LOW-DOC LENDING EVERYTHING YOU NEED TO KNOW
MPAMAGAZINE.COM.AU ISSUE 14.6
STEVEN DEGETTO SUNCORP’S NEW HEAD OF INTERMEDIARIES BUSINESS STRATEGY ESSENTIAL ADVICE FOR AMBITIOUS BROKERS
MPA EXCLUSIVE
NON-MAJOR BANK ROUNDTABLE
MPAMAGAZINE.COM.AU
18 NEWS
BUSINESS STRATEGY
4 | Round-up The latest market intelligence from the world of property, economics and mortgages
51 | Social media A simple guide to creating your social media plan
8 | Data The latest statistics from MPA sister site Your Mortgage 10 | News analysis Do Aussies think we’re facing a property bubble?
WEEKLY INVESTIGATIONS NOW ONLINE: Recruitment Dispute resolution
FEATURES 64 | Where have the first home buyers gone? Deposit Power’s Keith Levy offers his thoughts
54 | Motivation Why understanding human motivation boosts productivity 58 | Marketing The 8 marketing sins to avoid
MORTGAGE INSIDERS 32 | Dale Heremaia Why buying a trail book did wonders for his business
COVER STORY
MPA exclusive: Non-major bank roundtable Representatives from seven of the country’s largest non-major banks discuss the big issues
34 FEATURES
Low doc lending
Why it can be a vital tool in any broker’s arsenal
14
MORTGAGE INSIDERS
Steven Degetto
How Suncorp Bank is building strong relationships with brokers
48 | Peta Siebert Key lessons on building a broking team from scratch
mpamagazine.com.au
JUNE 2014 | 1
EDITOR’S LETTER / 14.6
MPAMAGAZINE.COM.AU
COMMITMENT TO EXCELLENCE
For our top story in this issue I was fortunate enough to sit down with representatives from seven of the country’s leading non-major banks to facilitate a fascinating discussion on some of the mortgage broking profession’s biggest issues. While each of the members of our exclusive roundtable discussion were competitors in the lending space, what they all had in common was a real passion for the third-party channel and commitment to working with brokers to allow them to develop their businesses and do the best thing by their clients. It strikes me that one of the key characteristics of the mortgage broking profession – and ‘profession’ was a word that our panellists were keen to stress, given the commitment to excellence that today’s brokers exhibit – is that it never stands still. Whether it’s a case of reacting to legislative changes, or proactively seeking out business solutions to take the profession forward, there’s a real dynamic edge to those brokers and lenders that are taking broking to the next level. Where do you think the next innovations in broking will come from? Why not get in touch and give us your perspective? We’d love to hear from you. Robin Christie, managing editor, MPA
2 | JUNE 2014
COPY & FEATURES
EDITOR Robin Christie PRODUCTION EDITORS Roslyn Meredith, Moira Daniels CONTRIBUTORS Doren Aldana, Mark Oliver, Muhammad Yasin
ART & PRODUCTION
DESIGNER Red Redrico DESIGN MANAGER Daniel Williams
SALES & MARKETING NATIONAL SALES MANAGER Rajan Khatak ACCOUNT MANAGER Simon Kerslake MARKETING EXECUTIVE Alex Carr TRAFFIC MANAGER Abby Cayanan
CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR Justin Kennedy ASSOCIATE PUBLISHER Rajan Khatak CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil
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
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, Manila 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.
NEWS / ROUND-UP
MPAMAGAZINE.COM.AU
LEADERSHIP
PEOPLE
THE FOUR LEADERSHIP TRAITS OF SUCCESSFUL LEADERS
HOW TO PICK THE BEST NEW BROKERS
Great leaders inspire, motivate and engage their teams, and they often do so by leading by passionate example. What surprising traits and qualities do the most powerful leaders generally possess, and how can you use these qualities to inspire your broking team to reach great heights? 1. They trust in their employees Do you find yourself micro-managing every element of your brokerage? If so, you’re not alone, but this is a bad habit that needs to be broken. According to Terry Reynolds, regional managing director, Asia Pacific, rogenSi, a surprising number of leaders are reluctant to let go of the reigns by trusting their employees to get the job done, without micromanaging. “Giving your employees a sense of empowerment can motivate them to succeed, which in turn drives better results for the company,” he said. “Having a high level of trust in your employees generally leads to a more proactive team.” 2. They show their vulnerable side “The best leaders are not afraid to show vulnerability, often choosing to take the road less travelled,” Reynolds said. “Ask yourself what key events, decision and turning points have made you the leader you are today, and what passions and values have developed as a result? What baggage must you let go of to be the leader you know you could be?” 3. They build genuine rapport Effective leadership is about building rapport and motivating your team, said Hillary Armstrong, director of education at the Institute of Executive Coaching and Leadership (IECL). You can inspire others by telling a compelling story of the future, and engage fully by connecting peoples’ passionate interests with their roles,” she said. 4. They allow a margin for error Creating an environment where people feel safe to make mistakes is a surefire way to encourage true innovation and growth, Reynolds said. ”Sometimes to get better results, we need to take some risks and tackle some fears,” Reynolds said. “Create an environment that encourages your people to take risks and be more courageous... Good employees will learn from their mistakes and grow.”
STATS
15,958 The number of dwellings given building approval in Australia
Source: ABS Building Approvals Australia, March 2014
44%
The percentage of businesses that are anticipating increased trade in the new financial year Source: Dun & Bradstreet Business Expectations Survey, Q3 2014
3.2%
The increase in capital city unit rents in 12 months Source: RP Data, March 2014
4 | JUNE 2014
Iconic Home Loans’ James Pibworth brought in 11 new brokers in the space of nine months, and currently has 13 trainee brokers on his books. Bringing in such a large amount of fresh talent in a small space of time may sound like a herculean task, but Pibworth knows what he’s looking for. “I’m not really after reams of finance industry experience for our trainee guys,” he said. “Obviously I’m after the usual intelligent, presentable, attention to detail professional but also I need something different: Passion oozing from them, enthusiasm, drive, determination, hard work and, more importantly, someone who really really wants it. Someone that won’t take no for an answer, that doesn’t give up, that picks themselves up after a knock – someone with a point of difference.” When it comes to finding these driven individuals, he does benefit from a close family connection who can help to make the talent drive a lot easier. “We are lucky in the main as we use a specific recruiter, Pathways Recruitment, who only specialises in finance brokers and the finance industry,” he explained. “Carla Pibworth, who is my wife, recruits trainees for us and for many other brokerages. Carla organises the trainee’s registration for their diploma plus works with them with a checklist so that they obtain MFAA membership, sit the exams etc. In doing this the candidates are well on their way when we onboard them.” Another pipeline that Pibworth targets is bank staff and finance and insurance industry employees who have experienced a working environment that bears similarities to mortgage broking. That said, he notes that some of his more senior brokers who were trainees four to five years ago came from various backgrounds including gardening, electrical engineering, pizza delivery and cleaning. For Pibworth, what’s more important than the trainee’s background is that they have a personality that fits in with the company’s culture. “Due to the way Iconic is, young, energetic, forward thinking and passionate, we need these guys to have explosive personalities – guys that woo and captivate you,” he said. “If they have all of these things, I, along with our systems, processes and fantastic mentors/senior brokers, can teach them the rest.” What’s important, he said, is that the trainees have a point of difference that they can present to clients who are shopping around for brokers. “They have to woo them and captivate them and impress them with their personality, intelligence and skills,” he said. He added that, with one eye on their career progression, he also aims to bring in individuals that show an aptitude for networking – as ultimately they’ll be on the hunt for referral partners.
NEWS / ROUND-UP
MANAGEMENT
CPI INCREASES
TOP FIVE WAYS TO RETAIN YOUR TOP TALENT
+6.7% TOBACCO
+6.7%
+6.7%
MEDICAL AND HOSPITAL SERVICES
+6.7%
AUTOMOTIVE FUEL
PHARMACEUTICAL
+6.7%
+6.7%
SECONDARY EDUCATION
PRODUCTS
TERTIARY EDUCATION
+0.6% OVERALL CPI
Source: ABS, CPI March quarter 2014
6 | JUNE 2014
What can you do to retain the brokers who are most critical to the success of your business? Latest research from Insync Surveys’, Why people stay: how to keep your best employees, suggests it comes down to implementing five key themes. Nicholas Barnett, CEO of Insync Surveys, explains that these are “fulfilling jobs, inspiring leadership, a performance focus, values driven culture, and to feel proud”. Here are five tips to consider: 1. Job fulfilment and growth: Offer meaningful work via mechanisms such as job fit, mission alignment, role clarity, job enrichment, personal development and career progression. “Employees are more likely to stay when they enjoy their work, are satisfied with their jobs, are able to fully use their skills and talents and perceive that their organisation has effective plans for developing and retaining its people,” said Barnett. 2. Inspiring leadership: Employees are more likely to stay when the senior leadership team has an inspiring vision, encourage innovation, are good role models, act with integrity, and get the maximum from people’s individual talents and knowledge. Senior leaders set the tone for the whole organisation, and this influences employees’ views about whether the organisation is right for them in the long term. 3. Performance focus: Employees are more likely to stay when they consider their organisation to be high performing and well run, according to the research. Items highly related to retention include the perception that their organisation is committed to best practice; being able to link everyday actions and performance to the organisation’s goals; and the belief that the organisation is committed to high standards of performance. 4. Values driven: Organisations that have clear values that are demonstrated in practice are more likely to retain their staff. Items highly correlated with retention include equity in resource allocation, being advised about organisational changes that will impact the employee, belief that the organisation cares about and is committed to the employee, and seeing the organisation’s values and behaviours being demonstrated every day in the employee’s work group. 5. Pride and advocacy: Employees who can envisage a future for themselves in the organisation have a strong sense of connection with, and pride in, their organisation, according to the survey. Items highly correlated with retention include being willing to recommend the organisation as a workplace to others, being proud of working for the organisation, and having a strong sense of belonging. These items emphasise the reciprocity inherent in the employer-employee relationship. “When the employer provides the employee with a fulfilling job within a positive organisational context, the employee typically reciprocates by performing to the best of their ability and being an advocate for the organisation to others,” Barnett explained.
MPAMAGAZINE.COM.AU
CONSUMER FINANCE
MEDIAN DWELLING VALUES
Darwin $547,000
Perth $515,000
Source: RP Data, March quarter 2014
• Households across Australia have on average 1.8 credit cards
Brisbane $435,000
• 26% of Australian households are mortgage-free • 42% of households with a mortgage are paying down ahead of time
Sydney $630,000 Adelaide $390,000
• 4% of households with a mortgage say they are getting behind in their mortgage
Canberra $526,000
• 6% of households say their income is not enough to cover immediate bills and debts
Melbourne $515,000 Hobart $339,000
Source: ING DIRECT Household Financial Wellbeing Index, Q1 2014
• Across all Australian households the median savings level is $14,702
JUNE 2014 | 7
THE DATA / YOUR MORTGAGE INDEX
MPAMAGAZINE.COM.AU
BUYER TRENDS Key stats from borrowers making enquiries at Yourmortgage.com.au LOAN AMOUNTS $414,000
Average loan amount
$403,000 $392,000 $381,000 $370,000 Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
HOW SOON MORTGAGE IS REQUIRED 50% 40% 30% 20% 10% 0% Apr
May
Jun
Not immediately
54% First home
17%
To buy an investment property
buyers
Jul
In the next few months
Right now! Hurry!
TYPE OF MORTGAGE REQUIRED 50% 40% 30%
PURPOSE OF MORTGAGE
20% 10%
2% 1%
13%
Give my home a makeover I want some Move home spending money
Intro
Apr
Mar
Feb
Jan
Standard variable
Basic variable
Visit www.mpamagazine.com.au/consumer-borrowing-data for all the latest borrower trends
8 | JUNE 2014
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
15%
Refinance to get a better deal
Apr
0%
Fixed
NEWS ANALYSIS / MARKET SENTIMENT
MIXED MESSAGES
Australians remain relatively optimistic about the short-term future of the property market, but doubts remain about whether the sound of a bubble bursting will be heard in the longer term
10 | JUNE 2014
Where is the property market heading? It’s the perennial question that pricks up the ears of homeowners, investors, brokers and just about everyone who’s engaged with the great Aussie obsession with property. RP Data and Nine Rewards have gone about gauging the mood of the nation with regards to the Aussie property scene by carrying out their regular housing market sentiment survey. And the news is mixed for brokers. To start with, the good news: 68% of survey respondents think now’s a good time to buy property, indicating that there are plenty of potential clients out there. The bad news, however, is that the mood has become more pessimistic over the past 12 months; last year 80% of respondents said that now is a good time to buy. What conclusions can be drawn from the drop in confidence? According to the report’s authors, this result most likely reflects “the frothy housing market conditions that could broadly be described as a seller’s market”. But this doesn’t mean that brokers across the board should be expecting to work harder to find enthusiastic buyers. In those areas that hadn’t seen a substantial rise in dwelling values, the mood amongst respondents about the direction that the property market is heading was more optimistic than in those areas that have seen a recent boom. Compare Tasmania, for example, where 90% of respondents said that now is a good time to buy, with Sydney, where only 49% of respondents ticked the good time to buy box. Respondents in ACT (57%) and Melbourne (69%) were also among the most bearish, while respondents in regional Queensland (81%) and NT (80%) were approaching the Tasmanians for bullishness.
