Mortgage Professional Australia magazine Issue 12.11 by Key Media

COMMISSION CONUNDRUM THE FATE OF BROKERS’ PAY A WIDE NET FRANCHISING YOUR BRAND MPAMAGAZINE.COM.AU ISSUE 12.11

TIME ON YOUR SIDE MAKING THE BEST USE OF LIMITED HOURS

BREAK CROWD FROM THE

AUSTRALIA’S TOP INDEPENDENT BROKERAGES RISE ABOVE THE NOISE

CONTENTS / ISSUE 12.11

Bridging the divide Short-term finance fills the gap for consumers

Commission conundrum What’s the future of broker commissions?

WEEKLY INVESTIGATIONS NOW ONLINE: COVER STORY 26 | Top Independent Brokerages A look at Australia’s best broking businesses

SMSF opportunities Mortgage Choice’s diversification drive » mpamagazine.com.au

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CONTENTS / ISSUE 12.11 NEWS & VIEWS

STATS

8 | Round-up The latest market intelligence from the world of property, economics and mortgages

56 | Digging up profits Mining towns see booming returns

12 | On line The best from MPA Online and Australian Broker Online 16 | Product news A round-up of the latest rate changes and product launches

36 42

58 | Your Mortgage Index The latest mortgage hunter trends from our sister website

LIFESTYLE 62 | My favourite things ... John Flavell, NAB

SMART BUSINESS 36 | Licence to grow Franchising your business 42 | Time wise How to work more efficiently

PROFILES 52 | Kellie Lam shares her secrets of success 54 | Greg Mitchell on Homeloans’ Refund buy

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NEWS / ROUND-UP

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CONTENTS / EDITOR’S LETTER

AN INDEPENDENT STREAK Independence has long been the watchword of the mortgage broking industry. The biggest part of the broker value proposition is the ability to offer clients an unbiased viewpoint, and guide them to the best loan and lender for their set of circumstances. While niggling NCCP requirements have now banned brokers from touting their independence in advertising, mortgage broking nonetheless remains impartial, unbiased and independent in spirit. It’s in that spirit that MPA offers its look at the nation’s top independent brokerage firms. These are broking businesses truly embodying the entrepreneurial drive that makes mortgage broking such a vibrant industry. Turn to page 26 to see who made the list, and how they’ve achieved their impressive results. Elsewhere in the magazine, you’ll find advice on how to turn your independent brokerage into a powerful brand that branches out its influence (page 36), along with a look at the future of commissions. And, as always, you’ll find the industry’s leading news, views and data. Adam Smith, editor, MPA

COPY & FEATURES EDITOR Adam Smith CONTRIBUTORS Andrea Cornish, Jill Fraser PRODUCTION EDITORS Carolin Wun, Danielle Chenery

ART & PRODUCTION DESIGN Ginni Leonard

SALES & MARKETING NATIONAL SALES MANAGER Rajan Khatak ACCOUNT MANAGER Simon Kerslake MARKETING EXECUTIVE Anna Keane TRAFFIC MANAGER Abby Cayanan

CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley MANAGING DIRECTOR Claire Preen CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR – BUSINESS MEDIA Justin Kennedy ASSOCIATE PUBLISHER Rajan Khatak CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Adam Smith tel: +61 2 8437 4792 adamsmith@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 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, Auckland, Toronto 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

CONNECT

Contact the editor: adam.smith@keymedia.com.au

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Printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry

NEWS / ROUND-UP

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NEWS / ROUND-UP TECHNOLOGY

COMPLIANCE

ASIC at it again Another month, another instance of ASIC baring its teeth. This time, a Sydney director has copped the industry’s first civil penalty under the National Credit Act, in a verdict being trumpeted by ASIC as an example of its tenacity in enforcing the new credit laws. ASIC said the Federal Court in Sydney ordered Nathan Elali, of South Hurstville, to pay a penalty of $7,500 after his former company was found to have advertised that it could provide credit despite being unlicensed. The company advertised for more than a year that it could provide home and investment property loans, while not having an ACL. Despite repeated warnings by ASIC to remove the advertising, ASIC says that the company did not respond. The material was removed only after ASIC had commenced court action. CONSUMERS

BORROWERS FRET ABOUT BILLS, JOBS

Customer reviews ‘word of mouth on steroids’ With user review internet sites like Yelp and TripAdvisor quickly reshaping the way consumers choose their service providers, one aggregator has urged its brokers to jump on board. Loan Market executive chair Sam White told the company’s brokers independent review sites are tantamount to “word of mouth on steroids”, and can generate more business for brokers. “The reality is, for a good business, this is a huge lead generator. Take the already good experiences that you’re giving your clients and start to promote them more aggressively,” he said. “People go on these sites and rank their experience. You have no control over what your clients say… it’s happening whether we like it or not,” he said. White claimed Loan Market brokers had rated highly on independent satisfaction reports. “Looking at [these results] this is a weapon we should be using.” He revealed the brokerage would focus on embracing independent review sites over the next three to five years.

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STATS

$55.3m*

*The amount a Swiss banking group recently paid for the former RBA building in Perth, WA

A Mortgage Choice survey has found that job loss and rising utility bills are top of mind for consumers. The poll of 900 first-time homeowners revealed that 32% feared utility costs could put their ability to make repayments in jeopardy. Concerns over job security rose 8% from last year’s survey, with 15% of respondents expressing concern they could find themselves out of work. But interest rates are no longer weighing as heavily on borrowers. The poll found just 13% of respondents were worried about potential rate hikes, compared to 47% last year. The survey also found buyers were saving longer to purchase their first home, a shift a Mortgage Choice spokesperson put down to changing consumer sentiment and a reluctance to jump into the housing market while prices were still falling.

NEWS / ROUND-UP TURNAROUNDS

PROPERTY

CREDIT WHERE CREDIT’S DUE While ING Direct rated fourth overall in this year’s Brokers on Banks survey, the second tier was ranked 10 out of 12 for what many brokers saw as a tight credit policy. But the bank claims recent changes to its policy and assessment team have dramatically improved its turnaround times and resulted in easier approvals. The bank recently increased the number of staff on its credit assessment team and added 18 policies with a focus on pushing deals through quickly. The bank’s head of broker distribution Mark Woolnough said 43% of cases, which previously required additional information, were now approved on the spot. “It’s clearly addressing a key detractor that brokers previously identified and we’re really happy with the results,” he said. “Brokers are receiving clearer, more accurate and consistent credit decisions.”

“Brokers are receiving clearer, more accurate and consistent credit decisions”

Room with a view

INFOGRAPHIC

35 and male A look at the average investor

57%

are male

are in their teens or early 20s

24%

are 46 or older

Source: Your Investment Property

61%

54%

of prospective of this group investors are are aged between the ages between 26 of 26 and 45 and 35

There’s often debate about whether or not Australian housing is overpriced, but few people could argue that a recent property up for sale was asking a bit much. A 16 square metre beach pad in Bondi was recently put on the market for $270,000, making it Australia’s most expensive bedsit. Real estate agent Kiel Glass put a positive spin on the Lilliputian living quarters, saying it was perfect for a single person or investor “wishing to enter a sought-after beachside location.” “I’m very confident it’s going to sell,” he told News Ltd. But Mortgage Choice broker Mark Sourintha poured cold water on the assertion, saying a flat so small could have trouble obtaining finance. “The general rule of thumb is anything under 50 square metres internally (not including the balcony, car spot or outdoor living areas) is hard to get finance for,” Mortgage Choice Surry Hills broker Mark Sourintha told News Ltd. “Some of the bigger banks have a credit risk appetite so they might take on smaller properties, but 16 square metres? That’s ridiculously small – it’s like the size of a balcony,” he said.

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NEWS / ROUND-UP ARREARS

ECONOMY

Don’t discount the boom: Clyne

With talk rife that Australia is in the sunset of its mining boom, one major bank head says it’s premature to call time on the wave of investment. NAB CEO Cameron Clyne claims the mining boom is far from over, telling guests at a Sydney luncheon that significant investments were “in the pipeline”. He acknowledged commodity prices had peaked and were falling off slightly, but “were still quite high.” “There is no suggestion that we have seen that people are going to stop that investment. But the other side is that commodity prices are coming off.” Clyne also allayed fears of an imminent housing market crash, telling the lunch guests “nothing we have seen would suggest that there is a precipitous collapse about to happen.” He said there was a “floor underneath property prices” which would prevent a collapse.

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OUT-OF-TOWN DELINQUENTS A broker in the worst-hit region for delinquencies in Australia is placing the blame on “impulsive” holidaymakers. Nelson Bay in NSW was identified as having the highest delinquency rates in Australia by Fitch Ratings. Ben Eick, of Hunter Home Loans Solutions in Nelson Bay said the rising arrears were not due to the fault of local residents. “My understanding is that the properties are bought basically from people coming up here on holiday, liking the area, seeing an apartment or unit that looks fantastic,” he said.

He claimed the area on the Central Coast of NSW enjoyed a boom in property purchases by holidaymakers during 2005 and 2006. “[They thought] these places would keep appreciating… and of course what they’ve done since then is depreciate. And that’s where they’ve come unstuck.” “The rental market up here isn’t especially strong, as opposed to other areas that are driven by the mining industry further up the valley. “It can have a direct effect on whether they can pay their mortgage or not,” he said.

GOVERNMENT

REGIONAL SCHEME NEEDS MORE REWARDS

STATS

* 93% *The

proportion of financial planners offering risk advice Source: Money Management

PRDnationwide says a government-backed scheme encouraging homebuyers inland will struggle unless more jobs are provided. Its claims focus on the state government’s Evocities program, which aims to repopulate rural areas by encouraging city residents to relocate. PRDnationwide said the

key concern for city dwellers was job prospects. It called upon corporations to consider moving their head offices to inland cities. “The main issue of employment remains on top of the agenda for both councils and residents in country areas,” said research analyst Oded ReuveniEtzioni.

