Mortgage Professional Australia magazine Issue 11.9

CELEBRATING 10 YEARS

www.brokernews.com.au ISSUE 11.9

SMALL FISH

BIG POND KS ON NON-BAN

2011

REFUND POLICY THE LATEST COMMISSION MODEL

ONE-STOP SHOPS THE EVOLUTION OF BROKING?

LAW AND ORDER KEEP ON TOP OF COMPLIANCE

CONTENTS / ISSUE 11.9

40

Cash grab The erosion of commissions is forcing brokers to be innovative to protect their income.

We find out more about refund models

20

One-stop shops If you don’t fancy diversifying yourself, why not team up with other finance professionals? We tell you how

COVER STORY 24 | Brokers on Non-Banks Advisors have their say on the products, rates and service offered by the smaller lending institutions

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WEEKLY INVESTIGATIONS NOW ONLINE: Broker evolution Credit fraud Low-doc loans » brokernews.com.au

CONTENTS / ISSUE 11.9 NEWS & VIEWS 08 | Round-up The latest market intelligence from the worlds of property, economics and mortgages

44

12 | Product news A round-up of the latest rate changes and product launches to keep you up to date

Using eNewsletters Email newsletters are a cheap and effective way to communicate to your database and keep your brand top of mind

14 | Viewpoint What visitors to our website are saying about brokers leaving the industry

34

Q&A time Since vacating the top spot at Vow Financial at the end of last year, Jeff Zulman has kept a pretty low profile

16 | The Big Story A compilation of the top quotes from our weekly multimedia broadcasts

SMART BUSINESS 44 | Close contact How to harness the power of eNewsletters to stay in touch with your database 46 | Regulatory assistance Five leading providers from the worlds of compliance and training give licensing advice 54 | Driving down costs If you regularly use your car to meet clients, you

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need a cost-effective vehicle

PROFILES 34 | The Book Buyers Brokerage boss Jeff Zulman discusses his latest venture and the growing pains of the Australian mortgage market 42 | Choice Capital director Nick Caple on how he made it onto the MPA Top 100 Broker list

STATS 60 | This month’s statistics round-up looks at residential land prices and volumes across Australia 66 | Your Mortgage index The latest stats from our sister website show that loan values are on the rise

LIFESTYLE 68 | A day in the life of… Brett Halliwell, Advantedge 70 | My favourite things… Tim Brown, Vow Financial 72 | Words of wisdom…

Dr Timothy Sharp, renowned psychologist

NEWS / ROUND-UP

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CONTENTS / EDITOR’S LETTER

ACTIONS SPEAK LOUDER THAN WORDS This month’s special report – our annual Brokers on Non-Banks survey – has proved to be most timely, coming hard on the heels of ABS lending figures showing that banks now account for 92.5% of all mortgage lending, leaving mutuals and nonbanks to fight over the scraps. The statistics don’t lie, but brokers answering our survey seem keen to increase the amount of business they place through the non-banks.

With ING Direct also issuing a ‘use us or lose us’ ultimatum to advisors hell-bent on placing all their home loans with the majors, we seem to have come to something of a crossroads in the competition debate. Brokers want a range of providers to choose from – as do their clients – yet by their actions, they are reducing the chance of competition in the Australian market remaining healthy. It’s not just the third party channel’s fault though and they need to be met halfway by the lenders. Until non-banks and second tier lenders put their money where their mouths are and provide a genuine alternative in the shape of rates, products and service, things will remain as they are. Fingers crossed the deadlock is broken soon, or we will have a monopoly situation on our hands.

As well as our non-bank survey, this issue also contains features on brokers trialling commission refund models, how to assemble a team of finance professionals if you don’t wish to diversify yourself and even how to buy the most cost-effective car. We also speak to compliance and training providers who can help you if you’re struggling with regulatory issues, interview Jeff Zulman about his trail book venture, learn how MPA Top 100 Broker Nick Caple made it to where he is today and find out more about Vow Financial’s Tim Brown and Advantedge’s Brett Halliwell.

Enjoy the magazine and all the best for a busy month.

Barney McCarthy, Editor

CONNECT

Contact the editor: barney.mccarthy@keymedia.com.au 6 | BROKERNEWS.COM.AU

COPY & FEATURES EDITOR Barney McCarthy CONTRIBUTORS Andrea Cornish, James Evans

ART & PRODUCTION DESIGN PRODUCTION MANAGER Angie Gillies DESIGNER Paul Mansfield PRODUCTION EDITORS Sushil Suresh, Carolin Wun, Moira Daniels

SALES & MARKETING NATIONAL SALES MANAGER Rajan Khatak ACCOUNT MANAGER Simon Kerslake COMMUNICATIONS EXECUTIVE Lisa Narroway SENIOR MARKETING EXECUTIVE Kerry Corben MARKETING EXECUTIVE Anna Keane TRAFFIC MANAGER Abby Cayanan

CORPORATE DIRECTORS Claire Preen, Mike Shipley CHIEF OPERATING OFFICER George Walmsley PUBLISHING DIRECTOR Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan 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

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NEWS / ROUND-UP

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CONSTRUCTION

NON-BANKS

Smaller lenders being squeezed out

Sagging land sales mean few home starts A fall in residential land sales augurs poorly for home building, according to the HIA. The HIA’s recent residential land report has found the volume of land sales fell by 6% over the March quarter and was down 43% on the same period last year. Land cost, meanwhile, increased 0.8% in the March quarter. HIA chief economist Harvey Dale said land cost was proving a barrier to development, and said residential home construction would be negatively impacted by the trend.

“The continuous and substantial decline in land sales volumes since late 2009 is a further indication that new home starts could reach one of their lowest levels seen since the mid-1990s,” Dale claimed.

RP Data research director Tim Lawless added that the low volume of land transactions foreshadowed a poor volume of residential housing starts and lambasted the “excessive cash grab” of state and local government development costs.

Banks have continued their lending dominance, with the MFAA claiming other players are being squeezed out of the market.

The MFAA has pointed to ABS lending finance figures showing banks have taken a 92.5% share of the mortgage market, the highest since housing finance figures started being recorded in 1992. By comparison, mutuals accounted for 2% of mortgage lending, with non-banks writing the remaining 1.2% of home loans. The MFAA stated that the current landscape stands in contrast to 20 years ago, when mutuals made up 10.2% of the market, and the 15.2% share non-banks saw at their peak in 2003.

MFAA CEO Phil Naylor commented that the figures show government intervention is needed to stimulate sagging competition in the sector.

“This is an important part of the Australian economy and it is being dominated by one type of lender,” he warned. “The figures tell us that the non-banks are the most competitive when it comes to interest rates, yet they are being squeezed out of the market.”

Interest rate data backs up Naylor’s assertion. The average standard variable rate among the four majors was 7.79% in May. Mutuals had an average SVR of 7.32%, whereas non-banks had the lowest average SVR, at 7.01%.

“History shows us that when non-bank lenders are thriving, borrowers pay less for their mortgages as well as have more choice in their lenders,” Naylor added.

For more on non-banks, turn to page 24 for our annual broker survey.

LMI

GREENS BILL WOULD FORCE LMI REFUNDS A banking reform bill introduced by the Greens will include measures to make LMI portable. The bill, revealed by Greens MP Adam Bandt, will require banks to help

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customers switch their accounts to rival banks.

Banks will be required to re-route direct debits and credits to customers’ new accounts after they switch financial institution. The bill would also require lenders to refund the outstanding value of LMI policies when

borrowers move their mortgage. The government’s feasibility study into account number portability, conducted by former RBA governor Bernie Fraser, has also been concluded. Treasurer Wayne Swan’s office said the government would release its response in due course.

FACT: 7.01% – average non-bank SVR compared to 7.79% among the four majors Source: MFAA

NEWS / ROUND-UP

FIRST HOMEBUYERS

Market sees 60,000 fewer FHBs

19%

percentage of consumers who intend to apply for credit in the September quarter Source: Dun & Bradstreet

AUCTIONS

CLEARANCE RATES ON DOWNWARD SPIRAL

Talk of rising enquiries from first homebuyers has not translated into sales, according to Rate City.

Loan Market recently claimed a 10% spike in enquiries from first homebuyers in June, but a study by comparison site RateCity has indicated 60,000 fewer first homebuyers entered the property market in the 12 months to May 2011 than in the 12 months to May 2010.

CEO Damian Smith said ABS figures showed around 7,500 first homebuyers per month active in the market in the 12 months to May. This compares with around 12,500 per month in the previous corresponding period.

“Despite the Reserve Bank boards’ decision to keep rates steady for the past seven meetings, it’s clear that prospective buyers are still wary about jumping into debt because their monthly repayments are going to be much, much higher than they were in late 2009,” Smith said. “The answer is not to introduce further grants to stimulate growth in the first homebuyer market.

Historically, grants doled out to new buyers have tended to increase property prices without increasing the supply of new housing.”

Rather, Smith said the answer to stimulating first homebuyer activity was increasing incentives for prospective buyers to save for a deposit. He called for restrictions on the government’s First Home Saver Account Scheme to be eased.

“First home saver accounts continue to be overly complex and as a result most prospective homebuyers are unaware of the generous rates of interest offered by these types of accounts,” Smith concluded.

Auction clearance rates have averaged below 50% for 12 weeks, with listings across the nation remaining at elevated levels.

RP Data’s latest Property Pulse has indicated a continued downward trend for auction clearance rates.

After picking up slightly to 52.5% for the week ending 3 July, clearance rates stumbled again last week, falling to 48%. The result has brought the 12-week average to just below 48%, which RP Data said highlights weak market conditions.

While new listings fell both nationally and across capital cities, total listings remain significantly elevated.

Nationally, total listings are 24.7% higher than

the same time last year, while listings are 20.8% higher in capital cities.

RP Data analyst Cameron Kusher said: “What we were finding earlier in the year is that listings were still rising even though the market wasn’t particularly strong.

Maybe people are getting the message there’s a lot of stock on the market and if they’re serious about selling it’s probably not the best time to bring their property to the market.”

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NEWS / ROUND-UP CREDIT

HOUSEHOLDS STRUGGLE TO MAKE REPAYMENTS Credit demand has continued to wane and nearly a third of households are anticipating difficulty meeting their repayments, according to Dun & Bradstreet.

Its Consumer Credit Expectations survey shows fewer consumers plan to apply for credit in the September quarter than expected in the June quarter.

Just under a fifth of respondents said they would apply for credit

in the September quarter, down from the 27% who indicated they would do so in the June quarter.

While the proportion of respondents who say they will struggle to meet their repayments has fallen slightly, 30% still indicate they will face difficulty fulfilling their credit obligations.

Nearly half the survey’s respondents said any RBA interest rate rise would damage their household finances.

DISTRIBUTION

ING Direct issues broker ultimatum

FACT: 7,500 – the number of first homebuyers active in the market each month in the 12 months to May 2011 Source: Rate City

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ING Direct has warned that brokers could become irrelevant as a distribution channel for the lender if they continue to send the majority of loans to the Big Four.

The lender currently sources the majority of its mortgage deals through brokers. However, executive director of delivery Lisa Claes has said that this arrangement would only continue so long as the broker channel remained relevant to the lender’s customers.

Claes said brokers are in danger of losing their relevance both to lenders and consumers if they do not offer a range of choice in lenders, and said they were in danger of becoming an early casualty of the current competition amongst the major lenders. She bemoaned major bank market share, saying brokers continue to send deals to the banks despite the majors actively working against the third party channel.

“Brokers are sending most of their business to the Big Four banks, institutions that are likely to have a preference for their own branch networks,” she said. “The one true advantage of the broker offering is providing the consumer with an informed choice. The concern is that choice is diminishing. Sure, competition in the current slowing home loan market is fierce, but the number of players is getting less.”

SENTIMENT PROPERTY

HOUSE PRICES CONTINUE DECLINE House prices have continued to soften in the June quarter, with rental growth also slowing, according to the NAB Quarterly Residential Property Survey.

2% 3.7% 1.3% 1.4%

Nationwide decline in house prices for the June quarter (1.1% drop in the previous quarter) Biggest decrease (Queensland)

Rental growth rates still positive at growth in the June quarter, but down from 1.7% in March Expected decline in house prices over the coming year, compared to the 0.6% forecast back in March

Consumer mood darkens Consumer sentiment has fallen to its lowest point in more than two years as households show concern over their financial position.

The Westpac-Melbourne Institute of Consumer Sentiment fell 8.3% in June, with households still expecting an RBA rate rise in the coming year in spite of rates remaining on hold for seven consecutive months. Westpac chief economist Bill Evans said households still harboured the fear of future rate moves.

“The confidence of those who have a mortgage plummeted by 16.5%,” he said. “Despite the Reserve Bank keeping rates on hold following the Board meeting in July, the Bank has persisted with its hawkish rhetoric.

This is continuing to undermine confidence amongst households who it would appear are incredulous that such a policy is favoured given the current circumstances.”

Concerns over the property market appear to be easing, however. Evans added recent price declines had led to greater optimism regarding housing affordability.

However, he commented that the prospect of prices experiencing further falls may continue to keep prospective buyers out of the market.

“The confidence of those who have a mortgage plummeted by 16.5%”

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PRODUCTS / ROUND-UP

PRODUCT NEWS A bite-size guide to the the latest rate changes and product launches to keep you and your clients up-to-date

Who: Bankwest What: Premium Select and Low Doc home loans The spec: Bankwest has reduced the rate on its Premium Select Home Loan. This sharpened pricing will equate to 6.85% on loans below 75% LVR and 6.95% on those between 75% and 95% LVR plus capped LMI for aggregate borrowings between $200,000 and $749,000. For clients seeking aggregate borrowings above $750,000, bigger discounts are available. The lender is also reinstating its Low Doc Home Loan at 7.20% where the LVR is equal to or less than 60%.

What they say: “These product changes are a reflection of where we are at.

Bankwest’s sharpened pricing offers our customers some of the most competitive rates in the market. To coincide with this and to further cement our commitment to this channel, we will also be extending our nil application fee offer on our home loan

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products until further notice.” – Ian Rakhit, head of specialist banking

Who: Mortgage House What: Vantage Simple Home Loan The spec: The non-bank lender has launched the Vantage Simple Home Loan, which has a standard variable interest rate of 6.78%. It has no ongoing fees, and no application or valuation fees.

