Mortgage Professional Australia magazine Issue 10.7 by Key Media

www.brokernews.com.au ISSUE 10.07

tune in 2010 SURVEY

Brokers on Banks

Major lenders ranked on service, products and support in our no-holds barred poll

MORTGAGE MANAGERS THE TOP DOGS PROFILED

HOME SAFETY STAYING SECURE ON PERSONAL VISITS

PLANNING AHEAD TMPG ON DIVERSIFICATION

EDITOR’S LETTER

Hello and welcome to Mortgage Professional Australia Firstly, let me introduce myself as the new editor of MPA. I’m new to these shores and to the Australian mortgage market, but I bring with me a wealth of experience from the UK, where I’ve been covering home loans for six years. The Australian mortgage landscape is broadly similar to the UK, although it has been encouraging to see how well the market here has withstood the GFC. The third party distribution channel has certainly fared better in the southern hemisphere, with many UK non-banks and aggregators disappearing or being swallowed up by their rivals. While some consolidation has inevitably occurred in the Australian market, competition remains far healthier. One issue that caught my eye immediately was the volume hurdle debate. The UK market is tightly policed by the Financial Services Authority who would be highly concerned by such a practice.

issue

10. 07

This month’s issue also includes our annual Brokers on Banks survey, and this latest poll is the eighth consecutive year we’ve conducted our comprehensive audit of introducer opinion. Turn to page 34 to see what brokers think of the big banks’ service, products and turnaround times. Elsewhere in the issue, we look at the personal safety of brokers going on home visits, how you can target a new lucrative generation of female borrowers, and we sit down with some of the industry’s key movers and shakers in our profile pages. It has been great to speak with many of you already, including a busy few days at the MFAA conference in Melbourne, and I look forward to meeting as many of you as possible in the near future. Enjoy the magazine and all the best for a busy month.

Barney McCarthy Editor

MPA 2.0 Our multimedia edition features on-camera interviews with the industry’s biggest players. Visit Brokernews. com.au/MPA to hear their thoughts on the hottest issues facing mortgage brokers.

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CONTENTS

cover story

Bulletproof business Stephen Craig imparts some top tips on how brokers can diversify by ringfencing clients’ deposits

34 Brokers on banks

MPA listens to what more than 800 advisors have to say about the big banking institutions

10. 07 issue

BROKERNEWS TV VOW FINANCIAL’S MANAGEMENT TEAM TELLS US: »» how the name Vow goes to the heart of its business ethos »» why it focused on increasing the range of products its brokers would have »» what its complete independence means for brokers »» its diversification growth plans for the future www.brokernews.com.au

CONTENTS

NEWS ANALYSIS 30

10 Jeff Zulman outlines why the big banks could be looking over their shoulders as the smaller players make a renewed push for the top

FEATURES

16 MPA looks at how brokers can protect themselves during potentially dangerous home visits 30 How advisors can target the ‘Sex and the City’ generation

PROFILES 20 Leaders: Frank Paratore, general manager of Ballast, talks about the boutique’s aggressive expansion plans

PUBLISHER Justin Kennedy

DESIGN MANAGER Jacqui Alexander

DIRECTOR Claire Preen

DESIGNERS Paul Mansfield Lucila Lamas

REGIONAL MANAGING EDITOR George Walmsley

SALES MANAGER Rajan Khatak

EDITOR Barney McCarthy

ACCOUNT MANAGER Simon Kerslake

CONTRIBUTOR Andrea Cornish

HR MANAGER Julia Bookallil

PRODUCTION EDITORS Jennifer Cross Moira Daniels Carolin Wun

MARKETING EXECUTIVE Kerry Buckley

24 Broker: Darryl Benn of The Mortgage Planner Group tells us about a pioneering new training course

TRAFFIC MANAGER Stacey Rudd

60 Business: Julian Mitton from Licensed Finance Brokers of Australia discusses the aggregation platform’s shared ownership initiative

LIFESTYLE 14 A day in the life of... Joe Mullen, Liberty 64 My favourite things: Andrew Clouston, National Finance Club

Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as MPA magazine can accept no responsibility for loss

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10. 07 issue

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Editorial enquiries tel (02) 8437 4790 fax (02) 9439 4599 Editorial enquires: barney.mccarthy@ keymedia.com.au Key Media Pty Ltd Level 10, 1 Chandos Street St Leonards, NSW 2065 www.brokernews.com.au

This magazine is printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry

NEWS MARKETS

Low-income households could forfeit mortgage payments A study released by a reporting agency has found that one in four Australian households indicated they would most likely miss their mortgage payment if they find themselves short on cash, while one in three said they will pay bills late in the coming year. The Consumer Payment Priorities Study, released by Dun & Bradstreet, revealed many Australians are unaware of the consequences of paying late bills. More than half said they would be more likely to pay their accounts on time if they knew late payments would be listed on their credit report. A payment can currently be listed on an individual’s credit record if it is overdue by 60 days. However, new credit reporting laws which have already been accepted by the federal government will allow payments to be listed on an individual record if they are just one day late. In addition, the study reveals that younger Australians and those in lower income households are more likely to pay their bills late in the year ahead. One in five Australians aged 50–64 years indicated they will pay at least one bill late, compared to one in three for the two younger groups surveyed (18–34 and 35–49 years). Meanwhile, 30% of people in high income households ($80,000+) said they expect to pay late in the year ahead, with the figure jumping to 37% for those households earning less than $80,000.

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36, 000

The number of Australian firms classified as being at high risk of experiencing financial distress in the coming 12 months » (Source: Dun & Bradstreet)

Lenders continue to tighten mortgage criteria Most of Australia’s lenders show no signs of easing lending criteria, following a study of more than 2,000 home loans by RateCity. The research found a continuing decline in the number of home loans with a high LVR of 95% or above. There were 1,079 such loans available in May 2010 versus 1,110 in February 2010. The trend was even more apparent for very high LVR loans of 98% or more. RateCity recorded only one loan in May with an LVR of 98% compared to 20 in February. This trend started in late 2009 with rising interest rates and the end of additional first homebuyer stimulus. Damian Smith, RateCity’s CEO, said tighter lending criteria are making it tougher for first homebuyers. He said: “Australia’s average house price is at a six-year high according to Australian Property Monitors at $542,827. Even at constant LVRs, the size of a deposit therefore keeps rising, and the tighter average LVRs only exacerbate this challenge.”

HIA reveals home building fears The Housing Industry Association (HIA) has expressed concerns that a lack of available skilled labour is exerting a constraining influence on Australia’s new home building recovery. HIA chief economist Harley Dale said figures released by the Australian Bureau of Statistics revealed growth of just 0.8% in new residential building work in the March 2010 quarter – only 1.5% higher than in the mid-2009 trough. He added: “This meagre increase, which included a decline in work done on detached houses, is a reminder of the importance of ensuring sufficient skilled labour is available to keep the wheels of recovery turning. Also, the extremely high value of work approved but not commenced in recent quarters highlights the risk that actual construction levels will continue to disappoint.”

CBACM1737_E.pdf

Page

23/03/10,

1:15

Lender of the Year two years in a row. We couldn’t have done it without you. The Commonwealth Bank has been voted MFAA Lender of the Year 2010 by those who know – namely, you. Across a wide variety of criteria, including best product offering, best loan approval process, best overall support and more, we came out on top for the second year in a row. Of course, we couldn’t have done it without you. Thank you for your support and continued business partnership.

Important information: The Commonwealth Bank of Australia is the MFAA Excellence Awards Lender of the Year – 2010. Commonwealth Bank of Australia ABN 48 123 123 124. CBACM1737_E

NEWS MARKETS

$1.4

million

Moody’s forecasts positive outlook for mutuals Moody’s Investors Service has recently reported an optimistic outlook for Australian building societies. In its paper Australian Building Societies – Industry Outlook, the agency stated: “Our industry outlook for Australia’s building society sector is stable, reflecting sound prospects for the Australian economy, which will support asset quality metrics.” Industry body Abacus welcomed the report. CEO Louise Petschler said the report acknowledged that building societies are generally conservative business models that have weathered the GFC. She added: “This is true because most building societies – like credit unions – are mutuals, so they don’t pay dividends to external shareholders but rather put their profits back into outstanding service, excellent products and competitive rates for their members.” The report continued: “As the sector is composed predominantly of mutuals, it is not under the same pressure as listed institutions, given the absence of shareholders pressing for returns. This allows the building societies to maintain their non-profit maximising business models and focus on providing strong service and competitive pricing to their customers.”

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The cost of the MFAA’s new advertising campaign » (Source: MFAA)

Mortgage Choice hits protection landmark Mortgage Choice has passed the $2.5bn milestone in mortgage protection cover for its customers. The broker said an increasing number of customers are seeking peace of mind, knowing that their mortgage repayments would be protected in the unexpected event of being diagnosed with a terminal illness, a serious medical condition, or suffering a serious accident or even death. Mortgage Choice national manager of non-core products Simon Dehne said: “This goes some way to demonstrating the extent to which Mortgage Choice brokers are embracing diversification opportunities and successfully adapting their businesses to changing market conditions. “We recognise that Australians invest heavily in their mortgages, whether it’s in the form of a significant emotional commitment, financial commitment or both, and we want to increase their level of comfort with that situation.” Dehne admitted the industry is facing single digit credit growth, highlighting the need for mortgage brokers to obtain additional sources of income to help cushion the downturn.

Vow makes $100 response pledge Mortgage aggregator Vow Financial has put its money where its mouth is in regards to its service guarantee, promising brokers $100 if they do not receive a call back within four business hours. CEO Jeff Zulman said: “Our national coverage and flexibility means we can offer greater access, guaranteed response times and ongoing consultation.” Marketing manager Matt Mitchener described the move as a powerful statement that gives Vow a point of difference by assuring its broker partners of its commitment to quality of service, and claimed Vow was the only aggregator offering such a guarantee to its broker network.

NEWS ANALYSIS

The heat is on Jeff Zulman looks at developments that could have the Big Four banks quaking in their boots

Jeff Zulman

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or mortgage brokers, it is more than straws in the wind. Competition among lenders is coming back into the Australian market – not with a roar but certainly with more than a whimper. The Big Four, of course, still hold sway. In March this year, Commonwealth Bank and Westpac had 50% of the market between them, and National Australia Bank and ANZ took another 13.2% and 12.5% share, respectively. Since the GFC, the Big Four have therefore increased their market share from 65% to 76%. It has been a significant shift, and that this shift has occurred in the wake of the GFC is hardly surprising. In this difficult environment, the banks were competitive on pricing, consumers returned to the brands they trusted (if not liked), and other forms of lending such as securitisation, which had emerged in the early 1990s, simply dried up. But there is now growing evidence that the Big Four are treading water in terms of their share of this market, and that other lenders are making a comeback. Securitisation is re-emerging and

smaller banks, credit unions and building societies are beginning to flex their muscles. The evidence is not just anecdotal, although in talking to brokers there is plenty of circumstantial evidence about. According to independent research and consulting firm Market Intelligence Strategy Centre (MISC), the December 2009 quarter was a milestone, with the Big Four banks actually ceding market share to the regional banks and the latter growing their place in the sun to 24%, up from 20.6% in the previous quarter. This gain by the regional banks is the third consecutive increase in successive quarters seen in 2009. MISC added that there were also further signs of smaller non-bank lenders re-emerging as some of the larger lenders provided seed funding for new lenders, and niche players developed specific ‘broker only’ offerings. Significantly, this market shift in the December quarter occurred while loan volumes fell 13% to just $16.3bn. In a recent speech to the Mortgage Innovation Conference, Assistant Governor (Financial

NEWS ANALYSIS

Markets) of the Reserve Bank, Guy Debelle, provided more evidence of this welcome trend. “The outlook for the smaller lenders has improved since mid-2009. The securitisation market is starting to recover, with the volume of issuance to non-Australian Office of Financial Management (AOFM) investors picking up and secondary market spreads decreasing,” he said. “With the securitisation market showing greater vitality in recent months, the housing loan market remains contestable. Any widening in margins is likely to attract new competitors into the market. Already, the improvement in securitisation has encouraged some of the smaller lenders back into the market and encouraged some brokers to again look to increase their own mortgage lending. With these developments, the provision of mortgage credit in Australia is likely to continue to be adequate in a competitive marketplace.” JP Morgan banking analyst Scott Manning, who helps author the six-monthly Australian Mortgage Industry Review, is of a like mind. “Mortgage originators, credit unions and building societies were showing signs of a comeback after having lost their share to the banks over the past year,” he said. “Credit union and building society capacity to originate profitable mortgage flow was severely crimped, due to deposit compression of the funding base in a rapidly falling interest rate environment. More recently, they have modestly increased volumes as legacy term deposit rates have reset, allowing them to participate in the first homeowner uptick.” That’s the macro picture; the news coming from lenders is also encouraging. ING Direct, which is the fifth biggest mortgage lender after the Big Four, announced its mortgage portfolio rose by nearly 4% to $36bn in 2009. Unlike its major competitors, ING doesn’t boast a branch network, with its business going direct through brokers (75%), white label arrangements (20%) and direct (5%).

