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issue 10.01
100 people most likely to impact your career
PRESIDENTIAL TALK JOE SIRIANNI AND PETER WHITE tell all
CHALLENGES AND OPPORTUNITIES what will 2010 bring?
ama franchise of the year award smartline profiled
Editor’s letter
Getting warm, warmer… hot!
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10. 01
Is it summer yet? It seems Australians have more than one reason to break out the barbecues and crack open some cold ones as we move into the hottest season of the year. Unemployment figures are better than expected and the economy looks like it’s going to grow – not a bad start to 2010! In this issue we asked industry players for their forecasts on the market, the industry and their own businesses. Many reported feeling “cautiously optimistic”. OK, so no one is screaming that the end of the GFC is here, but it’s a far cry from the worried predictions many gave a year ago. And speaking of getting warmer – how about MPA’s second annual Hot List! These are the movers and the shakers of the industry; the most influential beings to touch the industry. There are the usual suspects, but there are also plenty of new faces this year – check it out to see who’s on, who’s off and what we can expect from them in the next 12 months. All the best in 2010.
Andrea Lavigne 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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36 2010 Hot List our annual preview of personalities most likely to grab the headlines and shape the industry in 2010
Look for extras in MPA's 2.0 eMag edition. On-camera interviews with: Vince Scully
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Steve KANE
Ian Graham
24 president speak Joe Sirianni of MFAA and Peter White of the FBAA on the road ahead for industry bodies
10. 01 issue
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Features 9 Office move: How Citibank in Adelaide made life more convenient for its brokers 14 Year ahead: We ask those representing banks, non-banks and brokers to do a bit of crystal ball gazing 22 Diversification: UK group Countrywide explains how they have made inroads in real estate and mortgages 52 Opinion: Steve Sampson says low-doc lending will make a comeback in 2010 54 Case study: Franchise operation, Club Financial
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Education 48 Market offering: educational providers explain what they are offering brokers preparing for regulation
MPA LENDER 56 News: A review of news in the world of non-bank lending and mortgage management 60 Specialist broker: Vince Scully explains how brokers can take advantage of the SMSF loan niche
10. 01 issue
PROFILE 28 Business: AMA franchise of the year, Smartline
LIFESTYLE
PUBLISHER Justin Kennedy
DESIGNER Lucila Lamas
DIRECTOR Claire Preen
SALES MANAGER Rajan Khatak
REGIONAL MANAGING EDITOR George Walmsley
Account MANAGER Simon Kerslake
EDITOR Andrea Lavigne JOURNALIST Tim Neary
MARKETING MANAGER Danielle Tan
PRODUCTION EDITORS Carolin Wun Katrina Fox
MARKETING COORDINATOR Jessica Lee
DESIGN MANAGER Jacqui Alexander
TRAFFIC MANAGER Stacey Rudd
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
64 My favourite things: Peter White
REGULARS 6 News review 10 News analysis: Conference round-ups – Loan Market and PLAN Australia
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HR MANAGER Julia Bookallil
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News review
Property investors can expect cash returns Investment property owners will continue to enjoy positive cash returns on investment property despite rising interest rates, property firm Washington Brown has said. According to the company, for investment property owners on $75,000 a year, a new $500,000 investment project will remain cash-flow positive until interest rates are between 6.75% and 7.25% depending on whether the property is a high-rise apartment or free-standing house. For those earning $150,000, interest rates would need to go as high as 7.5% for high-rise or 8% on free-standing houses. Washington Brown director Tyron Hyde said depreciation is a key factor in achieving positive or neutral cash flow. “Our calculations are based on over 20 years’ worth of depreciation data and provide investors with real insight into just how much their property will cost them if interest rates go up,” he added. Hyde pointed out that as interest rates rise, investors need to ensure they are maximising their tax depreciation allowances.
Mortgage Choice buys Loankit Mortgage Choice has followed up on hints made in 2009 that it would be looking to make acquisitions, and bought aggregator Loankit. The ASX-listed business has bought “selective Loankit assets including its information technology platforms, loan book and contracts with 50 mortgage brokers”. Loankit has to date sub-aggregated through Connective. The acquisition marks Mortgage Choice’s first step into aggregation via its fully-owned subsidiary, Beagle Finance Pty Ltd, which will launch in the first quarter of 2010. Further “acquisitions and alliances” are planned in the future to “help boost the national company’s rate of loan volume growth.” CEO Michael Russell said, “Our expansion to date has been solely organic but as the housing finance market evolves, acquisitions provide a means to take advantage of growth opportunities and maintain our position as an industry leader.” He said alongside diversification and franchise recruitment, acquisitions and alliances were “necessary to strengthen Mortgage Choice’s growth.” Loankit owner Kym Rampal said, “I am very pleased that the aggregation business that I and my brokers worked so hard to build is being sold to a company with clear vision, exciting strategies and a future full of potential. “
$5 m Refund has to date paid back more than $5m in broker commission refunds to borrowers
Franchise rules shame bullies, protect small business operators Small business owners will have greater protection from anticompetitive behaviour under the new amendments to the Franchising Code. New rules include tougher penalties for franchisors and a broader scope of unconscionable conduct provisions in the Trade Practices Act. The amendments also include new dispute resolution requirements. The federal government is acting on a parliamentary investigation on franchising. While it has rejected some of the committee’s recommendations on good faith requirements, it has set up another expert panel to report at the end of January.
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Westpac offers green loans
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Second-tier banking ‘dead’: CoreDatabrandmanagement Research group CoreData-brandmanagement has declared the second-tier banking sector “dead” based on its declining share of the residential lending market. It calculated that Westpac and Commonwealth Bank now hold nearly half of all outstanding residential lending by value (48.0%), and are gaining market share: this includes Westpac-owned St.George (8.2% market share according to 2009 annual results) and CBA-owned BankWest (3.2% according to 2009 results). “The Big Two will soon control more than half of all outstanding Australian mortgages by value, as market share continues to accelerate, reaching 48.9% in September 2009, compared with 45% at the start of 2009”, said CoreData-brandmanagement head of mortgages and insurance Tony Crossley. NAB and ANZ lag far behind the Big Two with just under 13% of the market each. Crossley said NAB was “addressing its poor mortgage market acquisition strategy though the purchase of Challenger’s broker channel, with ANZ more focused on Asian than local growth”. The next biggest lender outside of the major banks is foreign-owned ING Direct which has 3.39% of the market. Of the remaining independent regional banks, Suncorp has a market share of just 2.79%, followed by Bendigo & Adelaide Bank which has 2.49%. Bank of Queensland, which does not use brokers to distribute its mortgages, has 1.99% of the market. Citibank’s share is only 0.89%. Crossley said regional banks had significant challenges in competing on either brand or price and were therefore providing no barrier to the Big Two banks continuing to gain mortgage market share. Collectively, the non-bank sector holds just over 10% of all outstanding residential lending by value.
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360, 000 The green loans program has the potential to help 360,000 Australian households save on energy and water bills, according to Westpac
Westpac is supporting the government’s Green Loans Project by offering an interest-free ‘Green Loan’ worth up to $10,000. The loan will help borrowers install solar, water-saving and energy-efficient products to reduce greenhouse gas emissions. According to Westpac, the loan program has the potential to help 360,000 Australian households save on energy and water bills. The loans were made available 16 November and are to be paid over a maximum of four years.
Liquidity rules could push interest rates up Borrowing rates could go up 0.05 of a percentage point should new liquidity rules proposed by the Australian Prudential Regulation Authority come into effect. APRA designed the rules to protect Australians from bailing out banks in the event of another financial crisis, and according to the AFR the costs are in keeping with estimates by other world regulators. Under the rules, banks would be required to hold larger quantities of liquid assets, as well as higherquality liquid assets such as government bonds and less paper from other banks. The increased costs could mean banks will raise interest rates above the official cash rate.
Forecast for 2010 rosy The Mid-Year Economic and Fiscal Outlook released in late 2009 forecasts lower unemployment than previously predicted and higher growth. The positive outlook predicted unemployment will peak at 6.75%, well under the previous forecast of 8.5%, while the Australian economy will grow at 1.5% in 2009/10 and 2.75% in 2010/11.
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Citibank moves office
Business moves Competing with the major banks on price and product has been a difficult exercise over the past two years for mid-tier banks, but one lender has proved it’s possible to stand out in terms of service
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itibank Mortgages Adelaide has taken the extraordinary step of moving its CBD office (on Grenfell Street) to Norwood, located 2km northeast of the city. State sales manager of mortgage distribution Chris Thredgold says the inconvenience of the previous location was an impediment to brokers. The lack of car parking space meant brokers who did use the office were forced to pay for parking and had to move their cars regularly to avoid getting a ticket. “We’ve purpose-built an office here which has easy access for street parking and a good sized board/training room that we also offer to different aggregator groups for training. Plus we have two smaller interview-type rooms, and those brokers who want to meet a client in a professional environment can come and meet them here.” The lender says that now brokers visit Citibank more frequently for personal service, to ask questions, or to just drop in. Sometimes they bring their whole mortgage application in for Citibank to help them put together or to run through it if Citibank thinks it’s likely to be accepted. According to Thredgold, the commitment Citibank has demonstrated to the broker channel by moving offices is its point of differentiation in the market. “We’re still in a tight market so the majors still hold a reasonable stranglehold over the market at
the moment but what we’re doing is setting ourselves up for the ease in the market and making sure our relationships are very strong so that when we’re able to be a bit more competitive, the brokers will be ready and know us as well, or better than they have, through the services we’ve offered in a more difficult time.” The move is not a first in Citibank history and mirrors similar actions by the WA and Queensland offices. Thredgold says the lender had plans to move the Adelaide office for some time, but had to wait until it could break its lease before making the transition to Norwood. The new office was officially opened in mid-September. The feedback from brokers has been terrific, says Thredgold. Citibank Mortgages in Adelaide has seen a 90% increase in the number of brokers coming in compared to when it was located in the CBD. The lender says the majority of Citibank’s brokers are located close to Norwood – and while the rest are spread throughout South Australia, very few are in the city centre. It also says that no other bank in Adelaide has offered its facilities to brokers to use for their own needs and that none of the competition, including the big four banks, are set up in this way. Citibank Mortgages in Adelaide has indicated that it has plans to expand its team in the near future. mpa
“ What we’re doing is setting ourselves up for the ease in the market and making sure our relationships are very strong ”
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news analysis
A new chapter Just days after being bought out by Ray White, Loan Market Group held its International Broker Retreat in the plush surroundings of Melbourne’s Crown Promenade Hotel. Larry Schlesinger attended and reports on some of the highlights The conference kicked off on the Thursday morning with an address by Loan Market chairman Sam White, but more than 220 delegates met for drinks and a buffet dinner at the hotel bar the night before. Given the events of the past 12 months, the mood at the bar was surprisingly festive, with delegates involved in animated discussions about the state of the market and the implications of NAB’s recent purchase of Challenger. “Things are ticking over nicely in the ACT,” one broker was overheard to say, an upbeat remark which reflected the tone the following morning of White’s ‘state of the market’ address. White began by reminding all those present that though they had taken different paths to join the Loan Market Group, they were all part of a “new chapter” in the company’s history. “Some of you found your way here via a real estate company trying to find an answer to the Suncorp purchase of LJ Hooker (Ray White Financial Services); some through online lead generation (Realestate.com.au Home Loans); some of you joined three entrepreneurs (X Inc) who had the courage of their convictions to go out and find a better broker proposition; and some of you joined a company after all this had happened and wondered what the fuss was about,” he said. But regardless of how they found themselves part of the new entity, White said Loan Market brokers had all joined a “company that shared the same vision and values” that was focused on “doing things better”. He emphasised the point that Loan Market was not a subsidiary of Ray White, but a “separate entity” with its own game plan, ambitions and direction going forward. At the same time, he said its key proposition for brokers was the ability to lever off the infrastructure of both businesses and take advantage of the “shared learning” from each. From survive to thrive White also acknowledged members for surviving “the test of uncertainty” of the past 12 months “when no one knew what was going to happen”.
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Loan Market executive chairman Sam White in conversation with business guru and TV presenter Peter Switzer in Melbourne
“Your very competence was challenged… never before has such a confluence of events come down at the same time,” he said. He then went on to list – based on Loan Market customer research – the key areas brokers needed to focus on if they wished to be successful: trust, expertise and continuity. “The thing that came out is that fundamentally what we sell is trust,” he said. Borrowers, he said, expect brokers to be experts on the market and on the products available. “Unless you tick that box, then you are not in the game.” Furthermore, the importance of offering advice and building a long-term relationship with clients also struck a chord with consumers. “Consumers look to us to be advisors. It’s not just the deal that they want done; they also want us to have an ongoing relationship with them,” said White. While for many brokers (judging by their eagerness to dress up in cheerleader costumes, school uniforms and nun’s habits) the highlight of the conference was surely the ‘Back to School’ disco party held at the Melbourne Scienceworks museum on the Thursday night, the keynote
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speaker sessions and lender panel discussion delivered an array of invaluable insights. Ray White chairman Brian White’s talk focused on encouraging brokers to step up to the plate as business leaders, (though he did manage to also have a dig at rival LJ Hooker, describing its 20-year relationship with Suncorp as a “disaster”). White urged brokers to develop into business leaders and to not be afraid of the challenge of leadership. “Profit is the payment you receive for good leadership – not because you are a good manager,” he said. “The mistake people make is thinking they are not born leaders,” he added, describing the journey of leadership as a “thrilling one”. Global woes In a talk titled ‘Interest rates post the GFC’ John Pilkington, general manager of liquidity operations at the CBA, gave brokers a lot more than just a prediction on future rates. While explaining in some detail how increased cost of funds has affected the rate at which banks lend money, an interesting sidebar was Pilkington’s assessment of major world housing markets. “The outlook for China is good… the best you can say about the UK housing market is that it’s at the bottom and showing signs of improving… there are positive signals coming out of Germany and France.” But Pilkington said the problem for Europe was that Eastern European countries were “basket cases”, with their impact on Germany in particular “unknown at this stage”. Thus expecting Europe to come out of this crisis quickly was “a bit of a dream”. As for the US, he said it was “probably at the bottom” but that the prospect for recovery was “not good” due to the “great big overhang” – the US property market. “Over the last three months close to a million homes have been foreclosed in the US, with expectations that another seven million may go the same way,” Pilkington said. “Such numbers do not give you any confidence at all that they will pull themselves quickly out of this.” But global woes aside, Pilkington reassured those present that Australia was in a “very fortunate position” with its prospects “very good”. Lively panel Lender panel discussions are part and parcel of most broker conferences these days, and are usually one of the most eagerly anticipated events on the program due to them being unscripted and with the potential to be quite explosive. The Loan Market Group panel discussion, which brought together state managers and third party executives from CBA, Westpac, ANZ,
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New Zealand-based ASB and ING, certainly lived up to expectation. While it took a little while to warm up, things got heated when the discussion turned to minimum volume requirements. A huge cheer erupted from the audience when Tim Brookhouse, senior BDM at ANZ, said the bank had no intention “at this point” of putting in minimum volume quotas. “Glenn Haslam (head of broker distribution) has the view that if a customer wants to come to ANZ, we should not stop them from coming to ANZ simply because they use a broker that does not use us a lot,” said Brookhouse. Earlier in the debate, Emoke Palos, state manager for the CBA in Victoria, had defended the bank’s controversial policy of four loans required every six months, which she said amounted to “eight deals in a year, not even one deal a month to a major lender”. Palos said the bank had categorised around 5,000 of its 8,000 brokers as “D”-class brokers – those that submit between zero and 10 deals per year. CBA statistical information, she said, provided evidence that it was in relation to these brokers (those writing one, two or three deals a year) that the most complaints were received. Similarly Westpac’s Victoria state manager, Michael Ianchello, said its minimum quota (one deal every six months) was also based around quality. He warned that conversion rates at the bank were sitting at about 60% across the industry. “Submitting one deal every six months should not be an issue when about one in every five deals is a Westpac product,” he said. Earlier in the discussion, comments from the lenders’ reps made it apparent that BDMs think of themselves as the “meat in the sandwich” – due to having to pass on new policy changes to brokers sent down from head office, changes that they may not always agree with. This, the panel agreed though, was part and parcel of the BDM role. While it was somewhat reassuring to know that brokers are not the only ones sometimes caught in the middle, Palos warned brokers not to lose their cool when deals did not go their way. When she received a “heated call” from a broker, Palos said she would cut them off and ask to speak to them at a later time when the emotion is out of the conversation. “Emotion just creates more emotion,” she added. Sam White closed the business end of the conference before brokers headed up to their hotel rooms to slip on school socks, ties, hats, blazers and an assortment of outrageous outfits before boarding a procession of buses heading out to celebrate, in ‘back to school’ style, the ‘next chapter’ in their evolution.
“ Things got heated when the discussion turned to minimum volume requirements ”
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2010 Predictions
watch this space What will the next 12 months look like for brokers? MPA conducts a straw poll of aggregators and lenders to understand the upcoming challenges and highlights for the players themselves and the market as a whole
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redicting what the mortgage industry will look like in 12 months’ time is no mean feat. In the past two years, we’ve heard everything from ‘the sky is falling’, to ‘the sub-prime crisis will have no effect on Australia’. Participants in our crystal ball gazing would be the first to admit that they are not economists. However, they are keen observers of the market and its players. Here’s what our mortgage industry seers said:
Banks Kathy Cummings, executive general manager, Third Party Banking, CBA What will be the biggest challenge? For brokers, the biggest challenge will be to ensure they meet their obligations under responsible lending by maintaining a thorough knowledge of their lender partner’s credit policies and processes. Their role is now much more than just putting applications together. They have a duty of care and under the new legislation they will have responsible lending obligations. Brokers will need to find time in their weekly business to ensure that they and their staff are able to lodge quality applications. They need to educate customers on how to save money and, if the deal is not affordable, they will have to say no to them.