What they say: “People can use the Vantage Simple Home Loan in two ways to minimise their mortgage. Firstly, through refinancing to the lower interest rate and reducing the monthly repayment figure, freeing up funds to assist with the increasing cost of living. Secondly, they can reduce the number of months or years left on the term of their loan by continuing to make their previous mortgage repayments on Vantage’s lower interest rate.” – Sarah Roberts, managing director

Who: Mortgage Ezy What: SMSF Loan The spec: The Self-Managed Super Fund loan will carry a rate below 8% and be available with a maximum LVR of up to 70%.

What they say: “Mortgage Ezy is clearly evolving from the typecasting traditionally applied to most mortgage managers. There is a real surge of energy among our business partners and optimism levels are high because we’re actually delivering on the stuff we said we would, like no clawbacks post-July with great rates combined with fair and reasonable commissions.” – Chris Wisbey, head of sales and marketing LAUNCHING A NEW PRODUCT? To be considered for inclusion on this page, send the details to barney. mccarthy@keymedia.com.au

NEWS / COMMENT

VIEWPOINT Each issue we select a story from Australian BrokerNews that has got intermediaries talking and publish the best responses.

This month – brokers leaving the mortgage industry

THE STORY: ONE IN FOUR MORTGAGE BROKERAGES CLOSING SHOP A slowing mortgage market has seen one in four mortgage broking firms close its doors in the 12 months to March, according to MISC Global.

Its research has found only 119 broking firms sold even a single mortgage in the March quarter, compared to 161 in the March quarter of last year, a result that sees the fewest active mortgage broking businesses since MISC began gathering mortgage broker and banking data in 2001. The value of all mortgage business done through brokers fell $2.7bn to $11.6bn for the quarter.

MISC has correlated the result to the advent of NCCP licensing and reforms. According to the company’s data, ASIC had approved 5,559 individual licences as of March. In spite of the contracting market, the brokers remaining have seen an 18% increase in lending activity. MISC said this increase came in spite of constrained conditions in the mortgage market. MISC research has indicated the increase in productivity has come on the back of heightened competition among lenders, with banks offering pricing incentives in a play for mortgage market share.

THE ONLINE REACTION: Whistleblower on 04 Jul 2011 02:11 PM What’s even more interesting is that out of the 5,559 ASIC-ACL licences, a large number have secured an ACL so as to protect their trail incomes from sources that threatened to steal their trails if they didn’t have an ACL. I know many brokers who had an ACL, then left the industry – measure that!

Daniel Son on 04 Jul 2011 02:23 PM It’s no surprise. If we could earn a dollar doing something else, I’m sure most of us would. not a broker on 04 Jul 2011 05:33 PM Did I read this right? One in four brokers have quit? Tell me whether or not I’m not

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crazy to be thinking of paying thousands of dollars to buy a franchise…

Ozboy on 05 Jul 2011 10:30 AM not a broker, you’re crazy! sidbroker on 05 Jul 2011 11:45 AM Not a broker – at least you have asked the question. If you go against Ozboy’s advice then you can be re-classified as you know what. If you still want to be a broker, then why not send me a blank cheque? That would be a good way for my business to make money at your expense. matto on 05 Jul 2011 04:18 PM Only 119 broking firms sold a single mortgage in the March quarter? What is their definition of a broking firm? petert71 on 07 Jul 2011 12:50 PM Only 119 groups sold a home loan? How many brokers/aggregators do they actually believe there are?

NEWS ANALYSIS / MULTIMEDIA

THE BIG STORY

Every week, Australian Broker News rounds up influential figures to discuss issues in the mortgage industry. You can watch these bite-size videos online on our website, but here we bring you the highlights from last month’s clips

The subject Is credit growth set to rebound?

The lowdown In recent months, banks have been vying for consumer attention, as credit growth has slowed to historically low levels. But is this set to last?

Steve Kane, FAST: “Economic predictions are showing that it is likely to sit around 6–8% and currently it’s a little short of 6%.

We see it remaining at that level and increasing as confidence comes into the market, particularly consumer confidence.”

David White, Australian First Mortgage: “People in the market are looking to see it stabilise a bit. Low rates and no fees aren’t sustainable so the market will settle down over the next three to six months.”

Michael Russell, Mortgage Choice: “Mortgage Choice and most of the other industry players and banks we’re talking to are forecasting settlement growth in 2011/12. Yes, 2010/11 has been a bit apocalyptic, but I’m pretty sure we’re at the end of it. However, we’re not going to be at the dizzy heights of 2009/10 and that will mean lenders will still be chasing home loan business as their big books continue to run off. There’s more pressure to keep topping up with new loans.”

SK: “Entrants see that the market has decreased and therefore the size of the pie has decreased, so therefore competition increases. The direction that the banks are taking is certainly to be more aggressive in the broker channel.”

DW: “Household debt levels are still historically very high and the refinance market is opening up with fierce competition, so people are aware of low interest rates and good offerings and low fees to

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NEWS ANALYSIS / MULTIMEDIA

This month’s guests...

Steve Kane FAST

David White Australian First Mortgage

Michael Russell Mortgage Choice

Ian Rakhit Bankwest

Graham Mendelowitz MKM Capital

Stephen Moore Choice

set up their loans. The refinance and debt consolidation markets are still very active and brokers in that space will do very well.”

SK: “The banks and lenders are now focusing on the mass market to ensure that all the market is aware of their services and products so we’re seeing a return to the more Mum and Dad type customers.”

MR: “At the moment with the full engagement of our lender panel, there is an opportunity for brokers to increase their market share and customers are standing to benefit. Brokers with a good brand should expect to be rewarded with some good lead generation volumes over the next year or two. The message is stay close to all borrower types.”

DW: “Long-term brokers in established markets will continue to do well, but new players will need to find a niche to do well.”

The subject Customers lying for credit The lowdown Lying for credit has seen a rapid rise, according to Veda Advantage. Is your client’s situation really what it seems?

WATCH IT NOW!

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open accounts rather than the current point in time credit reporting can result in better decisions. This will lead to a better outcome for borrowers with good credit history and potentially better rewards for brokers focusing on quality business.”

IR: “Positive credit reporting will allow those customers with a perfect credit rating and perfect payment records to get a shorter application form and quicker approvals. We as a bank will see higher approval levels and those customers may be able to command a better price by being able to bid for the highest quality offer on the market.”

GM: “For borrowers [positive credit reporting] is a double-edged sword. On the one hand, if you’ve had a few blemishes, that might be positively balanced by some of the good things that may come through.

In another regard, because one is reporting on your full financial commitments, even if they are positive, that may place pressure on serviceability as lenders take commitments into account.”

SM: “The message to consumers is clear – you’ve got to get your finances in order. If you look at a typical Australian, they are not too good at managing their expenses, so brokers can help consumers with this.”

Ian Rakhit, Bankwest: “We haven’t really

GM: “I think it’s going to make it harder in

seen any difference in recent months compared to previous years. We have those customers who genuinely forget they have a small credit and equally we have some customers who try and hide or ignore certain debts. We always check that to the Veda credit file to ensure we have consistency between what customers owe and what they disclose.”

some cases for brokers, because they are in a situation now where they are not just presenting the customer’s immediate needs associated with their mortgage.

There’s now going to be a much more comprehensive picture painted which on the one hand may be positive in terms of a customer’s overall intent and history, but on the other hand it could place pressure in relation to serviceability.”

Graham Mendelowitz, MKM Capital: “Our

visit our website: www.brokernews.com.au

Stephen Moore, Choice: “More insight on

processes are designed to substantiate what customers are telling us through a pretty comprehensive due diligence process. There has been and always will be a percentage that do get found out in that process, but we haven’t necessarily seen an increase in those numbers.”

IR: “I don’t think anything changes for brokers – if anything this is positive news.

We would always encourage them to ensure they have full disclosure from clients. If there are any delayed or missed payments, the broker should ring the bank and make sure the deal stacks up.”

FEATURE / HOLISTIC FINANCIAL SERVICES

veryone talks about diversification and while most agree it’s part of the next evolution for the mortgage industry, very few brokers effectively incorporate it into their service. “At the moment less than 5% are truly diversifying their business,” notes Vow Financial CEO Tim Brown.

Why? It may be because it is much easier said than done. In a recent BrokerTV panel discussion, Mortgage Choice broker Leeanne Scott said she sticks to what she knows best and doesn’t “pretend to know about financial planning or insurance”. In addition, she said that the additional income she could gain from writing general insurance or life insurance was negligible and not worth the effort.

Smartmove’s David Brell has a similar take on diversification. “We have a whole office and all we do is mortgages, all we talk is mortgages, we just breathe mortgages, so we become – I like to think – the very best at doing that. We refer everything else on. I just can’t see how I could be doing the best thing by my client if I’m doing something else.”

There is a risk of spreading yourself too thin when you add additional services to your business. ALCo general manager Lesley Wood recently warned brokers who try to become financial planners or risk writers that they will struggle to wear both hats effectively.

“Of course, it can be successful for some, but it isn’t an easy road,” Wood points out. “Adding this service can result in difficulty with focus and often stretches the broker thin, not to mention the additional costs incurred, the need for double CPD points, software and compliance across two separate licences.”

Brett Abikhair of The Selector Group is one of the rare brokers who has done it all. After almost two

decades in banking, Abikhair became both a financial planner and a mortgage broker in 2002.

“It’s hard but it can be done,” he observes. “However, I don’t think it’s for everybody – quite the contrary. The majority probably need to specialise in what they do and do it well. But then how do you actually add value to what your client is doing? I think that needs to be part of your organisation.”

Abikhair had the expertise to deal with clients’ financial needs himself, but in 2008 he decided to create

As much as industry groups and aggregators bang on about the benefits of diversification, the reality is very few brokers do it well. Are too many trying to go it alone when they could be better off teaming up with other finance professionals?

ANDREA CORNISH finds out

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a new business model. Abikhair and his business partner created a diversified financial services ‘one-stop shop’ that provides personal insurance, financial advice and investment options as well as mortgage finance.

Within The Selector Group are three different brands: Mortgage Selector, Wealth Selector and Real Estate Selector; and each hub is responsible for providing expert advice to clients. Abikhair evolved his mortgage broking business into a holistic financial services company because he saw an opportunity in doing so.

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FEATURE / HOLISTIC FINANCIAL SERVICES

Mark Bouris, Yellow Brick Road

Brett Abikhair, The Selector Group

“If you’re a mortgage broker you’ve got one channel to market – which is effectively opportunity with debt, but there are lots of other reasons why you might need to talk to someone in finance, from ‘I need cover for my business’, to ‘I need my super looked at’, or ‘I need a lease’ – whatever the case may be – they’re all opportunities to deal with new clients. And once you’ve got them in the door, you can offer them all the other products. So it was actually an opportunity play.”

There are other ways to look after your clients’ financial needs – referring them to other specialists, for example, but Abikhair says that it comes down to client ownership. “So, if you’re referring, then you’re flicking them off to somebody else – you don’t actually control that client relationship. And we wanted to be the gate keeper so if a client came to us, we wanted to make sure we could execute on anything they could possibly want.”

The Selector Group isn’t the only business providing clients with a one-stop solution and Abikhair notes that Mark Bouris’ creation of Yellow Brick Road is proof that

Pros and cons at-a-glance ADVANTAGES Easier than doing it yourself Increased revenue stream Greater ‘wallet share’ or client retention Decreased dependence on home loan market fluctuations Next evolution of mortgage broking

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DISADVANTAGES Increased complexity Increase in licensing and compliance issues Need for a bigger back office Greater emphasis on systems and processes

this business model is a natural evolution for the industry. Bouris established Yellow Brick Road in 2007.

The business provides advice along with a full range of financial services including home loans, insurance, investment strategies, accounting and taxation, selfmanaged superannuation fund establishment and administration, estate planning, business structuring and succession planning.

“I think in an environment where the flow of new mortgage business is less and where commission payments are under pressure, you have to have diversified revenue streams,” reckons Bouris. “One obvious one is insurance. Less obvious, but probably more profitable are super and general investment advice. But in order for a mortgage broker to do those there’s a fairly big uplift in qualifications, licensing requirements, compliance and probably marketing cost.

“So what our hub and spoke model allows us to do is actually maintain the costs within the hub and then to build on an economy of scale whereby all the spokes enjoy the value of what comes out of compliance, licensing and marketing.”

According to Bouris, all brokers have to do is actually originate the business.

“Some mortgage brokers who go into our model can’t deal with the client, but they can originate the client and look after the client, and someone else needs to do the advice work. So you need access to someone who can give the advice. Our model does that – we have financial planners within our organisation who can actually go out to the branch and give the advice on behalf of the company and brand. That’s really important because you can’t expect all these guys to be financial planners – it’s too hard and it’s too expensive a process.”

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SPECIAL REPORT / BROKERS ON NON-BANKS

SMALL FISH

The Big Four continue to dominate the Australian mortgage market, but away from the mainstream the non-bank scene is enjoying something of a resurgence. In our ninth annual Brokers on Non-Banks survey, Barney McCarthy hears what intermediaries had to say about the products, rates and service on offer from the nation’s alternative lenders

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The global financial crisis hit the entire mortgage market hard, but the impact was perhaps most keenly felt in the non-bank sector. Hardest hit were the niche players that concentrated on specific areas of the market and didn’t have the financial clout of the big banks to weather the storm and subsequently fell by the wayside when the going got tough.

Australians like nothing more than a battler though, and the resilience of much of the non-bank sector has surprised and impressed many. But far from viewing survival as their only goal, lenders outside the mainstream have removed the hatches and are now bringing the fight to the majors. They may still like the firepower of their larger counterparts, but what they lack for in size they make up for in flexibility, innovation and – according to the hordes of you who voted in this year’s survey – tailored and timely service. On behalf of MPA, thanks to all the brokers who took the time to vote and provide valuable insights into the performance of Australia’s non-bank lenders, and before we reveal the results, here is a word from our survey partners, Advantedge.

There’s little doubt that the non-bank sector is undergoing a revival. With the global financial crisis now behind us, and a new world without exit fees upon us, the non-bank proposition is growing stronger by the day. With such competition in the marketplace between lenders right now, borrowers are no doubt price conscious – and with many non-banks competing toe-to-toe with the majors on rate, they’re gaining ground.