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That banks such as Citibank are able to push back into the market is not all that surprising. The GFC might have seen “a flight to government guarantee”, but these lenders continued to maintain their relationships – even as business was slowing. They remained active in talking to their broker partners. They realised it was critical to remain engaged and provided support at a time when the ability to use wholesale funds didn’t make commercial sense. Now that the markets are thawing it is allowing them to become more competitive and provide viable lending options to brokers. For Bankwest, the emphasis today is on the quality of the loan the broker brings to the table – not the quantity. At the same time the bank is working closely with its broking community to ensure all parties get the paperwork right the first time around. It’s all part of a focus on excellence. But as more confidence returns to the mortgage market, Bankwest, which traditionally has had an extensive broker network, can be expected to pick up the volume of loans – further evidence that the second-tier banks are reasserting themselves. But perhaps the most interesting development has been the re-emergence of the securitisation market. In November last year, ME Bank issued $782m of residential mortgage-backed securities (RMBS); in March this year it returned with an issue of $673m. Other lenders to enter the market are BoQ and Aussie Home Loans. Yet this market will not return to its pre-GFC form, at least for a while. At that time, about one-third of RMBS were structured offshore. The liquidation of this part of the market generated an overhang of stock in the secondary market that took time to work its way through the system. But with that overhang being largely yesterday’s story, and with spreads narrowing significantly, domestic issuers are returning that haven’t required the support of the AOFM. MPA Jeff Zulman is chief executive of Vow Financial

COLUMN

A DAY IN THE LIFE OF…

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COLUMN

A DAY IN THE LIFE OF...

A day in the life of… As state sales manager for SA, WA & NT at Liberty Financial, and head coach of Adelaide United’s National Youth League soccer team, a typical day in Joe Mullen’s life is certainly a busy one

0800h

My day usually begins by catching up with a colleague over a coffee to discuss business matters, or something more formal, like this morning’s breakfast meeting organised by a credit insurance provider with whom we do business.

0930h Joe Mullen

“ We have a wide customer set, so these meetings are informative to the introducer and gives them a chance to discuss our products features ”

The first of the day’s meetings kicks off, usually with an aggregator head with whom I’ll discuss matters like current member volume applications and conversions, any product training needs that have arisen, and future promotions that we can collaborate on.

1030h

I usually attend a visit to an introducer with one of our BDMs. Liberty Financial has a broad range of asset classes, including residential and commercial mortgages and asset finance. We have a wide customer set, so these meetings are informative to the introducer and gives them a chance to discuss our products’ features, the ease of use of our systems and processes, how to market our products to potential customers, and how to package deals to present to our underwriting team for approvals. These meetings are also critical in the development of our BDM team as they provide me with the chance to provide coaching, feedback and support.

1130h

I set aside an hour to catch up on e-mails, and respond to any scenario or accreditation enquiries from our introducers.

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1230h

I try to take half an hour or so at lunchtime to grab a coffee and light lunch and prepare my thoughts for the rest of the afternoon. I usually use some of this time to also start planning the evening’s soccer coaching session.

1300h

Typically I will have another meeting or two scheduled during the afternoon, whether that be to a direct introducer, aggregator member or specifically to a potential new introducer or intermediary. However, while I am based in South Australia I also manage sales throughout Western Australia and the Northern Territory, so I make sure that I take half an hour during the afternoon to call our BDMs in WA to discuss their current activity and offer any support I can where necessary. I will also set aside time to make some outbound calls to our NT-based brokers.

1600h

Towards the end of the day I catch up on administrative tasks and report reconciliations.

1830h

I head out to conduct my soccer coaching session. The team trains four nights a week, so I do a lot of technical and tactical planning to ensure the team are in peak condition ready for their matches each weekend. Every other weekend we play away games interstate, so my life certainly involves a fair bit of travelling.

2100h

Home for dinner and I usually close the day by spending an hour or so catching up on e-mails and housekeeping.

FEATURE BROKER SAFETY

Risky

business

Stepping into a stranger’s home is all part of the job for mortgage brokers. But what can you do to ensure a safe encounter with the unknown?

band of upper-class seniors in Germany made headlines last year when they kidnapped and tortured their financial advisor in a ‘revenge attack’ for substantial losses they incurred during the credit crunch. The victim, 56-year-old James Amburn, told the media he thought he was “a dead man” after he was assaulted and bound “like a mummy” with masking tape. Two couples that had entrusted Amburn’s investment company with A$4m of life savings bundled him into an Audi and drove him to one of their holiday homes near the Austrian border, where they held him in a cellar for four days. Forty armed policemen eventually freed Amburn after he pretended to send a fax to a Swiss bank asking for a transfer of funds that said, “call police”. This story is by no means an isolated case. Financial advisors, realtors and mortgage brokers make a living dealing with the general public. But can you always trust your customers? Recently the JournalNews in Ohio reported that in early February, a female realtor was attacked. The woman was preparing to close an open house when the doorbell rang. She opened the door to find a man wearing a ski mask asking

“ If you feel something about someone is not quite right or is dodgy, trust your judgment and refuse the ‘opportunity’ – many more will come your way ”

BROKERNEWS.COM.AU

to see the house. She told him to leave, then locked the door. She then hurried to the garage to lock it, but the man came in and grabbed her. Luckily, she managed to fight off the attack and her assailant ran away. It’s not uncommon for realtors to meet customers for the first time alone in a house. Agents are often on their own in the office late at night doing paperwork and some agents go door-todoor looking for listings – all strikingly similar to the activities of mortgage brokers. Katrina Rowlands, principal of Mortgage Success in Wollongong, is one of the most successful brokers in Australia and a perennial favourite on MPA’s Top 100 brokers list. “I always see clients at their convenience so this still may entail home visits,” she says, adding that these visits are often in the evening. Rowlands agrees that she feels slightly more vulnerable being a woman and on occasion she says she has felt some trepidation at visiting clients privately. “I will admit I have – probably twice or three times – asked myself, ‘should I have put myself in this situation?’ ” On one occasion, Rowlands says she backed out of a meeting after her office received a strange phone call. “The client specifically asked to see a woman and asked if I was the lady in the photo and specifically asked if I would attend the appointment alone in the evening after 8pm. “My staff member did not make an appointment but referred him to me after discussing his questions. I offered to see him out of

FEATURE

BROKER SAFETY

Safety tips • Always meet a client

for the first time in the office

• Introduce the client to your co-workers

• If visiting a client at

their home, try to stay closest to the door

• Make sure a colleague

or family member knows where you are

• Mark the appointment

and details of the visit in your calendar

• Keep valuables safe by leaving them at home or locking them in the car

• Always carry a mobile

phone and make sure that emergency numbers are programmed into the speed dial

• On home visits, keep

your phone in your hand and not in your bag or » on the table

• Ask the office manager to control all keys to the office and to place deadbolts on the doors. If you are alone in the office at night, draw the shades and do not admit anyone you do not know well and trust BROKERNEWS.COM.AU

FEATURE BROKER SAFETY

hours in my office prior to [that time] – and planned to have staff still here – or at his home with my partner and he did not call back. I did not pursue the appointment.” Haley North, mortgage and finance consultant from Smartmove, recalled her own odd meeting request. “I once had an experience where I did not feel comfortable meeting a client, on my own out of hours at a public place. The ‘opportunity’ was generated by handing my business card to a colleague of a friend of mine who wanted to meet to discuss loans, but I got the distinct impression that that was not the real reason he wanted to meet. After speaking with my colleagues we agreed that another broker would attend the meeting with me – once this was suggested to the new potential customer his interest in meeting died off and he never made a time.” North, who also makes home visits with clients, suggests that it would be a good idea to let a colleague or family member know when you are meeting a client at their home. This is precisely the protocol Rowlands has adopted for special circumstances, where she feels unsure about the client. “If I have any doubtful feelings about a home visit, I tell my husband exactly where I am and at what time I entered the home and the address and phone number. In my diary I always note the contact details of the clients, so again he knows where I am and to call the client to check my whereabouts if he has concerns,” she says. “Also, I keep his number on the front of my phone so a knock of the right key will allow him to

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Safety tips • Go with your gut. If

something doesn’t feel right, if anything raises the hair on the back of your neck – escape the situation immediately. You might feel like an idiot but don’t worry about it

• Don’t let your

desperation for business override common sense. No deal is worth risking your life for

• Be suspicious – police

have also noted an increase in crimes where a woman sets up the victim, even for sexual assault. Women tend to be much more trusting of another female and let down their guard. Until you really know a customer, remain vigilant at all times – regardless of the gender, appearance, dress, or charm

listen in on the meeting. I always keep my phone on my lap in this instance, not on the table.” Claire Kilgore of National Mortgages says she always makes sure someone knows where she is when she’s on the road visiting clients. But Kilgore also takes comfort in the fact that all of her clients are by referral. “We have made it a business strategy to develop our referrals purely from existing customers, which avoids cold-callers and tyre-kickers, so if there is no personal referral I would not make a home visit.” Maria Rigoni, director of Universal Wealth Management, says she wouldn’t have any qualms about turning down business if it didn’t feel right, especially if she had no idea who the person was, or if the enquiry came via the internet or some other unsolicited media. “If you feel something about someone is not quite right or is dodgy, trust your judgment and refuse the ‘opportunity’ – many more will come your way,” she says. Rigoni often makes home visits in the evening. While she doesn’t fear her clients, many of whom are referred on, she still takes special precautions. “I always park in well-lit areas close by the residence I am visiting. I avoid parking near toilet blocks or dark park-like areas. I usually glance around the streetscape before I hop out of the car.” Brokers should use their common sense. Rowlands suggests to “offer alternatives to the client and you can nearly always make a mutually satisfactory arrangement, if all they are really after is a good home loan. Any doubt is not worth the risk – better to miss the loan than to regret a silly decision.” MPA

PROFILE LEADER

Vision for Ballast – the boutique all-rounder from Western Australia – is picking up speed and aggressively

n this business it pays to be friendly to the competition. Frank Paratore, general manager of Ballast, can attest to that. Almost 20 years ago, the company Paratore was working for was bought out by its competition. Fast-forward to 2009 and Paratore’s company Ballast bought out Sound Finance Group – the directors of which belonged to the acquisition Paratore was involved in two decades earlier. “It just goes to show that you never know when people from your past will pop up again,” he says. And when you’ve in been in the business for as long as Paratore has, it’s hard not to know just about everybody. He was recently made general manager of Ballast – a boutique multi-disciplined independent financial services group located in Perth. The ‘one-stop shop’ company offers finance, insurance, planning, superannuation, accounting and settlements services Australia-wide, and is both a wholesale and retail aggregator. It currently has more than 100 brokers and 22 financial planners. Paratore landed the top job by convincing Ballast’s directors Wayne Blazejczyk and Kaylene Bishop – whom he’s known for more than 10 years – that the time was ripe for Ballast to expand its reach. “I always thought Ballast could be very successful as a diversified boutique independent financial services group,” he says. “I told them ‘if you guys are ready for this then I want to take the business further’.” And so far for Ballast, Paratore has made good on his word. He started in February 2009 and by August Ballast announced its acquisition of Sound Finance Group. The deal included the purchase of two retail offices based in Victoria Park and Rockingham in Perth. At the time, Paratore commented on the deal by saying: “It is extremely important to us that as we grow we never forget the qualities that