MPAMAGAZINE.COM.AU
NOW IS A GOOD TIME TO BUY
80% 81 %
KEY STATS
NT
77%
Regional QLD
75%
Regional WA
73% Brisbane
Regional SA
Regional NSW 71% Sydney 49%
74% Perth
57%
77% 79% Adelaide 69% Regional VIC Melbourne
Source for all infographics: RP Data - Nine Rewards Consumer housing market sentiment survey
A STABLE OUTLOOK? The statistics also suggest that Australians don’t expect a property crash anytime soon. Only 6% of respondents expected home values to fall in the next six months, while 10% expected a fall in the next 12 months.
WILL HOME VALUES RISE? RISE 51%
THE NEXT 6 MONTHS
FALL 6% STABLE 43%
RISE 51%
THE NEXT 12 MONTHS
FALL 10% STABLE 39%
ACT
90 %
“Clearly, Australians remain positive about the direction of TAS dwelling values, however most respondents who think values will rise over the coming six and 12 months have fairly measured expectations of value growth with most suggesting values are likely to rise by less than 5% over the coming year,” said RP Data national research director Tim Lawless of the results. However, while the report suggests that Aussies expect positive or stable property market outlook in the short term, an alarmingly high 66% of respondents thought that the Australian housing market was vulnerable to a significant correction in dwelling values. Lawless’ take on this result is that, despite the strong housing market conditions, there is an underlying concern among consumers about the sustainability of the growth in Australian dwelling values. “When we asked this question six months ago, 60% of respondents thought the housing market was vulnerable to a significant correction. We have now seen the proportion increase to 66%. While most respondents think values will continue to rise, it is interesting to note that most respondents are also concerned about the sustainability of dwelling values,” he said.
IS NOW A GOOD TIME TO BUY?
YES 68%
NO 32%
IS NOW A GOOD TIME TO SELL?
YES 60%
NO 40%
JUNE 2014 | 11
NEWS ANALYSIS / MARKET SENTIMENT
KEY STATS
IS AUSTRALIA’S HOUSING MARKET VULNERABLE TO A SIGNIFICANT CORRECTION IN VALUES?
YES 66%
NO 34%
He adds, however, that market activity suggests that demand remains high despite these concerns. The good news on this front for brokers is that transaction numbers continue to rise and auction clearance rates are at near record highs, but worries remain about the future of some of Australia’s biggest markets. “The ongoing debate about a housing market bubble is clearly an issue that has the potential to dampen housing market sentiment, particularly in markets such as Sydney and Melbourne where home values have shown larger capital gains and tend to be higher,” said Lawless. “Additionally, in the Northern Territory, regional Victoria and regional Queensland more than 70% of respondents thought the market was vulnerable to a significant correction.”
IN THE BUYER’S MIND When it comes to the talking points that brokers should expect to address with potential clients, the most important factor that respondents cited with regards to purchasing a property was their personal financial situation. Almost half of respondents (49%) ticked the personal financial situation box, while prospects for capital growth came in second with 17%. Interest rates (15%) and job security (12%) came in third and fourth.
WHAT IS THE MOST IMPORTANT FACTOR WHEN PURCHASING A PROPERTY? Personal financial situation
Prospects for capital growth
17%
49%
Interest rates
15%
Job security
12%
Other
2%
The level of housing supply Government incentives
2% 3%
12 | JUNE 2014
“The fact that ‘prospects for capital growth’ rates relatively high amongst survey participants highlights the fact that many housing market participants are seeking to build their wealth via property,” said the report, which went on to highlight variations on this theme within different age groups. “This response was especially important to those survey participants aged 56-60, where 25% of this group indicated that prospect for capital gain was the most important factor for purchasing a home. A large proportion of 25-30 year olds also rated capital gains as their most important consideration for purchasing within the housing market,” said the report.
CAPITAL GROWTH IS THE MOST IMPORTANT FACTOR
Age
%
18-24
11%
25-30
22%
31-35
18%
36-40
14%
41-45
20%
46-50
13%
51-55
14%
56-60
25%
61-65
21%
MPAMAGAZINE.COM.AU
SELLER’S MARKET? Looking at the results, one big sentiment change that’s taken place over the past year is that survey respondents’ attitudes have warmed when it comes to selling. Whereas just over a third of last year’s respondents said that now was a good time to sell, 60% now believe that the time is ripe for selling. “The improvement in selling optimism comes as no surprise considering the strong housing market conditions over the past year,” said the report. But before brokers start focusing on upgrading activity in their area, it’s worth noting that there were some stark geographical differences in attitudes to selling. Northern Territorians were the most optimistic about selling, with 80% saying that now is a good time to sell, closely followed by Sydneysiders (79%) and regional Victorians (71%). At the other end of the scale were respondents from regional Queensland (38%), Tasmania (40%) and the ACT (43%).
NOW IS A GOOD TIME TO SELL 80% 38 %
NT
47%
Regional QLD
50%
55% Regional WA
54% Perth
47%
Brisbane
Regional SA Regional NSW Sydney 79%
49% Adelaide
43%
71% 68%
Regional VIC
ACT
Melbourne
40% TAS JUNE 2014 | 13
HEAD TO HEAD / STEVEN DEGETTO
“The benefit to broker partners will be even better service, faster turnaround times and improved” capabilities
SERVICE
GUARANTEED 14 | JUNE 2014
MPAMAGAZINE.COM.AU
Suncorp Bank has been working hard on its broker service proposition over the last couple of years. As the bank’s head of intermediaries, Steven Degetto, explains, this is an ongoing process, but brokers are already seeing the benefits MPA: You were appointed to the role of head of intermediaries earlier this year. How have you approached taking on the job? Steven Degetto: It’s a privilege to lead Suncorp Bank’s intermediaries business, especially after the hard work undertaken by the team over the past couple of years. The business is in a strong position after a period of substantial growth and sustained improvement. Two years ago we thought about how we could best add value to our brokers’ businesses, and we established the best way to do this was to improve ours – this belief has not changed and it’s fundamental to our strategy. My approach is to continue to build on this work and to evolve Suncorp Bank’s proposition further.
Longer term, we will continue to evolve our proposition to add value for brokers, including improving our variation process for existing customers and point of sale capabilities for BDMs. It’s important we continue to improve our business and maintain the position as the genuine alternative to the big four.
MPA: Does Suncorp Bank have any initiatives planned that you’d like to make brokers aware of?
MPA: What are your short-term and long-term goals for the new job?
SD: Suncorp Bank is making a significant investment in the future capability and growth of the business, by replacing legacy systems with a modern, core banking platform, supported by standardised processes. This will simplify our business and bring greater alignment and efficiency across our bank. The benefit to broker partners will be even better service, faster turnaround times and improved capabilities.
SD: For us the challenge is driving increased consideration across a broader number of brokers while simultaneously growing the number of loans from brokers currently working with us.
MPA: What kind of feedback have you received from brokers on Suncorp Bank’s products and services?
“In the last six months, we’ve only received five service guarantee claims in almost 18,000 facility lodgements’’ We appreciate the brokers who have given us the opportunity to do business with them in the past 12 months, and one of my key goals is to grow and enhance these relationships over a longer-term period. Key to Suncorp Bank’s broker proposition is dealing with brokers who have the openness and appetite to consider a non-major for the benefit of their customers.
CAREER TIMELINE
SD: Our service is at the heart of Suncorp Bank’s broker proposition. The common feedback we receive from brokers is our ability to deliver on what we promise, and we’re proud of that. We know time is important to our brokers, so we aim to get the basics right, like our broker support call centre which answered more than 85,000 broker calls last year, each in under 40 seconds. Our 100% transactional offset account has a unique structure of up to nine sub-accounts, which allows customers to budget and save, while our three-year fixed rate is very competitive in the market. It’s a pretty powerful proposition when brokers can offer their customers some of the best rates in the market, backed by our service guarantee and the full banking proposition.
1994–2000 State sales manager, personal banking, Queensland; business banking and branch roles, Tasmania, Trust Bank of Tasmania
2000–2003 State sales manager, third party banking, Vic/Tas, CBA
2003–2006 State manager Vic/Tas/SA, Lawfund Australia
2006–2012 Associate director, state sales manager, Vic/Tas, Macquarie Bank
2012–2014 State manager intermediaries, Vic/Tas/SA/ WA, Suncorp Bank
2014–present Head of intermediaries, Suncorp Bank
MPA: How have brokers reacted to Suncorp Bank’s service guarantee? SD: Our service guarantee has been overwhelmingly
JUNE 2014 | 15
HEAD TO HEAD / STEVEN DEGETTO
“Across the country we’re seeing the broker channel fast becoming the channel of choice for many customers” service guarantee claims in almost 18,000 facility lodgements. That’s the type of service brokers can rely on if they lodge a deal with us.
MPA: What would you say to brokers who haven’t tried Suncorp Bank for a while? SD: Our broker proposition has been significantly enhanced over the past two years. Our service is market leading and we’re offering competitive pricing. We’re excited about new brokers doing business with us because we’re confident that the relationship will be a lasting one.
MPA: How important are brokers to Suncorp Bank’s overall strategy? SD: Across the country we’re seeing the broker channel fast becoming the channel of choice for many customers. This is both a testament to the integrity of the mortgage broker industry and the changing trends of customers. It is a critical channel for us in terms of mortgage growth. well received; it backs our promise of having the capability of a big bank and the personal touch of a small bank – genuine support and genuine service. We’re committed to the guarantee. Also, the bank’s significant investment in its automated workflow and imaging capability has given us the ability to double the number of deals in a day without affecting our processes or service. The fact we back up our 48-hour service guarantee with a $500 payment to the client really shows how serious we are about delivering consistent service brokers can rely on. Consistency is the key; it builds culture. In the last six months, we’ve only received five 16 | JUNE 2014
MPA: How can the non-majors such as Suncorp Bank challenge the major banks for mortgage market share? SD: Non-majors are an integral part of what has become a highly concentrated market driven by the big four. Non-major banks encourage choice amongst brokers that will have a significant flow-on effect to competition that will benefit the customer and the industry. True competition leads to better products, pricing and service. Australia wants and needs a strong, multi-tiered banking industry, and Suncorp Bank is an important part of the banking landscape.
MPAMAGAZINE.COM.AU
BUILDING RELATIONSHIPS Steven Degetto talks MPA through Suncorp Bank’s approach to forging strong, ongoing relationships with brokers Our business strategy is all about forging meaningful and lasting connections while building trust and confidence. We empower brokers to work with us throughout the process by giving them direct access to the decision-makers, tracking tools, and a responsive service which supports their relationship with their client. Our national team of BDMs aim to have more meaningful conversations with brokers by seeking to understand what the individual broker values. If the relationship between us and the broker is strong, it will flow through to the relationship between the broker and their customer.
MPA: Where do you stand on brokers diversifying outside of residential mortgages? SD: Diversification may be a good option for some brokers, but it’s not for everyone. We understand some brokers are focused solely on mortgage lending and aim to specialise. However, if a broker has the appetite and the infrastructure to offer additional complementary services or a more complete financial solution, then I think this makes sense from a customer point of view.
MPA: Do you have any other key messages you’d like to pass on to our readers? SD: For those that have given us the opportunity to do business with them, thank you. For those brokers who may not have given us an opportunity recently and are open to change, get in contact with your Suncorp Bank BDM or state manager and see if what we have to offer matches with you and your clients.
“Australia wants and needs a strong, multitiered banking industry”
JUNE 2014 | 17
SPECIAL REPORT / NON-MAJOR BANK ROUNDTABLE
MPA EXCLUSIVE
NON-MAJOR
ROUNDTA
18 | JUNE 2014
MPAMAGAZINE.COM.AU
BANK
BLE
MPA brought together representatives from seven of the country’s largest non-major banks to discuss the big issues the mortgage industry faces today. Their insights were fascinating
JUNE 2014 | 19
SPECIAL REPORT / NON-MAJOR BANK ROUNDTABLE
W
hile there’s no doubt that Australia’s major banks are providing a valuable service to mortgage brokers, the nonmajor banks are hot on their heels, developing innovative mortgage products and services aimed at bringing more brokers into the fold. To find out more about the non-major bank service proposition, and to get the perspective of the non-majors on some of the key industry issues, MPA brought representatives from seven of the country’s largest non-major banks around the same table for a fascinating discussion on the state of the market. So, what’s the non-major take on the major issues facing mortgage brokers? The insights from our seven panellists are presented in this special report – truly a must-read.