But that’s not the main reason why Australians are choosing non-banks for their mortgages. The service proposition offered by non-banks has long been their advantage. Brokers have been drawn to non-banks with the knowledge that deals will be turned around quickly and usually with a degree of flexibility. The lack of channel conflict is also a key driver behind brokers’ partnership with non-banks – empowering them to truly own the client and improve overall client servicing. As Australia’s leading wholesale funder we work in partnership with non-bank mortgage managers to elevate their businesses and grow the sector’s market share.

Our partnership of MPA’s non-bank survey reflects this investment in the sector and our commitment to growing the channel.

Brett Halliwell General Manager, lending distribution Advantedge Financial Services

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SPECIAL REPORT / BROKERS ON NON-BANKS

Methodology This year’s survey drew 387 responses from the mortgage-broking community. Participants were asked to name the three non-banks they thought had performed the best over the past 12 months in the following categories: turnaround times, BDM support, transparency of commission structure, broker support, interest rates, product range, overall service, satisfaction with credit policy, internet platform, customer support, product innovation and marketing. They were then grilled on what percentage of business they conducted with non-banks, what they would like this figure to be in an ideal world, and they were also asked how many customers specifically enquired for home loans from these lenders. Next, respondents were asked whether they were satisfied with non-bank commissions, whether the introduction of licensing had affected their relationship with smaller lenders and what impact the exit fee ban would have on non-banks. Finally, brokers taking part were asked what the best thing a non-bank lender had done for their business in the last year was, and how they can improve over the coming 12 months.

CATEGORY IMPORTANCE

Market share The average respondent places

41% of their business through non-banks

Categories (in order of importance)

SCORE

Turnaround times

4.48

Overall service

4.37

Satisfaction with credit policy

4.22

Customer support

4.09

Product range

4.05

BDM support

3.95

Interest rates

3.95

Product innovation

3.76

Broker support

3.46

Transparency of commission structure

3.44

Internet platforms

3.28

Marketing

2.96

The third party distribution channel is still committed to using non-banks 26 | BROKERNEWS.COM.AU

As well as naming the non-bank lenders they thought excelled in each area, respondents were also asked to rate the categories out of five for importance. Speed proved key, with brokers awarding turnaround times 4.48 out of five. The famed non-bank service wasn’t far behind, garnering an average of 4.37, and credit policy was also prominent on the broker’s wish list.

Interestingly, brokers in this survey considered BDM and broker support less important than those that voted in our Brokers on Banks poll where the sections finished third and fourth. Marketing was considered the most trivial element of non-banks’ operations, but still registered an average of close to 60%. Internet platforms also weren’t considered the ‘be all and end all’, perhaps suggesting that brokers dealing with non-banks still prefer to pick up the phone and speak to someone rather than complete a transaction online.

The average respondent would like to place

63% of business through non-banks

Percentage of consumers requesting non-bank home loans

20%

The latest figures from the Australian Bureau of Statistics make for grim reading for those with a vested interest in the non-bank sector with banks now accounting for 92.5% of the mortgage market, leaving credit unions (4.3%), building societies (2%) and non-banks (1.2%) to fight over the scraps. When you consider that non-banks accounted for 15.2% of the market back in 2003, this is some contraction.

Nevertheless, respondents to our survey painted a rosier picture for smaller lenders, proving that the third party distribution channel is still committed to using nonbanks. The average mortgage broker we polled places 41% of their business through non-banks, up 4% from last year. When asked how much business they would ideally like to place through non-banks, this percentage soared to 63%, showing that there is an eagerness to do business that lenders outside the mainstream are unwilling – or unable – to capitalise on. Consumer

obliviousness may play a role here too, with just one in five borrowers specifically requesting a home loan product from a non-bank.

Brokers were also asked about brand profile and whether the relative invisibility of non-banks affected the likelihood of respondents recommending them.

Homeloans Ltd was singled out as by far and away the most recognisable marque, with several respondents suggesting that its use of AFL star Matthew Pavlich as a brand ambassador had raised its profile. Mortgage Ezy and Liberty Financial were also singled out for having distinct imprints, a sign of things to come in the general rankings. Profile is important to brokers too, with 64% saying a recognisable brand helps them sell products to clients.

YES

NO

Has the introduction of the NCCP Act restricted your dealings with non-bank lenders?

21%

79%

Will the removal of DEFs affect your dealings with non-banks?

26%

74%

Changing times The preparation for the new regulatory regime seems to have been going on forever, but even though licensing has arrived, the debates won’t disappear overnight. It is still too early to comprehensively gauge what effect regulation will have on the market, but brokers are already noticing differences in their dealings with non-banks. Just under four-fifths say licensing won’t influence their relationships with non-banks, but the fact that a fifth have noticed restrictions is a worry for a sector that can ill afford further contraction. The gist of comments from brokers who claim business as usual is that they and non-banks have been operating as if they were regulated for years now, so the advent of licensing makes little difference and that non-banks are held to the same standards as their mainstream counterparts, so there is no reason for smaller lenders to be marginalised. Of the respondents who did feel their access to non-bank lenders had been restricted, a common complaint was an indirect result of their choice of licensing method. Those becoming credit

FUTURE FOCUS Do you think non-banks will increase their market share over the next 12 months?

Non-bank market share may have recently plummeted to record lows, but respondents were still optimistic for the future health of the sector.

Almost three-quarters of those polled expect non-banks to grow their slice of the pie and while nay-sayers may claim things can’t get much worse, smaller lenders can console themselves that they have the support of brokers. A bleaker picture is painted by 28% of brokers who don’t envisage non-banks winning any market share back off the banks.

It wasn’t all just unconstructive criticism though, and respondents were asked how

YES

NO

72%

28%

they thought non-banks could improve. Despite ranking marketing as the least important category that they judge non-banks on, many survey participants acknowledged it was vital if non-banks wish to raise their profile. One Merrylands-based broker had some specific advice about the image non-banks need to portray. “They need to advertise to the public the fact that they no longer charge an exit fee,” he suggests. “They also need to make it clear they enjoy the same support from the Government as the banks and highlight the fact that flocking solely to the banks reduces

competition and could bring us back to the dark days when banks had no competition and dictated whatever they wanted to the consumers. It can be a good opportunity to promote themselves and the brokers alike.”

Pricing was another issue that cropped up, with brokers feeling that non-banks could be more competitive, as well as adopting a more flexible approach to their credit policies. A respondent from Mulgrave hit the nail on the head: “Non-banks need to have more aggressive pricing, which is where most fall down. Some have competitive rates, but the related fees pull that rate up to a less competitive level. To be successful they must be extremely sharp with pricing or carry less credit restrictions.”

Service is often an area that non-banks excel in and brokers say non-banks must continue to

offer a great experience for brokers and consumers alike to keep it as a point of difference.

As one broker from Canberra put it: “The best thing the non-banks have going for them is their people, so they must continue to have credit smart staff that are willing to look into a deal rather than have a computer program telling them it fails.”

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SPECIAL REPORT / BROKERS ON NON-BANKS

representatives of their aggregator are often limited to home loan products from a selected panel, and if non-banks don’t feature, then brokers aren’t allowed to use them. Others felt that non-banks have become stricter than their major counterparts when it comes to compliance and paperwork, but if consumer protection and satisfaction is truly a broker’s goal, then this argument carries little weight.

Another issue that has dominated proceedings this year has been the drawn-out saga of the exit fee ban.

Our respondents were asked whether they thought the removal of DEFs would affect their dealings with non-banks and just shy of three-quarters thought their relationships wouldn’t be influenced, while 26% expected some changes. Of the group expecting a transformation, not all expected the differences to be negative. The more pessimistic voters envisaged compensatory fee hikes in other areas or cited clawbacks as an adverse side-effect, but glass half-full brokers claimed the removal of DEFs could make the non-banks a more attractive option to borrowers.

Turnaround times were the most important category to brokers, and non-banks outdid themselves this year

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THE RANKINGS And now, the bit you’ve all been waiting for – the results.

A handful of non-banks dominated proceedings this year, but more than 30 lenders were nominated in some categories, showing there is still depth and variety outside the mainstream. Regional lenders such as B&E and Newcastle Permanent received support in their territories, and organisations from Australian Financial to Redzed garnered votes, but unfortunately not enough to make the podium. Finishing positions were determined by totalling the votes received for each lending institution in each section.

Turnaround times 1ST

2ND

3RD

HOMELOANS LTD

LIBERTY FINANCIAL

AUSTRALIAN FIRST MORTGAGE

Highly commended: Mortgage Ezy/Heritage Building Society Turnaround times were judged to be the most important category to brokers and, judging by the responses, non-banks outdid themselves this year. Brokers were impressed not just with the speed with which cases were handled, but how quickly potential problems were smoothed out. One respondent from Victoria lauded a non-bank for turning a last-minute decline from another lender into a settlement within seven days, which rescued his reputation with an important client. Another broker from Bundall said a non-bank had also helped him save face. “We had an urgent finance date which needed to be met,” he recounts. “The file was quite large and complex. The mortgage insurers approved and we sent to the funder for approval the same day as the finance date. Knowing the impending deadline, they approved the file on the basis of our and the insurers’ assessment only. They looked at the big picture, they took our past business history and reputation into account and helped us greatly.” Homeloans Ltd won this category, ahead of Liberty Financial in second and Australian First Mortgage in third. Mortgage Ezy and Heritage Building Society just missed out on the medals.

Overall service 1ST

2ND

3RD

HOMELOANS LTD

LIBERTY FINANCIAL

HERITAGE BUILDING SOCIETY

Highly commended: Australian First Mortgage, Mortgage Ezy Non-banks are often vaunted for their service, making this one of the most prestigious categories of the poll.

Homeloans Ltd again struck gold, with Liberty Financial and Heritage Building Society joining them on the podium. Australian First Mortgage and Mortgage Ezy were the non-banks with the next highest scores. Some brokers felt that larger lenders took them for granted or displayed an arrogant attitude in their dealings with intermediaries. One broker from Taylors Lakes says: “There is no comparison to the banks in terms of service – the non-banks are streets ahead. The banks have a greater market share and therefore have become complacent while the non-banks are hungry for business and therefore give the best service.” Other respondents spoke of sharing more of an affinity with non-banks compared to the banks and feeling “on the same team”.

Satisfaction with credit policy 1ST

2ND

3RD

HOMELOANS LTD

LIBERTY FINANCIAL

PEPPER/ AUSTRALIAN FIRST MORTGAGE

Highly commended: Mortgage Ezy, Heritage Building Society

Homeloans Ltd was adjudged to be the non-bank with the most understandable and logical credit policy, ahead of Liberty Financial in second place and Pepper and Australian First Mortgage who shared third place.

Mortgage Ezy and Heritage Building Society finished just off the pace. There did seem to be more broker unrest around non-bank credit policy this year compared to feedback from previous years, but this is probably due to a tightening up of policy across the market in line with regulations as opposed to smaller lenders becoming pernickety for the sake of it.

Nevertheless, one broker from Wollongong feels that non-banks could be less strict. “They should relax the stringent credit policy guidelines,” he suggests. “They need to stop treating every file as potential fraud.”

Others felt that non-banks had become even stricter than their major peers, but smaller lending institutions can ill afford to fall foul of new regulations.

Customer support 1ST

2ND

3RD

HOMELOANS LTD

LIBERTY FINANCIAL

AUSTRALIAN FIRST MORTGAGE

Highly commended: Mortgage Ezy, Heritage Building Society While on the face of it customer support is a highly important consideration for brokers when using non-banks, it is also something of a contentious issue.

Advisors want their clients to be able to access assistance when required, but they also want lenders to acknowledge that they don’t ‘own’ the client and avoid cross-selling or stealing the customer. Respondents to our survey said non-banks struck a fair balance here and

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SPECIAL REPORT / BROKERS ON NON-BANKS

Along with tailored service, products are one area where non-banks can really take the fight to the non-lenders outshone the behaviour of the major lenders.

Homeloans Ltd secured another victory here, beating Liberty Financial and Australian First Mortgage to the top spot. Once again, Mortgage Ezy and Heritage Building Society were in the running, but just missed out on glory.

Product range 1ST

2ND

3RD

HOMELOANS LTD

LIBERTY FINANCIAL

AUSTRALIAN FIRST MORTGAGE

Highly commended: Mortgage Ezy, Heritage Building Society In what is becoming a familiar procession, Homeloans Ltd led Liberty Financial and Australian First Mortgage home when it came to the most impressive suite of mortgages. Mortgage Ezy and Heritage Building Society completed the picture with commendations. Along with tailored service, products are one area where non-banks can really take the fight to the bigger lenders. They may not be able to match their more esteemed counterparts in terms of the best rates, but they can serve niche sectors the banks are unwilling to operate in.

30 | BROKERNEWS.COM.AU

BDM support 1ST HOMELOANS LTD

1ST

3RD

HERITAGE BUILDING SOCIETY/ AUSTRALIAN FIRST Highly commended: MORTGAGE Mortgage Ezy, Pepper LIBERTY FINANCIAL

If the best thing about non-banks is their staff and the levels of service provided, then BDMs are integral to this, acting as brokers’ first point of contact. This was a keenly contested division, with the top positions being shared. Homeloans Ltd and Liberty Financial split the gold medal, while Heritage Building Society and Australian First Mortgage carved up bronze. There was no silver medal due to the fact the top position was taken by two lenders. Mortgage Ezy and Pepper nearly made the podium, but fell slightly short. Many intermediaries voting in this section singled out individual BDMs for going beyond the call of duty including being contactable after office hours and working hard to find solutions to unorthodox applications.

Interest rates 1ST HOMELOANS LTD

2ND AUSTRALIAN FIRST MORTGAGE

3RD MORTGAGE EZY/ LIBERTY FINANCIAL/ HERITAGE BUILDING SOCIETY

We’re constantly reminded that there are more to suitable products than the sharpest interest rate, but

tasty tariffs do no harm. Homeloans Ltd was adjudged to be the non-bank lender with the keenest rates, edging out Australian First Mortgage. Three lenders fought over third place, with Mortgage Ezy, Liberty Financial and Heritage Building Society all receiving an identical number of votes. The consensus among responses in this category seemed to be that nonbanks punch above their weight in terms of rates, but that they must remain on a par with the banks if they are to stay competitive.

