homeloans rolls out ‘elite’ broker service Homeloans has begun piloting a new ‘Elite Broker Circle’ offering, which the nonbank has said will provide a premium level of service for selected broker partners.

Homeloans said the new preferred service platform recognises Homeloans’ existing capacity to bring the “value of superior service to the forefront with key broker partners”.

The creation of the ‘elite’ segment is

being piloted with 15 key broking groups in NSW, with the service to quickly expand to other states and territories of Australia within the next few months.

Selected brokers will be able to order valuations upfront and access Veda Advantage credit checks when completing applications, to assist in smoothing the passage of their deals. The non-bank will also have designated credit managers assigned to service these brokers.

Homeloans general manager of retail sales Greg Mitchell said while service levels were already “very good”, the initiative would make the loan application and settlement process “a bit sharper” for key brokers that have supported Homeloans in the past with volumes.

Mitchell said aspects of the service had been tested for some time, and the group is confident it can quickly scale the service up for a wider pool of elite “one percenters”.

Following major bank initiatives such as St.George’s Flame and CBA’s Diamond program, Mitchell said premium service offerings are what brokers are expecting – and should be expecting – across the board. He added that with Homeloans’ traditional focus on providing more personalised service than the major banks as a smaller lender, it would not be a major step up from the already existing service offering. “If our existing offering is business class, then this is first class for those coming on to the system,” he said.

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13

WORLD

‘Solo’ agents prompt Irish peak bodies CAAMP response get closer In Canada, peak mortgage broking association CAAMP was forced to reiterate a pledge to work with provincial governments to ensure minimum education standards for mortgage professionals, in response to concerns inexperienced mortgage agents were “flying solo” in Ontario markets.

According to Canadian Mortgage Professional magazine, CAAMP is seeking to harmonise regulations and legislation governing the industry, due to the current “wide range of practice standards being applied to agent supervision among some of the country’s brokerages”. Ontario-based broker Nick Tassone of Midtown Mortgage Service told CMP that since new regulations in Ontario did away with the requirement to have a licensed broker on-site, the market had been flooded with inexperienced agents working without the “direct and necessary training and guidance of their broker”. “I know that these people will not survive, but it’s the damage they do along the way that matters,” he said.

The Irish Brokers Association, the Professional Insurance Brokers Association and the Independent Mortgage Advisers Federation could become a single association representing brokers in Ireland by September, following movements from their members to enact a tie-up. The latest effort – which would bring together a total of 1,300 members – comes on the back of previous failures over a period of six years, according to the Irish Independent. The push is coming due to a desire among these members to have one voice representing brokers on important matters such as regulation. The movement also reportedly has the support of banks, insurers and regulators in the jurisdiction.

The paper reported that the biggest obstacle to the merger among the associations was a “jockeying for positions” among association staff. The latest verdict on a potential merger will be reached in September.

UK propagates new mortgage products The number of mortgage products available to mortgage intermediaries in the UK has increased for the seventh month in a row, bringing it to the highest level since the summer of 2008. In good news for the market, the UK’s Mortgage Introducer magazine reports that a recently-released product analysis shows a 4% increase in product availability during the month of June this year, bringing total mortgage products to 12,525. While all main product types increased in number, the greatest increase was in variable rate products – which were up 21% – to a total of 1,500 of all available mortgages. Fixed rate products continue to dominate the UK market, providing 7,788 of all new product options. The Mortgage Brain figures showed that 4,500 products had become available in the past seven months alone, and that these numbers put the market at its highest level before the financial crisis.

14 www.brokernews.com.au

News Credit demand worst in Rate pause coaxes first four decades: Cummings homebuyers back Demand for credit is at its lowest for 40 years, and lenders will have to make aggressive rate moves to remain competitive, CBA’s Kathy Cummings has said.

Cummings, the bank’s executive general manager of third party and mobile banking, has commented that credit growth is the slowest in decades, and lenders will have to fight over a tight refinancing market as new purchasers increasingly retreat.

“We are experiencing the slowest credit growth in the home loan market for 40 years, and with a decline in demand for new mortgage lending, there is likely to be a resulting pressure on refinance offers as well as a highly competitive rate environment,” she said.

Bankwest head of specialist lending Ian Rakhit agreed, and said well-funded banks are fighting to gain or defend market share. He commented that low volumes could not be blamed on industry consolidation due to the NCCP, but were indicative of sluggish consumer demand.

Rakhit said banks and brokers could use the lull in borrower activity to examine and fine-tune efficiencies in their loan processes.

“Banks and brokers are looking to be even more efficient, and so now is the time for us all to examine how we do business and

Ian Rakhit

whether that is the most cost efficient way. Quality of application submission remains very variable, which adds time to both broker and bank in the transaction with more frequent customer interactions required. A fully completed application requires minimal touches for all of us, which saves time and money and gives a quicker approval to the customer,” Rakhit said.

Along with improving efficiencies, Cummings said brokers will have to focus on referral relationships as enquiries become less frequent.

“Brokers who have key strategic partners and solid referral sources, such as real estate agents, accountants and financial planners will be in a position of strength,” she commented.

The RBA’s signals that rates may remain on hold for the rest of the year has provided a shot in the arm to the struggling first homebuyers’ market, Loan Market has claimed..

At its July board meeting, the Reserve Bank indicated that slowing employment growth, modest credit demand and softening asset prices as reasons for a continued cash rate freeze.

The Bank also noted that temporary price shocks from natural disasters earlier in the year are expected to dissipate, leaving inflation close to the Bank’s target range over the next 12 months.

RBA Governor Glenn Stevens gave his strongest signal yet that the necessity of a rate rise in the months ahead may be dwindling.

Stevens conceded that recovery following this year’s floods and cyclones was proceeding slower than expected, and that growth for 2011 was now not expected to be as strong as earlier predicted.

Loan Market spokesperson Paul Smith said there was a strong case for the Reserve Bank to leave rates untouched for the remainder of the year. He pointed to recent ABS figures showing a 7.9% decline in dwelling approvals for May, and said consumer confidence was still shaky.

“Many analysts have forecasted inflationary pressures to ease off without any short-term rate rises.

Right now people are very cautious about spending, but the RBA can go a long way to restore confidence by keeping rates down,” he commented.

The protracted rate pause, Smith said, is making first-time buyers more eager to enter the market.

First homebuyer demand has seen massive declines since the wind-up of the First Home Owners Grant Boost, but Smith said Loan Market had seen a 10% increase in firsttime buyer enquiries in June. He commented that the RBA’s decision to pause on rates may have been instrumental in the result.

“We have gone eight months without an interest rate rise and this has encouraged those looking to purchase their first home,” Smith said.

Diplomas should be minimum for real estate agents: REIA The REIA has cautioned the government on a national licensing regime for real estate agents, warning it could erode national standards.

The latest industry to see a Federal move to create a national licensing system, the real estate industry is expected to see licensing commence by 1 July 2012. The Council of Australian Governments is currently developing a licensing system to remove inconsistencies between states and territories. However, the REIA has warned the moves could see educational standards for real estate agents lowered, with the REIWA claiming it would have the effect of “watering down” existing standards.

“The REIA is adamant that the key to providing a low-risk

professional service to homebuyers is through mandating a high level of initial qualification and ongoing professional development.

The REIA also believes that with more and more individuals having exposure to commercial real estate, either directly or through their superannuation fund, it is imperative that commercial agents are included in the national licensing system,” REIA acting president Pam Bennett said.

