Mortgage Professional Australia magazine Issue 11.5 by Key Media

CELEBRATING 10 YEARS

www.brokernews.com.au ISSUE 11.5

at h w d n i h rs e o b t h a g ut e r r t g e g h a T r : i s e ge th a f s o s e ke m a d m Mixe rs really e k o r b

4th ANNUAL BROKERS ON AGGREGATORS SURVEY

EDITOR’S LETTER

Going to the polls It’s not just the residents of NSW who have been casting their votes of late. More than 500 of you took part in the fourth running of our ‘Brokers on Aggregators’ survey, ranking your networks on everything from lending panels and support to IT systems and training. As with the state election, there was some candid feedback, with a number of respondents feeling that promises had been broken and that change was necessary. Turn to page 24 to see what brokers had to say about aggregator mergers, white-labelled products, licensing and commission payments. You won’t have to wait four years to head to the polls again either – voting has opened for our ‘Brokers on Banks’ survey and we are also welcoming nominations for the Australian Mortgage Awards.

11. 05 issue

Elsewhere in the issue, we take a look at the lenders that don’t always dominate the headlines. The Big Four banks are once again going head to head in a battle for market share, but we look beyond them to the lenders waiting in the shadows to swoop. We round up six of the most competitive second-tier lenders to see what they have planned and also profile Doug Lee of Macquarie and Tony Carn of Homeloans Ltd. In addition, we investigate whether commissions could be on the way up again, look at what the rise in online mortgages means for the future of the broker channel and spell out 10 business pitfalls to avoid. There are also columns on how to help your clients with property investment, how to get referrals, and we find out more about Connective’s Murray Lees and Peter White of the FBAA. Enjoy the magazine and all the best for a busy month.

Barney McCarthy Editor

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

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CONTENTS

54 Best of the rest

cover story

A round-up of what second-tier lenders have planned for the rest of 2011

24 Brokers on Aggregators 2011 Advisors rate performance and have their say on mergers, whitelabel products, commissions and more

11. 05 issue

THE BIG STORY Visit our website to watch our latest weekly investigation. The latest clips look at: »» First Homebuyers’ confidence »» The ban on exit fees »» Lending competition John Mohnacheff

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CONTENTS

EDITOR Barney McCarthy

NEWS ANALYSIS 10 Genworth’s latest Homebuyer Confidence Index evaluates the impact of the Queensland floods 12 The big story: A compilation of the top quotes from our weekly multimedia broadcasts

FEATURES

COPY & FEATURES CONTRIBUTOR Andrea Cornish PRODUCTION EDITORS Carolin Wun, Moira Daniels ART & PRODUCTION DESIGNERS Paul Mansfield, Doug Jeans SALES & MARKETING NATIONAL SALES MANAGER Rajan Khatak

20 C ommissions comeback: Are banks ready to pull the remuneration lever as the battle for market share rages on?

BUSINESS DEVELOPMENT MANAGER Lisa Tyras

38 The top 10 ways to lose business: Common mistakes to avoid if you want to run a successful operation

TRAFFIC MANAGER Jessica Jazic

ACCOUNT MANAGER Simon Kerslake MARKETING EXECUTIVE Kerry Buckley MARKETING COORDINATOR Anna Keane

CORPORATE

42 W eb wars: As more lenders launch direct to consumer mortgages online, MPA investigates whether this could leave brokers out in the cold

DIRECTORS Claire Preen, Mike Shipley CHIEF OPERATING OFFICER George Walmsley PUBLISHING DIRECTOR Justin Kennedy ASSOCIATE PUBLISHER Rajan Khatak CHIEF INFORMATION OFFICER Colin Chan

COLUMNS 18 Bricks and mortar: Tony Hayek describes how mortgage brokers can help potential property investors into the market 48 Word of mouth: Tony Imbruglia explains how to forge referral links

11. 05 issue

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PROFILES 16 Macquarie’s Doug Lee details how his experience in North America has helped him in his current role 46 Tony Carn of Homeloans Ltd on the non-bank renaissance

HUMAN RESOURCES MANAGER Julia Bookallil

Editorial enquiries Barney McCarthy tel: +61 2 8437 4790 barney.mccarthy@keymedia.com.au Advertising enquiries Sales Manager Rajan Khatak tel: +61 2 8437 4772 rajan.khatak@keymedia.com.au Account Manager Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@keymedia.com.au Subscriptions tel: +61 2 8437 4731 • fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media www.keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Singapore, Hong Kong, Toronto www.brokernews.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as MPA magazine can accept no responsibility for loss

LIFESTYLE 10 A day in the life of…Murray Lees, Connective 64 My favourite things…Peter White, FBAA

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

NEWS

Covered bonds given green light

MARKETS

Banks will be given the green light to issue covered bonds, though only up to a limit of 8% of their assets. This is less than the sought-after 10% cap – which would have mirrored New Zealand’s market. The government initiative, which is part of its efforts to revive lending competition, will allow banks to issue the special class of bonds to investors, enabling further diversification of funding sources. The government had initially proposed a 5% cap on covered bonds, though lenders pushed to have the ceiling raised to 10%. Covered bonds have to date been unavailable to institutions in the Australian market, due to the unpalatable nature of the products, which protect the investors before ordinary bank depositors. However, the move has been sought after by banking players, who are under pressure to keep interest rates down, and are battling a wholesale funding market that has jumped in price radically since the global financial crisis. They argue borrowers will see the benefits through lower rates.

Steve Weston

Advantedge forecasts licensing switch More brokers will begin to choose the credit representative model over the ACL one, as licensing comes more plainly into view, a major aggregator has predicted. Advantedge’s general manager of broker platforms Steve Weston said the aggregator expects to see more brokers move away from holding their own licence and instead opt to become a representative under their aggregator’s licence. “We don’t necessarily think it’s to do with the complexity of what is involved in being a licensee; rather it’s more about the time that a licensee needs to spend on non-client matters,” he commented. Weston said he believes ACL holders will increasingly move towards the credit rep model as they find too much of their time and energy taken up by the task of compliance. “Most mortgage brokers are also small business operators who need to maximise the time they spend engaged in customer interactions. Managing a licence, in our opinion, distracts from that focus,” Weston remarked. “A credit representative gains the benefit of having the administration of the licence requirements largely removed. Correspondence with ASIC, the development of policies and procedures, demonstration of continuous compliance and the annual compliance return to ASIC are all activities that will done by the licensee and not the credit rep. While we will provide guidance to our ACL holders, we cannot perform this activity on their behalf.”

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New ID check task could fall to brokers

percentage of a bank’s assets they can issue covered bonds for

Brokers could be called upon to perform identity verifications for lenders when registering or transferring a mortgage under a new conveyancing scheme, Gadens Lawyers has said. Gadens senior partner John Denovan told stakeholders the new National E-Conveyancing Scheme, under which the lodgment of land dealings occurs electronically, could see lenders using brokers to verify a client’s identity. Denovan said the scheme could potentially “create a bias against brokers and lenders without large branch networks” by requiring face-to-face meetings with clients to perform identity checks. Gadens said although the National E-Conveyancing system is currently a few years away, lenders are being asked to give feedback on the proposal to use brokers to perform ID checks, in much the same way as many brokers currently undertake AML/CTF identification for lenders. According to Denovan, the proposal necessitates that lenders accept liability for the accuracy of the checks brokers perform. Denovan said the suggestion to use brokers has been based upon the fact that brokers are now licensed and carry PI cover. It also requires lenders to ensure brokers receive adequate training and to carry out regular quality assurance checks. Gadens has also revealed another option being considered is allowing Australia Post to verify identity on behalf of lenders.

NEWS MARKETS

Rising rents could spur buyers

Banks balance risk with reward Banks are under pressure to lower their lending standards to maintain continued growth, according to the RBA. The Reserve Bank’s latest Financial Stability Review said that credit growth is unlikely to return to pre-crisis levels, as this growth was based on a one-time adjustment to financial deregulation and the shift to low inflation. It suggested that if industry participants attempt to sustain earlier rates of credit growth, they could be induced to take risks that may subsequently be difficult to manage. “Increasing competition in housing loans is starting to put pressure on lending standards,” the report said. However, the NCCP is expected to ensure that banks take a responsible approach to any new growth. “The responsible lending requirements...should help limit any undue loosening in household lending standards… Banks are now reportedly requiring their branch and broker channels to seek additional information from potential borrowers to determine the suitability of a product and borrowers are being required to provide more documentation in support of low-doc loans,” the report said.

Buyers clamour for 100% loans Borrowers still have an appetite for 100% LVR mortgages, despite the fact lenders aren’t offering them, Loan Market has said. According to the new study by the company, web searches for no-deposit loans have increased almost 30% since the start of the year. Loan Market chief operating officer Dean Rushton said the company’s own website saw enquiries for the loans hit a six-month high in February. “First homebuyers are looking to get into the property market but many are trying to do so by borrowing the whole cost of the property. However, 100% home loans were justifiably the first products to be taken off the market after the GFC, and those enquiring about this product will not get a loan,” Rushton said. He said prospective buyers will have to work hard to save a deposit, and criticised the government’s First Home Saver Account scheme, which he said has seen little uptake.

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7% expected increase in capital city rents in 2011 Source: RP Data

Mortgage Choice has highlighted the home ownership opportunity available to investors and first homebuyers as the gap between rental prices and mortgage repayments narrows. The broker has pointed to new figures showing expected increases in capital city rents Kristy Sheppard and predicted more people may consider home ownership as a result. While property investors may look forward to greater rental yields for the year ahead, Kristy Sheppard, Mortgage Choice spokesperson, said renters are facing significant rises. “RP Data recently reported capital city rents increased by 4.2% in 2010 and commented that they are expected to rise by 7% this year,” she said. “To put this into real terms, in Sydney it equates to an extra $33.60 on the average weekly rent of $480 for a house, and $30.80 on the average weekly rent of $440 for a unit. “Likely, we’ll see interest rate rises of around 0.5% by the end of 2011. For a 30-year, $300,000 principal & interest home loan at 7% – by no means the lowest rate available – this means $23.47 extra on the required weekly repayment of $460.29,” explained Sheppard.

NEWS LENDER

St.George woos business borrowers As banks continue to offer sweeteners to entice home loan customers, St.George has upped its proposition to business banking customers. The bank is offering business borrowers a pay-back of up to 0.5% of the size of their business loan to switch to St.George, up to $50,000. The move comes as new RBA figures show business lending fell 0.1% in January and 2.4% over the past 12 months as demand for business finance flagged. St.George COO Andrew Moore said the Westpacowned bank is looking to expand its business customer base, along with growing residential lending. “We are looking to acquire new customers, which is a bit of a change from the approach at St.George over the last few years, which has been dominated by the merger with Westpac and the global financial crisis,” Moore stated. Moore added recent competitive moves among the banks signalled a fight for market share in an environment of waning demand for credit. “Competition, whether it is in the home loan market, deposits or business lending, is as strong as it has ever been. Post-GFC, we are in a lower credit growth environment. To win business at the moment, you need to really fight harder for it, and when there is low credit growth you have to take customers from competitors,” Moore remarked.

Non-banks will adapt to DEF ban With the ban on exit fees now law, the head of a non-bank lender predicts non-banks will find a way to adapt. Pepper Home Loans chief operating officer David Holmes believes most non-ADIs will have already run projections on how to restructure their products, but will continue to publicly oppose the ban in hopes it will be delayed or reworked. “They’re waiting for detailed legislation before they make any moves,” he said. Holmes also said lenders will have a plan, but will not

make such plans public because of intellectual property concerns. Likewise, Homeloans general manager of third party distribution Tony Carn has admitted the company is conducting research and working through models to absorb the DEF ban. He has even expressed tentative hopes that the ban may even have its upsides, and may strengthen the relationship between non-banks and brokers. “A lot of customers were treated badly during the GFC by large corporate lenders who withdrew from the market and did a lot of damage… With DEFs being abolished, brokers may be more comfortable with non-banks,” Carn remarked.

Price wars fail to convince borrowers

The high-profile mortgage price war between the major banks has yet to convince consumers, a Loan Market survey has found. According to the research, only 12% of respondents believed price discounting moves by the banks signalled genuine competition in the marketplace. Borrowers showed scepticism about the campaigns, with 45% saying the price war would only boost the profiles of the banks. While 20% of respondents said the discounting moves were a welcome development, they indicated they did not believe such pricing initiatives would last. “There’s obviously some scepticism among borrowers about the potential benefits of the major banks trying to outdo one another to win over customers, but the bottom line is there are some good deals to be had and customers can save a lot of money by choosing the right deal,” Loan Market COO Dean Rushton said. Rushton added that though consumers were sceptical of the price war, they could still stand to benefit by switching lenders.