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PROFILE

growth expanding. MPA caught up with general manager Frank Paratore to learn more have made us so successful in the first place. Sound Finance and our new Midland branch are a good fit with Ballast’s business ethos and we are very pleased to announce that all existing staff will be retained.” Up until that point, Ballast really had a more wholesale mindset, Paratore says. But part of his key performance indicator (KPI) is to expand the retail aggregation business. “I believe in removing obstacles,” he says. “If brokers want full support, then there’s the retail side of the business. If brokers want more limited support, then we have the wholesale side.” Ballast experienced another growth spurt in May when it opened three new offices in Western Australia. The expansion brought Ballast’s total numbers to seven offices nationwide, and expanded its reach to clients in South Perth, Melville and the Goldfields region of WA. “Increasing the reach of our operations is essential in maintaining a growing and successful business. Our newly-opened outlets will allow

Ballast to increase its presence in WA, and continue to provide the highest standard of financial services and products to our new and existing client base,” Paratore says. Homegrown This rapid growth has cemented Ballast’s place in WA, which is an area that Paratore himself has a solid base in. Paratore has always resisted the allure of the country’s bigger financial centres. Homegrown in the west, he graduated in 1991 with a BA in Business from Edith Cowan University in WA. Straight out of university, Paratore joined Household Finance Corporation (HFC) an American-based group. It was a second-tier lender that specialised in personal loans, mortgage refinancing and home equity loans. “It was a very quick baptism of fire in the industry,” recalls Paratore, “but it was a sensational training ground,” he adds. Paratore worked there for 12 months as a loan writer and

LEADER

PROFILE LEADER

Personal fact file Frank Paratore + Position: general manager + Company: Ballast + Age: 41 + Family: Married, three boys + Hobbies: Real estate, fishing, sports, travelling, gardening, enjoying a Shiraz + If I wasn’t in the financial services industry I’d be… not going grey, seriously... in property development

was quickly promoted to branch manager, where he stayed for another four years. Then HFC’s major competitor at the time, AVCO, bought the company out. Paratore says AVCO earmarked 12 individuals to remain with the group for six months – of which he was one – but after this time was up he decided to move on. Paratore then joined AGC – Westpac’s finance company – and spent two years there as the state sales manager. “Up until that point, I was mostly dealing in personal loans, credit cards and second mortgages – but had limited experience in the true residential mortgages. I really felt I needed to broaden my horizons,” he says. So from there he joined Trust Bank, the state bank of Tasmania. At the time, Trust Bank was looking to expand into mainland Australia by selling residential mortgages through the thirdparty channel. “So that’s when I really started dealing with brokers – in 1997. Which is really not too far down from when the broker industry got going in Australia,” he says. Trust Bank was then taken over by Colonial, which was later taken over by CBA. “That was the start of many mergers in the late 1990s. At the time, Kathy Cummings was boss of CBA. I survived through all of these changes, but I wondered how long I would continue to survive. CBA said it would stay committed to the broker

Industry issues Ballast’s general manager Frank Paratore weighs in on some key issues facing the industry Fee for service: “I like the fee for service model,” Paratore says. “I think it brings a lot of transparency to the industry.” According to Paratore, the public is happy to pay for services where they see value – and if you’re a good broker then there’s nothing to fear about the fee-for-service model. Paratore was even as bold to predict that within 24–36 months the industry will witness even greater movement in that direction. Part of that can be attributed to the fact that the financial planning industry is moving down that path and the two industries are closely aligned. Minimum loan requirements: The introduction of minimum loan requirements by certain major banks has been a hot button issue for brokers across the country. Paratore says he believes accreditation should be based on quality and conversion, not volume. “If a broker can give you a good deal, then they shouldn’t be punished for submitting loans less frequently,” he says.

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channel, but I wasn’t sure for how long. True to Kathy’s word, they did,” he says. It was at about that time that Garry Driscoll, who was at Homeloans Ltd, came calling. Driscoll (who has since moved to Mortgage Ezy) offered Paratore a position with the non-bank and Paratore took up a role as state manager for five years. Then in 2005, Paratore says he was “saved” by Aussie, and chosen to grow the “true third party channel”, which he did until he joined FinanceCorp as general manager between 2006–2008. Then in 2008, Mortgage Solutions hired Paratore as their GM. Unfortunately, the new position coincided with the worst of the global financial crisis, and Mortgage Solutions was forced to cut Paratore loose. But their loss was Ballast’s gain. Growth through adversity Convinced that the financial crisis was a time of great opportunity, Paratore persuaded Ballast’s directors to use their strong cash flow and strong financial position to grow the business. “The GFC was a blessing in disguise,” he says. “While other groups were pulling their heads in, I said, ‘let’s take a more aggressive approach’.” In addition to looking at expansion opportunities, the company began spending more money to put its name out there. In July 2009, Ballast confirmed it would be the MFAA’s Western Australia platinum sponsor – a commitment it reaffirmed in 2010. As well, Ballast decided to host a series of ‘sundowner’ parties in WA for industry participants – both for Ballast members and non-members alike. “We deliberately didn’t use the sundowners as an opportunity to talk about our model,” Paratore says. “They were just about injecting a bit of fun back into the industry.” Paratore says the group is still looking for more growth, but the emphasis will be on finding businesses that are aligned with Ballast both strategically and culturally. “There needs to be a true understanding of what diversification really is,” he says, adding that it’s something a lot of companies out there still aren’t doing well. “Which is good for us,” he admits. MPA

PROFILE LEADER

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PROFILE BROKER

Evolution leader Mortgage planning is not a new term, but veteran industry member Darryl Benn has pioneered a new training course and organisation dedicated to this fresh style of broking

arryl Benn is creating a new breed of brokers. The principal of The Mortgage Planner Group is leading a revolution in the industry – converting brokers into planners and one-time customers into long-term clients. “What we’ve created is a product called The Mortgage Plan, but we believe we’re creating a new profession in the industry,” he says. The Mortgage Planner Group, which launched in May, is offering brokers this new product to sell to their clients – the Mortgage Plan. What Benn is hoping to sell to brokers is a new way to diversify their service. And while he’s not the first to wave the ‘mortgage planner’ flag, he is the first to use it as a rallying cry to other brokers.

“ We are really excited by what Darryl Benn has put together and are really keen to help this plan get out there to customers ”

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Broker to planner Benn’s own journey in the industry started in 1997, when a friend asked him to join his mortgage business as a broker. For Benn, who had worked in the finance industry for 15 years previously and had also run various businesses, it was an easy career move. Then in 2000 he set up his own mortgage origination group, which he operated for five years before moving across to work as the general manager of a brokerage house that specialised in commercial finance. “Then in September last year I sat back with all my years of experience and came to the

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Intellitrain Q &A What is the new course? The concept of mortgage planning incorporates a range of skills that many mainstream finance brokers may not have, particularly in the areas of cash-flow management, credit management and direct property. Whilst this knowledge can be obtained through various existing courses, TMPG wanted to bring them all together into one specialist program – which we have called ‘The Advanced Course in Mortgage Planning ‘. What makes it unique for Australian brokers? While there are already a small number of brokers out there undertaking what we are referring to as mortgage planning, what TMPG has done is formalise and bring together all of the necessary components. This includes not only the training, but the mortgage plan document, software, budgeting, loan products and business support. It is important to note that this is nothing like the old mortgage reduction schemes. Mortgage planning is a service offering, not a product. What topics does the course cover? The technical side of the course focuses on the structuring of loans and bank accounts, how to manage cash flow, debt reduction techniques, direct property, managing credit issues and creation of the actual mortgage plan document. The business side of the course covers how to sell your new service offering, how to manage mortgage planning clients and how to use mortgage planning to build your business. And, of course, no program is complete without a brief look at regulation, licensing and the distinction between mortgage planning and financial planning. How will it help brokers improve their business? A key business risk for many brokers is the fact their remuneration is essentially set by lenders, and it’s no secret that some of these lenders have been dishing out pay cuts. With smaller loans and some complex and time-consuming deals often being unprofitable for brokers, they need to be able to charge fees if they are to take control of their financial destiny. The problem for many brokers is that they cannot justify charging fees for their current service offering – or perhaps more to the point, their clients are not prepared to pay additional fees unless more value is being added. Please don’t get me wrong – brokers do provide real value to clients in selecting a lender and facilitating an application, but the trouble is there are thousands of brokers and lenders lined up behind them who are willing to do this for no additional fee. Operating as a mortgage planner takes them beyond broking – they become a finance advisor (not a financial advisor), a debt and cash management expert who partners with clients rather than simply doing transactions for clients. There are numerous potential benefits to this, the most obvious of which is differentiating themselves from their colleagues and providing a service that locks in repeat business and referrals. It also increases the ability to charge fees if they wish, taking financial control from the lenders and placing it with their service offering – where it should be. Is it accredited? Although Intellitrain is a registered training organisation, the mortgage planning program is not an accredited VET course (nor is it required to be). Upon saying that, we have considered transitioning it into a formal Certificate IV course and consequently designed it accordingly, which includes participants completing assessments. This way if we do decide to have the course accredited, prior participants will have already met the criteria to add some more letters after their name. How many CPD points can brokers earn by taking the course?  12 CPD points.

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“ We believe that people struggle to meet their repayments when mortgage brokers just use the banks’ service calculators and do not consider the lifestyle of the client ” conclusion that with the cut back in upfronts and trails, tighter lending regulations, and less products on offer, the business model of a broker is going to struggle.” As a result, Benn created The Mortgage Planner Group. The group is not an aggregator or franchise, nor is it a mortgage manager or lender. Benn describes the group as an “innovator of new ancillary products for the mortgage industry”, as well as being an educator and provider of new software tools. The thrust of the group is to help brokers become mortgage planners. According to Benn, the difference is that a broker is concerned with providing a customer with a loan based on the banks’ servicing models, whereas a planner creates a complete financial plan for their client that includes a summary of their entire financial position, a summary of their new loans, an analysis of budget and cash flow, and a summary of their future objectives. “We believe that people struggle to meet their repayments when mortgage brokers just use the banks’ service calculators and do not consider the lifestyle of the client. When we train a mortgage broker to become a mortgage planner, it is a totally different focus,” he says. For example, a bank service calculator determines that your client can afford a $500,000 loan, while a look at their budget and cash flow reveals that they can really only afford a $400,000 loan. But if the client still wants the $500,000 loan, then the job of a mortgage planner is to help them get their budget in order to get what they want, without ending up in payment arrears months down the line. “The essence of my business model is about responsible lending,” Benn says. “I have a passionate belief that we are entering an era of

responsible lending, and putting the client first means absolutely that. When a mortgage planner negotiates with their client, in all cases it’s the requirements and needs of the client that comes first. We’ve written a multi-point Code of Ethics that is at a higher standard than the new ACL requirements under the Act.” And the benefits to brokers-turned-planners are many, he says. For example, industry professionals will be able to distinguish themselves by providing a new level of service. In addition, giving clients a complete financial plan creates opportunities to build long-term relationships. And lastly, it opens the door for cross-selling and more opportunities for referrals. Planning products The jewel in the company’s crown is The Mortgage Plan – an 80-page comprehensive document that brokers can use for first homebuyers, property investors, borrowers looking for debt restructuring

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PROFILE BROKER

Profit opportunities Mortgage planning offers industry participants another source of revenue, suggests Darryl Benn, principal of The Mortgage Planning Group. For instance, in addition to receiving the upfront and trail for the loan from the lender, brokers could charge a separate fee for the mortgage plan, the budget software and an annual review. Example: $300,000 loan Upfront $1,500 Less aggregator fee $300 Trail (year one) $600 Total $1,800 Mortgage plan $900 Budget software $250 Annual review $300 New total $3,250

or elimination, and retirement planning. Benn describes the plan as being comparable to a statement of advice that a financial planner would provide to their client. To access the organisation’s Mortgage Plan, brokers will have to complete a new mortgage planning training course created by Benn and being distributed by Intellitrain (see box, page 26). The course, which is believed to be the first of its kind offered in Australia, is designed to teach brokers how to look at their clients in “a more holistic way”, says Benn. The course covers domestic cash-flow managements, budgets, cash-flow forecasting, how to complete a fact-find, the components of a mortgage plan, a technology course and business development. Once completed, brokers have no obligation to join The Mortgage Planner Group. The second ancillary product on offer from The Mortgage Planner Group is a software program designed to help customers track their budget. The Mortgage Planner Group has partnered with Iden Group, which is offering a new line of Powersaver mortgage products that includes both The Mortgage Plan and the budget software program free of charge (see box, right). The Mortgage Planner Group, along with Intellitrain’s Mortgage Planning course and Iden Group’s Powersaver mortgages, were scheduled to be launched in late May. Benn is predicting the first wave of mortgage planner converts to be 100-fold by the end of the year. MPA

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Q&A with Iden Group’s director Barrie Gaubert

What are the PowerSaver mortgage products? The PowerSaver is a new approach that has distinct features we are focusing on. Some parts of the product, for example an offset, are very common but still not really understood or well used. All PowerSaver products include ‘budget management software’ (valued at $495) at no cost to the borrower. All PowerSaver mortgages have the option of a mortgage plan. With the ‘PowerSaver Mortgage Plan’ loan the ‘mortgage plan’ (valued at $990) is inclusive in the package.