The organisation is calling on a licensing system that would require a diploma and compulsory professional development. It has criticised moves to allow a Cert IV as a minimum standard, saying this would allow short-training courses in which agents could be licensed within two days. The

move would reduce pre-existing minimum standards in WA, NT, Tasmania and SA from a diploma to Cert IV. REINSW President Wayne Stewart said this low entry-level training, already regulated in NSW, has reduced the professionalism of the industry in the state.

“It is beyond belief that in NSW

a person can achieve the regulated entry education requirement in two days. There is an inherent lack on training in these two day programs, yet we are asking those who do them to advise consumers on complex property transactions and matters involving assets of significant value. This just sets people up to fail,” Stewart said.

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15

Brokers must evolve Greens bill would and stop ‘product force LMI mobility flogging’: Bouris Brokers are undermining themselves if they “flog products” rather than evolving into more holistic advisers, YBR chairman Mark Bouris has said.

With the number of brokers in the industry shrinking and credit demand softening, Bouris has commented that borrowers expect more holistic advice from a broker, rather than merely being directed towards a home loan product.

“Borrowers don’t just make a decision in isolation anymore. It’s not like going to the supermarket and selecting a product off the shelf. They expect a broader view on the advice being given. The consumer is smarter. They understand you have superannuation, you have risk issues around insurance and want to make sure they have the best mortgage every year.

If you don’t offer these things you’re going to be bypassed,” Bouris said.

While Bouris stated that brokers should be able to advise clients on a wide variety of products including superannuation, wills and insurance, he said brokers should, at minimum, specialise in risk management products along with mortgages. Bouris believes risk management should be a part of every discussion a broker has with a client.

“It doesn’t make sense for the client to trot off and see an insurance broker the next day. They’d rather stay in one shop.

Mark Bouris Then the relationship becomes about managing debt and managing risk as opposed to selling a mortgage,” he commented.

Diversification will be key to surviving in a tighter mortgage market, Bouris indicated.

“The NCCP raised a whole lot of new costs. Revenue lines reduced as well. Banks have quashed commissions. Flows have reduced, margins on flows have reduced and costs have increased.”

In the midst of reduced revenues and higher costs, Bouris said there is an opportunity for motivated brokers to evolve along with consumer expectations.

“The good ones are going to become very good and be far more beneficial to their clients, and have a broader range of offerings.”

The brokers who will not survive, Bouris said, are those who focus on selling products rather than advising consumers on debt and risk management.

“That’s one of the reasons we had a major credit crisis, and the GFC – too much product flogging,” Bouris said.

A banking reform bill introduced by the Greens will include measures to make LMI portable.

The bill introduced by Greens MP Adam Bandt would require banks to help customers switch their accounts to rival banks.

Under the legislation, banks would be required to re-route direct debits and credits to customers’ new accounts for 13 months after they switch to another financial institution.

Bandt said the bill would provide for a smoother changeover and encourage more people to consider switching banks.

“A customer’s old and new banks will have to make sure there is a seamless changeover. This will remove a big barrier to switching accounts and help businesses who can lose out when their customers change banks,” he said.

The bill would also require lenders to refund the outstanding value of LMI policies when borrowers move their mortgage.

Bandt said the legislation would require lenders to make borrowers aware of LMI refunds to which they may be entitled.

“Mortgage insurance can cost thousands of dollars. If someone wants to switch banks, they lose

that money and have to pay it again to their new bank. Under recent laws consumers are entitled to recover their insurance. The Greens Bill will require banks to tell people they are entitled to a pro-rata refund if they leave their mortgage early at the start of a contract. If customers do switch mortgages, their old bank will be required to give the customer a pro-rata refund of the unused insurance premium automatically, removing a big barrier to switching mortgages,” Bandt commented.

Genworth chief risk officer Paul Caputo argued that partial LMI refunds were already available to borrowers, an issue he said the company would discuss with the Greens.

“Genworth was in Canberra ... and is in positive dialogue with all sides of politics. Genworth looks forward to meeting with the Greens soon to discuss their recent proposals and details further. There are already partial refunds available in the market, so this is one issue we’ll be discussing with the Greens.

Genworth looks forward to constructive and open consultation,” Caputo said.

Flashback: Ellie Comerford on LMI portability Genworth CEO Ellie Comerford told Australian Broker in April that full LMI portability would require massive regulatory change.

“If the government wanted to achieve full account portability it couldn’t just be for LMI, it would have to be for mortgages as well. If you want full LMI portability you would need a mortgage repository,” she said.

18 www.brokernews.com.au

News

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

Home loan demand worst since 1976

Rental growth tracking below inflation

Credit demand slowed in May to less than a third of the average growth rate of the previous decade, with home loan demand showing its lowest growth on record.

Recent RBA figures show demand for credit rose by 0.3% in May following a flat April. Home loan demand was the main driver for growth, increasing by 0.5% over May following an increase of 0.4% in April. In the year to May, demand for housing credit rose 6.2%. The result represents the lowest annual growth since the RBA began recording credit data in 1976.

The MFAA has pegged the rising cost of living as the main factor deterring demand for housing credit.

The latest Bankwest/MFAA Home Finance Index has found 37.5% of households believe they are worse off financially than 12 months earlier. The proportion of respondents who intend to be active in the property market has also fallen, down to 19.1% in May from 21.6% in January. The index indicated that more housholds believe their financial conditions have worsened compared to those who believe they have improved, the weakest result since November 2008.

The index also surveyed

Capital city rents have grown below inflation over the past year, RP Data has stated.

New figures from the company’s June quarter Rent Report show rental rates increased 2.9% nationally over the past 12 months, and 2.7% in capital cities.

The growth is markedly slower than the five-year average annual growth in capital cities of 7% for houses and 7.9% for units. RP Data analyst Cameron Kusher said the trend of slow rental growth has been evident since 2008.

“As many investors will be aware, rental growth has been relatively subdued since 2008 due to a number of factors such as stimulus from low interest rates and the First Home Owner’s Grant Boost which enticed prospective new home owners into buying and eased demand for rentals,” Kusher said.

Kusher said despite the slowdown, inactivity of first home buyers and an under-supply of new housing could lead to growing demand for rentals.

“Limited new development

consumer expectations of house price growth, and found 36.3% though prices would remain flat in the coming year, while 28.8% believed prices would rise and 34.9% expected prices to decline.

In spite of July’s rate hold and economist predictions that the Reserve Bank may stay its hand for the remainder of 2011, 68.7% of households indicated they expected rates to move higher over the next year. MFAA CEO Phil Naylor said the survey indicated high rates were a factor in dampening consumer confidence.

“It appears that people are feeling some financial pain at present but they are also anticipating things might get worse before they get better, and this cycle will need to be broken in order for the housing market to show signs of life,” he said.

The number of households struggling to meet mortgage repayments has also grown, reaching more than one in four (25.7%), up from one in seven in previous polls. In spite of the difficulties households say they are facing, 68.2% of borrowers are still meeting repayments, while 5.2% said they have repaid late and less than 1% indicated they were behind on payments.

Spirit of ‘76

during 2011 is likely to add to the upwards pressure on capital city rental rates and as a result we expect rental growth to revert to around five year average levels with inner city units and outer more affordable housing stock having the strongest prospects for rental growth. This activity may be beneficial to investors who could see a boost in rental rates as vacancies tighten and fewer new dwellings continue to commence construction,” he commented.