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NEWS ANALYSIS

Flooding hits homebuyer confidence Ellie Comerford, CEO of Genworth Financial, reviews the latest Genworth Homebuyer Confidence Index and evaluates the impact of natural disasters on consumer sentiment

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or brokers, lenders and insurers, the sentiment of homebuyers is the lifeblood of our business. And in the wake of recent natural disasters around the country, it’s vital we understand the immediate and longer-term impact these events have had and will continue to have on the Australian housing market. The findings from the latest Genworth Homebuyer Confidence Index and accompanying report Streets Ahead, have affirmed what we had anticipated: that homebuyer confidence is down, largely due to the recent spate of natural disasters. The index uses data collected from surveys conducted between 2005 and 2011 in combination with unique data built up over more than 45 years, and measures consumer sentiment within the mortgage and property market. The devastating events of the past summer have weighed heavily on the index, causing a fall of 1.5%. If we remove the natural disaster-affected states, however, national homebuyer confidence would have risen by 0.8% compared to last year. Looking more closely at the state-based results shows you why. A staggering one-in-three borrowers surveyed in Queensland said they were impacted by the floods, compared to the national average of 14%. Results showed that homebuyers in Queensland and Western Australia also had greater difficulty servicing their debt with 9% of WA respondents and 5% of Queensland respondents struggling to make repayments every month over the past year, compared to the national average of 3%. This has meant Queensland’s index score was 94.8 and WA scored 95.6, while the rest of the nation reached 99.9 – almost as confident as pre-GFC levels. The focus now for these disaster-affected states is the long road to recovery. However, Streets Ahead shows most of those surveyed in the impacted areas are optimistic about the recovery process, with 60% expecting to recover from floods,

bushfires or cyclones in two months or less. Of greater concern, however, is the 21% who believe it will be more than six months before they’re back on their feet. As borrowers embark on the recovery process, 45% are looking to take on more debt to pay for property repairs. The mortgage strain experienced by borrowers in disaster-affected areas has caused a significant jump in borrowers seeking relief via lenders’ hardship solutions. Indeed, total hardship requests to Genworth in early 2011 increased by over 70% compared to the same period last year and 40% of these requests were natural disaster-related. Conversely, it is encouraging to see that awareness of government relief programs was strong, with 78% of respondents aware of these relief initiatives. As anticipated, borrower awareness of lender hardship relief measures was lower at 39%, but it is encouraging to see that 60% of those respondents who were using lenders’ hardship initiatives were more than satisfied with the service and support they received. All of us in the industry have an important role to play in helping disaster-affected borrowers get back into their homes and stay there. We’ll continue working with lenders and brokers to educate consumers so that more borrowers can access the support they need in tough times. But it’s not just about getting help early; it’s also about accessing the right help. Ahead of the Genworth HCI findings, our dedicated hardship solutions team anticipated that flood-affected borrowers were likely to struggle for longer and in response are working to develop a borrower relief package that will minimise the terrible financial strain borrowers can face in the wake of natural disasters. Genworth plans to introduce new assistance solutions in the next few weeks as many borrowers in Queensland approach the tail-end of their short-term hardship assistance solutions. MPA

The GHCI would look very different without Queensland and Western Australia

NEWS

ANALYSIS

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NEWS ANALYSIS MULTIMEDIA

The big story Every week, Australian BrokerNews rounds up influential figures to discuss the major issues in the mortgage industry. You can watch these bite-sized videos online in the multimedia section of our website, but here we bring you the highlights from the last month’s clips

STORY 1

The existence of a property bubble and whether it is about to burst Economist Steve Keen “In the 1960s, if you went to a bank with $30,000, they would lend you $70,000. Now, if you walk into a bank with $30,000, they will lend you $970,000. That’s the impact of going from 70% to 97% LVR. You go in with the same amount of money, but now you have the capacity to bid $1m on a house. Is it any wonder that house prices went up? It’s not a unique situation, there have been land shortages anywhere you care to name – Tokyo, California, England, Canada. If you go back to 1987 and look at the biggest bubble then, which was in Tokyo, the argument was that there wasn’t enough land there and that was why prices were rising, but the fundamental reason that house prices rise is because people borrow more money to buy property.”

Lisa Montgomery, Resi “We are currently under-supplied in this country by about 200,000 homes and that’s an issue across the board. We keep talking about under-supply, but I don’t think we’re seeing any initiatives from the government at a national or local level. There has to be a change in some rules and we need housing start figures to increase.”

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On comparing the Australian and US property markets… Andrew Hawking, Mortgage Choice “Unlike the US, Australia is a highly-regulated country. What we saw in the US with its bubble was that people were able to get 110% finance on their property’s future value whereas in Australia we look at current values.”

Montgomery “In this country we’ve always had prudent and appropriate legislation – regulation to ensure there are responsible lending practices in place. Now, with the NCCP legislation in place, they are articulated even more clearly.”

Keen “Australian mortgage debt to GDP back in 1990 was roughly 20%, whereas now it is 90%. The American situation over the same period went from 40% to 80% and is now heading down. How can you say we’re more responsible when we’ve gone from a lower base, more rapidly and have a higher level of aggregate debt at the end?”

On when any possible bubble will burst… Keen “Buying a first home in Melbourne or Sydney now costs $500,000 or $600,000, which is out of reach. That’s normally what causes bubbles to burst. Bubbles are usually driven by people upgrading from their first home to their second home, but if new entrants can’t afford to buy that original property then demand drops off.”

NEWS ANALYSIS

MULTIMEDIA

Montgomery “As affordability in the major capitals

Denovan “I go to dinner with friends and they say

is an issue, we will see a shift in where people are buying. People will look outside metro locations towards fringe and regional areas. That can only be healthy as it will assist those first homebuyers who really want to get into the market.”

‘Isn’t it terrific they’re banning exit fees?’ and I say, no, it’s the worst possible thing you can do. Every time you say you’re going to take a cost out it sounds good but borrowers will pay that in terms of annual loan fees or upfront establishment fees.”

Sampson “It saves customers money at the STORY 2

Exit fee abolition debate Steve Sampson, Provident Capital “[Abolishing exit fees] fails to recognise that they create competition in the market. They allow non-banks to recoup acquisition fees over a period of time, whereas larger banks can absorb it into their balance sheets.”

beginning of the loan when they most need the cash, by deferring the acquisition costs and not putting that onto the loan. Providing they keep it going, there is no cost to them.”

Russell “Those mortgage holders that start flippantly refinancing their mortgage will need to be funded. Those recruitment costs that lenders can’t recoup will be paid across the board.”

Jon Denovan, Gadens Lawyers “The ban is very

Denovan “It’s a bit like the deposit game at the

significant because it is a ban on any fee that is payable at the end of a mortgage contract. Can you imagine how many people would own an iPhone if there was a ban on the end of a telco contract? No one would own one. It won’t be as dramatic, but why would someone go to all the trouble of setting up a mortgage for you if you could repay it two days later at no cost?”

moment where to get the highest rate you have to move your money every six months. That kind of swapping destabilises our financial system.”

Sampson “I would think [this situation] would be a good angle for associations like the MFAA and FBAA to start putting stuff out into the market to educate customers about the current situation and how it will cost the customer more in the long run.”

Michael Russell, Mortgage Choice “Mortgage Choice recently conducted a survey of our refinance clients over the past six months and 46% paid no exit fee with 35% only paying an exit fee up to $1,000.”

Russell “We’ve still got time to convince them that a deregulated banking system should be preserved. We need to accept that a user paid system is the right way forward.” MPA

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HEAD TO HEAD DOUG LEE

Notes from a

big country After spending five years in Macquarie’s North American division, Doug Lee is back in Australia heading up the lender’s broker sales division. Barney McCarthy finds out what he learned on his overseas adventure, how Macquarie’s return to the third party sector is faring and his take on current market issues

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Q: How did you arrive at Macquarie? Where did you work beforehand? A: I’ve been in the financial services industry for 30 years. I initially started with NAB and spent seven years there. I then worked my way through a couple of building societies and branch management roles and also spent some time setting up the financial services division of an accountancy firm in Brisbane. I then joined Suncorp which was known as Medway back then and spent nearly 10 years there. I worked my way through a variety of roles including branch manager, area manager, then ended up being the state manager for NSW and Victoria. In 2001, I had the opportunity to join Macquarie to lead the sales effort and was involved in accelerating its growth into the broker space, and I did that for five years. The opportunity arose in 2006 to go to North America which I jumped at. I spent two years in the US and two-and-a-half years in the Canadian business which was fantastic. In October 2010, I returned to Australia to head up broker sales. Q: Did you always plan to work in the financial services industry? A: I went into banking straight from school. A major influence from childhood was watching tellers from the local Commonwealth Bank branch kicking a footy around the car park at lunch and after work and sometimes they let me join them. For some reason that had a real influence on me, and I thought that banking looked like a fun type of thing to do.

Q: What did you learn from your North American experience? A: The interesting thing about going abroad to work was that nobody knew who I was. People really take you on face value in terms of what you present and how you act. In one sense, you’re very conscious of how you interact as it is a different culture. We all speak English, but it’s quite a different language over there. It gave me an opportunity to discover my true self in those types of markets and how I could hone my skillset to suit that local market. Bringing a bit of Australia into those markets helped create a point of difference. My passion is around relationships, so it was interesting to see how it worked bringing that approach into a new market. Q: How strong is the Macquarie brand out there? A: We were successful. Our Canadian business created a very big presence in the market there. The Canadian and US broker markets are similar, but at different stages of advancement. There are three things that really come to mind. The first is commissions. In the Canadian market, the commissions market is heavily geared towards an upfront model with only a couple of lenders – including Macquarie – paying a trail. There are very little metrics and none of the changes we’ve seen occur in the Australian market. The second thing is technology. One hundred per cent of loans in Canada are lodged electronically and 98% of that is through one supplier. The whole lender/

HEAD TO HEAD DOUG LEE

broker interface is very electronic. Technology drives a lot of the platforms, meaning there are quick answers. From a broker perspective, the customer relationship management technology in terms of the broker groups is a lot more advanced in Australia. Q: Is the broker market still strong in the US and Canada given they were harder hit by the GFC? A: In the US, the market was about 70% broker dominated and that has now reduced to around 25%. Canada, on the other hand, has always struggled to get beyond 25% or 30%. If you go back 10 years, the Canadian and Australian broker markets were at very similar levels of penetration, but whereas the Australian market has grown further, Canada has struggled to break through that ceiling. That takes me onto another point about the market differences – in Canada the lender/broker relationship, especially in terms of the majors, is quite adversarial. The major lenders will compete openly with brokers on price and terms compared to the approach here which is far more partnership-oriented. Q: Returning to the Australian market, how successful has Macquarie’s comeback been? A: We’re happy with how our progress is going and we’re getting the growth we’re looking for. For us, it’s been about understanding what brokers are looking for and how we can deliver it to them in terms of product suite, compensation model and relationship/service focus. The

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HEAD TO HEAD DOUG LEE

MPA 2.0 Visit BrokerNews.com.au to watch video excerpts from this interview

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feedback is that they’re embracing what we have to offer. Our model is geared towards looking for brokers who understand our proposition, then making sure we can support their growth. It’s very relationship-focused. We have a very open accreditation system, but at the end of the day it’s not about accrediting 10,000 brokers, it’s about finding the ones we can work closely with to form a strong bond. Q: Have you seen any reluctance on the part of brokers who haven’t forgiven you for exiting the market before? A: You can’t please all the people all the time. The beauty is that brokers have choice. We have an offer out there; if that suits the broker that’s fine, but if it doesn’t they have a number of other lenders they can use. Q: You mentioned the accreditation system, how has that been adopted by brokers? A: It’s gone extremely well. There are two elements to the process. Firstly, it is very open and we don’t put volume hurdles on our brokers. I prefer to say we put a relationship hurdle on them. Secondly, our recently launched online reaccreditation process was about taking feedback from brokers and how we could make life easier for them. We’re about continued support for brokers. It’s a breath of fresh air for brokers. Q: Have you seen any drop-off in broker numbers as licensing has been introduced? A: Broker groups have certainly reported a slight decline in numbers, but from our point of view, because we’re in growth mode, we haven’t really noticed it. Q: What’s been your take on the recent NAB advertising campaign and the Big Four continuing to go head to head? A: There are a whole lot of competitive forces at play at the moment. Lenders do different things when they are trying to market to a particular niche or client type. We’re seeing a lot of movement in that space. From our point of view, it presents us with the opportunity to continue to elaborate to the brokers what our actual proposition is. It’s not just about price or pulling levers here and there, it’s about providing a whole package and that’s the message we’re getting across to brokers. When the market is in a state of flux, you either try and grab market share or just maintain it depending on your strategies. I don’t see the current battle as heralding a return to bad lending practices.