NEWS / ROUND-UP BANKING

Banks branching out New research shows bank branches continue to open at an increasing rate, despite the rise in online activity. The Australian Prudential Regulation Authority (APRA) reported a 1.2% increase in bank branches for 2012, representing the strongest growth in three years. There was also an increase in the number of financial institutions now classified as banks. Steven Münchenberg, CEO of the Australian Bankers Association (ABA) said branches had continued to open in defiance of the tough economic climate, increasing over the last five years by an overall 7.2%. However, Mortgage Choice’s CEO Michael Russell claimed branches were losing out in areas “where customers are no longer using the branches.” He cited results from the 2011 JP Morgan report at a media conference last week as evidence of a changing financial landscape. “It came up with some compelling conclusions that somewhere in the order of 30% [of ] bank branch networks are at risk of being stranded in areas where customers are no longer using the branches,” he said. “It [implied] banks will need to, and probably are, reconsidering their bank branch footprint.”

INFOGRAPHIC

Super satisfaction: Proportion of customers who say they’re satisfied with their super

67.3% SMSF

50.6%

Industry superfunds

43.6%

Retail superfunds

Source: Roy Morgan Research

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NEWS / MULTIMEDIA

ONLINE The latest highlights from MPA online and Australian Broker Online

In motion

SAY WHAT? THE BIGGEST

The latest from Broker News TV and MPA TV

“While it was possible prior to the NCCP for dishonest borrowers and unscrupulous brokers to make up a figure… the new regulatory environment and practice standards introduced by lenders minimises this type of fraud”

SHARE THE WEALTH Mortgage Choice’s diversification strategy

QUOTES FROM THE MONTH

– Former FBAA president Ray Weir on the prevalence of low-doc fraud

THE GREAT SMSF OPPORTUNITY Westpac’s Sinclair Taylor on the size of the SMSF prize

“Good deals are out there for first homebuyers but a general lack of confidence to take the first step may see some miss out on their ideal property to savvy investors” – RAMS CEO Melos Sulicich on reticence among first homebuyers

GATHERING PACE MFAA calls for banking reforms

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“A recent experience alerted me to the fact that insurance companies were still getting away with murder” – Former Labor politician Barry Cohen on problems in the insurance industry

To find out more on all of these stories, as well as latest business strategy advice, special reports, profiles, news, views and analysis, visit mpamagazine.com.au

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NEWS / MULTIMEDIA

BANKS FIRE BACK Bankwest ranked fifth in this year’s Brokers on Banks survey. Ian Rakhit, head of specialist lending, gives expanded responses to the results.

Q: IS THERE MORE PRODUCT INNOVATION IN THE WORKS? A: As a challenger brand, we will continue to innovate both product and policy to adapt to changing market conditions as well as customer wants and needs. Being a smaller bank, we have the ability to be nimble to meet market demands with product innovation.

Q: HOW VALUABLE ARE THE RESULTS OF THE BROKERS ON BANKS SURVEYS FOR YOUR STRATEGIC PLANNING? A: At Bankwest, we believe our customer service, product and pricing are second to none, meaning the findings in this survey are of no surprise to the continuous feedback already known to us. Like all lenders, there are areas of improvement marked within different segments of a business. For Bankwest, we understand the importance of fast approval times and improving client support. These are key parts of our threeyear strategy and this feedback is extremely welcomed.

Q: WHAT ARE YOUR PRIORITIES FOR THE YEAR AHEAD? A: We will continue to act on broker feedback and improve a number of our processes, to reach our aim of reducing our turnaround times by half. To coincide with this, Bankwest will continue to improve business efficiencies for both broker and bank by investing in back-end systems to improve back channel messaging and lodgment platforms. Another key focus for the bank will be to improve our brokers experience via our online web presence with a new web chat portal.

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Feedback from the forum The Australian Broker forums erupted in a firestorm of controversy when Port Group chief executive Voula Kotsiras detailed the company’s strategy to draw more women into the broking industry. Kotsiras commented that women could have an advantage in broking by being “more sympathetic in general”. Evidently, that didn’t sit well with some male brokers.

For Truth “If it is politically correct to also push females in front of males, I have had enough. It is time we stand up and stop this constant demeaning of men.”

Mortgage Road Warrior “You and others in the print and electronic media would never dare put out an article headlined ‘Men make better brokers’. More reverse sexism that males have had to put up with for too damn long.”

Sidbroker “I have employed female brokers before and have found that their personal lives can interfear [sic] with their professional reliability.” These comments set off a maelstrom of responses, mostly accusing the commenters of having some rather backwards views.

Potkettle “@sidbroker. Did you club them on the head before dragging them back to your cave?”

CJ “Sidbroker, seems the article's hit a nerve… you make blokes look bad and whiney… Just get on with it, mate.”

Sigh “Sidbroker and For Truth – you need to get over the discovery of fire and the invention of the wheel (I know this must be pretty exciting for you both), and come, join us, in the 21st century. The article was in no way offensive or demeaning to men.”

Emma Lockwood “Re: Sidbroker – I think he actually makes a valid point. I have two young children and this impacts on my flexibility for my clients. No meetings after 6.30pm or weekend appointments. Even taking a phone call after hours is difficult. I’m not sure this impacts on my ‘professional reliability’ though. I am wary of managing my clients’ expectations upfront [and] outlining the process and how long each step takes in that process so that they are not constantly calling to seek updates.” Meanwhile, Port Group’s brokers leapt to the defence of the company.

Colin Sheppard “Port Group has a great balance of brokers and moreover it is the fastest growing boutique aggregator in the country, so clearly it is doing something right. Port Group provides our business with fantastic support and having worked with various aggregators over my 10+ years in broking, I wouldn’t even consider an alternative aggregator!”

RDV “As a male broker as part of Port Group, I can only say to those who have nothing constructive to say, maybe keep your sentiments to yourself; clearly there are many that can’t read the article properly. Ms Kotsiras only said that we should try and balance up the numbers, not that us blokes are crap brokers. Maybe people should keep their insecurities to themselves.”

NEWS / PRODUCT ROUND-UP

PRODUCT NEWS A bite-size guide to the industry’s newest products, key updates and fresh initiatives EDITOR’S CHOICE Who: ING DIRECT What: Living Super

The spec: The second tier has launched its own super product providing customers the ability to select their own investments, including cash, managed investments and real time share trading. The fund touts no fees on cash and term deposit accounts held with the bank, as well as no administration or management fees. Customers can also access and manage their super account online. What they say: “Our research found satisfaction and engagement with superannuation is lacking and customers’ trust in their fund managers is at an all-time low. Australians are seeking to take more control of their investments, and their future, but are struggling to find products with the accessibility and transparency to make this a reality. In fact, levels of satisfaction with members’ main superannuation fund are now at their lowest level in eight years. Living Super provides members with control, fee transparency, simplicity, and ING DIRECT’s industryleading customer experience.” – Vaughn Richtor, CEO, ING DIRECT

KEY FEATURES: • No admin or management fees • Invest in cash, term deposits, managed investments or shares • Real-time share trading • 24/7 online access

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“Our research found satisfaction and engagement with superannuation is lacking ” – VAUGHN RICHTOR

Who: CHOICE and PLAN What: ME Bank The spec: Both aggregators announced the addition of ME Bank to their lending panels. What they say: “ME Bank has proven a competitive force in the home loan market. Flexible, fair and competitively-priced home loans are at the heart of ME Bank’s lending ethos and these qualities are front and centre for most homebuyers.” – Trevor Scott, CEO, PLAN “To this day, ME Bank continues to offer very competitive and compelling borrowing options and we are proud to announce our new partnership with them.” – Stephen Moore, CEO, Choice

Who: YOUR CLIENT MATTERS What: Better BUSINESS marketing program The spec: The marketing gurus are running a program specifically geared towards commercial and equipment brokers. What they say: “We are excited about expanding our proven program into the commercial and equipment broking sector because I believe there are great opportunities for these sectors to also achieve results through greater client and customer engagement.” – Deena Janes, managing director, Your Client Matters

Who: BLUEBAY FINANCE What: Smart Families loan The spec: Mortgage manager Bluebay Finance’s patent-pending loan allows parents to help their children apply for a loan without becoming liable. The Smart Families loan does not require parents to use their home as security or appear on the title. Instead, parental contribution is treated as a loan which is paid back with interest (albeit at half the rate of the rest of the loan), and parents also own a stake in the home. What they say: “This isn’t available anywhere else on the market, especially for parents who want to help their children without putting their own home at risk.” – Gerry O’Donnell, general manager, Bluebay Finance

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FEATURE / COMMISSIONS

COMMISSIONS:

LOOKING UP New regulations, increased education requirements and the rising cost of business have made it increasingly difficult for mortgage professionals to grow their margins. And while lenders indicate funding issues are a persistent challenge, there are promising signs that better days are ahead for mortgage brokers

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FEATURE / COMMISSIONS

hen it comes to commissions, mortgage professionals haven’t exactly had it easy. Brokers took a significant hit during the GFC as lenders restructured remuneration packages and put the onus on businesses to increase the quality of applications to earn top dollar – in other words: more work, less pay. But four years later some industry stakeholders indicate the pendulum is starting to swing. “We’ve actually found the trend over the last 12 months to be the other way. There have been movements here and there by a few of the lenders,” says Mark Hewitt, general manager, AFG. Hewitt points to Macquarie’s decision in early September to increase upfront commissions to 0.65% (from 0.60%) and trail commissions to 0.15% for years one to three, and 0.20% for year four onwards (up from a flat 0.15%). “Brokers are our primary distribution channel and we take a partnership approach to these broker relationships, ensuring that we can help to support a sustainable and compelling third party distribution segment. Through the broking channel, we are focused on providing choice and competition to the market which we believe is the basis of a healthy mortgage industry, and we believe that our proposition provides appropriate value for the service provided by brokers,” says James Casey, head of mortgages product, Macquarie Bank.