Among the capital cities, Darwin is the most expensive in which to rent houses, with a media advertised rent of $520 per week. Canberra ranked as second-most expensive at $500 a week, followed by Sydney at $460 per week. Sydney ranked as the most expensive city for unit rentals at $450 a week, followed

by Canberra at $430 a week. The most affordable cities for both house and unit rentals are Adelaide and Hobart, with Melbourne and Brisbane also proving more affordable than Sydney, Darwin and Canberra.

Capital city rental rates Houses Median rent

Units

Annual change

Median rent

Annual change

Sydney

$460

2.2%

$450

7.1%

Home loan demand in May was the lowest since the RBA began keeping records in 1976.

Here are some other records from 1976:

Melbourne

$360

2.9%

$350

2.9%

Brisbane

$370

2.8%

$365

2.8%

• Romanian Nadia Comaneci scores seven perfect 10s in gymnastics at the Montreal Olympics • ABBA’s “Fernando” is number one on the Australian charts • Rocky tops the box office and wins Best Picture at the Oscars • Actress Isla Fisher is born

Adelaide

$330

3.1%

$290

3.6%

Perth

$400

5.3%

$375

2.7%

Hobart

$330

-2.9%

$280

1.8%

Darwin

$520

0.0%

$423

-1.7%

Canberra

$500

4.2%

$430

4.9%

Source: MGM/United Artists

Source: RP Data

Mortgage House keeps rates, fees steady with clawbacks Mortgage House has stated it will not increase interest rates or introduce upfronts in response to the ban on DEFs, but has conceded it will claw back commissions from brokers.

The lender responded to media reports that several smaller lenders have increased rates and introduced application fees in the wake of the ban, a move Mortgage House said “defeats Treasurer Wayne Swan’s reform”.

The company said it had removed DEFs, but would still offer its products with no application fee

and no valuation fee.

“We hear firsthand from customers wishing to move their loan to us that the upfront costs are prohibitive even though they know they will save more in the long run. The reform removes this hurdle from the customers and provides them with greater ability to find home loan finance that suits their needs. We make it easier for them to bring their business to us by eliminating a large portion of the initial set up costs including application fees and valuation fees,” Mortgage

House managing director Sarah Robertson said.

While up-front fees and interest rates may be holding steady for the lender, Mortgage House spokesperson Jennifer Kazangi said broker clawbacks would be involved in maintaining the lender’s interest rate and no-fee offer. Mortgage House will enforce a 100% clawback for 12 months, with no clawback thereafter.

Meanwhile, fellow non-bank Nationwide Lending has released a 6.79% variable rate home loan

with no clawback.

In a release to brokers, the lender advised that its Synergy Home Loan, funded by Resimac, will carry a 6.79% rate, with a maximum LVR of 90%. The product is available for loans up to $1m. Nationwide Lending stated the loan will pay 0.66% upfront commission with no clawback, and 0.165% trail. The structure will include a 1.1% settlement fee. The loan is also available at 6.95% without the settlement fee, but will include a broker clawback.

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19

INDUSTRY NEWS IN BRIEF PCF outlines clawback embargo Premium Capital Finance will hold off on any commission clawbacks, despite abolishing deferred establishment fees from 1 July. The group, which offers both home and commercial loans, has announced a three month embargo on clawbacks for introducers, with no planned changes to its structure until 30 September this year. Head of sales at PCF Andrew Rae said the group will be issuing a formal notification to all of its introducers within the next six weeks, advising what its clawback position will be. “Whilst we will have to look at having claw backs we will be coming up with what we regard as a fair and reasonable percentage of the upfront commission paid out,” Rae said. “We want to take into account and acknowledge the hard work put in by our introducers when introducing a loan to PCF.” PCF has also said that it will not extend clawbacks beyond 12 months, unlike some of its competitors.

NAB changes tune on rate hikes NAB has pushed back its forecast for an RBA rate rise until the end of the year, with a second to follow in mid-2012. The bank’s Monthly Business Survey in July indicated slumps in business confidence and worrying conditions in the retail sector, as well as slowing global growth.

NAB pointed out that the gap between strongly performing sectors and poorly performing sectors has grown. Finance/ business/property saw markedly improved conditions, as did the recreation industry.

Retail, meanwhile, continued to perform weakly. Confidence fell across all industries except mining. In light of the weak results, the bank has now revised its predictions for a rate rise from the Reserve Bank. NAB had initially forecast two rate rises by the end of 2011. The bank now expects one in December, with a second to follow in May 2012.

Heritage completes $800m RMBS deal Heritage Building Society has finalised an $800m RMBS deal in its largest domestic securitisation transaction. The deal, which was increased from its initial amount of $500m due to investor interest, was arranged by NAB in conjunction with ANZ and Westpac. Heritage said the transaction was its first public RMBS issue in five years. CEO John Minz said the RMBS transaction represented the strength of the building society’s low-risk funding style. “We roadshowed the deal and received a very positive reaction from investors, with good feedback and how we are positioned in the market. At $800m, this is the largest domestic transaction for Heritage surpassing the $750m deal completed in June 2006, which demonstrates the depth of support for our low-risk style of securitisation issuance.”

RBA flags stable cash rate The RBA has signalled rates may stay on hold longer than previously expected.

At its July board meeting, the Reserve Bank indicated that slowing employment growth, modest credit demand and softening asset prices as reasons for a continued cash rate freeze. The RBA also noted that temporary price shocks from natural disasters earlier in the year are expected to dissipate, leaving inflation close to its target range over the next 12 months. RBA governor Glenn Stevens conceded that recovery following this year’s floods and cyclones was proceeding slower than expected, and that growth for 2011 was now not expected to be as strong as earlier predicted. Loan Market spokesperson Paul Smith said there was a strong case for the Reserve Bank to leave rates untouched for the remainder of the year. He pointed to recent ABS figures showing a 7.9% decline in dwelling approvals for May, and said consumer confidence was still shaky.

BoM offers mortgage discounts The new Bank of Melbourne will offer discounts to customers who take out multiple products with the bank, according to its chief executive Scott Tanner. According to media reports, the new bank is set to offer retail customers tiered pricing, with a potential discount of 1 percentage point off its standard variable mortgage rate. Tanner said that as part of its strategy, it would seek to reward customers for having more products across banking divisions that will include banking, insurance and wealth management. Tanner told the Australian Financial Review: “The more products you have with us, the more balances you have with us, the better the quality of your relationship with us, the more you will save. It’s a very simple proposition and nobody’s actually doing it.”

Consumer sentiment dives Consumer sentiment fell to its lowest in more than two years as households showed their concern over their financial position. The Westpac-Melbourne Institute of Consumer Sentiment fell 8.3% in June, with households still expecting an RBA rate rise in the coming year in spite of rates remaining on hold for seven consecutive months.

Westpac chief economist Bill Evans said households still harboured the fear of future rate moves. “The confidence of those folks who have a mortgage plummeted by 16.5%. Despite the Reserve Bank keeping rates on hold following the Board meeting in July (until the last governor’s statement) the Bank has persisted with its strongly hawkish rhetoric. This is continuing to undermine confidence amongst households who it would appear are incredulous that such a policy is favoured given the current circumstances,” Evans said. Concerns over the property market appear to be easing, however. Evans said recent price declines had led to greater optimism regarding housing affordability.