“ I have a passionate belief that we are entering an era of responsible lending, and putting the client first means absolutely that ”

What is the link between Iden Group and The Mortgage Planner Group?   Our relationship with The Mortgage Planner Group is a business one. We are independent businesses. However, we are joined together by this new plan and approach for brokers and customers. We are really excited by what Darryl Benn has put together and are really keen to help this plan get out there to customers. As for the budget software, it is a critical tool for the ‘kit bag’ of brokers that are going to help customers with this planning approach. Many customers really need help and this tool will help them big-time. This coming together of the tools and the plan and the product will really provide a very distinctive point of difference to brokers as they educate and help customers. Too many customers are floundering with their budgeting, planning, and goals of becoming financially secure and independent. This all-up package will help many brokers connect with their customers and help them on this journey. It is also an economical solution, so it’s all-win on this strategy.

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FEATURE

TARGETING FEMALES

Think

pink Women are getting better educated, better paid and are now looking for better accommodation. Andrea Cornish looks at how brokers can target this burgeoning market

adies across the country strapped on their Manolo Blahniks and quaffed cosmos in celebration of the sequel to Sex And The City (SATC) which hit 450 cinemas in June. Much like the original movie, which opened in 2008, theatres sold out weeks in advance. The fever pitch which surrounds SATC is not hard to understand – legions of Australians can identify with the show’s four characters and their lifestyle – particularly women in their mid-30s with good jobs and even better shoes. Australian women – like their American counterparts – are evolving. More are choosing to get married later in life or not at all and an increasing number earn higher salaries thanks to higher education, better training and improvements in work-related experiences. The Australian Bureau of Statistics noted in 2008 that the last 25 years have seen substantial changes in women’s economic circumstances. “The proportion of women earning their own incomes has risen, and levels of economic autonomy experienced by women have increased,” it said. To demonstrate this phenomenon, in 1982, women aged between 18 and 64 years earned 31%

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of all income received by men and women in this age group. But by 2005–06, this share had increased to 38%. It is no surprise then that this demographic is one of the most exciting new target markets for mortgage brokers.

Looking to buy Home Loan Hints conducted a national survey in March 2010 of 600 people to highlight the gender differences in the home loan market. Survey findings revealed that not only are females the dominant gender in their participation as active home loan customers, but they are also more likely to be buying their first homes. According to the data, 58% of those looking for a home loan were females. The results also found 38% of women were in the search to buy their first home compared to only 30% of men. And on the information front, more than 70% of females said they trusted and were satisfied with the advice they obtained from external sources, as opposed to only 40% of males. Claire Bailey, corporate affairs leader of Home Loan Hints, says the availability of information

FEATURE

TARGETING FEMALES

“ Basically, women are more active, because they are less influenced by biased content – so they search more, knowing what to look for ”

online has played a big part in the increased interest from women searching for home loans. “It seems largely correlated to the active role women play online today and the services now available and provided online, in combination with the trust factor,” she says. “There is an unprecedented amount of information now provided over the internet, mostly out of demand for self-education. The problem raised by both genders in our survey is the authenticity and objectivity of the information. However, our results show that women – although equally as cautious of biased intent – are less likely influenced by it in their search. Men, on the other hand, are. Basically, women are more active, because they are less influenced by biased content – so they search more, knowing what to look for.” Therefore, Bailey adds, women tend to be more prone to using outside sources to help them secure a loan. “Our survey suggests that women are more aware of availability and opportunity. Because they are more actively seeking home loan information and products, they are more susceptible to recognising their options.”

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FEATURE

TARGETING FEMALES

It should be noted that Home Loan Hints data isn’t just for city ladies – the research applies regionally as well. “From our data, it seems to exist across the board. Once again, this would be correlated to the limitless geographical boundaries of the internet.”

Marketing advice Reaching the female market comes down to understanding your audience, says Bailey. “First of all, we are seeing that women are instinctively wary of anything to do with home loans: the qualification of the person giving them the advice, to the reason behind the answer. However, we have now established that the most active seekers and influencers are women looking for their first or later home (aged 26–55).” So, starting with that bit of information, Bailey recommends a “combination approach” that integrates traditional practices with new online methodologies. “Often, we come across lenders/brokers who in the rave of social media and the internet, drop their traditional methods. Our results found that face-to-face meetings are still a significant component with over half (57%) of females listing this as an important communication methodology.” Bailey adds that there are also both those who are

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“ Online is where women are spending a large, if not majority, portion of their leisure and research time. So consider platforms that share your demographic ”

latent in the uptake of online marketing, and those who just do it completely wrong. “Online marketing allows you to be dynamic with your advertising – direct and accountable. Even more important to note, online is where women are spending a large, if not majority, portion of their leisure and research time. So consider platforms that share your demographic, and allow you to promote your message.” Bailey says that in the case of Facebook, where there are about eight million users, 60% are women and of that figure 30% are aged 25–34 and 30% aged 35+ who spend on average around 14 hours a month interacting with others. “It just makes sense,” she says. “Don’t forget though, your audience is cautious of your intent, so rather than trying to push your presence in directly, it is sometimes helpful to advertise an extended service or product that can introduce you to the customer – such as a ‘free manage your mortgage’ webinar. You cannot just paste rate updates. Use mediums like Facebook to engage with consumers and place them with others – that’s the whole point of social media.” Another key point is to offer information, but keep it simple. “Women are doing their own research,” Bailey says. “Our results show the majority of those looking for home loan help are doing it on their own and are satisfied with what they are finding (56%). However, issues of mistrust and affordability constantly pop up – so bear this in mind with your content creation.” According to Bailey, consumers feel they have information overload. “So keep it simple and keep it sharp. After all, they have plenty of alternatives.” And lastly, Bailey suggests brokers team up with businesses that share the same audience. “If there are mutual benefits of a union then negotiate your grounds. The local real estate agent might send out monthly newsletters to a large database of potential customers that you can advertise with. In return, you send them leads.” Sites such as Home Loan Hints have a large female demographic. It allows professional advisors who meet its criteria to actively engage with consumers via its Q&A engine, although it requires responses to be unbiased (ie, not to direct the answer for their own sale). Soon, it will be offering a ‘bio’ avatar, which will allow the respondent to advertise their business for brand awareness. MPA

The final countdown BROKERS ON BANKS 2010 SURVEY

Brokers now account for 40% of the Australian mortgage market, making them more vital than ever as a home loan distribution channel. MPA listened to what they really think of the banks in its eighth annual ‘Brokers on Banks’ survey

t’s that time of year again, when banks nervously pore over these pages to see what the country’s mortgage brokers have made of their performance over the last 12 months, like a nervous pupil bringing their report card home to the parents. Despite now accounting for two-fifths of Australia’s mortgage market and providing an invaluable stream of new business for the banks, many brokers feel their efforts go unrecognised. Many respondents to our survey said the nonbanks do much more on their behalf. One disgruntled participant said, “banks believe we need them so don’t try too hard” while another labelled them “arrogant”.

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It wasn’t all flak though and brokers didn’t hesitate to laud banks where they thought praise was due. Many acknowledged the individuality of each application and singled out specific BDMs for congratulations.

The vital statistics This year’s survey was our biggest yet, with well over 800 brokers taking part. MPA’s research remains the standard-bearer in the industry, with this being the eighth year running of the ‘Brokers on Banks’ poll – making it the definitive and most authoritative index available. The poll is also fiercely independent – sent out to brokers using our own website and resources, ensuring the results are fully impartial. Respondents to our survey are not rookies either. Between them, our participants have

COVER

BROKERS ON BANKS

Broad market

racked up just shy of 3,000 years of experience – around the same time it takes some BDMs to answer their mobiles if some of our cheekier contributors are to be believed! In total, 12 banks were rated over 11 criteria on a scale of one (very poor) to five (excellent): BDM support, broker support, interest rates, internet platform, overall service levels, phone support, product range, satisfaction with credit policy, support systems, transparency of commission structure and turnaround times. The score attained by the banks in each category was averaged to give them a grand total.

ANZ

3.23

ING Direct

3.06

CBA

3.05

As well as ranking the banks, brokers were also asked to provide more detailed comment on a range of issues, including how bank accreditation and segmentation has affected their business, what changes this has caused, their satisfaction with commissions and whether bank service levels were as good as their non-bank counterparts. They were also posed questions regarding how banks can improve over the next 12 months, asked to name the best thing a bank has done for them in the last year and tapped for their views on channel conflicts. Finally, and perhaps most revealingly, brokers were asked straight up which was their favourite bank to deal with, and why. This year, for the first time, we have further segmented the results to give an even clearer picture of the opinion of the top-grossing brokers. Answers submitted by MPA’s top 100 brokers have been separated from the broader market results, to give an idea of what the crème de la crème of introducers really think of the banks.

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COVER STORY BROKERS ON BANKS

Turnaround times

Overall service levels

Bendigo and Adelaide

3.16

CBA

3.46

Citibank

3.16

ANZ

3.17

ING Direct

3.07

ING

3.12

Turnaround times Once again, turnaround times proved to be the most important element of our survey, with the majority of respondents ranking it as very important to their business. After all, choosing the right deal for your client is only half the battle – you have to actually deliver it too. All but two of the 12 banks managed to register a score above the 2.5 ‘average’ in this category, with the three top spots being taken by Bendigo and Adelaide, Citibank, and ING Direct. The top two banks also made the podium in this category last time round, showing true consistency in processing applications. A Traralgon-based broker heralds Bendigo and Adelaide’s “speed and flexibility”, while one respondent was gushing in her praise for ING Direct. “It has the best BDM, best turnaround times and a fantastic product offering,” she says. Nobody’s perfect though, and the introducer admitted the lender could enhance its website to allow brokers to track cases. At the other end of the spectrum, some brokers were more scathing. One Bathurst-based broker says “most lenders have unacceptable turnaround times. Brokers count day one from the time the loan is submitted to the lender. It seems to me that most lenders count the submission time two or three days after this and pretend their turnaround times are better than the reality.” And another respondent got all nostalgic on us. “Poor all round. I recall when two-day turnarounds were long.”

Overall service levels Those of a nervous disposition may like to look away now. And it’s probably best to make sure the kids are safely tucked up in bed too. Mention the very words ‘bank’ and ‘service’ in the same

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sentence and most brokers could give you an earful on their latest debacle. But, being the honest bunch they are, they are not shy to admit when the lender they are using has excelled itself either. A Leederville-based introducer claims dealing with one top four bank was “homicide”, while some of the other terms bandied about – “terrible”, “pathetic”, “woeful” and even “disgusting” – are bound to make the banks blush. There were many variations on the “what service?” theme too. Perhaps the most depressing contribution came from an intermediary from NSW, who writes: “It is without a doubt the most frustrating time to be in the financial industry. The banks are forever changing their policies and making it harder and harder to obtain approvals, all under the guise of responsible lending.” It wasn’t all bad news though, with one candid broker admitting “we all need to service the customer better” and a handful singling out specific institutions for praise. The broader market victor in terms of service was CBA, with an average score of 3.46. ANZ landed the silver medal while ING took out third place. One contributor has encouraging words for two of this section’s medallists. “It is clear that brokers are an important part of ANZ’s business,” she says. “Other lenders say we are, but their actions prove we are not. I think CBA is trying really hard to place the same level of importance on brokers and I definitely welcome its recent push. I think it can be the market leader and brokers will support it if we continue to feel part of its model.” ING Direct was also singled out for praise by a senior loan consultant from Adelaide. He says “[ING has] excellent BDM service and I am aware of its policy limitations. It has a simple application

“ It is clear that brokers are an important part of ANZ’s business. Other lenders say we are, but their actions prove we are not ”

BDM support

Broker support

“ The good BDMs are overworked and underpaid. They spend most of their day fixing problems that should not have occurred rather than growing their business ”

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CBA

2.97

Citibank

3.56

ANZ

2.69

AMP

3.34

ING Direct

2.67

ANZ

3.26

process, no channel conflict and an excellent customer service line.”