Q: What’s the general mood in the mortgage market at present? A: It’s positive, but there are obviously a number of challenges to brokers. They are trying to come to grips with NCCP and licensing. I don’t believe the market is as buoyant as it has been. It’s hard to get a grip of exactly what is happening as we see different figures coming through month by month. This is reflecting consumer uncertainty, but again, it creates opportunity for growth in specific areas. Q: Are you concerned with property prices? A: We’re already seeing through valuation reports that prices have been impacted lately, both in flood-affected areas and other regions. Meanwhile, other markets are claiming renewed buoyancy again. There’s talk of a two-speed economy, but I also think we’re seeing a two or three-speed property market. It’s quite cyclical and depends on which state you look at. One thing we offer to brokers that helps them make sense of this uncertainty and confusion is the ability to order a valuation upfront. What that does is provide peace of mind for the broker and client and helps the broker to structure the deal without resorting to guesswork. It leads to greater efficiency for all parties. Q: A lot of economists try to compare the Australian market to the US one, but the fundamentals are completely different, aren’t they? A: They are totally different markets. I’ve got first-hand experience of the US market and still have property there, so I’ve just seen it dive in value by 30%. Q: Where do you think the RBA cash rate will be by the end of 2011? A: Macquarie’s view is that the cash rate is likely to remain unchanged for the short to medium term with the likelihood of movement later in the year. Q: What do you like doing outside the office? A: My main focus is spending time with the family. I met my wife in the US and we have a three-yearold daughter together, but I also have a 12-year-old son from a previous marriage, so at the moment, I’m introducing them to Australia and I’m playing tour guide a lot of the time. On a personal level, I’m a bit of a train freak. In the US and Canada I was able to experience some great journeys. At Easter, my son and I are taking the Savannahlander from Cairns to the middle of nowhere in Forsayth. There is a lot of exploring involved including lava caves and gorges, so it should be a great experience. MPA

HEAD TO HEAD DOUG LEE

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FEATURE REMUNERATION

C me Commissions Word on the street is that a new day is dawning for brokers, and sweeter commissions could be on the cards as lenders vie for a larger slice of the mortgage pie. MPA investigates…

hree years ago, the headlines were dominated by cuts to commissions. One by one, banks unveiled changes to their remuneration structure that essentially meant brokers would have to do more to earn less. At the time lenders blamed the cuts on wholesale lending prices, which were being squeezed upwards by the credit crunch. But many industry spectators argued it was an opportunistic move made by lenders that had been looking for ways to force brokers to improve submissions quality, thereby improving the profitability of the third party channel. And to that end it worked. “Two-fifths of brokers who send business to St.George are earning 70 bps upfront, which is far more than what they were earning prior,” says Steven Heavey, head of intermediary distribution for St.George, which was one of the first banks to announce changes to its commission structure in 2008. “And it’s driven a better quality application; supporting documents are starting to arrive, all those things that make it easy for us to process a loan and get it through quickly. It’s all been driven by the change in our commissions structure. It’s a bit like what we did with electronic lodgment. We paid an incentive to brokers who moved to electronic lodgment and eventually we moved to a situation where we had 100% of our applications electronically lodged.”

The present picture Speaking at the Mortgage Choice Half Year Results meeting in Sydney in late February, CEO Michael Russell indicated that banks could raise

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back commissions to draw more home loan business. “If banks want to grow their lending, they could pull the commission lever. It’s the number one lever they could pull to guarantee themselves volume from third parties,” Russell said. He cited St.George’s decision to return to paying trail commissions on loans between 30 and 60 days in arrears as the “first win for mortgage brokers since this war started”. Heavey agrees that the current landscape is competitive with a lot of lenders fighting for market share, but with regards to St.George’s decision to reverse their policy on trail, he says the bank simply decided it was punishing brokers for circumstances that were out of their control. “The feedback we got from aggregators and brokers was that their ability to influence that outcome was fairly minimal. My view was that it was unfair to penalise the broker when a customer went into arrears greater than 30 days, and hence decided that in the best interests of our relationship with the industry that it was an unfair measure, and I reversed that policy.” While the bank has no plans to hike commissions, Heavey says the opportunity for brokers to earn what they were making five years ago is there. “At the moment you can get 70 bps upfront and, over time, if the loan stays on the books for four years you can get 25 bps – so the opportunity to earn 70 and 25 bps is there. You just need to modify your business and make sure that the customer stays on the books for four years and that every loan you lodge goes through to settlement.”

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NAB’s general manager of broker distribution John Flavell recently indicated in the media that, like St.George, the broker channel has produced great results for the bank, adding that NAB has increased volume, grown share and increased efficiency in its system. He also stated that the average customer life is increasing which means greater commissions for brokers due to the bank’s ramped commission structure. As for CBA, executive general manager of third party distribution Kathy Cummings told MPA that the bank has no plans to raise commissions in order to win business from brokers, adding that under NCCP, it would be very dangerous to let commission influence the loan that a broker recommends. In fact, Cummings recently warned brokers that the onus is on them to prove their worth to the banks. Speaking at the Australian Banking and Finance Mortgage Innovation Conference in mid-March, Cummings noted that as margins tighten for banks the efficiency of the broker channel will determine its value proposition to lenders. She also indicated this could affect commissions in the future. “[Commissions are] as good as they’re going to get,” she said. “We’re working to hold them where they are, and don’t foresee changing

“ To grow their lending, banks could pull the commission lever. It’s the number one lever that guarantees volume from third parties ” BROKERNEWS.COM.AU

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“ Consolidation will open the door to higher commissions for the high performers ”

them anytime soon, but I need you to work on efficiency.” Westpac also indicated to MPA that it has no plans to raise upfronts or trails. “Westpac is confident that it has a competitive offering in the market for brokers,” says Huw Bough, general manager of mortgage broker distribution. “We also remain focused on building sustainable relationships that are not determined by any one factor by ensuring any broker that deals with Westpac provides the right products and advice for customers.” Completing the Big Four picture, ANZ actually restructured commissions in February – putting a greater emphasis on low-LVR, high-value loans. Under the new commissions structure, the base commission of 50 bps remains the same, but the total commissions brokers can earn in the first year (including bonus payments) was reduced from 70 bps to 67.5 bps.

Good news ahead? While the majors seem reluctant about improving commission changes, there has been evidence of movement in the second-tier. In an effort to lure brokers and customers, Bankwest offered discounting on loans, as well as commission initiatives and a waiver of application fees. The promotion, which began in March and is scheduled to run until 27 May, was “a direct response to moves by the other banks to secure new business flows,” according to Ian Rakhit, head of specialist banking. As part of the initiative, Bankwest offered a 10 bps upfront bonus to brokers on loans with an LVR of 75% or less. The commission increase followed a similar promotion that was run by Bankwest from October to January. “What we’ve looked to do on both occasions is to reward clean deals,” Rakhit says. “When they come in under 75% LVR, they don’t need valuation or LMI, we save on application costs, and we want to pass those savings onto our brokers.” About 65% of Bankwest’s business comes from the third party channel and Rakhit says the response from both promotions has been extremely positive. Market share data from February revealed that in WA, Bankwest received the highest share of new business from five of

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the country’s biggest aggregators – AFG, PLAN, Aussie, Mortgage Choice and Connective. Rakhit attributes the increase in business from the third party channel to a number of factors: Bankwest’s decision to waive application fees, its early move back into the high LVR market and its promotions. The bank also recently announced a 10 bps increase to upfront commissions for business deals settled between 21 March and 30 June. “We expect that this competitive increase in commission will give the brokers we work with an extra incentive to secure more deals and grow their business in the lead up to the end of the financial year,” adds Aaron Milburn, Bankwest head of business broker sales.

The non-bank scene Alternative lenders such as Provident Capital already offer a very competitive commission rate. At 82.5 bps upfront and 16.5 bps trail starting in year two, the lender has one of the highest pay structures in place. “We’re happy where it sits,” says Steve Sampson, group national lending manager. “However, who knows what will happen when exit fees are banned.” The government officially passed the exit fee ban into law on 23 March and it will apply to all new home loans from 1 July 2011. The move will severely curtail non-banks’ ability to offer lower interest rates and several have indicated clawbacks will have to be introduced. Homeloans general manager of third party distribution Tony Carn says that while the nonbank doesn’t currently enforce clawbacks, it will be a sad necessity of the DEF ban. However, he also indicated that the lender will examine its commission structure to find different ways to remunerate brokers in an effort to soften the blow.

Predictions Fujitsu Consulting’s managing director Martin North says the industry is witnessing greater alignment of commissions to different types of business and different customers. “This is part of what I call the move to customer-centric banking, which is where most of the majors are moving towards. It’s a move from a one-size-fits-all, to targeted propositions to

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specific customer groups which are perceived to be more profitable, lower risk, or more sticky.” North predicts commissions to remain at the same level, but brokers who are able to write business for the most attractive segments will be rewarded more. “I also expect quality applications and those via electronic submissions will receive greater rewards. I expect the new credit codes to require more information to show that the loan was not unsuitable. This means brokers will have to spend more time on getting an idea of the applications needs, and financial understanding, and making sufficient notes so as to be able to prove post the event they did sufficient research.” Brokers who do this adequately will receive higher commissions, he says. North adds that broker numbers will continue to fall and broker groups will join the larger aggregator groups. “This consolidation will open the door to higher commissions for the high performers.” MPA

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The

are in

With the introduction of licensing, reduced commissions, accreditation requirements and talk of a property bubble, brokers have done it tough. Barney McCarthy sifts through the results of MPA’s fourth annual Brokers on Aggregators survey to see what intermediaries make of their networks

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Methodology

This year’s survey attracted more than 500 respondents – a doubling of last year’s response – proving brokers have more to get off their chests than ever before. It wasn’t just members of the usual suspects who cast their votes either, with more than 20 aggregators featuring in the final shakedown. The survey was divided into three main sections. Firstly, brokers were asked to rate the importance of eight different elements of their aggregator’s proposition: quality of lending panel, IT and broker systems, back-office support, assistance with licensing requirements, training and education, marketing support, quality of BDMs and how well their aggregator kept them informed of industry issues. Next up, brokers were asked seven specific yes/no questions about their relationship with their aggregator including their thoughts on possible mergers, white-labelled products and commission payments. Finally, respondents were asked for general feedback on their aggregator, incorporating why they originally chose them,

what they could do more and less of, and any other concerns.

Results overview When it came to ranking the different elements, all the categories were considered fairly important, with no area averaging less than three out of five. Quality of lending panel proved to be the most important section, averaging 4.15. Marketing support was by far and away the least crucial aspect for brokers, registering an average score of three. The six remaining elements were clustered together between 3.5 and 3.85. The seven yes/no questions yielded four photo finishes and three more conclusive results. Opinion was divided on mergers, aggregator size, credit representative fees and satisfaction with commissions, but there was more of a consensus on white-labelled products, aggregator loyalty and transparent payments. Read on to see exactly what brokers had to say, and thank you to all the respondents who took time out of their busy schedules to give us the low-down on how aggregators are faring.

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Quality of lending panel Ave score Brokers ranked this the most

important consideration when it comes to choosing an aggregator, with just shy of half the respondents awarding it five out of five. This is hardly surprising, as a choice of different lenders is perhaps the main selling point of brokers to consumers. In the main, brokers seemed happy with the panels their aggregator provides them with, although there is room for improvement. Several advisors remarked that they would like to see more credit unions, non-banks and second-tier lenders on their aggregator’s panel. Others were more verbose and argued that the behaviour of the lenders on a panel was as important as the overall quality. One Queanbeyan-based broker said: “Aggregators have allowed banks to dictate volumes. The original reason they came into being was because as an individual you could not maintain volumes with several lenders and aggregators were supposed to solve that problem. Any lender that introduced volume hurdles or ratings systems should be removed from the panel. If all aggregators did that, the relevant banks would have to re-think.” Other requests from brokers included the presence of niche lenders equipped to deal with specialised scenarios, more timely evaluation of the lenders on the panel, and specific providers not on their aggregator’s panel were sought by a handful of respondents. The overriding theme was that many aggregators need to expand their panels so brokers – and subsequently, consumers – have more choice. In this instance, less is most definitely not more.

4.15

IT and broker systems

“ Any lender that introduced volume hurdles or ratings systems should be removed from the panel ”

IT systems, we cannot even lodge a deal.” Many brokers commented how broker systems were more important than ever, providing invaluable compliance records now that NCCP legislation requires detailed archives. Aggregators’ IT systems weren’t without their critics though. One NSW-based broker was concerned that his aggregator had focused on quantity at the expense of quality. “It’s too bulky,” he complained. “They’ve put too much information into it which makes navigating it cumbersome.” Others had more technical concerns, with several bemoaning the lack of offline capabilities and one broker unhappy with the lack of compatibility with Apple hardware.

Would you be disappointed if your aggregator merged?

yes! 53%

Ave score Second on the agenda for brokers

was IT and broker systems. Advances in technology have made everyday-life easier and efficiencies in the workplace are invaluable as they can save time and money. Far from being an additional benefit, technology is now at the very heart of everything intermediaries do, as one broker from WA clarified: “Technology is the bread and butter of the mortgage-broking business. Without efficient

3.85

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47%

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Perhaps the main cause of dissatisfaction however, was with a lack of adequate training. Introducing flash new software is only half the battle after all – it’s worthless if brokers can’t use it. Some honest brokers admitted their lack of expertise was their own fault, but many felt their aggregator could be doing more to educate them on how to make the most of their platforms. Aggregators could perhaps be more timely in their roll-out of new systems too – several respondents said they were still waiting for enhancements that had been long promised.

Licensing assistance Ave score The importance of this category

was obviously dependent on whether brokers chose to obtain their own credit licence or become a representative through their aggregator, but respondents still saw fit to rate it as the third most important factor. Many aggregators have made public pronouncements that they would support their members whichever licensing route they took, but feedback provided here would suggest that wasn’t strictly the case behind closed doors. One broker from Wantirna claimed: “All they were concerned about was getting brokers to sign up as credit representatives, a sure-fire way to print money.” Plenty of others suggested they were left out in the cold with little advice once

3.76

they had made it clear they intended to obtain their own approval. Of those aggregators that did back brokers seeking their own ACL, assistance was often limited to pointing them in the direction of third party groups who could help. Words such as ‘confusion’, ‘mayhem’ and ‘messy’ were also bandied about, suggesting that aggregators were often as in the dark as their members when it came to legislation. It wasn’t all bad news though, and some respondents had praise for the licensing support on offer from their aggregators. Praise was given for the provision of templates for key compliance documents, the methodical and thorough approach of some aggregators and some even singled out individuals for special thanks.