Product innovation

training and seminars. Pepper took out third place, while Mortgage Ezy and Better Mortgage Management also fared well. Brokers in regional areas were appreciative of non-banks that sent their BDMs to areas outside the state capitals and who held training events in these locations. It is important for non-banks to be proactive in this regard if they are to wrest any market share away from the major lenders, and educating brokers will also help them in the long term with more clued-up brokers being able to submit appropriate applications more efficiently.

Transparency of commission structure

1ST

1ST

3RD

HOMELOANS LTD

LIBERTY FINANCIAL

PEPPER

Highly commended: Australian First Mortgage/Mortgage Ezy/ Heritage Building Society Another close-run category saw non-banks vying for room on the podium. Liberty Financial and Homeloans Ltd shared top spot after receiving the same number of broker votes. Consequently, there was no silver awarded, but Pepper took out the bronze. Australian First Mortgage, Mortgage Ezy and Heritage Building Society were all bunched just behind the leaders too. As mentioned in the product range category review, non-banks may not be able to compete with the majors on rates, but niche areas and genuine innovation are ways they can stand up and be counted. Judging by the responses, non-banks are already innovating in an informal way by considering applications that may on the face of it seem to be outside the box.

Broker support 1ST

2ND

3RD

LIBERTY FINANCIAL

HOMELOANS LTD

PEPPER

Highly commended: Mortgage Ezy, Better Mortgage Management Liberty Financial broke Homeloans Ltd’s stranglehold to take out this category. They recognised the assistance non-banks provide brokers with in terms of information,

1ST

2ND

3RD

HOMELOANS LTD

LIBERTY FINANCIAL

MORTGAGE EZY/ AUSTRALIAN FIRST MORTGAGE

Highly commended: Heritage Building Society Homeloans Ltd continued its dominance by taking out the transparency of commission structure category ahead of Liberty Financial in second and Mortgage Ezy and Australian First Mortgage. Heritage Building Society was commended for finishing narrowly outside the top three.

The responses revealed brokers were satisfied not only with the fairness of non-bank commissions, but also the level of remuneration on offer. A comprehensive 83% of respondents were happy with the payment on offer from non-banks, a complete turnaround from our Brokers on Banks poll this year where 81.5% were unsatisfied with the amount they earned from commission.

Perhaps the majors can take a leaf out of non-banks’ stance in this regard, but don’t hold your breath.

A number of brokers were quick to point out that while transparency was important, the level of commission should be a secondary consideration, particularly under new regulation. “I am not driven by commission,” stated a respondent from Wandana. “I am motivated by building a happy client base. The client’s needs outweigh who pays me the most. Therefore, I choose to not be mindful of commission rates when assisting with the selection of suitable finance options.

While the commissions are disclosed in my FBA I can’t recite them as I prefer not to know, and then this doesn’t influence my decision making.”

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SPECIAL REPORT / BROKERS ON NON-BANKS

Internet platforms 1ST

2ND

3RD

HOMELOANS LTD

LIBERTY FINANCIAL

HERITAGE BUILDING SOCIETY/ AUSTRALIAN FIRST MORTGAGE

Highly commended: Better Mortgage Management, National Finance Club, Mortgage Ezy Perhaps surprisingly, brokers considered snazzy websites and online functionality the second least important attribute for non-banks. Whether they don’t expect smaller lenders to have the technological prowess of the big boys or if it’s simply a case of preferring to speak to someone over the phone is unclear, but either way, internet platforms are not a pressing concern. The usual suspects dominated the top spots, but there were some new faces among the commendations. Homeloans Ltd edged out Liberty Financial, Heritage Building Society and Australian First Mortgage to triumph in this section, but Better Mortgage Management and National Finance Club joined Mortgage Ezy as the lenders unlucky to miss out on a top-three finish.

Marketing 1ST

2ND

3RD

HOMELOANS LTD

LIBERTY FINANCIAL

PEPPER

Highly commended: Mortgage Ezy, Australian First Mortgage Marketing was deemed the least important part of a non-bank’s arsenal by brokers although, conversely, it was flagged by many respondents as an area where smaller lenders could improve and help close the gap on the big banks. Participants in the survey felt that not only did non-banks need to increase awareness of their brands, but also allay fears among consumers regarding potential volatility of funding lines and promoting themselves as a genuine alternative to the majors.

Homeloans Ltd landed this award, with several brokers applauding its use of sports stars in its advertising campaigns. Liberty Financial and Pepper completed the podium picture, with Mortgage Ezy and Australian First Mortgage not far behind.

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OVERALL RANKINGS 1ST

HOMELOANS LTD

2ND

LIBERTY FINANCIAL

3RD

AUSTRALIAN FIRST MORTGAGE

4TH

MORTGAGE EZY

5TH

HERITAGE BUILDING SOCIETY

It doesn’t take a mathematical genius to work out who landed our title of Non-Bank of the Year. After blitzing the majority of the categories, Homeloans Ltd was our clear winner in 2011, improving from second place last time round. Liberty Financial was another lender that improved this year, climbing to second after finishing third in 2010. Last year’s winner Australian First Mortgage had to settle for third. Mortgage Ezy and Heritage Building Society were two other lending institutions that garnered more votes this year than last, finishing in fourth and fifth place respectively. Congratulations to our winners and to all the non-banks that received votes and praise in this year’s survey.

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CEO & A

Since vacating the Vow Financial hot seat at the end of 2010, Jeff Zulman had disappeared off the radar. Now back with his latest venture, he discusses it – and the growing pains of the Australian mortgage market – with Barney McCarthy

Q: Where did the idea for The Book Buyers Brokerage come from?

A: When I worked on putting together what

became Vow Financial, it became very clear to me that consolidation was occurring at multiple levels. It started with acquisitions at the bigger end by some of the banks such as the CBA acquisition of Bankwest, through to Aussie swallowing up Wizard at the supplier end of the chain. At the next level, aggregators were consolidating and the next step was brokers coming together. All these mergers were fuelled by the need to drive efficiencies. When the industry started 15 years ago, brokers had approximately a 2% market share and now it’s as much as 40%. This tremendous growth coupled with low barriers to entry fuelled plenty of scope for operators to achieve critical mass, then others

34 | BROKERNEWS.COM.AU

HEAD TO HEAD / JEFF ZULMAN

Out of office I love exercise and participated in the ITU World Championship triathlon event in Sydney in April, finishing near the back of the field.

I’m also training to run the City2Surf with my son, who is already a better runner than me at 11.

I love to travel and recently visited Mauritius, as well as a trip back to South Africa. The US is next on the agenda.

I have four kids aged 13, 11, 10 and 8, so family is obviously a big part of my life.

“We are in a classic sorting phase, where the industry will selfrationalise and emerge stronger from it, and regulation will help to facilitate that process” came through with innovative models and there were enough spoils to go round.

Even without a GFC, any industry will hit a point in its maturation curve where it starts to level out – where the young child gets into its teens and is no longer growing an inch a month. When you get that, together with the double whammy of things getting tougher, commissions being cut and costs going up with regulation, it makes it imperative to focus on how to grow the business or get out. It’s simple maths. Even if brokers are doing as much business as before – which would be good – their trail income would still shrink by up to 40% because of these additional factors. People understood this on an intellectual level, but didn’t do anything about it as there was always tomorrow. Now things are starting to bite, they are doing one of three things: getting out; buying someone else because organic growth is harder; or teaming up with others, whether it is other brokers so they can share back-office resources or bringing in other professionals such as financial planners. As soon as they get into any of those three areas – selling, buying or merging – they get into an area where most have little or no experience.

It became clear to me there were the same mistakes being made over and over when I went to look at acquisition opportunities. Things like shareholder agreements that are entered into which make it almost impossible for some people to do anything in the future because they are blocked by one shareholder or a small minority. Or cases where there is no shareholder agreement and the different parties remain in deadlock and they can’t move forward. You would have thought these issues are things their lawyers would help them with, but the reality is that the lawyers need to be briefed and must be the right lawyers for the task. It’s like going to your family GP when you need a specialist.

They might go to their trusted suburban lawyer who says they will help; then the agreement is missing important components. All this gave rise to the situation where I was wondering who was going to service these brokers? They don’t want to spend a lot of money, but sometimes they need somebody to sit down with them

BROKERNEWS.COM.AU | 35

who has 20 years of experience and say ‘What do you want to achieve? Why? What have you done so far?’ and then give them a checklist of what they need to do.

The second part of it was my own frustration with looking to buy trail books of business. I very quickly saw that the market wasn’t transparent. On a prosaic level, you’ve got a situation in some cases where people ask how much does a broker want for their book, they say a certain amount, it is sold, but little do they know that person is on-selling it at an enormous mark-up. There is no transparency. On the other side, I’ve been helping people looking to buy books with due diligence, analysing what is there and looking at it from a legal point of view. There are differences between buying a company and buying a trail book, such as the GST and legal implications as well as warranty and privacy considerations. What I’ve found is that even with the best intent, information is not presented in a clear, coherent way. I thought there was scope for someone to step in and be the broker’s broker – to stand in the middle and facilitate the buy/sell process and improve the transparency. Finally, I realise there will be opportunities for us to help people who want to be discreet. What I found a bitter pill to swallow when I was running an aggregator was that people will go to their friends when they want to sell, but don’t go to their aggregator. They would rather keep it quiet. I plan to act independently on behalf of those people but I don’t want to compete with the aggregators. I would say to the aggregator this business can stay with you and we can find someone in your group to look after those clients.

Alternatively we might buy a share of the business and become a sleeping partner, buy the whole thing, or help with short-term funding.

The Book Buyers Brokerage is essentially a boutique mergers and acquisitions advisory service that provides advice for brokers. Secondly, it is a transparent brokerage system for those who want to buy and sell.

And finally, it is a principal funding mechanism where I have secured funding for those who want to sell or bring in a financial partner in to provide expansion capital.

Q: So it’s not just helping brokers buying loan books, it is company acquisition as well then?

A: Correct. There will be some good opportunities where some of the doyens who started in the industry 10–15 years ago are looking to retire. They have good young teams, but not the necessary capital to buy out the founder in one instalment. We would be willing to be a sleeping partner, take a stake, to fund the new generation or transition to the next generation.

Q: How long have you been formulating the idea for?

A: When you work for one aggregator, you can’t be neutral and service the entire brokerage community. In

36 | BROKERNEWS.COM.AU

HEAD TO HEAD / JEFF ZULMAN

the past six months I have formulated the idea with the help of some friends and identified that here I can be independent and not look after the interest of one party.

Q: How many brokers have you come across who want to leave the industry as a result of licensing?

A: There is a lot of information bandied about that suggests the figure could be as high as 25%. Anecdotally, I don’t think that’s the case. What has actually happened is that more people are giving over their books to colleagues or friends to let them tend to them. Some brokers were already all but out of the industry and licensing was the ‘straw that broke the camel’s back’. For those that remain, the figures look quite good. We are in a classic sorting phase, where the industry will selfrationalise and emerge stronger from it, and regulation will help to facilitate that process.

Q: Why did you leave Vow? Was it to launch this venture? Were you only ever on a temporary consultancy arrangement?

A: I didn’t leave with the intention to launch this. I helped put Vow together – I specialise in managing that first merger and acquisition phase, helping put the structure together. When it got to the gateway to the next stage and we had ticked most of the boxes, Tim Brown was a natural choice and has heaps more experience in terms of building distribution and is widely respected in the mortgage industry. I learnt a lot at Vow and I am very grateful for the good friends and contacts I made there.

Q: What was your background before Vow? A: After my legal studies in the UK, I worked for an American investment bank in New York and London. I came out to Australia originally to run a joint venture I had set up in direct marketing. I have set up, or invested in, run and then sold four businesses in my time and each time I try and find opportunities and anticipate trends.

Q: Was Vow your first role in financial services?

A: I initially worked for Goldman Sachs in the private wealth area in London and cut my teeth on Wall Street.

Then I came out to Australia and after selling my first Australian business, I ran an investment group and was involved in setting up Advance Loan Direct.

Q: How long have you been in Australia?

A: My wife and I emigrated here in 1994. I’m a firm believer you can predict trends in one market by what has happened elsewhere, particularly as the UK had mortgage regulation earlier than Australia. I don’t think Australia has experienced big economic swings like the UK and the US, but I can feel some cold winds blowing. It’s only the strength of China and our mineral base keeping the Australian economy strong. In other areas, people are doing it tough and I don’t know how it will play out. We have a strong dollar, a robust housing market and good exports, but it only takes something of a wrong foot in the local economy and it could be the beginning of the housing market being knocked off its perch. How can property prices continue to go up if salaries are not increasing in line? People are straining to afford more.

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FEATURE / COMMISSION REFUNDS

CA$H

GRAB

The erosion of commissions and increase in clawback measures have convinced some industry players that the introduction of a fee-for-service is inevitable. But where does this leave companies offering borrowers a refund? Andrea Cornish finds out

The decline in commissions and the rise in clawbacks have directly correlated to increasing interest in charging a fee-for-service. Smartline managing director Chris Acret is one industry figure who recently indicated the franchise was considering a ‘no-go’ fee, suggesting the idea is not unreasonable.

Mortgage Choice is another brokerage examining the issue more closely. It commissioned a recent Fee for Service Survey to gauge consumer response to such a move. While 61% of respondents indicated they would not pay a fee to use a mortgage broker, CEO Michael Russell said the company would continue raising consumer awareness of the value proposition provided by brokers.

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FEATURE / COMMISSION REFUNDS

FEE-FORSERVICE: THE NUMBERS According to Mortgage Choice’s 2011 Fee for Service Survey, 61% of respondents would not pay a fee to use a mortgage broker, while 24% indicated they would not even consider paying a fee which was fully refundable upon settlement.

He added that consumer resistance to a fee-for-service model would diminish as a result. The company is commissioning another survey at the end of the financial year and won’t be adapting its model until after that time.

But if the main driver behind the fee-for-service movement is declining commissions, where does this leave the commission refund model?

General manager Jon Mardell has been a broker for eight years but started Cashback Mortgage 12 months ago. While the company offers customers a fairly hefty refund (70% of upfront commission), it still manages to turn a profit.