MPAMAGAZINE.COM.AU
THE PANELLISTS
Stewart Saunders, national broker manager, ME Bank
Steven Degetto, head of intermediaries, Suncorp Bank
Jarrod Cahill, state manager, Vic/SA, Bankwest
Ray Esho, national sales manager, ING DIRECT
Glenn Gibson, head of sales and marketing, AMP Bank
Clive Kirkpatrick, mortgage broking general manager, St.George Banking Group
STATE OF THE MARKET To kick off the discussion, we quizzed our panellists on the state of the mortgage market and what advantages the non-major banks can offer brokers. For ME Bank national broker manager Stewart Saunders, one of the non-major sector’s strengths has historically been its ability to produce innovative products and drive competition. “While brokers may not benefit directly from every loan that they put to a non-major, we’re seeing increased competition across the market that nonmajors are driving,” he says. Bankwest state manager, Vic/SA, Jarrod Cahill agrees, adding that the non-majors are all looking to differentiate in one way or another. “For brokers I think that creates an element of choice,” he says. “And for the consumer that ultimately is the benefit.” One point that AMP Bank head of sales and marketing Glenn Gibson brings up is that, from his perspective, there has been a shift in attitudes among the non-majors in recent years – from competing among themselves to trying to go toe to toe with the majors. “So we’ll try something different; we’ll bring out a niche,” he says. “It could be a change in credit or it might be a change in product or it might be a change in price. But it’s not necessarily aimed amongst ourselves anymore; it’s more so aimed at the wider market, and I think we’re all seeing the benefit of that.” The ability to offer a personalised service is something that Adelaide Bank senior manager, 20 | JUNE 2014
Fons Caminiti, senior manager, broker distribution, Adelaide Bank
SPECIAL REPORT / NON-MAJOR BANK ROUNDTABLE
broker distribution, Fons Caminiti highlights as a strength of the non-major sector. “I think it’s something that we try and leverage off quite frequently, because we’ve got the scale to be able to do that. And I think that’s really important for us,” he says. Offering a genuine choice is also important, adds Suncorp Bank head of intermediaries Steven Degetto. “And for brokers it’s being able to offer something to differentiate themselves from other brokers,” he says. This is an issue that St.George Banking Group mortgage broking general manager Clive Kirkpatrick picks up on. From his perspective, it’s important to work hard with brokers to be, if not a first choice, then a sound alternative. “You’ve got to actually work hard to make sure that your products are there to provide the choice to the broker, and therefore the customer,” he says. “I think we all need to work harder to get that to be the viable alternative.” While the GFC proved to be a major hurdle to the industry in terms of funding, ING DIRECT national sales manager Ray Esho is cautiously optimistic that the non-major banks are able to really compete on this front again. “Whilst we can’t get too complacent about risk appetite having returned and things having 22 | JUNE 2014
normalised, I think small lenders and non-majors more broadly are able to get back into the game,” he says. “So, whilst we’re not on the trajectory that we would have been on had it not been for the crisis period, I think things have normalised.” This normalisation, combined with the nonmajor banks’ nimbleness and general lack of legacy issues, has allowed the non-majors to bring out seriously competitive products, he explains, which in turn is creating a larger appetite among brokers to “think outside the majors”.
THE CHALLENGE AHEAD In terms of challenging the majors for a larger slice of the mortgage pie, Cahill believes it’s vital to listen to brokers and adapt to their feedback. “Given the majority of our loans at Bankwest are introduced though the third party, we see that as a great offering to be nimble,” he says. “And ensuring that we’re always seeking that feedback to better ourselves.” For Gibson, it all comes down to service. In the broker sphere specifically he says it’s essential not to take a one-size-fits-all approach, and service the brokers in the way that they want to be serviced – whether it’s on price, product, BDM support or credit access, for example. “How do we deliver a service not only to our
MPAMAGAZINE.COM.AU
brokers but to the end customer the way they want to receive it?” he asks. “I think the non-majors are fairly nimble in their ability to change from one broker to the other, and I think that’s certainly showing in our favour too.”
“It’s always a much stronger message coming from another broker that they’ve had a good experience with a bank, and they’ve delivered on their expectations” Stewart Saunders, ME Bank Service is an issue that Caminiti says is also a key area of focus at Adelaide Bank, highlighting turnaround times in particular. “We’re talking a lot more to brokers than we have in the past about what their needs are,” he adds. “So for us it really is about staying relevant in the market … and giving them alternatives to the majors.” Consistency is the key word when it comes to service, in Degetto’s view, which is why his organisation, Suncorp Bank, has been attempting to hammer the service consistency message home with its service guarantee, to prove that it’s a genuine alternative to the majors. “That consistency also helps build confidence and then you can, I guess, earn the right to ask for a greater share of a broker’s business,” he says. For Kirkpatrick, innovation is vital. As well as looking at niches in which his organisation can excel, such as SMSF and non-resident products, he adds that innovation through technology has been another area of focus. Allowing brokers to submit supporting documentation online, for example, helps to create cleaner deals and faster turnarounds. “I think that’s key to the broker, to get an answer quickly, whether it’s a yes or a no – preferably a yes,” he says. “But we just get the answer quick, so they can either move on to another funder or provide the answer back to the client.”
LENDERS SPEAK: WHITE LABEL PRODUCTS MPA asks the panel whether white label products are a threat or healthy competition Clive Kirkpatrick If the broker’s providing advice and providing a solution to the customer, and that product, a white label product, fits that need, then that’s great. If it’s something different, then I’d feel that that’s unhealthy. Ray Esho We don’t think it’s an issue. I think the one thing that we’d like to see is more of a long-term plan in what that looks like. What is their strategy? At the moment, there’s probably a shorter-term view, because funding is available, seeing it as probably a bit more of a shot in the arm. Stewart Saunders I think any competition in the market will be beneficial for consumers and brokers. Where the issue arises, though, is where the playing field is changed for brokers. We’ve seen a significant change in the ownership structure of aggregators over the last three-four years, and the white label products that you’ve seen through those aggregators have changed in terms of the market share that you would have seen traditionally. I personally think that those market shares can be considered as probably larger than they should be for a white label product, and that does raise some questions. Jarrod Cahill I think it keeps both majors and non-majors looking at their product suite and making sure that we are competing in that landscape. Providing the product is suitable to the needs of the consumer, I’ve no issue at all. Glenn Gibson I suppose from a non-major, when you consider a large percentage of those white labels are funded by a major, you then say, “well, is it healthy competition?” We’re very happy for their products to fit in with our products, as long as there’s no channel conflict within the aggregators. Fons Caminiti It’s competition; it’s just another form of it. We accept that fact. What we want to do at Adelaide Bank, though, is just keep our eyes on the ball and ensure that we keep delivering the message to brokers about our heart and soul, and what we stand for – which is around simplicity, affordability, reliability and advocacy. Steven Degetto If you look at it in a positive context, maybe aggregator house brands are doing some pioneering work for us in helping brokers sell something that’s a non-major brand. And I think for us that’s a positive, and how we leverage that and get more and more brokers to consider our own brands, I think that’s increasingly important. JUNE 2014 | 23
SPECIAL REPORT / NON-MAJOR BANK ROUNDTABLE
Esho echoes the sentiments of the rest of the panel in highlighting service as one area in which the nonmajors must – and have been – competing. He also returns to the improvement in funding conditions as another reason why the non-major banks can make an effort to increase their market share. “The non-majors are punching well above their weight in terms of what they can offer the broker, and ultimately the end customer,” he says. Saunders adds that, based on his conversations with brokers, he believes brokers want to be made to look outstanding in the eyes of their customers. What this means for non-major banks like ME Bank, he thinks, is that it’s vital to deliver consistent service in the areas that matter, as well as compete on price. “One thing that we’ve struggled with is that nonmajors do have outstanding customer service scores in the eyes of their customers, but we haven’t been able to convert that into building business and market share yet,” he admits. But he agrees with Kirkpatrick that investing in technology to be able to deliver consistent service is one way the non-majors can improve that situation.
GIVE US A GO On the question of how the non-major banks can persuade brokers to give them a go in the wake of the post-GFC consumer flight to the majors, Gibson brings up the familiar theme of going for a niche. “Once you get that niche, and once somebody starts to utilise you and appreciates that you’re very good at doing that, then you get more business,” he says. “If you look at AMP, we very much specialise in self-managed super funds. Obviously, with our brand it makes a lot of sense. And brokers start to 24 | JUNE 2014
MPAMAGAZINE.COM.AU
utilise us for that product and then realise, well hang on, we have the whole suite of products, so we’ll get a little bit more of a broker’s business.” It’s a point that Caminiti can’t argue with. He talks about Adelaide Bank’s recent success in building up recognition of its fixed-rate 100% offset products – with “all the bells and whistles”. “Once they use you a few times and they see you can underpin an offer with a service proposition that’s going to meet their needs and their clients’ needs, then you’re in the door,” he says, adding that the bank’s commitment to the broker industry is also a key selling point. For Degetto, however, he’d rather focus on being a genuine alternative than a niche player. In the case of Suncorp Bank, he believes it’s important to build confidence in the brand. “It’s probably the best-kept secret that 40% of a broker’s customers are already customers of our group,” he says, adding that the group encompasses several large insurance brands as well as $93bn assets under management. “So, what myself and my team have tried to do over the past 12 months – and continue to do – is help brokers explain that to customers,” he says, “to build that confidence that we are a good business for them to consider their lending needs for.” The issue of choice is one that Kirkpatrick says is very important to both brokers and their customers, and he believes that – whether it’s providing a branch network, cheap products or complex products such as SMSF loans, for example – the non-major banks come up trumps in this area. “I think it’s important that we work with the brokers to continually educate them on what we as a
SPECIAL REPORT / NON-MAJOR BANK ROUNDTABLE
“We’re talking a lot more to brokers than we have in the past about what their needs are. For us it really is about staying group can provide – not just the St.George group but relevant the non-major bank group,” he says. “We can provide in the basically anything that the customer walks into the door wants.” market … Esho, the flight to the perceived extra safety and giving of For the majors hasn’t been as much a driver of customer behaviour in the last couple of years as it them was in the immediate aftermath of the GFC. alternatives That said, he believes that brokers forged strong ties with the majors during the crisis period, so the to the job for non-major banks is to convince brokers to branch out. majors” Fons Caminiti, Adelaide Bank
26 | JUNE 2014
“At ING DIRECT, we’ve been working on a number of things,” he says. “Apart from raising awareness about what we think are very competitive home loans, we’ve been pushing the commercial message.” Also in the offing, Esho says, is a broker referral program. Saunders accepts that, for the non-majors, building market share from a base that’s significantly lower than that of the majors is a challenge, but also a great opportunity. And in order to capitalise on this opportunity to persuade more brokers to give them a go, he believes the non-majors need to keep innovating, as well as generating positive wordof-mouth referrals within the broker community.
“It’s always a much stronger message coming from another broker that they’ve had a good experience with a bank, and they’ve delivered on their expectations. And that’s been a fantastic way that all of us have been able to capitalise and grow market share recently,” he says. “I think we’ll all put our hands up and say we can’t do it in every single situation, but most of the time we do get it right. And we take on board the feedback from brokers, and continually work on fixing any service issues or any opportunities that we can to improve the service across the board.” Customer satisfaction is as important as broker satisfaction, argues Cahill – and, from his perspective at Bankwest offering unique credit policies, such as products with 95% LVR plus capitalised LMI, it goes a long way. “It’s a great time for us to be competing. And I think ultimately the consumer and the broker will benefit,” he says.