Information provision Ave score Despite brokers regarding this

as the fourth most important category, not many felt their aggregators were doing a very good job of it. A broker from Newcastle claimed being kept abreast of industry issues was “essential to our business, but rarely seen in action” while others claimed information supply was non-existent. Those that were satisfied with their aggregator’s performance in this section said they received weekly updates, and some attended seminars hosted by their network.

3.69

Would you support white-labelled aggregator products?

80%

yes!

20% 28

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“ Praise was given for the provision of templates for key compliance documents, and the methodical and thorough approach of some aggregators ”

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To be fair to aggregators, they may not see it as their role to be a news source for members and plenty of respondents acknowledged the fact, saying they kept up with developments by following the media, which was obviously music to our ears. With Australian Broker News sending out a daily newsletter and a weekly video clip featuring a debate on the biggest news story from the last seven days, as well as updating content on its website by the hour, brokers don’t have to look far for their information fix. The MFAA was also heralded as a useful font of information by a handful of participants.

Training and education Ave score It’s not just rookie brokers that

need tutoring. With new legislation coming into effect, products constantly launched and tweaked and curveballs such as volume hurdles and commission cuts thrown into the mix, advisors could be forgiven for feeling like the goalposts are constantly shifting. To this end, it is important that brokers regularly top up their knowledge bank and never adopt the attitude that they have nothing more to learn. Feedback for aggregators was pretty good in this category, with the majority of respondents feeling satisfied with the training on offer. One broker from Croydon, Victoria, was effusive in his praise. “My aggregator provides very good training and professional development,” he beamed. “It makes extensive use of webcasts which are a real time-saver rather than needing to travel to a venue, but it also provides good face-to-face networking opportunities as well.” Conferences and courses were mentioned by a number of respondents as informative and useful. The biggest gripe brokers had was that those in regional areas often felt overlooked. One broker based in the Southern Tablelands said: “Training provision is non-existent for my area. The only training is done in Sydney – even the national road show didn’t come to my area.” This sentiment was echoed by a number of brokers who felt marginalised by their location. With other aggregators successfully utilising webinars, and technology such as Skype remaining free and easy-to-use, it is surely only a matter of time before aggregators bridge this gap.

3.68

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Quality of BDMs Ave score It is perhaps a little surprising that

brokers placed relatively little importance on the eminence of their main point of contact from their aggregator, but respondents seemed largely happy with their representative. Some of our more seasoned participants reasoned that aggregator BDMs weren’t strictly necessary once a broker had been signed up as they didn’t add any value to the process, but a clutch of other respondents requiring guidance were left disappointed with their relationship. One broker from Mount Gambier was unequivocal in her response. “An especially poor performance this past year,” she commented. “Even the state manager wouldn’t return a call when a particular situation reached crisis point and support was required.” Some claimed their BDMs were fine when everything was going well but disappeared off the radar when a solution to a problem was sought, while others lamented high staff turnovers which rendered relationship building difficult.

3.62

Does the size of your aggregator matter?

48 % yes 52% no

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Of the positive responses, many chose to name BDMs they felt had gone above and beyond the call of duty. One broker from Mackay, Queensland, was overjoyed with her BDM: “The support, understanding, knowledge, accessibility, availability – awesome.” Brokers appreciated regular visits and phone calls as another way of being kept in the loop.

Back-office support Ave score This was another category that was

interesting to find located towards the bottom of the importance list given that many brokers admitted back-office support was most crucial when it came to sorting out commission issues. Of those respondents that utilised back-office support for remuneration problems, the majority were unhappy at how complaints were dealt with. Several claimed disputes were forwarded to lenders without any input from the aggregator and a number of brokers said many offices were understaffed for the number of cases they had to deal with. This was probably the root cause of brokers’ major bugbear in this category – enquiries not being dealt with in a timely manner. One SAbased broker was very critical of her aggregator. “There are lengthy delays before calls are returned and time inefficiencies are rampant,” she wrote. “They don’t consider that the broker is busy with the additional workload under the new credit licensing and we haven’t got time to waste waiting for a call that will probably be ages away. It is difficult to manage client expectations in this sort of scenario.” A warning was also sounded to aggregators in the form of maintaining support levels through operational changes. Some brokers said back-office assistance quality had waned as their organisation grew in size and others were unhappy with being saddled with unfamiliar or underperforming teams once their aggregator had merged. The final word goes to a pragmatic respondent from Enoggera, Queensland, who acknowledged that brokers’ problems weren’t usually caused by the aggregator itself, and that they appreciated help from them in solving the issue. “There will always be things that happen,” she said. “You have to know who to call, when and what they can do to help you and be confident that when they say they’ll help, they’ll follow through.”

3.5

“ Brokers are busy with the additional workload under the new credit licensing and we haven’t got time to waste waiting for a call that will be ages away ”

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Marketing support

Are you looking to switch?

Ave score Brokers considered this to be the

least important element of an aggregator’s proposition, presumably because the majority of brokers like to be in charge of their own marketing. Of those that looked to their aggregator for advertising provision, comments were mixed but the good seemed to marginally outweigh the bad. One broker based in Port Macquarie appreciates the marketing support available to one-man bands. “Such assistance is integral to a small, single-person operation and my aggregator’s program is fantastic for client retention and keeping me at the front of clients’ minds,” he said. Another respondent based in Victoria acclaimed his aggregator’s help in this section. “It has an excellent integrated customer relationship management system within the software it provides which, in turn, leads to improved marketing capability.” On the flip side, some respondents claimed available marketing support was either too expensive or only available through affiliated partners. Others expected more assistance even if they produced their own material. One intermediary from Melbourne said: “As I chose to be an independent and not trade under the aggregator umbrella, I receive virtually no marketing support other than general information and sessions presented at business development days when marketing is a featured agenda item. Therefore, it’s not a great performance by my aggregator, but no complaints as I chose this structure to maximise my own commission split.” As with all the categories presented in this section, the overall theme seems to be one of broad satisfaction with room for improvement.

Broker views Aggregator mergers When asked if they would be disappointed if their aggregator merged, 53% said yes, while 47% were more open to the idea. This even split is a slight reversal from last year’s result when 56% stated they would not be upset with an amalgamation.

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12%

88 % no Whether this shift is a direct result of dissatisfaction with mergers that have already occurred isn’t completely clear, but a number of our responses hinted this may be the case. One respondent from Victoria was unhappy with the changes he witnessed post-merger. “I was formerly with [an aggregator that merged] and witnessed its deterioration in service and support, as well as an escalation of fees and charges,” he said. “In its previous incarnation it was a completely different organisation. I would not want to see my current aggregator merge and need to make concessions, compromises or changes to its existing service philosophy and offering.” Many more brokers are fearful of having their situation compromised by a conflation. A concerned broker from Malvern, Victoria, said: “I haven’t seen another aggregator with the same culture, so can’t imagine a merger would go well.” Even the brokers that didn’t mind if their aggregator merged often included caveats that they would only be happy if their businesses weren’t adversely affected. The handful of positive comments left by brokers suggested that there could be strength in numbers with a merger, and that a larger aggregator could perhaps have more bargaining power with lenders.

yes

“ My aggregator’s program is fantastic for client retention and keeping me at the front of clients’ minds ”

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White-label products The next question asked if brokers would support white-labelled products released by their aggregator, and four-fifths said they would back such mortgages. Many suggested their aggregator had already ventured into this space and said they were happy to support the products as long as they were competitive or serviced a niche that wasn’t adequately supplied. One broker from Melbourne was impressed with the initial rollout. “My aggregator has already launched its own products and they are working very well, even in their infancy,” he observed. “The products could be refined and improved, but I am quite happy with the progress thus far and support the own-branded loan channel.” Of the negative comments, several respondents felt that it wasn’t their aggregators’ place to be venturing into this arena and expressed concerns about a loss of focus. One broker from Queensland had this to say: “The only negative thing I can say about my aggregator is that they have launched their own products. I wish they hadn’t as it makes me doubt their commitment to being my representative to other lenders and it worries me that they’ll give better service to members who support their own products as opposed to those of us who don’t.” As with many questions in this section, brokers aren’t fearful of change as long as it is undertaken with their best interests at heart.

Does size matter? Opinion was divided on the importance of size, with 52% saying the magnitude of their aggregator wasn’t an issue, while 48% thought it was. As with the famous adage, many brokers countered that it is what you do with it that really counts. Although a fair number of respondents felt that bigger size meant a greater chance of having more influence when dealing with lenders, brokers were also concerned with aggregators over-expanding and becoming too impersonal or losing sight of their original objectives. One Croydon-based broker said size shouldn’t be important, but that it was mainly the bigger organisations that had the most effective systems in place. “Size isn’t everything, but IT systems would need to be of a very high standard,” he opined. “My view is that an aggregator needs critical mass to be able to deliver integrated

CRMs, online banking, back-office support and value-added services at a reasonable cost. At this stage, only the larger aggregators can do this.” Some members of aggregators that have grown or merged said they were yet to notice any real benefits of the expansion while others were more apathetic, but maintained a watching brief. “The size of my aggregator makes no difference to my day-to-day operations, but may suddenly become relevant if it became evident that a smaller organisation could not provide the breadth of business development activities and technological platforms to support my business,” said one Melbourne-based respondent.

Switching sides Despite their grumbles, brokers appear to be a loyal bunch with only 12% of brokers admitting they are looking to switch aggregators in the next 12 months. Delving further in to the statistics though, the matter isn’t quite as clear cut as the result suggests, with a number of respondents saying they felt unfairly trapped in their current arrangements. Several expressed remorse they had tied themselves in indefinitely, while others claimed they could not afford the financial fall-out that would result from a transfer. One broker from Samford, Queensland, said: “I can’t change aggregators due to unfair

If you are a credit rep, are fees reasonable?

51% 49% yes

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Satisfied with commissions?

yes! 49%

no 51% benchmarks on my agreement that if I don’t meet in any one year, the aggregator has the right to keep my trail if I leave. Pity any broker who has six months’ off through holiday or sickness.” This was a common theme and others felt that such stipulations hindered competition. “I feel that if you do change aggregators, you should be able to transfer your loan book,” wrote a Newcastle-based advisor. “This would create greater competition among aggregators. Secondly, why should the aggregator continue to receive a commission split if they aren’t providing you with a service after you have moved to another aggregator?”

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“ Why should the aggregator continue to receive a commission split if they aren’t providing you with a service after you have moved to another aggregator? ”

Of the supposedly happy campers, a significant number threatened departure if things didn’t improve or worsened, and a number felt hamstrung by a lack of viable alternatives. Aggregators would do well not to be complacent based on the headline statistic from this section and be aware that there is some discontent bubbling just below the surface.

Fair fees? This category produced one of the closest results. Brokers were asked whether they thought the fees charged by their aggregator for becoming a credit representative were reasonable and 51% thought they were, while 49% disagreed. Again, this doesn’t quite tell the whole story, with what seemed like the majority of respondents choosing to seek an individual licence, which tells a story of its own. Many brokers felt that the fees charged were not only excessive, but altogether unjustified. A number of respondents felt they already paid enough in commissions and that becoming a credit representative should have been automatically included in their package. Others felt that the levy was more than just recouping costs and that aggregators were looking to profit from such arrangements. Of the brokers that sought their own licence, several cited the desire for independence and a handful felt that becoming a credit rep was a waste of money, and that intermediaries should be fully capable of operating under their own approval.

Commission payments Remuneration was another hotly-contested category, with 51% saying they weren’t happy with the commissions they currently received in comparison to 49% that were satisfied with their pay packet. All things considered, this is still a fairly good outcome for aggregators, as it takes a certain level of contentment for anyone to pass up more money and a near-even split is good going. It is also worth mentioning that a number of respondents that weren’t satisfied with the commission payments they receive focused their ire on lenders rather than their aggregators. Some brokers felt that their aggregator could be doing more to justify their slice of the commission pie. One Melton-based intermediary

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said: “It is hard to run a business on the reduced commission and the extra work and we are downsizing because of this by cutting overheads. We would like to see our aggregator doing more, after all they keep a percentage of the money.” Another broker from Queensland agreed: “Our aggregator makes between $40,000 and $50,000 per annum from my commissions, which is way too much when you consider the services they provide. My aggregator, overall, provides pretty good service but it doesn’t deserve to receive that much income from one broker.” Several respondents also felt that commissions should be on the rise again to reflect the fact the worst of the GFC has now passed. A number also mentioned they had been forced to adopt a fee-for-service model to make up the shortfall caused by falling commissions.

Payment accuracy Whatever their stance on how much commission they are receiving, the majority of brokers don’t think their aggregators are up to anything shady, with 75% of respondents believing they are paid accurately and transparently. However, a fair number of those that declared themselves satisfied admitted that mistakes did sometimes occur and that resolving such issues was costly in terms of missed income and time spent sorting them out. There were several complaints around clawback and trail payments and a few brokers thought this could be made clearer upfront. Some

respondents that did feel aggrieved said they had no real way of checking the veracity of payments or simply didn’t have the time, due to the number of cases they handled. One SA-based broker had a fair point about whether aggregators were playing fair on payments. “If commissions were paid accurately, how do you explain the amount of orphan commission sitting in their trust accounts?”