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Will competition return? We do have competition, with the major four banks and a few second-tier banks and the regionals all funding residential home loans. But non-bank lenders will continue to find it difficult to access funds in a tightening credit environment with increasing interest rates. I expect it will take a couple of years before alternative sources of funds, such as securitisation, will be readily accessible in the market. What will the housing market look like? It looks certain that interest rates will continue to go up in the next 12 months. It also looks certain that demand for housing, particularly in NSW, will increase, due to the shortage of supply. This means there will be plenty of work around for brokers who know how to deliver excellent customer service. What’s your general feeling about the next 12 months? I see a market full of challenges but also full of opportunities to be profitable. Lenders who invest in technology to deliver efficient processes and who provide MIS back to brokers and head groups will win their business. Communications will be important in the next 12 months to ensure brokers and head groups are informed of credit changes in a clear and timely manner. Commonwealth Bank will continue to partner the industry to ensure its growth and sustainability.
Kathy Cummings
“ There will be plenty of work around for brokers who know how to deliver excellent customer service ” – Kathy Cummings
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2010 Predictions
Huw Bough, general manager, Westpac Mortgage Broker Distribution What will be the biggest challenge? While there are a number of challenges facing the industry as we move into 2010, I think the greatest one will be managing the changing value proposition as lenders shift their focus from quantity to quality. Banks, and in particular Westpac, are seeking brand advocates – brokers that represent the core proposition of the bank and communicate that with customers. This is a partnership that must be built on trust and a differentiated service offering. Moreover, brokers – and indeed lenders as well – must recognise that the broker channel is not about the lender or the broker, but about delivering value to the customer. This mindset will be core to our third party strategy moving forward. Our vision is to be the leading financial services company in Australia and New Zealand. To achieve this we need broker partners that put customers at the centre of their business – those that transact not only on price but on a deeper understanding of their customers’ needs as well as the lender’s total value proposition. To this end, we are looking to partner with brokers that seek greater customer satisfaction. In turn we’ll work hard to delight customers by ensuring that the whole Westpac local team pull together as one to ensure a great customer experience. So considering the challenge of managing the changing value proposition, I feel we’re well positioned for 2010; indeed we’re looking to be market leaders in driving this shift. Will competition return? Competition is invariably affected by market conditions and I’m sure that this will continue. I believe lenders, borrowers and brokers have all learnt lessons from the past decade. For Westpac, we are well-positioned for the year ahead with a focus on strengthening partnerships with our brokers. What will the housing market look like? It is hard for me to make a call on the performance of the housing markets over the coming year as there are still considerable challenges ahead. We have already seen a strong upswing in the lower price brackets as a result of the surge in first homebuyer activity and so my sentiments are that
this momentum will carry through the other price brackets as other market segments, such as investors and up-graders, pick up. The demand for new housing will increase and there will be pressure to ensure that enough new dwellings are constructed to meet demand. I think there will be a wider role for mortgage brokers to play in assisting customers with their financial needs – this includes mortgages as well as other financial products. While the industry will have an overall smaller number of participants by way of brokers, I think we’ll have a stronger platform from which to grow the market share. We’ll achieve this through a number of ways. Especially, lenders will have a deeper respect for the channel and the value it provides. We have a true sense of urgency on driving an active customercentric culture; however, we know we need to simplify our processes, products, and practices so that we work on making it easier for our key broker partners to delight the customer. Together, we’ll enhance efficiencies, systems and the overall end delivery to the client – which, when combined, will drive the market share increase. What’s your general feeling about the next 12 months? I have considerable optimism about the coming year and believe that it will be a defining time for the industry as a whole. The overwhelming focus on quality that we have seen across the industry, coupled with licensing, will have a major positive impact on the mortgage broking industry. The standards across the industry have been steadily rising. Better quality business ultimately benefits the client but it also ensures that there is a greater opportunity for better efficiencies throughout the supply chain. For Westpac, last year was about determining which brokers the bank was best suited to partnering. Over the coming 12 months it will be about strengthening those partnerships and improving our support. Lastly, funding: I think that most people still don’t realise how challenging the funding environment is for lenders. The cost of the funds we borrow is not governed entirely by the cash rate set by the RBA. Our funding costs remain high due to competition in the market for deposits and higher wholesale funding costs. It is therefore more important than ever before that the right partnerships between lenders and brokers are forged and strengthened in order to meet the market challenges side by side.
Huw Bough
“ We need broker partners that put customers at the centre of their business ” – Huw Bough
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2010 Predictions
non-Banks Kim Cannon, founder and CEO, FirstMac What are your predictions for the market? The market is coming back. Competition will be hard. The banks are still playing hard in the home loan space. From a non-bank’s point of view we have to rebuild trust in the borrower, and it’s ironic because the people that caused the lack of trust in the first place were probably the banks and large institutions – the ones that put up their cost of funds outrageously. They really forced the cost of funding up in the non-bank space and left a bad taste in people’s mouths – GE especially. And I guess the second thing is building up the trust again with the brokers. It’s a funny situation with the brokers – they can whinge and bitch about the banks but they still pour all the business into them. I’ve been to some of these industry roundtables where they just treat the brokers with contempt but it just doesn’t seem to matter. They still promote business to them. But as it’s happened in the past, the banks will do something stupid and the brokers will come back to us. How will rising rates affect non-banks? When the market was hit, we were hit first because we relied very heavily on the wholesale markets, while the banks didn’t really start lifting their rates until six months after us. So by nature if you look at this current deal we’re doing, we’re starting to see investors on the horizon and the price tension is there and our cost of funds will probably drop quicker than the banks. What will be the biggest change over the next 12 months? APRA’s new liquidity regulations – if the APRA standards go through, it will be hard for the small institutions to justify being in business without a huge margin shift upwards. What’s your general feeling about 2010? What did I say two years ago? I said in two years’ time it’s going to get better and everybody said how could it be? But I’m looking at the market now and saying it’s time to re-enter, time to take off the shackles. What’s next for FirstMac? We’re looking at a banking licence and that’s interesting because that will diversify our funding base and apply more services to our clients.
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Tanya White, managing director, AFM
Kim Cannon
Tanya White
What will 2010 look like and what can we expect from AFM? 2010 is the year for the non-bank lender (or so I’d like to think); it is time for us to re-create consumer confidence in non-banks and build brand awareness for this sector. Non-banks in the past two years or so have been severely impacted, tarnished and left questioning their value proposition, but the new year will bring about opportunities to overcome these issues and re-gain our market share. While this is relevant to the industry, nationwide economic conditions will keep 2010 challenging – for example, rising unemployment, interest rate increases. More activity from second and third purchaser/borrowers and investors is needed. The biggest change without a doubt will be regulation, but from a non-bank perspective the common dilemma will be available funding and funders. The now limited number of funders available to fund non-banks will possibly lessen competition in the early part of 2010, unless new funders or previous funders re-emerge. Possibly the latter part of 2010 will see greater competition if funding issues lessen. I think the housing market will be generally ‘stable’ with the higher-end properties remaining stagnant in value and dare I say with a few good buys to be had. The mid-range properties will stabilise and begin to tend upwards. Not surprisingly, I anticipate there will be less first homebuyers entering the market. The only way to describe the sentiment for the year ahead is ‘positive’; we have survived the GFC [and] AFM as a non-bank lender is on a path to re-claim our market share, and as consumer confidence increases, the non-bank business sector as a whole should begin to thrive. How ‘exciting’ it is to think of a thriving business rather than a surviving business! We are certainly gearing up for a hectic 2010.
“ From a non-bank perspective the common dilemma will be available funding and funders ” – Tanya White
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2010 Predictions
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2010 Predictions
Aggregators Brendan O’Donnell, CEO, Choice Aggregation Services What will be the biggest challenge? Rather than just one key challenge, 2010 is going to serve up a number of major challenges for the industry; however, these are challenges I’m confident we can meet head on. First and foremost, the new licensing regime is going to shake up the industry. The key result of the new licensing regime will be the forced shift to a more professional industry as a whole. Licensing requirements will require brokers to lift their game, which in turn should result in better client servicing and an overall deeper client relationship. Another challenge is the ability to capture market share. I’m confident that the industry has the capacity to win at least 50% of all business within the next three to five years and at Choice we are offering our brokers the resources and capabilities they need to play an active role. Finally, the third major challenge is to ensure that we keep a healthy panel of lenders, with a better spread of business across a wider range of lenders. Tighter access to funds has reduced both the lenders and products available to brokers. Collectively, brokers need to continue to consider all alternatives to mainstream bank products and diversify the lenders they deal with. This will ensure the broker proposition while reducing the mainstream banks’ dominance of the market. What will be the biggest change? The biggest change will be the move to the new licensing regime and meeting the new requirements set. As I mentioned above this will pose a number of challenges, but the net result will be a more professional industry that can maintain its market position and sustainability into the future. There’s obviously a lot of talk around the impact broker licensing will have on broker numbers; while I believe there will be attrition as some part-timers exit the industry, in the most part brokers will step up to the plate and embrace the new licensing regime. Will competition return? I hope that it will – the mainstream banks currently dominate market share. There’s the
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opportunity for new lenders to enter the market and existing ones to ramp up their lending, but I’m afraid that 2010 will remain tight in terms of available credit, the overall cost of funding and the concerns around potential higher bad debt. There are some recent indicators that appetite for RMBS is improving; however, we’re still a long way off to returning remotely to the market that existed pre-GFC. Nevertheless, as more non-banks and second-tier lenders access funding via wholesale markets I believe brokers will support those lenders – which is, no doubt, good for competition. What will the housing market look like? Some research houses are calling for growth rates of 20%; however I feel this is a little overly optimistic. The market will continue to grow albeit at a slower rate than we have seen in 2009… the surge we have experienced in 2009 will be difficult to sustain. When considering potential growth for the property markets there remains some sound fundamentals – importantly, we are fortunate that we have a shortage of housing; moreover, we have a steady flow of immigrants coming to Australia. This should continue to drive demand for construction; this will also ensure low vacancy rates which will result in sustained rentals for investors. What’s your general feeling about the next 12 months? I’m very bullish about the year ahead but I recognise that we still have a way to go in order to get through the full impact of the GFC. We have not yet seen the last of the casualties locally and internationally and we are, by no means, out of the woods. However, the green shoots of recovery are emerging and we’re already registering results in our business. The RBA’s decision to start hiking rates is testament to the improving economy. Brokers are overall more upbeat and positive and they’re experiencing increased interest from a number of market segments – including investors and refinancers. The challenge for brokers will be to continue to prospect for new business while leveraging current clients – we’re focused on supporting members to embrace a truly diversified business and product offering, and our strategy through 2010 will be on helping ‘mortgage brokers’ transition to ‘finance brokers’.
Brendan O’Donnell
“ I’m confident that the industry has the capacity to win at least 50% of all business ” – Brendan O’Donnell
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2010 Predictions
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2010 Predictions
Steve Kane, CEO, FAST What will the market look like in 2010? The overall economic positioning of Australia appears to be much better than any other country… going forward it appears that the Australian economy has weathered the storm that has gripped the rest of the world. We predict we’ll see around 8% growth in the mortgage industry. We think that there are a number of factors that will stimulate growth – a shortage of dwellings and rising population; also we have low rental vacancies, so that will drive investor interest. Rental returns are almost getting to a positive gearing and there is a level of confidence there. Are first homebuyers being replaced by investors? A thing that is a bit of a misnomer is that first homebuyers are only in the marketplace because of the grant. Yes, some first homebuyers will no longer seek finance because they don’t have the wherewithal to do it, but first homebuyers normally account for 15% of the market regardless of incentives. So it will come down from the high 20% to a more normal 15%. Clearly there is a shortage of housing in Australia; we have population growth, we have issues – particularly in NSW – around vacancy factors for rentals, so we’re seeing investment starting to pick up. What effect will the rate increases have? The rate increases will really just ensure those borrowers who are serious about entering the market will re-evaluate their ability to service their mortgages and for lenders to make sure they are prudently lending. People still need to buy houses and investment properties. Can we expect to see an improvement in lenders’ service? There are improvements but to say that service delays have been corrected would be wrong. We still have a shortage of players in the marketplace, so competition is very limited. The major four still account for around 70–80% of broker-introduced business; that has impacted on their ability to service in the back office. As the market improves, we’ll see further pressure on their back office so those problems will remain an issue going forward. Do you expect to see competition improve? Competition was primarily driven by non-bank lending where securitisation was used as the
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funding mechanism. Clearly there are some inroads in the securitisation market opening up, the AOFM’s additional $8bn investment will assist in that market, but given the size of the mortgage market it’s really only a drop in the ocean. So until we see the cost of funding normalise, we’re going to see significantly reduced competition in 2010. What can commercial brokers expect in 2010? We have the major banks looking closely at all credit applications for commercial property, particularly where the loan amounts are exceeding $10m. That’s driven by the cost of capital. The fact that CBA and Westpac have absorbed BankWest and St.George respectively they have reached or passed their prudential limits set by APRA, so we are seeing a significant tightening of credit. Even for the very good deals that might have been approved two years ago, they’re finding it very difficult to get finance. We’re also seeing a move by the banks to look at a whole of relationship concept, rather than just funding the debt finance, so they are taking on the relationship with the customer, including all transaction banking, foreign exchange, everything that goes with a commercial relationship. So that will limit the commercial market. As business improves, we should see a resurgence in the equipment finance area as more investment goes to the capital expenditure for those businesses that require it. What does NAB’s ownership and the creation of Advantedge mean for FAST brokers? If there was ever any doubt around the solvency of an aggregator and the protection of trailing commissions, that is now a non-event for FAST. Being owned by Advantedge, which is subsequently owned by NAB, means we have one of the largest balance sheets in the world behind us. It will bring to FAST brokers additional opportunities around white labelling products. We will see further enhancements to offerings around technology. Also, in terms of the changes that will be coming through legislation in 2010, we have the advantage of dealing with some very experienced people on the MLC side that have been through the licensing of financial planning. mpa
see the interview live Steve Kane shares his thoughts on the market in 2010 and whether we can expect to see a return in competition
Steve Kane
“ Even for the very good deals that might have been approved two years ago, they’re finding it very difficult to get finance ” – Steve Kane
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2010 Predictions
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diversification
Chain of command Whereas its rivals have floundered, UK group Countrywide Plc has prospered through the global downturn by offering a holistic endto-end service and by being committed to face-to-face distribution
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ountrywide Plc group CEO Grenville Turner’s late afternoon presentation to the St George Flame broker group on diversification last year was as unexpected as it was inspiring. He kicks it off on an attention-grabbing note by saying: “I think it is a fair summary to say that at Countrywide we will do anything to do with property that will make money.” Some would call Countrywide’s modus operandi ruthless, others would label it business smart. Either way, the company must be doing something right because Countrywide Plc is still one of the top providers in the UK. Leverage It aims to “sort of” do everything to do with property in the UK; to leverage opportunities with customers all the way through the home loan value chain. “And everything hangs off a discipline of strict adherence to the Countrywide business model – which all starts inside the real estate branches,” says Turner. Each branch operates under a local brand name. One of the things Turner believes the big corporates get wrong when they acquire smaller businesses is they operate the new business under one brand and chuck out the original local brand. “They put up a name that has never been there before and has no association with the market,” he says. “So they pay a fortune for what is called goodwill on a balance sheet and then they throw it all away.”
Countrywide’s real estate market share in the UK is typically around 25% and in some areas it is as high as 30%. Another thing Turner is very comfortable with is his brands competing among themselves. This could be as many as four brands in some of the towns and cities where they operate. His rationale is simple: “Any estate agency only sells 50% of the properties they take on. So when the customer moves his business to the next agency around the corner, it is also owned by Countrywide.” Point of sale In financial services, Countrywide is the UK’s largest mortgage broker. Last year was a tough one for the company. It only settled £5bn in loans, down from £7.5bn in 2007. But here is the rub. From the 39,000 mortgages it settled, the company sold 32,500 life insurance policies and 38,500 general insurance policies. “We tell the customer they are about to take on the largest financial commitment they’ve ever taken, and ask how are they going to pay it off should one of them die,” he explains. According to Turner, Countrywide’s cross-sales performance outdoes everybody “by a country mile” and he puts it down to two fundamental aspects of the business. The first is Countrywide recruits from outside the industry and trains all new consultants itself. The company has a five-week program in which, as well as being taught the Countrywide way, consultants are told of the conversion rates they have to hit once they go out into the field.
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The second is that all consultants are performance-managed from the very beginning. Countrywide utilises a one in 10 supervisory regime, so line managers see consultants every week and go through their business details. One transaction You cannot buy a house from Countrywide without sitting down with one of its financial consultants. It is not compulsory for the buyer to do the mortgage through Countrywide, but it is encouraged. And at the same time, customers are offered great deals with general and life insurance and other financial service products. “I believe that if we can make the sales process as simple and straightforward as possible they are going to buy from us – and they do,” says Turner. Face to face One of the differences between Countrywide and its competitors is its absolute belief in face-to-face sales delivery.
“We get the conversion rates others don’t because we sit in front of the customer and we go through a two to three-stage process with them,” says Turner. Brokers sit in the real estate offices offering loans from a limited panel of lenders (for simplicity reasons). Charging a fee for service is not part of Countrywide’s business model. “We don’t want to put any barrier in the way of a customer seeing a consultant. And a fee, we believe, does [create that barrier],” says Turner. On the current conversion rates that Countrywide achieves, its average income per property sale transaction nearly doubles with every cross-sale it makes. “So am I bothered about charging a small fee and facing the prospect of losing that customer who won’t engage with me? Not in the slightest,” says Turner. mpa
Grenville Turner
To read a full version of journalist Tim Neary’s feature Chain of Command visit Brokernews.com.au
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industry associations
Mr President Taking on the role of president can be a thankless job in any industry association. MPA asks the MFAA’s Joe Sirianni and the FBAA’s Peter White what’s in it for them?