SUPPORT AND PROCESSING Another area where the non-majors can’t afford to lower their game is their back office, and this is a zone that Caminiti and his team at Adelaide Bank have been investing in. “We’ve done a lot of work in that third-party mortgage operations space to improve our touchpoints with brokers along the journey, from the submission coming in to contracts being issued and then settlement,” he says. “And that seems to be having a really good effect.” For Degetto over at Suncorp Bank, the heavy investment has been in automated workflow processing, which he believes has allowed the bank to grow without seeing service standards deteriorate. “I think brokers want two things around service: they want consistency and they want transparency,” he says. “So if they’re talking to a customer and they say it’s going to take two days, it takes two days.” Interestingly, he’s also found that offering flexible work arrangements to back-office staff – such as the ability to work part-time and offsite – has helped to bring in good-quality loan processors. He adds that their performances are measured, in part, on the percentage of loans they get through to settlement. Kirkpatrick admits that the issue of back-office support and processing has been a “pain point” for the St.George Banking Group, and this has spurred major investment in that area. “We went out with a number of campaigns that drove volume in, and we weren’t structured at the
MPAMAGAZINE.COM.AU
back end to handle that, so we’ve invested quite significantly,” he explains. On the assessment and approval front, he says the number of staff looking at broker deals has increased by 40%. Meanwhile, there’s been a delegated authorities restructure that’s reduced hand-offs. He adds that the aforementioned ability of brokers to submit supporting documents online is speeding up the process. “At the moment we’ve got deals turning around in four hours or less – and docs out same day,” he says. “So we invested heavily in the front end to try to get the fastest time to ‘yes’, as quickly as we could.” Settlements have also been brought onshore, he says, with a First Mortgage Services partnership providing “a fully localised settlements capability and certifications capability in each capital city”. “We just haven’t done a good job and we think we’ve now got the capability to deliver,” he says. “It’s so important to get your fastest time to ‘yes’. But then when you settle a loan, settle it when you promise to do it.” Consistency is vital, adds Esho, as brokers can’t manage their customers’ expectations without it. “I think not all of us can be lightning fast at our turnaround times, and I think that’s fine. But what brokers will tell us is just make sure that you’re not susceptible to volume shocks, and I think we’re all getting a lot better at that,” he says. It’s also important, says Esho, not to take a cookie-cutter approach when servicing brokers. To that end, taking a tailored approach to meeting their needs is vital. Saunders picks up on the volume shock theme, noting that investment in technology can help the non-majors build scale without sacrificing consistency. He notes that ME Bank, for example, is in the final year of a four-year $70m automation project. “We won’t see the benefit of that until late this year. So we’ve had to – similar to St.George – increase the manpower in our credit operations area by over 45% in the last 12 months,” he says. Technology is the key for Cahill, too. “For us at Bankwest we see the digital platform as a great way to move forward,” he says, adding that click-to-chat, Kofax and optical character recognition are all exciting developments in this field. “It enables the system to read the documentation which is being sent through, removing the human capital validation piece. And that allows us to shift
some resources into more complex transactions,” he says. “That then filters into our aspiration to have 80% of all deals unconditional within five days.” Returning to the volume shock theme, there are also lessons the non-major banks can learn from history, Gibson explains. He notes that over the last 10 years “every lender has blown up their back office, whether they’re a major or a non-major, because they just haven’t picked the market properly”. He’s optimistic that these lessons have been
“It’s a great time for us to be competing. And I think ultimately the consumer and the broker will benefit” Jarrod Cahill, Bankwest
JUNE 2014 | 27
SPECIAL REPORT / NON-MAJOR BANK ROUNDTABLE
non-major banks tend to benefit from tech providers choosing smaller operations to test their new solutions with. “You always test out on a pilot, and your pilot’s always a smaller organisation,” he says, adding that non-majors are also able to be nimble when it comes to reassessing, or even replacing, front-end mortgage origination platforms if they’re not working.
AGGREGATORS TO THE FORE
“The non-majors are punching well above their weight in terms of what they can offer the broker, and ultimately the end customer” Ray Esho, ING DIRECT learnt by a maturing non-major sector, which nowadays thinks about its operational capacities before launching new products. “Realistically, we could all come out with the best price and the best product in the marketplace tomorrow. But the first conversation we have in our pricing meetings is ‘can we handle the volume?’,” he says. Once again, the recurring theme of technology takes centre stage, with Gibson noting that the 28 | JUNE 2014
Of course, a key intermediary between the nonmajor banks and brokers are the aggregators. And, as Degetto points out, the non-majors are all keen to form strong relationships with their aggregator business partners. But how does this relationship work, and where do brokers fit into the picture? “For us it’s around trying to understand what are their goals,” he says. “What are they looking to achieve? What’s their point of differentiation? And certainly, having an understanding of that, I think that allows us to target what we provide to aggregators.” One core request, he says, is that every one of an aggregator’s brokers receives a high level of service. And this is something that Suncorp Bank has taken on board. “We’ve consistently provided 48-hour service to conditional approval for every broker within an aggregator. If we don’t, we pay the client $500,” he explains. Kirkpatrick agrees that understanding an aggregator’s goals is vital to forging strong ongoing relationships. “Understand what their goals are, where they want to take their businesses, what they see as their differentiators,” he says. “And then lock in mutually beneficial sponsorship packages so that we get access to as many of the brokers as we can through the aggregator.” In addition, he adds that it’s important for the bank’s technology to link in with the aggregator’s to make life as easy as possible for the broker. The theme of understanding the aggregators’ strategies is one that Esho runs with. He notes that his organisation, for example, has recently put in a framework to guide interactions with aggregator partners. “We’ve been applying a bit of pressure on getting some information out of the aggregators about what their strategies are and how we can get them to align with what our strategy is,” he explains. “So we’ve been talking a lot about, at ING DIRECT, the
MPAMAGAZINE.COM.AU
primary bank strategy and how we can work with the aggregators and their networks to do more than just the home loans.” He adds that the better aggregators know their network of brokers and what’s important to them, and can offer frank and useful feedback to banks as a result. “When we’re interacting with these aggregators they’ll often say to us: ‘With what you’re looking at doing, don’t waste your time’. And that’s fine, but at least we know,” he says. Saunders adds that the nature of the relationship varies from aggregator to aggregator. “We do see a vast difference across the different aggregation groups on how they work with nonmajor banks to be able to get that message out there,” he says. “For me, there’s no value in standing at a table doing a business card draw and that’s the only interaction I have with brokers during the day. We want brokers to be able to talk to their aggregator about how can we help add value to them – be it at PD days, at separate sessions – to be able to really provide value for their businesses.” For Cahill, communication is vital at all levels of the relationship. “It’s about being consistent and
an aggregator isn’t a one-way street. He sees it as a mutually beneficial arrangement that allows aggregators to spread their business risk across a number of lenders. “So they work with us very strongly to, in essence, spread their volumes across all non-majors,” he says. Meanwhile, Caminiti, having taken on his new role with Adelaide Bank relatively recently in November 2013, brings a fresh perspective to the table. He admits that more work could be done to
“For brokers it’s being able to offer something to differentiate themselves from other brokers” Steven Degetto, Suncorp Bank transparent around what our goals are as an organisation and how they can be tailored to fit in with yours,” he says, noting that Bankwest, for example, has increased its sponsorship with aggregators this year. He also agrees with Degetto that providing a consistent service to all brokers under an aggregator’s umbrella is crucial. “It doesn’t matter what volume you write; we see potential to grow that relationship,” he says. On the subject of relationships, Gibson explains that the relationship between a non-major bank and
JUNE 2014 | 29
SPECIAL REPORT / NON-MAJOR BANK ROUNDTABLE
“I think that’s key to the broker, to get an answer quickly, whether it’s a yes or a no – preferably a yes … so they can either move on to another funder or provide the answer back to the client” Ray Esho, ING DIRECT work aggregator sponsorships, and that this will be an area of focus this year. “I think, at the end of the day, what I want to do is work a lot more differently with the aggregators, to be honest, to try and seek mutually beneficial outcomes,” he says.
MESSAGES TO BROKERS Before wrapping up the roundtable, MPA offered the non-major bank representatives the opportunity to offer their feedback to brokers on what the key issues are that they encounter with mortgage applications – and how brokers and lenders can work together to improve turnaround speeds and conversion rates. As Esho points out, conversions have always been a hot topic in the market, but what his team at 30 | JUNE 2014
ING DIRECT are focusing on internally is having more of a targeted approach when it comes to rework. “Conversion rates can hold but reworks can increase,” he says. “So deals are settling but there are just more touchpoints in getting them to settle. So we want to try to be able to improve the turnaround time and the proposition for the broker and the customer.” He adds that this isn’t a systemic issue, but there is a pocket of traffic that he’d like to target on this front. In addition, Esho calls on brokers to sell “on the front foot” package deals as well as possible and pre-empt any questions the assessor may have. Rework is an issue that Saunders zones in on as well, noting that every deal is different and it’s important to think about the questions that need to be answered and supporting documents that need to be provided to speed up the process in each instance. “The majority of brokers are very quick at responding to requests for information. But again that slows up the process when it’s double handled, triple handled, picked up four times,” he says. “Having that information available and trying to provide it all up front with the transaction is what you see from the really strong brokers in terms of their low rework percentages.” He adds, however, that ME Bank is focusing on its internal process to reduce rework for brokers as well. Cahill agrees that the banks need to make it simple to lodge deals, noting that constant reviews of documentation requirements are critical. “Recently we announced some changes within our payslips, reducing them from two to one, and also our contract for sale requirements,” he says. “The second element is ensuring that our partnership managers are educating the brokers on what our policies are.” He also urges brokers who have any uncertainties to speak to partnership managers on Bankwest’s credit hotline. All of the panellists agree that improving the application process is a two-way street, involving lenders as well as brokers. And Gibson recognises that banks need to understand how brokers work. “I would prefer that a broker could submit it fully packaged; it would make life easier,” he says. “I think where we’ve come from is to simply say, how do brokers actually operate?”
MPAMAGAZINE.COM.AU
Recognising that all brokers operate differently, he notes that around 40% of brokers take up AMP’s upfront valuation option, while around 60% submit the deal first before ordering the valuation. Not ordering the valuation up front, however, creates double-handling issues. Caminiti believes the team at Adelaide Bank feel that they’re doing a good job in explaining their requirements to brokers. “We’ve had a quality control or a compliance regime in place for four or five years now. What we find is that it works, it’s very effective, it’s efficient, it works well for the brokers,” he says. “We give regular reporting back to our BDMs through the third-party mortgage operations team, and they get back to the brokers if there is an issue there very very quickly. We move those deals on as a priority when the information comes back in that’s required.” He adds, however, that this doesn’t mean they’re going to be resting on their laurels. “We’ve got to keep monitoring these things and working on them to keep gaining efficiencies so that you’re processing effectively,” he says. For Degetto, it’s all about the simple things. As well as the basics of using Suncorp Bank’s checklists, carrying out serviceability checks and signing forms in the right area, he reminds brokers that they have an obligation to make reasonable enquiries about a borrower’s capacity to repay. “I think that ultimately the first thing we all need to look at is: can the borrower afford it?” he says. “Interest rates I don’t think will stay low forever, so it’s really ensuring that that’s considered. “But also from us it’s really listening. And we’ve got some people that are fantastic at that in our own organisations, and assessing transactions on their merits. But that’s certainly our aim to do that, continue to do that, and get better at it.” Kirkpatrick accepts that each of the non-major banks has its idiosyncrasies when it comes to application requirements. “We acknowledge that, as a broker, you’ve got to learn a lot,” he says. “So it’s up to us to make it easier.” To that end, he explains that the St.George group has been looking at dynamic checklists to make sure the right documents are presented, as well as the capacity to submit supporting documents online. “The big benefit to that, as one broker’s telling me, is around the tax file numbers. So you can actually redact the tax file number online. They’re
“Every lender has blown up their back office, whether they’re a major or a non-major, because they just haven’t picked the market properly” telling us that saves about 15 minutes per deal,” he says, adding that character recognition can make sure that payslip dates match with policies. Communication, too, is essential, says Kirkpatrick, to make sure the right documents are submitted to allow the deal to go through without delay. “It’s around how we’re communicating that to whoever the correct party is, whether it’s the broker, the solicitor or the customer direct,” he says. “So there’s a lot of work that we can do around communicating better.” Returning to the technology theme, he believes brokers would be well served in the long run by taking the time to learn about the tools on offer. “The first couple will take you a bit longer, but it’s going to give you a great result in the end.” “As the guys were saying, if we work better, with much more clarity, it’s going to be beneficial, particularly to the customer in the end.”
Glenn Gibson, AMP Bank
JUNE 2014 | 31
PROFILE / DALE HEREMAIA
ALL BOOKED UP
Buying a trail book did wonders for Dale Heremaia’s business. MPA caught up with Heremaia, and the man who facilitated the deal, Trail Book Buyers’ James Turk, to discover how the deal went through so successfully
Around a year and a half ago Dale Heremaia was looking for ways to generate extra income, and realised that buying a trail book would make good business sense. He turned to James Turk of Trail Book Buyers for assistance and purchased a book that has done wonders for his business. “It was a really good investment in terms of generating an income,” says Heremaia. “Even though it was with a different aggregator, it did give me the ability to expand my client base.” He adds that there were “no real complications” when it came to buying a trail book that was under a rival aggregator’s umbrella. “It was good that James and Trail Book Buyers had some good standard paperwork. Everyone’s position was well laid out,” he says. “Considering the number of people with fingers in the pie when it comes to a loan book, I thought it all went fairly smoothly – both from the aggregator I was dealing with and Trail Book Buyers as well. Ultimately, James is reputable and did have what I was looking for.” Turk adds that, while the process is quite straightforward for both the sale and purchase of trail books, the parties involved in this deal were particularly helpful. “Dealing with a party that is ready to move and does what is required of them made this particular transaction all the better,” he explains. 32 | JUNE 2014
“We try to guide parties through the process and make it as painless as possible with readymade documentation; however, a forthcoming buyer or seller is an important component to getting the transaction completed in the shortest possible timeframe.”