“Remuneration is what it is and we need to work with what we’ve got” – KAREN LE COMTE, SMARTLINE

Meanwhile, NAB Broker’s general manager for distribution John Flavell says NAB is happy with their present commission structure, however, brokers will already be noticing the benefits of changes the bank made 12 months ago. “Brokers will see a change in commissions from us, and they’ll see that on an ongoing basis. The first thing we did over the last 12 months is we gave all brokers a 4-star rating which means all brokers are paid a 65 basis point trail upfront. So through working with brokers we managed to gain some efficiencies that meant that we could give all brokers the benefit of that higher commission. So that’s a positive that we’ve seen come through.” The other thing that brokers will see, according to Flavell, is the benefits of NAB Broker’s ramped trail structure. “Every day, 300–400 broker/client relationships hit that next milestone and brokers see the amount of trailing commission being paid increase by five basis points all the way up to 35 basis points. So, that takes place every day, which is good.”

Increased competition recently saw Macquarie lift upfronts from 60bps to 65bps and increase trails to 20bps

Brokers: Up or down? “Competition is the driving force behind commissions and whilst there is a fight for market share there will be upwards pressure on comms.” David Westerman managing director State Custodians

“When you compare the banks’ and non-bank lenders’ commissions, some are extremely poor and uncompetitive over the medium term. If a lender’s borrowing rates aren’t amongst the best and its commission offering is poor, it is unlikely to be on the list of loans recommended by a broker to a client.” John Minihan mortgage consultant Professional Finance Mortgage Brokers

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“Given the current downturn in activity, I think banks who know that the broker channel is the most effective channel in acquiring new business would not want to hinder this in any way, especially by diverting potential business to those lenders who do wish to work with brokers and are committed to the industry and who don’t have channel conflict.”

“I would love to see a clawback system based on circumstance – divorce, death, sale, hardship are things that we cannot control, so why should we be penalised? Especially when you look at the ‘after sale’ service we provide, along with the ongoing client reviews. Having said that, remuneration is what it is and we need to work with what we’ve got.”

Moshe Moses director Niche Lending

Karen Le Comte personal mortgage adviser Smartline

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FEATURE / COMMISSIONS

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FEATURE / COMMISSIONS

Australian First Mortgage has lifted upfronts from 65bps to 70bps

Other major lenders seem content with their present commission structure. CBA’s executive general manager third party banking Kathy Cummings told MPA that Commonwealth Bank “has no immediate plans to change current broker remuneration”. Tim Carroll, national partnership manager in the ANZ broker distribution team, echoed that statement telling MPA: “At the moment we are comfortable with our broker commissions.” And while Westpac’s general manager Tony MacRae acknowledged that funding costs remain challenging, he also indicated Westpac had “no current plans” to change its commission structure. Mortgage Choice spokesperson Belinda Williamson says the aggregator is not anticipating any broad-based changes to commissions from major banks, however, she indicates a bump in remuneration may be felt from other lenders. “A number of second-tier lenders would very much like to be writing more volume and we would not be surprised to see some upward movement in their commission structures.” In the interim, despite rising costs for brokers, Williamson says current remuneration is enough. “While operational costs for brokers are increasing, the current levels – while challenging – are at least able to sustain the industry.”

DIY COMMISSIONS Aside from waiting and hoping for higher commissions, there are other ways for brokers to protect, and even boost their incomes. Late last year, Connective launched flexible pricing for its white label product, which allows brokers to

“As costs increase and if commissions don’t, then something has to give and brokers will need to look at different ways to top up their income” – GARRY DRISCOLL, MORTGAGE EZY

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tailor product pricing around commission needs. For instance, an established brokerage, which may put greater value on annuity income from trail, may increase the trail and scale the upfront commission. Conversely, a new brokerage, which relies on upfront commission for cash flow, may elect to forgo trail commission and boost the upfront. The aggregator says 90% of applications are now using this model, and according to Connective head of sales and business development Michael Goerner, “a number of broking brands have been influenced to partner with us in order to take advantage of the flexibility offered”. Meanwhile, general manager Frank Paratore contends the Ballast model was built with income protection in mind. “The hardest thing is to gain a customer. Once you’ve got that customer you should be doing absolutely everything you can, to keep that customer on board. So if you can provide more services to the one customer, the less likelihood they’re going to leave, which is going to protect your income and actually increase it.” The boutique aggregator gives brokers several options in which to incorporate financial planning into their service offering. “With our model, people can either refer into us and we will take care of their referral for them and still pay them an upfront and trail with a guarantee to not cross-market back to their database; or if they want to grow their business – because we hold the AFSL – and want to bring a planner into their business, that planner can be licensed under us, work for them and you’ve got a whole database to market to,” Paratore says. Customer retention is also at the forefront of AFG’s income protection plan for its members, says Hewitt. “We have our SMART marketing program. Essentially, we act as the marketing and CRM department for each of our brokers. We communicate with customers throughout the loan life cycle, from the initial settlement right through to birthdays and loan anniversaries. It looks like it actually comes from the broker, as it’s from the broker’s brand. It’s all aimed at retention of existing customers so that when the customer is looking to borrow, the first thing that comes to mind is their broker. It’s also about generating referrals.” Meanwhile, Loan Market says it helps brokers protect income levels through training and broker support. “We also provide the marketing tools needed to grow a business in the new tech-savyy world,” says Mark de Martino, national director of sales for Loan Market. “One of our tools we offer brokers to protect

their income levels is our broker websites, which are a full feature experience for any client looking at a home loan from a mortgage broker.”

FEE-FOR-SERVICE Talk of commissions and protecting broker income always gives rise to the fee-for-service debate. Smartline’s Karen Le Comte suggests more brokers are moving towards this model to boost income. “Absolutely, we are starting to see brokers moving to this model already. I think the real difficulty is that the level of service varies from broker to broker. To charge a fee for service, perhaps an industry standard/ guidelines should be met so the client knows what level of service to expect. We need to be providing superior service continually, not just at the transaction stage.” Niche Lending’s Moshe Moses says some brokers may adopt a fee-for-service model; however, such moves could prompt further calls from lenders to reduce commissions. Mortgage Ezy CEO Garry Driscoll, who thinks that over time the industry will see a move towards fee-for-

service, echoed his concerns. “Do I necessarily agree? Well, not really, but this is something that the big banks have been pushing for a while and they have a track record of getting what they want. Fee-for-service will not happen overnight, but as costs increase and if commissions don’t, then something has to give and brokers will need to look at different ways to top up their income. If you want to charge a fee then you need to offer something, and this is where formal qualifications, training, experience and presenting yourself as a professional will really kick in and brokers need to prepare for this change.” Meanwhile, Professional Finance Mortgage Brokers’ John Minihan says he doesn’t think many mortgage professionals will switch to fee-for-service as “the amount charged is insignificant compared to the commissions earned.” The other barrier, according to State Custodians general manager David Westerman is consumer acceptance. “Fee-for-service sounds all very admirable, however, the majority of borrowers will resent having to put their hand in their pockets.”

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SPECIAL REPORT / TOP INDEPENDENT BROKERAGES

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BREAK CROWD — FROM THE —

Independence is the watchword of the mortgage broking industry, and these independent brokerages set the gold standard

ndependent brokerages embody the entrepreneurial spirit that defines the mortgage broking industry. Many top independent brokerages operating in Australia today started out as industry pioneers, battling to break into the marketplace when mortgage broking was still a burgeoning profession. Today, these brokerages have grown from upstart challengers to highly professional operations, employing large staffs and settling some of the biggest volumes in the industry. But these businesses still retain the spirit of independence that makes mortgage broking such a vibrant industry. Read on to find out which businesses ranked as MPA’s Top 10 Independent Brokerages.

METHODOLOGY To find Australia’s top independent brokerages, we approached aggregators across the country, asking them to nominate their top non-franchise broking businesses of five or more brokers. We then ranked the nominees on the total value of loan settlements for the 2011/12 financial year, the number of brokers in the business, the average settlements per broker, their total loan book size and their average conversion ratio.

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SPECIAL REPORT / TOP INDEPENDENT BROKERAGES A word from our partners ... St.George Bank, BankSA and Bank of Melbourne are proud to sponsor MPA’s Top 10 Independent Brokerages list, an accolade that acknowledges and recognises the hard work and dedication required to build a strong, successful business in an extremely competitive industry. The past year has seen intense competition in the mortgage broking industry, and that level of competition creates an opportunity for the best of the best to step forward. As the industry talks about compliance, diversification, new revenue streams and reducing exposure to risk, 10 independent brokerages have stepped forward. They’re standing tall and standing out. To be named as one of the Top 10 Independent Brokerages by MPA is to be acknowledged nationally as a team to be reckoned with. Being a successful independent brokerage in today’s competitive and dynamic environment is a balancing act between achieving great numbers, understanding your customers and building a business where the best people want to work. There are many different factors that come into play when a broker helps a customer choose the right home loan, but when everything is said and done, it comes down to trust – how the broker makes the customer feel. We all know customer satisfaction and advocacy are key to achieving success and customers need to feel valued and confident their broker is giving them the very best possible advice. There’s a certain set of values a business needs to demonstrate to make it to a point of being widely acknowledge within its industry and widely acknowledged by its peers, the very same values that underpin the St.George Banking Group. Courage, working together as a team, delighting customers, acting with integrity, and being the best you can be are the traits we aspire to, which is one of the reasons we feel strongly aligned to the Top 10 Independent Brokerages list. Congratulations to those who have made the St.George Banking Group and MPA Top 10 Independent Brokerages list for 2012. We appreciate your absolute drive and commitment to the industry, and we applaud you for setting the standard.