“We have to do high volumes to get a return on our investment, so that’s obviously how we make our money,” Mardell says. “I would imagine most brokers would handle $1m–$2m per month, whereas we write significantly more than that.”

Since Mardell converted to the cashback model, he’s noticed a significant uptick in the number of customers walking through the door. And he believes any industry movement towards a fee-for-service model will benefit his business further.

“I’m sure customers would rather go to someone who was going to give them some money back, rather than someone who is going to charge them,” he predicts.

But Mates Rates Mortgage Brokers director Trent Lee says going forward, companies that only refund a part of upfront payments will have a harder time surviving in an environment of declining upfront commissions. “The ones that are going to struggle are the franchise models that share both upfront and trail commissions between franchisor and franchisee and just give a few hundred

bucks of upfront commission instead of paying the customer any of the trail,” he warns.

Mates Rates offers customers money back – it keeps the upfront and credits 100% of the trail commissions to customers as a monthly rebate. “Mates Rates is unique – there’s no other broker in the industry that refunds 100% of the ongoing commission on a monthly basis – so it can make the Mates Rates offering tens of thousands of dollars cheaper over the life of the loan compared to the exact same loan from an ordinary mortgage broker who doesn’t refund commission, or the lender direct,” he says. “Because it is such a unique selling proposition, we get a lot more volume of enquiry and consequently get a lot more business.”

Lee is also on the cusp of launching another business with a similarly unique proposition to the customer.

Interestingly, bSmart Mortgage Brokers combines both a fee for service and a commission rebate. While Lee developed the bSmart system in 2003, the business has been in cruise mode whilst developing Mates Rates Mortgage Brokers.

However, Lee says the timing is right to bring the bSmart model to the market.

“The difference with bSmart is the customer will get 100% of the commission full stop; upfront and trail and pay a fee-for-service. However, the customer can opt to pay the fee-for-service upfront or have it debited from the commissions received by bSmart for brokering their loan,” Lee explains.

According to Lee, the new model combines the best of both worlds – the impartiality across bSmart’s lender panel of a fee-for-service business, and the consumer benefit of a commission refund.

The Refund fight Wayne Ormond launched Refund Home Loans in April 2004, promising a cash refund to customers for every loan written through his franchise network.

He was celebrated for his business success in 2008 by SmartCompany for achieving 106.68% growth, and was ranked #64 on the BRW Young Rich 2010 list and #74 in 2009, among other awards. The group now has more than 350 franchisees.

But Ormond’s entrance into the mortgage market was met with backlash.

Three banks threatened to shut the company down or refuse funding to the group. Ormond lodged a complaint against one bank with the ACCC for price fixing, which was scheduled to come before the federal court this year.

Despite cutbacks to commission three years ago, Ormond told SmartCompany that he wouldn’t

change his business model, however, he would slightly adjust the amount of commissions refunded to the client to offset reduced earnings for franchises.

According to Ormond, Refund Home Loans was not affected by the slowdown in volumes felt during the GFC and stated that his customers still prefer to get something back from Refund over nothing from other brokers.

Ormond has appeared on national programs such as A Current Affair and Today Tonight as a consumer advocate, however, in 2009 Refund Home Loans was featured for his dispute against Mates Rates Mortgage Brokers which he claimed infringed on its brand.

Ormond was in the spotlight again in 2010. But this time he was forced by the ACCC to admit making false and misleading

statements to franchisees in contravention of the Trade Practices Act. He told franchisees: “Now I’ve spoken to the ACCC. I’ve done everything in accordance with the law.” Another time he said, “I’ve had meetings with Graeme Samuel himself. I have nothing to worry about.”

Ormond was unable to respond to MPA’s request for an interview prior to press deadline.

BROKERNEWS.COM.AU | 41

Choice Capital director Nicholas Caple made his debut entry into MPA’s Top 100 at 9th in 2010, settling more than $87m in 2009/10. While residential home loans are a successful part of his financial services business, it is but one string to his bow

THINGS I’VE LEARNED Q: What do you attribute your success to?

A: We’ve been around for a long time – trading now for

11 years. We have a big network and rely heavily on repeat business. We do a lot of networking to the database – newsletters, emails, information on products, industry changes – and we also send out Christmas and birthday cards. We run seminars for our database on different topics such as setting up self-managed superannuation funds and borrowing for investment properties. We’re conscious of giving everyone great service. The experience of our business really starts with the receptionist or the person welcoming them at the door with a smile and a cup of coffee.

Q: What keeps you motivated?

A: I have a lot of other strings to my bow. I do

commercial finance and property development as well, so the diversity of my business keeps me motivated.

Having staff in leadership roles has allowed me to dilute my responsibility. That also keeps me motivated, because now I don’t have to do everything. I really enjoy the company of all our staff and the people that I work with – it’s like we’re a big family and I enjoy coming to work to engage with my workmates. If I were to leave tomorrow I’d really miss that.

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Q: What has been the biggest turning point in your career?

A: There have been many turning points along the way.

One milestone came when I decided to employ my first person. At the time it felt like a massive decision and so it was a huge issue. But it was a great thing for me and for the business to do that. Moving on from that was making the decision to move into a much bigger office that was too large for what we needed at the time.

Taking on a big lease was a huge financial burden, but all those decisions have been justified. When I first started the business, I only wrote commercial and construction finance, so that’s all I did for the first two years and then at the time I had a PA who asked why don’t we write home loans? I said I didn’t want to bother and so she asked if she could start writing home loans and that’s how we started writing home loans – it was sort of an accident. It was a funny way for it to happen, yet now you turn around and see we’re writing $150m a year in home loans…

BROKER PROFILE NICK CAPLE

Q: Have you faced any professional hurdles and how did you overcome them?

A: One of the biggest professional challenges is finding really good staff – particularly in this industry where it’s all about service. Finding good staff and keeping them is a big challenge. The bigger the business grows, the more you need systems and organisation and that’s really a challenge for a small business to get right. We’re always working at getting systems and accountability in place and having a unified message being conveyed to all the clients by everyone at work.

Q: What kind of advice would you give a new broker?

A: You need to be a people person and be very good at speaking and dealing with customers. The market is tough, the industry is tough and there’s less money to be made than there used to be. More than ever, we as brokers need to be focusing on our service offering to clients as opposed to just trying to find the cheapest interest rate. Most clients are after the service. Interest rates are important, but it’s not the main reason someone uses a mortgage broker. It’s also vital to be organised – you need to have a system to remember all your lead opportunities so you can follow them up.

Q: What are you doing differently from other mortgage professionals?

A: I diversify so I don’t rise or fall solely on the success of the home loan side of the business. The financial planning we bolted on about six years ago is quite a mature business now. The home loan business brings a continuous stream of clients through the doors and opportunities for us to cross-sell to them with financial planning or their needs in commercial finance – whatever the case may be.

Q: What areas of your business need to be improved?

A: Systems and our message to clients. We want to start

Fact file Nick Caple

++ Company: Choice Capital ++ Location: Albert Park, Vic ++ Years as broker: 11 ++ Top 100 spot: 9th ++ Settled (2009/10): $87,495,948

getting better at charging upfront fees which we’re trying to implement. It all stems from the message we’re selling clients; if we’re selling our service to clients and we reckon our service is better than every other mortgage broker, then we want to charge for that. We’re gradually implementing this with every new sale opportunity, but it’s easier said than done.

Q: What do you do to reduce clawbacks?

A: You ask all the leading questions to determine if the customer is looking to sell or refinance in the short term.

Often people will just tell you that and then you can charge them a clawback fee. All you can really hope to do is get a pretty good idea from the client on day one whether they will be paying out the loan during the clawback period, but sometimes it’s just a bit of collateral damage that we all have to put up with.

Q: What form of marketing works best for your business?

A: We just market internally to our database. It does cost us money – quite a lot because we do it well, but that’s really the only marketing we do. We don’t do external marketing. We’ve had a couple of fleeting things like sponsoring a football team or a community organisation, but we’ve never really reaped any benefit from that.

Q: What would you say is the most challenging issue facing the industry at the moment?

A: Probably regulation, just from a processing point of view – it involves more man hours. The move from the banks to steal market share from the brokers is also an ongoing issue. They’ve gone back to employing more in-house loan writers.

COLUMN / NEWSLETTERS

Email newsletters are a cheap and effective way to communicate with your database and keep your brand top of mind

CLOSE CONTACT Email newsletters are one of the easiest ways to keep in regular contact with your client database. Not only do they help keep your brand top of mind, they are an excellent opportunity to show your customers that you are up to date with the latest industry news. And while they can help you strengthen your current customer relationships, they can also generate new business, as there is always the possibility that customers will forward engaging articles to their friends, family and colleagues.

The main advantages of sending eNewsletters are: n low cost n easy to produce n strengthens customer relationships n unobtrusive way to keep in contact n keeps your brand top of mind n convenient for clients n demonstrates your knowledge of market n educational for clients n generates new business opportunities n allows you to introduce new products, concepts

CONTENT IS KING There are several ingredients that go into making a good eNewsletter and at the top of the list is quality content.

Your customers most likely receive dozens of eNewsletters, so if you want to ensure yours is opened

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then it’s important that your content is interesting and relevant to their needs.

In addition, the content should reflect your brand and your client base. For example, if your core business is Mums and Dads, then articles relating to interest rates and the housing bubble will be of greater interest than what’s happening in the commercial property market. The tone of the articles should also reflect your audience – avoid technical jargon if it’s going to confuse your audience.

Lastly, avoid the temptation to use eNewsletters to market your services too heavily. If readers are interested in fixed rates for instance, then a story about the increase in popularity of these products should be enough of a hook for them to contact you – there is no need to explain why your brokerage is the best at arranging these types of loans.

BUILDING BLOCKS Now you have to figure out how to build the newsletter and send it. There are a couple of options. These include purchasing software or partnering with a hosted supplier.

Purchasing software is a cost-effective way to deliver your information to clients. It provides you with templates to help you create your own newsletter. Once you’ve plugged in your articles you can simply email them to your client database. The disadvantage is it

doesn’t allow you to personalise the newsletter or track who is reading it and what articles they’re following.

A web supplier can help you design, build and maintain your newsletter as well as track its success by reporting on how many customers are unsubscribing and which articles they’re clicking on most. In addition, they can help you personalise the newsletter.

FREQUENCY There is no set rule on how often to send eNewsletters out, but you need some regularity so that customers come to expect and count on them. Many brokers like to send out their eNewsletters on the back of the RBA’s monthly rate announcement, but if you have the time and resources you could send them out more frequently.

LEGALITIES One of the most important rules to follow is to never disclose your client list. Under the Privacy Act, it’s illegal to disclose your mailing list to any other party without the express consent of your clients.

For more information on privacy guidelines, visit the Federal Privacy Commissioner’s website http://www. privacy.gov.au.

In addition, you must heed the 2003 SPAM Act and Privacy legislations. The Act specifies that you can only send electronic messages with the addressee’s consent, you must clearly identify yourself as the sender, and you must have a functional unsubscribe facility that allows you to deal with requests immediately. For more information, visit www.spam.acma.gov.au.

Cardinal sins Putting out an inferior eNewsletter just for the sake of trying to keep your client database warm could be detrimental to your client relationships. Just because this is a fairly low cost and easy way to keep in touch with clients, it doesn’t mean you shouldn’t do it well.

Whatever you do, avoid these mistakes: n Don’t forget to spell-check n Don’t overuse it n Don’t use it to spruik your services n Don’t be inconsistent n Don’t be longwinded

Easy eNewsletters Building quality eNewsletters and tracking performance can take time and effort, but there are several solutions out there for the busy broker. Broker Marketing Services Online (BMS Online) provides the latest mortgage and refinancing information through eNewsletters, website content, social media marketing and private label content.

The newsletter service includes monthly newsletter content, property reports, mail distribution and tracking.

Missives are delivered on the first Tuesday of the month to coincide with the RBA’s interest rate announcement and ensure pertinence. The articles cover a wide variety of topics to interest first homebuyers, refinancers, and investors and are written to

encourage the customer to get back in touch with the broker. BMS Online tracks the performance of the eNewsletters on behalf of the broker and highlights how many clients have opened them, how many unsubscribed and which articles were read by whom – all of which are designed to help strengthen brokers’ ability to follow-up with those clients.

USEFUL RESOURCES Mail Chimp » Templates » Box » Interspire » Constant Contact » E-Newsletters Online Send Blaster

BROKERNEWS.COM.AU | 45

GETTING STARTED / COMPLIANCE

Brokers have already become credit representatives or obtained their own licence. BARNEY McCARTHY spoke to five key players in the compliance and training sectors and asked them how brokers can improve their regulatory efficiency

IMPROVING

EFFICIENCY 46 | BROKERNEWS.COM.AU

What percentage of brokers has obtained their ACL compared to those becoming credit representatives?

Greg Ashe, QED Risk Services: Our partner contacts cover approximately three-quarters of the licensee population.

What we’ve seen in our partnet network is around 70% taking credit licences.

Doug Daniell, Walker and Miller Financial Services: I’m not sure of the exact statistics, but we mainly deal with ACL applicants and licensees. However, we have seen that most brokers have chosen to be authorised representatives. This is dependent on the aggregator model that they are under and the level of support offered. We are also seeing medium to larger groups that initially chose to be under the aggregator platform now seeking to obtain their own licences. There does not seem to be the same movement the other way.

Claire Wivell Plater, Gold Seal: There are varying estimates of the number of brokers in the industry, but ASIC statistics indicate that 14,758 people are registered under the NCCP Act. Of those, as at May 2011, 7,093 had applied for licences and 5,928 licences had been issued.

Andrew Hetherington, Intellitrain: From the aggregators I have spoken to, it would appear that around 60% of brokers are seeking their own licence. It’s surprising really, you would expect more brokers to have become credit representatives.

However, we have an expectation that over time a number of brokers who have their own licences will hand them back and become credit representatives.

What are the advantages and disadvantages of both routes?