THE NEXT STEP Heremaia explains that he knew there would be certain restrictions regarding how he could treat a book that was with a different aggregator, but says the purchase was well worth it all the same. “Basically, I could only work the loan book itself, and not the database behind it,” he says. “The loan clients themselves that were paying a trail were my clients; I could contact them and deal with them and do whatever I liked.” He adds that, had he been accredited to the aggregator that was servicing the loan book, he would also have received a database of previous clients, but he’s more than happy with the book he received. “I only had access to the clients that were on the loan book at that point in time, but it was still good value,” he says. “The numbers still stacked up.” Ultimately, a change in business plans led Heremaia to sell the book recently (he’s remained in the broking game, currently running two Mortgage Choice franchises), but he’s happy with the way that it performed while it was in his hands.
MPAMAGAZINE.COM.AU
WORDS OF WISDOM When asked for any advice that he’d pass on about trail book buying, Heremaia warns brokers not to be too hasty. “I know a lot of brokers are looking at buying books because they’re finding it hard to get business, and I’ve seen that they don’t treat it the same way that they would be if they were processing a loan,” he says. “They don’t verify everything and, because they’re keen to buy and expand their business, they turn a bit of a blind eye to things that they shouldn’t.” He advises taking a good look at all paperwork and loan statements, and adds that it’s vital to make sure the broker who’s selling the book is clear on their intentions post-sale. “You’ve got to be really careful that, for example, if they’re leaving the industry, that they are leaving the industry; that they’ve got no reason to be contacting your clients,” he says. He adds that, if the selling broker claims to have an ongoing relationship with clients in the book, then this needs to be accounted for in the negotiations, and those clients need to be removed from the book prior to sale. “I’m not going to pay for them, because what they’re saying is that you might lose that client,” he says. Turk adds that due diligence is an important part of the buying process. “We provide all our buyers with an opportunity to complete a due diligence on the trail book they are purchasing,” he says. “This is a verification process and can be completed very quickly usually during one meeting, as long as the information is ready at that meeting.” He was also able to help Heremaia with due diligence when he decided to sell the book. “The purchaser in this case was made aware of the information at the very start, and their motivation for purchasing meant that due diligence was completed very quickly,” he explains. “We handled this for Dale and were able to fast-track the sale even more than normally.” And Heremaia has no complaints about the buying and selling process. “They didn’t want any money up front. It was all nicely paced; no one was pushing me to have to do anything,” he says. “It was all a case of ‘there’s a process to follow, there’s no shortcuts, we need to sign agreements and you need to negotiate’. I just thought James went through it rationally and logically, and in a very businesslike manner.”
JUNE 2014 | 33
FEATURE / LOW DOC
LOW DOC
THE REAL DEAL
Low doc lending can be a useful tool in any broker’s arsenal. MPA catches up with several of the key lenders in this space for their advice on how to put together a low doc deal
34 | JUNE 2014
MPAMAGAZINE.COM.AU
Low doc lending is well and truly shaking off the stigma that’s attached itself to this type of product since the GFC. Several lenders have even gone so far as to rebrand this type of lending as alt doc to underline the responsible nature of these products. Whatever name is attached to low doc lending, it appears to be coming back into the collective consciousness of the broker community. La Trobe Financial’s head of credit – product, Cory Bannister, explains that the most significant development over the past year in the low doc sector has been the increase in the number of brokers that are now willing to consider it as an option. “They once again recognise it as a viable and worthwhile product,” he says. He believes that there was an expectation among many brokers that the National Credit Code and ASIC’s Regulatory Guide 209 and Report 262 would spell the death of low doc lending, but that this “simply wasn’t the case”. Instead, Bannister believes these regulations and guides have implemented reasonable standards and expectations to ensure this type of lending is done professionally and meets the borrower’s requirements and objectives. “This has, in turn, removed the unscrupulous or inexperienced players that were tarnishing this product, leaving a pool of very experienced and wellqualified participants to cater for this important sector of Australia’s borrower population,” he says. “Brokers are beginning to regain confidence in this product and are seeing their bottom lines increase as a result.” Pepper director of sales and distribution Mario Rehayem agrees that the low doc (or alt doc in Pepper’s case) market is on the up. This demand is being driven by consumer demand, he says, as well as by brokers accepting that these loans are an appropriate solution for self-employed customers. “As long as the broker adheres to his/her responsible lending guidelines, they inherit no additional risk writing an alt doc loan as opposed to a full doc loan,” he says. So how much has the low doc market bounced back? If the results from Liberty Financial are anything to go by, there’s quite a resurgence underway. “In the most recent quarter we had 40% more applications for low doc loans compared to the same time last year,” says Liberty’s national sales manager, John Mohnacheff.
The growing demand for low doc loans has been driven, in part, by a tightening of lending criteria among the major lenders, explains Bluestone general manager Peter Wood. Approximately 20% of the Australian workforce, or two million people, are self-employed, says Wood. He adds, however, that “lending in the small to medium business space has become increasingly difficult amongst the mainstream banks”. These tightening credit assessments have seen self-employed borrowers turn to the broker market for help, adds RESIMAC chief commercial officer Allan Savins. He explains that RESIMAC has also embraced the ‘alt doc’ terminology to reflect that this type of lending gives borrowers a choice when it comes to supporting documentation that may not be available through other channels. “When borrowers cannot provide two years’ full taxation returns and financial statements, as required by most lenders, RESIMAC offers the option to provide alternative documentation,” he says. Options include accountant’s verifications, business activity statements and trading account statements. “In most instances the documentation being provided is more relevant, as it is a more accurate reflection of the borrower’s current trading position,” says Savins.
HUGE POTENTIAL Better Mortgage Management (BMM) is another lender that uses the alt doc label. And for managing director Murray Cowan, one key driver of growth in this market has been the return to health of the SME and self-employed sectors. “If brokers do decide to take advantage of this growing market, it can be very rewarding,” he says. “At BMM, brokers have informed us that selfemployed/small business owners are often timepoor, and many appreciate that brokers can save them the time and hassle that comes with applying for a loan. Not only this, but self-employed/small business owners also recognise that brokers have experience and market knowledge in an area where they do not.” Cowan explains that self-employed borrowers are also an excellent source of referrals. In addition, he adds that calling the borrower’s accountant or financial planner – which is good practice anyway to confirm borrowers’ details for compliance
JUNE 2014 | 35
FEATURE / LOW DOC
“Assessing an alt doc loan should be no different to assessing a full doc loan” Mario Rehayem, Pepper
36 | JUNE 2014
MPAMAGAZINE.COM.AU
requirements – can also sow the seeds for a referral arrangement. AFM managing director David White isn’t so sure that it’s a market on the rebound, but he does stress the usefulness of low doc lending for the right type of borrower. “It’s not a growing market but an available product only when a complex borrower (a borrower with many companies) does not have financials readily available and needs to borrow money for residential or commercial purposes,” he says. Rehayem is in the growing-market camp, and makes the important point that, given the size of Australia’s self-employed sector, brokers that don’t currently offer low doc loans are in a prime position to grow their business simply by including them as an option for their clients. “You don’t need to advertise to be an alt doc specialist,” he says. “A percentage of your leads/ existing customers may already be in need of an alt doc product.” He’s also confident that the number of low doc customers in the market will continue to
APPLICATIONS: REHAYEM’S TOP 3 TIPS
1 2 3
Review the income that the applicant has declared to ensure it is a reasonable estimation.
Assess the alternative documentation provided to see that the applicant’s declared income is supported. Discuss the declared income with the applicant’s accountant and get their opinion as to whether it is a reasonable estimation.
grow, given the strength of the economy. Bannister is also expecting steady growth in the low doc market, but points out that this is coming from a relatively low base. “Low doc market share in Australia fell significantly post-GFC from its peak of approximately 10%,” he explains. “It has since stabilised at much lower levels, but we expect to see steady growth as Australia’s self-employed population continues to grow as more people begin to run their own businesses, particularly with the explosion of online businesses.” Wood gives an insight into just how far low doc market share has fallen by citing J.P. Morgan’s finding that low doc loans currently account for less than 2% of all new mortgages written. However, his organisation has certainly put its money where its mouth is in backing the huge potential this market offers. Having taken a new-lending hiatus during the GFC years, Bluestone is now very much back in the low doc space. “The broker attitude of ‘maximising every opportunity that walks through the door’ is a true reflection of the increased awareness and volumes of non-bank lending,” says Wood. “Bluestone’s re-entry into the lending market has identified real opportunities for brokers and borrowers within the small to medium business sector within Australia.” Savins adds that low doc lending gives brokers an opportunity to bolster their volumes, increase their bottom line and enter long-standing relationships with new clients. Plus, the remuneration for brokers remains attractive. “The commission available on alt doc loans is the same as what is available on standard full doc loans, so brokers should be viewing alt doc loans in the same light as any other loan transaction,” he says.
FEATURE / LOW DOC
MPAMAGAZINE.COM.AU
RISK MISCONCEPTIONS
“The commission available on alt doc loans is the same as what is available on standard full doc loans” Allan Savins, RESIMAC
Despite the opportunities that low doc lending presents, there may be brokers out there who have shied away from this sector of the market under the preconception that it represents a risky form of lending. To such brokers, Rehayem offers a clear message. “Unfortunately, I would be inclined to say that they need to review their responsible lending guidelines. Assessing an alt doc loan should be no different to assessing a full doc loan,” he says. “All inquiries and verifications a broker must make to satisfy their obligations are scalable, depending on the customer’s circumstances. “If the broker carries out a lax assessment whilst assessing an alt doc loan, the actions of the broker are in question, not the product.”
He points out that in some cases the documentation provided for alt doc applications can be more relevant than the documentation provided for a full doc loan. “For example, most lenders will not require the previous year financials until March of the following year. This means that, in February of 2014, full doc applicants could still submit financials from June 2012,” he says. “That information would be 19 months old.” Cowan points out that, if low doc lending could be considered risky, then so too could full doc lending where borrowers have a small deposit. However, he believes the media scaremongering has focused on the low doc space, perhaps intensifying the perception that it’s riskier than it actually is. “If brokers follow the processes and policies outlined by ASIC and, if applicable, their aggregator, then the perceived riskiness of alt doc lending should decrease. It’s no riskier than any other type of lending,” he says. “With NCCP the broker has to validate and verify self-employed in exactly the same way they validate and verify PAYG borrowers. “The difference is they do this using alternative documentation as opposed to tax returns. The legislation is clear evidence other than tax returns is acceptable under NCCP.” Bannister concedes that low doc lending “does carry a slightly higher risk than traditional loan products”, but he explains that this just means that brokers need to upscale their enquiries, particularly around income verification and serviceability. He adds that in many cases the degree of investigation and income verification that lenders apply to low doc applications – or ‘lite doc’ applications in La Trobe’s case – is greater than that applied to traditional home loans.
NCCP TO THE RESCUE While NCCP may have created something of a headache for brokers, it also gives them clear guidelines for all loan submissions, regardless of the loan type. What this means is that if brokers follow NCCP to the letter, they can treat low doc submissions in the same way that they treat full doc loans. That said, when it comes to making reasonable enquiries around a borrower’s circumstances and declared income levels, and keeping a record of those enquiries, Savins offers some practical advice when it comes to the low doc sphere. He notes that 38 | JUNE 2014
FEATURE / LOW DOC
“Lending in the small to medium business space has become increasingly difficult amongst the mainstream banks” Peter Wood, Bluestone
APPLICATIONS: WOOD’S TOP 3 TIPS
1 2 3
Brokers can use Bluestone’s online ‘decision in principle’ tool to maximise the opportunity of approval for a customer’s application. This will quickly determine whether or not the borrower will meet our lending criteria and produce an approval letter, all within minutes. Follow the comprehensive checklist to ensure that all supporting documentation requested by the lender is provided at the time of lodgement of the loan, including serviceability calculations. Provide submission notes that support the application, acknowledge strengths and mitigate areas of concern. The submission should show that the broker understands the customer, and give an insight into their business, current financial position and current and future objectives.
