Mortgage Professional Australia magazine Issue 13.09 by Key Media

MPAMAGAZINE.COM.AU ISSUE 13.9

-SPECIAL REPORTWhich non-banks are setting the standard?

WHOLESALE LENDING THE BIG TRENDS THAT ARE AFFECTING BROKERS

SOFTWARE AND CRM SOLUTIONS THAT ARE SHAKING UP THE MARKET

JONATHAN STREET THINKTANK CEO AND HIS NEWEST RECRUIT

CONTENTS / 13.09

COVER STORY

Brokers on Non-Banks 2013 What brokers think of the players who are challenging the banks for a larger slice of the mortgage market

NEWS 4 | Roundup The latest market intelligence from the world of property, economics and mortgages 11 | Online The best from MPA Online and Australian Broker Online 12 | News analysis Is it time for brokers to stop criticising and start engaging with industry bodies?

FEATURES 44 | Star tech: the next generation The new and innovative software solutions that are shaking up the broking market in 2013

WEEKLY INVESTIGATIONS NOW ONLINE: Work-life balance What new brokers want mpamagazine.com.au

62 | Credit files uncovered Credit Repair Australia reveals some fascinating credit history stats

BUSINESS STRATEGY 52 | Execution: the holy grail of business? How to follow through on your corporate strategy effectively 56 | Trust: the new competitive advantage Why trust is both the financial service sector’s biggest problem and greatest opportunity

MORTGAGE INSIDER

Andrew Read How a Diploma in Financial Planning from Intellitrain helped to boost business

MORTGAGE INSIDERS 18| Jonathan Street and Peter Vala The Thinktank execs on what the future holds for commercial lending, and where brokers fit in 42 | Peter Schroeder Why moving into broking from car and equipment finance was a natural progression 60 | Day in the life Thinktank head of sales and distribution, and father of six, Peter Vala’s busy schedule 61 | Favourite things Suncorp GM, intermediaries, Steven Heavey

FEATURE

Wholesale lending: the state of play Insights from three of the sector’s leading lights on how the wholesale lending market is faring

SEPTEMBER 2013 | 1

EDITOR’S LETTER / 13.09 COPY & FEATURES

EDITOR Robin Christie JOURNALIST Amy Rosenfeld PRODUCTION EDITORS Roslyn Meredith, Moira Daniels CONTRIBUTORS Omer Soker, Cyril Peupion

ALTERNATIVE THINKING There’s no doubt that the GFC shook up nonbank lending to a considerable degree. The non-bank share of Australia’s mortgage market has more than halved since the GFC took hold, and consumers have taken flight to the majors in search of safety. But that’s not to say that the non-bank sector isn’t fighting its corner. How well are the non-banks serving the broker channel? All is revealed in this month’s cover story, Brokers on Non-Banks 2013. The results of our Brokers on Non-Banks survey provided a fascinating snapshot of how the non-banks are performing in brokers’ eyes. There’s a lot that the non-banks are getting right, and the lenders that have been voted in as best in class in this year’s survey are testament to the hard work that the non-bank sector is putting in. But there are areas of improvement that brokers have highlighted, and these too have been presented in this year’s Brokers on Non-Banks report. Turn to page 22 for the full story. In this issue we also take a look at the state of the wholesale lending market, as it continues its own recovery from the GFC. What does this mean to brokers? Turn to page 36 to find out. Speaking of brokers, our interview with broker-cum-financial adviser Andrew Read certainly provides food for thought on the diversification issue (page 32), while our software roundup (page 44) takes a look at the latest technological solutions that brokers have at their fingertips. Robin Christie, managing editor, MPA

ART & PRODUCTION

ART DIRECTOR Jonathan Phillips SENIOR DESIGNER Rebecca Downing DESIGNER Marla Morelos

SALES & MARKETING NATIONAL SALES MANAGER Rajan Khatak ACCOUNT MANAGER Simon Kerslake MARKETING EXECUTIVE Anna Farah 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 Robin Christie tel: +61 2 8437 4787 robin.christie@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, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Auckland, Toronto, Denver mpamagazine.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: robin.christie@ keymedia.com.au Printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry

NEWS / ROUND-UP

SENTIMENT

ECONOMY A BIGGER PROBLEM THAN IMMIGRATION

Listening to the Rudd vs Abbott debate you’d be forgiven for thinking that all the nation cares about is border protection, but research suggests that Aussies are more concerned about the state of the economy. According to Roy Morgan research, Australians consider economic and finance issues to be the most important problem facing the country today. The result places economic and financial concerns (35% of respondents) ahead of issues such as government policy/immigration/human rights (18%), social issues (9%) and environmental issues (7%). “Days before Prime Minister Kevin Rudd announced the ‘PNG Solution’, this special Roy Morgan qualitative research showed asylum seekers to be a major concern to the Australian people,” said Roy Morgan CEO Michele Levine. “However, the largest issue for Australians remains the economy, including the rising cost of living and unemployment.” INFOGRAPHIC

AUSTRALIA’S BIG PROBLEMS

35%

Economic and financial issues

18%

Government policy/ immigration/ human rights

STATS

Stable

Social 52%

9% issues

Environmental issues

Source: Roy Morgan Most Important Issues Special Poll

4 | SEPTEMBER 2013

2.8% Australia’s median house price rise during the 2013 June quarter Source: APM June Quarterly House Price Report

NEWS / ROUND-UP

FBAA

CONSTRUCTION

CONFERENCE SPEAKERS REVEALED

The Finance Brokers Association of Australia (FBAA) has confirmed a handful of keynote speakers for their innovative free conference on November 8 at Sea World, Queensland. Key speakers will include Teamcorp director Tony Wilson, David Carson from Compliance One, Greg Rodgers from law firm Rodgers Barns & Green, and others still to be confirmed. “[Wilson’s] doing ‘truly motivated teams’,” said FBAA events coordinator Leah Renwick. “So he’s basically coming in and getting people to understand their teams, high performance, the cost of it physically and business-wise ... because a lot of brokers forget that they need work-life balance! “David Carson will basically be there to educate brokers on compliance and to help companies become compliant,” she added, “while Greg Rodgers will be discussing compliance issues from a legal perspective.”

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RESIDENTIAL CONSTRUCTION PLUMMETS

STATS

46% SMSF investors who are under the age of 30

Residential construction rates have dropped across the nation, with only WA being spared the downturn. Figures from PRDnationwide’s Quarterly Economic and Property Report indicated that the total value of residential construction work completed in Australia fell by 10.1% in the March quarter. But PRDnationwide’s director of research Aaron Maskrey said WA had showed resilience, with residential construction rising in the state by 10.8%. “This can be attributed in part to ongoing large-scale mining and energy projects in the state, which continued to attract new residents to Western Australian cities and townships at a rate almost twice the pace of the national average. All these new residents need somewhere to live, and the construction industry has ably supported this growth,” Maskrey said. The ACT and NT saw the most significant declines, falling 19.3% and 17.8% respectively. Tasmania followed, slumping 15.1%, followed by Victoria (-14.5%), Queensland (-14%), SA (-12.4%) and NSW (-9.6%).

INFOGRAPHIC

QUARTERLY RESIDENTIAL CONSTRUCTION FIGURES 15

Source: Macquarie Bank/SMSF Professionals’ Association of Australia Active Management Report

WA +10.8%

0 -5

-10 -15 -20

ACT -19.3%

NT -17.8

TAS -15.1%

VIC -14.5%

QLD -14%

SA -12.4%

NSW -9.6%

Source: PRDnationwide Quarterly Economic and Property Report

NEWS / ROUND-UP

CREDIT

ASIC

MORTGAGE ENQUIRIES ON THE UP

Good news. Mortgage enquiry figures have seen their biggest quarterly increase since 2010. According to the latest report by credit bureau Veda, mortgage enquiries took an upswing in the June quarter, showing an increase of 6.9% on the June quarter last year. “The increase in mortgage inquiries appears to suggest better housing market conditions. Inquiries are a good indicator of homebuyer demand,” said Veda’s general manager of consumer risk, Angus Luffman. Mortgage enquiries increased in all states, but WA (+15%) and NSW (+13%) fared particularly well. Personal loan applications, however, were down. After coming in 10.3% higher, year-on-year, in the March quarter, they were just 6.3% higher in June. Luffman said growth in demand for personal loans had been driven by a surge in car sales. He said this area of demand appeared to be fading.

INFOGRAPHIC

CHANGES IN MORTGAGE DEMAND % YEAR-ON-YEAR NT

+15%

+10.3%

QLD

+1.6%

+7.5%

NSW

ACT

+13% Source: Veda Quarterly Consumer Credit Demand Index, June 2013

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TAS

-1.3%

-3.3% VIC

+1.2%

NOT-FOR-PROFIT LENDER TO REPAY INTEREST OVERCHARGES

STATS

13,427 The total number of dwelling unit building approvals in June 2013 Source: ABS Building Approvals Australia, June 2013

A not-for-profit lender will pay consumers back around $157,000 in overcharged interest following an ASIC enforcement. ASIC has said Fair Loans Foundation Pty Ltd, a firm providing credit to financially disadvantaged consumers as an alternative to payday loans, has entered into an enforceable undertaking to pay overcharged interest back to around 864 borrowers. The regulator said the company advertised interest rates lower than the actual rates charged, alleging that Fair Loans advertised rates of 15.95% or 19.95% when rates were actually 28.25% or 35%. “The cost of credit is a key factor for consumers when shopping around for a loan, and the law requires that representations about cost both in advertising and loan contracts are accurate. ASIC will not accept overcharging, and where necessary will take action to ensure consumers are not out of pocket,” ASIC deputy chairman Peter Kell said. In addition to the enforceable undertaking, the watchdog also issued two infringement notices for related NCCP breaches totalling $22,000. ASIC has accepted the enforceable undertaking from Fair Loans in resolution of its concerns over the miscalculation and disclosure of interest, and acknowledges Fair Loans has already repaid the overcharged interest to a significant number of the affected consumers and has entered into a repayment plan to pay the infringement notices. The regulator also noted that payment of an infringement notice is not an admission of a contravention of the National Credit Act. ASIC can issue an infringement notice where it has reasonable grounds to believe a person has contravened certain consumer protection laws.

MPAMAGAZINE.COM.AU

SEPTEMBER 2013 | 9

NEWS / PRODUCT ROUND-UP

PRODUCT NEWS Your bite-sized guide to the industry’s newest products and initiatives

WHO: Liberty WHAT: Commission boost and rate cut KEY FEATURES:

WHAT: New SMSF product

• Liberty Financial has announced significant rate reductions of up to 1% across its entire range of custom (non-prime) mortgages. • In addition, it has increased commissions on its prime home loans to “amongst the highest in the industry”. • Interest rates for new custom full-doc customers started from as low as 5.74% pa (comparison rate 6.27%), effective Tuesday 16 July. In addition, low-doc interest rates for self-employed borrowers were also slashed, starting at 5.99% pa (comparison rate 6.32%). (Rates correct at time of publication.) They say: “With upfront commissions increased to 0.7% for prime home loans and paying trailing commissions from day one, Liberty offers top-tier remuneration along with its first-class customer service” – Liberty national sales manager John Mohnacheff We say: Will Liberty’s boost to broker commissions see it feature in the top three for commission levels in next year’s MPA Brokers on Non-Banks report?