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Joe Sirianni, president, MFAA The MFAA’s new president Joe Sirianni joins the industry body at an exciting juncture in the MFAA’s history. At the time of writing the organisation was finalising details on its strategic review – set to be released at the association’s AGM at the end of November. He says the review will provide a very strong blueprint for the way forward in the next two years “and hopefully with a new strategy we’ll be able to drive significant change”. For Sirianni, it’s a chance to effect change – which is one of the main reasons he got involved with the MFAA 10 years ago, while he was still working for ANZ. “I always felt a willingness to participate and help shape and influence things,” he says. But it’s not as if Sirianni is bereft of things to do. The executive director of Smartline has been building the company up since he joined in 2004 and most recently helped merge the franchise group with WA-based Mortgage Force. While he admits serving on the MFAA takes its toll in terms of his time, he says it’s enjoyable.
“In the process you meet some really, really wonderful people and it’s a great opportunity to network and build relationships. It’s all voluntary of course, so no one can really be abusing you for volunteering your time for an industry association.” On the subject of apathy and industry body bashing, Sirianni admits there are a few cynics, but says the vast majority are all quite positive and have plenty to say (even if it’s not always good). “I don’t think [apathy] is a big issue in our industry. If you look at the membership survey that the MFAA ran recently, they had something like a 27% response rate, which is unheard of. So I think a lot of people do like to get involved and pass comments. I think this industry is quite different from most – it’s quite dynamic, vibrant and new and I think people really do get engaged.” Going forward, the biggest issue for the MFAA will be the new pending legislation. The association has been working on the new rules for close to six years and while it’s been a slow train coming, its efforts should come to fruition this year. “We’ve been talking about it for quite a long period of time,” says Sirianni. “The reality is it’s
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Joe Sirianni’s 2010 predictions For the MFAA… The real issue will be positioning for legislation. That will be the key issue. Just making sure that your house is in order and that you can satisfy the requirements. On the market… I think interest rates will rise, but I think the market will still be pretty buoyant actually – I don’t adhere to all the doom and gloom. It’s been quite strong. You read about huge population growth in Australia and I think that underpins fairly strong demand for housing. So I think the economy will improve. There will be slightly less brokers, but the ones that will be here next year will position themselves for strong growth going forward. On competition… Yes, I think the capital markets are starting to improve. We’ll see securitisation markets improve. Perhaps next year the banks may pull back on their credit requirements. Joe Sirianni
moved pretty quickly and efficiently in the past year or so under Kevin Rudd and it’s going to come in under July. I don’t think it’s a bombshell, but will be a process of getting used to a new regime.” The new legislation gives ASIC control over licensing and regulation – powers formally held by the MFAA. But Sirianni says the changes in no way undermine the importance of the body. “One must not associate membership with an industry association. Just because licensing has come in, it doesn’t mean you don’t have to belong to an industry association – that’s a fallacy. The reality is the industry needs a professional body.” While licensing is a significant impact to the industry, Sirianni says that in his mind it’s the bare necessity. “Just because you’ve got a licence doesn’t mean you’re a professional. The MFAA still has a role in lifting and providing professional standards. “To date the perception is ‘I’m forced to be an MFAA member because the lenders won’t deal with me otherwise’, so we’re shifting from an industry association to a professional body and the members want to adhere to the highest ethical standards of
professionalism, code of conduct and belong to an association that represents something and has meaning to their customers, in terms of an improved service proposition.” Part of the lifting of professional standards is the MFAA’s emphasis on education. In July 2009, the association cut 1,500 members from its ranks for failing to meet the minimum Cert IV educational requirement. “You can’t keep barking without biting,” says Sirianni. “Once in a while you’ve got to flex your muscles and say you’re serious about lifting standards and this is the process. If someone can’t do that, you have to ask why.” The association has hinted it might raise standards beyond the licensing requirement, but at the time of writing this was yet to be announced. While 1,500 is a significant number of members to cut, there is speculation that legislation will drive an even greater number from the industry. Decreased membership will have an effect on the MFAA monetarily, but Sirianni says the association has not yet determined how the fees will be affected.
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“Suffice to say that at the moment, our membership fees are perhaps the lowest of any professional industry association in Australia. The board decides what it will be going forward, but we haven’t come to a conclusion at this stage. But yes, it will have an impact on future revenue streams – there’s no doubt about that. That’s why the board focused on making sure we deliver value because it’s not about the price, it’s about the value proposition. You can have a low membership fee and deliver nothing – that’s still expensive. Some people still say it’s too expensive, so the big task for us is to demonstrate real value in whatever that price will be so people won’t question it.” Another issue also broached by brokers is the inclusion of lenders into the association. When lenders cut commissions in 2008, many loan writers questioned why the MFAA didn’t battle on their behalf. But Sirianni says it simply wasn’t the association’s place to do so. “The MFAA is not a union. It doesn’t get involved in commercial arrangements with members. That’s a competitive situation that you have to allow for.” But part of the body’s strategic review is defining its membership base. “There’s some work being done at the moment around who our members are,” says Sirianni. “And I think members can represent a broader range of interested parties and that consists of lenders, valuers – a whole host of different members. But then the question is ‘Who do we represent?’ and we represent intermediaries and loan writers. So you mustn’t cloud membership and representation as one thing. We want everyone in the lending chain to belong to an association. But what we represent are the interests of our credit advisors.” There are obvious advantages to bringing lenders to the same table as brokers, Sirianni adds. “My view is, without the lenders we haven’t got a key role to play. They are key stakeholders in the business and I would prefer them actively participating in the improvement of the industry … it encourages greater commitment and greater cohesiveness between all parties. I would be very disappointed to see two different associations representing two different interests because it creates combative elements. One of the best things about our industry is the mix of all members.”
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“ Once in a while you’ve got to flex your muscles and say you’re serious about lifting standards and this is the process ” –Joe Sirianni
Peter White, president, FBAA The FBAA’s motto is that it’s an association run by brokers, for brokers. Peter White, the managing director of Avanti Commercial, has been involved with the association since 2003, starting as NSW state president and advancing to the national executive. While his two-year term as national president was up in 2009, his renomination was confirmed at the association’s AGM. “I got involved in this because I wanted to give back to an industry that I take from,” he says. “And I felt I had something to contribute. There were things that I didn’t necessarily agree with and being an industry practitioner there were things that were affecting me. So if I was saying ‘Hey why are we doing this?’ or ‘Shouldn’t we be doing that?’ I wanted to do something about it. And that drive, that motivation has just gotten stronger. “I’ve been 30 years in this game. You see things you don’t agree with and I’m not one to sit back and say, ‘Well you should do this or you should do that.’ I got off my butt and I’m trying to do it.” While White says there are some wonderful people in the industry who donate their time, he acknowledges that there’s an equally proportionate number of people who want to sit back and criticise. “We went through a whole pile of this earlier this year where people were saying industry associations should do this, that or the other and that’s fine. Why don’t you lend a hand? We can only do so much. We’re all volunteers. If you’ve got a point to prove, great – come and give us a hand. It’s easy to sit back and criticise.” Like Sirianni, White says the pending legislation will present the biggest change to the industry. “The NCCP bill is going to bring a different rationalisation to the market that we haven’t seen before. So 2010 has a fairly significant level of unpredictability about it as to whether the majority will go for their licence or whether they’ll sit on somebody else’s licence. Will it shake a lot of people out of the market, or will the small player want to comply and absorb the cost? Is it going to be too hard? It’s going to be a year of questions, but within that there’s some well-defined initiatives being undertaken.”
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Peter White’s 2010 predictions On the market… There will be further rate increases into 2010. I would expect to see some stabilisation of rates somewhere in the mid-7 mark as far as interest rates go. So long as unemployment contracts, rates will keep moving north. That said, I’m not an economist and I really don’t want to be one. I think that economically Australia will head in a positive direction. And we can look at the share market and see that’s heading in a positive direction. On the commercial property sector... There’s still a bit of movement in terms of property values, but as we head into next year we’ll see that balance out. Again, it comes back to the lending market. From a lender’s perspective this is the right time to be lending to the commercial property sector. This is the lowest your rates are going to be, so if you’re gearing at 60–70% LVRs, your risk factor in that particular area of dynamics of lending is fairly low. Also you’ve got to look at the capabilities of cash flows and balance sheets, but from an LVR standpoint, it’s a very good time to be lending. So we hope through 2010 that this area of lending begins to gain some momentum, but it’s going to take a few years before it’s back on its feet. On equipment finance... A growth in this area will depend on the capability to fund. This market’s been heavily devastated by the collapse in various capital markets, so if you’re lending to the blue-chip-style area, that market is still there. It’s tough, but anything outside of that is virtually non-existent. So there really is market capability for new entrants to come back into this area if they can get the funding to support it. Peter White
Unlike the MFAA, White says the FBAA’s model and membership make-up will make it less prone to any drop in broker numbers. “We don’t see it as having any great impact at all. We’re conscious of it, and through the whole GFC period we’ve only seen a 2.5% decline in numbers. The beauty of the FBAA is we have a mature membership of brokers so we don’t have the young guns who might be here today and gone tomorrow. Therefore it won’t have that big of an impact on our membership. Obviously as licensing comes into play, the dynamic might change a bit, but because of the structure we have, we might even see an increase.” The FBAA has always had more of a corporate structure, which is reflective of its members, many of whom focus on plant and equipment commercial loans. “So our dynamic is a little bit different. We might even be fortunate enough to see an increase in members,” says White. While legislation changes have prompted many brokers to ask what their association can do for them, White believes he has an answer.
“The FBAA is in front of that with our co-op as we go forward into 2010,” he says. “It’s an enormous initiative for this industry. No one else has done it and it’s all been driven by what the industry says it wants.” The co-op is a service house whereby brokers can find answers to various business needs. For instance, it will provide an access portal for brokers who need different arrangements with aggregators or mortgage managers for specific clients and products. It will also give brokers fleet discounts on new vehicles. “All brokers drive motor vehicles of some sort and they’ve got to pay insurances, so there will be insurance discounts,” says White. “They’ve got to put fuel in the car, so there will be fuel discounts. Then you’ve got telco discounts. There’s a whole range of value-added benefits such as financial planning and accounting platforms.” White says the FBAA has been working on the co-op concept for years as a response to the needs of members and it’s not an attempt to justify the association’s value given the new licensing and regulation powers being taken over by ASIC. mpa
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Profile business
too smart Having been involved with the broking industry from its infancy, managing director Chris Acret started Smartline with Bill Rankin and Roy Hessey in 1999. Tim Neary reports on what has made the company so successful that it has picked up the AMA Franchise Operation of the Year award in 2009
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PROFILE BUSINESS
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martline was started with a fairly simple vision in mind: to be a great business that would set the benchmark for quality and professionalism. Acret had in mind a business that would be supported by three foundations: the delivery of great service to clients, quality business to lenders, and an opportunity for franchisees to build successful businesses. Success breeds success At the time he knew that Smartline wouldn’t be successful unless its franchisees were successful. It is a philosophy that has set Smartline apart from many others in the industry. “Ten years on I believe that approach has been shown to have real merit,” he says. “We have in excess of 200 franchisees, 40-plus group office staff, write $3bn annually in loans and have assisted more than 100,000 Australians with buying a home.” Today, in spite of Smartline being a franchise group, it likes to think it’s broken the mould, somewhat, by being less restrictive. Acret describes the Smartline model as being one that gives franchisees the best of all worlds. “We have invested huge sums of money over the years in putting infrastructure in place in consultation with our franchisees,” he says. “This has allowed us to highly systemise the business, which allows them to focus on building relationships and servicing their clients.”
Believing firmly in mortgage broking being a relationship-based industry, Smartline has no territory restrictions. “They’re just not relevant when so much of our business comes from personal referrals,” says Acret. Direct access Smartline maintains a very flat structure, allowing franchisees direct access to the directors as well as continual input into the running of the group through forums such as its Franchise Advisory Council (FAC). It’s not mandatory for Smartline franchisees to have a shop front. In fact, in a setup that works well, many brokers share offices. Neither are franchisees required to contribute to expensive advertising campaigns. “We use a
Smartline on the future of mortgage managers and aggregators in Australia Mortgage managers should get access to credit again, and provide some much needed competition. “They really were important in driving competition in the Australian marketplace from the early 1990s and creating a much more competitive environment,” says Acret. Aggregators will need to add value beyond the commission administration role, as the industry becomes increasingly regulated and more professional. Many aggregators are going to need to invest more in their businesses and their systems, which may require a review of their cost structures and commission arrangements. They will need to provide assistance across all aspects of their brokers’ businesses – systems, marketing and compliance with increased regulation.
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Profile business
very successful and cost-effective referral-based marketing approach,” says Acret. “The thing I am most proud of at Smartline is our culture. It’s a team culture and it’s not common in this industry. Business is hard enough; having a positive team culture where we all work together on the one side makes it much easier and more rewarding.” There is a strong level of trust and support within the Smartline group, something that Acret says has given and continues to give it a big advantage. Straight talk Smartline’s key point of difference in the market is its clear brand proposition based on people rather than loans, and straight talk rather than jargon. “We are very strongly client-focused within the business and have positioned Smartline and our mortgage brokers as ‘trusted advisors’. We’ve backed that up by giving our franchisees a range of tools and systems to assist them to deliver that superior level of advice and service to their clients,” says Acret. Smartline makes use of an efficient, systemised and comprehensive client care program. It ensures ongoing and consistent contact with clients at the time of the
Smartline on the three main challenges facing the industry 1. Regulation. The new regulatory regime will usher in barriers to entry and a greater administrative burden on brokers and aggregators. This means brokers will need more support and they will be looking for groups to provide infrastructure and systems. It will, however, result in a greater level of professionalism in the industry. 2. Lack of lender competition. The tightening of competition as a result of the GFC really has been a challenge for brokers. The consolidation of power among a few players and less options in the marketplace means service levels have suffered, placing greater pressure on mortgage brokers. 3. Broker income streams. As a result of the significant changes to commission structures, it makes sense to consider other income streams. This might be a fee for service, a broader suite of lending products or risk insurance.
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“ Business is hard enough; having a positive team culture, where we all work together on the one side, makes it much easier and more rewarding ”
transaction and well after the loan has settled too. The proof of this approach is hard to argue with – 85% of its business comes from referrals. Despite the recent difficult times, Smartline has actually had an increase in referrals received. People business Smartline’s key to running a successful financial services business is recognising this industry is always about the people: the clients, the franchisees and the lenders. And developing win-win relationships with all of them. “We’ve always seen a high level of systemisation as critically important,” says Acret. “Those systems take care of the back end so our franchisees can focus on the front end, working with people to grow their business. You need to have a lot of basics in place to have a successful business, but at the end of the day it’s ultimately a people-based business,” says Acret. He maintains also that the most important role of management in a franchise group is to provide whatever support the franchisees need. Smartline works hard to create its team culture, always promoting the importance of family and balance. “Being in business can be very lonely,” says Acret. “We have a strong focus on sharing and knowledge transfer between those in the group. Franchisees control their own destiny but they never have to go it alone. They know they have people around them to support them, share ideas and who genuinely want them to succeed,” Smartline franchisees, on average, settle $15m per annum.
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Fair weather Acret says the GFC, coupled with the reduction in loan volumes and the commission cuts, exposed the business models that were successful in the good times but couldn’t stand up to a more challenging environment. He calls them the ‘fair weather’ businesses. “I think it has shown the importance of the fundamentals in business: having good systems and processes in place, ongoing client care, and providing quality submissions to the lenders,” he says. By focusing on the fundamentals, some top-end Smartline brokers, have written record business levels month after month throughout the GFC. “Our systems and marketing approach meant our brokers were able to stay close to their clients throughout the GFC,” says Acret. “They provided the client care that people were looking for. Client loyalty is the ultimate competitive advantage.” In the pipeline While Acret is proud of what Smartline has achieved, he knows there is always room for improvement and refinement. As a result, he is mindful of keeping abreast of the needs of the company’s clients, franchisees
and lenders. Being committed to continued business growth, Smartline has put an aggressive strategy in place, to build on its current level of 200 brokers. As a result, for the first time it is actively looking at good-quality brokers in the industry as recruits; a strategy shift away from simply targeting people from a banking background, or those new to the industry. “We think we are an attractive proposition for an experienced broker,” says Acret. “With regulation coming in, the focus is now on the industry becoming far more professional. More brokers are looking for support and the best systems. They want support to manage their regulatory requirements. They want to be part of a professional outfit, part of a professional broking group. We are in an environment where commissions are increasingly being linked to quality, where accreditation with lenders isn’t guaranteed.” Having said that, Acret maintains the company will be selective in who it takes in. New recruits “really need to meet our standards – which are high,” he says. Smartline is also looking to expand its income base, and is continually investigating new income streams for its brokers. MPA
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cover hot list
hot MPA Hot List 2010 The fate of the mortgage industry is in the hands of a select few. MPA presents the movers and shakers of the broking world…
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he most influential figures in the mortgage industry have been gathered in the pages of MPA’s second annual Hot List. These stalwarts represent the brightest minds in the sector. Not only have they made an impact in the months leading up to 2010, but their presence will shape the months to come. Congratulations to this year’s inductees into the Hot List 2010. We look forward to watching you over the course of the year.