Regulatory Guide 209 covers in detail a broker’s requirements when it comes to lending to consumers, including lending to self-employed borrowers. Notably, he points out that the guide doesn’t classify borrowers in terms of full, low or alt doc but in terms of PAYG or self-employed. 40 | JUNE 2014
In the case of lending to the self-employed, Savins says the guide states that the following may constitute reasonable enquiry: • • • •
Financial statements Business bank account statements Recent income tax returns A statement from the person’s accountant, setting out details of the consumer’s financial position • Business activity statements
“So, really, under NCCP the borrower selfcertification income declaration is no longer acceptable in isolation, which is why other forms of alternative income documentation need to be sought,” he explains. “As long as brokers take the time to make reasonable enquiries as to the borrowers’ needs and financial position, and act with honesty and integrity, then there is no reason for brokers to be
MPAMAGAZINE.COM.AU
concerned about offering alt doc-styled loans to these borrowers.” Also pointing to RG 209, Mohnacheff adds that ASIC expects brokers to make reasonable enquiries to satisfy themselves that a loan is not unsuitable. “A lot of ASIC’s stated concerns with regard to low doc lending are focused on what constitutes reasonable enquiry, particularly of income. ASIC has some very helpful guidelines around these requirements set out in RG 209,” he says. “Summarily, though, if brokers maintain good records and use recent multiple verification sources to satisfy themselves that a loan is not unsuitable, then they will meet many of ASIC’s requirements.” However, despite the NCCP providing clear guidelines on how to do the right thing when lending in a low or full doc environment, Cowan says brokers have been led to believe this type of lending is riskier or harder to comprehend than it actually is. “If brokers are able to take the time and understand the NCCP and alt doc process, many will realise it is not as difficult as once perceived,” he says, adding that understanding the processes that surround this type of lending can help to build confidence.
APPLICATIONS: BANNISTER’S TOP 3 TIPS
1
Ensure full disclosure: While this is important for any application, it is much more important for low doc loans to ensure that an applicant’s full position is understood. Due to the greater level of investigation done for these loans, any ‘missed’ information will likely be found and, if not previously disclosed, may result in the application being declined.
2
Work with the lender: Particularly if you are inexperienced with low doc products, or simply if you are unsure about a particular lender’s policy or requirements, call them to go through it in detail. Often by speaking to the lender directly you can overcome any issues or questions that may arise along the way.
3
Understand your client’s situation: Ensure you understand why your client requires a low doc loan product, and that the reason given is a genuine one.
“Brokers are beginning to regain confidence in this product and are seeing their bottom lines increase as a result” Cory Bannister, La Trobe
JUNE 2014 | 41
FEATURE / LOW DOC
“For example, BMM interview all alt doc applicants as a part of its approval process,” he says. “This assists in clarifying loan details at an early stage and may assist brokers in writing compliant loans.”
NEVER TOO CAUTIOUS
“In the most recent quarter we had 40% more applications for low doc loans compared to the same time last year” John Mohnacheff, Liberty
White, however, believes that brokers can “never be too cautious” when it comes to low doc lending. In addition to following NCCP requirements to seek supporting information, he believes that brokers should keep their own record of the process. “The interview process needs to be well documented to prove the applicant was not pushed into low but offered the product after failing to be able to provide the correct documentation for full doc,” he says. Wood goes so far as to say that education, product understanding and confidence in explaining and selling non-conforming products remain the biggest hurdles preventing more brokers from growing their businesses, and agrees that lenders can play a role in educating brokers and easing their fears. “Through recent broker focus groups we have identified an increase in brokers wanting to write self-employed loans but who are reluctant due to industry myths,” he says. “Bluestone will be holding a series of workshops in the coming months to help brokers better understand the non-conforming and self-employed sector and how NCCP has made the market even safer.”
ALTERNATIVE DOCUMENTS Rebranding is one way in which lenders are trying to get the message across that low doc lending isn’t as risky as brokers think it is. Many are embracing terms such as alt doc, which Rehayem believes is a more accurate way of describing the product. “The term ‘low doc’ lending is not a fair description of what this solution is all about. Pepper rebranded all of our former low doc products to alt doc as this more accurately reflects what happens when assessing a borrower’s income – we use alternative forms of documentation in the event that the borrower’s tax returns are not up to date,” Rehayem says. He notes that the documentation required may vary from lender to lender, but in Pepper’s case they require a declaration of financial position – completed by the borrower – supported by one of three options: six months’ business bank statements, 42 | JUNE 2014
MPAMAGAZINE.COM.AU
APPLICATIONS: MOHNACHEFF’S TOP 3 TIPS
1 2 3
Ensure all supporting information is included in the loan application. Run the scenario past your BDM. We offer brokers quality service with an emphasis on constant updates, deal-by-deal support and attendance at professional development days. We also provide brokers with direct access to our business partner service team as well as our underwriters. Look to lenders such as Liberty who are specialists in these types of scenarios.
six months business activity statements, or an accountant’s reference using Pepper’s template. “The borrower must have been in business for a minimum of 12 months with a registered ABN, and GST must be registered for a minimum of six months if they declare a turnover greater than $75,000,” he adds. AFM operates a similar policy, explains White, where the lender’s ‘Lo Doc Declaration’ must be provided, supported by either business activity statements, business statements or an accountant’s confirmation letter. RESIMAC also accepts these documents among its options for supporting documents, but stresses that income verification requirements will vary from product to product. “Brokers also must keep in mind that the documentary requirements of the lender are the minimum requirements needed to satisfy the lender in terms of assessment, and that they must make reasonable enquiry as to the borrower’s ability to meet their obligations under the loan contract,” he adds. “This is where a fact find and diary notes come into play.” At Bluestone, Wood explains, their Lite Blue product is available for self-employed applicants, companies and trusts that have traded for 12 months or more and have six months of bank statements showing regular and reasonable trading income. “Brokers can lodge low doc applications with the standard supporting items, as detailed in the application form,” he says. “Through NCCP we are able to assess full doc and self-employed loans under the one credit policy; they only differ from an income perspective.” Meanwhile, at La Trobe, Bannister says that in
JUNE 2014 | 43
FEATURE / LOW DOC
APPLICATIONS: COWAN’S TOP 3 TIPS
1 2 3
Educate the borrower so that they understand the product. Make sure the borrower understands that if there is a higher rate or fee, why that is the case, and that it is a different type of loan compared with the standard full doc loans. Fully understand the current financial position of the applicant. This will assist in completing the loan submission and ensure there are no non-disclosure issues during assessment. Preview the relevant product checklist that BMM supplies, and make sure that all the requested information is provided up front. Doing so will help provide a favourable assessment outcome and increase the likelihood of a speedy approval.
addition to standard loan forms and documents, applicants need to provide a borrower repayment declaration, which is completed by the borrower and states their taxable income, ABN details, and ability to afford the loan without substantial hardship. “They also need to provide an accountant’s certificate, which acknowledges the details provided by the borrower and confirms they are true and correct based on the accountant’s knowledge and review of the applicant’s recent financial statements,” he says. “These documents are provided in lieu of traditional income verification documents such as tax returns or assessment notices.”
TELL A STORY When it comes to the application process, Savins explains that the story is one of the most important elements. It’s important, he says, for a broker to explain their knowledge of the client, covering risks and mitigants, and this story generally doesn’t need to take up more than half a page. “Full disclosure of all known facts will increase the chances of approval and ensure a speedy approval process,” Savins says. One point of difference to a full doc application, says Cowan, is the income verification process. While most full doc applications require two or three years’ tax returns for all entities, he says 44 | JUNE 2014
that alt doc applications (ie BMM’s Flexi Ultimate product) only require any two of three forms of verification: an accountant’s declaration, BAS, or trading statements. “This, however, can differ between alt doc products, as some may only require one of those three forms of verification,” he adds. White explains that, when it comes to low doc applications, a heightened review is required. This will include additional research in relation to what he calls ‘the common sense factor’, ie does the income declared make sense? “A sole trader plumber would not realistically earn $300,000 per year, but under a company structure, with many employees, the borrower could earn this income,” he explains. “We will search the net to see how the business advertises, to take further steps to ensure the application meets the common-sense test.” On the whole, though, the low doc application process doesn’t differ greatly from the full doc process. And in some cases it’s exactly the same. Bluestone uses a uniform assessment criteria for all types of loan, says Wood. He states that, as a non-conforming lender, Bluestone does not credit score or rely on mortgage insurers to consider applications received. “The only difference between full doc and low doc loans with Bluestone is the type of income verification required to support each application type,” he says. Rehayem also picks up on the supporting documentation issue, stating that this is the difference between PAYG and self-employed applications at Pepper. “The way a broker reviews a borrower’s financial situation can be approached in many different ways, and therefore they may request different paperwork than what the lender requires to satisfy their assessment,” he says. “It is important for brokers to adhere to their own credit policy instead of solely following the lenders.”
DON’T CUT CORNERS When it comes to the common mistakes that are encountered with low doc loan applications, Mohnacheff warns brokers that it’s particularly important to take the time up front to gather and review the appropriate verification documents, despite any calls for urgency from the client. “Like other clients, low doc borrowers can be eager to get their loan approved, but cutting corners
MPAMAGAZINE.COM.AU
“If brokers do decide to take advantage of this growing market, it can be very rewarding” Murray Cowan, BMM early may lead to costs or even declines later,” he says. Bannister adds that the biggest mistake the La Trobe team encounters is applicants failing to disclose all the relevant information. “Low doc loans are merely an alternative method of verifying income,” he says. “All other standards apply. Applicants failing to disclose their full situation will have their application declined immediately after non-disclosure has been discovered.” Savins picks up on the issue of applicants not providing enough information on where their income comes from. “Simply saying ‘the client is a director of a company earing $250,000 per year’ is not sufficient,” he says. “We require detail on what goods or services the company provides and how it generates income.” He notes that RESIMAC often receives applications containing an income far higher than reasonable industry standards – a painter earning $350,000 per year, for example – without a reasonable explanation for the anomaly. “As long as we receive a reasonable explanation as to why an applicant earns income that is higher than reasonable industry standards, there’s no
BROKERS ON NONBANKS
2014 SURVEY Turnaround times Service BDM Support Credit Policy Rates & More!
Visit
www.mpamagazine.com.au
to take part Survey closes 27 June Supported by:
JUNE 2014 | 45
FEATURE / LOW DOC
APPLICATIONS: WHITE’S TOP 3 TIPS
1 2 3
“The interview process needs to be well documented to prove the applicant was not pushed into low doc” David White, AFM reason why we won’t consider the application for approval,” he says. “Another common mistake we see is applications that are submitted for applicants that are not GST registered but have a turnover in excess of $75,000,” he adds. “It would fair to say that in these instances 46 | JUNE 2014
Ask for further documentation and check that serviceability meets the lender’s requirements. Keep good file records of the application. Provide background on the applicant to the lender and a summary of how their business operates.
the broker has failed in their obligation to make reasonable enquiry.” Over at AFM, White says a common mistake with applications is not checking that the applicant services the loan, and not checking the applicant’s personal bank statements to ensure there aren’t other income sources. “A common mistake is that the personal bank statements show income from government support agencies which are not questioned. If an applicant declares a large income, it is unlikely they will receive this type of income,” he says. Wood adds that common errors include noncompletion of forms; incorrect, insufficient or outdated supporting documents; overestimation or incorrect calculation of income; and non-disclosure of debt. Fairly often, there’s also a failure on the broker’s part to fully understand the parameters of the product chosen. “If a broker is unsure, they should always contact their Bluestone BDM for assistance prior to submitting the loan application,” he says. Applicants also require education on the product, says Cowan. He notes that the main problem BMM faces is applicants who “don’t understand the alt doc product they are applying for”. This includes not understanding why the product may have higher fees, require different supporting documents, and have different terms and conditions to a full doc loan. “Most of the time, this issue can be resolved by the broker educating the borrower about the alt doc loan,” he says.
RIGHT UNDER YOUR NOSE Having read thus far, you should have a pretty good grasp of the low doc lending process, but how can you go about finding clients who may benefit from this type of loan? Mohnacheff suggests seeking out referral agreements.
MPAMAGAZINE.COM.AU
“As low doc borrowers are primarily selfemployed, contractors or new business owners, a mutually beneficial referral relationship with an accountant is a good place to start,” he explains. “Local rotary clubs and local business networks are also good ways to secure qualified leads. But many of us buy goods and services from small business people every day, so there may even be deals right under your nose.” Another ‘right under your nose’ solution, says Bannister, is to look within your own CRM. He notes that self-employed clients in the following scenarios may benefit from a low doc product: • Approaching house limits of mainstream banks • Tired of having to prepare annual review documents for the bank • Looking to purchase additional property and requires a higher LVR than the banks can offer, or wishes to do so without incurring an LMI expense • Looking to access equity in their property for personal, investment or business use
“For most brokers this will generate significant deal flow,” he says, adding that accountants and financial planners can also yield leads. Savins also points to accountants as a referral source, but notes that, by simply integrating low doc loans into their existing offering, “brokers will find they will come across applicants that will benefit from alt doc loans”. As well as speaking to the usual referral partners, Wood says a simple and quick start for a broker is to look at existing or previous loans that have been declined by prime lenders. Meanwhile, Cowan adds that it’s vital to get your own education in order before seeking out potential low doc clients. “We recommend brokers understand how alt doc lending works before looking for borrowers who may or may not fit the relevant criteria,” he says.