KEY FEATURES:

WHO: Aussie

WHO: HOMELOANS

• ‘Classic SMSF’ product enables established SMSFs to borrow funds for the purchase or refinance of residential investment properties • Maximum loan size of $500,000, and loanto-value ratio (LVR) of 80% • Funded by Homeloans’ Residential Mortgage Trust (RMT), the first RMT-funded product launch in more than five years They say: “We have experienced steady growth in demand for our SMSF products and as such have created one with a low interest rate and higher LVR” – Homeloans GM, sales, Greg Mitchell We say: Is Homeloans’ first RMT-funded product launch since the GFC a sign of things to come?

10 | SEPTEMBER 2013

WHAT: Pepper appointed to panel KEY FEATURES: • Aussie Home Loans has announced the addition of specialist mortgage lender Pepper to its panel of lenders. • The addition of Pepper is in response to the growing demand for specialist lending products. • Pepper will be offering a ‘bespoke’ range of products for Aussie, targeted at customers who don’t fit mainstream lending criteria, with dedicated statebased business development managers and direct access to the Pepper credit team for a more streamlined approval process for borrowers. They say: “Pepper’s specialist lending expertise increases the borrowing options for our customers, many of whom may be self-employed or contractors and don’t meet the current lending requirement of some of our lenders” – Aussie executive director James Symond We say: The Aussie partnership forms part of Pepper’s business strategy to continue to grow its home loan base in the Australian domestic market, and will provide a significant base to open up the specialist lending category further.

NEWS / MULTIMEDIA

ONLINE IN MOTION

The latest from Broker News and MPA TV

The latest highlights from MPA Online

SAY WHAT?

THE BIGGEST QUOTES OF THE MONTH

COMMONWEALTH TOPS BROKERS ON BANKS THIRD YEAR RUNNING

CBA executive general manager of third party and mobile banking Kathy Cummings offers her feedback.

“I say to all those who are asking – quite simply, AFG is not for sale. And to the person or persons spreading the rumour – enough!”

– AFG GM, sales and operations, Mark Hewitt, tackling false reports that AFG is for sale

WHY BROKERS NEED TO LEARN TO SAY NO Clients and referrals stream in for those brokers who will go the extra mile and work beyond the call of duty – but is it time brokers learned to say no? “Yes-icide” can lead to dire results in the long run, argue Janet Kestin and Nancy Vonk of creative leadership lab Swim. Thankfully, they say yes-icide is preventable, and they suggest three questions brokers should ask themselves before saying yes to any extra assignments: 1. Is my ‘yes’ aligned with achieving the long-term goal? 2. Is ‘yes’ aligned with the brand’s values? My company’s? With mine? 3. Does the data support a ‘yes’? If the answer is no to any of the above, you’re in danger of committing yes-icide, say Kestin and Vonk. Now ask yourself: •• What’s the worst that can happen if I say yes? •• What’s the worst that can happen if I say no?

TO FIND OUT MORE...

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

SEPTEMBER 2013 | 11

NEWS ANALYSIS / INDUSTRY BODIES

INDUSTRY BODIES:

A CALL TO

ACTION With the industry bodies crying out for engagement from the broker community, is it time for the vocal minority of ‘lazy’ brokers to stop criticising and start engaging? Amy Rosenfeld investigates

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MPAMAGAZINE.COM.AU

L ‘Lazy’ brokers can’t complain about the industry bodies if they’re not prepared to get involved with them, say the FBAA and MFAA. Both the main industry bodies are crying out for more engagement and feedback from their members, and all they’re getting is criticism, says FBAA president Peter White. “It’s easy to sit back and criticise, but unless you’re participating and helping, put up or shut up. I’m not being nasty but it’s very easy to point the finger and the reality is we’ve only got a certain amount of heads and hands to do things, but the more we have, the more we can do and the quicker we can do it.” The wider broker population are brilliant, says White, but a few “lazy” brokers continue to critique the bodies while refusing to put in the effort to make a change. “We want more councillors in certain states, but trying to get people involved, you feel like you’re asking to cut their head off, but then they’re happy to say you’re not doing a good enough job. If you think we’re not, get on board, be part of the solution. That’s what I’d love to see.” White understands that brokers “have a lot on their plates”, but being a part of an industry body

doesn’t necessarily take a lot of commitment. “It’s not a huge amount of time. There are no real barriers to helping out. There’s one meeting every couple of months for council, maybe up to three events a year… It’s not a huge thing to ask. Especially if you think you have a voice that needs to be heard.” MFAA president Phil Naylor agrees, and says the organisation is always looking for “new blood and fresh ideas” at state council and board level. The MFAA also encourages feedback through its weekly newsletters and LinkedIn forums. “I understand and respect the fact that being, in the main, one person businesses it’s not always easy for brokers to get involved in councils, forums etc. That is why we provide the options of online involvement through our LinkedIn forums.”

VALUE PROPOSITION But ex-FBAA president Graham Reibelt argues that, while getting members involved in any association is difficult, neither industry body offers a strong enough value proposition to its members to encourage engagement. If aggregators and lenders were to remove requirements for brokers to be a part of an industry body, the organisations would be forced to increase

SEPTEMBER 2013 | 13

NEWS ANALYSIS / INDUSTRY BODIES

“The board is well balanced with several different and diverse skill sets” Phil Naylor

HOW SATISFIED ARE YOU WITH WHAT THE MFAA DOES TO REPRESENT YOU?

51%

Completely or somewhat satisfied Neutral

25%

Somewhat or completely dissatisfied

23% 1%

Unsure 0

Source (all graphics): MFAA Member Engagement Survey 2012

HOW OFTEN DO YOU DISCUSS THE MFAA WITH CLIENTS?

Actively discuss

52%

When prompted by client

24%

Never

24%

14 | SEPTEMBER 2013

their desirability to brokers, says Reibelt. “I think you’ll find that most members are only members because they have to be, but if membership was voluntary I think it would force the organisations to really lift their game and offer a true value proposition to a broad membership base.” Reibelt also says the difficulty in getting brokers involved in the industry body has meant that many decision-makers in the MFAA are not in the broking business, making it difficult for brokers to relate. Naylor, however, refutes this claim. “Constitutionally, at least 70% of the members of each state council must be a broker and all states currently exceed that ratio. The MFAA’s board of 12 comprises five brokers, two mortgage managers, one lender, one aggregator, one lawyer and one independent director. In accordance with good corporate governance procedures the board is well balanced with several different and diverse skill sets.” Reibelt says on-going education is a key factor in providing a strong value proposition to brokers, and the MFAA’s diploma initiative has been a step towards this, but still does not go far enough. “I was a member of the MFAA when our membership was three digits and all we got was a quarterly newsletter, and a warm and fuzzy feeling was the reason you belonged. “I think those days hopefully have gone, but I think a lot of people still just spend their $500 a year because they have no choice and otherwise their lender won’t deal with them.” But White argues that entirely voluntary membership would not change anything in the way the organisation runs. “It’s not going to put more pressure on us to lift our game; we’re constantly looking at ourselves to lift our game in the normal course of our business.”

A VOLUNTARY BODY Naylor says that while a “couple of broking groups” have MFAA membership as a requirement, the organisation is by and large a voluntary industry body and is run as such. “No one’s membership is taken for granted. The value proposition that MFAA has of increasing and maintaining high professional standards, lobbying on behalf of members and consumer and media awareness, has shown to be an attractive proposition to the majority of our members.”

NEWS ANALYSIS / INDUSTRY BODIES

Graham Reibelt

“I think a lot of people still just spend their $500 a year because they have no choice and otherwise their lender won’t deal with them” DO YOU FEEL YOU UNDERSTAND WHAT THE MFAA DOES TO REPRESENT YOU?

While the MFAA’s most recent member engagement survey showed just over half of members were “completely” or “somewhat” satisfied with the industry body, Naylor says feedback received at regular forums and PD days has always been very positive. White feels that the FBAA has been proactive with regards to feedback, but admits that he doesn’t “have the intellectual property on know-it-all”, which is why he encourages brokers to “be a part of the solution, rather than posting anonymous negative comments on blog sites or off the back of editorials”. “My advice to everyone is to get involved at committee level, or if you’re really passionate about doing some good for the industry, do what I did. We don’t care who it is, but get involved with someone so you can have your voice heard in a more succinct and a more profound fashion.” BROKER ENGAGEMENT: A GRASSROOTS CAMPAIGN

90.5% Yes

9.5% No

Source (all graphics): MFAA Member Engagement Survey 2012

DO YOU FEEL CONNECTED WITH THE MFAA AND ITS BRAND?

69% Yes

31% No

ARE YOU SATISFIED WITH THE CURRENT CONTENT OF EMAIL COMMUNICATIONS FROM THE MFAA?

74.4% Yes

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25.6% No

The MFAA recently announced that Vow Financial CEO Tim Brown would take over as the association’s president at the MFAA’s AGM in November. Here are some interesting comments on broker engagement that the MFAA presidentelect made in a video the MFAA posted online announcing the appointment. The board has been discussing the strategy with the MFAA management team and there’s two or three things that we think we can introduce over the next 12-18 months that will sort of be a grassroots campaign. But I think it also then comes back to us working with the brokers, and the brokers themselves working within the community to lift the profile. I’ve been in the industry for a long time – probably too long, actually, that’s why I’ve got the grey hair! But I think it was a point in my life where I thought it was time to give back to the industry and I really felt that I could make a difference. I’ve been a broker ... I’ve been a lender, so I’ve seen the lenders’ perspective. I’ve also been an aggregator. So I think what I can bring to the role is a diverse number of experiences and backgrounds. Also, I’ve lived up and down the east coast of Australia [and] I’ve traversed most of the countryside, so not only can I bring the experience, but I can also bring the demographic and geographic knowledge as well. So hopefully that will hold me in good stead as the years go.

HEAD TO HEAD / THINKTANK

A BOLD FUTURE Commercial lender Thinktank is going through a bold transition at present. CEO Jonathan Street and head of sales and distribution Peter Vala offer their thoughts on the future of Thinktank, the commercial market, and where brokers fit into the picture

MPA: As a specialist commercial property lender, have you noticed any trends in the market that brokers should be aware of?

Jonathan Street

property below $5m going into SMSF structures, and, unless the federal government substantially moves the goalposts, this trend is here to stay, particularly for commercial property where a business owner-occupier can hold their property in a SMSF and lease it back. Brokers, lenders, advisers and borrowers should all become well informed of the benefits of SMSFs and look for opportunities to become involved, or increase their involvement, in this rapidly evolving segment of the market.

Jonathan Street: Weâ&#x20AC;&#x2122;d have to say the most apparent trend over the past year or so has been the shift in commercial property purchasers towards buying in an SMSF. Although not all purchasers are borrowing as part of the acquisition, the sea change clearly demonstrates the rapidly increasing awareness among SMEs, property investors, wealth advisers and finance professionals of the significant MPA: Whatâ&#x20AC;&#x2122;s your approach to capital gains and income tax advantages of holding forging strong relationships with property to term within a super fund. the broker channel? Anecdotally, we have been seeing between six Peter Vala: We have always had a can-do attitude and eight out of 10 purchases of commercial and seek to maintain regular communication with

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MPAMAGAZINE.COM.AU

our business partners. Thinktank essentially helps brokers meet their clients’ financial needs. I am looking to deepen our relationships within the broker community and provide an outstanding level of service based upon my own experience, understanding of the industry, commercial property and credit knowledge, and our market-leading package of financial options, access and support.

MPA: What would you say makes Thinktank stand out from other commercial lenders? PV: At times there has been a perception that we are a second-tier nonconforming lender. The reality is Thinktank is a specialist commercial property finance provider that offers a genuine and indeed better alternative in many cases to mainstream commercial finance options. We are not here to cross-sell other products and services that attempt to lock the client’s wallet and goodwill into the one financial institution or in any way detract from, or undermine, a broker’s relationship with the borrower.