Broker support Introducers were also restrained in their opinions of the support they receive from banks, with none of the 12 featured banks managing to average a score of three. CBA topped the pile with a 2.97 score, followed by ANZ in second place (2.69) and ING Direct in third (2.67), making it the second consecutive year that ING and CBA have received recognition in this category. The issue of channel conflict was addressed by the majority of our respondents, with most brokers claiming the situation is worsening. Some paint a grim picture of banks stealing custom and acting unethically, with one contributor saying starkly, “I have no faith in branches not poaching my business.” Others blame such shady practice on the banks, setting themselves unrealistic targets. One broker damns the banks with faint praise with his response. “On the surface it appears to be improving, but it is hard to trust any big business.” Brokers are nothing but honest though and a Queensland-based introducer admits some of the onus lies with them. “Brokers need to take responsibility for positioning themselves as valued components of the process,” he warns. “Channel conflict exists because brokers neglect their clients.” And a broker located in Albion was keen for one bank not to be tarred with the same brush as the others. “My local CBA branch welcomes my customers and values me as a business partner,” he says. “There is no channel conflict with my clients at CBA whatsoever.” Overall though, brokers in this category did not feel that their hard work was acknowledged by the

banks, and enhanced support is definitely on the wish list. Even the successful banks posted modest scores in this category, so perhaps showing brokers a little more love will be higher on the agenda as we move into 2011.

BDM support The fourth most important category to brokers was the assistance they receive from their BDM. Citibank retained the gong, posting an almost identical score to last year (3.56 this year, 3.57 in 2009). The next most successful banks were AMP and ANZ. With BDMs being your main point of contact with a bank, your relationship with them can completely colour your perception of the lender. As one broker succinctly puts it, “BDMs can make or break a lender”. While many BDMs came in for criticism, many brokers were quick to apportion the blame to their senior bank colleagues. “BDMs are obviously asked to service too many brokers,” claims one intermediary from Victoria. “It is rare that we can call a BDM without having to leave a message and wait for their return call. It is even rarer to have one visit our office. It amazes me that some lenders require brokers to do business with them despite this. Surely if they want us to know their product offering and policy, it is their responsibility to provide an opportunity for brokers to be trained in these areas which could be solved by BDM visits.” Other introducers agreed. “Give adequate support to your front-line BDMs,” one implores. “The good ones are overworked and underpaid. They spend most of their day fixing problems that should not have occurred rather than growing their business.” Communication was the main bone of contention, with countless respondents

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BROKERS ON BANKS

Satisfaction with credit policy 3.1

ANZ

Bendigo and Adelaide

3.05

Citibank

2.89

claiming they had a better relationship with certain BDMs’ voicemails than the individuals concerned. Many claimed BDMs hid behind texts and e-mails rather than picking up the phone or getting out and meeting brokers face-to-face. As before though, there were brokers who had kind words for BDMs. A Cairns-based brokerage director highlighted a BDM who had gone out of their way to personally deliver documents out of

hours, while one grateful broker singled out a St.George BDM who helped get a loan approved against vacant land, that had otherwise been declined due to a discrepancy in zoning. The overriding feeling was that banks could put more resources into their BDM teams, seeing as they are the public faces of the brand that brokers interact with. Many brokers felt the relationships they have with their BDMs are a one-way street, and that more can be done to both educate them on each bank’s proposition and to keep them in the loop with the developments on individual cases.

Satisfaction with credit policy Next up was satisfaction with credit policy. Brokers often kick off at what they see as banks unfairly moving the goalposts, but in a post-GFC climate, banks have every right to ensure they are lending responsibly and to the right borrowers. ANZ topped the pile with an average score of 3.1,

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COVER

BROKERS ON BANKS

Product offering

“ There needs to be more consistency with credit policy. [Banks are] changing LVRs too frequently ”

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Interest rates

ANZ

3.86

NAB/Homeside

3.87

CBA

3.41

ING Direct

3.49

St.George 3.41

ANZ

3.47

narrowly pipping Bendigo and Adelaide (3.05) into second place. Citibank retained its third-placed standing from last year with a result of 2.89. To be fair to them, many brokers understand the logic behind altering credit policy, but were universal in their call for more transparency and consistency behind the decisions. Others called for more flexibility and common sense to be used for genuine applications. A home finance broker in Goodna had this to say: “I would like to see a relaxation of credit policies. It’s very black and white at the moment and we need to have more grey, so deals are actually looked at as opposed to just being scored.” Others called for banks to look at the bigger picture rather than simply focusing on the ‘here and now’. A broker from Manly had this to say: “There needs to be more consistency with credit policy. [Banks are] changing LVRs too frequently, seemingly not taking a long-term view of the types of client they wish to attract.” One broker cites claims the GFC is over by stressing that banks need to return to normal lending policy such as 95% LVRs. Credit policy is never going to be an area where brokers and lenders completely agree on, as brokers inevitably want all their applications to be accepted and banks have businesses to run. Indeed, banks not just accepting submissions wholesale could very well be one of the reasons that the Australian mortgage market didn’t run aground quite so dramatically as some of its global counterparts did, but a couple of comments make sensible and reasonable requests. The first, from a broker in Sydney, says “[banks need to] review credit policy as some of it is dated. Credit needs to focus on the risk and the client and stop ticking boxes as the climate is

forever changing.” And finally, a North Fremantlebased introducer adds “banks should explain why they change credit policy and give notice, rather than just change it without informing brokers first.”

Product range Every bank is judged by the products it offers, but, surprisingly, brokers only ranked it the sixth most important category in our survey. ANZ walked away with this year’s crown, registering an impressive average of 3.86 to fend off competition from CBA and St.George, in joint second place with 3.41. It is understandable that brokers want quick turnaround times, good service levels and support, but is perhaps slightly worrying that the actual products should be so far down their list of priorities, particularly as getting the best deal for their clients is at the heart of everything they do. Brokers weren’t very forthcoming about why they rated individual banks’ products highly either, with “good”, “competitive” and “cheap” about as verbose as it got. One Aussie franchise holder from NSW hit the nail on the head as to why ANZ takes the plaudits in this category though. “ANZ has a good product range, requires the least paperwork and has a good approval rate,” he says. Some optimistic souls called for an end to dual pricing, while others wasted no time in drawing parallels between the banks with the best products having the poorest service, and vice versa. Unfortunately for those wry few, ANZ shattered that myth by triumphing in both categories.

Interest rates Another category that found itself in unfamiliar

New Credit Reporting Rules Proposed for 2011 Internet platform 1

CBA

3.39

ANZ

3.28

Westpac

3.15

territory towards the bottom of the pecking order was interest rates. NAB scored its only victory of the survey, with the highest average score recorded in the main poll in this year or last (3.87). In second place was ING Direct with 3.49 and ANZ finished third with 3.47. Similarly to the product category, brokers were none too effusive on how they felt about the interest rates on offer from the majors. Presumably, they realise that banks only have so much scope to play with outside the parameters set by the RBA and wider economic conditions. Some brokers did hint that banks were quick to pass on any rate rises to their customers, but not so quick off the mark when it came to reductions, however.

Internet platform With more and more of our daily – and working – life conducted online via the internet, this category was keenly contested by the banks. Brokers failed to get too hot under the collar about it though, ranking it only the eighth most important category, but the banks are bound to be keen to see how well their websites are being received. CBA edged out ANZ for victory this time round, reversing the top two results from the IT/ technology category last year. Westpac came home in third, registering its only podium finish in the broader market survey. A number of brokers heralded CBA’s paperless applications and good internet tracking for making their lives easier and one introducer describes its website as “first class”. As a larger proportion of the mortgage application process shifts online, this category is sure to take on added importance for banks, and brokers are sure to rank it more highly as they begin to use the banks’ websites – even more than they do now.

Following recommendations of the Australian Law Reform Commission, the Australian Government has committed to the reform of the credit reporting system. The proposed reforms will deal with a number of key issues including: 1. more comprehensive consumer credit data to be available in credit information files. The new categories of data are: • the type of each credit account opened (for example mortgage, personal loan, credit card); • the date on which each credit account was opened; • the current limit of each open credit account; • the date on which each credit account was closed; and • whether over the prior two years a person has met repayment obligations for a credit account and if not, the number of repayment cycles the person was in arrears. The Government has stated that the increased access to data will only be implemented once responsible lending obligations in the National Consumer Credit Protection Act 2009 are in force (January 2011). The information will only be available to lenders who are licensed under the Act. 2. Prohibition of using credit information for direct marketing except for pre-screening of direct marketing lists to remove adverse credit risks. 3. Only members of an external dispute resolution scheme may access credit files 4. Personal insolvency information to be included on credit files However, credit reports will be required to adequately differentiate between the forms of administration. 5. Prohibition on some information in credit files The proposed reforms will prohibit the collection of credit reporting information: • about presented and dishonoured cheques; • about persons under 18; • which includes sensitive information (as defined in the Privacy Act); and • listing overdue payments less than a prescribed amount, proposed to be $100. The access to additional information afforded by the reforms should be of great assistance to credit providers and assist with compliance with the responsible lending obligations under the National Consumer Credit Protection Act. It is planned that the new Credit Reporting Rules will be operative in 2011.

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COVER

BROKERS ON BANKS

Transparency of commission structure

Support systems (CRM)

ANZ

3.65

AMP

3.58

ING Direct

3.45

Transparency of commission structure It is with much admiration we must regard the fact that brokers have relegated their own bottom line to almost the end of their list of priorities. Either that, or banks are doing such a perfect job of clarifying their commission structures that brokers have found absolutely no reason to complain about it. Back in the real world, ANZ continued its impressive showing this year by being named top dog in this category, followed by AMP retaining its silver medal from last year and ING Direct coming home in third. As to be expected, brokers weren’t backwards in coming forward on the topic of whether they felt they were being remunerated fairly and how transparent the banks were about payment. One scathing broker says “the banks made a 30% increase in profits, yet they pay us less. We work in the best interest of the client, yet the banks force us to use them to keep our accreditation.” Others complained that banks had cut commissions as part of wider cost-cutting drives, then subsequently refused to increase them again when the cost of funding decreased. One intermediary stresses the importance of commission clarity for all parties involved. “We need consistency in commissions to encourage transparency both within and outside the industry,” he says. “It is important clients know that the commission structure is identical with any broker, group or head group.” Introducers also felt that their increased workload was not being reflected in the commission they receive. A mortgage advisor from Carnegie had this to say. “The pre-October 2008 commission rates were satisfactory. Brokers now

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CBA

3.17

ANZ

2.96

St.George

2.83

have to work twice as hard to make the same money. There is no other industry that receives a pay cut instead of a pay increase.” Some brokers felt they were being unfairly hampered by some of their underperforming peers. “I dislike the fact that the commission level is tied into aggregator volume and the performance of other sub-standard brokers within the same aggregation business,” says one respondent. Many brokers called for a standard commission structure across the board, but acknowledged that the banks would be reluctant to gather around a table and thrash out the relevant logistics. One broker has a stark warning for banks to not bite the hand that feeds them. “Thanks to brokers the banks are still making record profits yet, at the same time, many brokers are going out of business. Wouldn’t it seem sensible for the banks to ensure they stay strong in the future by helping brokers to survive now?” Brokers were also vocal on the topic of trail commission, arguing it should be paid from day one and not after a year, while clawbacks were also much maligned.