Ashe: I believe that the advantages of being a licensee lie in the obligations involved. All the impositions placed on licensees by the General Conduct Obligations are things that modern day businesses are doing as best practice anyway. As a licensee, you get to choose how your business will meet those obligations. In other words, you’re in control. On the other hand, other brokers take the view that they’re either handling those things already in the running of their business; or they feel those areas are not a priority to them and they just want to get on with writing good business. For these businesses it may be better that they become credit representatives and leave the burden of monitoring compliance to their licensee. There is certainly no significant cost advantage either way apart from the modest licence fee. Outsourcing compliance monitoring to a good compliance provider costs about the same as what the main aggregators are charging their credit representatives.

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GETTING STARTED / COMPLIANCE Daniell: Holding your own licence

Wivell Plater: If you hold your own

can be seen as the mark of a professional business. It’s a standard recognised by other businesses as well as clients, governments and the public as an assurance of dedication, skill and quality. Several broker groups market their own licence as a way of differentiating them from their competition. Growing businesses find particular benefit in being able to streamline the process of setting up new brokers by offering them the ability to become an authorised representative under their licence. Where the licence is held by an aggregator platform, the paperwork and the system can be complicated and time consuming.

You can also pick and choose your lender panel and are not limited to the lenders authorised by the licensee. Being an authorised representative with a supportive licence holder can make the administration and ongoing compliance easier for brokers that do have the time or inclination to worry about compliance and dealing with ASIC. For a sole operator with no plans to grow or employ any other brokers, being an authorised representative can also often be a cheaper alternative.

However, a full service offering from a compliance company can offer a broker business the best of both worlds, removing the stress and worry of compliance concerns while giving them the freedom of running their business their way.

licence, you are in charge of your destiny. You can provide whatever services you wish in the way that you wish and – subject to lenders’ requirements regarding loan submission and borrower eligibility – in any way that you decide. No one will be telling you how, when and what to do with your clients. You will be free to develop your own branding, service proposition, client relationship management methods and to manage your business as you choose. On the other hand, if you become a credit representative of a licensee, the licensee will be as responsible for the services that you provide to your clients as they would if you were employed by them. This of course can be good and bad. On the good side, they will provide you with all the processes, tools and templates that you need in order to provide your credit services. However, they are also likely to mandate the way in which you deal with clients by laying down strict rules about what, when and how you do things. Also they will be obliged to monitor and supervise your activity regularly to ensure that you are complying with the credit laws, especially the responsible lending obligations that require you to provide various disclosure documents, including a credit guide, quotation and credit proposal to clients and to make a preliminary assessment of whether the loan is unsuitable for the client.

“A compliance company can offer … the best of both worlds, removing the stress and worry of compliance concerns while giving [brokers] the freedom of running their business their way” – DOUG DANIELL 48 | BROKERNEWS.COM.AU

Jeff Mazzini, AAMC Training Group: Naturally, the advantages of a broker holding their own licence include more freedom in making the decisions on the products, services and directions the business may take. Disadvantages include total responsibility for full compliance monitoring for yourself and all your employees, ensuring ongoing training of all representatives under the licence, monitoring cash flow and business viability and keeping up with your representatives’ requirements and mentoring them.

The main advantage of being a credit representative is that it enables you to focus on what you do best and that’s selling, while someone else looks after the ‘stuff’ on your behalf. However, credit representatives cannot write other loan products that are not on the licence holder’s approved product list, are under the total control and supervision of the licence holder and must adhere to their directions and instruction, and client ownership is also a potentially confusing issue.

Hetherington: The main advantage of having your own licence is control, but this also places brokers under great obligation in terms of the compliance requirements. I’m sure many brokers prefer to have their own licence just because, but is there any real advantage above and beyond that for the average operator? Not really. The guys in financial planning who took on their own licence did so for the autonomy and so they didn’t have to share commissions, but mortgage brokers are part of aggregator groups anyway, so they still have access to the same lenders.

GETTING STARTED / COMPLIANCE

Do you envisage any switching between the methods as credit representatives seek more independence and ACL holders look for more compliance support?

Ashe: Without any doubt and it will be for exactly those reasons. Our experiences at the grass-roots level show that there are just as many brokers falling into both those camps. We saw the same thing happen in the early Australian Financial Services Licence (AFSL) days. But importantly, this is not the same as the AFSL world and I think that, in the end, the overall percentages I mentioned above will not alter substantially.

Daniell: For organisations of three or more active brokers, it would be hard to imagine those switching back to credit representative status

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once a licence has been obtained.

With three or more people there can be a significant saving for holding a licence over paying three separate lots of credit representative fees, but for professional businesses looking to grow and expand, the greatest benefit is control and the induction process of new brokers and staff members. We have seen several brokers and groups that initially set up under their aggregator’s licence platform in order to get the initial support and ongoing compliance paperwork, as this was a ‘no thought’ process before they applied for their own ACL through us. Several brokers mentioned that they thought this was the easiest and safest option during the initial transition into a licensing regime.

Now they have a better understanding of the legislation they are applying for their licences.

providers of external compliance support companies. To survive in today’s environment with the ever-changing goal posts, and products and services being added to a client’s service offerings, it is vital that the licensee stays on top of it all. Freedom at what overall cost is the big question. So it is really a matter of can you do it all or do you need the support and assistance of either an outside party or look for the support of a larger licensee structure? Having held an Australian Financial Services Licence in the past, I felt the freedom outweighed the responsibility requirements of owning my own licence. Each individual is different and it’s a question of where your focus and strengths lie.

Hetherington: Once people get more comfortable with what each one involves and get a bit more clarity around that, we think people will be less concerned with having their own licence and be comfortable being a credit representative.

How can ACL holders benefit from using your services?

Wivell Plater: The trend we are

Ashe: The two key things that set us

seeing is for credit representatives to obtain their own licence. They have realised that it is not as onerous as they had initially thought and they are seeing the flexibility that it provides is worthwhile.

apart from others in the market is that firstly our tools and services focus on being practical and giving brokers what they need, rather than a bunch of legal theory – after careful guidance of course. Secondly, we are focused on the whole set of obligations that licensees have, using these as a win-win for the licensee and not just getting bogged down in file audits. Let’s face it, good brokers have had the responsible lending principles embedded in their businesses for years. It’s the other obligations that are new to them and too many people forget that.

Mazzini: Many small ACL holders are now realising it’s not like it was before and that ASIC is serious about enforcing the rules. As more are fined for not complying with the regulation requirements, more will look for the support of either a larger licence holder or the

GETTING STARTED / COMPLIANCE

BROKERNEWS.COM.AU | 51

GETTING STARTED / COMPLIANCE Daniell: The benefit of holding your own licence is the flexibility and potential cost saving. Unfortunately this can be quickly eroded by the time taken to understand ASIC regulatory guides, produce documents, update registers and prepare and submit your annual compliance certificates. With our ongoing compliance support packages ranging from a basic file compliance review to our annual compliance management support subscription, you get to choose your level of involvement in the compliance process. Walker and Miller offers a complete support system for brokers, starting with MFAA-preferred qualifications for Cert IV and Diploma, NCCP compliance management and simple, flexible CPD solutions.

Wivell Plater: Our compliance management system is a complete guide to all the compliance and regulatory requirements that apply to broking businesses. Using it and then having our compliance helpline and consulting services available ensures brokers have access to all the information and support that they need to operate within the requirements.

Mazzini: AAMC was one of the first

Claire Wivell Plater says while broker numbers vary, according to ASIC, 14,758 people are registered under the NCCP Act. Of those, as at May 2011, 7,093 had applied for licences and 5,928 licences had been issued

to the market with our credit toolkit and handbook, as we fully understood what was about to happen. We have in fact been offering Financial Services Credit Guides, Authorised Credit RepresentativeProfiles,ClientsNeeds Reviews and Statements of Credit Advice to clients since July 2007 as we saw the need to change industry attitudes for proper and full disclosure. Having owned and operated my own AFSL in a past life, it was just a simple matter of asking, ‘what is the regulator looking for here, what do they themselves understand and what have they been used to in the past?’

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“The regulators will not tolerate behaviour that shows a complete disregard of the rules and regulations” – JEFF MAZZINI It’s a simple matter of duplicating the whole process into a way ASIC will understand. For compliance training we offer a full handbook and tool kit for licensees and their authorised credit representatives at $399 plus CPD points. We are in this to support the industry with our knowledge and experience in a fair and equitable way. In addition we are also well-placed to offer many add-on services at a low cost so that at the end of the day, it’s a win-win for all. We also offer a compliance customer file-checking service. Ongoing CPD support and monitoring services are accessible through our online learning management system.

Hetherington: Intellitrain offers assistance in learning what your obligations as a licence holder are.

What would be your top compliance tip?

Ashe: Begin to concentrate more on your other General Conduct Obligations and make sure you are regularly testing yourself against them. Compliance is as much about the demonstration of compliance as it is about the compliance itself.

Daniell: If you don’t have somebody managing your compliance, write everything down. ASIC specifies all

the information that you need to keep related to this compliance.

Your compliance plan needs to be written. Your potential conflicts of interest need to be documented.

Your professional development process needs to be outlined. When ASIC comes around for an audit and you can’t show them your written internal dispute resolution process, it will be assumed that you do not have one in place.

Wivell Plater: Think carefully about how you want to service your clients and retrofit the disclosure and responsible lending requirements into your service model so that they become an integral part of the way you operate.

Mazzini: Treat this whole matter as serious and make sure you understand all the regulations and responsibilities whether you are a licensee or credit representative.

The regulators will not tolerate behaviour that shows a complete disregard of the rules and regulations. ASIC has already started monitoring and taking action against those who flaunt the rules.

Hetherington: We believe the top tip would be not just knowing your client, but proving or demonstrating that you know them by keeping very good data collection forms more comprehensive than brokers are used to and keeping regular file notes of all activity.

GETTING STARTED / COMPLIANCE

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SMART BUSINESS / LOWEST-COST CARS

DRIVING DOWN COSTS For brokers who drive to meet with their clients, cars are one of the key tools of their trade.

Therefore, it is important to get the most bang for your buck, not just a vehicle that looks nice.

James Evans explains how to make the best decision next time you buy a new car

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Everyone knows new cars start to depreciate the moment they leave the lot and some cost a fortune to keep on the road, but how much do they really cost to run? Using common sense and some key data, we have compiled a list of the most economical vehicles in Australia and worked out how you can drive your dollar further.

CALCULATING TRUE OVERALL COST Working out the true cost of owning a car over a given time period is fairly easy, but it does go beyond simply looking at the price you pay to the dealer. Put simply, the true overall cost equates to the depreciation cost plus the operating costs. Depreciation cost is what you pay the dealer for the car minus what you get for it when you sell it, or its re-sale value. For the purposes of this article, we will assume that you will sell the vehicle after three years.

Operating costs are made up of: • fuel • insurance (usually both compulsory third party, or CTP, and comprehensive) • registration • maintenance (servicing) • tyres and repairs For most smaller and medium-sized cars, depreciation cost over three years is more than operating costs, but for smaller cars, operating costs can be well over half the total. The NRMA also lists the opportunity interest cost as a factor to consider. This is the amount of interest you could have received on the depreciated portion of the purchase price if you instead invested it in a high-interest savings account. Sometimes this is significant.

ASSESSING RE-SALE VALUE Depreciation cost is the cost of the new car minus the selling price. Finding out the cost of the new car is simple enough – just ask the dealers. Getting an accurate picture of what the re-sale value is likely to be is a bit trickier. One of Australia’s most thorough and respected vehicle depreciation handbooks is Glass’s Guide, published by Glass’s Information Services.

Santo Amoddio, managing director of Glass’s, says: “We look at where a vehicle sits in a segment, and whether it’s being sold to private or fleet buyers. We analyse the level of discounting being given on that vehicle and we take into account buying patterns.

Then we consider economic factors and any changes in taxes that may affect the future values of cars.”

Glass’s also looks at trends and fashions, the vehicle’s model lifecycle and movements in fuel prices. With all these factors taken into account, Glass’s is able to predict re-sale values with a reasonable degree of accuracy.

Smart buying and owning tips

THE LOWEST-COST CARS

Colour Common not unusual ones

After analysing hundreds of the most popular vehicles in the country, we found that the Toyota Yaris is the best value car on the Australian market; the threedoor and five-door models took out first and second place in the light car segment. According to our calculations, the Yaris costs a little over $100 a week to own and run. It retains its value very well (64% after three years) and has low operating costs.

Toyota suffers relatively low depreciation across most of its light, small and SUV (4WD) classes. In fact, the Toyota Landcruiser Prado GX retains its value so well that its overall running cost is $7.70/week lower than even the most economical medium-sized sedan.

Rodney Michail, director of Car Loan King, an umbrella organisation for over 40 used car dealerships across Queensland, backs up the Glass’s Guide re-sale figures: “Toyota Landcruiser Prados are very, very solid,” he notes. “They’ll hold their prices for two or three years in a row.”

Toyota is the highest-selling passenger vehicle brand in the country, and this popularity flows through to the second-hand market, where Yaris, Corolla and Landcruiser are among the most popular used cars. “Our dealers are always looking for a Toyota Corolla in an automatic,” says Steve Adis, director of the Car City dealerships in Sydney and Melbourne, “anywhere from two to 10 years old.”

High demand means high re-sale values.