We have a deep understanding of the commercial property market and we share this knowledge openly with our accredited introducers via our personal communication, regular market updates, and in the course of individual deals. It is this unique understanding of the commercial property sector that allows us to assess transactions in a different light to other institutions and allows us to provide tailored terms and conditions to the benefit of the customer and their individual circumstances.

MPA: Based on broker feedback that you’ve received, what would you say are the key issues or challenges that brokers are facing at the moment? PV: Customer retention: A broker’s business revolves around their client base, and it is paramount that the broker remain a trusted adviser of their customer. Actions by some in the market can see this relationship challenged or diminished, particularly where the funder appears to assume a trusted adviser position in the borrower’s mind

SEPTEMBER 2013 | 19

HEAD TO HEAD / THINKTANK

and, in turn, a broker’s future business can be jeopardised. Thinktank unreservedly respects the fundamental and ongoing relationship between a client and their broker, which means we see our accredited brokers as both clients and trusted business partners for the long term. Potential commission changes: We understand viable trailing commission is an important part of a broker’s income stream, and as such we remain committed to delivering flexible, trail-based remuneration to brokers from date of settlement right through to loan discharge. While other lenders are constantly turning on or off the commissions tap according to market conditions and their own circumstances, our approach on commissions has not changed from day one nearly a decade ago, and that is to pay leading commissions and leave the option of flexibility in the hands of our finance partners.

MPA: What kind of feedback have you been receiving regarding Thinktank’s service proposition? JS: We continually receive positive feedback around our service and delivery. Internal and independent external surveys have backed that up, but it doesn’t mean there aren’t areas where we can still seek to make improvements. Peter coming on board last month has been a great addition for us. He is extremely service focused and relationship driven, which only adds to our overall proposition. Ultimately, it is all about the package we offer brokers and their clients. A business like ours must offer a compelling combination of relevant products,

contemporary modes of access and delivery, consistently outstanding service, and value-adding expertise in property and finance that is relevant to our finance partners and their clients.

MPA: Thinktank is going through a transformative time after expansion in funding lines and the introduction of key initiatives based around technology, product development and brand reach. What can you reveal about the transformation? JS: While we are still in the mid-stages of the transformation, we have been very encouraged by the positive response received right across our business relationships, from finance partners to service providers, stakeholders and institutions in capital markets. The motivation behind the change has been to allow the business to shift gears by extending our market reach, becoming more accessible, directing investment into core relationships, and scaling up our operations and funding. Everything has been slotting into place very smoothly, and the most pleasing aspect for us at this stage is the validation received from not only

Peter Vala

JONATHAN STREET’S CAREER TIMELINE 1987

1994–1998

1998–2001

2004

Completed Bachelor of Economics at Sydney University

Operations manager on family farm in southern NSW exporting 1,000 tonnes of fresh asparagus to Japan each year

Married and moved to London, variously working with Cargill, Rothschild and Accenture

Wrote the business plan for Thinktank as one of the founders

1988–1994 NAB graduate program, teller through to branch manager

20 | SEPTEMBER 2013

2001–2004

Financial controller with White Agriculture

2006 First Thinktank loan settled in September

the positive feedback but the immediate uplift we have seen in actual loan volumes and the pipeline of new business. Things are looking very positive.

MPA: Thinktank revealed its new branding at this year’s MFAA National Convention. What has been the reaction to this? JS: On the whole, reaction has been great and overwhelmingly positive. As is always the case with these things, we’ve received some ‘constructive’ feedback in there as well, but the change-up has people looking, talking and engaging with us, which is fantastic.

MPA: What are Thinktank’s plans for the year ahead? JS: We expect the year ahead to be a busy one as we keep the focus on execution around key initiatives such as an imminent product release in the SMSF area, further technology roll-outs that have us quite excited, a move to larger premises next month to accommodate our progressive expansion and, for the most part, continuing to build on and invest in our key relationships and partners within the industry. We are seeing, and are keen to continue seeing, measured growth occurring in our business and that of our business partners, yet we do remain inherently watchful around the direction of the economy alongside implications for both residential and commercial property markets. We are in a different era of shorter cycles and pervasive uncertainty, which makes it a challenge for everyone running a business, although that doesn’t necessarily diminish the number of types of opportunities that are out there, and, for our part, we anticipate a pretty solid year ahead.

2007 GFC rolls into town; competitors begin closing down

2008 Acquires master trust structure from Allco Finance Group in meltdown for $20!

2010–2013 Commences new growth phase with additional stakeholders, capital and multiple funding lines. Closing in on $500m in settlements

SPECIAL REPORT / BROKERS ON NON-BANKS

-SPECIAL REPORTHot on the heels of MPA’s Brokers on Banks survey, brokers have been asked to turn their attentions to how the nonbanks are performing in the third party channel. Here’s what brokers think of the players who are challenging the banks for a larger slice of the mortgage market

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METHODOLOGY

MPA ran an online survey to quiz the broker community on its attitudes towards the non-bank lenders. Respondents were asked to score each of 13 key elements of the non-bank service proposition out of five for importance. These key metrics were as follows: Turnaround speed Credit policy Overall service to brokers Overall service to consumers BDM support Interest rates Product innovation Commission levels Mortgage product range Communications and training Online platforms Marketing and brand awareness Diversification opportunities

Non-banks play a crucial role in keeping the mortgage market competitive, and have been soldiering on through extremely difficult market conditions in recent years. Perhaps inevitably, the GFC preceded a decline in the non-bank mortgage market share. According to the MFAA, the banks’ share of the mortgage market has grown from 78% pre-GFC to around 93% this year. With brokers acting as an essential conduit for non-banks to get their products to consumers, MPA has surveyed the broker community to find out what they think of the non-banks’ performance in the third party channel. What are they doing well, which non-bank lenders are standout performers, and where can the non-bank sector pick up its game? The answers to these questions and more, as well as the identity of this year’s non-bank lender of the year, are presented throughout this special report. Read on to discover what brokers really think of the non-bank sector.

These key service elements have been ranked and presented in order of the average score that was given to them for performance. We also asked brokers to list the top three non-bank lenders for performance in each category, and the non-banks that received the most votes have been highlighted in each section. The five lenders with the best results across the board have been presented as our non-banks of the year. As well as looking at individual elements of the non-bank service proposition, we also wanted to gauge broker opinions on the key issues that they face when providing non-bank loans. To that end, respondents were asked to respond to several additional questions. These included telling us how much non-bank business they wrote over the last financial year, how much they would like to write and presenting us with the key barriers to selling non-bank loans. The fascinating responses to these additional questions are presented alongside the results for each performance metric. A WORD FROM OUR SPONSOR

Consumers are benefiting from improved affordability with interest rates running at lows not seen in generations. While lenders are competing hard on rates the market has narrowed and Australians are now looking for differentiation beyond price. This is where mortgage managers can gain a compelling edge by letting their product and service proposition do the talking. Non-bank lenders can provide flexible, nimble, innovative and personalised solutions to customers. They also offer a unique proposition in terms of a more dedicated back office service, and in fact they are generally closer to the end customer so can tailor offerings more closely to Brett Halliwell, general manager distribution, Advantedge their needs. As Australia’s leading wholesale funder, Advantedge continues to provide ongoing support to our non-bank lender partners to help them elevate their business and demonstrate the unique benefits they offer. Our continued partnership with MPA’s non-bank survey demonstrates our commitment to remaining a proactive voice in the sector and enabling brokers to provide a range of market leading products to uniquely fit their customers’ needs.

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SPECIAL REPORT / BROKERS ON NON-BANKS

1. Turnaround speed IMPORTANC

1st place 2nd place 3rd place

E IMPORTANC

RATING /5

4.4

=2. Credit policy

Australian First Mortgage Better Mortgage Management Homeloans

Turnaround speed has been pegged as the most important element of the non-bank service proposition again this year, with Australian First Mortgage, Better Mortgage Management and Homeloans taking out the top three spots. When asked to comment on what the non-banks did well, several respondents pegged turnaround speed as a major element of the non-bank service proposition. Comments included “The turnaround times are better than the banks”, “Faster turnaround, better access to BDMs, more online options” and “quicker, more personalised”. But that’s not to say that brokers didn’t feel that improvements could be made on this front. When respondents were asked what would be the single most important thing non-banks could do to improve over the next 12 months, responses included “employ more credit assessors to improve turnaround times”, “faster turnaround of initial offers and the settlement process” and “even shorter turnaround times”.

STAT

Are clients typically open to considering non-bank products?

No 23% Yes 77%

RATING /5

4.3

1st place 2nd place 3rd place

Better Mortgage Management Pepper Australian First Mortgage

When it came to its average score for importance, credit policy came hot on the heels of turnaround speed with an average of 4.3 out of five. Better Mortgage Management and Australian First Mortgage were once again voted into the top three by respondents, this time in first and third place respectively. Pepper was also highly rated on the credit policy front, taking second place. Broker feedback when it came to the non-banks’ credit policy focused on the personalised service that the non-bank sector can offer. Comments such as “you can talk direct to the approval manager”, “more accessibility to credit people”, “more keen to lend” and “ready access to credit” were a common theme. But not all respondents agreed. One went as far as stating that non-banks “cannot compete with banks” on credit policy, while other respondents noted that non-banks could improve on “credit policy niches to overturn the major banks”, “be less pedantic on credit policy” and “provide competitively priced products that have a more relaxed credit policy compared to traditional banks”.

IMPORTANCE RANKINGS Rank

Category

Turnaround speed

4.4

Credit policy

4.3

Overall service to consumers

4.3

Overall service to brokers

4.2

BDM support

Interest rates

3.9

Product innovation

3.8

Commission levels

3.8

Mortgage product range

3.8

=10

Communications and training (product information, training, seminars, etc)

3.5

=10

Online platforms

3.5

Marketing and brand awareness

3.2

Diversification opportunities (eg insurance, credit cards, SMSF loans, etc)

2.7

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Average score (out of 5)

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SPECIAL REPORT / BROKERS ON NON-BANKS

STATS

What percentage of loans did you put through non-bank lenders in the last 12 months?

=2. Overall service to consumers IMPORTANC

What percentage of your business would you like to put through the non-bank lenders?

IMPORTANC

RATING /5 Better Mortgage Management Homeloans Pepper

Also receiving an average score of 4.3 out of five on the importance scale was overall service to consumers. Better Mortgage Management took out the top spot in this category, with Homeloans and Pepper rounding out the top three. While several brokers commented that consumers often seek out the over-the-counter service that the banks can provide through their branch network, others were more optimistic about customers’ attitudes to non-branch service models. One stated that clients are “very open, especially now they rarely seek counter service at a branch. Nonbank linked with a reasonably good, caring broker equals greater choice, better service and outcomes”. When it came to the areas in which the nonbanks could improve their consumer service levels, comments included “customer service post settlement needs improving” and “work with brokers to improve service to end customers and better product delivery”.