20

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Analysis

The Big Squeeze: Shrinking players in a shrinking market Is the diminishing number of industry players the result of consolidation, regulation, a tough market or all of the above?

161

T

he consolidation of the mortgage broking industry has long been heralded. As lenders, aggregators and broking businesses push for economies of scale, a contraction of brands and broker numbers has been a fairly well-flagged development. Now, amid NCCP reforms and slowing credit growth, the consolidation of the mortgage industry is well underway, according to figures from the Market Intelligence Strategy Centre (MISC).

MISC collects a pool of data from major and regional lenders, as well as national and state concentrated broker groups. Between them, the research company’s stakeholders represent 73% of all home loan business in Australia. And, according to MISC’s latest report, the number of people writing this business is shrinking drastically.

The pool from which MISC draws its data was established in 2001. In its latest release of mortgage broking numbers the Centre said the March quarter saw the fewest active participants in the mortgage broking market than at any time since the pool’s inception. The March quarter saw only 119 broker aggregators and other broking firms write at least three loans, representing a 26% decrease on the March quarter of 2010. The value of the loans being written by its broker pool took a dive as well, falling $2.7bn to $11.6bn. This, MISC says, shows serious consolidation of the industry in the midst of some difficult economic conditions.

MISC put some of this consolidation down to the impact of the NCCP and the exodus caused by licensing. As of 30 June, ASIC had issued 6,081 licences. The result is a far cry from the 14,000 brokers who last year registered to become ACL holders. However, the regulator has also licensed 24,005 credit reps, a sign that many brokers are choosing to unite under larger aggregator or franchise groups. Bankwest head of specialist lending Ian Rakhit says there is little doubt NCCP regulations have driven much of the industry consolidation.

“I think the NCCP has definitely had a part to play. It has brought with it a clear standard as far as duty of care,” Rakhit says.

Rakhit believes the MISC result partly represents a number of part-time brokers and lenders leaving the

March Quarter 2010 March Quarter 2011

$97.84M# $82.96M

119 *

* 26% decrease #

Active broker groups Source: MISC

18% increase

Average new mortgage lending

industry, having found the cost of NCCP compliance outweighed the benefit of their credit activities.

“What I saw in the UK as we went through mortgage regulation there is that those brokers and lenders who didn’t have mortgages as their main day-to-day activity found it harder to keep abreast of those day-to-day standards,” he comments.

For those left, business has been more robust. While the total value of loans was down for the March quarter, the amount of business done by those remaining in the industry has risen. MISC says its pool saw an 18% improvement in lending productivity. This came on the back of what MISC calls “unprecedented competitive activity in the broker channel”. With the majors starting the well-publicised mortgage price wars, other lenders have followed suit and increased their competitive proposition to keep themselves in the game. This, Rakhit says, is not only due to a smaller number of players in the market. It is also related to an increasingly shrinking number of consumers for the lenders to fight over. Rakhit says while the NCCP had led to some consolidation, he believes most of the market exodus can be attributed to a tight lending environment and weak demand making it difficult for some brokers and lenders to remain viable.

CBA executive general manager of third party and mobile banking Kathy Cummings agrees, and says potential borrowers are showing hesitance to enter the market, a market Cummings says is the tightest in decades.

“Consumers are not showing a lot of confidence in the economy and have been saving rather than spending,” Cummings says.

The data largely reinforces Cummings and Rakhit.

ABS figures show a 17.4% decline in housing construction over the quarter. The RBA indicates credit demand is the slowest on record. On top of this the HIA’s National Outlook winter edition has predicted a 13% fall in housing starts over the two-year period of 2010/11 and 2011/12. HIA chief economist Harley Dale said apart from the GFC and a recessionary period surrounding the introduction of GST the result would be the weakest level of housing starts since the mid-1990s.

And as demand slows, Rakhit says, those left in the market will have to ramp up their price discounting and competitive offering to stay afloat.

“I think the banks are well funded and are all looking to gain or defend market share. In a tight market, I would expect competition to remain high,” he says.

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21

What a difference a year makes … or not. Australian Broker reflects on the punditry, breaking news and trends that made headlines in the magazine 12 months ago Issue: Australian Broker issue 7.14 Headline: ASIC supervision is carrot and stick (cover) What we reported:

What’s happened since:

Headline: Industry clashes over ACL value (page 2) What we reported:

What’s happened since:

Headline: Fixed rates are now in borrower sights (page 14) What we reported:

What’s happened since:

Headline: Local growth a world wonder (page 18) What we reported:

What’s happened since:

The newly-enfranchised industry watchdog ASIC last year commented that it would seek a “developmental role” in the credit industry, and assist industry participants in enacting the NCCP compliance regime. ASIC senior executive leader for credit Greg Kirk told Australian Broker at the time that the regulator would work with businesses which, despite their best efforts, fell short of compliance, while deploying “significant enforcement and deterrence resources” against those industry participants who were willingly non-compliant.

Connective last year stirred some controversy within the industry when principal Murray Lees claimed an ACL would make a broker’s business more valuable than credit rep status. Lees said that if two brokers attempted to sell their businesses in five years’ time, an ACL holder would command a higher price than a credit representative, a fact he said had to date been “lost in the hysteria” of the licensing debate. Other industry figures, of course, raced to refute this, with Mortgage Choice’s Michael Russell saying there was no inherent value difference between an ACL and a credit rep status.

Loan Market last year reported a 20% jump in enquiries for fixed rate loans, amid fears of continued RBA rate hikes. While COO Dean Rushton conceded that not all the enquiries followed through on locking in a rate, he said the uptick demonstrated a fresh move towards fixed rates. Meanwhile, lenders such as National Mortgage Company, National Finance Club, Australia First Mortgage, National Australia Bank and Bankwest made moves to capitalise on the trend by cutting fixed rates.

The International Monetary Fund last year fawned over Australia, touting low unemployment figures and debt levels as reasons Australia coasted through the GFC with much more ease than other advanced economies. The IMF forecast strong growth of 3% for the Australian economy in 2010, and an even stronger 3.5% in 2011.

ASIC has been true to its word in the deployment of its “significant enforcement and deterrence resources”. Since the beginning of 2011, ASIC has issued two permanent bans, an infringement notice and a suspension. And those are just the actions they’ve publicised. The watchdog has made it clear it will continue to increase its monitoring activities as the industry moves from a pre-licensing environment to one of ongoing compliance. An ASIC spokesperson recently commented that as these activities continue, the regulator expects to see further penalties handed out.

Regardless of the value of either licensing path, brokers en masse opted to become credit reps over ACL holders. As of 3 June, ASIC said it had issued 6,081 ACLs. Compare this to the 14,000 industry participants who registered to become ACL-holders. While fewer than half those expressing interest in the ACL followed through, ASIC registered 24,005 credit representatives. As the licensing process has evolved and drawn to a conclusion, many brokers seem to have decided the day-to-day task of compliance was too onerous and the benefits too few.

History has repeated itself, as fixed rates have again seen a rebound in popularity. Mortgage Choice data for June showed fixed rate products saw their highest level of demand since January. Banks again capitalised on the trend, slashing their fixed rates to attract borrowers. RateCity reported in early July that average fixed rates had dropped to within 8bps of average standard variable rates. The comparison site theorised lenders could be trying to draw borrowers into fixed rate products as the government’s exit fee ban does not apply to fixed rate break costs.