Darren Little, head of intermediary services, St.George

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Pinnacle Finance Brokers Location: Offices throughout Brisbane area Aggregator: Astute Financial Loan book size: $759,678,835 Annual volume (2011/12): $153.8m Number of brokers: 6 Average volume per broker: $25.6m Conversion rate: 88% PETER TRETHOWAN, DIRECTOR

MPA: What’s the benefit of setting up an independent business rather than joining a franchise system? Peter Trethowan: Someone running their own

“Clients keep coming back because we’ve surrounded ourselves with good people” - PETER TRETHOWAN

business can build that business without all of the existing franchise agreements in place. You have a little bit more freedom. That being said, they need to align themselves with a good aggregator who’s got that point of difference.

MPA: What’s the secret to your success over the last year?

PT: We’ve always just sort of run our own race and implemented the right procedures and structures in our business. Clients keep coming back because we’ve surrounded ourselves with good people and good lending partners. We’ve got excellent brokers who are probably the top 10% in their field.

MPA: Have you looked to diversify outside of residential loans? PT: We have in a big way. We have a full-time guy

who does equipment finance. We also set up Pinnacle Wealth and Insurance about two years ago, and we have an in-house financial planner.

MPA: What would you say to a broker looking to launch their own independent business?

PT: Good luck. Seriously, though, they’ve got to align themselves with an experienced broker or broking group. It’s difficult to start from scratch. With compliance and regulations, you especially need to make sure you’re doing the right thing. There are no short-cuts anymore.

“[Diversifying] actually entrenches the client as long as you’re competitive” - MOSHE MOSES

Niche Lending Pty Ltd Location: Sydney Aggregator: Astute Financial Loan book size: $415m Annual volume (2011/12): $176.8m Number of brokers: 9 Average volume per broker: $19.6m Conversion rate: 89%

MOSHE MOSES, DIRECTOR

MPA: What does it take to succeed as an independent brokerage?

Moshe Moses: You need to have a good service delivery platform that goes past just doing a deal or a single transaction. It has to be one where you look at all aspects of the client’s needs.

MPA: How has business been over the past year?

MM: We’re just as busy as ever. Everyone has the presumption the market is down and property isn’t moving, but that brings out another type of client that suits our current proposition. So we are doing a lot of property, but also a lot of commercial business.

MPA: How have you marketed your business to new clients? MM: Our marketing is purely based on referrals or

1st Street Home Loans Location: Rose Bay, NSW Aggregator: National Mortgage Brokers Loan book size: $579m Annual volume (2011/12): $175m Number of brokers: 5 Average volume per broker: $43.8m Conversion rate: 90% JEREMY FISHER, DIRECTOR

MPA: Have you changed any strategies in your business over the past 12 months? Jeremy Fisher: We’ve spent more [time] in the past

12 months in bringing financial planning in-house so we can provide an all-encompassing solution to clients. The second thing we’ve focused on is the social media space. Though we haven’t seen massive results yet, we’ve build up a big presence on Facebook, LinkedIn and Twitter. We know it’s going to be a big space in the future, and we don’t want to get caught behind.

repeat business. At present, we don’t do any advertising. We have developed our website for introductions of the business to customers who have not yet been introduced but, for the past 10 years, we have predominantly grown on repeat business and a referral basis.

MPA: Have you diversified outside of residential mortgages? MM: Yes. I think we are nearly there in terms of

having a full financial services offering. We just have one little piece of the puzzle left, which is conveyancing. [Diversifying] actually entrenches the client, as long as you’re competitive and offer the right level of services. It gives the client security to know they can come to one place and have access to or be provided with the prospective products or services they require.

MPA: How have you gone onboarding new brokers into your business?

JF: My business model has just evolved to one where anyone who has joined has had significant industry experience. We don’t even have any other full-time staff members in the office, just brokers. We don’t have enough hours in the day to spend with someone new to the industry.

MPA: How do you market your business to new clients? JF: It’s only word of mouth. We have monthly

newsletters that go out to our clients, and we spend a lot of time focusing on our referral partners. All our business comes from referrals.

“We’ve built up a big social media presence” - JEREMY FISHER

MPA: What’s your business strategy over the next 12 months? JF: We’ll keep building onto the new parts of the

business, financial planning and commercial, while still focusing on our core business of home loans. Hopefully that will give us more exposure to clients and more reason for them to get in contact with us.

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SPECIAL REPORT / TOP INDEPENDENT BROKERAGES

Better Choice Mortgage Services Location: Balcatta, WA Aggregator: AFG Loan book size: $925m Annual volume (2011/12): $227m Number of brokers: 11 Average volume per broker: $20.6m Conversion rate: 87%

“Get out there and knock on referrers’ doors”

SEBASTIAN SCURRIA, DIRECTOR

MPA: What’s the secret of operating a successful independent brokerage?

- SEBASTIAN SCURRIA

Sebastian Scurria: Our secret is focusing on our core market. We’re not trying to be all things to all people. We’re not trying to morph into financial planners. We outsource all that stuff, and we stick to finance, whether it be residential, commercial or equipment.

MPA: So you’ve diversified your business outside of residential mortgages? SS: From day one. We’ve always gone almost

DANIEL DI CONZA, CEO

MPA: To what would you attribute your success?

Daniel Di Conza: For us it’s the team of people and

the culture. That’s probably the most important thing. We’ve made plenty of mistakes over the Acceptance journey, but it’s about keeping the right people. A Finance lot of the people who work here feel real ownership over what we do. They don’t look at their coLocation: Balwyn, Vic Aggregator: Connective workers as competition; they look at them as colleagues. We have financial planning as well, and Loan book size: $970m the financial planners and mortgage brokers work Annual volume with each other to create a one-stop shop for our (2011/12): $234.3m client base.

Number of brokers: 12 Average volume per broker: $19.5m Conversion rate: 87%

completely across the spectrum of finance. We’ve done standard residential, commercial acquisitions and equipment finance from day one. Unfortunately, you find a lot of brokers are wary of any areas of finance they don’t specialise in, but they should try their hand at it, obviously with initial guidance.

MPA: What’s the benefit of operating as an independent, rather than under a franchise model?

SS: I think you’ve got to look forward to where you want to be in five years’ time. I understand a lot of people coming into the industry out of lenders want the reassurance of the umbilical cord a franchise seems to offer, and they’re happy to sacrifice their commission to get that reassurance. What I would say is utilise that franchise fee as working capital. Get out there and be willing to knock on doors of referrers. In five years’ time, if you’re willing to cold call and show people what you can offer clients, you’ll be far better off and have more control rather than being fettered to a franchisor.

and, about two years ago, we ended up in a bit of strife with our financial planner. He left and we changed the model. We went away from a salaried employee model to a self-employed model. We’ve gotten three financial planners on board since then and they have been fantastic.

MPA: How do you ensure new employees reflect your company culture? DD: They have to meet with not only the sales

manager, but with their future potential colleagues. Our staff has as much say in the recruitment of the next person as does our sales manager.

MPA: How have you managed to incorporate financial planning into the business? DD: Through trial and error. We got into financial

planning, probably five years ago, with mixed results,

“A lot of the people who work here feel real ownership over what we do” - DANIEL DI CONZA, CEO

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“Bill Gates once said he always hired people smarter than him” - DAVID BRELL

Smartmove

Location: Neutral Bay, NSW Aggregator: AFG Loan book size: $767m Annual volume (2011/12): $254.8m Number of brokers: 6 Average volume per broker: $42.5m Conversion rate: 90%

DAVID BRELL, MANAGING DIRECTOR

MPA: What’s the secret to succeeding as an independent brokerage?

David Brell: If I had to pin it down to one thing it’s backing ourselves and backing the staff we hire, and hiring the best independent staff in the marketplace. Bill Gates once said he always hired people smarter than him. Why wouldn’t I listen to the words of one of the world’s most successful businessmen? Having honest, hardworking staff makes or breaks it.

MPA: Why do you think it’s important to empower your staff?

DB: A lot of people are too money focused. A lot of people do a massive amount of volume as an individual, but they really have four or five people behind the scenes allowing them to do that. They’ve got to let go of the ego and hire really good people.

At the end of the day, I didn’t make this business. They did. We all did. All I did is control the environment.

MPA: What are some of the difficulties involved in launching an independent brokerage?

DB: It’s years and years of putting in systems and spending the money. Aggregators don’t really provide the systems. They’re more involved with providing tools and software. But it takes years to earn clout with lenders and to operate within the mass market. It’s a very difficult thing to do. We’ve been operating for 10 years. How do you suddenly step into it when someone has been in the business for 10 years and has 10 years of relationships behind them, and lenders won’t want a bar of soap from you?

Australian Lending and Investment Centre

Kevin Agent: Having past lending experience has

Location: Melbourne Aggregator: Connective Loan book size: $663.4m Annual volume (2011/12): $328.2m Number of brokers: 5 Average volume per broker: $65.6m Conversion rate: 89%

MPA: What’s the benefit of launching an independent brokerage rather than operating within a franchise system?

MARK DAVIS and KEVIN AGENT, DIRECTORS

MPA: What has led to your success in this year’s Independent Brokerage rankings?

Mark Davis: I suppose we’ve been very true to our brand and what our business proposition is. We’re dealing with high net worth clients who want to invest and have the resources to do so. To add to that, we’ve taken on further salespeople over the past 18 months, which gets us on track to hit half a billion in settlements this financial year.

also been beneficial. Both Mark and I had business planning and financial planning experience.