RATING /5

4.3

1st place 2nd place 3rd place

0-20% 43% 21-40% 20% 41-60% 14% 61-80% 13% 81-100% 10%

4. Overall service to brokers

4.2

1st place 2nd place 3rd place

Australian First Mortgage Pepper Iden

Perhaps unsurprisingly, the overall level of service provided to brokers featured in the top four when the 13 key service points presented in the survey were scored and ranked. Australian First Mortgage and Pepper once again made the top three, in first and second place respectively, while Iden managed to grab the third spot. In a similar vein to comments on credit policy, respondents offered some glowing assessments of the personal service provided by the non-banks. These included “they are much more personal and involved with helping to grow your business. you are just a number with most of the banks”, “personalised, they care about getting your business and keeping it” and “do not have that arrogant attitude that banks have, which is ‘take it or leave it we don’t really care’”. On the flip side of the coin, there were brokers who believed that the non-banks could learn from the bigger players in this area. One respondent, for example, noted that “even though non-banks rely heavily on broker business, they haven’t mastered the service levels of the majors”. Other comments in this vein included one respondent stating that non-banks could up their game by working with brokers “to improve service to end customers and better product delivery”.

BROKERS SPEAK: BARRIERS TO PUTTING MORE BUSINESS THROUGH NON-BANKS

0-20% 17% 21-40% 24% 41-60% 20% 61-80% 16% 81-100% 23%

“Service and brand awareness.” “Trust from the client. If they know a brand, they are happy; if they don’t, it is hard to convince them.” “Client trust and preference for the big four banks.” “Somewhat tighter credit policy on some things, like length of employment.” “Many of my clients wish to have access to branches.” “Access to offset accounts.”

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5. BDM support

6. Interest rates

E IMPORTANC

RATING /5

1st place 2nd place 3rd place

Better Mortgage Management Australian First Mortgage Pepper

BDM support took out fifth spot in the importance rankings, with an average score of four out of five. Better Mortgage Management took another first place in this category, with Australian First Mortgage and Pepper coming in second and third respectively. The issue of BDM support was one that numerous respondents were keen to comment on. In terms of what the non-banks were doing well when compared with the banks, comments included “usually much better BDM support, makes things a lot easier”, “BDM support is a much higher quality” and “the banks’ BDMs only look after their top ranking brokers”. But there are two sides to every story, and a few brokers highlighted areas where non-banks could improve. One commented that “BDMs can make a significant difference, and there should be more of them so they can provide the level of service”, while other comments included “employ better quality BDMs who are proactively involved with your business” and “ensure that the BDMs are motivated and not overloaded”.

RATING /5

3.9

1st place 2nd place 3rd place

Australian First Mortgage Liberty Firstmac

Interest rates came in sixth on the importance scale, with Australian First Mortgage once again taking a top three spot. Second was Liberty, while Firstmac took third place in this category. One issue that came to the fore was whether clients were willing to trust a non-bank lender over the better-known banks, even if the non-bank provided a lower rate. When asked ‘what is the key concern you encounter, if any, when presenting non-bank products?’, one broker stated the following: “Less confidence. How they will perform in the future, and whether they will pass on the RBA rate cuts”. Another respondent, however, claimed that low rates were still a big draw, despite consumer wariness of non-banks, stating that “generally clients are a little sceptical about dealing with lenders that they have not heard of, but it mainly boils down to interest rates and loan costs”.

STAT

Are you happy with the service levels provided by non-banks?

No 12.5% Yes 87.5%

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SPECIAL REPORT / BROKERS ON NON-BANKS

=7. Product innovation IMPORTANC

RATING /5

3.8

1st place 2nd place 3rd place

Better Mortgage Management Liberty Australian First Mortgage

The equal seventh most important element of the non-bank service proposition turned out to be product innovation, which received an average importance score of 3.8 out of five. Looking at the top three, some familiar names have cropped up again, with Better Mortgage Management, Liberty and Australian First Mortgage taking first, second and third places respectively. Technology appeared to be front of mind when it came to product innovation. Broker comments included “my clients that have loans with non-bank lenders are still banking with CBA, ANZ… on iPads”, and [customers ask] “how do we correspond with the lender? Are the online and phone banking facilities on par with the majors?”.

=7. Mortgage product range E IMPORTANC

RATING /5

3.8

1st place 2nd place 3rd place

Better Mortgage Management Australian First Mortgage Homeloans

Closely linked to the issue of product innovation, and also taking joint seventh place in the importance rundown, was mortgage product range. Once again, Better Mortgage Management and Australian First Mortgage made the top three, with Homeloans

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completing the podium positions in this category. When it came to product range, this year’s survey participants weren’t backwards at coming forwards with suggestions for products that the non-banks could introduce to improve their service proposition. These suggestions included “do 100% lending, even at a higher rate”, “construction loans up to 80%”, “95% plus LMI for investment property” and “look at extending the term to 40 years”. Brokers also called out for non-banks to improve their niche offerings (such as SMSF loans) in order to compete with the majors.

=7. Commission levels E IMPORTANC

RATING /5

3.8

1st place 2nd place 3rd place

STAT

Better Mortgage Management Pepper Australian First Mortgage

Also scoring 3.8 out of five on the importance scale was commission levels, with the three lenders that stood out in this category being Better Mortgage Management, Pepper and Australian First Mortgage. Overall, brokers were quite happy with the commission arrangements that they had in place with the non-banks. Eighty per cent of respondents stated that they were satisfied with the commissions paid by the non-banks, while 20% said that they weren’t satisfied with non-bank commissions. There were some interesting broker comments when it came to the subject of non-bank commissions, with many respondents comparing banks with nonbanks on this issue – especially when it came to payment times for trail commissions. Comments included “commissions are compatible if not better than the banks”, “non-banks usually pay slightly higher commissions than a big four bank lender, as they do not have to man branches. Usually trail is paid in year one”, and “in line with what normal banks offer, and sometimes slightly better. Trail income available for settlement”.

Are you satisfied with the commissions paid by the non-banks?

No 20% Yes 80%

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=10. Online platforms E IMPORTANC

RATING /5

3.5

1st place 2nd place 3rd place

Better Mortgage Management Australian First Mortgage Liberty

Online platforms received an importance score of 3.5 out of five, putting this element of the non-bank service proposition in equal 10th place. Better Mortgage Management took out yet another first place in this category, with Australian First Mortgage continuing its strong showing in this year’s survey by taking second place. Another high flyer this year, Liberty, took third spot. A few brokers believed that the non-banks could improve their online platforms. When asked ‘what would be the single most important thing nonbanks could do to improve over the next 12 months?’, one respondent, for example, replied “online lodgements or, if filling in application form, have pdf files you can save data into”. Another suggested that all non-bank loan applications should be able to be lodged through aggregator software.

=10. Communications and training E IMPORTANC

RATING /5

3.5

1st place 2nd place 3rd place

Liberty Pepper Australian First Mortgage

Also taking equal 10th place in the importance stakes was communications and training. Liberty was voted as the best non-bank lender in this category, with Pepper taking second place and Australian First Mortgage rounding out the top three. When asked how non-bank service levels could be improved, several brokers highlighted the issue of communication. Suggested improvements included “constant communication when issues arise”, “more communication” and “putting on and properly training more staff when there is going to be a need (eg special discount periods, etc)”. Comments didn’t come in as thick and fast on the issue of training brokers, but one respondent did suggest that the single most important thing nonbanks could do to improve over the next 12 months would be to work on education and training for brokers.

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SPECIAL REPORT / BROKERS ON NON-BANKS

12. Marketing and brand awareness E IMPORTANC

RATING /5

3.2

1st place 2nd place 3rd place

Australian First Mortgage Pepper Homeloans

Somewhat surprisingly, considering the number of broker comments that came in surrounding the need for non-banks to increase their brand awareness amongst consumers, marketing and brand awareness came in 12th out of 13 in the importance scale. Australian First Mortgage took out the top spot in this category, while Pepper and Homeloans came in second and third respectively. Broker comments on marketing and brand awareness included “if they don’t know the brand they are less likely to trust this option” and “the majority of clients haven’t heard of or know about the non-banks and the service and products they offer”.

13. Diversification opportunities E IMPORTANC

RATING /5

2.7

1st place 2nd place 3rd place

Australian First Mortgage Better Mortgage Management Homeloans

Last, but not least, on this year’s survey’s importance list was diversification opportunities. The top performers in this category were Australian First Mortgage, Better Mortgage Management and Homeloans. Brokers weren’t as vocal on the issue of non-bank diversification options as they were on subjects that received higher importance scores, but a few brokers felt that the non-banks could do more to compete with the banks on diversification.

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THE TOP FIVE 1st place 2nd place 3rd place 4th place 5th place

Better Mortgage Management Australian First Mortgage Pepper Liberty Homeloans

Better Mortgage Management managed to take out the top spot in this year’s Brokers on Non-Banks survey, thanks to its string of top three performances in the 13 categories voted on by brokers. Hot on its heels was Australian First Mortgage, which also scored an impressive number of top three finishes. Pepper took out the third spot, with Liberty and Homeloans rounding out the top five. Here are some of the comments that brokers offered on our top five performers.

• Better Mortgage Management: “Excellent range of products and have always had great support from BDM Gavin Robinson.” • Australian First Mortgage: “Fast service levels, accessible and solutionsoriented credit assessors and proactive BDMs that value add my business.” • Pepper: “The BDM works hard to promote the business and the products and rates offered for the non-conforming market are fair considering the risk.” • Liberty: “They have a great ‘can do’ attitude, from the BDM to credit to policy.” • Homeloans: “They provide fantastic support to brokers and clients and have a great range of competitive products.” TOP OF THE PILE

Better Mortgage Management managing director Murray Cowan reacts to the lender’s first place performance. How do you feel about being voted in as the non-bank of the year in this year’s Brokers on Non-Banks? Our business is solely focused on servicing mortgage brokers, so to receive positive feedback from this survey is pleasing and vindicates the investments we have made in improving our business over the past 12 months. What are the key improvements that you’ve been making to Better Mortgage Management’s broker service proposition over the past year? We’ve continued to make improvements to our product range, particularly in the Alt Doc space. We launched our Capital Specialist range last September and have had a very positive reaction from brokers who appreciate many features weren’t widely available in the market such as accountant verification of income up to 80% LVR and Alt Doc land loans. We continue to invest in improving our product range and recently launched a special 0.5% risk fee on our Capital Specialist Alt Doc loan, which will potentially save borrowers thousands. How does Better Mortgage Management intend to improve its service proposition further over the next 12 months? We plan to upgrade both our website and PAL online scenario search engine to improve the functionality of our broker resources which we develop in-house. We are also actively seeking to join more aggregation panels so that brokers who can’t access our products now will have the opportunity.

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BROKER PROFILE / ANDREW READ

BROADENED

HORIZONS

Andrew Read, owner of Yellow Brick Road's Dee Why branch, explains how gaining a Diploma in Financial Planning through Intellitrain helped him to expand his business and boost revenue. Amy Rosenfeld reports MPA: How did you find the course? Andrew Read: I did the Intellitrain course through correspondence and completed it in about six months. We had a 12-month allowance, but you’re able to complete it at your own pace, provided you meet all the requirements. It wasn’t just for brokers, but a lot of the participants were brokers. I think the course itself had a ‘real-world’ edge to it. It wasn’t just a purely academic-style course; it was real-life scenarios. It gave me the confidence to feel ready to sit in front of a client essentially as soon as I’d finished, and know what to expect, what sort of things they would ask and what I needed to answer. It wasn’t just purely all of the facts and figures; Andrew, my trainer, had a lot of real-world experience and that came across in how he presented the course.

MPA: What made you decide to undertake further study? AR: For me it was to be able to provide those additional services to my clients. With the model we work under at Yellow Brick Road, we market that we are a full-advice company, even though our bread and butter is home loans, so I had to get those qualifications to meet what we were putting out to the market – and also to offer a full service both to clients that I had already and any ones that came in through the door. Having had no experience in that

32 | SEPTEMBER 2013

area initially, we had to rely on the financial advisers Yellow Brick Road was providing to us, but I found that it’s much more personalised if the advice is coming from the one source.