It may have been a premature call to say Australia had recovered from any impact of the GFC. With consumer and business confidence spiralling downward, credit demand drying up and most sectors outside of mining facing a difficult road, Westpac recently revised its growth forecast for 2011 down from 3.8% to 2.5%. Likewise, the bank expects unemployment to start heading up, climbing from the current 4.9% to 5.5–5.75% by 2012.

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www.brokernews.com.au

Comment OPINION

Mundane market cannot mask opportunity While questions remain over the current status of the property market, Century 21’s Charles Tarbey argues opportunities abound for savvy brokers There is no doubt a variety of factors are making the current mortgage broking industry quite a difficult environment for brokers to navigate.

With the challenges brokers have faced – including the tightening of commissions by large banks which started in 2008, and the transfer of consumer credit laws to the federal government – it is little wonder that many are leaving the industry.

Recent research regarding the mortgage industry is worrying. According to MISC Global research, one in four mortgage broking firms shut down in the 12 months to March 2011 and surviving firms wrote a lower number of mortgages – the March quarter saw business down 20% from where it was a year ago.

It is thus becoming clear that in order for brokers to survive professionally, business opportunities must be proactively sought.

In my role as the chairman of Century 21 Australia and Century 21 Home Loans, I’ve been uniquely positioned to have an understanding of the threats and opportunities in both industries and how they affect each other. These insights have allowed me to respond to situations in both real estate and mortgage broking with a perspective that I may not have otherwise had.

For brokers in particular, I believe it is important to maintain an understanding about trends in residential property and how these can be converted into opportunities to generate new business.

While the housing market is having its own ups and downs at the moment, there are many aspects to residential property that can be viewed as presenting a series of opportunities to mortgage brokers in the current climate.

1) Pride of ownership Not only does Australia have an almost innate pride of property ownership but we also loathe selling our properties if we can’t obtain a higher selling price than what we originally paid.

This Australian characteristic sees many people consider refinancing options to hold onto properties when conditions are tough – astute brokers should take notice of this trend.

2) Interest rates Despite the fact that rates have been kept on hold by the Reserve Bank for seven consecutive meetings, ironically this stable position has many property owners on tenterhooks about the uncertainty surrounding a possible rate rise.

Despite rates remaining at attractive levels, many Australians who borrowed at incredibly low rates during the global financial crisis are now running into trouble as rates edge towards the upper limits of their initial affordability bracket. Further upward

pressure on rates will see a proportionate rise in refinancing demand from the market.

3) Properties are still selling despite reduced auction clearance rates I’ve never been an advocate for the use of auction clearance rates as a definitive guide to the number of properties sold. These figures do not take into account the post-auction negotiation period which often results in favourable sales.

This of course depends on the ability of agents to educate their vendors about the state of the market and what they can reasonably expect.

The truth is that properties are still selling and people continue to borrow to be able to buy them, however vendors are having to concede greater discounts to their expected sales price.

These three points emphasise the reasons why brokers need to be aligned with real estate agents and agencies. Not only does this group have their pulse on the property market, they can deliver leads to brokers at the critical ‘point of sale’.

While the big banks may enjoy increased market share over the coming years, brokers that build fruitful and lasting relationships with agents will also enjoy continued success. With the formation of Century 21 Home Loans I attempted to bridge that gap – customers appreciate and benefit from a comprehensive solution to their housing and finance needs.

Charles Tarbey is the chairman of Century 21 Home Loans

FORUM Diversification is always a divider, with ALCo’s Lesley Wood stirring debate by claiming brokers should remain mortgage specialists (Don’t wear too many ‘hats’: ALCo, 7/07/2011).

Agree totally: there are other diversification options that do not require the need for licensing and CPD requirements.

JT on 07 Jul 2011 12:36 PM Depends on how you do it. The client buys the advisor, not the next person along the chain. Does anyone look after your client as well as you? In this market, why trust somebody else with your precious resource.

Find a model that allows you to do what you do best (interact with your client) and offers a full back-end support structure. Become the financial services ‘GP’, not a jack-of-all-trades and master of none. It can and does work for the right brokers.

Julian on 07 Jul 2011 12:59 PM

CBA’s executive general manager of third party and mobile banking, Kathy Cummings, said banks were being forced into hyper-competition (Credit demand lowest in 40 years, 7/07/11).

So I wonder if this will lead to the CBA removing its minimum submission requirements? Interesting times.

Ozboy on 07 Jul 2011 11:47 AM

• Decreasing mortgage managers • Decreasing mortgage brokers • Decreasing home building approvals • Decreasing LVRs • Decreasing FHOG applicants • Decreased retail sector spending • Growing national savings • Killing competition via stealth (ie, the NCCP Act) • MFAA and FBAA decreasing membership base Seriously, does anyone really need any more of a tip? I think you should all Google the basic ‘industry lifecycle model’ … and seriously ask yourselves, what stage is this industry currently in? It might help you re-frame and re-adjust your next career choice.

Whistleblower on 07 Jul 2011 12:20 PM Whistleblower, focus on the positives: • Mortgages rose 4.5% for May • NCCP has effectively provided a barrier to entry to mortgage broking • Banks offer monoline products • Banks have some good, lots of ‘OK’ staff • Consumers like choice • Competitive strategy suggests firms in oligopoly fight for market share to maintain earnings. A la discounting to stay Two years ago I was cooked. Lenders tried to find ways to decline a loan. I stayed in the ring, and now they want my good customers again. Upside is all I see!!!

Spinner on 11 Jul 2011 10:53 PM

Broker online readers were so far left nonplussed by Bank of Melbourne’s launch in Victoria (Bank of Melbourne to ramp up broker comms, 6/07/2011).

As a broker, I can’t say that this announcement excites me much, and it would certainly need to if they have any chance of growing their market share via brokers.

Broker on 06 Jul 2011 01:00 PM Perhaps they could start by paying us properly, as I feel this will be their only way of attracting new business. Just putting a Bank of Melbourne sticker over the St.George logo isn’t going to cut it. Until they give brokers the credit policies in full and the same servicing calculator as the assessors submitted at St.George, a BoM deal is playing with fire, especially when your income is determined by a quality matrix. St.George, just give us the basics so we can feel confident in recommending your products.

Ozboy on 07 Jul 2011 09:50 AM

Finally, InTouch Finance’s Paul Ryan called for non-bank positivity, rather than negativity.

Agree. Let’s move on and make the most out of the opportunities in this great industry. positivebroker on 06 Jul 2011 12:16 PM To vote in our latest online poll, visit our online home page at www.brokernews.com.au

www.brokernews.com.au

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Clawbacks are a contentious issue – and brokers are increasingly passing these costs onto clients. We asked our talking heads whether they thought this was advisable

VIEWPOINT Tony Bice Director Finance Made Easy

In order to charge any sort of ‘fee-for-service’ including getting a reimbursement of a ‘clawback’, you need to be able to convince the client that the fee is justified in the first place, and at the same time not jeopardise losing the client altogether.

So if you are going to implement a ‘claw back’ in your Finance Broking Contract, you need to be able to show quite clearly to the client that while taking a risk in having to possibly pay a ‘clawback fee’ at some stage in the future, it is still in their best interests to go forwards with you.

How do you do that?

What competitive advantages do you have when the same client can go to another broker down the street who doesn’t include a ‘claw back’ in their FBC? Alternatively,

a client can go straight to the bank and not have to worry about a ‘clawback’ at all.

We’ve all heard the phrases ‘know your client’ or ‘providing superior service’ which are all good – but they are not a point of differentiation in justifying a ‘clawback’ on your FBC – in a client’s mind, these are a given!