Support systems (CRM) and phone support These two categories were newly introduced divisions within the service questions this year. Four banks occupied the six places, with ANZ and CBA featuring on both podiums. CBA topped the support systems pile, followed by ANZ and St.George. In terms of phone assistance, ANZ triumphed with Bendigo and Adelaide in second place and CBA third. The phone support section may be a slightly touchy subject for brokers, judging by some of their responses to the BDM category, but several gave

COVER

BROKERS ON BANKS

Phone support 1

ANZ

3.2

Bendigo and Adelaide

3.18

CBA

3.1

special mention of ANZ’s assistance. As brokers mentioned in their submissions to other survey criteria though, there is still an overriding feeling that banks could do more on a face-to-face level rather than hiding behind computer screens and telephone lines. While such support is obviously not possible for every case, it is certainly something for the big institutions to consider if they are serious about nurturing their broker relationships. In terms of CRM, brokers had mixed opinions with regards to their personal relationships with banks. They were dubious about the banks’ intentions with regard to brokers’ clients, with many feeling that the banks were trying to muscle in on their patch.

Overall standings And now the moment you’ve all been waiting for, the prestigious overall standings. Despite protestations about the stranglehold that the Big Four banks have on the market, you still saw fit to rank two of them in your top three, proving that they are obviously doing something right to justify their market position. This year’s overall winner was ANZ with a grand total score of 3.23, a massive improvement from its sixth-place finish last time round. The bank finished top in four categories, an achievement made all the more impressive considering seven banks didn’t top any sections. One broker claimed ANZ was “simply the best of the bunch in all aspects of the game at present”. This is high praise indeed. ING Direct retained its second place from last year with a total score of 3.06, proving it has consistency to match its other attributes. Despite

“ We need consistency in commissions to encourage transparency both within and outside the industry ”

not triumphing outright in any individual category, it had five podium finishes, proving it is well and truly in the mix across the board. One introducer summarised its success this way: “ING is a good all-round lender and wants broker business. It is very helpful.” CBA took the bronze – and improved by one place from last year’s fourth – with an overall score of 3.05 and victory in four categories, as well as three further medals. The bank also took a healthy share of the vote when we asked brokers which bank they preferred dealing with. One broker claimed it was more committed to the broker channel than any other lender and one went as far as to say he could not operate his business without its support. Just outside the medals were last year’s victors AMP in fourth place and Bendigo and Adelaide – showing a massive improvement from last year’s performance – in fifth place.

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Say what? Among the reasoned and sensible offerings from brokers in this year’s survey, there were the occasional comments that tickled our compilers. Here is a selection of the most amusing answers: On bank service: “I’m sorry? I’m having trouble with that concept. Bank service? I’m not sure what you mean…” “They are starting to wear me down” On which bank you most prefer dealing with: “I wish I didn’t have to deal with any of them” “Wake up industry, you are selfdestructing” “They are all as bad as each other” On the best thing a bank has done for your business in the last 12 months: “Made my hair greyer” “Nothing much except pay me on time” “Absolutely nothing, only given me a few more headaches” “Showed some care rather than not giving a ****” “Pass on this one”

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Cream of the crop This year, for the first time, we sifted out the results from the top 100 mortgage brokers in Australia – according to MPA’s definitive annual list – to see whether the introducers doing the most business had a different view of the market

hen it came to ranking the importance of the categories, the top dogs agreed with the broader market that turnaround times and overall service levels were the two most pertinent issues for their day-to-day operations. In fact, the only major change was that the highest grossing brokers placed more emphasis on their satisfaction with credit policy, ranking it the third most important factor as opposed to its fifth place in the mainstream ordering. In overall standings, ANZ made it a double by being named overall top bank by the top 100, to go with its broader market crown. It registered an even healthier 3.28 score, adding 0.05 to its grand total and taking four category wins. Westpac made up for a modest performance in the main event to secure second place in the eyes of the top 100 brokers, posting an overall average of 3.19 and with a hat-trick of section victories. Third place went to CBA, making it two overall bronzes with a 3.16 score from the crème de la crème and winning a trio of category gongs.

Breaking it down So what did the top 100 think categoryby-category? Starting with the most important in their eyes – turnaround times – Westpac finished top of the pile with a score of 3.46, a dramatic improvement on their result in the mainstream voting. CBA came in second with 3.05 and Suncorp warranted its only podium finish of the entire process with a score of 3. Interestingly, none of the top three in the top 100 rankings made the podium in the overall turnaround time results, suggesting banks may take a different approach to cases they know are being submitted by larger brokers. In terms of overall service levels provided to the top 100, ANZ was victorious again with a score of 3.38. CBA claimed silver and Westpac again showed a massive improvement on its standing in the broader market equivalent to land third spot. CBA scored the first of its three top 100 prizes in the satisfaction with credit policy chart, scoring 3.25 to edge out ANZ (3.19) and Westpac (3).

COVER

BROKERS ON BANKS

MPA Top 100 1

ANZ

3.28

Westpac

3.19

CBA

3.16

ANZ continued its stellar showing by having the most transparent commission structure, followed by Westpac and Bankwest. In the final two combined service categories, the spoils were taken by ANZ, Westpac and CBA in terms of phone support, and Westpac, CBA and St.George when it came to CRM systems.

End game

The century club When it came to BDM support, CBA topped the polls in the eyes of our top 100. They gave the bank an overall average of 3.31 in this class, ahead of ANZ with 3.22 and Westpac with 3.15. The broker support category brought an identical podium line-up, albeit with more modest averages: CBA (2.97), ANZ (2.69) and Westpac (2.67). The top two places were occupied by the same banks as in the mainstream rankings, proving that the same levels of assistance are available to all intermediaries. ANZ registered yet another victory when it came to how its product range is

viewed by the top dogs, posting this year’s highest average score of 4. Westpac followed next with 3.65 and St.George landed bronze with 3.50. The interest rates category brought a double for NAB – topping the pile to add the top 100 plaudits to its broader market victory. It recorded an impressive average of 3.96 to pip ANZ (3.67) and CBA (3.28) to the post. Westpac landed the technological honours, being named best internet platform by the top 100 brokers. It scored 3.68 for its online proposition to outpace CBA and ANZ, with scores of 3.26 and 3.12 respectively.

This year’s results may make uncomfortable reading for some banks, but others can be rightly proud of their performances. Many of the responses we received from brokers – even the harsh ones – were couched with constructive criticism or ways that the banks could improve. Hopefully the lenders will take some of these suggestions on board before next year’s survey rolls around. Finally, a massive thanks to the hundreds of brokers who took the time to contribute to our survey, making it the biggest survey yet. The results were truly enlightening, so here’s hoping the banks agree. And stay tuned for next month, when the banks will be giving their responses. MPA

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ROUNDUP

MORTGAGE MANAGERS

Managing expectations

MPA asks eight of the industry’s leading mortgage managers what sets them apart from their contemporaries in a co-published roundup

Mortgage Ezy The Big Four banks show no signs of relinquishing their seats at the top table of the mortgage industry, but the non-bank sector also continues to go from strength to strength. Mortgage managers have really proved their worth to smaller banks without well-developed branch networks and given them a better chance of fighting against the big boys. Here we outline eight of the best and ask them what makes them successful.

Mortgage Ezy has been providing what it describes as “bank replacement treatment” to the broker community since 2001. Its head office is located in Surfers Paradise, but its processing and logistics hub is based in Sydney. It currently employs 46 full-time personnel, including state-based account managers in Queensland, NSW, Victoria and WA.

“ We will not poach your clients … we will not set up branches to compete with you and we will never market to your clients ”

Easy street Mortgage Ezy CEO Garry Driscoll is brutally frank about what mortgage managers can bring to the table. “We will not poach your clients,” he promises. “We will partner brokers and not screw them over, we provide more flexible commission structures, we supply better products that are broker and client friendly, we work with you and value the relationship, we will not set up branches to compete with you and we will never market to your clients.” Mortgage Ezy’s selling point is the flexible products it offers. Its most popular solutions for brokers are its uQUIT Variable Full Doc product featuring 90% LVR and its Ezy Lo Doc Offset which enables up to 80% LVR for purchases. Driscoll stresses both products combine the key ingredient of competitive rates with easy-to-use, uncomplicated features. He adds: “We supply home loans for owner-occupied and investment purposes so the point is make it very simple and very flexible to best meet the customer’s needs.”

“Mortgage managers supply programs that in most cases surpass what a bank can deliver,” he claims. “If you can’t kick the bank habit completely, then adopt a sound investment strategy and spread your risk around.” Driscoll also has a warning for the big banks. “We will continue to take on the majors, even though it is David versus Goliath, but we all know who won that battle in the end.”

Giant killer Mortgage Ezy places a lot of its marketing emphasis around quitting the bank ‘addiction’ and Driscoll’s top tip for brokers echoes this philosophy.

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Garry Driscoll

ROUNDUP

MORTGAGE MANAGERS

Ken Sayer

Mortgage House Launched in 1986, Mortgage House is an established name in the Australian home loan industry, although it originally commenced operations as a broker. It adopted mortgage manager and originator status in 1998, which also saw the introduction of its own branded home loan products and customer service operation. After opening its first retail Home Loan Centre in Blacktown in 2001, it has gone on to open more than 40 additional outlets, with an eye on doubling this figure over the next 12 months. Mortgage House currently has approximately 50 staff working out of its head office in Parramatta covering credit, compliance, IT, marketing, customer service, accounts, operations and lending managers.

“ We have a central focus on the customer and a better level of support available. Commissions are also greater using mortgage managers, turnaround is faster ” House’s calculations reveal this could be worth $183,000 on a $300,000 loan, reducing the term by seven years. Mortgage House also offers an Essential Offset mortgage available in both fixed and variable interest rates, offering customers flexibility without fees.

Vantage point

Customer focus

The product Mortgage House is proudest of is its Vantage Offset Package. Offering a 100% interest offset account with features including a debit card, cheque book, 30-year loan terms, four free splits and unlimited free internet access, redraws and transactions, it’s easy to see why. Ken Sayer, chief executive officer, says: “This product is already sold when we mention the rate, then when customers hear all the included features they can’t wait to sign. It is currently 1.02% cheaper than the bank’s standard variable rate and customers are shown exactly how much that saving on their home loan interest rate adds up to in dollars in their pockets or months off their term.” Mortgage

The benefits of using mortgage managers are clear in Sayer’s eyes. “We have a central focus on the customer and a better level of support available,” he reasons. “Commissions are also greater using mortgage managers and the turnaround times for submissions, approvals and valuations alike are faster.” Sayer also cites no clawbacks and selected upfront commissions being paid weekly as a key point of difference between Mortgage House and its competitors. His words of wisdom for mortgage brokers are to look outside their immediate profession in order to thrive. “Invest your time into looking at the local community and become intimately familiar with every business in your proximity,” he suggests.

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ROUNDUP

MORTGAGE MANAGERS

David White

Australian First Mortgage Australian First Mortgage (AFM) was incorporated in NSW seven years ago and its three founding directors have more than 75 years of experience in the banking and finance industry behind them. With a staff of 40, its current portfolio stands at a handsome $1.25bn. As well as its Sydney head office, AFM owns premises in Melbourne, Adelaide, Perth and the Gold Coast, as well as lending in Tasmania and Darwin.

Production line AFM has a varied proposition, from Complete Option Full Doc through to a Flexible Option Lo Doc. As well as residential lending, it also specialises in commercial property finance, leasing and hire purchase finance. As David White, director of credit services, explains: “If a client is requiring a mortgage to purchase a commercial property and wishes to raise the deposit by refinancing their existing residential loan, we are a one-stop shop for this.” AFM is funded by Advantedge, Adelaide Bank and Resimac.

It’s good to talk White claims AFM’s main point of difference is its accessibility and stellar service offering. “The three directors work in the business as required, seven days a week if needed,” he says. “Our phones are only turned off on flights! Imagine trying to discuss the structure of a loan with a director of a major bank. This could never happen.” AFM pledges to process all applications within 48 hours of receipt and its head of credit is constantly on-call. All brokers are allocated a

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“ We do not have channel conflict as business is sourced from the brokers and the large aggregators ” dedicated, experienced business manager who controls the relationship going forward and introducers are encouraged to discuss applications with AFM’s credit staff.