Industry issues Selection criteria When brokers were asked why they had chosen their current aggregator, myriad reasons were provided. However, what stood out among the responses was that it often took little for a broker to choose a particular partner. Many cited word-of-mouth recommendations, previous relationships with staff in other guises, and a sizeable cross-section even claimed they joined the aggregator that got back to them first. A number of respondents claimed the decision wasn’t down to them and that they had fallen in line with their company’s existing arrangement while others were apathetic and suggested they had been with one partner too long to bother changing. Of those that had made the call themselves, among the reasons cited were service, reputation, software, support, lending panel, commission model, integrity and general professionalism. However, as with the question about switching, an undercurrent of displeasure ran

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Are you paid accurately and transparently?

75%

yes!

25% through many of the answers, so aggregators need to ensure they are listening to feedback from their broker members.

Reasons for change Brokers that had switched aggregators in the past 12 months were asked what the primary motivator behind their move was. The main reasons given included poor BDMs, concern over commissions and poor attitudes towards brokers obtaining their own ACL. The stand-out factor however, was dissatisfaction with new regimes brought about by mergers or new ownership. Some advisors that had joined their original aggregator for a specific reason felt this had been compromised by a merger and that they now belonged to an organisation they had never chosen to be a part of. Service was also an issue for some of our respondents. One frustrated broker from Wilston, Queensland, said: “I switched lenders because of a lack of service; in fact, there was none. Every time I phoned, no one was available to meet with me, even if I gave them a three-week window to arrange an appointment. My office is located five minutes away from their head office.”

“ Every time I phoned, no one was available to meet with me, even if I gave them a threeweek window to arrange an appointment ”

suggestions were bountiful, from improved IT platforms to increased training and working with the government on issues such as the exit fee debate. Brokers also wanted more help with diversifying their income stream and wanted their aggregator to add specialist providers to their panel. Undoubtedly, the most popular request was that aggregators defend brokers’ corner more and bring the fight to the banks. Many respondents felt that was the main purpose of an aggregator but that their representative wasn’t doing enough. Another bugbear was marketing. Brokers felt that they benefitted from belonging to a collective of advisers, but this message wasn’t being effectively communicated to consumers. One broker from Mulgrave, Victoria, said: “My aggregator should be more visible to the public and marketed as an umbrella brand of brokers. It could be more aggressive in selling the services of its brokers and not just taking a slice of their commissions without any real input into business generated. Needless to say, if lending institutions dealt with individual brokers, aggregators would simply have no value and be irrelevant.”

More, more, more

Cut it out

This question simply asked brokers what they wished their aggregator was doing more of. The

When it came to what brokers wanted to see less of from their aggregator, a reduction in

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BROKERS ON AGGREGATORS

trumpet blowing was high up the list. A number of respondents mentioned that they would like to see more walk and less talk from their aggregator and several participants criticised networking events as a waste of time. Brokers were also concerned that their aggregators seemed more preoccupied with attracting new members and scoping out possible merger opportunities rather than taking care of their existing relationships. Other gripes included the publication of news updates that contained obsolete information, being reactive rather than proactive and being too obsessed with their own white-labelled products.

Accreditation support The final question in this year’s survey asked brokers what support they had received to become accredited. As mentioned previously, a substantial number of respondents sought their own ACL, but those who became credit reps seemed pleased with the assistance on hand. Training days, informative literature, webinars and updates were all heralded and many broker said they had maintained an ongoing dialogue with their aggregator contact regarding compliance issues. MPA

Causes for concern Despite a relatively even split in the earlier category regarding how brokers felt about a possible merger, the main concern for brokers centred on future mergers. Many belonged to aggregators that had already amalgamated or been taken over and expressed fears for the future. Some brokers were unhappy that they even had to use aggregators at all. One disgruntled broker from Wollongong said: “Aggregators do nothing other than distance us from the lenders. We should have direct access rather than paying part of our income just to collect what should be sent directly to us.” A number of respondents echoed this sentiment and felt they had become ‘just a number’ rather than a valued member of their aggregator. Aggregators will do well to heed this warning and ensure that everything in-house is rosy before they push on with expansion plans.

Growing your wealth Brokers cited diversification and marketing as the two main ways their aggregator had helped them grow their wealth. Training and PD days were also applauded, although brokers said it was important that content was relevant and tailored towards the individuals concerned. Special mention was also made of aggregators who endeavoured to help brokers foster relationships with other local businesses and schemes that brought advisors together to share knowledge. Despite these endorsements, a fair percentage of respondents felt that any business growth was as a direct result of their own actions rather than giving their aggregator any credit.

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FEATURE

BUSINESS MISTAKES

The top 10 ways to lose business Australia’s top brokers reveal the biggest blunders to avoid in broking…

here’s a little chestnut of wisdom here for everyone – even if you already are God’s gift to mortgage broking. Because mistake #1 in business is thinking you’re perfect. If you’re not routinely examining your business and looking for ways to improve your services then you’re leaving the door unlocked for competitors to steal your clients. It’s called capitalism, baby. And keeping an eye on what the other guy is doing – or not doing – is an important part of that. So in an effort to help you keep tabs on the country’s best mortgage professionals, MPA took a straw poll of brokers to find out what they think are the greatest gaffes in the game.

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BUSINESS MISTAKES

2 Failing to pick up the phone

We get it – you’re busy. You’ve got 20 balls up in the air and you’re trying to do everything at once. There’s nothing new to tell your client, so there’s no reason to call or email them, right? Wrong. A host of brokers told us that failing to communicate is the fastest way to lose business. Anthony Smith of Mortgage Choice says: “If a client is not happy with the communication, they are unlikely to return or refer new clients to the business. The most common complaint I have heard in the industry is regarding not being kept in the loop. As brokers, we need to concentrate on what we can control. To an extent, once a deal is submitted to a lender we lose control of timeframes and results. What we can control is keeping the clients up to date with the progress of the file and what we are doing to help the file through the system. It can be hard making a call to say there are delays or in fact no news at all; however, any reasonable client appreciates the communication and understands you are doing your best to get a good result as quickly as you can.” Queensland Financial Services’ Terry Hill reminds brokers to put themselves in their client’s shoes. “The client’s application may be one of several that you are working with, but to a client it is their only concern – and often in their view, your only transaction – and they are keen to know what is happening. It is a simple concept, but one that I, and others, often forget. Basically, it involves putting yourself in the client’s position and therefore appreciating how they feel.” To counter this problem, it may be worth creating email templates for different stages of the application process. So even if you have nothing to report, it will take you 2.2 seconds (yes, we’ve timed it) to copy and paste their name into the email and hit send. And if a simple email won’t cover it and you are busy looking after a million other things? Quit being a control freak and outsource some of the workload. It could just save your sanity and your business.

4 Not listening

How many times have you arrived home in your car and suddenly realised you have absolutely no recollection of the journey home? It’s OK – everybody goes on autopilot sometimes. But it’s a problem when you start doing it at work, unless of course you actually are a pilot. Smartmove’s David Brell agrees this is a common mistake, but a huge one when you consider that the client is actually your boss. Daniel O’Brien from PFS Financial Services adds that it’s easy for a broker “to assume what someone wants or needs”, but it’s imperative to really listen to their client’s goals and objectives.

3 Transactional thinking

Just like snowflakes and weight scales – no two clients are ever the same. Each comes with a unique set of circumstances and financial goals. If you fail to identify their long-term ambitions, you’re failing to position yourself as a life-long advisor to that client. Money Smart mortgage advisor Brad Oliver says it’s a huge mistake to try and sell the client a product, instead of a solution. “In the initial interview, you should be looking to find out as much as possible about what their needs and plans are,” he suggests. “This shows them you actually care more about them than the sale itself.”

5 Breaking promises

It can be tempting to promise the world to clients. You’re telling them what they want to hear and they’re excited about doing business with you. But it all falls apart when things go wrong. A number of brokers agree that managing clients’ expectations is a big part of the job. “If there is one thing that I believe is most important in terms of not losing business it is that you always need to do what you say,” says Smartmove’s Simon Orbell. It’s a sentiment shared by 1st Street’s Jeremy Fisher, who adds: “Some brokers fall into the trap of promising too much in an effort to win business but this is a short-sighted approach. Nobody likes to be disappointed so to be on the safe side, I under-promise and over-deliver.”

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BUSINESS MISTAKES

6 Trash talking the competition

State Custodians’ David Westerman advises brokers to never bad-mouth the competition. Trying to big up yourself by talking down other brokers always backfires. Borrowers will suspect that you’re compensating for some other shortfall, or perhaps too focused on what other businesses are doing to really focus on your own. The best thing to do is let your work speak for itself. And if the other brokerage in your area really does give the mortgage broking profession a bad name, then perhaps it is something to bring up with your industry association.

7 Losing touch

Unlike infomercial rotisserie ovens, you can’t just ‘set it and forget it.’ After the loan is settled, you still need to find ways to keep your business top of mind with customers. Galvin Dawson, of Finance Edge Australia, advises brokers to “always stay in touch with your existing clients. Otherwise they may forget about you and use another broker for their next loan”.

8 Acting superior

Gerard Tiffen of Tiffen & Co/The Mortgage Detective advises brokers to keep their cool with customers and remember who’s boss. “In the broker world, I think it’s important that you have to be professional at all times, especially when dealing with difficult or worried clients. It’s important to be kind, courteous and help them. Refrain from conflict or blame placing. It’s a difficult time for them and obviously stressful. Be supportive – stand up for your business in a professional manner and treat clients with respect at all times, and remember the saying – the customer is always right.”

9 Confusing the client

Brokers represent choice – one of the main reasons customers seek advice from a mortgage broker in the first place. And while your aggregator may have 35-plus lenders on their panel, it’s not imperative to outline every loan option available to the client. Steve Marshall from the Loan Arranger says: “You need to be very clear and position yourself in the driver’s seat. It is best not to confuse the client by offering too many options. Make a recommendation for them based on the best available options for their situation.” That is why they pay you good money, after all. #

10 Churning clients

There are a lot of great offers at the moment and with the government’s very public offensive on DEFs, a lot of borrowers might be tempted to refinance their loan. But State Custodians’ David Westerman advises brokers to “be prepared to tell the borrower that the rate that they are on at present is excellent and that there is no need for them to refinance. The borrower will appreciate your honesty”. It might mean you lose out on an upfront commission, but you’ll be rewarded with positive word of mouth. MPA

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FEATURE

ONLINE MORTGAGES

Web wars Lenders are attracting tech-savvy borrowers with competitively priced online mortgages. Do these proprietary products represent a threat to brokers? Andrea Cornish finds out

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t’s hard to argue with the numbers. A market analysis from Your Money Magazine revealed that if you take the average of the Big Four banks’ standard variable loans (7.79%) and compare it with the average rate for a selection of online standard variable loans (6.79%), borrowers can save more than $55,000 on a $350,000 loan over 25 years. That’s big savings for an increasingly tech-savvy market. But does this channel represent a legitimate threat to mortgage brokers? What’s new in online-only mortgages and where can brokers fit in with this channel?

Online only Consumers have become increasingly comfortable with shopping online for everything from flights to insurance. It’s a 24/7 platform that is as convenient for consumers as it is for vendors. And shopping for mortgages appears to be the next step in this ongoing technological evolution. Andrew Inwood, managing director of CoreData, says his research indicates 20% of the population are ready to secure a mortgage online. As a result, Inwood says the market will increasingly see lenders launch multiple-brand

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ONLINE MORTGAGES

strategies such as NAB’s UBank product. In late February, NAB launched the long-awaited UBank homeloan product. The direct-marketed online UHomeLoan offers a 7.05% variable rate, with a 6.98% comparison rate as a result of a 10 bps discount for customers after three years. The competitively priced loan also carries no application fees and no break fees, and promises settlement in 10 business days or less. The launch followed closely on the heels of Homeloans Ltd’s new online product, iMortgage. The iMortgage product is a 90% LVR loan with rates starting at 6.79%. Homeloans launched the online-only product in response to its own research, which revealed 25% of potential borrowers would consider obtaining a mortgage product online. Homeloans general manager of third party sales Tony Carn says demand for online mortgages is growing as more borrowers look to do transactions online. “Gen Y are tech savvy and already a lot of people are researching for loans online,” he says. For lenders, it’s an easy win. Online mortgages cut out branches and brokers, saving

lenders’ from paying commissions and overhead costs. And it appears that a few industry players are spotting other opportunities to reach the online market. Speaking at the Australian Banking + Finance Mortgage Innovation conference in March, John Symond indicated that Aussie Home Loans is on the verge of kicking off a direct online channel to cross-sell products. Aussie’s research revealed that brokers are finding it difficult to cross-sell during the loan process and it was more affective to introduce credit cards and personal loans to customers after they have moved into a new home.