KA: You’re not stuck by the franchise policy, and you can build your own brand. Branding to me is the big one. We don’t want to give away our margin to a franchise model.

MPA: What sets your business apart from other independent brokerages? MD: It’s being able to be holistic with the client, and

“Banks don’t service investment clients the way they should” - MARK DAVIS

not being seen as just a rate or product provider, but a holistic lending manager. That’s what’s created the speed with which we’ve built the business over the past 36 months. Banks actually don’t service investment clients the way they need to, and that’s definitely a proposition we believe is required out in the marketplace.

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SPECIAL REPORT / TOP INDEPENDENT BROKERAGES

“We go through quite a lengthy coaching process” - STACEY MARTIN STACEY MARTIN, DIVISIONAL MANAGER

MPA: What’s the secret to building a successful independent brokerage?

Stacey Martin: The first thing is the team you have behind you, and the culture of that team. The second thing is our support model, which allows our guys to focus on servicing clients and developing relationships with referrers.

MPA: How do you integrate new brokers into the business?

Colin Lamb, director, Mortgage Solutions Australia

SM: We go through quite a lengthy coaching

process where new employees meet twice a week with their coach to do one-on-ones, and they also have fortnightly meetings with the whole team. We do quarterly training as well, and try to do a lot of team building with the whole team. We’re very fortunate that a lot of BDMs want to deal with us, so they’re always out here doing training on products. We’re also very compliance focused, so we do a lot of training on that as well.

Mortgage Solutions Australia Location: Offices in Doubleview, Kalgoorlie and Albany, WA Aggregator: PLAN Australia Loan book size: $1bn Annual volume (2011/12): $251.6m Number of brokers: 7 Average volume per broker: $35.9m Conversion rate: 95%

MPA: How do you source the majority of your business? SM: It’s probably about 40% referrals. We’re

fortunate to have a relationship with Ausnet Real Estate Group, and they send us referrals. We also have a very strategic plan of bringing on agents who aren’t in that group. About 60% is repeat business, and Colin also does a lot of seminars with mining communities in the northwest of WA.

Top 10 rankings An unprecedented six of the top 10 independent brokerages made their first ever appearance on the list this year

2012

Company

Tiffen & CO

Oxygen Home Loans

Mortgage Solutions Australia

Australian Lending and Investment Centre

Smartmove

Acceptance Finance

Better Choice Mortgage Services

1st Street Home Loans

Niche Lending Pty Ltd

Pinnacle Finance Brokers

2011

N/A

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Oxygen Home Loans Location: Offices across NSW and QLD Aggregator: AFG Loan book size: $1.1bn Annual volume (2011/12): $492m Number of brokers: 25 Average volume per broker: $19.7m Conversion rate: 71%

JAMES GREEN, GENERAL MANAGER

MPA: What’s been the secret to Oxygen’s success as an independent brokerage? James Green: It’s providing six-star customer

service not only to borrowers and clients, but also to our brokers and partners.

“We have seen a large increase from winning Australian Brokerage of the Year” - JAMES GREEN

MPA: You’ve moved up two spots in the rankings since last year. To what do you attribute your improvement?

JG: We won Australian Brokerage of the Year at the Australian Mortgage Awards, and have leveraged off that. It’s enabled us to grow our internal market share with McGrath from 59% to 87%, resulting in lodgements of over $1bn, up 53% year-on-year. It shows the result it can have if you win awards like this.

MPA: Why did you choose to launch as an independent brokerage rather than under an existing franchise model?

JG: We prefer the independent model as it enhances the team environment, which is inherited from the McGrath culture.

MPA: How do you source most of your business?

JG: It’s predominantly through referrals from McGrath; however, we have seen a large increase from our online presence and the promotion of winning Australian Brokerage of the Year. We have clients ringing up and writing to us saying, ‘We heard you’re the Australian Brokerage of the Year. Can you help us?’

MPA: What are your strategies for the year ahead?

JG: We’re going to continue leveraging off the success we’re having with industry awards, and we’re expanding our footprint into Brisbane with the opening of five new McGrath Queensland offices.

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1 “We started getting a mentor program going – we got together to see the sales figures” - GERARD TIFFEN

Tiffen & Co Location: Kingston, ACT Aggregator: National Mortgage Brokers Loan book size: $1.5bn Annual volume (2011/12): $367.9m Number of brokers: 7 Average volume per broker: $52.6m Conversion rate: 98% GERARD TIFFEN, DIRECTOR

MPA: What’s led to your success over the past year?

Gerard Tiffen: It’s a few things we implemented about 24 months ago, probably. We started getting a mentor program going, sort of out of the Weight Watchers philosophy where a bunch of people sit around a room and have to weigh themselves in front of each other. So it’s an accountability sort of thing, and we’re a little more open than we had been. We started getting together and seeing what the sales figures were, so far. That’s all I can put it down to, and it just sort of kicked along from there.

MPA: Why did you decide to go the independent route rather than joining a franchise system?

GT: Well, when I started doing this it just wasn’t established. Aussie Home Loans didn’t have

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franchises, and Mortgage Choice was just sort of starting out. I initially just started writing loans for Westpac. I never had the opportunity to get into a franchise system. If I was starting out now, there’s no other way I would go. I’d be Mortgage Choice or Aussie, and use their systems and processes. I had to develop all that myself.

MPA: Have you diversified outside residential mortgages?

GT: I’ve stuck with residential mortgages, because it’s what I’m good at. I don’t understand financial planning and I don’t want to get involved. I know when I do a mortgage I can offer the client the best product. There seems to be a strong push toward financial planning in this industry, but the people I’ve seen doing it, do it poorly. I do have a referral relationship with a financial planner, but I don’t try to handle that in-house, and why would I? I’m settling good figures and doing well.

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BUSINESS STRATEGY / FRANCHISING

LICENCE TO

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GROW

{ FRANCHISING YOUR BRAND } Franchising, a $128bn industry in Australia, is a natural fit for the mortgage industry. But is it right for you? Jill Fraser investigates

ince Mortgage Choice first franchised in 1994 and went on to establish a highly acclaimed, multi-award-winning system, franchising has become an increasingly popular expansion and brand-building strategy for mortgage brokers. Building a burgeoning network is an enticing prospect. But experts advise to temper dreams and proceed with caution. Growing a franchise is not an automatic ticket to success. Many would-be franchisors fail, often in the early stages of development. “Never franchise a business that isn’t successful,” says international law firm Norton Rose partner Stephen Giles, who is also chairman of the Franchise Council of Australia. “If you haven’t got a proven and profitable business model, you would just multiply your headaches. Franchising does not perfect an imperfect business

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BUSINESS STRATEGY / FRANCHISING

“If you haven’t got a proven and profitable business model, you would just multiply your headaches” – STEPHEN GILES, FRANCHISE COUNCIL OF AUSTRALIA

model. It is about replicating successful business practices across a network. So the first question you need to ask yourself is, ‘do I have a successful business model?’ “You’d be amazed at the number of people who want to create a franchise in order to try to save a failing business,” says Franchise Legal principal Ilya Furman. “That’s the best way I know to ensure it ends up on the rocks,” he declares. Both Giles and Furman warn prospective franchisors that franchising is not a get rich quick arrangement where you can flog franchises simply to make money. When there is no realistic prospect that the franchisee will be profitable, the franchisor is liable to be sued or prosecuted or both. The first step is to figure out whether your business is

Advice for would-be franchisors “Franchising is often described as a marketing or distribution method. It is, in fact, a business system and requires unique design every time a new system is created. The nature of a franchise network is such that, often, major problems that endanger the network are consequences of what was done or not done during the initial stages,” says Ilya Furman, principal, Franchise Legal. Here are Furman’s tips:

01|

Is the business ‘franchisable’? – The first step is to assess whether the existing business can be franchised. This is determined by evaluating the market in which the business operates and assessing the ability to establish successful ‘clone’ operations in other locations. In making such an assessment, it is necessary to understand the reasons for the success of the existing business so the same criteria can be sought for each franchised location. A small business can perform well in one location but fail in another.

02|

Financial modelling – it is essential to create a financial model, having regard for the franchisor and the franchisee. It is necessary to establish that the franchisee, after paying the franchisor all relevant fees, will receive an acceptable return on investment. Similarly, the franchisor must establish that the franchisor’s business (separate from the operation of the existing business) will remain profitable after the introduction of franchisees into the system.

03| 04|

Separation of obligations – the operational model of the system entails the creation of workflow and separation of duties between the franchisor and franchisees.

Operations manual – the operations manual is a crucial part of the offering to franchisees. It is the operational bible of the business and must comprehensively cover all aspects of running the franchisee’s business. It should include references and guides relating to any relevant legislative requirements of the business, such as occupational health and safety, employment laws, licences or permits required to operate and the franchisor’s recommended manner for dealing with such matters.

05|

Territory/site – depending on whether the franchisee has a mobile or retail business, the franchisor must determine whether the franchise is being granted for a territory or a specific site. It is important in determining potential franchise locations and/or mapping territories, the franchisor rely on sound demographic evidence, which is not only consistent with the franchise model but also provides a large enough market for each franchisee.

06|

Supply arrangements – it is tempting for a franchisor to create additional income streams separate from the franchisee group of businesses. Such arrangements may be in breach of provisions of the Competition and Consumer Act 2010. Seek legal advice.

07|

Franchise agreement – it is the lawyer’s role to correctly record commercial terms and the parties’ obligations in the franchise agreement. The agreement should incorporate the terms of the operations manual and allow for the franchisor to amend the manual.