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statesmen
Leaders in government and in the mortgage space, these individuals have the greatest influence on the direction of the industry
Name: Graham Samuel Title: Chairman Organisation: ACCC
Hot Props: Samuel has one of those jobs where he is forced to make unpopular decisions all the time. He came under heavy fire for allowing Westpac to buy St.George and CBA to acquire BankWest, and despite promising a tougher line on future mergers, could see no competitive disadvantage in allowing NAB to buy Challenger Mortgage Management. The first two decisions have irrevocably changed the competitive landscape, while the jury remains out on the last of these. 2010 will undoubtedly see further acquisitions with second-tier lenders looking vulnerable. The question is: Will Samuel put his foot down?
spotlight ON Name: Glenn Stevens Title: Governor Organisation: Reserve Bank of Australia The persistence of the GFC made last year a busier one than usual for the RBA governor, and when Stevens cut rates late in 2008 for the first time in seven years, it was a taste of bigger things to come. Yet, to his credit, all through the worst of it, as he moved the interest rate around like a chess master, Stevens remained positive and was always on hand to talk up his belief in the Australian banking system. In the end, he cut 425 basis points off the cash rate, dropping it to a record 3% where it stayed until October last year. With markets normalising now, expect increases to around 5% by the year end. At the time, his confidence was well placed. Despite cases where some provision for write-downs was required, Australian banks still reported healthy profits at the end of FY09. Stevens’ urging of Australians to avoid what he termed ‘gloomy talk’ paid off. Remember this sage advice? ”The biggest mistake we could make would be to talk ourselves into unnecessary economic weakness." Stevens says that the economy is “weathering a very large storm pretty well”, and while the future will pose its own challenges, his positive attitude continues as he says Australia is well positioned to meet them.
Name: Wayne Swan Title: Commonwealth Treasurer Organisation: Federal Government
Name: Chris Bowen Title: Financial Services Minister Organisation: Federal Government
Hot Props: Step for step,
Hot Props: Bowen was
Swan has travelled alongside the Prime Minister in plotting Australia’s course through the global economic meltdown. His much lauded RMBS investments have been instrumental in keeping the sagging non-bank sector afloat during the crisis, allowing it to maintain a whisper – if not a rich voice – against the major bank lenders. But he still has work to do. More innovative solutions are required to restore choice to a market where the majors continue to write 90% of new loans.
accused of skewing the home loans market in favour of the Big Four, after government’s controversial guarantee of retail and wholesale deposits. But he vociferously defended the action, saying it protected financial institutions from collapse. In a position that is hard to argue against given Australia’s head start in the global recovery, he said the guarantee was vital in ensuring continued confidence in and sustainability of the entire Australian financial system. Bowen one; critics zero.
Name: Joe Sirianni Title: Executive Director Organisation: Smartline
Hot Props: A great advocate of the
Name: Kevin Rudd Title: Prime Minister Organisation: Federal Government
Hot Props: Having acted decisively exactly when it was needed, Rudd steered Australia through the worst of the GFC with his multi-billion dollar stimulus program. Now, with the country having emerged better off than any of its developed-nation cousins (like the US, UK, Japan or Germany), the Prime Minister has gone on the front foot, calling for a sweeping renewal of global financial institutions and the elevation of the G20 – and Australia’s role in it – as the world’s premier decision-making body.
professional broker value proposition, it’s been a big year for one of the industry’s most recognisable faces. Sirianni took up office as president of the MFAA and also picked up the prestigious Australian Mortgage Awards Golden Morgie prize for lifetime achievement in the mortgage industry. Also, he steered Smartline across the line to pick up the Franchise Operation of the Year award at the same ceremony. We’ll hear more from Sirianni this year, as he drives out the new era of broker regulation and professionalism.
Name: Peter White Title: National President Organisation: FBAA
Hot Props: With the reputation of being honest, hardworking and without outside agendas, White continued his crusade to garner more credibility for the FBAA. It’s a task that he relishes; under his guidance the industry body tee-ed up a new cooperative platform to bring a raft of financial services on board for the benefit of its members (and the broader market), as well as developing a compliance tool kit to help brokers adjust to the demands of the new regulatory environment. Not one to shy away from a confrontation, White found time to take the CBA’s controversial accreditation policy on – calling it a ‘flawed approach’.
Name: Ralph Norris Title: CEO Organisation: Commonwealth Bank of Australia
Hot Props: While CBA remained in number two spot behind Westpac, Norris continued to drive out initiatives that sent encouraging messages to brokers – most notably by arranging a high-level lunch with the industry’s most senior aggregator executives. In doing so, he demonstrated the CBA’s ongoing commitment to the broker channel.
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Hot Props: Since swapping one
Name: John Symond Title: Founder and Chairman Organisation: Aussie Home Loans
Hot Props: It has been some time since ‘Aussie’ John stepped back from the day-to-day running of Aussie Home Loans, but his role as the most respected and widely known industry statesman has not diminished. He remains the industry personality that garners more mainstream newspaper inches than anyone else. With teething problems surrounding the Wizard acquisition now gone, Symond has an even more ambitious task: repositioning Aussie as a one-stop shop for all consumer finance needs.
Name: Tony D’Aloisio Title: Chairman Organisation: ASIC
‘Choice’ for another, Russell has wasted no time in making changes in a business whose share price is seen as the industry’s barometer of confidence. Several senior staff were let go shortly after he came on board, while the appointment of Simon Dehne as national manager of nonresidential business – a new role – made clear the importance of diversification for Russell. He launched wholesale aggregator Beagle Finance on the back of making the first of what is likely to be a series of acquisitions, the purchase of LoanKit. Name: Phil Naylor Title: CEO Organisation: MFAA
Hot Props: The MFAA took some decisive action in 2009 by cutting 1,500 brokers from its ranks who couldn’t be bothered to complete their Cert IV before the industry body’s deadline. This sent a message to members unwilling to step into the mortgage industry’s new era of increased professionalism. Naylor has since discussed increasing education standards above the current minimum, but what exactly the new measure will be remains unknown. As ASIC takes control over licensing and regulation, the MFAA will be looking for ways to prove its value to members.
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Name Sam White Title: Executive Chairman Organisation: Loan Market Group
Hot Props: It has been
In most cases, they are an arm’s length distance from brokers, but these big wigs make decisions with farranging effects…
another busy year for Sam White. Late last year the White family added Loan Market Group to the Ray White real estate and property group when it took a 100% stake in the mortgage broking operation. White, after acquiring the outstanding balance of LMG’s shares (from the founding X Inc Finance directors Dean Rushton, Jennifer Nielsen and John Kolenda), will be looking for the new ownership structure to leverage the obvious synergies between mortgage broking and real estate practices.
Name: John McGrath Title: CEO and Founder Organisation: McGrath Real Estate
Name: James Symond Title: Executive Director Organisation: Aussie Home Loans
Hot Props: The charismatic
Hot Props: As outgoing president of
founder of McGrath Real Estate is excellent at drawing an audience – whether that be at industry functions or on his blog (www.johnmcgrathblog. com.au). The self-made millionaire at the age of 23 has written several books, including You, Inc; You Don’t Have to be Born Brilliant; and The Ultimate Guide to Real Estate. While he started his business in his living room in 1989, he’s now considered one of the most influential figures in the property industry.
the MFAA, you might think James Symond would have more spare time on his hands. Not so. A tireless worker for and in the industry, his latest crusade is in support of the often underestimated female brokers by throwing Aussie’s weight behind The Women in Mortgage Business Network. Symond is known to believe that women represent a powerful force within the mortgage broking industry, and jumped at the opportunity to take a leading role in developing the knowledge base of the female broker workforce.
Hot Props: ASIC has expanded its influence over the mortgage broking industry by taking control of the new licensing and regulation regime proposed under the National Consumer Credit Protection bill. If that wasn’t enough to take on, D’Aloisio was appointed to lead an international body that will play a role in the regulatory responses to the global financial crisis and will be working closely with the G-20’s Financial Stability Board. His appointment was heralded as a sign of respect that the international community has for Australia’s prudential and markets regulation.
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Name: Kevin Conlon Title: CEO Organisation: SEQUAL
Name Patrick Snowball Title: CEO Organisation: Suncorp Group
Hot Props: The ambassador of
Hot Props: Now this guy’s got a
reverse mortgage providers says the sector has achieved sustained “albeit slower” market growth over the six months to June 2009, which is demonstrative of the important role equity release continues to play in this country. As of 30 June 2009, the relatively small market sector consisted of 38,000 reverse mortgage facilities with total outstanding funding of $2.6bn. Despite its slow growth in Australia, brokers remain a “preferred” channel, Conlon says. So far, 1,600 brokers are accredited to write reverse mortgages.
tough job. First the Suncorp board kick John Mulcahy, the previous CEO, out of the boardroom at the beginning of last year. Then at the end of the year, after the Suncorp Group recorded probably its (and the industry’s) worst annual results, Snowball had to fend off a gaggle of angry shareholders who were calling out for the entire board to stand down. But, even before he took office, Snowball said he knew it would be a tough challenge and one that he was ready for. And so far he’s held his nerve. Still, this year will be his to shine.
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Name: Mark Forsyth Title: CEO Organisation: Firstfolio
Hot Props: It was with good reason
Name: Huw Bough Title: General Manager, Mortgage Broker Distribution Organisation: Westpac
Hot Props: Bough spent a lot of time last year implementing a strategy that would enhance Westpac’s relationship with brokers. It is no secret that Bough wanted to pull out all the stops after recognising the strain that last year’s unprecedented increase in volumes had put on Westpac’s servicing capabilities and broker processing levels. Accordingly, he acted quickly to create accreditation and development manager roles in each state to help with broker requirements.
Name: Kathy Cummings Title: Executive General Manager for Third Party Banking Organisation: Commonwealth Bank of Australia
Hot Props: Cummings has many solid and diverse qualities, but having the ability to be invisible is not one of them. At last year’s MFAA conference on the Gold Coast she upped the ante of the aggregator panel discussion somewhat when she unexpectedly grabbed the roving question time microphone. Love her or hate her, there is no denying that incidents such as this one show just how deeply this true industry identity’s passion for the broking industry runs.
that Forsyth had his contract renewed at Firstfolio for a further three years. Under his direction Firstfolio’s mortgage book grew in the FY09, from $8bn to $12bn. In returning the financial services company back into the black, Forsyth attributed the growth to a mixture of acquisition and organic growth. During the year, he also boosted his management team by pulling in ING’s former head of mortgage management Brett Mansfield and former director of Virgin Money Andrew Russell to fill the gap left by COO Warren Nicholls.
Name: Sherman Ma Title: Founder and Managing Director Organisation: Liberty Financial
Hot Props: Still some years shy of his 40th birthday, Ma is something of a veteran of the specialist lending space, with 12 years in the game and a personal fortune estimated by BRW to be in excess of $100m. In 2009, his leadership skills have shone through as Liberty managed to continue lending while its major competitors exited or drastically scaled back their operations. In 2010, Liberty has made its intentions clear – to take on the major banks and broaden its suite of products, which now include car loans, debtor finance and commercial loans.
In commenting on Genworth’s 2009 Mortgage Trends report, Barter said he was surprised at the somewhat optimistic attitudes of consumers
Name: Mike Smith Title: CEO Organisation: ANZ
Hot Props: Unlike its major rivals,
Name: Steven Heavey Title: General Manager, Intermediary Distribution Organisation: St.George Bank
Hot Props: Brokerorientated Heavey is always quick to demonstrate how important the third party channel is in the St.George business model. In an industry first, Heavey led the St.George Flame Study Tour to London where the bank’s top brokers gained valuable insights on coping with regulation and surviving the GFC. Furthermore, during the year Heavey twice simplified St. George’s commission payment model, making it easier for brokers to understand and to assist them in managing their businesses.
ANZ has steered clear of making plays in the third-party space and has not acquired any smaller banks or non-banks. Instead, Smith has focused on making the bank a “super regional” player in Asia via a number of acquisitions in 2009. Industry pundits wonder whether the bank might make a play in the broker space, but regardless, ANZ continues to have a strong broker channel, accounting for 36% of the bank’s distribution and Smith will want to continue to drive the bank’s broker-friendly stance to grow the mortgage book.
Name: Martin Barter Title: CEO Organisation: Genworth
Hot Props: Recently named as an officer to the US parent company, Barter’s work as CEO of Australia’s mortgage insurance business appears to have not gone unnoticed. But he hasn’t taken his eye off the Australian market. In commenting on Genworth’s 2009 Mortgage Trends report, Barter said he was surprised at the somewhat optimistic attitudes of consumers. But, with 30 years’ experience, he urged caution as unemployment remains a threat for the economy. He reaffirmed Genworth’s commitment to working with lenders to help Australians stay in their homes through its hardship solutions program.
Name: Kevin Matthews Title: Executive Director Organisation: AFG
Hot Props: Never one to stand back, Matthews made his presence felt again last year when he called on bank lenders to “please explain” the crisis around service levels and turnaround times earlier in the year. At the same time he pulled them up on the changes made to aggregator agreements and the status of commissions. Matthews also had occasion to tear a strip off a local federal politician for being ill-informed, when, referring to the GFC, the politician suggested it was the brokers “who had caused all the trouble”.
Name: Melos Sulicich Title: CEO Organisation: RAMS
Hot Props: Sulicich is very aware that when the RAMS brand was re-launched in January 2008 it didn’t have a customer base. Now, under his direction it has more than 15,000 customers, Money Magazine’s non-bank lender of the year award and a woolly ram mascot called Raymond. But Sulicich has more in store for the non-bank lender and has plans to double the franchise network and move it into new territories in South Australia and Tasmania. brokernews.com.au
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Name: Drew Hall Title: CEO Organisation: Advantedge
Hot Props: NAB’s acquisition of Challenger’s mortgage management arm thrust Hall to the top of the entity’s newly named Advantedge – which encompasses FAST, PLAN and Choice Aggregation Services, as well as its mortgage management arm. Hall describes the NAB acquisition as a “bolt-on”, in that the business will be run as usual – same management structure, finance, IT and premises – but with more “oxygen” to get the lending side going again. Going forward it will be interesting to see if mortgage managers regain some of the strength they’ve lost in the past two years.
Name: Leslie Janusz Hooker Title: Executive Chairman Organisation: LJ Hooker
Name: Gus Mendez Title: CEO Organisation: Loan Services Australia
Hot Props: Mendez has successfully steered the wholesale mortgage management company through the GFC by diversifying LSA’s offering and tapping into different sales and distribution channels such as MyRate and QuickDirect. Most recently, LSA launched i.lending – a broker-only, residential mortgage provider that promises huge improvements in service levels and turnaround times. It could be a huge selling point for brokers, as the major lenders continue to wrestle with service delays.
Hot Props: Leslie Janusz Hooker, the grandson of the founder of LJ Hooker, paid $82m to Suncorp Metway to buy back the family business in October 2009. While Hooker was named as the new executive chairman, managing director Alan Lambert remained in his position. Hooker stated that the deal marked “a new chapter” in the company’s 80-year-old history. LJ Hooker embarked on an aggressive recruitment strategy, pledging in February 2009 to add 100 brokers to its business. At the time of writing, the franchise group was on track to meet its target.
Kelly outranked US Secretary of State Hillary Clinton, TV’s Oprah Winfrey and the Queen, on Forbes’ annual list of the world’s most powerful women. The list, which ranks women on their public profile through worldwide media mentions, professional accomplishments and economic influence, put Kelly at number 18. Editors cited her position at a major bank, her accomplishment in terms of merging Westpac with St.George, and the overall importance of Westpac on the world banking scene as being key factors in determining her position. Kelly described the full year result ending 30 September 2009 as “sound” despite posting a 10.7% drop in net profit compared to the previous year to $3.45bn. The integration of Westpac/St.George appears to have gone smoothly and the bank now has 25% of all mortgages in Australia. Results showed a 17% growth in its mortgage book. Westpac also announced it would be reversing its two-decade policy of closing branches and has committed to opening at least 200 new branches in the coming years. It will be interesting to see if this means greater focus on the direct channel as a result.
Name: Cameron Clyne Title: CEO Organisation: NAB
Hot Props: As the head of one of Australia’s ‘big two’ providers of Lenders Mortgage Insurance, Graham continues to be an influential force on the mortgage industry. In addition to shaping policy that has wide-ranging effects, he is a market commentator. Graham predicted in October 2009 that property prices would grow by as much as 23% over the next three years, as upgraders and investors flooded back into the market. QBE LMI forecasted an increase in interest rates over the coming months – predicting it would settle at 5% by June 2012.
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Name: Gail Kelly Title: CEO Organisation: Westpac/St. George
Kelly outranked US Secretary of State Hillary Clinton, TV’s Oprah Winfrey and the Queen, on Forbes’ annual list of the world’s most powerful women
Name: Ian Graham Title: Chief Executive Organisation: QBE LMI
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Name: Neil Hyden Title: CEO Organisation: AOFM
Hot Props: Hyden announced he would double the AOFM’s investment into the RMBS market in October, much to the delight of non-banks and second-tier lenders across Australia. While many argue the investment is more of a band-aid solution to the problem of embattled securitisation markets rather than a cure for the financial lenders that depend on them, it was welcome news nonetheless. For more than a few lenders, the investment allows them to keep operating and keep their brand out there – at least long enough until markets do bounce back.
Hot Props: In his 12 months at the head of NAB, Clyne has earned a reputation for being cautious. Halfway through 2009, he warned unemployment would rise to 8% by 2010 and defaults would eat away bank profits. NAB did see bad debts rise to $4bn, which forced its net profit down to $2.6 bn. But thankfully, the government’s Mid-Year Economic and Fiscal Outlook, released in November, revealed unemployment would peak at 6.75%, well under the previous forecast of 8.5%. Still, Clyne has been reluctant to admit Australia’s economic pain is over, stressing it’s not clear what effect rising interest rates will have on business and consumer sentiment over the next 12 months.
Name: Matt Lawler Title: General Manager of NAB partnerships Organisation: NAB
Hot Props: The restructuring of NAB’s personal banking division in late 2009 put Lawler at the top of NAB partnerships, which controls both NAB Broker and the newly-created aggregation and mortgage management arm of the business that has been named Advantedge. While NAB has lagged behind CBA and Westpac in competing for brokers’ business, the acquisition marks a serious turn in strategy for the bank. Lawler has long been urging brokers to embrace the “advice model” by providing customers with a comprehensive range of services. His new position as GM should give his message even greater weight in the coming months.