“ Online mortgages cut out branches and brokers, saving lenders from paying commissions and overhead costs ”

Third party threat? Fujitsu Consulting’s managing director Martin North says there is a strong demand for online mortgages but not many of the lenders are really yet offering a compelling proposition. “They are mainly simple price offers. But Gen Y and others value social networks more highly than the banks, and expect to be able to do more online.” Fujitsu Consulting conducted a survey in March of 2,000 households and found that the majority of respondents are seeking assistance

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ONLINE MORTGAGES

to determine the best mortgage options, despite using online sources for information. “Brokers are seen as a relevant source, though some segments are less inclined to use them. Social networks and online media are important to households, but they do not believe the banks understand the new world,” North says. “So brokers have a couple of choices. First is to offer a service which is downstream from the initial web searching, to assist with the application and product selection. The other option is to offer an online service direct.” But the risk for brokers, according to North, is that they become less relevant as lenders build true online offerings from the customer’s point of view. “And I believe we will see a proliferation of these in the next 12 months or so,” he says. “The end game is to be able to apply, have the application evaluated in real-time, and an AVM does the property value, so in one transaction you get a confirmed offer. Eventually the paper trail would be replaced by digital signatures, and where e-conveyancing is in also, a true end-to-end online offer will be a category killer.” But none of the banks are quite there yet North says, adding: “not by a long chalk”. Provident Capital’s group national lending manager Steve Sampson also describes the online threat as a distant danger. “I still think that when it comes to a purchasing decision of a high value product such as cars, home loans and furniture, the internet in the main is used as a research tool. It’s a means to an end. On one hand, the customer is attempting to do the research a mortgage broker can do, but on the other hand they may want to approach a mortgage broker well-armed with information.”

“ Even though banks are bringing out cheap products online, the consumer needs and wants choice ”

Sampson adds that online mortgages will one day be popular when applying for a home loan but believes that is a number of years away before it become the norm. “Online mortgage applications will be part of generational change and maybe that is starting to happen but a recent survey in the US claims that of the customers that applied online, only 48% said that they were very happy with the process. Of those that applied in person 72% held the same view,” says Sampson. Another factor, according to Sampson, is that mortgage loan application forms in Australia are so cumbersome and lengthy to complete, especially online, “that I think people will avoid them like the plague until something simpler is found. I guess shrewd mortgage brokers would combat any online explosion by lenders by releasing their own online portal.” The good news is, should brokers look towards their own online portal as Sampson recommends, recent information from Gadens Lawyers suggests that online mortgage sales do meet NCCP requirements for conducting reasonable enquiries. Gadens Lawyers recently told Australian BrokerNews that it had received a number of enquiries from clients over the issue. But the law firm concluded that face-to-face contact to pursue reasonable enquiries with customers is not a legal imperative. Senior financial services partner Jon Denovan says that while banks often require face-to-face contact, this is not a legal requirement – it’s a credit requirement. He adds that it’s really a matter of assessing the particular customer and product. For

Better than the Big Four? If you take the average rate of the Big Four banks’ standard variable loans (7.79%), and compare it to the average rate for our selection of online standard variable loans (6.97%) it’s possible to save over $55,000 on a $350,000 loan over 25 years Repayments

Interest paid

Big Four

Online

Savings

Big Four

$2,652.85

$2,467.03

$185.82

$445,855.00

$390,109.00

$55,746.00

$611.70

$568.85

$42.85

$445,210.00

$389,505.00

$55,705.00

Fortnightly

$1,223.70

$1,137.97

$85.73

$445,405.00

$389,680.50

$55,724.50

Half monthly paid fortnightly

$1,325.73

$1,232.86

$92.87

$445,438.00

$389,716.00

$55,722.00

Monthly Weekly

Online

Calculations exclude fees and are made using the Your Mortgage Basic Repayment Calculator (yourmortgage.com.au). Source: Your Money Magazine

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ONLINE MORTGAGES

reasonably simple mortgage products, it should be possible to make reasonable enquiries and reasonable verification online. However, more complicated mortgage products could come under scrutiny from ASIC if no face-to-face contact occurs with customers. So is the online evolution a threat to brokers going forward? FBAA president Peter White says there will always be a place for good service. “Even though banks are bringing out cheap products online, the consumer needs and wants choice,” says FBAA president Peter White. “The broker has to understand that they are providing a significant service to clients,” he adds. MPA

Tried and failed Both ANZ and CBA tried online-direct mortgages, but pulled back their offerings after failing to get traction in the market. ANZ’s One Direct was launched in 2006, but stopped offering new loans in October 2009. The bank cited One Direct’s inability to build scale as the major reason for winding down the channel. At the time, a One Direct spokeswoman said it would have required “significant investment” to turn One Direct from a niche brand into a scale business. The bank initially offered One Direct to attract “time-poor, tech-savvy” customers. CBA had similar difficulties with its online-only channel HomePath. HomePath was shelved in October 2008 after failing to capture more than 0.5% of CBA’s home loan book. While CBA indicated three years ago that it would revisit HomePath in the future, recent comments from CBA’s executive general manager for third party and mobile banking Kathy Cummings suggest otherwise. Cummings told

members of the Australian Business + Finance Mortgage Innovation conference that the bank had been there, done that. “We did online. We appreciate that it is not where people want to make their major purchase. When people are buying a home they still want to look in someone’s eyes.” According to Mortgage Choice CEO Michael Russell, brokers should take comfort in the historical performance of these channels. “I’ll never forget that over 10 years ago mortgage brokers were issued a warning that consumers would soon be applying for their home loans online and that the percentage share of the mortgage broking industry would soon begin to subside. Every year since, the story makes it to the headlines and every year… well, you get the picture.” Russell adds: “What we have seen is CBA close down HomePath, ANZ close down One Direct and Virgin Money close down its online home loan business.

The fact remains that while the internet is increasingly being used for the richness of its education and research, consumers still want to sit face-to-face with a home loan professional and take advantage of the aftercare service these professionals willingly provide. To date, the predictions surrounding online application and fulfilment have failed to materialise and I for one wouldn’t advocate holding your breath,” Rushton says. Rushton also says that prospective buyers will have to work hard to save a deposit, and criticised the government’s First Home Saver Account scheme, which he said has seen little uptake from home buyers. “The federal government’s first home saver scheme has had little traction, so it’s up to borrowers to take the initiative. There have been encouraging signs that this is occurring but it has yet to flow through into first homebuyer activity,” he remarks.

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Personal fact file: ++ Tony Carn: general manager of third party distribution, Homeloans Ltd ++ Age: 41 ++ Family: Married, one son ++ Education: Hawkesbury Agricultural College, degree in land economics, post-grad diploma in marketing ++ Hometown: Dungowan, NSW (“It’s not even a one-horse town, it’s a half-a-horse town”) ++ Best part of the job: “Constantly interacting with people in the market and being involved with strategy” ++ Worst part of the job: “Watching the slow pace of competition coming back to the market” ++ Career progression: • Primary Industry Bank • Origin (ANZ) • Homeside (NAB) • Roles within aggregation services

PROFILE TONY CARN

The Homeloans

alternative

omeloans Ltd’s general manager of third party distribution Tony Carn is in a celebratory mood. The lender was recently awarded best non-bank lender at an industry ceremony, which Carn says is the best news he’s had all year. The accolade comes on top of the announcement that the non-bank lender has seen a 59% increase in lending volumes over the first half of 2011, which Homeloans attributes to an aggressive marketing campaign. Over the last 12 months, the non-bank has ramped up its marketing by signing on two new brand ambassadors – Fremantle Dockers captain Matthew Pavlich and NRL legend Shane Webcke. Both ambassadors can be seen in television commercials, as well as online, print and outdoor advertisements. “We have made and continue to make a serious investment in online marketing and we’re also doing TV advertising on a national basis,” Carn explains, adding that brand presence is pretty paramount for any organisation that is serious about being a competitive force. And according to Carn, consumers are starting to pay attention. “We’re receiving tremendous feedback about how our brand is received across all consumer segments – particularly with younger borrowers who have little or no affiliation with bank brands. “So we know consumers are comfortable with our brand and why. And the big drivers are: we’ve been established for over 25 years, we’ve got a national presence and we have a lot of awards to back up our service and value. And we’re particularly proud of being the recipient of the best non-bank lender award, too. So it’s a big objective to continue educating the market and promoting those brand attributes to further

Homeloans Ltd is positioning itself as a real alternative to brokers and borrowers through an extensive brand awareness program. General manager of third party distribution Tony Carn talks about its recent success and the obstacles that remain for the non-bank

cement the level of comfort that consumers and brokers have with us,” says Carn.

A headline act In addition to advertising, Homeloans has made a number of announcements in the last six months that have kept its name in the headlines. In August last year, the non-bank became one of the first lenders to announce it was loosening lending criteria to allow 95% LVRs, to accommodate what the group called “a real shortage” of options in the high-LVR market. In tandem with the credit policy changes, Homeloans tweaked its product names. The Balanced Special, Hassle Free Loan and MoniPower Line of Credit products became the MoniPower range, while the Premium range was switched to Ultra, and the Smart Saver loan became ProSmart. Then in October, the non-bank dropped interest rates on its full-doc MoniPower loan to 6.79% – a reduction of 0.31%. Carn says the move was a positive development at a time when borrowers were expecting bad news. As for further product changes, Carn says the non-bank will probably sit tight. “We’re actually pretty comfortable where we are. We have a fairly broad range of products. We’ve got some that are very, very competitively priced. We have great alternatives even for loans over 80% LVR. We have loans with offset accounts. The depth of credit policies and alternatives that we have across our range of products is perhaps understated, because it is something that you don’t get with a lender, whether it’s a major bank, a second-tier or a white label offering. So it allows us to be a true broker business partner,” he says. “So we’d like to focus on getting more awareness rather than on any new products.”

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PROFILE TONY CARN

The non-bank also recently launched the Access Homeloans brand, which is a separate brand being provided by financial planners. While it was piloted 12 months ago, it has been a fully operational up and running platform since mid-last year. Carn says: “We haven’t been actively promoting it, but we’re now starting to see some real traction with that brand. It’s just a demonstration that there is a lot of change going on and its just about adapting to the needs of a particular segment of the market, without competing with the other parts of the business.” Homeloans has also been active on the online front – launching a direct product called iMortgage – a 90% LVR loan with rates starting at 6.79%. The non-bank launched the product in response to growing acceptance of the online channel among potential borrowers. Recent research indicates that 25% of borrowers would consider securing a mortgage product online. Homeloans is looking to capture a segment of the market that would rather deal online than talk to a broker or go direct to the bank. However, Carn says brokers have no reason to feel threatened by this channel.

The broker channel Homeloans maintains that the third party channel remains the most important part of its distribution network – unlike some of its competitors. “We know that channel conflict with bank proprietary channels is a serious issue, but it’s going to become a very serious issue for the broking industry in the year ahead. We’re not only competitive but are an independent alternative as well, so we’ll be working feverishly to capitalise on that,” Carn says. Gaining broker confidence is a major objective for Homeloans, he adds. “We regularly conduct consumer market research and we know that consumer confidence with our brand in particular is pretty good – they’re pretty comfortable with it. The broker channel is where we have the biggest opportunity, particularly as it’s our principal distribution channel, so we need to just continue with our education and promotion efforts, and put our brand out there. So the challenge is just getting brokers comfortable with that.” He adds: “We all know that banks dominate lending and origination and as far as distribution

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“ The abolition of DEFs is a massive change for the industry. Fortunately we’ve got the scale, the capital and the infrastructure to embrace that change ”

through brokers goes – as they say – old habits die hard. But we’re very enthusiastic about it and very engaged and energetic about doing that. Once we have the opportunity to provide a solution for a broker’s customer, we just have to demonstrate that ‘wow’ factor and get them used to us so they use us on a repeat basis.”

Seizing opportunities In a recent effort to drive more business through its third party distribution channel, Homeloans announced a $600 cash-back incentive on new loans in its Ultra range. The non-bank also guaranteed to waive loan application fees if it does not provide a full loan assessment and written response within 48 hours. Carn told MPA that the non-bank chose to offer the cash-back incentive as an alternative way to entice customers. “We just think that service gets overlooked in the market. People are not focusing on what customers want outside of just price. So it’s been a good opportunity to demonstrate that great service is still available.” The government’s decision to abolish exit fees, which was passed into law in March, represents the biggest obstacle going forward for non-banks, says Carn. “The abolition of DEFs is a massive change for the industry. Fortunately we’ve got the scale, the capital and the infrastructure to embrace that change and evolve our offering with it. So we’re currently consulting the market to make sure we seize upon the opportunities it presents. “And we remain committed to growing awareness levels in the market and educating introducers about how consumers see the Homeloans brand as a real alternative.” Carn has admitted that clawbacks may have to be increased as a result of the ban. “It’s not a position we want to take,” Carn says. He also indicated that the non-bank will have to reexamine its commission structure, but will look for innovative ways to soften the blow for brokers. Homeloans currently pays 60 bps upfront and 15 bps trail, but does not have quality metrics in place. Carn added that the non-bank is watching the fee-for-service model with interest. “It’s difficult to offer fee-for-service when borrowers could simply go direct and not be charged anything, but I think it’s up to the lenders to see how they can accommodate for brokers looking to charge a fee.” MPA

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PROPERTY INVESTMENT

Bricks and mortar

With diversification continuing to be a hot topic, Tony Hayek explains how mortgage brokers can help property investors move into the market

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hile traditional residential mortgages may have once been the core of a broker’s proposition, diversifying your offering beyond this is now considered crucial in guaranteeing the future relevance – and indeed existence – of your business. With the multitude of products and services available, today’s consumer is savvier than ever before, so a smart broker needs to move with the demands of the marketplace. And with more than two-thirds of brokers in Australia currently offering a diversified product range, those not providing a full service run the risk of being left behind. Changing industry regulations including tighter lending policies, fewer lenders, commission cuts and diminishing availability of credit are all underlying factors highlighting the importance of fostering alternative income streams. Adapting to this lending environment by taking on new roles, offering a wider range of products, and partnering up with specialist groups has become a tool of survival, rather than a practice reserved solely for the nonconformist broker.