MPA: How did you go about implementing what you’d learnt into your business? AR: There were definitely some challenges. I think a lot of the reason brokers shy away from diversification is because they literally don’t have time to do it, so we had to restructure our business to allow that time and to change the roles in what we traditionally did, and that included adding more staff to cope with the additional workload. We brought more staff on in the mortgage space and in the advice space as well, so I have a full-time planner working alongside myself and my business partner now just to cope with the workload, because it is a lot more work to do, but there is a lot more income to be made as well.

MPA: What impact have these changes had on your business? AR: It’s had huge impact. My business partner and myself were both very much mortgage brokers. We hadn’t thought that either of us would be going into the advice space, and certainly not in the short

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BROKER PROFILE / ANDREW READ

“Lately, almost 40% of our revenue is coming from advice, compared to two years ago where if we were lucky it would have been 5%” term, but since then we’ve seen a huge change in the revenue structure of the business. Lately, almost 40% of our revenue is coming from advice, compared to two years ago where if we were lucky it would have been 5%. From a broker’s perspective, our advice revenue would be like writing an additional $5–6m in loans, and we’ve halved the amount of clients because we’re getting multiple revenue streams from one client, so it’s a huge shift in the business.

MPA: Aside from increased revenue, what other value has come out of diversifying into financial planning? AR: Definitely client retention, particularly in situations where a client may approach you who isn’t quite ready to do a home loan, or maybe their existing home loan is fixed for a period. Rather than them just becoming someone who you would contact at a later point, we’ve got a large array of services we can offer them right now that will retain them until they’re ready for a home loan. I think a client that you’re offering advice to is a client for life. It’s not just based around home loan interest rates and products; you’re selling yourself as a service. It’s also about the way you position yourself as a business in the market. For us we’re not just a mortgage broker anymore; we’re a wealth manager, so that opens up to a whole new market base in the community rather than those just looking for home loans. It increases the leads we get into the business, and I think the overall client experience is a lot better.

MPA: Did you have any difficulty in fitting study around your existing workload? AR: It wasn’t easy. It is something that you really need to sit down and study properly as it’s a whole new field essentially, so it did take time. I had to really time-manage myself in that area. The good

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thing in having a business partner is he was able to take on a bit of the extra pressure to give me more time to study, and I have a very understanding family.

MPA: Would you consider taking up more training in the future? AR: For myself, I would be looking at getting involved in the SMSF side of things, which is an add-on to the course. For my new staff, I’ll be looking at offering them the opportunity to go through Intellitrain to update their skills.

MPA: What advice would you give to other brokers looking to diversify? AR: The first step is to educate yourself on what’s required. When you do that it won’t seem as daunting. You then need to think about restructuring your business so that you have the systems and support staff to cope with the advice side of the business and an increased workload. Just give it a go; start small. You don’t need to offer everything at once, but maybe start by talking to your clients about risk and protecting their income. That’s a good starting point, and clients will definitely appreciate that you’re looking at their whole situation.

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BROKER PROFILE / WHOLESALE LENDERS

WHOLESALE LENDING:

THE STATE OF PLAY

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The wholesale lending market is a complicated beast, but one that brokers would do well to investigate. MPA speaks to three of the sector’s leading lights for an update on where the wholesale lending market is sitting in 2013 There’s an air of ‘steady as she goes’ in the wholesale market at present. As Advantedge general manager distribution Brett Halliwell explains, there haven’t been any changes in the big players over the past year, but there has been some movement on the mortgage manager front. “It’s fair to say that there are really five players in the market: three of them are authorised deposit-taking institutions – or banks – and then there are two securitised funders. So we’ve seen

a reasonably steady state in terms of their operations,” he says. “There’s certainly good, strong organic growth from those mortgage managers within the market, but there aren’t as many of them as there was a number of years ago. So it’s really the strong players that are continuing to put their best foot forward and grow organically.” Damian Percy, general manager third party lending, Adelaide Bank, adds that genuine mortgage managers have a well-earned reputation for service and a personalised approach to dealing with brokers. “Our partners who are doing that well are outperforming the market,” he says. When it comes to the funding-cost situation for the wholesale market, costs have fallen somewhat, and this is a trend that Halliwell believes will have some impact on the market dynamics. “That goes for the non-banks and the banks alike,” he says, “because the banks can tap into somewhat cheaper wholesale funding as part of their overall funding mix.” So where does this leave wholesale funders, mortgage managers and brokers? Read on for more candid insights from Percy, Halliwell and Firstmac’s Kim Cannon.

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BROKER PROFILE / WHOLESALE LENDERS

is fortunate to have such a low level of dependence on debt markets as a result of the funding strength of the Bendigo and Adelaide Bank Group.

What effects do these challenges have on mortgage managers and originators? With fewer funders operating in the market than six or seven years ago, ensuring a strong, wellfunded lender panel is harder than it once was. Together with the fact that lenders are more selective and more demanding today than ever before, managers and originators have to maintain a very high standard to guarantee access to a sustainable panel. Though this is entirely appropriate, it has meant that businesses have had to merge or partner up to reach the scale required.

What are the trends in terms of white labelling? Is this a growing market?

DAMIAN PERCY, GENERAL MANAGER, THIRD PARTY LENDING, ADELAIDE BANK How has the wholesale market fared over the last 12 months? We’ve seen our wholesale portfolio grow at well above systems over the last 12 months, and many of our partners are growing faster than that. Genuine mortgage managers have a well-earned reputation for service and a personalised approach to dealing with brokers, and our partners who are doing that well are outperforming the market. It’s pleasing to see increased levels of activity through some of the non-bank players who are clearly benefiting from a reinvigorated, if not fully restored, RMBS market. Though no one can doubt the level of price competition out there at the moment, the non-banks and non-majors have always been at the forefront of innovation, particularly in the wholesale market, and the more players active in the space, the merrier, in my view.

What are the biggest challenges facing wholesale funders? For those reliant on RMBS for ongoing funding, pricing is still well above that of the halcyon days, and there is always some risk that the market’s appetite for assets can wax and wane. Adelaide Bank

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The private label/white label market is growing strongly. To the extent it brings additional products and brands into the market, I think it’s a really good thing, particularly where the home brand product is managed carefully and doesn’t run the risk of compromising the foundation of the broker model – product independence. That said, I think there are some legitimate concerns around private-label products in circumstances where borrowers may not be entirely clear as to whom they are ultimately banking with and why.

How are you supporting your distribution partners? We continue to focus on doing what we’re good at, which revolves around delivering flexible products and policies and ensuring applications can be turned around quickly and reliably. We also recognise the importance of maintaining the infrastructure we supply on our partner’s behalf, which is why we’ve just upgraded our white-label online banking product. We’ve improved security, mobility, and self-service options so that each of our partners has an offering equal to that of the major banks. Do you have new products in the pipeline? Not so much a product as additional product functionality: later this year we’ll be rolling out an add-on to our new online banking system that will deliver integrated, automated and dynamic budgeting and financial management tools for customers of our transactional home loan products.

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BROKER PROFILE / WHOLESALE LENDERS

ling tends to be where a lender will offer a consumer product through brokers. The big advantage of that is the lender ends up being a little bit more involved in the consumer end of the proposition, including marketing, whereas the mortgage manager is really responsible for the end-to-end experience. Broadly we have seen an increase in the white-labelling space, but that really has been sitting alongside the continued success of mortgage management.

How are you supporting your distribution partners? We offer access to a very secure and stable source of funding through our AA- balance sheet. A wholesale funder working with a mortgage manager is all about partnerships. And when you think about partnerships often people will think maybe it’s just about sales. It’s more than that. The relationship will cover senior management, product design, marketing, getting products in the door, getting them underwritten, IT, credit and risk, finance, etc. It’s not just about distribution. Wholesale funders work alongside mortgage managers in true partnership – we touch every single area of each other’s businesses.

BRETT HALLIWELL, GENERAL MANAGER DISTRIBUTION, ADVANTEDGE What are the biggest challenges surrounding wholesale lending? Mortgage managers are very much about their brand, their business and their proposition in terms of what they offer to the market. Consumers do tend to ask the question, though – “Who is the underlying funder who’s sitting behind this loan?” And what they’re looking for is a level of security. To me, the key thing with mortgage managers is that they need to be clear about what they’re offering; who they serve. I think it’s fair to say that for a lot of them the proposition is really based around service. That tends to be a key cut-through and a key point of differentiation which is very important to them. Sitting behind that they need to have a competitive product suite and competitive pricing, which they do.

What are the trends in terms of white labelling? Is this a growing market? I probably would differentiate between white labelling and mortgage management. White label-

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What is your key message to brokers about wholesale funding? It’s really important that brokers are aware of the existence of mortgage manager products within the market. They really do play a really important role in terms of offering alternatives to the market. Some of them have levels of specialisation or niches which are available for brokers to select. And I think they continue to play a useful role in terms of injecting competition into the market.

Do you have new products in the pipeline? The last year and a half we’ve been focusing on a raft of product enhancements, and there’s been something in the order of 26 of them which were successfully launched to market. In terms of products that are available on the market, we’ve pretty much ticked all of the boxes that we wanted to in terms of feedback from our customers. What we’re largely concentrating on now is really post-settlement service. A lot of the other work we’re doing is on the service side. How can we ensure that we can give fast, efficient decisions, and how can we provide strong and effective service within the market.

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KIM CANNON, MANAGING DIRECTOR, FIRSTMAC How has the wholesale market fared over the last 12 months? It is emerging from the global crisis but not coming as fast as I had hoped. For brokers we are starting to see improvements and greater acceptance because of the products we have. We are running a broker special at the moment, which is a 4.99% variable rate with all the bells and whistles, plus we have a 5.25% three-year fixed. [Rates correct at time of interview.] The mortgage manager channel has been slow to react to price differentials. I still have concerns for the future of a number of those players in terms of volumes.

What are the biggest challenges facing wholesale funders? The biggest challenge at the moment is trying to process the volumes of business that we are receiving and still provide the high-quality service that our customers expect. Funding is becoming more open and workable now that the GFC is over. Our recent RMBS showed there was money about, and whenever we start to see offshore money hit the market it is a good sign. On June 7, 2013, Firstmac priced $500m RMBS with ÂŁ92m, its first dual currency RMBS since 2007.

What effects do these challenges have on mortgage managers and originators? Mortgage managers need to adapt to the new environment. There are actually two new worlds that have emerged, the first being the post-GFC world of banking, finance and regulation, and the second is the online world of web customers. People are becoming more comfortable using the internet to make big decisions, and the non-bank sector has a price advantage in the market at the moment because the cost of funds is falling while bank deposit costs remain high.

What are the trends in terms of white labelling? Is this a growing market? There is still demand there and, as we have always promoted to the broking community, they should be out there promoting their own names, their own brands, and building brand awareness instead of using their resources to promote the brand of a lender.

How are you supporting your distribution partners? With good-priced products and good service levels. We have also created our own online money management program for customers, called Livez Money, that helps them transfer funds and create budgets.

Do you have new products in the pipeline? Yep. Watch this space.

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LIFESTYLE / PETER SCHROEDER

Mildura Finance executive director Peter Schroeder has taken an interesting route into mortgage broking. He started out in car and equipment finance, but found that moving into mortgages was a natural progression. However, being an equipment specialist, he has also teamed up with several aggregators to successfully grow that side of the business. He tells MPA his story

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Which area of finance did you start out providing?