A much better approach is to diversify your mortgage business to capture a wider market of clients as well as holding them on your books for longer. In the rare instances that a ‘clawback’ may occur, you would like to think that as a result of the relationship you hold with them at a number of levels depending on the services/ products you provide – and if you are communicating with your clients regularly – they will come back to you for the refinance.

So while there is some work involved, you’ll get paid for the new upfront, which will offset the

Tanya Sale CEO Outsource Financial

Tanya Sale

There is every good reason to enclose a clause in relation to clawback in the Finance Broker Contract. We have seen too many times in this industry, brokers running around going the extra mile for clients, then only to find out six months later that they have all their commission clawed back due to the fact that the client has either ‘refinanced’ due to unforeseen circumstances – eg, a marriage breakdown, home has been sold, loss of employment, etc. The challenging part to all of this is enforcing it! Yes, put it in but how are you going to get it from the client when the ‘horse has bolted’?

costs incurred with the original fee clawed back and your trail will switch and be ongoing. That way there is no negativity in the earlier stage of the interview and you are not putting yourself into the possibility where your stance may be the difference between winning or losing the deal to a competitor.

Recent research has also indicated that around two-thirds – somewhere between 60 and 70% of all clients – are not ready or willing to pay a fee of any sort.

That means the remaining third may entertain some sort of fee as long as it can be fully justifiable in some form or another. But the bottom line is, if you are no different from your competitor or if the client seeks a lender directly given your firm position on the inclusion of reimbursement of a ‘clawback’ clause, then you will lose a percentage of those clients, and I’m not sure that in

Tony Bice

this market, any of us can afford to take that unnecessary risk.

Poll: Do you – or will you in future – include a clawback clause in your FBC? Are client clawbacks fair game? We asked our online readers what their views were on inserting clawback clauses into Finance Broking Contracts.

Here’s what they said:

Yes, I already have an FBC clawback clause 37% Not yet, but I definitely will in future 11% It’s possible, but I’m so far undecided

22%

I will never clawback from clients 28% Source: Australian BrokerNews Poll date: 4/07 – 15/07/11  To vote in our latest online poll or get involved in our forum, visit our home page at www.brokernews.com.au

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Market talk

On the mend?

AFG figures for June have indicated the surprise result that Queensland’s mortgage volumes reached the same level as the same month last year for the first time since the floods. It would seem at first glance that the Sunshine State is on the mend. However, more Mark Buchecker Brad Nolan than six months on from the disasters, some of the state’s top mortgage brokers have questioned the figures.

MPA Top 100 Brokers Mike Buchecker of Aussie Home Loans and Brad Nolan of Eastern Financial Solutions say Queensland has some way to go before its recovery can be celebrated.

Mining booms while the Southeast busts …

What kind of mortgage climate are you seeing in Queensland?

MB There is still a two-speed economy out there. The outer Brisbane suburbs, Gold Coast and Sunshine Coast are still very flat. Outside of Southeast Queensland the mining and boom towns are going ahead.

May was very flat & traditionally June is a catch-up month. A lot of interest in advance is done in June which is essentially an internal refinance, so I’m not sure if that is in the figures.

Have you seen any rebound in the market?

BN I work with agents from 13 different brands and I don’t know any who have noticed the market come up recently at all. I feel the data is inaccurate or out of context. Perhaps if you take the mining towns and communities out of the data then the results would be something completely different.

Has the Queensland property market started to rebound following devastating natural disasters? Some brokers think celebrations may be premature.

Equity being eroded …

What lingering effects are you seeing from the floods?

MB A lingering effect of the flood in many parts of Southeast Queensland is very soft valuations, hindering purchases as well as refinances. An increasing amount of loans are requiring mortgage insurance. An increasing amount of people are encountering negative equity stopping them from selling their current property.

Has refinancing picked up in Queensland as it has in other markets?

BN The Queensland market at the moment is the worst I have seen in the eight years I have lived in the state. Normally when the buying market has dropped off a little, we fill the void with clients refinancing, but at the moment we have a situation where owners are not wanting to have to revalue any of their properties. Perhaps they borrowed 80% a couple of years ago, and if they wanted to change banks today for a better product they would be in LMI territory.

Perception is reality …

Why is the market so depressed so long after the disasters?

BN I believe, little by little, the media plays such a huge role in sentiment or public perception when bad news sells. The public get bombarded with all the negative headlines, and the after-effects of the floods is an example of this. There is no doubt the floods were devastating for many people who lost property and loved ones, but if you look at the effects statewide, for example, we were very lucky on the Sunshine Coast and were not really affected.

Back on their feet?

Following the disasters, lenders and mortgage insurers began offering assistance to those whose properties and livelihoods were impacted.

More than six months on, Genworth says borrowers are recovering.

While Nolan and Buchecker say many Queenslanders are still suffering, Genworth’s chief risk officer Paul Caputo claims the situation is improving.

“Hardship assistance granted in relation to the natural disasters in Queensland peaked in recent months. The majority of these cases of hardship have since been able to get back on their feet,” he commented.

At a glance…

19.3%

*

* The fall in Queensland dwelling approvals compared to last year Source: RP Data

NUMBER CRUNCHING Capital city rental rates

welling approvals headed south: D May approvals figures Houses

Units

Total

1.2%

Median rent Quarterly Change

Annual Change

Five-year change

$360

2.9%

2.9%

38.5%

Capital cities $380

0.0%

2.7%

40.7%

National Source: RP Data

-7.9% -12.7% -17.5% -21% Source: RP Data

-14.5% Month-on-month Year-on-year

At a glance…

$480

*

per annum

* The amount Master Builders claims an average mortgage will increase due to the government’s proposed carbon tax

www.brokernews.com.au

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OPINION

The gulag delusion Soviet-era gulags and inner-city living are by no means synonymous, argues consultant and futurist Kym Dalton The Gulag was the Soviet Union’s system of forced labour camps. The Gulag system was made famous by Alexander Solzhenitsyn’s Nobel Prize winning book The Gulag Archipelago, which described the nearly 500 remote camps as a scattered “chain of islands”.

The fact that Australia has a housing affordability issue is generally conceded. There’s a body of debate as to how critical this issue is – some say there’s a combination of factors that mean that it isn’t too critical, but probably more say we have some of the world’s most unaffordable housing. As to how to deal with this issue, there’s a range of views. One of the options put forward, however, does bear looking at.

The thinking goes something along the lines of “to fix the affordability problem we need to make more land available on our urban fringes so young first homebuyers can get a start in the housing market”.

Now, I grew up in the “Nappy Valley” of Melbourne in the 1960s.

This suburb on the “urban fringe” was 15km and a leisurely 30-minute train ride from the G.P.O. A long way from say 60km and/or a 90-minute commute by car from the CBD. I know lots of young people, not too many of them want a 90-minute commute to work or to live 30 minutes from the nearest barista, just so they can live the fully detached dream.

They believe that those who think

they do are fully detached from reality.

There is no latte-hugging snobbery in any of this – there are many who for a host of reasons do want to buy affordable new housing that is remote from the centres of our main cities. – what I’m talking about is the arrogant presumption that this is what the majority of the young or FHB’s want, or ‘need’ – as if living on the urban fringe is an initiation rite that earns the right for you to put one foot on the lowest rung of the property ladder.