Diversify the pie It is clear that diversification in property investment is a key driver for business in the new age of broking, with recent research from RP Data revealing the average length of home ownership in Australia has increased over the past five years. The clear trend towards owning several properties should motivate proactive brokers to rethink their future business strategy and recognise the significant business opportunities up for grabs for investment property clients. Brokers needn’t become experts in every other service or assume they can offer everything under the sun. Simply expanding their client service repertoire by aligning themselves with a specialist group who can provide a wealth of resources will see brokers reaping the rewards of additional revenue streams, increased returns per transaction relationship and higher client retention rates. A good broker should regularly review their clients’ position to ensure they still have the most suitable home loan for their circumstances and to determine whether they may have built

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up enough equity to consider funding a new investment property. Although property investors should have an investment-savvy mortgage broker on their side, it seems many are currently investing in property without advice or assistance from their brokers. As a result, brokers are missing out on valuable additional business and potentially losing their clients to other lending sources. Cross-selling products that go hand-in-hand with home loan products, such as access to investment property opportunities through a research advice model, will only add kudos to a broker’s arsenal.

Establishing strategic partnerships Brokers don’t have to try to be all things to all clients, so it is worthwhile choosing a partner that mirrors their commercial values and business goals to add to their services and not risk losing clients. The key is to align yourself with a company that is committed to helping your business not only succeed, but flourish with a holistic approach. Look for a company that demonstrates a process that works – one that offers training and regular seminars, research and education for you and your client, consistently presents new or unique opportunities for your business, and has a record of proven results with case studies and references. Brokers are a good fit for specialist companies. They have clients who are buying property, and by working with a specialist team, the broker can help their clients make informed investment decisions based on research, so it’s a win-win situation for everyone – the client receives specialist advice through having access to opportunities and services that are not available to the mass market, while the broker creates a new stream of income. Ultimately, the responsibility of the mortgage broker is to provide the best advice in accordance with the duty of care and industry’s professional code of ethics. This includes providing unique investment opportunities from a specialist dedicated to sourcing a range of investments.

Tangible benefits Taking the step to partner up with a specialist company allows brokers to use that firm’s business model to leverage off a team of experts

“ Brokers needn’t become experts in every other service or assume they can offer everything under the sun ”

in the chosen field, and offer a streamlined service without their clients having to go to several different businesses for advice. Such organisations provide brokers with the means, the tools and the motivation to expand their business and become investment property advisors in their own right. Some companies choose to work with selected business partners rather than deal directly with the public and provide support in the form of investment property advice, seminars and opportunities to their clients, who include accountants, financial planners, real estate groups and mortgage brokers. While the potential to generate extra remuneration is the obvious advantage of having a diverse product offering, other key benefits include: maintaining a stronger client value proposition, saving your client time and money; increasing client loyalty and appreciation; and the opportunity to strengthen existing partnerships and in turn, create life-time relationships. Focus on a strong relationship with your database. Aim to make more money per transaction, ultimately benefitting the client as well as your own bottom line.

Broker for life Many brokers have come to the realisation that diversifying into property investment is the future of the industry and are curious to learn how they can have their slice of the pie. Aggregators are also beginning to include it in their revenue projections for the upcoming 12 months. Every broker can handle a simple first home loan application. However, it is the broker who understands how to help property investors obtain and structure multiple loans and can supply education, advice and opportunities to their client base to help them arrange the right loans for successful property investment who will stand out from the pack. Brokers can experience unparalleled levels of business and financial growth. Many brokers who diversify find that they are able to double their income within as little as six to 12 months. Adding an extra arm sourcing investment property opportunities complements existing business, contributes to a broker’s bottom line and ensures longevity in the marketplace. MPA Tony Hayek is CEO of Blue Wealth Property BROKERNEWS.COM.AU

COLUMN

GETTING REFERRALS

Word of mouth services. Have you ever been in a social setting and overheard someone talking about their financial needs or dissatisfaction with their current financial service provider? Did you introduce yourself and offer your business card and services? Seeing or hearing an opportunity to do business is a godsend. Acting on it is your responsibility. Say something like: “I couldn’t help but overhear that you aren’t happy with your current bank. I am a mortgage broker who helps people find the right loan to suit their particular needs. I would like to take the opportunity to sit down and have a chat about how I might be able to improve your situation. Is that something that you would be interested in?” If they are, grab their contact details and hand them your business card. Tell them that you will be in touch in the next day or two to arrange a suitable time to meet. This new prospect could now turn into a very satisfied client, but don’t forget to call when promised.

A constant flow of new opportunities is the lifeblood of any mortgage broking business, but where you find these opportunities is the challenge. Tony Imbruglia explains

eads can come from a myriad of sources but action on behalf of the mortgage broker is paramount. Wishing on a star is not a recommended course of action. So where do new opportunities come from? Mortgage brokers need to actively pursue opportunities and have a strategy in place to generate new leads. Here are some strategies that can be employed in your mortgage broking business. Whether you choose to use them all or just one is up to you, but doing nothing will generate minimal results.

Eyes, ears, then ask How often have you come across an opportunity to gain new business but never acted on it? Your powers of observation alone can present many opportunities where you could offer your

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Satisfied clients The clients you have helped in the past can become some of the most powerful advocates for your business. People listen to others who talk about their positive (and negative) service experiences. You want satisfied clients talking about your business to others. In fact, encourage it. You know when you have done a good job for someone, so don’t be afraid to ask them if they know anyone else who you could also help. Undoubtedly they will thank you and compliment you on the service you provided. Rather than just sit there and smile, use the moment to ask them to use their eyes and ears on your behalf. Say: “If you are happy with the service I provided, the biggest compliment you can pay me is to introduce me to others you may know who are in the market for a loan.” Give them several of your business cards and ask them to give them out to those who you can also help. Fridge magnets are also a great giveaway if you have them. Satisfied clients will invariably put one up on their refrigerator for ready reference. Visitors may also see your fridge magnet and ask what

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GETTING REFERRALS

your service was like resulting in another new opportunity. Why not put a line in your email signature saying: “If you are happy with the service I provide, the biggest compliment you can pay me is to introduce me to others who I may be able to help as well. Thank you for using [your business name]”.

Referral sources Traditional mortgage broking referrers such as accountants, financial planners, real estate agents, developers and legal practitioners are no longer able to moonlight as mortgage brokers without operating under an Australian Credit Licence. This has changed the mortgage-broking landscape as these traditional referrers still have clients who need the services of a mortgage broker. Approaching these types of firms and offering your services may result in a steady stream of qualified leads where no current mortgage broker relationship exists. But dropping in and dropping off a supply of business cards will not necessarily get you any referrals. Referrers want to know that clients they refer will be dealing with a professional who is qualified, experienced and is licensed to give financial advice around mortgage products. The best way to promote yourself and your services is to prepare a biography highlighting your service offering. Contact the potential referrer’s business principal, introduce yourself and offer to send them your bio at the same time as you set up a meeting with them. Some referrers will happily send you leads without expecting or wanting any referral fees but be prepared to discuss this topic if it is raised. If a referral fee is requested, discuss it with enthusiasm but don’t ‘give away the shop’. Any referral fees need to be fair and equitable for both you and the referrer. They can be paid as a flat dollar amount per client referred, a percentage of the net commission you will receive or a percentage of the loan amount settled for the referred client. Regardless, be very clear on the calculation method and document it in a referral agreement.

“ Seeing or hearing an opportunity to do business is a godsend. Acting on it is your responsibility ”

Online enquiries Many consumers have turned to the internet to make their initial enquiries regarding finance. They generally conduct a search using one of the many search engines and use phrases like “find a mortgage broker”. Search results can lead the consumer to a multitude of websites. Some will be specific mortgage broker sites, some will be mortgage broker directory listings while others may require the consumer to submit an online enquiry that is then sold to interested mortgage brokers via a lead-broking company. The trick here is for your business to be found, which can be quite difficult due to the number of large broking firms utilising sophisticated search engine optimisation techniques on their websites to increase their search result rankings. If you are a small player and have a website, the chances of you being found via a web search is akin to a hit and miss approach. If you choose to purchase leads from a lead-broking firm you may find that the leads have gone stale or the enquirer is just tyre kicking. This option can cost you money with no end result. Alternatively, you can subscribe to a service that provides mortgage broker business management tools like BrokerSource, which includes a free listing in its directory. When a consumer searches the directory by state, subscribing mortgage brokers will be listed along with their own ‘enquire now’ button. The chosen broker then receives this lead into their BrokerSource control panel. The broker makes contact and follows their normal interview process. If a loan is settled from the lead received, the mortgage broker then pays BrokerSource a referral commission equivalent to 0.11% of the loan amount, regardless of loan type. This commission is due 30 days after settlement and that’s more than enough time for you to be paid by the lender first. MPA Tony Imbruglia is managing director of BrokerSource Go to www.BrokerSource.com.au/Brokers for more information

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SECOND-TIER LENDERS

ADELAIDE BANK

Damian Percy, general manager – third party lending

best of the rest The Big Four banks have long dominated the Australian lending landscape and some recent high-profile advertising campaigns have done little to dilute that ubiquity. But away from the spotlight a raft of second-tier lenders are making waves of their own. Barney McCarthy caught up with six of them to see what sets them apart from the majors and what the coming months have in store

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Are there any advantages to not having as large a profile as the Big Four? In Australia, there has always seemed to me to be an inverse relationship between the size of an institution and the regard with which it is held by consumers. As a result, I’m not sure the current outbreak of public hostilities between the majors is being seen by consumers as much more than theatre – particularly given it was only months ago that arguments were being made around increased funding costs and the like. As a smaller bank with limited resources, we have to focus on building and maintaining a reputation rather than building a profile. The advantage here is that it necessarily keeps your attention on the broker experience rather than your own profile. In essence, we simply don’t have the cash the majors have to invest in advertising, sponsorship, ‘break-ups’ or brandbuilding. Instead we tend to spend our resources on building products and processing loans. Admittedly it’s a less glamorous approach for our marketing team, but they’ll get over it. What sets you apart from the majors? In any market dominated by a small number of very large institutions – be it groceries or banking – there are many opportunities to deliver a more personal touch. We provide a more engaged experience whilst delivering value-for-money products in a reliable way. We also support a number of different third party models and are able to leverage off our own brand and expertise and, through our wholesale propositions, a large number of alternative providers. This gives us a degree of diversity that the majors are generally unable to access. The closeness of our partner relationships also brings a broad range of ideas to the table that arguably wouldn’t arise from within. We don’t have all the answers and our partners are a great help in that regard.

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Is there any opportunity for you to grow your market share amid Big Four dominance and a non-bank resurgence? Absolutely. Our portfolio growth this financial year has been in excess of what was predicted, presumably reflecting the fact the brokers and their clients are looking for alternatives to the majors. As far as non-bank lenders go, we fund a fair number ourselves, so we’re keen on their resurgence for all sorts of reasons. What are currently your most popular products? Our transactional home loans – our 100% offset range or lines of credit – remain very popular, particularly now that we are able to leverage the ATM network of our Bendigo Retail business, including Suncorp’s ATMs. How important is lending competition for the future health of the market? No one wants to see the third party lending market go the way of the groceries market. What can we expect from your bank in 2011? We’re progressively refreshing components of our proposition across our various models, including our web presence, product tweaks such as a new version of the equity finance mortgage and some important technology bits and pieces. Largely, however, we’ll be spending a lot of time and effort delivering quick approvals and timely settlements.

ING DIRECT

Lisa Claes, executive director of mortgages Are there any advantages to not having as large a profile as the Big Four? As one of the largest second-tier lenders in Australia, ING Direct maintains a high profile in the industry. Customer appetite for competition has well and truly returned and ING Direct is well placed as a true alternative to the major banks. Being a branchless bank, not only do we have a competitive advantage of being low cost, we’re also nimble when responding to industry

developments and making product enhancements and pricing decisions. What sets you apart from the majors? ING Direct delivers simple, competitive and customer-friendly products. Our service proposition provides us with a competitive advantage, as evidenced via our customer and broker satisfaction rates. From a broker’s perspective, our national network of business development managers and dedicated broker support unit continue to provide exceptional value in the market. What’s more, our branchless model ensures broker customers aren’t targeted through branch networks, a common gripe within the broker industry. Is there any opportunity for you to grow your market share amid big four dominance and a nonbank resurgence? Sure. We’re very transparent regarding our appetite to lend and our recent initiatives have reflected this. We continue to offer a very compelling SmartPack promotion and recently returned to a 95% LVR policy. We also recently introduced a new tier on our Orange Advantage offset product and we’re overwhelmed with the success of these initiatives. We view the current home loan market as offering a great opportunity for us to compete – consumers are more aware, the government intends to improve competition and second-tier lenders (banks and non-banks) have a greater share of voice in the market. This all equates to healthy competition and this is what ING Direct intends to continue driving for the benefit of the consumer. What are currently your most popular products? Our Orange Advantage offset home loan has a competitively priced tier structure and a transaction account via Orange Everyday. Our recent increase to 95% LVR policy applies to our unique reduced equity fee offering which is a competitive alternative to LMI. Our Mortgage Simplifier loan is also popular and is currently available with a bonus 0.10% pa discount under SmartPack for the life of the loan. How important is lending competition for the future health of the market? Competition is imperative for the future of the mortgage market. Although competition is improving, the reality is that the major banks still have the lion’s share of the market and we’d like to see a more even spread among the secondtier institutions.