Sticking to the following could lower the overall costs of owning your vehicle Transmission Auto not manual

Size Small or medium not large Fleet cars Avoid them 4WDs Hold their value well Diesels Popular second-hand buys Servicing Full history of dealer services is best Equipment Nice stereos and seats will help Driving Minimise kilometres and air-con usage Care Keep free of scratches, dints and interior damage

BROKERNEWS.COM.AU | 55

LARGE CARS

MEDIUM CARS

SMALL CARS

LIGHT CARS

SMART BUSINESS / LOWEST-COST CARS

RANK

MAKE

MODEL

MRRP

% VALUE RETAINED

DEPRECIATION

LOST INTEREST

OPERATING COSTS

WEEKLY OPERATING COSTS

TOTAL COST OVER 3YRS

TOTAL COST PER WEEK

1

TOYOTA

YARIS YR 3D HATCHBACK

$16,690

64%

$6,008

$1,175

$8,482

$54

$15,665

$100

2

TOYOTA

YARIS YR 5D HATCHBACK

$17,890

64%

$6,440

$1,260

$8,285

$53

$15,985

$102

3

HONDA

JAZZ GLI 5D HATCHBACK

$17,990

64%

$6,476

$1,267

$8,500

$54

$16,244

$104

4

SUZUKI

SWIFT 5D HATCHBACK

$17,990

64%

$6,476

$1,267

$8,797

$56

$16,540

$106

5

FORD

FIESTA CL 3D HATCHBACK

$15,990

58%

$6,716

$1,314

$8,532

$55

$16,561

$106

RANK

MAKE

MODEL

MRRP

% VALUE RETAINED

DEPRECIATION

LOST INTEREST

OPERATING COSTS

WEEKLY OPERATING COSTS

TOTAL COST OVER 3YRS

TOTAL COST PER WEEK

1

HONDA

CIVIC VTi 4D SEDAN

$22,990

62%

$8,736

$1,709

$9,784

$63

$20,229

$130

2

TOYOTA

COROLLA ASCENT 4D SEDAN

$21,840

59%

$8,954

$1,752

$9,628

$62

$20,334

$130

3

HONDA

ASCENT 5D HATCHBACK

$21,840

59%

$8,954

$1,752

$9,692

$62

$20,398

$131

4

MITSUBISHI

LANCER ES 4D SEDAN

$22,490

59%

$9,221

$1,804

$9,477

$61

$20,502

$131

5

HOLDEN

CRUZE CD 4D SEDAN

$22,990

56%

$10,116

$1,979

$8,839

$57

$20,933

$134

RANK

MAKE

MODEL

MRRP

% VALUE RETAINED

DEPRECIATION

LOST INTEREST

OPERATING COSTS

WEEKLY OPERATING COSTS

TOTAL COST OVER 3YRS

TOTAL COST PER WEEK

1

HONDA

ACCORD VTi 4D SEDAN

$30,490

53%

$14,330

$2,803

$11,177

$72

$28,311

$181

2

TOYOTA

CAMRY ATEVA 4D SEDAN

$33,000

50%

$16,500

$3,228

$9,454

$61

$29,181

$187

3

TOYOTA

CAMRY SPORTIVO 4D SEDAN

$34,500

52%

$16,560

$3,239

$9,680

$62

$29,479

$189

4

HONDA

ACCORD VTi LUXURY 4D SEDAN

$32,490

53%

$15,270

$2,987

$11,500

$74

$29,758

$191

5

TOYOTA

PRIUS HYBRID 5D HATCHBACK

$37,400

50%

$18,700

$3,658

$7,954

$51

$30,312

$194

RANK

MAKE

MODEL

MRRP

% VALUE RETAINED

DEPRECIATION

LOST INTEREST

OPERATING COSTS

WEEKLY OPERATING COSTS

TOTAL COST OVER 3YRS

TOTAL COST PER WEEK

1

TOYOTA

AURION SPORTIVO SX6 4D SEDAN

$38,500

49%

$19,635

$3,841

$10,068

$65

$33,544

$215

2

NISSAN

MAXIMA ST-L 4D SEDAN

$34,990

46%

$18,895

$3,696

$11,246

$72

$33,837

$217

3

TOYOTA

AURION PRODIGY 4D SEDAN

$39,500

49%

$20,145

$3,941

$9,964

$64

$34,049

$218

4

TOYOTA

AURION SPORTIVO ZR6 4D SEDAN

$42,500

50%

$21,250

$4,157

$10,068

$65

$35,475

$227

5

HOLDEN

COMMODORE SV6 4D SEDAN

$40,990

50%

$20,495

$4,009

$11,327

$73

$35,831

$230

Sources: Glass’s Guide, NRMA, Green Vehicle Guide 56 | BROKERNEWS.COM.AU

THE CHALLENGERS According to second-hand car dealers, two brands in particular are making their mark, challenging the dominance of Toyota, Holden and Ford.

The first is Mazda. International market intelligence firm JD Power and Associates conducted its highly regarded Vehicle Ownership Satisfaction Study in Australia in 2008 and 2009. Both times, Mazda topped the table, ahead of Honda and Toyota. Mazda performed particularly well for quality, reliability and vehicle appeal (design, style, performance and comfort of the vehicle).

In the small car category, both the Mazda3 Neo sedan and hatchback models appear in the upper echelons, because they retain 59% of their value after three years and have low operating costs. The rising popularity of the brand and its historically competitive new car pricing mean that a good return can be expected when you come to sell.

Hyundai is the second brand whose popularity has soared. Entering the Australian market in 1986, the Korean company tried in vain for almost two decades to be taken seriously as a competitor to the Japanese giants. The much-derided Excel sold well in the

mid-1990s, but only because it was extremely cheap. Its bizarre pastel colours and trouble-prone engine did little to help Hyundai’s reputation.

The Koreans stuck at it, though, refining the mechanics and designs of the vehicles until they started turning heads for all the right reasons. Hyundai is now the fifth highest-selling new car brand in Australia, and between 2008 and 2009 it jumped from seventh place to fourth in the JD Power vehicle satisfaction survey.

“Hyundai Getz is one of our fastest sellers,” says Michail. “They hold their money pretty well … and they’re very economical.”

Hyundai’s market-leading five-year warranty has also lifted the second-hand value of its vehicles. Buying a three-yearold car with two years of factory warranty still attached is a highly attractive feature for the buyer.

MAXIMISING RESALE VALUE Some factors determining re-sale value are out of your control, but there is action you can take to ensure you get the best possible price when you sell your car.

“One of the most essential things is to keep it maintained to the manufacturer’s recommended schedule,” says Jack Haley,

Tips for fuel-efficient driving

01

Drive in the right gear Automatic transmissions will usually do this for you, but make sure you select economy mode if available. Modern manual transmissions often have an indicator light to tell you when to change up a gear, so learn to use this.

02

Drive smoothly Take it easy on the accelerator – more revs equals more petrol use.

03

Minimise fuel wasted in idling Most cars don’t need to be ‘warmed up’ by idling before setting off.

04

07

05

08

06

09

Don’t speed At 110km/h your car uses up to 25% more fuel per kilometre than it would cruising at 90km/h.

Minimise aerodynamic drag Additional parts on the exterior of a vehicle, or having the windows open, increases air resistance and fuel consumption, sometimes by over 20%.

Look after your tyres Inflate your vehicle’s tyres to the highest pressure recommended by the manufacturer to minimise fuel consumption.

Use air conditioning sparingly Air conditioners can use about 10% extra fuel when operating on a high setting.

Travel light The more weight a vehicle carries, the more fuel it uses. Leave heavy items like golf clubs or containers of water or oil at home unless you need them.

Keep your vehicle in good condition Keeping your car well-tuned and regularly maintained will maximise its fuel efficiency.

BROKERNEWS.COM.AU | 57

SMART BUSINESS / LOWEST-COST CARS

vehicle safety expert and motoring spokesperson for the NRMA. “You don’t have to take it to the branded manufacturer’s service, but I think there is an impression that they have the proper equipment to do the servicing.

Right or not, you’re better off going to the franchise dealer at least until the warranty period is over.”

Michail has a different view on service history.

“Servicing, believe it or not, isn’t one of the big things that motor dealers look at,” he says. “I think aesthetics is more important – that the car isn’t dinted and scratched, that the interior hasn’t been smoked in, isn’t covered in pet hair or smells like the kids’ chocolate milkshake.

Those things make thousands of dollars’ difference, compared to whether it’s had its last two services or not.”

Dave Weigold, manager of CarNet Auctions in Sydney, agrees that looks are very important. “If you look at a car and it sits up and smiles at you, well, you’ll buy that over a car that you’ve got to take away and spend $1,500 on,” he says.

“Maintain the vehicle in the best condition possible,” suggests Haley. “You may want to consider a professional detail when you’re selling, just to fix up little nicks. A good detail can make it look almost like a new car.”

58 | BROKERNEWS.COM.AU

When you come to buying a car, it’s advisable to start thinking from the very beginning about how it will sell in future years. “Don’t buy a vehicle with an unusual colour that would only appeal to a few,” Amoddio adds. “And understand that higher-thanaverage kilometres travelled will have a negative effect on values.” Average, for the purposes of most surveys, is about 15,000km a year.

“The price of variants within the model range tends to gravitate towards the mean,” notes Haley.

“So if you buy a lower spec model, it tends to gravitate upwards, whereas if you buy a top spec model, the second-hand price tends to gravitate [down]. If you want to maximise the resale price, [buy] the lower spec model, which might bring you a few more dollars when you sell it, relative to what you paid. In the second-hand market, people don’t see the difference as much.”

Look less at the selling price and more at the overall true cost (taking into account re-sale value and operating costs) when you choose which model of car to buy, then use and maintain it carefully to make sure you maximise that predicted re-sale value and minimise those predicted operating costs.

This article first appeared inYour Money Magazine, a fellow Key Media publication.

The latest issue is available from all good newsagents or visit yourmoneymag. com.au for more personal finance news and tips

BROKERNEWS.COM.AU | 59

This month’s round-up looks at residential land sales and values across Australia

NATIONAL PICTURE

AT-A-GLANCE

Residential land sales volumes in Australia continued to decline in the March quarter. The latest HIA-rpdata.com Residential Land Report revealed that overall residential land sales have plummeted 42.6% in the 12 months from March 2010, with the capital cities (44.4%) largely responsible and regional sales declining by 39.8%. The national weighted median land value grew in the March quarter by 0.8% to $193,380. The annual rise from March 2010 was 4.3%. The data gives the impression that the current downturn in new home building is set to last into 2012.

$200,000

30,000

$180,000

25,000

$160,000

20,000

$140,000

15,000

$120,000

10,000

$100,000

5,000

MAR 2011

DEC 2010

SEP 2010

JUN 2010

DEC 2009

MAR 2010

SEP 2009

JUN 2009

MAR 2009

SEP 2008

DEC 2008

JUN 2008

DEC 2007

Outside of the capital cities, a number of affordable land markets remain. The top three most reasonably priced markets are all in South Australia, with Victoria and Tasmania also featuring in the top 10. The majority of the costliest spots are in NSW and Queensland.

10 MOST EXPENSIVE REGIONAL MARKETS

10 LEAST EXPENSIVE REGIONAL MARKETS

RANK

REGION

MEDIAN LOT PRICE

RANK

REGION

MEDIAN LOT PRICE

1

Richmond-Tweed (NSW)

$265,000

1

Northern (SA)

$69,000

2

Sunshine Coast (NSW)

$262,000

2

Murray Lands (SA)

$73,750

3

Gold Coast (Qld)

$250,000

3

South East (SA)

$78,500

4

Illawarra (NSW)

$210,000

4

East Gippsland (Vic)

$80,000

5

Barwon (Vic)

$192,000

5

Mallee (Vic)

$83,000

6

Mackay (Qld)

$175,000

6

Mersey-Lyell (Tas)

$87,000

7

Hunter (NSW)

$170,000

7

Southern (Tas)

$87,500

8

Fitzroy (Qld)

$169,000

8

Murrumbidgee (NSW)

$92,500

9

Far North (Qld)

$165,000

9

Nothern (NSW)

$95,000

10

South West (WA)

$162,250

10

Murray (NSW)

$99,500

Source, all data this page: RP Data, HIA Economics

60 | BROKERNEWS.COM.AU

MAR 2008

SEP 2007

JUN 2007

MAR 2007

SEP 2006

DEC 2006

JUN 2006

$80,000 MAR 2006

THEDATA

Residential land sales & median lot value – Australia

STATISTICS / PROPERTY DEVELOPERS

NSW

The median residential land value in Sydney remained constant at $270,000 in the March 2011 quarter, but this represents a 4.9% decrease from March 2010. Land sales were down 22.4% year-on-year and 25.9% lower in the six months to March 2011 compared to the six months to March 2010. Sydney land sales are approaching record lows and aren’t even half of what they were in September 2009 when there were 1,600 sales in the quarter. In the regions, the least expensive land markets were Murrumbidgee, Northern and Murray with land values below $100,000 while Richmond-Tweed was the priciest region at $265,000 after a 24% increase in the first quarter of 2011.

Median residential lot value

Residential land – Sydney

Source: RP Data SYDNEY

Source: HIA Economics, RP Data $270,000

RICHMONDTWEED

$265,000

ILLAWARRA

NUMBER

$320,000

2,000 1,800

$300,000

1,600

$210,000 $170,000

HUNTER MID-NORTH COAST

$162,000

STH EASTERN CENTRAL WEST NTH WESTERN MURRAY

$99,500

NORTHERN

$95,000

$280,000

1,400

$260,000

1,200

$137,000

1,000 $240,000

$120,000 $101,000

400 $200,000

200

$300,00O

$250,00O

$200,00O

$180,000 $150,00O

O

$50,00O

$100,00O

$92,500

Vic

600

MAR 03 JUN 03 SEP 03 DEC 03 MAR 04 JUN 04 SEP 04 DEC 04 MAR 05 JUN 05 SEP 05 DEC 05 MAR 06 JUN 06 SEP 06 DEC 06 MAR 07 JUN 07 SEP 07 DEC 07 MAR 08 JUN 08 SEP 08 DEC 08 MAR 09 JUN 09 SEP 09 DEC 09 MAR 10 JUN 10 SEP 10 DEC 10 MAR 11

MURRUMBIDGEE

800

$220,000

No. of sales Value (LHS)

The median residential land value in Melbourne fell by 1.5% in the March quarter to $206,950. However, this figure still represents a 15% year-on-year increase. This means that Melbourne’s median land value has not significantly decreased since June 2006, barring a slight blip in December 2008. Land sales in Australia’s second most populated city were down by 48.8% from March 2010. In regional Victoria, East Gippsland ($80,000) and Mallee ($83,000) were the two most affordable residential land markets in the state, with Barwon the most expensive ($192,000).