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Name: Steve Kane Title: CEO Organisation: FAST
Hot Props: In the wake of shrinking
rainmakers
Through leadership and personality, these individuals are responsible for building broker relationships and are the driving force behind the success of their respective organisations Name: Tony Carn Title: General Sales Manager Organisation: Homeloans Ltd
Hot Props: The outspoken Carn compared the dominance of the Big Four in the market as a result of the GFC to a heroin epidemic, because, in his own words: “Everyone is dealing with the majors”. Last year, when one of the majors increased rates independently of the RBA’s official cash rate movements, he said simply: “What else do you expect?”
Name: Warren Stapleton Title: CEO Organisation: Century 21
Hot Props: Having started out with Westpac more than 20 years ago, the tireless Stapleton joined the mortgage industry in 2000 and launched Century 21 Home Loans a little over two years ago, just at the time when the GFC was making its presence felt in the financial markets. Since then he has seen the fledgling business grow and pass the milestones of getting national coverage and passing the 50-franchisee mark. Stapleton is the one to watch this year as his expansion plans mature in a market ready to become active again.
lender commissions, Kane has continued to diversify aggregator FAST’s product offering and added insurance provider Australian Life Insurance (ALI) to its panel in September last year. Kane said it would give FAST brokers access to a mortgage protection product that would be easily integrated into the mortgage process. As part of the ex-Challenger mortgage management business suite, FAST will now fall under Advantedge along with NAB Broker in the newly-formed NAB Partnerships business division. Name: Steven Ramage Title: Head of Mortgages Organisation: Citibank
Hot Props: Determined to lift Citibank off the lower echelons of the MPA Brokers on Banks survey four years ago, Ramage sent his charges out to ask brokers what they wanted from Citibank. They told him, and Ramage has implemented it. The result is that in the 2009 survey, in a year when almost all banks’ service levels had fallen over, Citibank finished beyond all expectations in third spot. Accordingly, Ramage said it wasn’t so much as what he’d done in the past year that led to the firm finish, rather it was pay-off from what he’d been doing in the past three to four years.
Name: Mark Hewitt Title: General Manager, sales and operations Organisation: AFG
Hot props: Hewitt’s focus on diversification earned him a valuable reputation among brokers during the year, as did his astute assessment of the effect of the FHOG. At the time he called it government’s most successful stimulus policy – but he warned that it created a boom that masked the evidence of credit tightening by the majors. As the industry moves into a more rigid regulatory framework this year, expect to hear a lot more sage advice from Hewitt.
Name: Steven Craig Title: Head of sales and distribution Organisation: AMP Banking
Hot Props: 2009 was a Name: Paul Francis Title: General Manager, retail services Organisation: Heritage Building Society
Hot Props: In his role looking after mortgages, Francis guided Heritage Building Society to its 10th consecutive pre-tax profit result and a ninth consecutive record post-tax profit in 2009. This is an impressive result for the society, which relies substantially on brokers for its mortgage-related lending, in light of the GFC and the difficulties it presented for lenders to raise wholesale funds.
productive year for Craig. Although AMP Banking has climbed steadily in the MPA Banks on Brokers survey in recent years, it would have taken a brave pundit to call it that they would finish in first place overall in last year’s survey. But it did, and Craig chalks the bank’s success up to listening to his brokers. He has spent the year working on the things that are really important to them; service, turnaround times and communication.
Name: Lisa Claes Title: Executive Director of Mortgages Organisation: ING Direct
Hot Props: ING Direct caused a bit of a scare early last year when it announced a global expense reduction exercise, but Claes was quick to allay local broker fears, saying then that the measures would not affect the Australian arm of the business. Since then she has continued to keep ING at the head of events in the bank lending space, picking up a second overall position in the MPA Brokers on Banks survey and scoring an impressive Roy Morgan research customer satisfaction rating of 84.2% – soundly beating the major banks.
Name: Michael O’Sullivan Title: Managing Director Organisation: Provident Capital
Hot Props: In spite of the shrinking market for low-doc and non-conforming loans, O’Sullivan maintained a focus on them during the course of last year. Through a continuity of funding and careful brand and reputation management, he kept Provident Capital well positioned to take the lead in this space. And while he might have started the year with tightened credit policies, as market confidence grew O’Sullivan became increasingly more encouraged to loosen them and expand Provident Capital’s product offering.
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Name: Mark Reid Title: Head of sales and distribution Organisation: BankWest
Name: John Flavell Title: General Manager Organisation: NAB Broker
Hot props: A people person well respected by the industry and his staff, Reid picked up a lot of flack at the onset of the GFC for cutting a bunch of aggregators from BankWest’s panel as well as turning the tap off to brokers for its popular RateTracker product. But Reid, saying he wanted to give a better service to the people who supported the bank, has done a good job of turning the criticism around and getting BankWest back into the fray. Still, he thinks the bank can deliver its overall service better. Reid is another one to watch as the market gains momentum in the wake of the GFC.
Flavell was elevated to the position of general manager of NAB Broker after the bank announced it was restructuring its personal banking division as a result of its successful acquisition of Challenger’s aggregation and mortgage management arm. Flavell’s new position puts him in charge of Homeside, MLC, Allianz and Vivid sections of the business. He spent much of October travelling Australia and allaying brokers’ fears that brokers under NAB’s new aggregation entity Advantedge wouldn’t be given preferential treatment over other industry professionals. He also apologised to brokers for the “horrible” service they endured over the past year and outlined steps the bank had taken to improve its performance. Flavell’s goal over the coming months is to work with brokers “as business partners” to enable them to provide a complete and broad range of financial solutions to their end customers.
Name: Brendan O’Donnell Title: CEO Organisation: Choice Aggregation Services
Hot props: With a successful career
Name: Garry Driscoll Title: CEO Organisation: Mortgage Ezy
Hot props: Last year, Driscoll bought a new fishing boat, which (in his words) suited his personality – “functional, practical and gets the job done”. A no-fuss entrepreneur, he’s been relentlessly getting the job done at Mortgage Ezy since taking over at the helm, in spite of the way the GFC has ripped the guts out of the non-bank sector. Now, with new life being breathed into the securitisation market, the banking sector is certain to feel more of Mortgage Ezy’s heat as the year progresses.
Name: Martin Lynch Title: Head of Reverse Mortgages Organisation: Royal Bank of Scotland
Hot props: Tireless crusader for reverse mortgages (and English cricket), Lynch had a busy year last year after first being called to defend the troubles of the Royal Bank of Scotland, and then to attend to the re-branding of the product following the UK bank’s earlier buying of its Dutch rival ABN AMRO. With the market steadier, we should see the demand for the reverse mortgage product increase as the year progresses.
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Name: Steve Weston Title: General Manager, distribution – broker platforms and lending. Organisation: Advantedge
Hot props: Weston is one of Advantedge’s most visible and respected assets. And with the new Advantedge/NAB deal now in full swing, word is that he might soon find himself with a more high-profile position in the NAB setup – a case of Weston finding himself as a bigger fish in a bigger pond. Weston was a regular presenter at industry conferences and forums during last year, dishing out a unique brand of industry wisdom and will remain a key industry commentator in 2010.
Flavell apologised to brokers for the “horrible” service they endured over the past year and outlined steps the bank had taken to improve its performance
Name: Glenn Goddard Title: CEO Organisation: RHG
Hot props: While it may no longer be lending, brokers will be closely watching the performance of RHG (formerly known as RAMS Home Loans) in 2010. According to its 2009 annual report, the ASX-listed business lists its significant liabilities as including $21.8m in trail commission. Goddard as chief executive officer will drive the day-to-day operations of the business with the responsibility of executing founder John Kinghorn’s goal to “maximise its tangible net worth”.
as a senior banking executive in South Africa behind him, O’Donnell has transitioned well into the role vacated by Michael Russell. Despite it being a tumultuous time – ownership of the business has changed hands twice since he came on board – O’Donnell has maintained a steady grip, while getting the message across to Choice brokers about the importance of diversification. An astute lender and regular industry commentator, he is now a key executive in NAB Broker’s Advantedge business.
Name: Barry Lambert Title: Managing Director Organisation: Count Financial
Hot props: Under Lambert’s management, Count has grown its stake in Mortgage Choice to not far shy of the 19.9% which would then, under ASX rules, require a mandatory takeover offer. While Lambert has stated Count is in no hurry to make an offer (a bid for Mortgage Choice was rejected in July 2008), he does believe the two businesses could work well together. That aside, Lambert is a strong supporter of the broker proposition, offering mortgage broking services to its clients via its highly successful wholesale aggregator Finconnect.
Name: Brad Wood Title: Director Organisation: Astute
Hot props: A lifelong supporter of the North Melbourne Football Club, Wood signed an agreement with the AFL side in March 2009 to come on board as its official finance partner. Wood says the deal will help grow the Astute brand throughout the Eastern seaboard, SA and WA. For brokers, not only does it give them a whole new client base (North Melbourne supporters) to market to, but they will also have access to the leadership and mentoring skills of the management; and coaching staff at the club.
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Name: Gerald Foley Title: Managing Director Organisation: National Mortgage Brokers
Hot props: In 2009, National Mortgage Brokers continued to attract quality brokers, adding 52 in the last financial year. Many would have joined based on Foley’s reputation within the industry. A past president of the MFAA, he is a regular commentator on industry issues and does not shy away from speaking his mind, most recently urging brokers to consider lenders outside the majors when possible. Unlike most aggregators of similar size, nMB regularly provides updates regarding its financial performance and composition of loan book. In 2010 Foley will once drive strategy at nMB, with acquisitions also a possibility.
Name: Clive Kirkpatrick Title: Head of Franchising Organisation: RAMS
Hot Props: Kirkpatrick joined RAMS last year and after three months in the role of head of broking, he was shuffled into his current position – head of franchising. The banking veteran has been aggressively growing the franchise network since, recently expanding into Tasmania for the first time. Kirkpatrick’s plan there was to start with mobile franchisees and then expand these into local RAMS Home Loan Centres. Under his leadership, RAMS introduced a new franchise distribution model that is designed to be “more flexible” and offer a “more competitive, performancebased commission structure and improved scalability”.
Name: Damian Percy Title: General Manager of Third Party Mortgages Organisation: Bendigo and Adelaide Bank
Hot Props: Percy is steering Bendigo and Adelaide Bank’s return to the mortgage market. Badly affected by the GFC, the bank restrained its lending volumes over the past two years, but an investment from the AOFM has opened the doors again to ramp up business. Percy says the bank can “provide a serious alternative to the majors” going forward and is hoping its “broker-friendly” policy nets it more business from the third-party channel in the next 12 months.
Name: James Boyle Title: Chief Operating Officer Organisation: Liberty Financial
Hot Props: Liberty hinted in October 2009 that brokers should expect something big from the non-bank lender by way of products and pricing, but at the time of writing it had yet to make an announcement. Boyle stated earlier in 2009 that the AOFM’s investment into RMBS has bolstered the non-bank lender’s ability to compete with the majors on price. Despite reports that provisions for defaults tripled from $19m to $60m, Liberty reported that it held $42m in “collateral value” for the purpose of recovering impaired loans, and the shortfall between this and provisions was not a concern.
Name: Allan Savins Title: COO Organisation: Resimac
Hot Props: Resimac promises it is on the verge of something big. Towards the end of 2009, Savins told MPA that the company has “a number of initiatives which have been in development and will be released to the market during the next quarter”. One of those initiatives was a retail offering called Hemisphere Financial Solutions, which delivers a branded offering to the borrowers, initially via the aggregation channel. Resimac received two transactions from the AOFM’s initial $8bn scheme, which has been crucial to its success over the past two years and remains a determined player in 2010.
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Name: Ray Hair Title: Chief Executive Officer Organisation: PLAN
Name: Wendy Higgins Title: Broker Organisation: Mortgage Choice, Glenelg East
Hot Props: Hair joins FAST’s
Hot Props: Higgins’ settlement volumes catapulted her from third place on MPA’s Top 100 list in 2008 to first in 2009. A broker with 11 years’ experience under her belt, she settled more than $123m over 515 deals. Higgins is the ultimate loan writing machine and is consistently recognised by Mortgage Choice as one of their top performers. Going forward she plans on diversifying her businesses’ income streams through offering insurance and making people aware that she can also offer leasing finance.
Steve Kane and Choice’s Brendan O’Donnell under the new NAB entity, Advantedge. They are to retain their individual brands and NAB has assured brokers that the acquisition will not mean significant change. Hair is optimistic going forward as Australia has seen the worst of the crisis, but provided there are no external shocks globally and unemployment in Australia doesn’t blow out. Name: Chris Acret Title: Managing Director Organisation: Smartline
Hot Props: Acret’s work as the head man at Smartline was recognised in 2009, with a first place ranking in Topfranchise. com.au’s Top 10 list. “While this result recognises our benchmark systems and marketing, most importantly it recognises that our people are passionate about what they do and about being part of the Smartline group,” Acret said. The accolade was followed by a win at the AMAs which gave Smartline the Franchise Operation of the Year Award.
Name: Peter Bromley Title: General Manager Organisation: LJ Hooker Financial Services
Hot Props: Demand on the real estate side of the business had a direct impact on the success of LJ Hooker Financial Services last year, which recorded a 26% increase in August loan settlement figures over the same period in 2008. Bromley seems to be in the enviable position of steering a company that is experiencing strong growth at a time when the industry as a whole has seen a decline. He’s been involved with LJ Hooker since 2004.
Name: Steve Lambert Title: CEO Organisation: National Brokers Group Name: Danny Masri Title: Commercial broker Organisation: Mortgage One Australia
Hot Props: Masri topped
MPA’s Commercial Brokers list in 2009, settling more than $126m. It’s an incredible achievement considering how tough commercial brokers have been doing it over the past two years. Lack of available credit and shifting credit policy has meant commercial brokers have had to have a solid combination of luck, skill and sheer doggedness to get deals across the line. Masri says the quality of his previous loans has helped him get new ones over the line, but feels optimistic that the economic conditions are improving in 2010. “I think the market has turned. If this is as bad as it gets, then we really shouldn’t be complaining.”
Hot Props: Lambert has stated that the biggest threats to the industry going forward are the reduction in the number of lender products and the tightening of credit policies. But he remains optimistic that competition from the non-bank sector will rebound in the coming months. He has been active this year in encouraging brokers to diversify their income streams; NBG offers commercial lending and leasing workshops and has built business relationships with a number of third-party professional business mentor programs.
Name: Meg Bonighton Title: Head of Broker Distribution Organisation: ANZ
Hot Props: Bonighton was appointed to her position in September and to date has remained a quiet player in the third-party distribution space. She comes to the position with a background in retail banking and has worked in mortgages in ANZ for the past five years and in financial services for more than 10 years. Her task in 2010 is to “achieve above-market growth”.
Name: Andrew Duerden Title: Business Development Manager Organisation: Loanworks Technologies
Hot props: For
connectors
Often behind the scenes, these people are responsible for creating and constantly improving the electronic software and platforms brokers depend on
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Duerden, last year was dedicated to making the life of the broker easier and improving the way the industry interacts with itself. The common challenges brokers face when processing commission payments featured prominently on his radar screen. Accordingly, he was instrumental in rolling out Loanworks Technologies intelligent broker commission process system using the groundbreaking ‘Commissions Productivity Ratio’.
Name: Jega Rajan Title: CEO Organisation: Pisces
Hot props: While cleaning up the balance sheet, Rajan might have placed the Pisces Group into voluntary administration, but all through it he has managed to keep his head above water and the company on-side with brokers. In another significant move, Rajan kept former Liberal Party leader John Hewson on as Pisces chairman.
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Name: Paul Eldridge Title: CEO Organisation: Intellitrain
Name: Erik Fenna Title: CEO Organisation: LIXI
Hot Props: A typical Canadian, Fenna just wants everyone to get along – or at least speak the same language. As the head of LIXI, Fenna has been furthering the end goal of getting banks, brokers, aggregators and anyone else willing to sit at the lending table to communicate electronically. But he’s still got his work cut out for him – last year, $1bn was spent on the loan approval process in Australia and almost $200m of it in re-work. Should Fenna realise the dream of full implementation of the National Electronic Conveyancing System (NECS), the cost savings to lenders would be about 15%.
Name: Martyn Beer Title: General Manager of lending solutions Organisation: Sandstone
Hot Props: At Sandstone, Beer manages a global team of 120 lending business and technology specialists – possibly one of the largest dedicated lending solutions centres of expertise in the world. This team has been developing, deploying and supporting Sandstone’s LendFast loan origination system since 2004 and is currently delivering Sandstone’s third-generation LendFast system. In addition to developing and implementing lending systems, the lending solutions group also provides lending business advisory services to help Sandstone’s customers transform their end-to-end loan origination processes and operations. Beer is personally engaged as an expert in this field, in addition to managing the ongoing strategic direction, product development plans and daily operations of his team at Sandstone.