“franchisable” and, if so, why? says Furman. This entails isolating the ingredients responsible for your business’ success and ascertaining if they can be multiplied effectively to other locations and/or people. “Often the reasons for your success are specific to you – perhaps you possess certain qualities or connections or networks – or to a particular location and therefore they can’t be duplicated by prospective franchisees,” says Furman. “Another crucial question you need to ask yourself is whether you can be competitive with other franchisors. It’s not like it was 10 years ago, when anyone could set up a mortgage broking franchise that would all have similar offerings. You have to ask yourself why a franchisee would want to buy your franchise ahead of Mortgage Choice, for example.” A critical point regarding the above is to assess your model from two perspectives – your own and that of potential franchisees. The first principle of franchising is that the franchisee must be able to make money. The second is whether you, as franchisor, can retain

“At the end of the day, there’s much more to being a successful franchisee than just paying your money, doing your training and hanging up your shingle” – PAUL GOLLAN, BROKER LOANS

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BUSINESS STRATEGY / FRANCHISING

and grow a lucrative commercial venture. “If you only want to appoint one or two franchisees, the likelihood is the franchisees will make money but you will make a loss,” warns Giles. “The franchisor needs to put in infrastructure, systems and controls in place to ensure there is consistency of consumer experience across the network. Then there’s compliance cost, a different type of support network you need for a franchise network. RESI CEO Lisa Montgomery suggests the reason so few franchises are established at a grass roots level in the mortgage industry is because transforming a business into a franchise has a lot of ramifications and requires ticking many boxes due to the number of laws and legislations that apply. Franchising is a contractual relationship, so setting in place a solid legal framework is imperative, says Giles, disclosing that ANZ Mortgage Solutions is a client and he has done work for Mortgage Choice. “In the mortgage industry the complexity of product distribution means that the franchise agreement needs specific care. So don’t just go to the internet and print off some franchise agreement and change hamburger to mortgage. The mortgage industry is highly regulated, therefore strong protection is required to enable the franchisor to avoid fraud or other inappropriate conduct. You need strong systems around ethics. You can’t afford to have franchisees being what they may consider entrepreneurial and compromising your brand.” Eighteen months ago, Patrick Marion franchised his 24-year-old business, Citiwide Home Loans. It took more than 12 months to get all the financial models in place and cost over $150,000 for consultancy fees, franchise agreement and legal costs. “It costs a lot of money to do it properly,” Marion told MPA. “You have to create a system and corresponding documentation, so someone outside your business can pick it up and apply it to their business. You also have to factor in taking on more support staff as the business grows, plus the fact you’ll have two sources of income, an upfront and a trail.” A potential trap, he says, is to fall for the temptation to take on board as a franchisee the first person who comes along. “There is a big difference between a broker and a franchisee. A franchisee needs to be business savvy and focused on building a business and their own little team. The average broker is often just executing a task.

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“Some franchisors promise franchisees the world and then don’t deliver” – PATRICK MARION, CITIWIDE HOME LOANS

They may be very good at what they do but they would never make a good franchisee, which involves running and developing a business and taking full responsibility for staff.” Disputes are rife in the world of franchising. Marion maintains the number one cause of conflict is the franchisor over-promising. “Some franchisors promise franchisees the world and then don’t deliver. I probably lose a lot of good people because I tell them the truth.” Industry veteran Paul Gollan, founder of Australian Mortgage Brokers and now Broker Loans, says choice of franchisees can make or break a franchisor. “You must be extremely selective about who you bring into your business because, if you get it wrong, you’re stuck with them for a long time,” he says, referencing the binding nature of the Franchise Agreement. “The ideal franchisee is someone who realises the franchisor and the system can only do so much. At the end of the day, there’s much more to being a successful franchisee than just paying your money, doing your training and hanging up your shingle. Cultural fit, says Gollan, is one of the key ingredients. “People who come in with the understanding that not only are they there to grow their business but also share a common brand with a team of others, will be your best franchisees.”

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BUSINESS STRATEGY / TIME MANAGEMENT

TIME Experts share top tips to help you rock the clock and keep time from getting the better of you

ime is a flexible concept. It can have economic value – “time is money” – or personal value – “time flies when you’re having fun”. You can lose time, find time, make time, and kill time. You can just about do anything with time, except the one thing business owners need most and that’s create more time in the day to get everything done. However, with the right time management tools you'll learn to use time more wisely, which will mean less overtime and more play time.

FOCUS PERIODS

According to The Heart Of efficiency expert Nikki White, most business owners prioritise the urgent to-do list, then the exciting long-term strategy creation and push mundane but necessary tasks to the back of the mind, causing stress. “To combat this, I recommend you create focus zones in your week, so you can get those lingering tasks you struggle to finish out of the way to free up not only your mind but also your time.” The first step to creating focus zones is to identify

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IS ON YOUR SIDE tasks you struggle with, which will vary depending on your skills, interests and responsibilities. The next step is to schedule regular zones for a time of the day (or week) that is conducive to completing those particular tasks. For instance, menial jobs that don’t require much thought could be done in the afternoon. You’ll also need to pick times when you know you will not be interrupted. Thirdly, switch off during your focus times – alert staff that you’ll be unavailable, turn off the email and switch off the phone. And the last step is to “do and review”. If you’re unable to focus and get the job done the reassess the tasks – are they things that could be outsourced?

CONTROL YOUR EMAIL

Linda Sultmann, principal consultant of White Room – Small Business Management, says emails are one of the most time consuming areas that people do not manage well. “Just because we have the technology to be accessible 24/7 does not mean you have to be. Exert control over your emails and smart phones. I check and answer emails in the morning before my first appointment, check in between my client sessions for phone and emails and respond to urgent important issues, then again at the end of the day for anything that can be quickly responded to.”

RESPONSE TIMES

You’re not Triple 0, so there’s no need to jump every time your phone lets you know you have a new message. Sultmann suggests setting expectations of

My strengths are relationship-building and building rapport with clients, so outsourcing enables me to go out and build greater relationships with clients and referral partners – NICOLE CANNON, PINK FINANCE

response times with clients according to your schedule. “My clients know that with emails: I respond in 24 hours; calls: within the day; and they should text me if anything is urgent. If your week is planned you know when you will be able to attend to issues. Also remember that poor planning on their part should not constitute an emergency on your part, so be firm about your boundaries to complete things.”

DELEGATE

Anything that is outside of your expertise, or below your skill level should be delegated or outsourced, suggests Sultmann. “I have a bookkeeper, cleaner, and administration assistant who all help me stay on the most productive tasks.” [see sidebar]

What to outsource Learning to “play to your strengths” is one of the best things a business owner can do. By concentrating on what you’re good at you can capitalise on your skillset and spend more time on the aspects of your business that you like. So what to do about all those other areas that need attention? Outsource it. “I think outsourcing is critical,” says Leah Busby, Blackfish Finance, who outsources her recruiting via a training company, some CRM marketing and accounting/bookkeeping. Outsourcing is a great way to handle aspects of your business such as recruitment, loan

processing or marketing enables me to go out and that you either have too build greater relationships little time for, or too little with clients and referral experience to do well. partners." Pink Finance director The other benefit of Nicole Cannon outsources outsourcing, according to her loan processing. Cannon Paul Taylor, owner of prepares the loan, which is Toowoomba Home Loans, is then picked up by the loan it allows you to hire processor who does the someone else to take care data entry, submits and of the work, without follows through with the bringing them in full-time. loan right through to Taylor outsources his settlement. The loan marketing and afterprocessor keeps clients and settlement client surveys. their solicitors up to date as “Sometimes you need the loan progresses, and is someone who's really good part of Pink Finance’s at what they do, but you ongoing CRM strategy, can’t hire them full-time,” Cannon says. he says. His present “My strengths are outsourcing arrangements relationship-building and allows him to bring in a building rapport with professional service on an clients, so outsourcing as-needed basis.

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FEATURE / SHORT-TERM LENDERS

FILLING THE

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Short-term finance can help bridge the divide between necessity and capital, but brokers should ensure their clients have an extra strategy

he term ‘short-term lending’ doesn’t always have the best of connotations. For many, it brings to mind shady loan sharks taking advantage of desperate people, luring borrowers into a cycle of debt. But short-term lending as an industry is not about seedy pawn shops. Rather, for many lenders, it’s a vital service for small businesses, filling a gap in the market. Without the availability of such finance, many small business owners would be left out in the cold.

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FEATURE / SHORT-TERM LENDERS

A QUICK SOLUTION “Short-term or ‘bridging’ finance is taken out mostly by people needing to take advantage of an immediate opportunity or to plug a time gap between expenditure and future income source,” explains Semper Capital’s director, Andrew Way. “It might be for stock in a business, to release equity prior to sale or refinance, to complete a development project, or to pay for a deposit on a property before another property is sold,” he continues. Way says reputable short-term finance exists to fill a short interim between necessary expenses and available capital, not as a solution to long-term financial problems. Andrew Littleford, director of Interim Finance, agrees with this. “In a word, [it’s] cash flow. Credit is the lifeblood of any economy. The ability for small business and individuals to fulfil their financial obligations takes up most of the working day. It’s cash flow.”

Prime Finance senior credit manager Peter Gibson says while a variety of borrowers may find themselves in need of short-term finance, the situation is often the same: an immediate opportunity requiring equally immediate capital. “If someone buys a property at an auction without finance in place, a short-term loan is actually his or her first preference. Or they may have an advantageous purchase that needs to be settled within 14 days. If the borrower doesn’t have enough liquidity and needs to draw on his/her existing assets, they’ll need a shortterm loan,” Gibson says. HomeSec Finance managing director Paul Stone points to situations that small businesses may commonly find themselves in. “A lot of short-term loans are designed to save businesses from worse outcomes or enable them to get in better situations by allowing them to take advantage of cheap stock,” he says.

A BAD RAP Though Gibson says many businesses are in need of such finance, few know it is available, he claims. This is partly because many brokers are unaware of its availability, Gibson says. “We find that a lot of brokers don’t know it exists, or those who do think it’s loan-sharking.”