JUNE 2014 | 47
PROFILE / PETA SIEBERT
BUILDING
FOR GROWTH Peta Siebert has overseen Victorian real estate agency Barry Plant Group’s establishment of a mortgage broking arm. And she’s learnt some valuable lessons about how to set up a successful team
48 | JUNE 2014
MPAMAGAZINE.COM.AU
Already an established name in real estate in Victoria, the Barry Plant Group has recently launched its own mortgage broking arm. By going down this route rather than relying on referral arrangements with existing brokers, Barry Plant Financial Services (BPFS) general manager Peta Siebert has come to recognise what is needed to ensure success in the financial services sphere. “The Barry Plant Group have utilised external referral relationships previously, with mixed success. The launch of our own mortgage broking arm was in recognition of the fact that success in the finance space requires focus, dedication and investment; we believe this was best achieved by bringing the business in-house,” she says. “Our view is that to build a business that creates value for our brokers, our offices and our staff, we must have direct input into the core elements of the business: the finance offering via our aggregator, the use of the valuable Barry Plant brand, the brokers we recruit, and the support we provide our brokers.” Taking this new approach has meant that the group has had to be very careful with its change management process. A sensitive approach, and installing the right brokers in the right real estate offices, has been crucial. “Our view from the outset was that the Barry Plant Financial Services offering must stand on its own two feet. Our offices have a mixture of referral relationships from no relationships, to bonds that have existed for many years. We are respectful of existing relationships and work hard to build trust and confidence by providing a level of service that vastly exceeds that of our competitors,” Siebert explains. This attitude, and the fact that Siebert takes the time to build relationships with the franchisees to understand their business, has won the respect and confidence of many of the group’s offices, she adds. “As a consequence, we have grown in just seven months from two brokers to 12. We see this as a huge vote of confidence in our approach.”
view to creating clients for BPFS that are engaged and committed to leveraging a broker for the maximum benefit of their clients and themselves,” Seibert explains. “As these office relationships have blossomed, we have taken time to recruit brokers that we believe will fit within the Barry Plant ‘family’. We look for people who can build strong relationships, have a desire to work as part of a team, and have a clear focus on service. We strongly believe that if you focus on service to customers and referrers, financial success will be a natural result.” One of the interesting elements of the business model that BPFS has adopted is that it goes down the sub-aggregation route. To make a success of this model, says Siebert, it was essential to choose the right aggregator. “The mortgage broking space is constantly evolving, and to stay above the pack you need to have 100% focus on these changes. It was for this reason we believed it was important to have the advice and support of a high-quality aggregator,” she says. “We also recognised the critical importance of software, product mix and BDM support for our brokers. For these reasons we chose AFG as our aggregator and have been delighted with our choice. AFG have a broad depth of experience in real estatebased mortgage broking models, together with the other market-leading elements we were looking for.”
‘‘We strongly believe that if you focus on service to customers and referrers, financial success will be a natural result”
THE RIGHT FIT
THE MODEL
When it comes to recruitment, taking time to find brokers that are the right fit for the group has been paramount. Not rushing the process, too, has been a key priority. “Whilst we have grown relatively quickly, our first priority in recruitment has not been to bring on board as many brokers as possible. Rather, we focus on building strong relationships with offices with a
So what’s the sub-aggregation relationship between BPFS and its aggregator? To get technical, Siebert explains that BPFS is an authorised credit representative of AFG, and its brokers can be credit representatives or independent contracted loan writers. That said, internal support – as well as that of the aggregator – is also key to the BPFS model.
JUNE 2014 | 49
PROFILE / PETA SIEBERT
“We have grown in just seven months from two brokers to 12. We see this as a huge vote of confidence in our approach”
50 | JUNE 2014
MPAMAGAZINE.COM.AU
“We take the view that our aggregator is a business partner, and as such we utilise as many of the training, systems and support structures offered to us as possible,” says Siebert. “However, we also recognise that ultimately the success of BPFS is dependent on the direct support and guidance we can provide our brokers.” To that end, Siebert explains that she was brought into the company to set the BPFS agenda within the Barry Plant Group and with its broker group. As part of the role, she conducts her own training and business planning, and acts as a liaison point for brokers and offices. When it comes to setting targets, Siebert explains that the model in place at present is built upon the relationships that BPFS and its brokers have with offices. She adds that, while they do set clear expectations of both offices and brokers about the core levels of support and service that BPFS requires, they also acknowledge that relationships operate on a continuum. “For example, some brokers and offices are extremely tightly integrated with brokers seen as ‘part of the team’, and some are at the start of their relationship,” she says. “For this reason, we set clear goals over time that are designed to build an office’s trust in the broker and in turn the broker’s and BPFS’s expectations
of the office. As we have success we communicate to all offices and brokers with a view to exciting both parties about the opportunities that BPFS can create.”
KEY LESSONS When quizzed on what are the key lessons the group has learnt about people management and business growth through this experience, Siebert says that, like all things in life, the more you put in, the more you get out, “and this couldn’t be more apt in relation to mortgage broking”. “We have spent the time and effort to build systems, trust and recruit people that provide a service that is worthy of the Barry Plant ‘red carpet’ moniker. That investment is now starting to pay off for our brokers, offices and our business,” she says. And, with one eye on the future, she reveals that there are more opportunities for brokers in the offing. “We are currently focused on ensuring our existing brokers and offices are working as a tightknit team. We are also leveraging our success to excite more of the Barry Plant Group about the opportunities that BPFS is creating and can create for them,” says Siebert. “Moving forward, we anticipate recruiting approximately five more brokers and introducing further systems to ensure strong lead flow to brokers.”
BUSINESS STRATEGY / SOCIAL MEDIA
MPAMAGAZINE.COM.AU
HOW TO DEVELOP A SIMPLE
SOCIAL MEDIA PLAN
You might be daunted by the prospect of getting social media right for your brokerage. Muhammad Yasin presents a simple guide to get you on your way
Feeling overwhelmed by the world of social media is easy, especially if you have yet to take part in it. Many businesses use it, have amassed hundreds of thousands of followers, built brand loyalists, and even generated sales leads. Yet without any prior experience with social media, it might get frustrating as you ask yourself the many questions necessary to start up your social media plan: Where do I start? Which social media platforms are right for me? What is the right balance? Social media is a cog in your marketing plan and should align with your other marketing goals, your branding, and with the way you engage your customers offline. You must have goals you want to reach before you actually begin the process.
JUNE 2014 | 51  
BUSINESS STRATEGY / SOCIAL MEDIA
FIRST STEPS Reserve your accounts An obvious but important first step, register the name of your business and the names of your products. Consistency is important through social media as a whole, but here particularly. If you use an anagram or a shortened spelling of your business on one account, you should use it on others as well. Use a handle that will allow people to find you when they go searching. When you start registering accounts, sign up for every social media site you know of. Start with well-known sites like Facebook or Twitter, but do not neglect the sites such as YouTube, Pinterest, LinkedIn, and others. You likely will not produce content for all of these accounts, but it is a good idea to secure your company/brand names to ensure that others do not register, and use, them for negative purposes. Monitor conversations Imagine yourself at a party. How likely are you to jump into a conversation between two people without knowing what the conversation is about? Hopefully, not very likely. The same should be true for social media conversations. Know what is being discussed through social media before jumping into conversations. Monitor what others are talking about. Use the search functions of the social networks to find out what people are saying about your industry keywords and your business and products. Create benchmarks Your marketing plan brings in customers, attracts people to work for you, and says a lot about your business. Social media is part of your marketing and public relations. Any goals that are set as part of a social media plan should be relevant to your marketing and PR, as well as your customer service and sales initiatives. Once you begin interacting, check your performance against the benchmarks you have created. Using analytics tools, measure the engagement of your content, your brand consistency, and return on investment (ROI). You can adjust your plan as necessary.
REACHING OUT Find your following Different people prefer to interact using different types of social media. If you know that your customers focus on specific sites, go to those first. Spending your time and content on Pinterest while 52 | JUNE 2014
all of your customers are on Twitter means you will lose valuable time in front of your audience. Search for the platforms with the most interaction, and go to that audience. Never completely neglect the smaller audience from the other sites, but spend your time where you stand to gain the best ROI. Valuable content Content is one of the most important parts of social media. While a large part of social media is interaction, another large part is learning. People take to social media and follow different people because of their expert status. As a business, you are the expert, and the content you share should reflect that. Blog your expert ideas and share them via social media. Remember, though, that sharing information via social media is not for the purpose of making sales. Instead, you are sharing information to establish a relationship with your followers. If your followers value your insight and expert opinion, they will come back to see you as a customer.
Your social media plan should align with your other marketing goals, your branding, and with the way you engage your customers offline Response Again, social media is about building relationships, and your main goal when using social media should be growing those relationships. People reach out via social media because they want a response, so you should provide them some kind of response in return. Any reply from you will strengthen the tie between you and the customer. Once you have loyal customers and brand evangelists, reward them through promotions. Mention and thank anyone who blogs about you. Keep track of your followers and note who is and who is not a customer. Remember that every person who interacts with you is a potential customer.
MPAMAGAZINE.COM.AU
5 TOP SOCIAL MEDIA TIPS
1
Reserve your social media accounts Register your business name and any brands that you own. There is no need to produce content right away, but do not let a competitor snap up your accounts. Start with the well-known ones (Facebook, Twitter and YouTube) and expand from there.
2
Monitor social media conversation It is to your advantage to monitor what others are saying about your brand and industry. Search your company names, brand names, and industry keywords using search functions. This is what you will need to talk about.
3
Set goals Planning is vital. Social media should be integrated into your marketing efforts. Make a plan that supports the existing marketing
Generating leads Just like you use marketing to generate leads and help the sales team, social media should be used to drive revenue as well. Unless you are bringing in, or at least learning about, potential customers, then the time you spend on social media is wasted. However, when you generate leads, different tactics are required for different social media platforms. Facebook With over one billion users, Facebook is a powerhouse in social media platforms. Share your expertise on Facebook by linking to blog posts, articles, or other relevant information that your followers would find interesting and pertinent. Customers can ‘Like’ you and your business, and then your posts will appear in their feeds. Be careful about the amount you share, though: share too much, and you will bog down newsfeeds, which may lead to you getting ‘Unliked’. If your customers like your content, they can share it and make it appear on their own pages, and link back to yours, expanding your network into theirs. Facebook is a great medium for contests and other promotions, and that is a great way to reward your following. Twitter Yes, the 140-character limit on each Twitter post is not a lot to work with, but used correctly it can
goals, and set benchmarks. Your actions in social media should support those goals, and the goals of the marketing plan overall.
4
Interact! Creating and sharing relevant and interesting content is very important, but it is also very important to interact with your followers. Social media is about building a community on a personal level and building relationships. Building relationships can help your business’s bottom line.
5
Measure performance As with any part of marketing, measuring your performance is vital to becoming more efficient and better overall. Set checkpoints to measure growth. Divide tools into four categories: Content, Diagnostic, Monitoring and ROI. Each will help you improve and adapt your social media plan overall.
capture the attention of your reader for just long enough to drive them to content or even to your website. Describe yourself well in your bio to give a better idea of who you are. Your Twitter icon should be an up-to-date head shot of you or your branding, so followers can identify you or your business. Stay relevant to your industry when you tweet. You should share a variety of content, but also engage in conversations. Make your tweets public, and use keywords and hashtags that will allow customers to find you. Twitter should be a natural conversation. Pinterest Many people think that Pinterest is full of recipes and home decorating ideas, but there is so much more to it than that. If you leave out Pinterest, you are missing out on a world of potential followers. Create boards that are relevant to the many aspects of your industry, and find great content you can pin to them. With Pinterest, you can gather some of the most creative pieces of content in the world all in the one place. As you generate leads, ensure that you continue to engage your current customers. Focusing on leads is certainly important, but your established relationships will pay dividends if you keep them solid. Social media boils down to building relationships, and if you give it the right attention, your business will soon see great results.
Muhammad Yasin is a public speaker, e-book author, and director of marketing for HCC Medical Insurance Services. In his role, Yasin is responsible for the brand building and lead generation strategy of several dozen social media accounts with over a quarter of a million followers.
JUNE 2014 | 53
BUSINESS STRATEGY / MOTIVATION
WHY YOU NEED MOTIVATED AND CAPABLE EMPLOYEES Mark Oliver explains why businesses need to understand the basics of human motivation in order to increase employee satisfaction and productivity in the workplace Motivation combined with capability tends to lead to effective behaviours, and behaviour underpins performance. To get the right answer to the question above, it helps to ask the right question, and the question in this case would be: how do we get our employees to perform better? If someone has the capability but not the motivation to do something required to perform, then the necessary behaviour is very unlikely to arise and they will not perform; similarly, if someone has the motivation but not the capability. You need both motivation and capability for performance.