In spite of it being a very busy time last year for Intellitrain, Eldridge remained a man on a mission. Seemingly capable of getting through an enormous workload, he constantly positions his company on the cutting edge of the industry’s education space. Along with Intellitrain launching a range of tech-savvy web products to assist brokers in meeting their ongoing education requirements, Eldridge scored somewhat of a coup late last year when he became one of a select group of RTOs in Australia to be granted a government tender for educational funding – a move that put Intellitrain into a position to offer a group of brokers the opportunity to undertake a government-funded diploma and save more than $3,000. Also, Eldridge continued to demonstrate his commitment to delivering the industry into the professional era by combining the launch of Intellitrain’s new website with the launch of a monthly ‘webinar’ program. But as the MFAA’s hard-line cutting of 1,500 brokers highlights, his work is not yet done. Keep an eye on Eldridge as the year unfolds. He will have his hands full assisting brokers with their licensing requirements as the industry embraces its new regulatory regime – and he’ll probably enjoy every minute of it.
innovators
spotlight ON
Name: Chris Dalton Title: CEO Organisation: Australian Securitisation Forum
Hot Props: Appointed CEO of the ASF in May 2009, Dalton has been tasked to help revive Australian securitisation markets. While it’s not an easy job, Dalton appears to be the right man to do it. In his 19 years with Standard & Poor’s (including eight years as managing director and country head Australia/New Zealand) he played a leading role in the development of Australia’s securitisation industry and has been a strong contributor to the ASF’s initiatives. Representing 120 organisations including banks, non-bank mortgage providers, investment managers, investors and ratings agencies, Dalton welcomed the government’s support of securitisation through its renewed investment in the AOFM scheme.
Name: Adrian Macleod Title: Chief Executive Officer Organisation: NextGen.Net
Hot Props: Typically behind-the-scenes, Macleod often lets NextGen.Net’s commercial director Curtis Brager do the talking. But both are pivotal to the ongoing success of the company, which announced a new partnership with the Stargate Group in 2009. The alliance allows the provision of the ApplyOnline electronic lodgment platform to more than 3,000 existing Symmetry users. It also provided NextGen.Net with the opportunity to extend its market reach and leverage off of its leading solutions. NextGen. Net is now working on a new data transaction standard that will allow parties to share documents in a standard way, while eliminating faxes altogether.
Name: Jason Hayden Title: Managing Director Organisation: Finware
Hot Props: Hayden is one of the few industry participants to look at the GFC with fondness. The managing director of Finware says it was “great for the industry as a whole”, adding that it forced many to increase their efficiencies. Of course, that’s where Finware comes in. The company’s iLend solution has steadily gained traction in the marketplace, having received a resounding endorsement last year when FAST announced it would offer the system to its brokers. Hayden says going forward, brokers who were using the iLend system “below capacity” will be looking to extract as much value as possible from the system.
Name: Jeffrey Zulman Title: Chief Executive to oversee the merger Organisation: Macquarie Bank
Hot props: Zulman, an IT
One step ahead of the game, these players have demonstrated that they know how to act, not react, in the current economic climate
expert from South Africa, will be heading up the new Macquarie aggregation business. Together with division director Tim Brown, he has been meeting up with aggregators to put the new venture together. And with the new cooperative business set to be built around a strong IT platform, his skills will be highly valued once the new entity is up and running.
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Name: Andrew Clouston Title: Managing Director Organisation: Club Financial Services
Name: Peter McGuinness Title: CEO Organisation: Bluestone
Hot props: When Clouston set up the
Hot Props: The good news story for Bluestone in 2009 was its net profit tax of $6.1m for the financial year ending 30 June – a 56% increase over 2008. While Bluestone took its foot off the gas on the origination side, it managed to drive profits by refocusing attention on servicing and capital management. Servicing contributed 36% to the group’s operating income, while Bluestone Capital Management contributed 12%. Although relatively new aspects of Bluestone’s business, McGuinness stated both represented “exciting opportunities for future growth”.
Club business in 2008, he promised it would offer first-class resources in the areas of management, sponsorship and marketing, with significant income streams to franchisee partners. Since then, results show that he must have got it right because Club brokers picked up three prestigious awards at last year’s Australian Mortgage Awards, including Franchise Young Gun of the Year, Franchise Broker of the Year and Australian Broker of the Year.
Name Paul Ryan Title: Managing Director Organisation: Opportune Home Loans
Hot props: Perennial innovator and always the entrepreneur, Wizard founding director Ryan’s newest venture is a consumer website, aimed at providing consumers with impartial advice. Ryan’s view is that with most major broking houses now being owned by banks, borrowers cannot be sure whose interests are being looked after when they seek advice.
Name: Lynne Wyatt Title: Head of brand and marketing Organisation: RAMS
Name: Murray Cowan Title: Managing Director Organisation: Better Mortgage Management
Hot Props: Wyatt is charged with the task of marketing the Westpac-controlled RAMS brand and distancing it from the renamed RHG Group, which nearly choked in the early days of the GFC. RAMS Home Loans has being recognised as “new and improved” – it was recently awarded five stars for outstanding value by Canstar Cannex. Wyatt spearheaded substantial research by the non-bank lender into the first homebuyer’s market and has stated that despite a winding down of government grants, she believes that in 2010 between 15 and 20% of RAMS customers will continue to be first homebuyers.
Hot Props: The Queensland-based mortgage manager was hit hard by the GFC, but it has managed to survive by improving operating efficiencies. Started in 1999 by Cowan, the business has more than $1.25bn in residential loan settlements. Cowan has stated that his company has witnessed a surge in applications for accreditations from brokers who are looking for alternatives to the big banks. In the medium term, he expects to see some additional volumes flow through from increased broker interest.
Name: Christopher Joye Title: Managing Director Organisation: Rismark International
Hot Props: Joye was selected as one of Australia’s top 10 Emerging Leaders by The Australian in its economic/wealth category. He was invited to speak in February 2009 on innovative policy solutions to America’s housing market woes at a private summit for Obama Administration officials in New York. As founder and managing director of research and investment group, Rismark, Joye helped pioneer the development of the world’s first mass-market, private-sector shared equity finance program in which the lender participates in both the capital gains and wears the losses associated with home ownership without charging any interest. The company revealed the performance of the EFM product for the first time in August 2009 – it generated an internal rate of return of about 7% a year.
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Name: Matt Baxby Title: Managing Director Organisation: Virgin Money
Hot props: Richard Branson started it, and Baxby – Branson’s man Down Under – intends to keep Virgin’s tradition of ‘just offering an alternative’ alive. This time he’s leading Virgin Money (in a joint venture with Citibank) into its second foray into the mortgage, credit card and retail deposits space, with the intention of breaking up the stranglehold of the Big Four on that market.
Ryan’s newest venture is a consumer website, aimed at providing consumers with impartial advice
spotlight ON Name: Mark Bouris Title: Chairman/Co-Founder Organisation: Yellow Brick Road One of the most well-known and most listened to business leaders in Australia, Bouris found himself on primetime television towards the end of 2009 as host of reality show, The Apprentice. While the jury may be out on the success of the show, the prize for the winning contestant – a senior position and a 12-month contract on Bouris’s latest venture, holistic financial advice business Yellow Brick Road (YBR) – was yet another clever advertising coup for a man who has always been something of a media darling. While it must have been disappointing for him to see the Wizard brand disappear and be replaced by John Symond’s Aussie, Bouris has moved on and growing YBR will undoubtedly be his top business priority for 2010. It could be an important benchmark for the industry too, as the concept of a diversified financial services business that charges a fee gathers momentum within the industry. Combine this with Bouris’s high profile and his role as a consumer advocate (his push for a cost of funds ‘bankwatch’ has the backing of both NAB and CBA) and YBR could, if successful, become a model for many to emulate in the future. And with his industry connections and business acumen, few would be betting against Bouris notching up another successful venture.
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Name: Simon Dehne Title: National Manager of non-residential business Organisation: Mortgage Choice
Name: Brett Mansfield Title: General Manager Organisation: eChoice (and wholesale lending at Firstfolio)
Hot props: In July 2009, Dehne was
Hot props: Mansfield, the
reunited with former Choice Aggregation boss Michael Russell when he joined Mortgage Choice. Dehne will call on his sales experience from his Choice Aggregation days as he focuses on implementing one of Russell’s key strategic drivers: the implementation and sale of a range of non-core products (including commercial lending, risk and general insurances and equipment finance) via its broker network.
former head of mortgage management at ING Direct, has a new challenge on his hands. Having joined Firstfolio on 1 June last year, he has been tasked with expanding eChoice from purely an online mortgage finance broker to a more diversified financial services platform. The expansion is all part of Firstfolio’s company-wide diversification drive and with the internet growing as a lead-generator and preferred starting point for many borrowers, Mansfield’s role will be a key one for the listed Firstfolio business.
Name: Craig Kennedy Title: Managing Director Organisation: Cuscal
Hot props: In 2009, under Kennedy’s leadership, Cuscal reached an agreement with NAB to create one of the largest ATM networks in Australia. A strong supporter of the broker proposition, he believes that Cuscal (which provides wholesale banking services to smaller lenders) has a role to play in driving competition back into lending. Future plans include ‘unlocking’ the Cuscal balance sheet to offer white-label mortgage products to its clients with brokers part of the distribution play.
Name: Frank Paratore Title: General Manager Organisation: Ballast
Hot props: Paratore has built up the Ballast business, which he describes as a “boutique” financial services provider. With an AFSL licence and 80 representatives in WA and Queensland, the business is set up to be at the forefront of those businesses offering a holistic ‘one-stop shop’ to their customers, in a similar vein to Mark Bouris’s Yellow Brick Road. During 2009, Paratore led Ballast in its acquisition of the Sound Finance group, and raised its profile via sponsorship of the MFAA.
Name: Tasso Papachatgis Title: CEO Organisation: Australian Life Insurance (ALI)
Name: Patrick Tuttle Title: CEO Organisation: Pepper Homeloans
Hot props: Given just a few months to cut his teeth as head of sales, Papachatgis was appointed CEO of ALI in March 2009. Since coming on board Papachatgis has devoted his energies to understanding the broker’s point of view with the aim of increasing product take-up. ALI boasts the biggest chunk of the third party mortgage risk insurance market and Papachatgis will have to work hard to maintain ALI’s dominant position given the advent of new players to the space and NAB’s ability to offer insurance products through brokers after its aggregation purchase.
Hot props: Since moving up from CFO to CEO at the start of 2008, Tuttle has had to re-engineer the business as the specialist lender was forced to pull back from new lending and instead focus on third party servicing. To his credit, Pepper has survived. In August 2009 Pepper launched new low-doc and full-doc specialist products available for distribution via the broker network. 2010 will see Tuttle looking to keep the momentum going. He is also a member of the national committee of the Australian Securitisation Forum.
Name: Mark Haron Title: Principal Organisation: Connective
Hot props: Under Haron’s
instigators Love them or hate them, these sharp-tongued players are never at a loss for words when it comes to commenting on the industry or sparking debate
direction, Connective has grown impressively both in terms of broker numbers and loan book – more than 900 and $14bn respectively at last count. This culminated in the aggregator being ranked 24th overall on the 2009 BRW Fast 100 list, perhaps paving the way for a potential takeover bid in 2010. Alongside this growth, Haron’s profile in the industry has strengthened on the back of his willingness to speak out against minimum volume requirements and other industry hot potatoes. Adding mileage to the Connective brand is the decision by Mark Bouris’s Yellow Brick Road to aggregate through the group.
Name: Louise Petschler Title: Chief Executive Organisation: Abacus
Hot Props: As head of the industry body representing credit unions and building societies (CUBS), Petschler has been voicing concerns over the government funding guarantee for banks and the unfair advantage it provides to the majors. Despite this, CUBS’ share in new owner occupiers was 7.9% in July 2009, up from 6.8% the year before.
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Name: Martin North Title: Managing Consulting Director Organisation: Fujitsu Consulting
Hot props: Predictions made by
Name: Lisa Gray Title: Personal Banking Group Executive Organisation: NAB
Hot props: News that the ACCC wouldn’t intervene in the NAB/Challenger deal was welcomed by Gray who said the deal represented an important component of NAB Personal Banking’s growth strategy. She added that it increased NAB’s presence in the broker distribution segment. She described this as being important since it would give NAB the capacity to grow and support the newlyacquired broker networks well into the future. Late last year NAB re-branded the Challenger businesses to the catchy Advantedge.
Martin North in his Australian Mortgage Industry reports have proved uncannily accurate, despite the groans of despair they elicit from many brokers. North’s skills are his ability to take a bird’s eye view of the market and identify strengths and weaknesses, and most astute brokers play close attention to his market observations. The Englishman is also well-versed on the impact of regulation on UK brokers and what the Australian market can expect when ASIC takes over as credit regulator.
Name: Ken Sayer Title: Founder and Managing Director Organisation: Mortgage House
Hot props: A veteran of non-bank lending, Ken Sayer has guided Mortgage House through the GFC, survived broker fraud, implemented new IT systems, developed an aggregation arm and continued to fund new lending. In past years Mortgage House was a sponsor of rugby league teams, the Melbourne Storm and Sydney Roosters. Sayer has earmarked 2010 for Mortgage House to return to sponsoring teams in the code. Always one to speak his mind, Sayer has set his long-term ambitions on Mortgage House obtaining a banking licence.
spotlight ON Name: David Liddy Title: Chief Executive Organisation: Bank of Queensland/ABA Liddy may have been under fire for BoQ’s lending practices to Storm Financial clients and from disgruntled former franchisees, but that didn’t stop him from wheeling and dealing in the boardroom. On the back of BoQ raising $340m in capital, Liddy said he was keen to do a $2bn deal with ailing Suncorp Bank to purchase its lease finance portfolio. He also hit out at the differential fees the government charges banks when they access the wholesale funding guarantee, accusing the system of undermining competition since the majors – which are seen as more secure by ratings agencies – were paying about half of what their BBB-rated regional counterparts were to the government. To make matters worse, Liddy felt the major banks were able to reverse “a decade-long reduction in net interest margin” – growing theirs while the regional banks were reporting a reduction in net interest margin. Also, in August last year Liddy was appointed Deputy Chair of the Australian Bankers’ Association (ABA), where he is expected to play an ongoing important role in regulation discussions. However, one engaging issue remains for Liddy, and that is BoQ still does not use brokers for its mortgage lending.
Name: Geoff Brieger Title: Founder Organisation: Vanilla Home Loans
Hot props: Brieger appears to have just as many supporters as detractors following the launch of his ‘fee for service’ retail offering in September 2009. His labelling of brokers who earn commission as “jokers” has resulted in a flood of comments on Broker News. Brieger, has recently trademarked his ‘True Broker’ fee for service model. At last count, Brieger had signed up a dozen brokers to his Gold Coast-based business. 2010 will be the test as to just how sweet the Vanilla offering really is.
Name: Lisa Montgomery Title: Head of Consumer Advocacy and Marketing Organisation: Resi Homeloans
Hot props: Always Name: Kim Cannon Title: Founder and CEO Organisation: FirstMac
Name: Matthew Bransgrove Title: Senior Partner Organisation: Bransgrove Lawyers
Hot Props: In 2008,
Hot props: One of the foremost
Cannon predicted that liquidity would not return to global markets for at least two years and time is proving him right. FirstMac has benefited from the AOFM’s investment in RMBS, but Cannon is not content to rely on securitisation. The non-bank lender is seeking a licence to tap into the retail deposit market, which would diversify its funding base. FirstMac posted a close to 80% increase in net profit for the year to June of $10.2m.
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experts in the field of mortgage and property law, Bransgrove specialises in acting for lenders on mortgage advances, enforcement and discharges. Dodgy brokers have met their waterloo when facing Bransgrove in court. He is co-author of the Lexis-Nexis textbook The Essential Guide to Mortgage Law in NSW, and his articles in the NSW Law Society Journal and textbook are “cited with approval” by the NSW Supreme Court. He is also a regular contributor to MPA and Australian Broker on precedent-setting cases involving brokers, non-banks and mortgage managers.
prepared to stand up for the consumer, Montgomery was quick to take the government’s spruiking of its mortgage relief for the unemployed deal with the Big Four banks to task, saying that most lenders already provided the same help. At a time when the full effects of the GFC were still being felt, she said both bank and non-bank lenders allowed customers in financial hardships to defer payments. Concerned that it would affect consumer choice, Montgomery said it was unfortunate the deal had been couched in that way. Her sentiment had the backing of the Consumer Action Law Centre.
Name: Jon Denovan Title: COO Organisation: Gadens Lawyers
Hot Props: An active partner to the mortgage industry, Denovan has been working with the federal government and industry groups to further national regulation for providers of consumer credit. Denovan has been a perennial favourite at industry conferences and presentations. In the midst of the GFC, he was asked whether he thought there was a light at the end of the tunnel. Always an entertaining speaker, he quipped: “Yes, it’s a train.” Gadens Lawyers has produced a NCCP Compliance Manual Program to provide support to lenders and larger broking groups that face greater compliance challenges in the coming months.
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Name: Tanya Sale Title: General Manager Organisation: finconnect
Hot Props: Never shy to voice her
global players
opinion, Sale was a vocal opponent in 2009 of fast-track financial planning conversion courses for brokers. She questioned who would go to a broker with just a nine-day course under their belt and ask for advice on life savings. One training course provider said that Sale’s comments were “ill-informed”. Sale has also spoken out on the future of part-timers in the industry, stating that there was no place for brokers going forward who couldn’t commit a full-time effort to the job.
Sale questioned who would go to a broker with just a nine-day course under their belt and ask for advice on life savings
Name: Paul Gollan Title: Director/CEO Organisation: Australian Mortgage Brokers (AMB)
Hot Props: Gollan could have fitted into the ‘innovators’ category for his efforts to expand his franchise group’s aggregation service to include brokers who operate businesses under their own brand name. However, he is an excellent example of an industry instigator for commenting on big issues, such as RAMS’ decision to cut off low-volume aggregators. While Gollan conceded AMB volumes had been low in the six months leading to RAMS’ decision, he attributed it to RAMS’ “outrageously slow service”.
Name: Ben Bernanke Title: Chair Organisation: US Federal Reserve
props: Bernanke boldly declared that the current recession was “very likely” over in September 2009, but predicted the US economy would remain weak for some time and national unemployment rates would come down slowly. Bernanke has been lowering interest rates in the US to ease the burden on borrowers. Going forward, he will be charged with the task of working with examiners to identify risks and imbalances in the system.
not hot! Name: Richard Branson Title: Founder and chairman Organisation: Virgin Group
props: Virgin Money credit cards and term deposits will return to Australia this year following the company’s joint venture agreement with Citibank. Mortgages are also in the pipeline for Australia, driving fresh competition into the market. Globally, Branson’s entrepreneurial flair shows no signs of abating, with a UK banking licence next up on their agenda.