“Never sign an offer letter without fully understanding the cost risk of the loan not proceeding” – ANDREW WAY, SEMPER CAPITAL

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Fee fishing to be caught Andrew Way earlier this year warned that brokers engaging in fee fishing and equity theft would eventually be caught out by ASIC. “There are those that are complicit, and those that are naive and are not aware of these practices. If they are complicit they should be put on notice: if a lender is prosecuted for fee fishing or equity theft and a broker has been involved with them on a serial basis, their licence is at risk,” he said.

The association of short-term lending with loan sharking or unethical practices can be pervasive. Part of this is due to the higher cost inherent in short-term loans. But Littleford argues that, while short-term finance may come at a premium, it does not have to be prohibitively expensive. “Money lenders throughout history simply don’t get good press. They exist to fulfil a need that cannot be catered for through their normal financing channels. Consequently, pricing will always feature strongly; however, it does not have to be a fee laden, egregious rate exercise,” he says. Littleford warns that, while there are sound and ethical short-term lenders in the marketplace to be found, some industry players have fairly earned their poor reputation. He urges brokers to carefully

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FEATURE / SHORT-TERM LENDERS

research lenders and prices before recommending them to their clients. “Do the research, compare pricing and, most of all, talk to the lender. Your own instincts in most cases are probably correct!”

BUYER BEWARE Way likewise warns that some lenders unethically gouge borrowers. He says brokers must studiously examine the fee structure of a short-term lender before deciding to go ahead. “Many lenders charge large fees under charging clauses in their offer letters and pursue these whether or not a loan proceeds to drawdown. This is called fee fishing and many applicants get caught by it. Borrowers and brokers should obtain interest rate

and establishment fee quotes in writing before asking for an offer letter. If a lender can’t provide these, find one that can. Never sign an offer letter without fully understanding the cost risk of the loan not proceeding. “Ask for commitment fees to be tied to the loan drawdown and not to the offer itself so that if the loan does not proceed, they don’t find themselves owing thousands of dollars for no benefit,” Way says. “Also, too many people see short-term funding as a loan of last resort, and many non-NCCP lenders will treat it as such and, unless a lender has concern for a borrower’s capacity to service and repay, the borrower is simply obtaining high-cost credit they cannot afford secured against equity they can least afford to lose,” he adds.

Short-term rates: How much is too much? “There is no typical rate. You simply have good lenders with transparent fees and processes and poor lenders who are opportunistic. For second mortgage-based deals – which seem to account for the majority of these transactions – rates that equate to approx 2% p.c.m. with application fees of around 1% are appropriate.” – Andrew Littleford

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“There is no typical fee structure but any bespoke loan is going to be more expensive than a manila-style bank loan. Some lenders with limited balance sheet have to achieve the highest return for capital employed so they do not price to risk but to market tolerance. They will charge large set-up fees and rates quoted in percentages per month. Three to 4% per month seems to be the high-cost average for second mortgages. We charge from 10.25% p.a. for first mortgages and we have offered as low as 14% p.a. for seconds where the borrowers are strong. Our average second would be about 20% p.a. with a 1% set-up fee.” – Andrew Way

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FEATURE / SHORT-TERM LENDERS

But Way claims that some brokers overlook this analysis in favour of the commission on offer from short-term lenders. “Sadly, we see too many brokers concerned about rates of commission rather than their client’s interest rates. They take clients to high-cost lenders because they receive a high fee, sometimes even if a loan does not proceed.” He urges brokers to carefully assess their client’s situation to ensure the best deal possible. “The prudent brokers shop around for the best rate for risk. If the borrower is not in a desperate hurry, and has a few days to arrange finance, they should be paying far lower rates,” Way says.

THE LONG VIEW After finding appropriate finance, Littleford says it’s crucial that brokers continue looking to their clients’ future. “Short-term funding by definition is not a longterm sustainable proposition. The broker needs to be satisfied that, for example, that the client’s refinance prospects are sound. Lending money is only one part of the equation. Causing unnecessary hardship through recovery proceedings should be avoided at all costs,” he says. Stone agrees. He says brokers must immediately work on solutions to move their customers into a sustainable long-term solution. “The broker needs to work on an exit strategy very quickly, so they need to work out if client is able to refinance and get on it quickly,” he says. Stone adds that brokers need to ensure that their clients fully understand the total cost of their short-term finance, and are comfortable that it is the right solution for their individual situation. He uses the example of public transport versus taxi hire, saying that taxi hire comes at a premium price, but is worth every cent to some customers for its ease and speed. “If I didn’t have a car and had to get to the airport, I could take a taxi which would cost $130 or take the train and two buses, which would cost $20. The train and bus proposition would take two-anda-half hours, while the taxi proposition would take

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45 minutes. It’s a cost-benefit analysis. Make sure your client has done that cost-benefit analysis,” he says. But, should clients meet the criteria and the terms of the finance are acceptable, Littleford says there can still be enormous benefit to short-term finance. The primary benefit, he says, is often the speed with which borrowers in need of a quick solution can obtain finance. “[It’s] speed and flexibility. Whenever possible, the broker should steer his client into the most cost effective form of finance. The simple truth is that the majority of banks cannot settle a loan in under six weeks and have very little flexibility on their credit processes. Private funders have a far less cumbersome logistic tail and much greater autonomy,” he says. Way also points to the quick turnaround available with short-term finance, but warns that this comes at a premium. He reiterates that brokers must be careful to ensure their clients understand this. “The benefit of short-term or bridging loans is the pace at which they can be established. But this comes with a higher cost, so borrowers should always consider the cost benefit. But if it helps them secure a good deal, or to take control of a situation that allows them to turn a cost benefit, then it is certainly worthwhile considering,” he says. And Littleford offers a further caveat. He says

“Money lenders throughout history simply don’t get good press “ – ANDREW LITTLEFORD, INTERIM FINANCE

brokers should be wary of “sloganism”, with lenders touting things such as “24-hour settlements” and “unlimited cash”. While these features may be a boon to some borrowers, he warns against being drawn in by unrealistic promises. “Money is a valuable commodity,” he says. “Nobody throws it away unless it is not their own. Sure, shortterm funders can act quickly, but every loan requires elements of due diligence. Brokers need to satisfy themselves that they are dealing with a lender and not a broker pretending to be a lender.”

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PROFILE / KELLIE LAM

KELLIE LAM FASHIONING

SUCCESS Kellie Lam has a passion for fashion, but the allure of a career in mortgage broking was too much to pass up. If her success at Abacus Home Loans is anything to go by, then it’s clear she made the right move Q: What do you attribute your success to? A: I have a passion for meeting new people and building

Q: What was the biggest turning point of your career? A: Since I have set up my city central branch in 2011,

long-term relationships with them. My approach is always positive and disciplined, and I work hard with a ‘never give up attitude’ and take the time to communicate and understand the needs and expectations of my clients and other stakeholders and always encourage my employees to have the same commitment.

conveniences and accessibilities for my clients started playing their due parts and adding value to my business. Moreover, being named number 28 in the MPA Top 100 list for 2011 was a testament that my career is heading in the right direction. This gave me encouragement that the efforts were being recognised and motivation to do better.

Q: What keeps you motivated? A: I firmly believe that a warm helping hand is needed especially when people are facing financial uncertainties and, sometimes, even difficulties. I love the challenge of helping my clients and take great enjoyment when I see them moving forwards to achieve their financial goals. I also take great satisfaction in creating a good work environment, which helps me build a great team of people.

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Q: How does your geographic location affect your business? A: Being close to Central Station in Sydney is great. It is very convenient and accessible for our clients, employees and stakeholders. It also makes it easier to perform our duties more efficiently and allows us to respond to various parties in a timely manner.

Q: Why did you become a mortgage broker? A: I had, and still do, have a passion for fashion, and

Q: Do you diversify and if so, in what areas? A: No, but it is something we may look into, perhaps

completed a fashion design course at East Sydney TAFE. When I finished the course, I considered career options in the industry, as well as other options, as I was keen to be involved in an industry where I could meet new people and express my personality, while also allowing flexibility. It was then that I had an opportunity to be involved in the industry as a mortgage broker and I have never looked back.

insurance broking, equipment leasing, business loans and chattel finance. I would actually like to expand in the commercial property finance area as we have successfully undertaken a few of these, but one step at a time.

Q: In what ways has the industry changed for the better since you started broking? A: The improvements in technology allow mortgage

base, representatives of our lender panel, real estate agents and solicitors. We are looking into the possibilities social media has on offer.

Q: How do you build brand awareness for your business? A: Through advertising in newspaper publications and

Q: In what ways has it changed for the worse? A: The paperwork associated in conforming to the NCCP,

online communications to repeatedly enforce our brand and by building relationships with our clients and other parties concerned. However, I think the best way to build brand awareness is by the quality of servicing your clients.

Q: What kind of advice would you give to a new mortgage professional? A: Educate yourself: Become strongly familiar with the market and attain as much knowledge as you can, as this is a necessary foundation required in this profession. • Plan ahead: Set your targets and plan carefully to achieve them. • Build relationships and listen to your clients: Help your clients by finding solutions to suit their needs. • Have their interests as your best interests: Exercise due diligence and fulfil your fiduciary duty as a mortgage broker.

Q: Do you feel fee-for-service is the way forwards in the industry? A: As clients are becoming much more educated and are offered many options in the market, we may have to charge a small fee for our services as some clients may utilise our resources for information but do not proceed in having the loan brokered on their behalf.