Residential land – Melbourne

Median residential lot value

Source: HIA Economics, RP Data

Source: RP Data

$206,950

MELBOURNE

NUMBER

$220,000

7,000 6,500

BARWON

$192,000

WESTERN DISTRICT

6,000

$200,000

5,500

$140,000

CENTRAL HIGHLANDS

$180,000

$130,000

GIPPSLAND

$121,000

GOULBURN

$120,000

OVENSMURRAY

5,000 4,500

$160,000

4,000 3,500

$140,000

3,000

$110,500

2,500 $120,000

$103,000

1,500 $100,000

1,000 500

$220,00O

$200,00O

$180,00O

$160,00O

$140,00O

$80,000 $120,00O

$100,00O

$80,000 $60,00O

EAST GIPPSLAND $80,00O

$83,000

$40,00O

MALLEE

2,000

MAR 03 JUN 03 SEP 03 DEC 03 MAR 04 JUN 04 SEP 04 DEC 04 MAR 05 JUN 05 SEP 05 DEC 05 MAR 06 JUN 06 SEP 06 DEC 06 MAR 07 JUN 07 SEP 07 DEC 07 MAR 08 JUN 08 SEP 08 DEC 08 MAR 09 JUN 09 SEP 09 DEC 09 MAR 10 JUN 10 SEP 10 DEC 10 MAR 11

LODDON

No. of sales Value (LHS)

BROKERNEWS.COM.AU | 61

Qld

Brisbane’s residential land values remain steady, with the median unchanged from the previous quarter at $205,000, a 0.5% year-on-year increase. Land sales were down 50.1% from March 2010, attributable in part to the flooding in the area at the beginning of the year, although the region was already showing weakness in the lead up to this period. The least expensive market in Queensland in the March 2011 quarter was West Moreton ($129,000), ahead of Wide Bay-Burnett in second ($151,000).

The Sunshine Coast ($262,000) outshone the Gold Coast ($250,000) as Queensland’s costliest plots.

Residential land - Brisbane

Median residential lot value

Source: RP Data

Source: RP Data, HIA Economics Group SUNSHINE COAST GOLD COAST

$262,000

$220,000

NUMBER 7,000 6,500

$250,000

BRISBANE

6,000

$200,000

5,500

$205,000 $180,000

$175,000

MACKAY FITZROY

4,500 $160,000

$169,000

FAR NORTH

4,000 3,500

$165,000

DARLING DOWNS

5,000

$140,000

3,000

$159,000

2,500 $120,000

$157,250

WIDE BAYBURNETT WEST MORETON

1,500

$151,000

$100,000

$290,00O

$270,00O

$230,00O

$250,00O

$210,00O

$170,00O

$80,000 $190,00O

$150,00O

$110,00O

$130,00O

$90,00O

1,000 500

$129,000

62 | BROKERNEWS.COM.AU

2,000

MAR 03 JUN 03 SEP 03 DEC 03 MAR 04 JUN 04 SEP 04 DEC 04 MAR 05 JUN 05 SEP 05 DEC 05 MAR 06 JUN 06 SEP 06 DEC 06 MAR 07 JUN 07 SEP 07 DEC 07 MAR 08 JUN 08 SEP 08 DEC 08 MAR 09 JUN 09 SEP 09 DEC 09 MAR 10 JUN 10 SEP 10 DEC 10 MAR 11

NORTHERN

No. of sales Value (LHS)

STATISTICS / PROPERTY DEVELOPERS

SA

Adelaide’s median residential land value in the March 2011 quarter was $180,000, affordable compared to the other capital cities. The average figure represents a 3.7% decrease from the previous quarter and a 2.7% year-on-year reduction. The volume of land sales was down by 39% from March 2010. In regional South Australia, Northern provided the best value for money with a median land value of $69,000, ahead of Murray Lands and the South East. These three areas are the cheapest in the country.

Residential land – Adelaide

Median residential lot value

Source: RP Data

Source: RP Data, HIA Economics Group

$180,000

ADELAIDE OUTER ADELAIDE

1,800 1,600

$175,000

$150,000

YORKE AND LOWER NORTH

NUMBER

$195,000

1,400 $155,000

$115,000

1,200

$135,000 EYRE

1,000

$112,000

800

$115,000 SOUTH EAST

$78,500

600 $95,000

MURRAY LANDS

400

$73,750 $75,000

200

$69,000

NORTHERN

MAR 03 JUN 03 SEP 03 DEC 03 MAR 04 JUN 04 SEP 04 DEC 04 MAR 05 JUN 05 SEP 05 DEC 05 MAR 06 JUN 06 SEP 06 DEC 06 MAR 07 JUN 07 SEP 07 DEC 07 MAR 08 JUN 08 SEP 08 DEC 08 MAR 09 JUN 09 SEP 09 DEC 09 MAR 10 JUN 10 SEP 10 DEC 10 MAR 11

$190,00O

$170,00O

$150,00O

$130,00O

$110,00O

$90,00O

$7,00O

$50,00O

$55,000

No. of sales Value (LHS)

BROKERNEWS.COM.AU | 63

STATISTICS / PROPERTY DEVELOPERS

WA

Median residential values are on the rise in Perth, up 3.4% from the previous quarter and 1.3% higher than this time last year to sit at $242,000. However, land volume sales were down 49.1% from March 2010. Outside of Perth, South West was the most expensive residential land market ahead of the South Eastern region.

Residential land - Perth

Median residential lot value

Source: RP Data

Source: RP Data, HIA Economics Group

PERTH

$242,500

NUMBER

$280,000

4,000

$260,000

3,500

$240,000

3,000

$220,000

SOUTH WEST

$162,250

SOUTH EASTERN

$155,000

$200,000

2,500

$180,000

2,000

$160,000

1,500

$140,000

1,000

$120,000

1,000

$100,000

500

Tas

MAR 03 JUN 03 SEP 03 DEC 03 MAR 04 JUN 04 SEP 04 DEC 04 MAR 05 JUN 05 SEP 05 DEC 05 MAR 06 JUN 06 SEP 06 DEC 06 MAR 07 JUN 07 SEP 07 DEC 07 MAR 08 JUN 08 SEP 08 DEC 08 MAR 09 JUN 09 SEP 09 DEC 09 MAR 10 JUN 10 SEP 10 DEC 10 MAR 11

$300,00O

$250,00O

$200,00O

$150,00O

$50,00O

$100,00O

$80,000

No. of sales Value (LHS)

Median residential land values have soared in Tasmania.

Prices rose by 2.2% from the previous quarter, but a huge 12.8% year-on-year, leaving the current average at $141,000. Unsurprisingly, land sales fell 45.9%. Hobart aside, the Northern region was the most expensive regional land market at $122,500, while Mersey-Lyell was the least expensive ($87,000).

Residential land – Hobart

Median residential lot value

Source: RP Data

Source: RP Data, HIA Economics Group

HOBART

$141,500

NUMBER 400

$150,000

350

$130,000

300 NORTHERN

$110,000

$122,500

250

$90,000 SOUTHERN

$87,500

200 150

$70,000

100 MERSEYLYELL

$50,000

$87,000

50

64 | BROKERNEWS.COM.AU

MAR 03 JUN 03 SEP 03 DEC 03 MAR 04 JUN 04 SEP 04 DEC 04 MAR 05 JUN 05 SEP 05 DEC 05 MAR 06 JUN 06 SEP 06 DEC 06 MAR 07 JUN 07 SEP 07 DEC 07 MAR 08 JUN 08 SEP 08 DEC 08 MAR 09 JUN 09 SEP 09 DEC 09 MAR 10 JUN 10 SEP 10 DEC 10 MAR 11

$160,00O

$140,00O

$120,00O

$100,00O

$80,00O

$60,00O

$40,00O

$20,00O

O

$30,000

No. of sales Value (LHS)

STATISTICS / PROPERTY DEVELOPERS

BROKERNEWS.COM.AU | 65

STATISTICS / YOUR MORTGAGE INDEX

Loan values on the rise

Attracting 150,000 visits a month, yourmortgage.com.au is a popular resource for homebuyers and investors.

MPA scrutinises its sister publication’s user activity statistics for insights into borrower sentiment

T

The latest data from the Your Mortgage index indicates that prospective hombuyers are borrowing more than they did 12 months ago. Statistics show that the average loan value in June 2011 was $343,906, an increase of 4.5% on the $329,036 being borrowed in June 2010. The type of loan being requested has also shown something of a shift over the last 12 months, with fixed rates continuing to grow in popularity and now accounting for 30% of the market. Standard variable rates have declined slightly, but still command the lion’s share of all home loans at 53%.

Geographically speaking, New South Wales continues to dominate enquiries to the website with just shy of a third (32.7%) of all requests, but Victoria has seen a surge in interest to see it rise to more than a quarter of all enquiries.

See the tables below for a full breakdown of this month’s statistics.

66 | BROKERNEWS.COM.AU

Buyer activity by state 50.00% 40.00% June 11

30.00%

June 10 20.00% 10.00% 0.00% ACT

NSW

NT

Qld

SA

Tas

Vic

WA

Loan type (% of total enquiries) 70.00% 60.00% 50.00% 40.00%

June 10

30.00%

June 11

20.00% 10.00% 0.00% SVR

FIXED

INTRO

NEWS / ROUND-UP

BROKERNEWS.COM.AU | 67

LIFESTYLE / A DAY IN THE LIFE OF

A day in the life of …

Brett Halliwell, general manager of lending distribution, Advantedge 11.00am On to operational

meetings next, focusing on service and quality. We discuss the volume of work coming in and I congratulate the team on their ability to turn such a high volume of work around so quickly.

12.30pm The Advantedge Red

4.30am Up with the birds. An early flight to Melbourne means a very early start.

5.30am Head to Sydney Airport to

catch my flight. I head straight to the Qantas Club for coffee. I spend the flight with some light reading, The Australian and The Financial Review.

9.00am Off the plane and head to

Advantedge’s Melbourne office at 101 Collins Street. I start the day off with a sales meeting. We cover off the latest news on our home brand products (PLAN LENDING, ChoiceLend and FASTLEND) and our mortgage management customers. The increase in volume and the overall growth of this segment is continuing at a great rate and we are all very impressed with the progress.

10.00am I stop past my Melbourne

desk, check emails and catch up with the product team. We discuss some exciting new product initiatives and improvements to be implemented in the next week or so.

68 | BROKERNEWS.COM.AU

Carpet Awards, our monthly employee recognition and award presentation has come around again.

I am presenting awards to our deserving collections and IT teams for great service and hard work as acknowledged by their customers.

It’s always great to hear customer feedback about the exemplary service provided by our staff.

1pm Work on the funding structure

for our mortgage managers. We have developed an innovative approach to the removal of exit fees. We are working to build flexible options with our mortgage managers as to how they receive their funding and how they build their pricing. It’s a new world, post-exit fee removals, we are continuing to work with our brokers and mortgage managers to provide the best outcome for everyone.

2pm I fit in a quick bite to eat while

catching up with Sandra, my PA. She

keeps me updated on the travel and event schedule for the next few days.

A great bonus of being on Collins Street are the excellent options for lunch.

2:30pm I take another look at my

emails and return a few phone calls.

3:30pm Head into a meeting with

our head of broker sales. We discuss the PLAN Lending, ChoiceLend and FASTLEND upcoming product improvements and the distribution of our home brands though our broker networks.

5pm My weekly catch up with our

head of products, Robin. There are many changes and product updates happening, so we have a lot to discuss.

7pm I head out of the Advantedge

office to a client dinner with one of our mortgage managers. We discuss the ongoing impacts of NCCP – and of course the football – over a glass of red.

9.30pm I head back to the hotel in time to finish off the emails and reading for the day.

10.30pm Time for bed, ahead of another early flight tomorrow.

“We are working to build flexible options with mortgage managers on their funding and pricing. It’s a new world, post-exit fee removals… ”

NEWS / ROUND-UP

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LIFESTYLE / FAVOURITES

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Favourite things...

Tim Brown CEO, Vow Financial Food:

Hobby:

I love seafood, especially when it is freshly caught and put straight to the fry pan

Surfing and golf. I’m not particularly great at either, but I love participating

Movie: I have to say the first Indiana Jones movie was one film that still sticks in my mind – I loved it from start to finish

Book:

Vacation spot:

I’m a big fan of anything written

by James Clavell or Peter Fitzsimons

Anywhere in Europe, as everything is so close. You can drive through three to four countries in a day and there is so much history to take in

Music: Generally heavy rock such as AC/DC, Bad Company, Yes and Led Zeppelin

Drink: Any good Shiraz

Sport: I played rugby union most of my life, then moved to competitive swimming and triathlons in my later years. I just train to keep fit these days

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Place to be: Byron Bay outside of school holidays.

I love the surfing and the atmosphere

LIFESTYLE / MOTIVATION

Renowned psychologist Dr Timothy Sharp explains how to turn the frown upside down and be positive in the workplace Brokers haven’t had a lot to cheer about over the past 12 months as they deal with falling commissions and an increase in paperwork to comply with new regulations, but every cloud has a silver lining and fee-for-service and increased professionalism could work out to their advantage in the end. Rather than just dwelling on what makes them unhappy in the workplace, the following tips could help them see the bigger picture and put things into perspective. Here are Dr Timothy Sharp’s top 20 tips for getting in a positive frame of mind.

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Top of the list – make happiness a priority.

Plan – the pursuit of happiness requires planning.

Shoot and score – make happy goals that are SMART (specific, measurable, achievable, relevant and timed).

Do a happy dance – or whatever it is that makes you happy. Keep doing things that give you pleasure and repeat them often.

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Work on your relationships – invest time and energy into the key people in your life.

Socialise – as much as possible.

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Lose the negativity – getting rid of negative thoughts helps strengthen the positive ones.

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Play – Why the serious face? Approach your responsibilities in a playful manner.

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Love yourself – and so will others.

Get some satisfaction – it’s not just about having fun.

Plan some tasks that will give you a sense of achievement.

Focus on strengths – identify what you’re good at and take some focus off the things that need improvement.

Dr Timothy Sharp has three degrees in psychology and runs one of Sydney’s largest clinical practices. He is also the founder of The Happiness Institute, Australia’s first organisation devoted solely to enhancing happiness in individuals, families and organisations. For more information, visit thehappinessinstitute.com

Gratitude – be grateful for life’s bounty and goodness.

Use your strengths – capitalise on the things you’re good at to succeed.

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Curiosity won’t kill you (just cats) – approach life with a sense of curiosity and search for new ways to have fun.

Plant happy thoughts – replace negative thoughts with optimistic thinking.

Get healthy – eat well, exercise.

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Sleep – happy people are well rested.

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Time management – take more control of your life by managing your time well.

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Control issues – it’s the old maxim: Control what you can control, accept the things you can’t and learn to know the difference.

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Live in the moment – be happy now.