Design for life AFM’s philosophy is very straightforward according to White. “AFM is for the broker and its clients,” says White. “We do not have channel conflict as business is sourced from the brokers and the large aggregators. AFM does not have ownership in any aggregator or franchise/ satellite offices, nor does it employ mobile lending managers to work and compete against its brokers.” The mortgage manager is confident for the future too, branding itself as here to stay. It promises clients competitive pricing, high service standards and commissions consistently paid on time. White has a useful nugget for intermediaries who can sometimes forget the basics. “Maintain constant and regular contact with your client,” he says. “Don’t ever do the deal and forget your client, which some brokers appear to do.”

ROUNDUP

MORTGAGE MANAGERS

National Mortgage Company Queensland-based National Mortgage Company (NMC) was established by chief executive Steve Dover in 1996. It now employs 60 staff and manages a growing portfolio of close to $2bn. It is famed for its professional packs and construction loans, priding itself on the competitive rate and flexibility of the former and the fact the latter is available up to 90%-plus capitalised LMI.

Decision makers

levels. “We will continue to be innovative with our service delivery, products and systems through our strong partnerships with funders and through listening to our clients,” he promises. Lloyd’s tips for brokers centre on the service values he holds so dear. “Don’t underestimate the power of providing exceptional service,” he warns. “And ensure that whoever you are referring your clients to is not jeopardising your business through poor service delivery.”

Grant Lloyd, head of wholesale mortgages at NMC, says the benefits of mortgage managers boil down to issues of communication. “Mortgage managers give you the ability to speak directly with the decision makers and provide access to service and support that the banks can’t match,” he says. “However, NMC is not your typical manager business. In essence, it is an aggregator of funding lines backed by some of the largest banks in the world with whom we hold in-house approval authorities. For our brokers, this means they can speak directly to the decision makers, have the ability to obtain loan information via our introducer site 24/7 and access to the highest level of standards.”

“ NMC isn’t your typical manager business. It’s an aggregator of funding lines backed by some of the largest banks in the world with whom we hold inhouse approval authorities

Going for growth NMC’s wholesale team has swollen to five BDMs within the last two months, testament to what Lloyd describes as the “methodical but aggressive” manner in which it intends to grow its introducer portfolio. He also makes a serious pledge on service

Grant Lloyd

”

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ROUNDUP

MORTGAGE MANAGERS

Andrew Clouston

National Finance Club Adelaide-based National Finance Club (NFC) has specialised in providing lending solutions for mortgage brokers since its inception in 2002. All its credit and administrative staff are based in its South Australia head office and its 20-strong team includes business development managers in all mainland states. NFC sources funds from a range of different funders and manages a total portfolio of over $1bn, including all post-settlement customer services across its range of funders.

Value for money Andrew Clouston, managing director of NFC, is eager to explain to brokers how much better off they could be if they use mortgage managers. “Clients get superior value [using mortgage managers] – they receive a value-based product with flexible loans, competitive pricing, a simple loan application process and quick approvals,” he says. “Brokers can also earn more money as they get paid more than through the banks and generally get paid more quickly too.” Clouston also claims that without the channel conflicts that exist elsewhere, brokers can focus on growing their business as they will always own the customer. In addition, he says mortgage managers are normally more nimble and flexible than other lenders, offering product innovation and a superior service proposition.

A true pro NFC’s most popular product for loans of $250,000 or more is its Pro-Pack offering which carries no upfront fees and, at the time of going to press, a keenly-priced variable rate of 6.61%. Its Basic

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“ Don’t underestimate the value of great service from your chosen lender. Their standard of service is reflected on the broker’s overall value proposition ” product is also well liked, carrying no valuation, legal or ongoing fees. NFC prides itself on charging no monthly account-keeping fees and levies, no redraw fees or minimum amount. Offset facilities are also available on some of its products.

The online age Clouston is excited about the future and says NFC has a technological gem up its sleeve. “In late June we will be launching our electronic application platform,” he reveals. “This will provide brokers with an automated loan submission process and allow real-time tracking of loan files from the time of lodgment through to loan settlement.” Clouston also adds that NFC has plans to further expand its product range over the coming months. His parting shot for brokers echoes the sentiments of many of his mortgage manager counterparts. “Don’t underestimate the value of great service from your chosen lender,” he cautions. “The standard of service provided by the lender is reflected on the broker’s overall value proposition. Choose a lender whose service standards match your and the customer’s expectations.”

ROUNDUP

MORTGAGE MANAGERS

Acuity Home Loans Pennant Hills-based Acuity Home Loans is part of the Acuity Group of companies and has been around for more than seven years. Established to give brokers “an attractive alternative to major banks”, it currently employs nine staff. Managing director Ranjit Thambyrajah has more than 25 years of industry experience and is also a director of Vow Financial. “We have a strong commitment to the role mortgage managers will play in the broker industry,” he reasons. “This was demonstrated during the recent GFC when Acuity Home Loans increased its staffing levels, product range and remained open for business.”

Raising the bar Thambyrajah believes using mortgage managers has a wide range of benefits. “Brokers are better remunerated, have direct access to the decision makers and a higher standard of personalised service,” he explains. “Brokers know that we have a sense of loyalty to the way they operate.” While acknowledging that mortgage managers can bring these advantages to the table, Thambyrajah also explains Acuity’s points of

difference. “We see that the future lies in computerbased applications – we want to make life easier for the broker in a climate of higher compliance and licensing requirements impinging on their time,” he details. “As a result, we have a number of initiatives in development including an electronic lodgment system, electronic tracking and the listing of our mortgage managed products on a product engine.”

Product power Acuity Home Loans has a broad suite of products, ranging from full to low-doc loans, debt consolidation and bridging finance, through to loans suitable for National Rental Affordability Scheme participants. Many of its products contain the ability to apply for a Visa card that can be drawn down at settlement. Acuity Home Loans offers more profit to brokers with no clawbacks and pays trail from day one. Thambyrajah says the company’s name is a hint at the way it deals with its clients. “Acuity stands for clear, sharp, precise – important features of the service we provide.” Thambyrajah’s top tip for mortgage brokers is sage and succinct. “The client who feels heard will always appreciate you,” he imparts.

Ranjit Thambyrajah

“ The client who feels heard will always appreciate you ”

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ROUNDUP

MORTGAGE MANAGERS

Tony Carn

Homeloans Ltd Homeloans Ltd was founded in Perth in 1985 by Tim Holmes and Rob Salmon, who both remain directors and major stakeholders 25 years later. The company operates across the country, having merged its six state-based brands under the one umbrella in 2002. A year earlier, the company was publicly listed on the Australian Securities Exchange and currently specialises in a wide range of products to meet the needs of all types of customers, from first homebuyers to investors. Homeloans Ltd distributes loans to customers via brokers and also directly through mobile lenders and satellite licensees.

A viable alternative Tony Carn, general manager of third party distribution at Homeloans Ltd, says mortgage managers have become a competitive alternative to dealing with banks and is quick to assure brokers that it does not compete with them through a vast retail network, meaning there is no channel conflict. “Brokers should not have to compete directly with their funder, especially when there can be huge differences in the level of service available,” he reasons. “We are represented first and foremost through the customer’s mortgage broker, as opposed to a bank branch and we feel this makes it far easier for brokers to maintain exceptional relationships with their clients as they are seen as the logical contact point for future enquiries and variations.”

Building bridges Carn is keen for the relationship between Homeloans Ltd and its brokers to be one

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“ Brokers should not have to compete directly with their funder, especially when there can be huge differences in the level of service available ” of true business partners. “We strive to work with introducers without dictating the terms on which business is conducted,” he says. “This encompasses a range of differentiating factors such as offering no commission clawbacks for most mortgage products, no channel conflict and no volume hurdles or complicated matrices.” The mortgage manager also recognises the importance of brand recognition among consumers and has recently embarked on a marketing campaign to raise its profile including the use of television and online advertising. Homeloans Ltd recently undertook an extensive market research program looking at buying behaviours in the mortgage market and identified unexpected trends in how consumers research mortgages and make their buying decisions, leading Carn on to his top tip for brokers. “Re-examine any pre-existing assumptions about your business model and how you are perceived in their market,” he advises. “It may be a good time to think differently.”

ROUNDUP

MORTGAGE MANAGERS

BMC The self-styled Better Mortgage Company was established in 1979 and has assisted thousands of Australians to realise their dream of owning their own home or investment property from its head office in the heart of Sydney. Rob Maloney, national sales and marketing manager for BMC, says its vast experience offers reassurance to its customers. “BMC is a longestablished mortgage manager,” he explains. “That gives potential clients some confidence that they are not dealing with someone who has just joined the industry.” Maloney says BMC has built its reputation on competitive deals and specialist service, combined with a streamlined process from application to approval and settlement.

Producing the goods As well as its standard homeowner and

investment loans, BMC also carries construction, low-doc and line of credit products. Maloney says its full-featured home loan has a fully transactional offset account, with the convenience of telephone, internet and debit card access. Combine this with what Maloney refers to as “good, old-fashioned service, pre- and post-settlement” and the broker is presented with a real workable alternative to the banks. Looking to the future, BMC aims to keep providing introducers with another choice to the mainstream lenders by continuing to provide competitive products, and Maloney reminds brokers not to forget the basics when trying to process a mortgage. “Make sure when submitting a loan application that it is complete,” he advises. “This will always ensure a speedy approval turnaround.” MPA

Rob Maloney

“ [BMC offers] good, oldfashioned service, preand postsettlement ”

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COLUMN

DIVERSIFICATION

Bulletproof your The financial skills and customer service know-how that comes with being an experienced mortgage broker can lead to a number of ancillary business opportunities, which create additional profit streams and broaden client reach, according to Stephen Craig

hile mortgages should remain top of mind for brokers, offering additional services to existing customers can mean a big boost to business – driving retention, opening up access to new income streams and helping to becoming a more diversified financial professional. According to a recent customer satisfaction survey conducted by AMP Bank, a staggering 86% of respondents indicated that they considered their main financial institution as the one where their savings or transaction account was held. It’s in this space that one of the key opportunities exists for brokers to bulletproof their business. Diversification Customer requirements change with individual circumstances and it is important that a broker’s business is diversified enough to be able to match those changes. Diversification is all about entering new business markets with new products. Businesses in the mortgage industry are typically

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owner-managed and the ability to diversify is usually dependent on the extent of the company’s existing capabilities and resources. A successful diversification strategy relies on a broker’s ability to sell complementary products or services to their customer base – and recognise which products don’t fit with the customer’s needs. To develop a level of trust with your customers so they are comfortable with the service you are providing, they need to feel that you are an expert in your chosen field. The simple reason that companies diversify is to create value or wealth in excess of what they would enjoy without diversification. Diversification allows you to have multiple streams of income that can often fill seasonal voids and, of course, increase sales and profit margins. Those companies that seek out different market segments are the ones that will be quicker to adapt to changes in the market, particularly through more challenging economic times. So, how can you diversify your business? First, look at your product or service offering against your current client base and the broader market. Then take a step back and consider, ‘is there another segment that could benefit from my product or service? Could I adapt my process to open up my business to a potential new customer pool?’ Retail deposits are a key example of a product that mortgage brokers can use to expand their business. As the process involves simply supplying

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business product information and facilitating the application, further licensing is not required to offer these products. When a mortgage deal is closing, there is an opportunity for brokers to explain to the customer the benefits of using a deposit account – and provide clients with further product information. Deposit and lending products have gone hand-in-hand for years. Take a minute to think about it: every loan you have written has a corresponding deposit account that goes with it. While you may have maintained the relationship with your client for the mortgage, have you sent them away to someone else for the other side of that same transaction? The importance of maintaining the customer relationship across both lending and deposit products is very clear. Lending customers have a need to hold deposit accounts and deposit customers either have an existing mortgage or may hold a mortgage. If you have an existing mortgage client, your focus is to get them to come back to you, if and when they take out another mortgage. And if you have arranged both their lending and deposit product requirements, the opportunities of working with that customer increase. Customer retention In today’s highly competitive market, customer retention is critical to driving profitable and sustainable growth.

Business owners often make the costly mistake of servicing a customer once – and assume they will remain part of their client base without maintaining and growing that relationship. A good exercise is to take a few moments to think of all the inactive customer files you have in your filing cabinet. There are many reasons a customer may stop using your products or services, but some common reasons include: • Perception of high or unfair pricing • An unresolved complaint • Competitor’s offer is more appealing • Lack of interest or engagement from service provider The last two points can be particularly hard to swallow. After all, it means these customers were inactive and may have felt you did not care about them – and your competitor did. This makes sense when you consider customers often purchase a product or service because they have developed a relationship with you, or they were referred by a trusted friend or associate.