Q: What is the most challenging issue facing the industry at the moment? A: The time and cost associated with compliance of the

Q: Have you embraced technology and social media in your business? A: Yes, we are introducing a CRM software system that

requirements of the NCCP Act is a factor. Also, facing the industry is a slow and conservative real estate market and an economy where people are less confident than before. However, should interest rates remain low and new products get introduced, we may see the industry strengthened through an increased number of people looking to refinance.

will create a more organised and efficient workplace. In regards to social media, various online communications are embraced in our business.

Q: How do you see the mortgage industry evolving in the next 10 years?

“We are looking into the possibilities social media has on offer” – KELLIE LAM

Kellie Lam, Abacus Home Loans ++ Hometown: Hong Kong, China

Q: What business development activities have you focused on? A: We are constantly in touch with our existing client

brokers to service their clients better and there is a continued and growing appreciation and recognition of people towards the industry.

involving all the different required forms, additional filing and archiving, etc. I think it can be streamlined into one or two simple documents.

Factfile

++ Education: · Advanced Diploma of Fashion Design · Certificate IV Financial Services (Finance/ Mortgage broking) · Diploma of Financial Services (Finance/ Mortgage Broking Management) · Diploma of Financial Planning (FNS50610) ++ Family: Two boys – my husband and son ++ Hobbies: Reading, fashion and badminton

I think it will utilise technology much more than it is today and it will be driven for the convenience of the client. This will also allow people in the mortgage industry to work from home more often. I also think that some overseas banks will see the potential in the Australian market and therefore the number of products on offer will be much greater than it is today. I also see the growth of self-managed superannuation funds over time and them being used more widely to purchase property.

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HEAD TO HEAD / GREG MITCHELL

GRAND DESIGNS Homeloans has managed to ramp up its retail presence. Greg Mitchell talks about how the lender has put itself in the public eye

When non-bank lender Homeloans Ltd acquired the defunct Refund Home Loans business earlier this year, it signalled a major leap forward for the company’s strategy. Homeloans had long eyed branded distribution, and had managed to build a network of around 20 branded brokers. The Refund deal saw Homeloans’ branded retail network more than triple, with the addition of 54 new Homeloans brokers. General manager of retail sales Greg Mitchell explains how the Refund buy fit into Homeloans’ grand plan.

MPA: The Refund acquisition was a very high-profile win for Homeloans this year. You were able to expand your branded distribution pretty significantly. Greg Mitchell: Yes, certainly that’s been a great one for us. We’ve always wanted to build the retail side of Homeloans. Through that channel, we’ve now got the potential to expand our brand and products through the 54 ex-Refund brokers we signed up throughout the country.

MPA: How are the former Refund brokers settling into their new role as Homeloans branded brokers? GM: You’re always going to have teething problems, but it’s actually been fairly stress-free. A lot of the Refund guys were not able to trade or actually do business while Refund was in administration, so we found it was refreshing to sit down with these guys and explain ways to build their business in the

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different areas we work from. We’ve done a lot of work in the last two to three years in regards to brand awareness, and we’ve done extensive work to broaden our range of products. So with one application form, these brokers have got access to five different funders. That makes their life a lot easier when they’re dealing with people out in the marketplace.

MPA: Is this kind of branded distribution growth a strategy Homeloans will continue to pursue in the year ahead? GM: We’re always after the right people to come onboard, and we want to make sure we have relationships with the right people. Being selective is good for the business. But we’ve always been up for the right acquisition.

MPA: You’ve said before that Homeloans wants to continue to build its retail presence and brand visibility. How have you gone about making consumers more aware of the brand? GM: We went right back to basics. When [national marketing manager] Will Keall came onboard, the visibility and consciousness of the brand in the marketplace were the initial elements he made sure we had right. Putting the profiles of people like Shane Webcke and Matt Pavlich to the brand has been good. We’ve also made people aware that we’ve been around for 26 years, we’re publicly listed, and we have five different funders – there are a lot of facets to building brand awareness. But consumers out there in the marketplace are now aware of who Homeloans are and what we do.

MPA: Following on the Refund acquisition, what does Homeloans have planned for the year ahead? GM: In the short term, we want to focus on having a

Perfect fit Homeloans COO Scott McWilliam helped mastermind the Refund Home Loans acquisition, and said the company was pleased with the result. McWilliam said the 54 exRefund brokers who signed on to the company represented some of Refund’s top performers. He agreed with Greg Mitchell that the acquisition was part of Homeloans’ long-term strategy. “This transaction fits perfectly with Homeloans’ strategy to expand through organic growth and acquisitions. From our perspective it was a mutually beneficial match and fit. They needed a home and brand to broker underneath, and we’re out there looking for ways to grow our distribution either organically or via acquisitions.”

retail presence and also a presence through the third party channel. Our biggest focus is service. It’s hard to put a value on service, and people talk about service all the time, but I would put Homeloans up against anyone in terms of service. Our BDMs are second-tonone. We’re building a tighter relationship with the people we want to deal with moving forwards, and that’s very important. We have around 6,000 accredited brokers on our books, and we need to build rapport with the brokers who are going to give us loyalty, and maintain our levels of service with every deal, every day for all the other brokers, and hence to their customers, too. It’s easy to say, but it’s not easy to do. But you have to do it. It devalues your proposition and the value of your brand if you don’t.

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THE DATA / MINING TOWNS

DIGGING UP PROFITS

THEDATA

Australiaâ&#x20AC;&#x2122;s resources riches may have peaked, but these mining towns show how house prices have benefited from the boom

DALBY, Qld Median price: $300,000 12-month change: 7.9% 3-year change: 24.0% 5-year change: 50%

MUSWELLBROOK, NSW Median price: $295,500 12-month change: 5.8% 3-year change: 16.1% 5-year change: 29.8%

SINGLETON, NSW Median price: $380,000 12-month change: 5.1% 3-year change: 22.6% 5-year change: 24.6%

GLADSTONE, Qld Median price: $465,000 12-month change: 13.4% 3-year change: 24.7% 5-year change: 50.9%

ISAAC, Qld Median price: $572,500 12-month change: 30.7% 3-year change: 46.8% 5-year change: 70.9%

Source: RP Data

THE DATA / YOUR MORTGAGE INDEX

Battler borrowers Affluent buyers don’t seem to be biting at the moment, with most of the recent enquiries on yourmortgage.com.au coming from middle-income Australia

Household income

18%

48% 20%

<$50k

$51–100k

$101–150k

12%

$151–200k

$201–250k

>$250k Source: yourmortgage.com.au

Borrower fast facts

51%

will buy with a partner

90%

want an interest-only loan

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85%

say they have good credit

66%

are first homebuyers

63%

have no dependents

35%

want a loan urgently

NEWS / ROUND-UP

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MOTIVATION / PROBLEM SOLVING

Practical tips for

Problem solving Problems. We all have them. How to make cash flow this month. When to hire that new person. Whether to upgrade the website or not. Fortunately, researchers are working hard to discover what helps us solve problems more easily. Here are six practical tips for problem solving based on recent neurological and psychological research.

01|

Find a thinking place

Samantha does her best problem solving while washing up. I think better at my dining table than I do at my desk. My mum used to think in the car while waiting to pick us kids up from music practice. Where you problem-solve matters. Establish a place for thinking, and do it there. Obviously, it is more effective if there is not too much noise and few interruptions.

02|

Stop trying Andrew’s

shower time is when he has his greatest ‘A-ha!’ moments. Perhaps you’ve experienced the same thing. MRI research shows the answer to a tricky problem comes when you think about it, and then stop thinking about it. It’s when you stop thinking – when the analytical left brain takes a

Cindy Tonkin is the consultants’ consultant. Find out more about the research behind these suggestions at bit.ly/P3AVj5

“It’s important to know that multi-tasking is a myth…And gender makes no difference”

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holiday and the associative right brain takes over – that you have insight. So give yourself time to think about it, and then don’t think. Stay in bed (awake!) for a moment or two longer. Spend a minute longer in the shower. Take a lunch-time stroll. You’ll solve more problems with less effort.

03|

Try the Brain(less) Trust When Bilyana, a

mortgage broker, gets really stuck on a problem, she talks to her sister, who works in childcare. Explaining the problem often solves it – her sister asks questions that no one else does. This is the magic of the Outsider perspective, well documented by creativity researchers.

04|

Smile Freaky experiments

show that people holding a pen between their teeth solve more problems. This activates the smile muscle which stimulates feel-good chemicals in your brain. If you can’t muster or maintain a smile, try holding a pen cross-ways in your teeth (not your lips). When you feel good, you solve more problems.

05|

Look after yourself

What’s good for the heart is good for the brain. Consider exercising (cardio-vascular exercise creates new brain cells, and may combat Alzheimer’s); napping (if you get REM sleep, you solve 40% more

puzzles than if you don’t); drinking more water; taking fish oil or B vitamins; and eating breakfast regularly.

06|

Do just one thing at a time Finally, it’s important

to know that multi-tasking is a myth. You cannot work on a problem while watching TV, helping kids with homework or talking on the phone. And no, gender makes no difference. Doing two things simultaneously drops your IQ by 10 points. Work on one thing at a time: you’ll be smarter, happier and solve more problems more quickly.

NEWS / ROUND-UP

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LIFESTYLE / FAVOURITES

❤

Favourite things... John Flavell, general manager of distribution, NAB Broker

Place to be in Australia: As an old-school surfer (no long board, though), I’d have to say Byron Bay

Hobby Without a doubt, surfing. But anything outdoors, really

Drink Ten Minutes by Tractor, Pinot Noir Book I enjoy reading about military history; The

Music I appreciate a good guitar, particularly acoustic

River War by Winston Churchill is a favourite

Movie Again a war classic, The Battle of Britain Food Buffalo mozzarella with tomatoes and olive oil, yum!

Vacation spot Anywhere

Sport I think my love of surfing is pretty well known

with good waves

but I also enjoy the F1

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NEWS / ROUND-UP

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NEWS / ROUND-UP

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