Name: Mervyn King Title: Governor Organisation: Bank of England
props: In late 2008, King was reappointed to the position of governor in spite of it being quite unlikely at the time. He was widely criticised for initially not pumping money into the British financial system to ease the credit crisis, famously saying at the time that such action would serve only to reward the banks for their reckless lending. Rather, he felt the banks should feel a bit more pain. However, under pressure, King eventually relented.
Name: Barack Obama Title: President Organisation: Government of the United States of America
props: His ‘We Can’ electoral campaign might have seen him historically into the White House, and he might just be the most popular US president since JFK; but there is no time for Barack Obama to sit back and enjoy the sunshine. Obama was elected on a promise of sweeping change, but many Americans are becoming impatient that a full year after his election his pledge has not yet borne fruit. However, Obama is quick to remind people that his biggest problems, from the economy to the war in Afghanistan, are the legacies of his predecessor, George W Bush.
Name: Mark Whittingham Title: Founder Organisation: Home Loan Selection Services (HLSS), Lead Search NOT HOT: The elusive Mark Whittingham continues to flog his databases of leads and continues to enrage brokers. No other individual in the industry has incited more angry e-mails and threats of legal action than Whittingham, with brokers alleging they have been sold worthless leads, old leads, leads they received in the past or in some cases no leads at all. Such outrage has provoked Whittingham to contact MPA on occasion to defend himself and issue counter threats of his own. And while his Lead Search business was wound up in June, he has continued with his e-mail sales campaign. Name: Adrian Camilleri NOT HOT: The former Sydney mortgage broker and ex-boyfriend of supermodel Miranda Kerr was sentenced to 21 months’ imprisonment with a non-parole period of nine months after being found guilty of one count of fraud. Camilleri received $123,441 from an investor to be used for either investment in short-term secured loans or to be returned – neither of which happened. Camilleri fraudulently omitted to account for them. Name: Samer Hraiki NOT HOT: The former mortgage broker was charged with obtaining $1m by deception. Hraiki allegedly used false documents to entice his victims into thinking they were engaging in a legitimate investment. The case was scheduled to be heard as MPA went to press. Name: Samuel David Saunders NOT HOT: Saunders of Orange, NSW – a property developer and mortgage broker – pleaded guilty in the Sydney Local Court to seven charges brought by ASIC. He was charged with three counts of obtaining money by false or misleading statements and four counts of fraudulent misappropriation of money collected. Each charge carries a maximum penalty of five years’ imprisonment.
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where are they now?
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Name: Matthew Nolan Title: Formerly Managing Director Organisation: Provident Cashflow
where now: He did take a chance launching an untested product, and the GFC did roll around at a rather inconvenient time for Nolan, but the way this former high-profile player has fallen off the media radar screen has been nothing short of remarkable. Now you see him, now you don’t. Word is that as the GFC took its toll on the business, Nolan moved on to a new venture and focused his energies on his television career at Sky News: Business.
Name: John Kolenda title: Founder of X Inc/ formerly Executive Director organisation: Loan Market Group
where now: The founder of X Inc and former executive director of Loan Market Group sold his shares to the White family group of companies in October and phased out his involvement with the company in late 2009 to focus on other business interests.
Name: Maria Rigoni Title: CEO Organisation: Australian Institute of Professional Brokers
where now: Amid much fanfare Rigoni launched her brand new broker body last year, known as the Australian Institute of Professional Brokers. She promised it would represent all members in a “transparent and honest fashion”. But since then, the AIPB seems to have fallen off the radar screen. A working finance broker and company director herself, perhaps Rigoni has had her hands full in the past year managing her own business. So let’s see how the not-so-new industry body goes in its recruitment drive this year.
Name: Jennifer Nielsen Title: Head of e-marketing Organisation: Ray White
where now: Last August, Bell announced he was stepping down from the chief executive position, agreeing to stay until a replacement was found, but at the time of writing he was still standing at the helm. Bell, who has served nine years in the role, has been an outspoken representative of the banking industry. His contract period concludes in July 2010.
where now: After steering mortgage broker X Inc into a merger with Ray White’s own mortgage broking group, Loan Market Group, Nielsen quit the mortgage broking group to take up a new role as head of online and marketing for real estate franchise Ray White. As head of Ray White’s e-marketing division, she is responsible for developing the online brands of both Ray White and Loan Market Group and improving integration of the two businesses.
where now: When NAB announced it was acquiring 100% of FAST, following its swoop for Challenger’s aggregation businesses, it meant that Syme had sold her majority stake in the aggregation business. While she remains the majority shareholder in WA-based The Loans Café, which she founded in 1999, she has kept a relatively low industry profile and she is rarely quoted in industry publications. Will 2010 be the year she raises her head above the parapet? brokernews.com.au
where now: With the ink hardly dry on his federal licensing draft legislation, Sherry was promptly promoted to the role of assistant federal treasurer following the Joel Fitzgibbon-induced cabinet reshuffle. In his new role, Sherry will be working closely with Wayne Swan in developing a response to the global recession and is expected to take a lead role in government’s response to the work of the Australia’s Future Taxation System review.
Name: David Bell title: CEO organisation: Australian Bankers’ Association
Name: Anne-Marie Syme Title: Former majority owner Organisation: FAST
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Name: Nick Sherry Title: Assistant Federal Treasurer Organisation: Federal Government
Name: Paul Lahiff (former CEO of Mortgage Choice) Title: CEO Organisation: WD Scott Global
where now: After six years at the helm of Mortgage Choice, Lahiff took up the reins at consulting company WD Scott Global. A perennial supporter of the third party channel, Lahiff’s presence will be missed in broking circles, but in his new role working with financial institutions in the area of business process improvement, he is sure to be spotted out and about in the marketplace.
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Ad Feature
shift happens: education round-up As the broking industry braces up for national regulation, Australian education providers will be re-jigging their service propositions to cater for a transformed lending landscape. In the third of our series of co-published features, MPA asks what learning interventions brokers can look out for
W
ith the lending landscape now inexorably altered, brokers will need to change the way they’ve traditionally gone about their business. Fortunately, they won’t be required to do it all alone. We asked the industry’s leading training providers to tell us about the plans they had for course developments in the year ahead, what they thought of the current Cert IV and for their views on how brokers could equip themselves best to take advantage of opportunities that almost certainly lie ahead.
Intellitrain It’s been a full 12 months in the making, but Intellitrain’s standout offering in 2010 will possibly be the newest Diploma of Financial Services (Planning) qualification on the market. CEO Paul Eldridge says Intellitrain has spent the past 12 months building the course by engaging with industry partners and course developers under the watchful eye of Andrew Hetherington, Intellitrain’s general manager. Experience Hetherington is a qualified financial planner who has experience in building a planning business, and has been successful in transferring much of this experience into the new course. “This provides a tremendous platform for those brokers looking at diversifying into providing
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general and personal advice in products – such as insurance,” says Eldridge. Eldridge says he has been critical in the past of what he calls ‘rubber stamp’ courses. The ones, he says, that focus on earning the Registered Training Organisation (RTO) money – but without having the best interests of the student in mind. This said, the new course ensures the student comes away with the ready knowledge to commence writing business in the financial services space from day one. “Anyone who is serious about moving into that space understands that a planning qualification is an investment in future earning capacity – not just a piece of paper on a wall,” he says. For those in the business that actually provide credit, Intellitrain offers a Certificate IV in Financial Services (Credit), that will meet ASIC’s requirements for minimum education standards. “We’re already working with some of the leading providers of credit in Australia to help shape a relevant and practical course,” says Eldridge. Recognition of prior learning Since a lot of brokers are already operating at the Cert IV level (or higher) – and so many qualified for Recognition of Prior Learning (RPL) – Eldridge says he “doesn’t have a problem” with the qualification. However, brokers are set to get a huge amount of value out of the bridging course, taking them from Intellitrain’s Cert IV to its diploma qualification. “The feedback that we are getting from participants in these programs is that they are actually learning something that helps them to diversify their income streams and earn more revenue,” says Eldridge. The Intellitrain diploma covers elements such as equipment and asset finance, commercial finance and complex lending. In addition, it promises that students will gain a solid foundation in business financial assessment and risk management.
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Three pillars Eldridge recommends that brokers consider building their businesses around three key pillars: sales and marketing, income diversification, and business ownership and management. Accordingly, he says Intellitrain has witnessed a significant increase in demand for its sales and marketing courses. “The tougher economic climate really brought home the need to develop essential skills in this discipline, and many brokers who we worked with freely admitted that they needed improvement in this space.” An emerging trend is the desire of many brokers to progress from “being a great loan writer to being a great business owner”. It appears to be one of the enduring spin-offs from the GFC. Intellitrain has capitalised on it. And, according to Eldridge, it has worked with a number of organisations during the course of last year to assist in helping members to make this important (and lucrative) progression.
Kaplan Professional Unless there is going to be an additional requirement for mortgage brokers as a result of ASIC Consultation Paper 113 – which, at the time of going to press, it was thought to be unlikely – Kaplan hasn’t any plans to add additional courses to its portfolio. “However, our existing Certificate IV in Financial Services – finance/mortgage broking is being regularly reviewed and amended in line
“ … they are actually learning something that helps them to diversify their income streams and earn more revenue ” – Paul Eldridge
Paul Eldridge
with any new or additional industry requirements,” the company says. Yardstick As a minimum training requirement for mortgage brokers, Kaplan believes the Cert IV to be more than adequate. “It is fine and accepted by the MFAA – which is the yardstick for the sector,” it says. The MFAA requirement for continuing professional development (CPD) is between 40 and 60 hours per year, which is more than the 20 hours per year suggested by ASIC under its new licensing regime. Since the current standard requirement for brokers is the Cert IV, Kaplan recommends it remain the starting point for those intent on keeping themselves abreast of best-practice qualifications in the industry.
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Natural progression From the Cert IV, Kaplan believes that the natural progression is for brokers to move to its Diploma of Financial Services (finance/mortgage broking Management). “The diploma is ideal for those seeking to broaden the scope of their mortgage and finance brokerage business. It will allow mortgage brokers to provide their clients with a wider range of commercial financing options,” it says. In addition, for those brokers who wish to diversify and branch out into the financial planning sector, Kaplan offers a Diploma of Financial Services (financial planning). “This diploma provides students with the practical knowledge and skills to provide advice across a range of financial areas in accordance with ASIC regulations,” it says.
National Finance Institute (NFI) For 2010, the National Finance Institute has developed a Diploma in Financial Services. It is a nationally recognised course that complements the Certificate IV in Financial Services, which was completed by the majority of brokers prior to 1 July last year. “It is an upgrade course of only two units across five modules and is designed for a broad range of people looking to formalise or advance their financial services skills,” says Peter Heinrich, managing director at the NFI. The course is offered in three styles: face-toface over two days, distance learning in a homestudy format, or via an online e-learning platform.
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“ … consumers are requiring more and more assurance, and a higher qualification helps that ” – Peter Heinrich
Peter Heinrich
Then upon completion of the study modules, the trainees have four assessment tasks to complete. In addition to the diploma course, NFI offers an improved commercial lending course, as many brokers have indicated an interest in entering the commercial market and adding to their current skill set. This is also offered in the same three training modes. Another course of interest is the Certificate IV in Financial Services (finance/credit management). This will be of particular benefit to the back office staff also wanting to earn a Cert IV qualification. “Several lender groups have already participated in the course and have put their administration and collection staff through the training,” Heinrich says. Seminars The NFI, in conjunction with Frontrunner Consulting Services, will be conducting a series of seminars around the country. The topics will be designed to assist brokers navigate the new
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an educational qualification – the higher the better. It may take either the insistence of the professional body or regulatory pressure to convince many brokers to take on higher educational studies.
lending landscape. Initially, the seminars will cover themes that range from the psychology of a loan and loan conversions to business efficiency and profitability. In addition to this, the NFI plans to make a host of more than 30 online training courses available to brokers. “Here they can go online, purchase a short course (from one to four hours) and they have one month to complete it. Brokers can earn from 1.5 to 6 CPD points for their efforts and they can complete them in their office at their own pace. It is a convenient way to earn CPD points, improve their business and skills and complete training whenever time permits,” Heinrich says. Higher standards Heinrich “notes with interest” the MFAA is advocating that the new standard of compliance should be at the diploma level – in line with the qualifications required of a financial planner. “They took a very brave decision in making the achievement of Cert IV compulsory, even if it was in line with the requirements of the new broker legislation. They took an even braver decision to expel those that hadn’t achieved the standard by 1 July 2009. It will be very interesting to see the reaction to an insistence on a higher qualification,” he says. Furthermore, Heinrich thinks the industry standard should be higher than Cert IV – but he’s not so sure that the brokers have an appetite for more study. “There are brokers who wish to upgrade their qualifications but there are many brokers who very reluctantly did the Cert IV. Many of them argued that they were already very experienced and that training wouldn’t make them any better – which is true in a way. “On the other hand, clients are looking for some reassurance that their broker is well educated and, for example, no one would use a financial planner if they didn’t have a diploma of financial planning nor would they go to a lawyer who didn’t have an LLB. “It is a fact of life that consumers are requiring more and more assurance, and a higher qualification helps that. Also, if brokers want to be considered as professionals they should be able to show a commitment to further education,” he says. Mortgage or finance broking is a profession, says Heinrich, and professional standards demand
Knowledge building All brokers should be looking to do courses which achieve two things: improve their skills and improve their businesses. On this score, Heinrich says a diploma is a very small commitment to make for brokers already in possession of a Cert IV. And, along with enhancing their skills, the diploma serves to give them “a more serious standing in the eyes of the consumer”. Brokers should also attend as many industry seminars and training sessions as they can, according to Heinrich. “This industry is changing faster than ever and requires brokers to be constantly upgrading their skills. The most successful will be the best educated, most up-to-date brokers who are willing to embrace change. Legislation will demand it, consumers will certainly demand it and brokers should demand it of themselves,” he says. He adds that the skills required for the future will also involve more strategic thinking and planning, so brokers should attend courses which assist them with that thinking and process.
Traineeship Management Australia (TMA) With the emphasis on risk management, TMA released a face-to-face upgrade to its Diploma of Financial Services (Finance/Mortgage Broking Management) late last year. “The new course is very practical for those wishing to take their business to a new level of professionalism,” says CEO Scott Donnelly.
“ The new course is very practical for those wishing to take their business to a new level ” – Scott Donnelly
Revamp Saying the course in its current format is not adequate with the industry changes taking place, Donnelly is expecting a revamp of the existing Cert IV. Donnelly has long been an advocate for brokers to find ways to diversify their income. Accordingly, he offers two courses to assist them in doing so: one in the commercial lending space and the other in life insurance. mpa
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Column
Provident Capital
Life left in low docs Provident Capital’s Steve Sampson argues there is a future in low-doc and no-doc lending
M
ortgage brokers are renowned for their passion and innovation. These two qualities have led brokers to look at ways to improve their business by diversifying their product offering to fill in the income gap left empty by the effects of the GFC. And so brokers have diversified – mainly into insurance. Yet I cannot help but think there is a more logical and complementary product that could be embraced in the areas of low- and no-doc lending.
Return of an industry When the GFC hit in 2008, ‘low-doc’, ‘no-doc’ and ‘non-conforming’ lending went into hibernation when major lenders, particularly banks, fled from this sector in an effort to limit their risk during the GFC, despite low-doc lending representing a strong proportion of the mortgage lending market – at the end of 2006, low-doc lending formed approximately A$37.9bn of all lending commitments.