Peter Schroeder: We started back in 2000, and we predominantly just started doing cars and equipment and then went into mortgages. Over the years we’ve built the business up where we run separate departments for each part of the business. So we have an equipment area, a motor area, a residential area and a commercial area that are all separate and that’s continued to grow.

What was the next step?

PS: Back in 2004 we did a joint venture with Connective to set up Connective Plant & Equipment, which offers equipment finance to all their mortgage brokers. So we offer car and equipment finance to all of their brokers – we run an online system. And that side of the business grew until about 2008 when we further diversified and we started offering equipment and motor to other aggregators. And now we deal with about six aggregation groups and about 3,500 mortgage brokers nationally.

Do you find other brokers easy to deal with?

PS: Yes and no. Education’s probably the key that we’ve found over the last few years – we’ve really pushed our education levels with the brokers. And it’s just not saying ‘here’s the product’, it’s teaching them how to sell and how to compete against car dealers and so forth. We push down the motor side more than the equipment side, because motor’s quite easy to do and there are so many opportunities within their database – every one of their clients owns a car, basically.

Do you provide funding yourself?

PS: No, we have a fairly large lender panel and our brokers go through our online system, which gives them access to about nine lenders, and then they can quote and offer. We deal with Connective, Smartline, Loan Market, LJ Hooker, Finsure and Mortgage Choice presently.

What tips can you provide to brokers who want to provide motor finance?

PS: The key is education. Either speak with the

aggregation group you’re under and do a training session on products available in the market, how to go

about providing advice, how to compete against car dealerships and so forth. And that’s generally what we do. We do a two-hour session with our guys, and then a 12-week marketing challenge for them as well. We help them to go through their databases and find opportunities and so forth. Often they’re quite scared of that first deal, but once we help them with the first transaction they say ‘this is pretty easy’. There’s no rocket science about it. The easiest way to do it is to do your own car first.

How can brokers stay on top of the workload?

PS: Some of the groups that we deal with operate with a PA. They source the transaction and give it to them to process it. And the good ones are generating enough income to pay for that PA – so they end up paying for themselves.

How much business do you write yourself?

PS: Locally we do about $50m a year in residential and commercial, and $70m a year in cars and equipment. We cross refer from residential into motor and vice versa. Cars and equipment have always been a larger part of the business, but one thing we find about writing cars is that it is a consistent way of generating income. Our motor department generates between $30,000 and $40,000 a month in income. And we get a lot of repeat business.

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FEATURE / SOFTWARE

STAR TECH:

THE NEXT GENERATION The 21st century broker needs an arsenal of high-tech solutions to keep up with the demands of their clients. Following on from last yearâ&#x20AC;&#x2122;s technology round-up, Amy Rosenfeld explores the new and innovative solutions that are shaking up the market in 2013

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There is now little doubt that we are working, and living, in a technology world. In a market where the slightest competitive edge can make all the difference, brokers are looking for the latest drivers of efficiency and differentiation, and clients are insisting on it. Time-starved brokers are demanding services that eliminate errors, cut costs and save precious minutes; tech-savvy clients are demanding service that is personal, efficient and always available; and industry pressures are demanding that brokers streamline costs without skimping on service. CRM software and broker apps have been called in to fill the gaps in a rapidly changing broker landscape. While aggregator software has dominated the market for many years, a number of independent software providers are stepping in with their own innovative solutions.

ON THE MOVE Technology has blurred the lines between work and play in the broking world, and increasingly clients expect their brokers to be available anytime, anywhere, says Stargate CEO Brett Spencer. Stargate has seen a steadily increasing demand for application-based software, especially with regard to the iPad, says Spencer, and as such the company is in the process of releasing a new version of its fact-finder tool, eFind. Stargate also has plans to release mortgage calculator and serviceability guide applications in the near future, and has seen strong interest in its two search engine applications, Mobbie and MyProductGuide.

Mobile and tablet-based technology allows brokers to take advantage of work opportunities outside the office, Spencer says. “If you’re on the golf course or at a pub and somebody starts talking about finance, everybody chips in their two cents worth, and that’s the opportunity for a broker to be able to pull up that information on their phone and say, ‘You know what? This right here is available for you’. “Brokers should always be going through that thought process: where can they get that next transaction from? And mobile technology gives them that opportunity because they have their office in their back pocket.” In the current market, brokers need to treat every person they meet, and every conversation they have, as a potential deal, Spencer says. “Software is only as good as the person using it, but what software does is it gives our brokers the ability to always be able to sell something to the customer. A broker doesn’t make any money sitting in their office on their bum waiting for the phone to ring. “Brokers generally run their own businesses, so if you’re not, as a business owner, ‘on’ 24/7, you may as well go and work for someone else digging ditches.” On top of 24-hour availability, today’s clients also expect service that is personal, relevant and fast, says Loanworks national sales manager Wayne Macartney. Due to broker demands, Loanworks recently launched its KNX Marketing System, which integrates with the company’s Loanworks Product Suite but can also be used as a stand-alone system.

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FEATURE / SOFTWARE

CHANGING DEMANDS

Jega Rajan

The life of a broker is more complicated now than ever before, and brokers are looking for new products to cope with changing demands, says Infinitive’s Jega Rajan. Today’s brokers are looking for CRM solutions that will help them in three key areas, he says: productivity, mobility and diversification. “Previously mortgage brokers were retired bankers. They knew their product well and they generally went to one bank, whereas the younger brokers are doing it by the book, looking at which bank is offering the best. With over 300 mortgage products available in the market, they can’t really remember everything, so they’re looking to automate this kind of stuff with the CRM.” Infinitive’s latest product, e-Lodge+, gives brokers the ability to lodge electronic applications to over 15 different lenders, says Rajan. With the complexity of compliance and credit legislation, brokers need an efficient CRM solution and not just a “gimmick”, he adds, stating that his offering improves efficiency by removing the need for data re-entry, reducing lodgement times to between 10 and 15 minutes, and giving 100% accuracy. Infinitive also recently released its online equipment leasing platform Drive Online, catering for the industry trend towards convergence, and the company eventually hopes to extend the platform to include insurance and financial planning modules, Rajan explains.

“It has the flexibility to define any field/data you want to track for marketing purposes (eg settlement date, lender, product, referrer) and gives you true set-and-forget functionality for birthdays, loan anniversaries, etc.,” Macartney explains. “Broadly speaking, brokers are asking, ‘How can I target the right product or service to the right prospective client?’ This implies getting smarter by segmenting your client base and marketing to them strategically – this goes beyond a simple blast email campaign.”

“Brokers are asking, ‘How can I target the right product or service to the right prospective client?’” Wayne Macartney

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TIME TRIALS The ability to maximise efficiency and productivity can be the difference between a top broker and the rest of the pack, but requests for more information and reworks are often holding brokers back, says Macartney. Electronic settlement has the potential to reshape parts of the industry, he believes, by introducing the ability to ‘fast-track’ settlements. “The question is being raised as to why you need a 90-day settlement period if you can efficiently improve, instruct and settle. Initially at least, this may prove to be a point of difference to the borrower. “The theory is that it will also take some of the risk out of being able to settle a deal, which may mean less headaches for the broker.” NextGen sales director Tony Carn says time lost through reworks is one of the top challenges brokers are facing today. NextGen’s ApplyOnline software links brokers’ CRM systems with lender processing systems, says Carn, capturing relevant data and highlighting gaps and discrepancies, reducing reworks and requests for more information. “At the moment, when lenders and brokers measure quality they do it retrospectively, at the end of the month or quarter or annually. They’ll look at their relationships and ask what their conversion rates were, what their rework rates were, and look at how they can improve those. What we have done very successfully over the last year is bring quality management forward to the point of sale,” Carn explains. A key advancement that NextGen expects to pilot with broker groups in the coming months is the addition of a supporting documents tab to lender modules. This will allow brokers to upload and file all supporting documents, validate them against lender policy, and then submit them to the lender in one hit. “Feedback on that from lenders, brokers and broker groups has been really, really powerful to date. It’s a pretty major innovation and it is real leading-edge technology. That’s a real game changer that is going to radically reduce reworks, radically reduce costs, and improve SLAs for brokers,” Carn says. NextGen has also upgraded its lender lodgement modules to valuate every loan submitted against the Geocoded National Address File, a

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FEATURE / SOFTWARE

INDIE SHIFT

Brett Spencer

Frustration at a lack of data ownership has seen the broker industry begin to move away from in-house and aggregator-provided software and towards independent software providers, says Stargate’s Brett Spencer. The difficulty with aggregator-provided software, says Spencer, is that you lose the ability to control and own your data space as a broker. “From a broker’s perspective you’re stuck on that platform, and if you leave you’ve got to learn a new platform. Independent software gives brokers the ability to own their data 100%, and it cannot be taken away from them.” However, Loanworks’ Wayne Macartney takes a more balanced approach and says aggregatorprovided software may be more appropriate in certain contexts. “There are pros and cons to both – you should look at what makes sense in the context of your business. Either way, software is not a ‘magic bullet’.”

“It empowers them to have greater confidence that their requests for more information should be almost eradicated” Tony Carn

feature that Carn says has also produced a huge amount of positive feedback. “Not a lot of people fully recognise that it’s actually quite a substantial driver of reworks; many lenders reported it as one of their top three reasons. It can lead to things like valuations having to be done twice, to issues where addresses don’t match what’s in the contract of sale, to credit bureau checks being done, and documents having to be reissued.” Using ApplyOnline software allows brokers to ensure that every loan application is aligned to the credit assessment rules and policies of a lender before submitting it, says Carn. “It empowers them to have greater confidence that their requests for more information should be almost eradicated.”

JUGGLING ACT Diversifying revenue streams and increasing client wallet share has become a popular trend for brokers, 48 | SEPTEMBER 2013

but the paperwork involved and difficulties in switching between software systems and re-entering data can often be a nightmare for busy brokers, Carn says. NextGen has seen growth in electronic lodgements for revenue streams such as commercial lending, equipment finance, and leasing and risk insurance from a number of different providers in recent months, he reports. NextGen’s software brings all of these different lodgements into one manageable channel, providing a solution to many of the key challenges in lodging a variety of loans. “It comes back to the manageability of data quality; not having to refeed data more than once. If data has already been submitted in an application, you can then reuse that data to submit a loan for a credit card or risk insurance or general insurance so it makes it low cost and efficient and makes for high-quality applications,” Carn explains. Stargate has also seen high demand from brokers to improve its interactions with third-party partners, says Spencer, and as such has partnered with software providers in other industries such as financial planning and insurance to allow easy twoway data transfers. “All of our big customers have talked about it and are saying it’s on their radar or they’re currently doing it, so it is a trend that we will see much more frequently.” Stargate’s ePass software allows brokers to connect themselves to third-party partners and creates a comprehensive record of referrals and interactions, Spencer says. “There are no errors and no replication of processes. You’re really collecting a full customer snapshot for all the external partners you’re working with, who you’re referring your customers to and who is interacting with your customers. We call it ‘capturing the financial desktop of the consumer’, and if we can allow brokers to capture that financial desktop, then that consumer is never going anywhere.”