“ Our branchless model ensures broker customers aren’t targeted through branch networks, a common gripe within the broker industry ”

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What can we expect from your bank in 2011? ING Direct has set very healthy production targets and we’re confident we’ll achieve these. We’ve experienced a great uptake of our 95% LVR policy offer and will continue working on new product development as the year progresses.

BANKWEST

Ian Rakhit, head of specialist banking Are there any advantages to not having as large a profile as the Big Four? We have two different approaches on the east and west coast. In our heartland in WA, we are regarded as the peoples’ bank and have a large market share while on the east coast we are one of the true challengers. Having a smaller distribution model and branch network than the majors also allows us to use brokers as our focal point. Around 70% of our business comes through brokers, whereas the percentage of the overall market accounted for by brokers is more like 43%. What sets you apart from the majors? We were one of the first lenders to return to the 95% LVR space and are constantly looking to innovate. In a period when commissions were being reduced across the market, we launched a number of incentives that looked to reward brokers for quality submissions. What are currently your most popular products? Our three-year Super Start home loan is proving popular at the moment. It has a discount of 0.8% off the standard variable rate for the first three years of the loan. We’re certainly seeing strong demand for discounted and low-doc products as opposed to fixed rates. We’ve sharpened our products across the board and withdrawn application fees on some home loans. How important is lending competition for the future health of the market? You always want lending competition in the market and it will help the broker market and vice versa. Brokers have many advantages

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“ Consumers are after an alternative to the majors. They want the big bank capability with small bank connection ”

including the ability to offer good quality advice, the choice of the whole market and convenience. They have a real opportunity with licensing to spread the message about their expertise and become more highly regarded.

SUNCORP

David Foster, CEO Are there any advantages to not having as large a profile as the Big Four? Due to their large customer bases and significant impact on the Australian population, the major banks tend to be the first port of call for commentary and insight on industry issues, some of which are tricky such as out-of-cycle rate rises or bank fees. We tend to have a much higher profile than majors in regional and rural areas where our community work and local connection is most noted. What sets you apart from the majors? Consumers are after an alternative to the majors. They want the big bank capability with small bank connection. This is what we pride ourselves on at Suncorp Bank. Majors might have real or perceived capability and other regionals might have customer connection, but we have both – the capability of a big bank and the connection of a small, personal service-oriented bank. As the fifth largest and only A+ rated regional bank in Australia – service, satisfaction and value proposition are central components of Suncorp’s strategy to drive targeted growth in our bank. The bank’s business centres and local branch staff provide a more personal service for customers than those of the big banks. Customers are able to talk to a real person when they contact our call centre. We employ a local area model, whereby the regional manager is empowered to operate his or her business at the local level, which means faster turnaround times and less frustration for our customers. We’ve demonstrated our big bank capability and our reach by taking out some major national

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SECOND-TIER LENDERS

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awards for online banking, term deposits and our telephone banking service – beating the majors on these fronts. Our customer satisfaction levels are consistently among the top three of all Australian banks. Is there any opportunity for you to grow your market share amid Big Four dominance and a non-bank resurgence? Definitely. We know there are many disenfranchised customers of the major banks out there and we know they are looking for a genuine alternative, such as Suncorp. Making the switch process as simple and convenient as possible is something we’re working hard on. What are currently your most popular products? Our Back to Basics Home Loan offer is currently very popular – 0.20% pa discount for the life of the loan and no upfront establishment fee. Also Suncorp’s Everyday Basics transaction account is proving popular – no account keeping fees and it provides access to a budget tracker tool. How important is lending competition for the future health of the market? It is paramount. Australia wants and needs a second-tier banking sector and viable non-bank lenders to ensure a healthy level of competition and a sustainable industry. Competition initiatives which support smaller banks and non-bank financial service providers are needed. These include innovative funding solutions and switching solutions that improve the ability for consumers to choose. Suncorp welcomes any initiatives that assist competition and create a sustainable, competitive second-tier banking system in Australia and regularly engages in dialogue with the government on such matters. Central to the issue of lending competition is access to funding markets at competitive prices for all financial services institutions. What can we expect from your bank in 2011? Suncorp Bank has a clear strategy and is focused on providing competitive products and superior service in our core areas of personal, small business and agribusiness banking. Obviously as a top 25 ASX-listed company, a top priority is achieving value and returns for our shareholders and the bank is focused on delivering this. Suncorp Bank will also continue to expand its branch footprint nationally, particularly in the key markets of NSW and WA. Another of our top priorities in 2011 is helping the flood and cyclone affected regions recover and rebuild. We’re

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in a good position to do this and have already launched several support programs to assist.

CITIBANK

Vibha Coburn, head of mortgages Are there any advantages to not having as large a profile as the Big Four? Absolutely. It’s no secret that there is considerable disenchantment among consumers regarding the Big Four banks. By being outside this group, we are able to capitalise on this consumer dissatisfaction with the offer of a fresh approach and higher service levels. Our smaller scale allows a more nimble and flexible approach to product innovation. Yet as one of the world’s largest financial institutions, we are able to offer exceptional globality – something the majors simply cannot compete with. At any point in time, around one million Australians are overseas – either travelling, working or studying, so our ability to offer global services has appeal that goes beyond a niche market. Without a Big Four profile, though, we have to work harder to build and maintain relationships. We simply can’t afford to take our brokers or customers for granted. Our smaller distribution footprint also means there is no channel conflict, which is highly advantageous when we’re dealing with the brokers in the marketplace. What sets you apart from the majors? Plenty. Perhaps our key point of distinction is Citibank’s globality. This allows us to take a good look at various practices from around the world and bring the best to the Australian consumer. On a practical level this translates into better service, a better product and market-leading innovations. Citibank led the way with the introduction of line of credit home loans to the Australian market and we continue to introduce fresh innovations. Today for instance, we offer business-purpose funding at residential home loan rates, as long as the debt is secured by a residential property. Citibank was one of the first

“ Australia needs a second-tier banking sector and viable nonbank lenders to ensure a healthy level of competition and a sustainable industry ”

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SECOND-TIER LENDERS

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banks to completely embrace the broker channel and we continue to recognise the importance of this channel. We maintain an open-door policy that gives employees direct access to everyone, from senior leadership teams right through to the CEO. We want new thoughts on best practice to be heard and shared by everyone in the bank. Is there any opportunity for you to grow your market share amid Big Four dominance and a non-bank resurgence? Definitely. There probably hasn’t been a better time to challenge the dominance of the Big Four – and it’s not just about capitalising on consumer levels of dissatisfaction with them. In a young, multicultural society such as ours, there are many Australians who were born overseas for whom the Big Four brands have no resonance and this certainly creates opportunities for Citibank. I also believe that mortgage acquisition – particularly through the third party/broker market – centres on strong relationships supported by excellent products that meet the needs and goals of the consumer. Citibank addresses this by investing in our relationships and delivering products and service that offer more value and innovation than those offered by our competitors. What are currently your most popular products? We continue to see strong demand for our Basic Variable mortgage. It’s a big step up from the traditional basic loan, combining a low rate with a wealth of features including redraw, interest-only options, flexible payment options and the freedom to make extra repayments at no extra cost. Our Mortgage Plus package is another evergreen favourite. It combines a Citibank Mortgage (from a choice of mortgages) with a Citi Platinum Credit Card and Citibank Plus Transaction account. Mortgage Plus provides a rate discount on the loan of 0.94% as well as a saving of $250 on the annual card fee. The transaction account offers great savings including zero monthly fees and a one-off $100 cash-back when $3,000 or more is deposited in the account for at least two months. How important is lending competition for the future health of the market? Competition is critical to the long-term health of any market. In an environment where a few players control substantial market share, it is the consumer who ultimately misses out. What can we expect from your bank in 2011? Citibank will re-emerge as a major competitor in the second-tier lending market. Our commitment

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to service, innovative, well-priced products, “ flexible credit assessment and a dedicated team In a young, are all tremendous assets that will underpin our multicultural return to profitable and sustained growth. society such as ours, there AMP are many Australians who were born Stephen Craig, head of sales and marketing overseas for whom the Big What sets you apart Four brands from the majors? AMP’s results rely have no on the partnerships resonance

”

we have with our distributors – so we don’t have a branch network, with the corresponding channel conflict that it brings. When you combine our distribution partnerships with our strong product range, great relationship managers, and agile business model – AMP has a great proposition. Is there any opportunity for you to grow your market share amid Big Four dominance and a non-bank resurgence? AMP provides customers with an alternative to the major banks. We have a great range of products, backed up by strong relationships with our distribution partners. Our results as reported by APRA for the first months of 2011 show great mortgage growth, and we expect this to continue through the year. What are currently your most popular products? We launched a revised basic home loan package at the end of 2010 and this has remained very popular. The package has no complex fee structure and has straightforward credit and operating rules – it’s easier for the customer to understand, and easier for the distributor to sell. How important is lending competition for the future health of the market? Lending competition is vital – consumers must be allowed to have a choice in product and lender. AMP provides this choice and we’re very keen to support competition in the market place. What can we expect from your bank in 2011? AMP will continue to have a range of competitive products, supporting our partnerships with distributors. MPA

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SECOND-TIER LENDERS

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LIFESTYLE

A DAY IN THE LIFE OF...

A day in the life of… Connective principal Murray Lees talks licensing, professional development and AFL

6am

I wake up and head out for my morning walk. I try to walk most mornings as it’s not only great exercise but it also provides me with some quiet time to prioritise what I need to do for the day. I follow this with a light breakfast at home (just a bowl of cereal this morning), read the morning paper, then off to work.

8:30am

Murray Lees

“ We have encouraged members to apply for their own ACL as we believe this places them more firmly in control of their own destiny ”

Into the office, grab a coffee and take 30 minutes or so responding to any urgent emails. I’m attached at the hip to my iPhone and iPad so I receive all my correspondence immediately, wherever I am. While this makes it more difficult to switch off at the end of the day, the upside is that there’s never any surprises waiting in my inbox in the morning.

9:45am

Catch up with Glenn Lees to discuss our latest NCCP/licensing initiatives. While offering brokers the option to become a credit representative under our licence, we have encouraged members to apply for their own ACL as we believe this places them more firmly in control of their own destiny and not beholden to a third party. Attaining an ACL does require more effort, knowledge and resources however, so we are very active in developing initiatives aimed at making the process as easy and straightforward as possible for members.

10:30am

Downstairs to the cafe with our events manager to discuss agendas and logistics for our professional development program and annual conference. We hold over 350 PD sessions each year (including webinars) so the work that sits behind that is significant.

11:15am

Weekly teleconference with my fellow directors, Glenn Lees and Mark Haron, to review and discuss our strategic direction. Seemingly as important as any work-related matters, we also eagerly discuss the multitude of reasons why Collingwood is a

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near certainty to take out the flag again in 2011. Mark is an avid rugby supporter (being a New South Welshman), but delivers a believable performance in feigning interest in the discussion.

12:00pm

A quick 20-minute catch up with our general manager to review our sales performance and forward targets. Connective dedicates significant resources to developing strategies which will see sustained growth while continually improving its service proposition for our member brokers. We head out for a bite to eat together to continue discussion and the topic invariably turns to AFL.

1:30pm

Meet with our marketing manager to run over the content for the next edition of our recently-launched monthly magazine. We discuss the best path forward in introducing more interactive elements to the publication, including blogging and online video reports.

2:15pm

Spend the next hour or so catching up on things that have unfolded over the day. I try to block out an hour each day to respond to emails and return phone calls.

3:30pm

Meet with Michael Goerner, our newly appointed head of sales and business development. Michael has joined Connective to drive the development and implementation of our white-label offering.

5pm

Meet with Doug Mathlin from FrontRunner Consulting to discuss the final elements of an initiative we will soon launch which is aimed at enhancing the education and development of all brokers, industry-wide.

5:45pm

Wrap up for the day and prepare for tomorrow. Finalise any outstanding tasks which need attention before heading home.

6:30pm

Leave the office for the day – home to spend some time with the family. Make a mental note to not schedule so many meetings in one day from now on.

LIFESTYLE FAVOURITES

TV I’m a huge Star Trek fan and enjoy most things sci-fi PLACE TO BE Relaxing by the pool

MUSIC My tastes are pretty middle of the road, although I will listen to anything from Alice Cooper to Gloria Estefan

Peter White

VACATION SPOT It would have to be New York. Not only is it the city that never sleeps, but it’s the city where money never sleeps either

+ President FBAA

Favourite things FOOD I eat a lot of Chinese and Indian food, but you can’t beat a damn good steak

CELEBRITY I admire Richard Branson for what he’s achieved and for his true entrepreneurial spirit. Not everything he’s tried has worked out, but he’s been willing to give it a go

MOVIE Without doubt my favourite movie is The Godfather – great actors, great story and great cinematography

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HOBBY I’ve had very little spare time of late to indulge my hobbies, but I do enjoy a spot of gardening as it helps me relax. I also inherited a stamp collection that has been passed down the generations, but I haven’t updated it for a while now

SPORT It’s a toss up between martial arts and golf. I used to teach Zen Do Kai

DRINK It depends on my mood, but Wild Turkey bourbon or Black Pepper Shiraz are both favourites

BOOK Bankers and Bastards by Paul McLean and James Renton. I read this almost 20 years ago, but it’s still amusing now and some things never change