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But most of us acknowledge that the no-doc and low-doc sectors of the market have largely been ‘lumped in’ with and tarnished by the practices of our American counterparts; however, in Australia these aren’t necessarily all ‘bad’ borrowers. Most of these borrowers simply don’t meet all the stringent requirements of the major lenders and banks for whatever reason. In the future economy there will be an appreciation of pricing for risk and while low- and no-doc will be priced as such, it is important to look at the rate as a proportion of the whole loan term. It’s a major driver in helping a client achieve their present goals, eventually leading to the achievement of their longer-term goals. This sector will start to return strongly in the near future, backed by sound practices and transparency. According to official figures, one in 10 Australians is self-employed. Brokers must start to pay much more attention to this sector of the lending market; we’re potentially ignoring a healthy
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Provident Capital
10% of prospective borrowers. While supply shrank in 2008/09 due to lack of product and funding, the appetite for low-doc loans continues to grow. With more borrowers being made redundant from corporate roles, many have taken the opportunity to finally become their own boss – and with housing demand and prices back on the rise, so too will be the demand for low-doc loans. As we sit at the cusp of an economic recovery, brokers need to re-focus themselves and their teams on this sector, and quickly, if they are to take advantage of the recovery. Courtesy of the GFC there will be many prospective borrowers who will be left with ‘damaged balance sheets’, both personal and corporate. While they have toughed out the GFC, they may have been left tarnished from a tough business year or by experiencing unemployment. It stands to reason that if you are able to identify those who have equity in property and are still standing, a self-certified serviceability loan may well be a suitable product to get them back in order and assist in achieving their 2010 goals. A complementary product As a form of diversification, re-focusing on no- and low-doc lending is the true, natural progression for brokers. The skills required to adequately service this sector of the market are skills that brokers already possess, the systems that are required are usually already in place and the amount of new knowledge required is minimal. Many lenders that specialise in this area should also be willing to provide training for loan writers on low-doc and non-conforming loans in general. As a complementary product to your existing offering, marketing and sourcing new clients is also much easier as you harness the power of your existing database and contacts. Your existing database and contacts within the real estate, accounting and financial planning industries are good places to start developing leads for clients who might be self-employed or need help with a no-doc loan – and with your
existing relationship it will be much easier to build and capitalise on opportunities that arise. Outside of your existing contacts, engagement with your local community at business networking events, marketing to the self-employed and making your presence known as a specialist broker in the self-employed community who can truly help any client to break into or manage their borrowings will create massive opportunities. A sticky client is a sweet client We all know that a ‘sticky’ client is one that can provide you with more activity, more referrals and more opportunities. Being able to help a client through a situation when other brokers are reticent to assist is the key to locking them in as a loyal client and that goes for referrers, too. If you are able to work with a lender that offers a suite of products from no-doc and low-doc through to prime, you will then be able to refinance your client into a more suitable product as their circumstances change – giving you a client for life and a lifetime income. A lender in need is a friend indeed Maintaining a strong relationship with a good lender who has a suite of products in this sector will be paramount to completing your journey in diversifying your product offering. With many of the bigger lenders, banks and even LMI providers all having tightened their criteria and/or usually requiring one year’s worth of Business Activity Statements (BAS), it is becoming increasingly hard to find true noand low-doc products to form a part of your product offering. Not only should a lender be able to support you in terms of training and marketing support, they need to assist you in having genuine no- and low-doc products so you can effectively meet your clients’ needs. Grasp this sector with both arms, do your homework and prospecting now, and reap the rewards in 2010. MPA
“ According to official figures, one in 10 Australians is self-employed. Brokers must start to pay much more attention to this sector of the lending market ”
Steve Sampson is the group national lending manager for Provident Capital, a non-bank lender specialising in the non-conforming, low-doc sector
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case study franchise
case study Rob Egan, managing director, Club Financial Services in Gippsland, discusses why he chose franchisor Club Financial Services and how they support him Franchisor Club Financial Services Franchisee Rob Egan, managing director, Club Financial Services in Gippsland
Rob Egan
Why did you choose Club? I saw that they had a clear vision in place and they knew exactly where they wanted to go. Club has a young team of directors who are very dynamic. Each has different roles and the right level of support staff to help them run the business. I recognised that they were prepared to provide mentoring and ongoing monitoring of my business, with clear performance measures in place to let me know how my business was running. How often do you see them? Since I am located in regional Victoria I don’t get to sit face-to-face with my Club coach very often. But I do have unrestricted e-mail and telephone contact with him. Also, the directors are always available. Example? With the new compliance regulations coming in, I needed to know exactly what was required of me in regards to making my business compliant. Club’s answer was that they were already way down the track anticipating the regulatory requirements, and had procedures in place to cover all compliance issues. The thing I value most about Club’s support program is that I’m not left in the dark looking for my own answers. Club is a pioneer in making sure all of its franchisees are permanently on side; not just with the lenders, but in the industry. How has being a Club franchisee increased your business volume? Club’s commercial lending area gives me access to equipment finance and car loans. One of the directors is in charge of that area, and he is very
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knowledgeable. So I’ve always got support there. Also, we get very good service from Club’s associated mortgage manager company, National Finance Club, with its mortgage-managed product. An added bonus is that it has its own in-house loans assessor so the product is very competitive. And I have access to all of the majors, second-tiers and CUBS (credit unions and building societies). Another benefit is that we are now aggregating through Astute. So we not only have internal support through Club Financial Services, but also additional support through the Astute staff as well. Is there any downside? If we were independent operators we might be able to negotiate a higher commission level. Also, as a franchisee I contribute to the running costs of the franchisor. But in return, Club’s obligation is to help me promote my own business. There are not too many downsides to being a franchisee. At the end of the day we are building a business around a brand name that is recognisable in the mortgage industry in Australia – a model that is saleable as an asset. Overall, are you satisfied with your decision to join Club? Yes. Look, we’re in business, so I might have issues from time to time that are individual to me. But I don’t dwell on them – I get them resolved. In general, Club is very supportive. I get regular updates via Club from all the lenders, which keep me informed on all policy, product and procedure matters and changes. Club is good with commissions and there is a definite commission structure in place. It has incentives built in, so the better my business performs the higher my commission levels. Any parting comments? It’s a good organisation. The Club directors know exactly where they want to take the business. mpa
Education
credit rationing
mpa lender news
contents 56 A review of news in the world of non-bank lending and mortgage management 58 The best quips from the nonbanking world 60 SMSF Broker Vince Scully
IMF warns recovery could be ‘sluggish’ The International Monetary Fund (IMF) has warned national governments against moving to cut stimulus measures introduced to combat the financial crisis too early, saying the global recovery could be ‘sluggish’. In its latest report to the group of 20, the IMF said, “The timing of exits should depend on the state of the economy and the financial system, and should err on the side of further supporting demand and financial repair.” The call comes after the Australian Government began to rein in stimulus spending by trimming $250m from its $2.7bn insulation program ahead of the Reserve Bank’s meeting on interest rates last week. The IMF also urged governments to curb national deficits as a matter of priority.
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Resimac reported increase in profit for the year to June of $14.2m
Resimac avoids no-doc ‘blow-out’ Non-bank lender Resimac avoided a “blow-out” in bad debts by not offering no-doc or 100% loans, its head of securitisation Mary Ploughman has said. Her comments came as Resimac reported a 77% increase in profit for the year to June of $14.2m. The good profit result was due to repricing during the GFC and access to cheaper funding sourced prior to the downturn. Ploughman told the AFR that consumers’ flight to perceived quality contributed to a fall in Resimac’s loan book from $4.5bn to $3.8bn. But she said Resimac had never stopped lending. She also forecast securitisation markets, where Resimac has traditionally sourced its funding, to open up next year along with renewed confidence in non-banks. But she said the lender would be reluctant to issue RMBS without government support. Last month Resimac priced a $290m RMBS issue following investment from the AOFM scheme.
mpa lender news
Nationwide Lending reaches brokers through Facebook Mortgage manager Nationwide Lending has set up a Facebook page to connect with its accredited brokers. Through its social media presence, its national network of approximately 250 brokers will be able to read the latest media articles and industry information. The lender said articles would be updated daily and could be used by brokers to inform their clients of the latest news from the real estate and finance industries. These articles cover the latest property pricing movements, investor news and opportunities, financial trends and product updates. CEO Glen Jones commented: “Online social media is the next stage in communication. With over 350 million users, and the fastest-growing demographic being those 35 years old and older, Facebook is a network that cannot be ignored.”
Firstfolio signs deal with AVJennings
9% Genworth reported that new insurance written in Australia grew 9% versus prior year to US$8.9bn ($10bn) while Canada’s new mortgage flow grew by 14%
AVJennings’ customers will now have access to Firstfolio financial products and services under a new agreement. The contract allows both parties to coordinate their marketing and sales programs to offer mortgage finance to AVJennings’ clients, and gives Firstfolio access to this clientele to offer a broader range of financial products and services. The announcement follows Firstfolio’s launch of Bloom, a business-to-business software platform that enables participating companies to collaborate on products and services. CEO Mark Forsyth says the partnership with AVJennings highlights Firstfolio’s expansion of its financial services capabilities with companies looking to collaborate and grow. “Our intention is to joint venture with strong brands, where we can offer customised financial services and products to help grow their business, while ramping up our own distribution platform,” Forsyth said. According to AV Jennings CEO Peter Summers, the Bloom system offers “a turn-key solution that will help strengthen our client relationship by offering customers an end-to-end property investment service.”
Genworth: new insurance in Australia up 9% LMI provider Genworth Financial Australia performed “soundly” in the third quarter of 2009, according to results filed by its US parent. Reporting on international mortgage insurance results, Genworth noted that new insurance written in Australia grew 9% versus prior year to US$8.9bn ($10bn) while Canada’s new mortgage flow grew by 14%. Genworth Australia reported a net operating Income of US$42m ($47m) in the third quarter of 2009 compared to US$48m in the third quarter of 2008; in comparison Canada made profits of US$70m and US$80m respectively for the same two quarters. Other good news was an improvement in loss ratios “sequentially” in Canadian and Australian mortgage insurance as well as in lifestyle protection. The US report said: “International earnings reflected sound mortgage insurance performance in Canada and Australia as housing markets improved and economies stabilized...” Overall Genworth International reported third quarter results for 2009 of net operating income available to Genworth’s common stockholders of US$81m compared to US$220m for the same quarter last year.
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mpa lender news
Quotes
Quotables Liberty downplays jump in distressed loans Loans 91 days past their due date have jumped from $43m to $253m at specialist lender Liberty Financial, forcing the non-bank lender to raise its provisions for defaults from $19m to $60m, according to accounts filed with ASIC. Despite this tripling in provisions, managing director Sherman Ma said it was not necessarily a sign that the lender was expecting a blowout in arrears. He said Liberty held $42m ‘collateral value’ for the purpose of recovering impaired loans, but said the shortfall between this and provisions was not a concern. “We are working with clients on a more involved basis where hardship is experienced and someone may have lost a job,” Ma said. He said a drop in demand for residential loans had been offset by demand for Liberty’s other products, which include car loans, debtor finance and commercial loans. Liberty posted a 4% drop in net profit to $35m for the year to June. Its loan book stands at $2.5bn, compared with a portfolio worth $3.2bn a year ago, a drop of 23%.
NAB unveils its new brand ‘Advantedge’ National Australia Bank unveiled a new brand for its mortgage management and aggregation business: Advantedge. NAB Personal Banking has created a new division called NAB Partnerships, within which Advantedge and NAB Broker will sit, according to executive general manager at NAB Partnerships Matt Lawler. He said the creation of NAB Partnerships and the acquisition of Advantedge marked the completion of an important milestone for NAB Personal Banking. “NAB Partnerships provides us with a great platform to build relationships with brokers, mortgage managers and financial planners,” he said. Lawler added that the mortgage broking and mortgage management segment was “an important component” of the home lending landscape, and that the Challenger acquisition gave NAB the capability to “increase its footprint in this growing market”. “One of the significant benefits from this acquisition is in gaining the talents of the teams from Advantedge, PLAN, Choice and FAST – we’re very excited to welcome them all to NAB,” Lawler said. Announcing the new brand, Advantedge’s CEO Drew Hall said: “This business is about giving brokers and mortgage managers an edge in business, with great lending products, sophisticated systems and support in the new credit legislation world.” The PLAN, Choice and FAST aggregator brands remain.
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“ It’s a funny situation with the brokers – they can whinge and bitch about the banks but they still pour all the business into them. I’ve been to some of these industry roundtables where they just treat the brokers with contempt but it doesn’t seem to matter. They still promote business to them. So those are the challenges. But as it’s happened in the past, the banks will do something stupid and the brokers will come back to us.” – Kim Cannon, CEO, FirstMac, on the challenges that face non-banks in 2010 “ The only way to describe the sentiment for the year ahead is ‘positive’; we have survived the GFC [and] AFM as a non-bank lender is on a path to re-claim our market share, and as consumer confidence increases, the non-bank business sector as a whole should begin to thrive. How ‘exciting’ it is to think of a thriving business rather than a surviving business! We are certainly gearing up for a hectic 2010.” – Tanya White, managing director, AFM, on her feelings about the next 12 months “ The real wildcard is the NAB and their purchase of Challenger, now Advantedge, which could stir up some real competition. The opportunity for mortgage managers to gain access to funding via such a strong balance sheet has huge positive implications on the competitiveness of this sector.” – Garry Driscoll, CEO, Mortgage Ezy, on the subject of competition “ The ‘Big Two’ will soon control more than half of all outstanding Australian mortgages by value, as market share continues to accelerate, reaching 48.9% in September 2009, compared with 45% at the start of 2009.” – Tony Crossley, CoreData-brandmanagement head of mortgages and insurance, on the death of the mid-tier banking sector
Broker Profile lender
The ABCs of SMSF loans Self-managed super fund loans may still be in their infancy, but technical consultant Vince Scully of SMSF Finance Specialists says demand from borrowers is growing
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“I
t’s just a loan,” insists Vince Scully, technical consultant with SMSF Finance Specialists. Scully has been actively educating brokers and borrowers on the merits of self-managed super fund loans since the government gave these products the green light in September 2007. And despite having hit the market two years ago, it really wasn’t until early 2009 that the person on the street really started to demand the product, he says. “When we first started, when I had a discussion with a client or an accountant, the question was ‘Can I really do that?’ Whereas when we got to July 2008 it was ‘Tell me how it works’ – and now it’s the client that’s driving it.” The slow progress of the SMSF loan sector can partly be attributed to the timing of its release, which coincided with the onset of the GFC in Australia. “It’s interesting, because if I think back on my 25 years in financial services, this is the product that has taken the longest to come into maturity,” says Scully. “When government changes the law, usually there’s a plethora of products that arrive very quickly after. It was really March of [last] year when consumer interest picked up. And we’re seeing a lot. Since July in particular – and I think that’s people getting their statements and saying, ‘My God, how much have I lost this year and how much in fees do those clowns take?’ And they’re saying, ‘Hey now I can do better than that – I can buy real estate.’ ” SMSF products may be ‘just a loan’, but there are two fundamental differences that set a SMSF
apart from your average home loan. The first is it must be ‘limited recourse’ – or in other words, include a no negative equity guarantee. It’s great for borrowers, in that they’ll never have to pay the bank more than the property is worth, but it comes with a price – generally borrowers can expect to pay about 1% more for these loans. The second difference is borrowers can’t hold the property themselves – it must be placed in the name of a special trust. As it’s ‘just a loan’ (with a few differences), Scully says from a regulatory perspective all brokers need to do to sell these products is to be a broker. He does recommend having a good background in superannuation and property investment, “partly to be able to sound credible with the clients and partly to provide comfort to your referral partners, particularly accountants”.
“ It’s interesting, because if I think back on my 25 years in financial services, this is the product that has taken the longest to come into maturity. When government changes the law, usually there’s a plethora of products that arrive very quickly after. It was really March of [last] year when consumer interest picked up. And we’re seeing a lot ”
Broker profile lender
see the interview live SMSF loans are just loans, explains Vince Scully at brokernews. com.au/MPA brokernews.com.au  
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He adds: “It’s not particularly difficult but it does take an investment in time and effort. But it is a natural extension to what we do as brokers, because it is just another funding product for property investment. If brokers are looking for new opportunities, this is really an extension of what we do today.” Sometimes there is advice structuring that needs to go around the loan, which of course would have to be done by an accountant or a financial planner, but Scully says this is an excellent way for brokers to build their centres of influence. “So if you were depending on accountants for referrals for your loans, now you’ve got something to give back because you can refer them to the super fund loans.” While cooperation with accountants on these products was tough as first, Scully says most advisors are slowly warming to its merits. “Accountants are naturally conservative, so it takes a while for that message to get through, but it is getting through.” Typical clients are in three categories, he explains. The first is the small businessperson who is looking to buy their own business premises – doctors, lawyers, vets and so on. About 70% of Scully’s business is made up of this market segment and typically they’re borrowing $500,000 to purchase an $800,000–$1m property. The next category is the property investor who simply wants to use their super fund to invest in real estate. That is a growing portion of the market and one that has taken a little longer to mature. But they’re motivated just like any other investor, Scully says, adding that they are typically looking for long-term holds.
Key points to consider • Brokers should limit themselves to selling the loan – the moment you get into tax strategies, you’ve overstepped your legal boundaries • Most lenders require brokers to receive independent financial advice before they will give the green light • To sell SMSF loans, brokers should first get accredited with respective lenders. These include Westpac/St.George, CBA, NAB, BankWest, Rabo, Firstfolio, among others • Most lenders run these products through their commercial arm, so generally commercial accreditation is required
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And the third category is the sea changers, who want to use their super fund to buy their property today, rent it out for the next 10 years and make tax deductible contributions to their super fund to pay it off until they are ready to move in. Scully’s main source of referrals come from accountants and financial planners. “We don’t have much of a direct client base,” he says. “And our pitch to the accountant is about providing a specialist service. Just as they bring in a specialist to do estate planning, we encourage them to bring in a specialist for these products. They know their clients, we know the product. We also do some work with the brokers too.” Currently there are about 10 lenders offering SMSF products to the market. But unlike home loans, you can’t simply line them up on price and features. “All of the products are quite different,” Scully says. “So you’ve got to focus on the clients’ needs. So if you’ve got a client that’s low-doc there’s not a lot of choice; if you’ve got a rural loan, there’s only one place to go.” Issues There are a couple of design issues that remain unclear with these products – one of them is the use of guarantees from members of the super fund. “We’ve always believed that they’re bad and we avoid them wherever possible,” Scully says. “And we’re in continuous dialogue with the ATO on this issue. Most of the banks will have that as an initial requirement but they can usually be talked into not taking them for the right circumstances.” Change? Scully says he doesn’t see the upcoming regulation having a big effect on the sector. “The real difference is going to be the disappearance of the part-timers in the industry, so we’ll be left with professional brokers, who are by their very nature more educated, more experienced and more dedicated and therefore more professional. So I don’t really think the regulation itself is an issue. But it depends on how they actually bring it into the licensing. If they try to force-fit it into the financial services licensing regime then maybe it will [be an issue], but we’ll have to wait and see.” MPA
lifestyle favourites
Peter White + president + FBAA
Favourite things Vacation Spot Tuscany or New York (from one extreme to the other)
Sport Martial arts (Zen Do Kai), tennis and golf
Music/Band James Morrison, Patrizio Buani, Midnight Oil
Place to be Family and friends' BBQs around the pool – otherwise the Bahamas look nice this time of year
Book Bankers and Bastards – a great satirical read from the early 1980s. Hey, nothing’s changed!
movie/TV star Patrick Stewart, Will Smith Food Love a great steak, homemade Italian pasta
Movie Star Trek – all of the movies – longterm Trekkie fan, plus almost anything sci-fi works in the main
Hobby Big motor bikes (choppers and tourers) and exotic cars
Drink Bourbon, water and ice
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