“ The companies that seek out different market segments are the ones that will be quicker to adapt to changes in the market, particularly through more challenging economic times ” BROKERNEWS.COM.AU

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While a growing business needs to constantly capture new customers, the focus and priority should firstly be on making sure your existing customer base’s needs are met. Customer retention and satisfaction drive profits. It’s far less expensive to maintain your existing customer base and sell more of the right services to them than it is to seek out new, single-transaction customers. Ultimately if you don’t give your customers some good reasons to stay with you, your competitors will give them a reason to leave. Protecting your client base Every business operating in the mortgage industry would agree that their customers are their most valuable asset. A good customer base is developed through years – and sometimes decades – of hard work, spent on building solid relationships with existing customers and constantly looking for ways to identify and attract new customers. Protecting this asset should be a primary concern for every business operating in the mortgage industry. By providing quality service, building a rapport with customers and increasing your involvement in a range of transactions from loans through to deposits, you can help protect your clients from poaching – and in turn increase the value of your business. The benefits of cross selling Just as effective customer retention and management processes can drive profits, the practice of cross-selling should be central to your strategic planning. There are various benefits of broadening the number of products sold to your customer base: • First, the more products a customer has the more profit the organisation generates • Second, an organisation with a wide range of products can provide customers with more financial solutions as they move through different stages in their life, and so keeps the customers’ business over time • Third, the more products customers buy the more difficult it is for them to take their business to a competitor – a process that marketers call ‘entanglement’ • Finally, these further products can all be sold by the same organisation, using the same people and the same processing and customer service facilities

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Stephen Craig

“ It’s far less expensive to maintain your existing customer base and sell more of the right services to them than it is to seek out new, singletransaction customers ”

Many financial services companies instinctively understand the benefits that cross-selling can deliver. However it’s important to assess how well you’re applying this practice to your business. Creating a client for life Before a customer buys their first home or investment property, many have to save a deposit. This is the opportune time for a broker to take control of the transaction account. Not only can you help the client set goals around their budget and savings in order to purchase a property, you are also preventing your competitors from marketing to your client. The goal here is to ‘ring-fence’ your client ahead of the mortgage purchase. Later, it’s likely your client will sell and buy other properties. When they do, they often have surplus cash for a period of time – and this is the second opportunity. If you let your client walk into the branch of a bank, it’s almost guaranteed someone will ask the question about what they intend to do with their money. After that, your client is at risk – so why let it happen? The other opportunity is to create a second income stream. Deposit accounts generate an annuity income based on the balance under management. This adds value to your business, while at the same time providing a value-added service to your clients. AMP Bank has developed a program where brokers can arrange deposits for their clients, which is currently being rolled out through its broker distribution channel. The program allows selected brokers to obtain accreditation to arrange basic deposit products – ranging from transaction accounts to online and cash management accounts to term deposits. Implemented in conjunction with our distribution partners, the program is an advicefree model and is delivered by our business development team, who provide all the training and support you need. So, for the broker, it’s an extended service that adds value for both the client – and your business. MPA

Bio: Stephen Craig

Stephen is the head of sales and marketing at AMP Bank

MPA LENDER NEWS

CONTENTS 58 NEWS: A REVIEW OF NEWS IN THE WORLD OF NON-BANK LENDING AND MORTGAGE MANAGEMENT 60 IN PROFILE: LICENSED FINANCE BROKERS OF AUSTRALIA

Pepper targets under-serviced niche

Lawler leaves NAB Partnerships NAB Partnerships’ executive general manager (EGM) Matt Lawler has stepped down after three years of spearheading the transformation of the bank’s broker business. Lawler is to take a family holiday during July and August and will announce his next career move upon his return, though the selection process to find a new EGM is already underway. He said: “The journey to get to this point has been hard at times but the business is in much better shape than when I started, which is what I set out to do. The fact the business now has a strong future and is an integral part of NAB’s strategy is one of my most exciting achievements to date.” Lawler’s departure was accompanied by an announcement that NAB Broker and Advantedge will be joined by UBank to form a portfolio of “growth” businesses. The bank said in a statement: “By building on the combined strengths of these businesses, the new division will have the ability to continue to grow in an unconstrained environment and capitalise on future growth opportunities for the bank.”

8.6% 58

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Pepper Homeloans has launched two new products aimed at a currently under-serviced segment of the market. It has released Pepper Flexi Advantage and Pepper Self-Employed Advantage targeted at those who run their own businesses and borrowers just missing out on a mainstream home loan due to unique circumstances. CEO Patrick Tuttle said: “We see the post-GFC world as an opportunity to build upon all the hard work we have put in during the tough times.” Pepper said that the GFC has proven to be one of the most challenging periods for the Australian mortgage industry in living memory, changing the home lending market probably forever. “We’re committed to providing brokers with a competitive edge by introducing new products,” added executive director Duco Sickinghe. “This also means that brokers will be in a better position to build their businesses by being able to close more loans, more quickly.”

Macquarie helps tackle homelessness Staff from Macquarie Bank and participants of The Big Issue’s Community Street Soccer Program went head-to-head in a soccer tournament in Sydney recently. The competition – which kicked off just before the FIFA World Cup in South Africa – was designed to allow Macquarie’s corporate executives to learn about homelessness and social isolation. Mark Brennan, division director in Macquarie’s banking and financial services division, played in one of the three Macquarie Group teams and was happy that goals were scored on and off the pitch. He added: “Everyone forgot everyday stresses and concentrated on playing the beautiful game while making a connection.” The matches were part of the Big Issue’s Community Street Soccer Program, which the Macquarie Group Foundation supports. The initiative uses organised team sports as a catalyst for changing the lives of homeless and disadvantaged Australians. In 2008, the Australian government gave $3m to kick-start the program and it has since expanded to 30 sites across the country, proving to be an effective, low-cost initiative with a high social impact.

What the average standard variable rate could soar to within the next 12 months, according to the OECD

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BUSINESS PROFILE LFBA

Licensed to thrill Julian Mitton, managing director of Licensed Finance Brokers of Australia, tells Barney McCarthy why he thinks the market is ripe for its new proposition

he Australian mortgage market has remained resilient throughout the GFC, weathering the storm far more effectively than some of its global counterparts – but some consolidation was inevitable. A number of broking groups were bought out by larger financial institutions and one such transaction brought about the genesis of aggregation platform Licensed Finance Brokers of Australia (LFBA). As founder and managing director Julian Mitton explains: “When NAB bought Challenger Financial Services Group’s mortgage management business, it highlighted an immediate opportunity in that brokers weren’t receiving any money as a result of the acquisition. LFBA offers mortgage brokers the opportunity to share a substantial ownership stake in the company and subsequently share the financial benefit of any potential sale or listing of the business.” This innovative proposition has launched in earnest, with LFBA canvassing brokers since the end of 2009 and aiming to sign up a couple of hundred in its first year. Brought to market by the team behind HomeStar Finance, Mitton says LFBA was born out of wanting to find a way to

“ LFBA offers mortgage brokers the opportunity to share a substantial ownership stake in the company and subsequently share the financial benefit of any potential sale ”

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BUSINESS PROFILE LFBA

harness the bargaining power of brokers while sharing the collective benefits with those who actually do the work. “Brokers normally earn nothing when an aggregation or finance group is sold to another financial institution, while the business owners become millionaires,” he adds. “We want to change that and this platform has been built by brokers for the benefit of brokers.” Back in the day Mitton’s own background is in chartered accounting and he spent 10 years advising financial services organisations as a management consultant. He also worked as a retail consultant and advised Aussie Home Loans before being approached by HomeStar Finance founder Paul Bird – an acquaintance he had first made at university – to join the team. HomeStar was established in 2004 and the current LFBA setup consists of 10 employees, with the possibility of growing this as the aggregation platform finds

its feet, with the majority of processes outsourced at present. Mitton claims the brands are very much separate, but says LFBA draws credibility from its link with HomeStar and will be leveraging that infrastructure into the broker channel. “The mood among brokers at the moment is that they don’t want to be bank-owned as they want more independence,” he adds. Money matters LFBA is working in strategic alliance with Firstfolio and has also established links with Resimac and Firstmac. Mark Forsyth, chief executive officer of Firstfolio, has already heralded the launch of LFBA. “We are happy to be supporting this innovation in the market with our wholesale lending program and lenders’ agreements,” he says. Mitton says LFBA will offer 100% pass through of competitive commission rates alongside a low

“ The mood among brokers at the moment is that they don’t want to be bank-owned as they want more independence ”

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BUSINESS PROFILE LFBA

flat rate fee of $390 a month. It will also allow flexibility with regards to branding, letting brokers choose between trading off the LFBA image, or keeping their own previously established identity. In terms of the brokers LFBA is targeting, Mitton outlines the perfect candidate as a reputable character with at least five years’ experience. LFBA is a member of the Mortgage & Finance Association of Australia and expects the same of its brokers.

The man behind the business + Family: Married with three children, including one-year-» old twins that keep » me alive! + Hobbies: Mainly outdoor sports, including surfing, tennis, golf, skiing, football and ocean swimming. I also love art, travel and film, although I don’t have much time for anything other than work and family at the moment. » I am also active as an alumni leader for the University of NSW Australian School of Business and assist them where possible. + Retirement plans: Keeping fit and working, although maybe less hours » a week!

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Driving licensing Mitton is enthusiastic about the introduction of licensing and his new organisation’s moniker is testament to that fact. Having witnessed similar regulatory progress in financial planning, he says the move can only be a good thing for the mortgage market. He envisages an enhancement in the perception of mortgage brokers in Australia – not just among consumers, but also by some of their peers in other financial services sectors. “If you take chartered accountants, they have to have a full degree, three years’ experience and undertake years of study and work to pass difficult examinations,” he explains. “Introducing professional standards for mortgage brokers will give the industry more credibility.” Although Mitton expects there will be little change for large established players already operating on a responsible basis, he reasons it will force a degree of rethink for smaller brokers to decide whether they are serious about their profession or not. LFBA expects to allow its brokers to be individually licensed or approved through its own accreditation. Future plans Looking ahead, Mitton says LFBA has set aggressive growth and financial targets, but is reluctant to be too specific. “There is definitely room for our offering and the dawn of licensing is the perfect time to launch,” he says. “The broker market has remained very consistent at 40% of the overall picture and nothing seems to have changed much, despite the GFC. LFBA has found that more and more mortgage brokers are shopping around for a better aggregation deal. Since the recovery of the financial markets, mortgage brokers continue to be squeezed and as bank profits grow, commissions are still shrinking and brokers are starting to take action.” With the licensing overhaul promising a brave new world for mortgage broking in Australia, the launch of LFBA looks like a well-timed move on behalf of its founders. If it can follow through on its ambitious plans and offer brokers strong commissions and low fees, then the aggregation market will have gained another major player. And if brokers really can share in any future sale or listing, then they will be just as happy as the LFBA bean counters. MPA

BUSINESS PROFILE LFBA

Want to become an MPA Top 10 Commercial Broker? Download your entry form from www.brokernews.com.au 5th JULY SUBMISSIONS CLOSE MONDAY

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LIFESTYLE FAVOURITES

DRINK Pinot Noir, preferably from the Tamar Valley or Central Otago, but I won’t say no to much

Andrew Clouston + managing director + National Finance Club

Favourite things MOVIE Iron Man for the action and humour, Avatar for the special effects

BOOK CEO of the Earth by Simon Hammond, a quirky but brilliant tale of building a brand from nothing

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CELEBRITY Robert Downey Jnr and Johnny Depp, great actors with a devilishly cheeky side

HOBBY Cooking, recreating restaurant dishes without a recipe book, just for the challenge PLACE TO BE MCG on grand final day, if only Carlton could join me there and complete the experience

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VACATION SPOT Island of Hvar, Croatia, hard to get to, but a true escape: brilliant aqua waters and spectacular seafood

SPORT Golf and AFL. Never been particularly good at either, both are a test of loyalty and emotional stability MUSIC All the music I grew up with from the 1970s

FOOD Everything I cook, with a leaning towards seafood. I have never found a food I didn’t like