Most young people I know do aspire to home ownership at some stage – and they contemplate having to make some sacrifices to do so. Most aren’t willing to sacrifice proximity to such things as work or entertainment – but they are willing to sacrifice the quarter acre block.

Most of them are used to higher density – either because they’ve remained at the ‘family home’ and are used to sharing space with parents or siblings or they’ve rented apartments or town homes. Changes in social trends, particularly with lower numbers of individuals per household also

mean that higher density may be preferred by many – maybe higher density is the new block?

Some existing urbanites concede that higher density is perhaps desirable – but NIMBY (Not In My Backyard, for those who have one).

To the NIMBYists I offer a new acronym. BEARASS (Backyards economically and responsibly aren’t sustainable stupid).

Higher density and vertical cities can work – Manhattan, Singapore, Hong Kong, amongst others.

Workable higher density offers many benefits over car-based cities like those in Southern California.

Where higher density didn’t work, like “the projects” or in Communist era Eastern Europe it’s generally because people were forced to go there – like the Gulag.

If we continue with the delusion that affordability can be ‘cured’ by increasing the supply of remote detached houses, there’s the risk that they could become the fields of broken dreams – if you build them, they may just not come.

Remember – The Future isn’t what it used to be.

Kym Dalton, www.futurology.com.au

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Insight

BDMs, and the sales ABC Bryce Deledio

Business development management is all about sales and relationships – just like mortgage broking. We asked some of the market’s top BDMs for some of their best sales advice

AFG national accounts manager, AFG BDM of the Year What is your top sales tip?

Planning, careful planning, is imperative to long-term success. I find most businesses fly through day-by-day without any clear objectives of where they want to be in two, five and 10 years’ time.

What’s one tip for building stellar client rapport?

Taking an interest in what interests them and not you.

Also, following through and delivering what you promise always helps ensure a long-term relationship.

What is your idea of stellar service?

‘Stellar service’ is a term that I believe is used far too loosely as every broker’s ‘point of difference’. Stellar service is not in the ‘saying’ but in the ‘showing and doing’. Actions always speak louder than words.

What is one thing mortgage broking businesses do well?

They protect their customer’s best interests. Generally speaking, I believe most brokers’ key objective is to go out of their way to do the right thing. They may not always get it right but in the vast majority of cases they do. This is a great foundation to ensure the long-term viability of any business.

What is one thing you feel many broking businesses could improve on?

Utilise a quality marketing and retention strategy that can transform a business from being purely ‘transactional’ to being fully ‘relationship’ based. At AFG, this is easy for our brokers as they have access to a custom-built CRM system which we manage on their behalf.

What makes you a stand-out as a BDM among competitors?

I believe my commitment in establishing a complete understanding of my brokers’ businesses and their objectives allows me to work in partnership with them to achieve a mutually successful outcome and has been critical to my success to date.

Renee Blethyn

Business development manager, WA, St.George Bank What is your top sales tip?

Sell the solution that satisfies the need for the client. Don’t sell on the rate – focusing on rate conditions your client to being very rate focused, which will drive all of their behaviour. Selling based on providing a solution that solves the need for the client provides long-term satisfaction and builds a fruitful portfolio, trail book and the potential for client referrals.

What’s one tip for building stellar client rapport?

Being a clear and concise communicator, really listening to your client. The old adage of two ears and one mouth, use them in that proportion… really rings true for me.

What is your idea of stellar service?

Keep your promises and deliver value, respond to challenges promptly, be transparent and honest, show clients that you understand and respect what is most important to them, and ensure your actions reflect that.

What is the one thing mortgage broking businesses do well?

Successful mortgage broking businesses service their existing client database well, using every opportunity

to add value and deliver options and solutions to their clients that provide long-term benefits to them personally.

What is the one thing you feel many broking businesses could improve on?

Management of their existing clients by utilising a CRM tool to grow their business. Develop a plan and strategy for personalised and valued touch points with existing clients multiple times through the year, engaging in review often, so that your clients come away from all communication with a thought or feeling of “Wow, they’ve really thought about me and understand what I’m about”.

What makes you a stand-out as a BDM among competitors?

Being new to the role (five months) gives me a fresh outlook, but I have experience in broking so that gives me an understanding of the broker side of the industry.

Personally I have a real desire to develop myself, and the St.George brand in WA, I really care about how I perform in my role and the service I deliver. I have a real passion for finance education and I enjoy helping brokers deliver options and solutions to their clients that help them take control of their finances, which I believe forms a solid base to build a great life.

Cameron Johnston

Business development manager, ANZ What is your top sales tip?

Don’t be a ‘brochure delivery manager’. It’s more important to understand what a broker wants and needs from a meeting, as opposed to going in with a preconceived notion. I would prefer to leave after a visit with both parties having something tangible that will directly benefit our businesses.

What’s one tip for building stellar client rapport?

Understanding a brokers’ business is crucial in building rapport. Once you understand their business model, you can then find a common ground that delivers mutually beneficial outcomes. From there, it’s simply about building confidence with the BDM and lender. Trust and advocacy is something that must be gained over time, not expected.

What is your idea of stellar service?

It is a cliché, but I think great service is about delivering on and exceeding expectations – you should never over promise and under deliver. There’s no point promising the ‘world’ and delivering an ‘atlas’. Consistently delivering what you promise will have a similar result.

What is the one thing mortgage broking businesses do well?

Initially, people look to a broker for advice because they are experts in their field. Long-term success, however, is achieved through a passion for exceptional customer service and continual communication both during and post-settlement. Good customer service results in more referrals, which is the key for growing your business.

What is the one thing you feel many broking businesses could improve on?

From a customer perspective, we want an application to be a partnership between lender and broker. It’s important to build relationships with all touch points for an application. Be it branch managers, valuers, business bankers or enquirers lines.

What makes you a stand-out as a BDM? It is about setting expectations and a consistently high level of service. Sometimes it’s as simple as promptly returning calls or workshopping a complex deal.

www.brokernews.com.au

27

People

AFM recruits PLAN Australia veteran

ING Direct unveils state management team

Australian First Mortgage has appointed former New South Wales PLAN Australia state manager Clint Hawthorn as its national head of sales.

After over a decade with PLAN in New South Wales, AFM hopes to leverage Hawthorn’s contacts, as well as marketing, recruitment, sales campaign and seminar delivery skills.

AFM director Iain Forbes said the company would continue to appoint sales staff in Sydney, Melbourne, Adelaide, Perth and the Gold Coast during the new financial year.

Hawthorn is well known to NSW brokers, with PLAN Australia’s Trevor Scott saying that it was “a shame to lose him out of my business”. However, Scott has wished him well, saying that after over 11 years in the job, Hawthorne must have thought it was “Groundhog Day”.

“I’ve known Clint ever since I started at Bluestone,” Scott said.

“While it’s a shame to lose him,

ING Direct has recently appointed three new state managers, with one filling a new Western Australia-specific role.

The lender’s newest appointment is Andrew Cairns in Queensland, who started at the beginning of July after vacating his senior business development manager role at CBA. Replacing Adrian Arnold who resigned, he will focus on expanding ING Direct’s Queensland footprint.

The new WA role has been filled

by Tony Versace, who was previously CBA’s third party banking state manager. Starting in May, Versace has been charged with identifying growth opportunities in the state for ING Direct’s third party channel.

Versace’s appointment sees Stephen Pettitt step back to managing only South Australia, after previously taking on both SA and WA management.