LOOKING AHEAD The coming years will see the advancement of the “mobile revolution”, says Spencer, as more and more functionality is taken out of CRM systems and put into applications. “We’re seeing that as a greater trend: the need to give brokers quick access to solutions rather than

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FEATURE / SOFTWARE

THE BEST OF BROKER APPS MPA Top 100 brokers reveal the apps they couldn’t live without: 1ST STREET APP: This app provided by National Mortgage Brokers is a simple, easy-to-use suite of calculators to assess loan repayments, government fees and duties, and borrowing power. Jeremy Fisher, director of 1st Street Home Loans, says the app is popular among brokers, and also provides a quick, easy way for clients to get in contact with individual brokers via a direct contact link. EVERNOTE: A popular organisational tool that lets users collate, categorise and share documents, notes, audio, images and web pages. Mark Davis, director of the Australian Lending and Investment Centre, says he frequently uses Evernote to keep track of client interactions. “You can use it more or less as a Dictaphone; it’s incredibly helpful for keeping track of all of the conversations you have externally, as well as organising any important documents and notes.” RP DATA MOBILE PRO APP: Provides property and owner details and valuations. This app also includes various property search functions and property comparisons. Jeremy Fisher of 1st Street says his brokers frequently use the app while they are with clients, in order to access property estimations and valuations to assist with purchases and refinances. PODIUM: The software platform of aggregator PLAN, this app provides a range of tools for brokers for CRM, compliance, electronic lodgements and reporting, among others. Daniel O’Brien, owner of PFS Financial Services, says that while the app has had “its fair share of issues” in the past, it is now functioning much better. “The mobile is especially handy on the road for simple things like addresses, phone numbers, etc. As long as your client date is current and up to date, you have every client’s info at the tip of your fingers 24/7, anywhere in the world.”

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SAFESYNC APP: This app is designed to enable simple data back-ups and secure sharing and syncing of files between devices. Jeremy Fisher says his brokers use the app to access files stored in a cloud-based database. “Our brokers can access previously saved info, WIP and loan applications whilst on the go.” MERCURY: Connective’s app released at the end of 2011 gives brokers access to basic CRM, financial calculators and product search features. Mark Davis of ALIC says the simplicity and ease of use of Mercury makes the app appealing. “In my opinion it’s the best on the market. We run our business through it; every staff member and every client is connected through it.” ST GEORGE BROKER APP: This lenderprovided app is designed as an interactive sales tool for brokers, featuring affordability calculators, product guides and scenario analysis tools. Jeremy Fisher says 1st Street Home Loans’ brokers use the app to access ATOMS to get updates on files in progress and read comments from assessors. TAP MORTGAGE APP: A simple calculator tool that also has a feature to allow brokers to email clients amortization tables with accompanying charts. “This is similar to the 1st Street App; however, it is far more basic so can be used for a quick repayment calculation or stamp duty calculation,” says Jeremy Fisher.

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having to lug around a laptop. It gives the broker the ability to enhance their business and be able to sell more loans when they’re not really trying to be productive. “I think a lot of broker groups are still looking at CRM systems and getting their back office into gear, but I think there needs to be a degree of aggregation of software. When you look at everything that’s coming out, it’s all about e-lodgement capabilities being improved by each of the lenders, and that’s great, but that’s a very long way down the track. “The first point of technology for brokers needs to be at the point of sale; the stuff they can do on their phones or tablets.” Spencer also expects to see a shift away from Apple devices and on to other products as brokers become more accustomed to platforms such as Windows. “I think iPhone had the advantage of being the first into the market, but I think, if not next year then very soon, Windows tablets will become

even more popular than iPads for brokers.” At NextGen, the company has close to doubled the number of lenders it provides electronic lodgement for in the past 18 months, and Carn is confident it is a sector that will continue to grow in the coming years. “The technology is there, and the uptake is definitely there. It is something that definitely has the attention of a lot of brokers and a lot of providers in the market, but I think we are now starting to see a more homogenised approach as to how they’re processed,” he says. Macartney agrees, and adds that brokers who don’t keep up with the rolling tide of software and CRM developments will struggle to keep a foothold in a competitive market. “To maintain a competitive advantage, you need to be leveraging your data and ensuring you maximise your productivity, while balancing the overhead of compliance,” he says. “The new generation of brokers will be totally tech-savvy.”

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BUSINESS STRATEGY / EXECUTION

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EXECUTION: THE HOLY GRAIL OF BUSINESS? It’s all well and good spending hours, days or months on putting a business plan into place, but if you fail when it comes to putting it into action then you’re back to square one. Cyril Peupion explains how to follow through on your strategy A real issue for many businesses today is the lack of execution. According to recent studies, two thirds of corporate strategy is never executed. Companies spend a lot of time and resources on thinking ahead, deciding their long-term vision and strategy. They engage consulting firms and their top leaders to do so. They involve many people and resources in producing a lovely Word document and numerous PowerPoint slides to display their plan and strategy, only to see that two thirds of it will never be executed. The issue is rarely the quality of the strategy and action plan decided. One of the biggest challenges for companies today is execution. They might be clear on their strategy, on where they want to head. But if you look at what people are doing on a dayto-day basis, what they spend their time on hour after hour, you realise there is often a big gap between what they are doing and the company’s strategies and divisional goals, and the KPIs they are supposed to be working towards.

WHY DOES SUCH A GAP EXIST? In working with many businesses in Australia from

all different industries, we have observed that this gap is created by both organisational ineffectiveness and personal ineffectiveness. Here are a few simple examples of organisational ineffectiveness. Ask 10 people in the same business three simple questions: • What are the goals of your organisation? • What are the goals of your team and how do they align with the goals of your organisation? • What are your KPIs and how do they align with the goals of your organisation? These are simple questions, but when we ask them we have found a few interesting things: • The majority of people do not know their organisation’s goals. • The majority of people have no idea what their team, or they, should do for their organisation to reach its goals.

PERSONAL INEFFECTIVENESS Personal ineffectiveness is different but has a huge impact as well. It all starts from a simple observation: most of us have never been taught how to work.

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BUSINESS STRATEGY / EXECUTION

Guess what? Last-minute crises will always happen. If you wait for a perfect time, you might wait a long time What a bold statement. However, in our view this is one of the most important reasons for lack of execution and lower-than-expected performance. Most people are committed to their role and want to do a good job. They are neither lazy nor unwilling. But they are not working efficiently – they work hard but not always smart. They have never been taught how to work. Over the years people develop work habits that are not the most efficient or effective. We are not born naturally effective. We have to learn the principles and practise them until they become habits.

HOW EACH PERSON CAN CREATE A DISCIPLINE OF EXECUTION Execution is a discipline and needs to become a habit. As Aristotle so rightly wrote, “We are what we repeatedly do. Excellence, then, is not an act, but a habit”. Leaders and their teams need to create a discipline of execution. Here are the bases of the discipline of execution we implement with our clients: Cyril Peupion and his team at Primary Asset Consulting’s main focus is to align people with the strategy of their organisation by changing work habits. They work closely with many businesses in Australia. Cyril is the author of Work Smarter: Live Better, which featured in the top 10 business books in Australia and top 100 Amazon worldwide. Visit primaryasset.com.au.

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THINK QUARTERLY

The first characteristic of highly successful people is that they are very clear on the goals they want to achieve and what they need to do to achieve them. To do this, you need to decide not only what to focus on, but also what you will not do. As the leadership expert Peter Drucker put it, “the key of strategy is omission”. That is, deciding what you will not do is as important as deciding what you want to do. Too many people take too much on and struggle to do anything well. Once a quarter, block off an hour with your team and ask each person to answer a simple question: “What are the two or three things that, if you did

them extremely well over the next three months, would have a significant long-term impact on the team/division/company’s performance?” Stick to two or three per person, no more. Yes, it’s hard. We always want to do too much.

PLAN WEEKLY

Once a week, each person needs to review their three high-impact activities for the quarter and organise their coming week. These activities have to become a must, a priority. Book meetings with yourself in your diary to advance your three activities. Organise your calendar so that 60–80% of your time is spent on them. This is easy to understand but harder to do. Very often the people we coach argue that they have a lot of urgent issues to attend to before having the time for these high-impact activities. Guess what? Last-minute crises will always happen. If you wait for a perfect time, you might wait a long time.

ACT DAILY – FOCUS

Be disciplined on a daily basis. If you have booked a meeting with yourself to spend two hours on one of your core high-impact activities, be 100% focused on this topic – no distractions, no interruptions; no starting late, having a break or checking a few emails midstream. Ask yourself a simple question: why would you have less respect or be less prepared for a meeting with yourself than with a very important client? When you have a meeting with yourself to progress one of your high-impact activities, start on time, focus 100%, and don’t allow interruptions and distractions.

A FEW LAST WORDS All of the above is simple but it is rarely applied, and, as a result, many companies struggle to achieve what was agreed in their strategic plan. Bain Consulting did an interesting study on strategy execution. They surveyed nearly 2,000 large companies and found that seven out of eight failed to achieve profitable growth, even though more than 90% had detailed strategic plans. This is because the strategic plan is only the tip of the iceberg. Execution is what lies beneath and what will enable businesses to perform.

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SEPTEMBER 2013 | 55

BUSINESS STRATEGY / TRUST

TRUST: THE NEW COMPETITIVE ADVANTAGE Australia may have been spared the worst effects of the GFC, but its powerful legacy continues to haunt all financial services firms. One word sums up the sector’s biggest problem and its greatest opportunity. That word is ‘trust’, argues Omer Soker

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It is the financial services industry that has taken the biggest hit in terms of trust at UBS and, of course, the infamous ‘Muppet Manifesto’ at Goldman Sachs. Is it any wonder they distrust whether the industry has learned any lessons? Not only has reputation suffered but so too has perceived performance and perceived behaviours.

THE EFFECT ON BROKERS

Capitalism runs on trust, and it was a lack of trust that brought the system to its knees during the financial crisis in 2008. Ironically, it was a lack of trust that permeated between the very financial institutions – both government and private sector – whose role it was, and still is, to serve as our fiduciaries. As the crisis unravelled, trust was further eroded: in the infallibility of markets, the sustainability of iconic institutions, the quality of executive leadership and the wider purpose of business itself. But it is the financial services industry that has taken the biggest hit in terms of trust. Part of this is logically due to the role it played in the crisis, which still bears its ‘financial’ name. Secondly, the fiduciary nature of the industry’s relationship with a customer’s money adds considerable weight to the responsibility it has to act in a trustworthy manner, which raises both expectations of behaviour and condemnation for breaches. Added to this, customers have witnessed incessant financial scandals throughout 2012, including allegations of mortgage fraud at Deutsche Bank, money laundering at HSBC, Libor manipulation at Citi and Barclays, rogue traders

What does this mean for mortgage professionals? How can they drive demand in the sector, meet the expectations of savvy customers, or add value by educating key clients on wealth creation? Trust is measured not only in terms of reputation, performance and behaviour but also in the specifics of transparent, fair and objective customer engagement. It provides an exceptional opportunity to not just restore lost trust in the greater system but also to use the creation of trust through responsible recommendations as a new competitive advantage. The enormity of the crisis has, perhaps unfairly, tainted all financial services firms, and this is the reality they must now work to change. The 2013 Edelman Trust Barometer reinforces the crisis of confidence in leaders themselves, with trust in business 32 points higher than trust in its leaders to tell the truth. This means the lack of trust ignited by the crisis has grown personal, with the onus now on leaders themselves to start restoring it. Michael E. Porter, a leading authority on company strategy and the competitiveness of nations, says that the legitimacy of business has fallen to levels not seen in recent history. One of the dangers he cites is that this diminished trust may lead governments to set policies that further undermine competitiveness and sap economic growth. Trust needs to be restored by the financial services firms themselves, not only to avert the intervention of more government regulation but also to keep in line with customer expectations. Ethical Consumer’s research shows that between 5% and 10% of buyers are always ethical, while 60% to 75% are sometimes ethical and influenced by

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BUSINESS STRATEGY / TRUST

The majority of buyers ... favour companies demonstrating trustworthy behaviour availability and choice. In other words, the majority of buyers are influenced by ethics, and favour companies demonstrating trustworthy behaviour.

ACCOUNTABILITY

Omer Soker is a corporate speaker, trainer and the founder of the Ethics of Success Corporation. This article is an edited extract from his new book on business ethics, trust and engagement, The Trust Future.

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Another fundamental point of difference today, from the past, is the ready availability of information and ‘mass connectivity’. The restoration of trust and growth now takes place in an environment of transparency and accountability. There are no shortcuts. This time, the world is watching. Armed with knowledge and social media, consumers are holding financial services firms accountable to act with ethics. As consumers fully realise their newfound power, they are increasingly wielding it to change the way business is conducted. The crisis has also strained the trust between companies and their employees, which can be measured by the amount of gossiping, venting and complaining that goes on under the surface. Most leaders are too weak to address this because they are scared of conflict and don’t know how to build the trust that resolves it, in turn creating a vicious cycle. Organisational ethics will restore trust because ethical leadership demands that issues such as a lack of resources, inappropriate pressure, mixed messages, lack of oversight, wasted productivity and internal politicking are addressed. Talented employees are quickly realising they don’t have to be compromised by this kind of conduct and are selectively targeting the best-practice employers they want to work for. Financial services firms must earn and maintain the trust of their employees by acting with integrity to get to the truth of what’s causing a problem, and then fixing it. Once this is done, the onus can shift to employees to deliver. In the 1500s Niccolò Machiavelli argued in his book The Prince that cruelty restored order and obedience. During the Industrial Revolution in the 1800s businessmen were able to ignore social

justice to increase profits. In the 1980s, ‘greed was good’ on Wall Street. In 2013, companies no longer have such control over markets, customers or employees, and need new tools of engagement. Our global system, too, is now so interdependent that our interests are becoming aligned. Financial services firms need to serve customers and communities better in order to serve their own interests. UQ Business School engaged Dr Graham Dietz and Dr Nicole Gillespie for a study on building and restoring organisational trust, and found three characteristics leaders need to build trust: Competence: the knowledge, skills and experience to do the job Benevolence: people want to feel their leaders have their best interests at heart Integrity: the adherence to a set of clear principles such as honesty and fairness

Ultimately, trust can only be created by behaving in a trustworthy manner on a consistent basis and delivering on integrity, competence and benevolence. Trust arises through respect, transparency, knowledge and diversity of ideas and influence. These are not new concepts. They are fundamental aspects of our true nature. To access them, we need to ‘unlearn’ many of the stereotypes we have been taught about business. In particular, we need to unlearn that control and command systems are effective, that secrecy and deceit enhance value, and that benevolence and integrity are actions that business often associates with weakness or naivety. For mortgage professionals, it starts with better questioning at the customer interface to understand fully and act on their needs and concerns. Recommend not just property-related options when asked for bigger-picture guidance, and you will find, in the long run, your trust will be rewarded. To restore trust in modern-day commerce, financial services firms need to change customer perceptions around ruthless, manipulative or hard-talking advisers being good for business. We need to unlearn many of the outdated, often unchallenged concepts we link with success, and open our minds to an evidence-based, pragmatic review of how integrity, benevolence and competence will drive commercial success in the financial services future.

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LIFESTYLE / DAY IN THE LIFE OF

Day in the life of... Peter Vala, head of sales and distribution, Thinktank 3.30–4.30am: Spring out of bed; time to check out the surf and weather report. If it’s OK, off to the beach somewhere between Longy and South Steyne to pick up the best of it. If it’s a shocker, then it’s a toss-up between some laps at the pool, the gym, or a walk with Monty the Newfoundland. Get home, trip over one of the two cats, which ends up waking up Tracey, my wife, and most of the six kids so they can start their day as well.

7.30–8.00am: In the office after experiencing the usual joys of Sydney traffic, and catch up with the BDM team.

Peter Vala

“Get home; walk into a tornado of events. I follow the trail of school clothes, shoes and bags to lounge room”

5.30–5.45pm: Reflect on the day that was with the team and what’s in the wings 8.00–9.00am: Gather all stats in regards to last

for tomorrow.

week’s performance and activities of the BDMs for presentation at the Monday sales meeting to the entire Thinktank (TT) team.

6.00–6.45pm: Again enjoy the spoils of Sydney traffic and receive the evening call

9.30–10.30am: Cover off coming week’s activities,

7.00pm: Get home; walk into a tornado of events. I follow the trail of school clothes,

appointments and any burning issues in our weekly ‘one-on-ones’.

shoes and bags to lounge room. The youngest is doing his homework and needs a hand with maths while flicking bits of rubber at his sister. The next oldest is putting a diorama together of some famous pilot that died in a hurricane, and retaliates in an appropriate fashion to her younger brother. The next oldest wants to know why she’s on dishes again tonight whilst having a dancing competition in the dining room with her older brother who is supposed to be studying for his HSC. The next oldest, who is doing his HSC, is in the dance competition whilst quoting classic lines from the movies Cool Runnings, Night at the Museum and Madagascar – accents and all, of course. The next oldest gets home from uni and we begin discussions of the ethical repercussions of some recent events discussed in her lectures. The oldest gets home after uni and soccer training and suggests we see Fast and Furious 6 with Vin Diesel (must say a fine, good-looking gentleman and actor) on the weekend. I’m in. Finally find my Tracey slaving away at the stove, cooking dinner for a family of eight.

10.30am–12.30pm: On the PC responding to emails, workshopping applications with the BDMs, working with credit to best structure various opportunities with the brokers’ input.

12.30pm: Quick lunch at the desk, usually last night’s dinner (that’s unless someone else in the family has already claimed and labelled it in the fridge at home the night before). Make some appointments for the weeks coming forward with aggregators and commercial brokers, and tee up various joint meetings with the BDMs and return more phone messages.

to bring home a few litres of milk and a couple of loaves of bread.

7.30–9.00pm: Sit down to dinner with the tribe and experience life in all its glory, 2.00pm: Attend meeting with aggregator group re the opportunity to support their members and strategic roll-out of TT’s offerings to the group.

with stories of the day and all its various interactions. If you’ve ever seen Cheaper by the Dozen the movie, well it’s no different with half a dozen! But I wouldn’t have it any other way.

3.30pm: Back in the office and respond to some more

9.00pm: Middle daughter ends on dishes, much to her dismay and disgust. Finally

emails and phone messages. Workshop a few more transactions. Convey various approvals in the absence of BDMs who are out on calls.

get some quiet time with Tracey.

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9.30pm: Off to bed to start over again.

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Favourite things Steven Heavey, general manager intermediaries, Suncorp

Steve Heavey

Place: Australia has so many liveable cities, but there is no place like home – Melbourne.

Music: I’m an eighties tragic. I love listening to Hell Freezes Over by the Eagles.

Book: I love most books, but looking forward to one that tells the real story behind the Gai Waterhouse/John Singleton saga.

Food: A tough one. My wife is a vegetarian and lentil curries are a regular in our home. But my favourite is an eye fillet medium rare.

Sport: I’m a sporting fanatic and love the State of Origin. But I don’t think you can beat the atmosphere at the MCG.

Drink: A bottle of pinot noir Movie: I recently watched The Intouchables, a French movie with subtitles. One of the funniest and most touching movies I’ve ever seen.

is my favourite, but a quiet beer now and then is hard to beat.

Vacation spot: Nothing beats a family holiday by the beach, and the Gaia Beach House in Far North Queensland is a stunning spot. The Bali-style huts add to the tropical setting and the kids love playing on the beach, which is just metres away. SEPTEMBER 2013 | 61

COLUMN / CREDIT HISTORY

CREDIT FILES UNCOVERED

A blemish on a client’s credit history is often the difference between approval and denial in the home loan space. Credit Repair Australia CEO Richard Symes has delved into the data to take a look at some credit history stats that brokers may find interesting Credit Repair Australia recently conducted an analysis of over 1,500 consumer credit files. The results indicate that certain characteristics are associated with those with a lower credit score due to black marks on their credit report. Credit Repair Australia CEO Richard Symes outlines the top 10 characteristics found to be associated with those individuals who have a lower credit score. Based on our analysis, we saw a greater number of males with a low credit score than females. The figure for males was 69.5%, whereas for females it was 30.5%.

STATE-BY-STATE PERCENTAGE OF CREDIT REPORTS WITH BLACK MARKS

NT: 2.2% QLD: 22.3% WA: 18.5% SA: 5.5%

LOW CREDIT SCORE BREAKDOWN: MALES VS FEMALES

NSW: 24.3%

69.5%

Males

30.5%

Females

ACT: VIC: 25.4% 0.5% TAS: 1.3%

Source for all infographics: Credit Repair Australia analysis of over 1,500 consumer credit files

Our analysis also exposed Victoria (25.4%), NSW (24.3%) and Queensland (22.3%) as the states that have the highest percentage of black marks on their credit reports. (The results reflect the highly populated eastern seaboard.) These black marks have the ability to lower an individual’s credit score. In fourth place was WA (18.5%). The state or territory with the fewest black marks on its credit reports was the ACT (0.5%). 62 | SEPTEMBER 2013

Our analysis of the consumer credit files found that the majority of people with a low credit score are renting (39.4%). Homeowners accounted for 19.5% of people with a low credit score. In addition, the majority of people with a low credit score are either working full-time or are selfemployed. This is not surprising as you need a steady income to be approved for finance. Failure to keep up to date on such finance can result in a black mark being placed on an individual’s credit report.

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LOW CREDIT SCORE BREAKDOWN: EMPLOYMENT STATUS

LOW CREDIT SCORE BREAKDOWN: AGE GROUP

18–25: 25% FULL-TIME: 66.6%

26–32: 32%

PART-TIME: 5.8%

33–39: 17%

SELF-EMPLOYED: 12.4%

40–46: 16% 47–53: 6%

The analysis also indicated that the average age of a person with a black mark on their credit report is 33. The average age remains at 33 for males, but the average age for a female with a black mark on their credit report has decreased to 32. Those aged between 26 and 32 are more likely to have a black mark on their credit report.

54–60: 3% 61+: 1% Furthermore, surprisingly, the average income of someone with a black mark on their credit report is $1,247.46 a week. This was the overall average of the sample group.

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THE DATA / YOUR MORTGAGE INDEX

BUYER TRENDS

Data from Yourmortgage.com.au shows the borrower breakdown for year to date WHAT TYPE OF MORTGAGE DO YOU WANT?

WHAT’S THE COMBINED LIMIT OF YOUR CREDIT CARDS? $0 - 10,000 $10,001 - 20,000 $20,001 - 30,000 $30,001 - 40,000 $40,001 - 50,000 $50,001 - 60,000

26% BASIC VARIABLE RATE 31% STANDARD VARIABLE RATE 5% INTRODUCTORY RATE 38% FIXED RATE

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80% 13% 3% 1% 2% 1%

WHAT IS YOUR INCOME BEFORE TAX? $0 - 50,000 $50,001 - 100,000 $100,001 - 150,000 $150,000 - 200,000 $200,001+

25% 47% 17 6% 2%

WHY MIGHT YOU WANT TO REFINANCE? 64% Better interest rate 3% Fix your mortgage rate 15% Other 7% Purchase investment property

11% Release cash from your home

WHAT IS YOUR PREFERRED REPAYMENT METHOD?

11% Interest only 89% Principal & interest