Meanwhile, Martin Glover joined the lender earlier this year as NSW state manager, filling the

he’s always made known he is a career-focused individual, and his next step was always going to be a national sales Clint Hawthorn manager type role.”

Scott said PLAN would seek to fill the role from existing third party ranks, and presented him an opportunity to “bring new blood into the business” with a “new way of thinking”. He suggested this would likely be a senior BDM looking to make the next step.

Scott said the aggregator was going through a time of management change following the departure of Ray Hair and now Hawthorne, but that it was symbolic of a “new PLAN Australia”. “While I would have preferred Clint to stay for another 12 months to give me time, you’ve got to play each ball on its merits,” he said.

shoes of Sergio Delvescovo, who left last year after securing a senior manager role at National Mortgage Company, an ING Direct mortgage manager business partner.

Mark Woolnough, head of broker sales, said the appointments would add experience and industry knowledge to the team, which he hopes will give the lender “a strong footing for the future to help us achieve a leadership position in the industry”.

The state managers are responsible for working with their BDM teams to attempt to meet broker expectations when it comes to the value and contributions BDMs make to their business.

“This is something that we know brokers place significant importance on and contributes considerably to the overall satisfaction a broker has with their lender,” a spokesperson from ING Direct told Australian BrokerNews.

Wealth Today to double with new CEO

Preston Rowe adds Sugars

Wealth management business Wealth Today is aiming to double member numbers in one year, on the back of the appointment of a new chief executive officer.

Announcing the group’s recent appointment of new CEO Michael Stephens, who comes from an entrepreneurial background in South Africa, the group said it would look to increase member numbers to 200 by July next year, from the current tally of 100.

The move to appoint Stephens comes as current managing director Tony Pennells steps back from day-to-day operations, to focus on strategic development at board level.

Stephens has been the director of several fast-growing small to medium companies across different industries in South Africa, according to Wealth Today.

For the past eight years, he has

Property services and valuation group Preston Rowe Paterson Australasia has named Greg Sugars as its new national chief executive officer.

With over 20 years’ experience in the property and valuation industries, Greg was previously the founding CEO of property services firm Optium Group. He has been tasked with actively expanding the PRP network throughout Australia and New Zealand.

In announcing the appointment to the PRP group, national chairman and former Australian Property Institute President, Greg Preston said his track record in effectively growing property service businesses will greatly assist in PRP’s growth.

Sugar said that he would focus on driving service in its valuation division, which focuses on

Michael Stephens

been working primarily in the related real estate industry, and has relocated to Perth.

Wealth Today’s plans for growth come on the back of an increase from just over 30 members at this time last year – an increase the group says is approximately 320%.

commercial and equipment more than the residential market. He said this would involve fostering relationships with the major lenders and mortgage insurers in this space.

Greg Sugars

Have you got people news? Send your movers & shakers to the editor at ben.abbott@keymedia.com.au

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www.brokernews.com.au

Caught on camera NAB Broker rewarded its top broker business partners with lunch events across Australia in June. Here are a few highlights from the Sydney, Brisbane and Melbourne lunches, which featured a series of prominent special guests.

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Russell Passfield and Paul Hicks (Mortgage Choice), Michael Trencher (NAB Broker) Lynne Sturgess (Precision Loans),| Lawrence Toledo (J L Finance) and Joy Rollings (Home Loans Approved) Murray Jones (NAB Broker), Scott Bradford and Gary Carroll (QSA Financial Services) Peter O’Connor (Cavalier Finance) and Leith Matthews Andrew Stevenson (Think Lending Services), Michael

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Frost and Steve Bourne (NAB Broker) Special guest Michael Malthouse, Wendy Robertson and John Flavell (NAB Broker) Special guest Michael Malthouse David Kearns and Cameron Stillman (Connective), special guest Michael Malthouse and Rob Irving (Connective).

Greg Gadsden (AFG) with special guest Michael Malthouse

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Max Billi (VIC State Manager Mortgage Choice), Michael Malthouse, Eddie Borg (Mortgage Choice) Sean Reid (Choice Aggregation Services), Michael Malthouse Lino Pelaccia (NAB Broker), Gerald Foley (NMB) and Jim Henwood (E-Select) Denver Beven (Bluezinc), Rob Ryan (NAB Broker) Frank Schiraldi (Wells Partners), John Gigante (United Permanent Home

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Loans) Paul Rabie (Rabie Finance), Paul Heilig (Eagle Consulting and Finance) Chris Carn (NAB Broker) John Flavell (NAB Broker) Special guest Peter FitzSimons Glenn Williams (Choice Aggregation Services) and Danny Chronopolous (Choice Mortgage Solutions) Glenn Murdoch (Custom Finance Group), Steve Kemp (NAB Broker), Jeff Bliss, (Custom Finance Group)

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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

Dolphins wanted, alive not dead Broker? No hon’, I said poker

“Hell of a thing, killin’ a dolphin…”

I

nsider would like to take this opportunity to laud lender ING Direct’s efforts (in true ‘Wild West’ fashion) to offer a reward for information leading to the charging of individuals responsible for the killing of two rare snubfin dolphins in a Great Barrier Reef world heritage zone. The lender put up $5,000 (which means more these days due to slimmer lending margins) for such information, after the dolphins were found tied to a mangrove and weighted

down with concrete blocks near Townsville. Authorities speculate the dolphins died after being tangled in fishing nets, and were then weighted down to hide the bodies. The killing sparked ING Direct’s sheriff-like reward offer, due to the bank’s involvement in research work with the World Wildlife Foundation in regard to the species. If ING Direct needs a John Wayne for this modernday Western, Insider has his Stetson ready.

Fate (and financial circumstance) can deal some good hands, and some bad hands – and a lot of the time, hands we never once thought to expect. And so it was for former broker, real estate agent and property investor Marsha Wolak (a resident of Sarasota in the US) who began frequenting card rooms after the US housing bubble burst. With such an amount of time on her hands and no clients to be seen, Wolak (who is also a former tennis pro) decided that with all the pessimism and lack of activity in the housing market, it would be better to focus full-time on cards. While Insider thinks for most brokers this would be a gamble with some very long odds, multi-talented Wolak managed to work on such a good poker face she was able to win $192,000 as champion of the Ladies Poker World Championship in Las Vegas.

Not content with having it over just the ladies, Wolak decided to stump up $10,000 of her winnings to enter the World Series of Poker Main Event. Gushing, Wolak was quoted as saying: “I realised I made more money playing poker than doing loans.” She also said for her, life was “all or nothing”, and she was unable to “do anything

halfway”. Well, Insider doesn’t know if he should take this as being an inspirational pep talk for Aussie brokers or not.

I don’t want to go on the cart

There’s no question credit has tightened up following the GFC. Banks have gotten a lot pickier about whom they want to lend to, and some of the borrowers who may have been highly soughtafter a few years ago are now being rejected like a pimply-faced teen on prom night. But, next time you’re trying to walk a client through a particularly difficult deal that keeps getting knocked on the head by uptight lenders, you can at least be thankful their bank hasn’t gone so far as to declare them dead. That’s the situation a Florida woman found herself in when she tried to refinance her mortgage. Chase Bank USA would not extend the woman any credit, as lending to the deceased fell out of favour following the sub-prime crisis. The bank even went so far as to issue a letter of condolence to her family.

The woman has now launched a lawsuit against Chase, claiming rumours of her demise have been greatly exaggerated, and have also ruined her credit score.

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