54 | JUNE 2014
MPAMAGAZINE.COM.AU
WHY MOTIVATION IS KEY The second question that follows on from this is: which is most important with regard to performance – motivation or capability? At first it would seem that the more important of the two would be capability, and there is often a great emphasis on training in the workplace to enhance that. The appropriate training is important and, after all, motivation is not trainable, so one might wonder what is the use in focusing on human motivation? But look more deeply and you will realise that motivation is much more important than capability in the wider context of both professional and personal life. In short this is because of two facts:
1 2
Motivation determines what you do; in many ways it determines the path you take at work (and in life). If you do not have the motivation, your capability becomes largely irrelevant. Not surprisingly then, motivation precedes capability and often leads to capability.
Given all this, the third question becomes very important: what can we do to increase motivation? To answer this you can split the factors affecting motivation into two parts: internal and external to the individual. Internal factors: The internal factors include a person’s personality (values, beliefs, etc.). An important time to look at this is when recruiting individuals, and it is wise to use good psychometric instruments to help increase the accuracy of your decisions, such as the Universal Hierarchy of Motivation Professional Report (see accuratesurveys. com), especially as they are so cost-effective. External factors: Key external factors are the systems and structure of the organisation. But it is often difficult to predict how these affect human motivation. Consider the real-life example of a day-care centre that encountered tardy parents at closing time each day. This situation led to anxious children and frustrated carers. A solution put in place by several day-care centres in Haifa, Israel, was to fine parents $3 if they were more than 10 minutes late. Rather surprisingly, this solution had the opposite effect and the number of late parents more than doubled after the fine was
If you do not have the motivation, your capability becomes largely irrelevant. Not surprisingly then, motivation precedes capability and often leads to capability introduced. It turned out that the guilt the parents felt in being late was motivating them to be on time, but now the payment of a small fine assuaged these feelings and they were less motivated to be punctual. A good model on human motivation is helpful because it helps you to predict better what the actual outcomes will be. The Universal Hierarchy of Motivation (UHM) provides the basis for a complete understanding of human motivation so that you can accurately predict what behaviours will result from system or structural changes. For instance, many people still believe that bonuses make employees work harder and more effectively. Alfie Kohn, a teacher-turned-writer, found that the more you reward a person with grades or incentives, the lower the person’s productivity. In this context, individuals become less intrinsically motivated. Bonuses (extrinsic motivators) actually reduce people’s performance on complex tasks because they limit individuals’ capacity to fulfil the task by changing their focus to how to get the best bonus.
INTRINSIC MOTIVATION American psychologist Edward Deci observed that tangible rewards inevitably reduce the intrinsic motivation of individuals. He stated: “the facts are absolutely clear, there is no question that in virtually all circumstances in which people are doing things in order to get rewards, external tangible rewards undermine intrinsic motivation”.1 (There is one exception to this observation. This involves jobs where there is little intrinsic
JUNE 2014 | 55
BUSINESS STRATEGY / MOTIVATION
MPAMAGAZINE.COM.AU
UHM LEVEL
MOTIVATIONAL DRIVE
INTRINSIC MOTIVATOR
EXTRINSIC BEHAVIOUR
7
MEANING
OPTIMISM
GRACE (COURTEOUS GOODWILL)
6
WISDOM
UNDERSTANDING (LISTENING) FEEDBACK (NOT CRITICISM)
5
COURAGE
EMPATHY
ACCOUNTABILITY
4
COMPASSION
SYMPATHY
COOPERATION
3
POWER
PRAISE (GENUINE)
COMMITMENT
2
PLEASURE
HUMOUR
INVOLVEMENT
1
SURVIVAL
BELIEF
SATISFACTION
How much an employee is ‘engaged’ to the organisation has been shown in many studies to have a direct correlation with productivity
Mark Oliver is managing director and CEO of MarkTwo Consulting, and author of The Seven Motivators of Life. Visit marktwoconsulting. com or lulu.com.
56 | JUNE 2014
motivation, such as simple repetitive manual tasks, and in that case rewards do tend to increase output or productivity.) The UHM helps you to understand human motivation comprehensively and so makes the most accurate predictions on what people’s motivation (and hence resulting behaviour) will be, given a set of system or structural changes. The higher UHM level we are at, the more impact we have on our own and others’ lives. The UHM levels are shown in the table above, correlated with the relevant intrinsic motivator and extrinsic behaviour. How much an employee is ‘engaged’ (feels an emotional bond) to the organisation has been shown in many studies across industries to have a direct correlation with productivity. International studies have found that employees who were fully engaged in their work were almost 50% more productive in terms of revenue generation and 300% better at delivering value than their disengaged (disaffected) colleagues. The ‘extrinsic behaviours’ in the table correspond to increasing levels of positive engagement, going up the table, and starting with the lowest one: satisfaction at work. The UHM theory explains the observations that paid bonuses at work are poor motivators because
they only move employees’ motivation to the level of pleasure, which renders them less able to deal with greater and more complex challenges which are best dealt with at a higher level.
CONCLUSION So to get the best performance (or combination of people’s motivation and capability) from those employees you currently have in the organisation, it is critical that you provide the structures and systems (including pay systems) that will help to motivate them at the higher levels. To be able to understand and predict what these are, you have to have a very good model or framework describing human motivation. Once you have set up the environment in your organisation that achieves this, only then is it worth investing time and money in training your employees. If you do it the other way around, the risk is that not only will the employees not use the new skills they acquire in their training but also they are more likely to leave the organisation, which means someone else is likely to get all the investment you have made in them! 1. Psychological Bulletin, Vol. 125, pg 627
BUSINESS STRATEGY / MARKETING
MEDIOCRE 8 MARKETING WAYS TO
‘Mediocre’ - that’s not exactly what brokers like to hear, but if you’re doing these ‘don’ts’, writes coach Doren Aldana, you may be writing that all over your 2014
Little things make a big difference. That’s true in marriage, parenting, and in marketing yourself as an insurance professional. In the little time we have together, I want to remind you of – or, indeed, surprise you with – eight deadly marketing sins that insurance professionals commit and that threaten business growth in any market, especially today’s challenging one.
SIN #1 – WORKING ‘IN’ YOUR BUSINESS INSTEAD OF ‘ON’ YOUR BUSINESS I was working with a consulting client recently who was in a sales slump. I decided to perform a very simple diagnostic. I simply asked him to email me a detailed list of all of his activities for the next three days, and then give me a call back. After reviewing his activities it was clear that he was in the ‘putting out fires’ business because that’s where most of his time was spent. Rather than working ‘on’ his business, he was working ‘in’ his business. This industry professional (and you) should be spending as much time as possible working ‘on’ your business, doing things like planning and developing ‘marketing assets’ that work while you’re not working. These are what I call ‘High Leverage Activities’ because they allow you to leverage your time so you can reap a higher long-term payoff. In his popular book, 7 Habits for Highly Effective People, Stephen Covey hammers this point home using his famous Time Management Matrix. Dr Covey emphasises that too many business owners spend their time doing “urgent but not 58 | JUNE 2014
important” activities when they should be spending their time on “non-urgent but important” activities. Non-urgent but important activities such as planning and marketing generate continued and sustainable long-term growth.
SIN #2 – FAILING TO CREATE AND USE A MARKETING PLAN Last year, I was speaking at a national conference and had about 100 professionals in the room. I asked the crowd to hold up their hands if they had a current marketing plan that they used and referred to on a consistent basis. Only three hands went up! Studies have shown that small businesses that create and consistently use marketing plans experience an average of 30% higher sales than their competitors. How would you like to increase your sales by 30% or more? Proactive marketing is the key! Here are a few tips to help you create your marketing plan: Tip #1 Create a plan for mining the gold from your existing database of prospects, clients and referral partners. If done right, this will allow you to maximise your repeat and referral business. Think of ways to add value and cultivate the relationship with little meaningful touches over time. Tip #2 Create a plan to attract more referral partners and motivate them to send you more referrals more
MPAMAGAZINE.COM.AU
often. The key to success is to develop a compelling, unique value proposition that positions you as an irreplaceable, indispensable asset on their team.
campaigns, renewal campaigns, weekly email tips and relevant greeting cards, all of which are designed to stimulate repeat and referral business.
Tip #3 Create a plan for generating qualified insurance leads independent of your clients or referral partners. I call this ‘Consumer-Direct Marketing’. For example, you could launch your own employee insurance benefits program designed to get companies to endorse you to hundreds, even thousands, of their employees.
SIN #5 – NOT TESTING AND TRACKING YOUR MARKETING EFFORTS
Tip #4 Block schedule at least 30 minutes every day to implement your marketing plan in each of the above three areas. Plan your work and then work your plan!
SIN #3 – FAILING TO IMPLEMENT SYSTEMS A system is a business process that generates predictable, consistent, and reliable results day after day. If you want to see a good example of a system, simply visit a fast-food franchise like McDonald’s or Wendy’s. Notice how they do the same things, the same way, every single time. Unfortunately, most insurance professionals never take the time to ‘systematise’ their business, which results in waste, chaos, and, ultimately, lost sales. Sin #1 is partly to blame for not getting around to creating and implementing systems.
SIN #4 – NOT MARKETING TO YOUR CLIENT DATABASE Many insurance professionals believe that once you ‘close the deal’ and the happy client walks out the door, then the deed is done and you need to quickly move on to the next prospect. While that’s true, your next prospect (in the form of repeat or referral business) might have just walked out the door. Many insurance professionals tend to think, “That deal is closed – they’re not going to buy another insurance policy any time soon, so why waste my time on them? Let’s find a new prospect”. Top producers, on the other hand, implement effective database marketing systems and, as a result, often get 60% to 70% of their business from their past clients through referrals and repeat business. That’s working smart, not hard. In your marketing plan you should be including customer appreciation events, monthly or quarterly newsletters, annual policy reviews, birthday
John Wanamaker’s famous 1886 quote sums it up very well: “I know that 50% of my advertising is wasted... I just don’t know which half!” There’s nothing worse than spending money on a marketing campaign and not knowing whether it worked. It’s even worse when you continue to spend money on a marketing campaign that you think is working but really isn’t. Most insurance pros use the SWAG method for tracking their marketing – Scientific Wild Ass Guess! The only way to invest in your marketing efforts with confidence is to test a campaign, track it, and measure your results. That’s why I recommend always offering something of high perceived value and low risk to motivate prospects to respond. For example, you could offer a special report, seminar, or audio CD to get people to respond immediately via the phone or your website so that you could track your response. This strategy also allows you to capture your prospects’ contact information so that you can continue to follow up with them. Remember, the fortune is in the follow-up!
This insurance professional (and you) should be spending as much time as possible working ‘on’ your business, doing things like planning and developing ‘marketing assets’
JUNE 2014 | 59
BUSINESS STRATEGY / MARKETING
MPAMAGAZINE.COM.AU
SIN #6 – NOT FOLLOWING UP WITH YOUR PROSPECTS Studies have shown that 81% of all sales happen on or after the fifth contact. If you’re an insurance professional and you’re only doing one or two follow-ups, imagine all the business you’re losing. Not following up with your prospects and customers is the same as filling up your bathtub without first putting the stopper in the drain! Here are four keys to developing a successful follow-up system:
1 2 3 4
Create a lead capture system that is accurate and reliable. Develop compelling follow-up marketing campaigns that will drive traffic to your website or generate phone calls (ie weekly email tips, monthly client newsletter, etc.)
Systematise the process so that it happens day in and day out, the same way every time. Automate the system as much as possible using Client Relationship Management (CRM) software and/or an outside mailing house to do your mailings.
SIN #7 – ‘SPRAYING AND PRAYING’
Doren Aldana is considered by many to be Canada’s leading mortgage marketing coach and has won the Best Industry Service Provider award two years in a row at the 2012 and 2013 Canadian Mortgage Awards. Since 2005, he has been dedicated to helping mortgage professionals attract more clients with less effort, regardless of market conditions. For a free copy of Doren’s new CD titled 21 Secrets of Superstar Mortgage Brokers, visit www. SuperstarMortgageBroker.com.
60 | JUNE 2014
Believe it or not, not everyone is a good prospect for your insurance services. If that’s the case, why would you spend your precious marketing dollars trying to reach them? It doesn’t make sense. If everyone is your prospect, no one will be your customer. If you want to maximise your marketing magnetism, you’ve got to shift from being a vague generality to being a meaningful specific. Unfortunately, too many insurance professionals blast their general marketing message using general marketing media such as radio, bus stop ads, newspaper ads, mass mailouts, etc. I call this ‘spraying and praying’. This approach is based on the premise that if you just throw enough yogurt at the fan, something’s bound to stick. The problem is, unless you’re a big dumb company with a multimillion-dollar ad budget and no requirement for a positive ROI, you can’t afford to waste a single penny on useless ads. Instead of spraying and praying, narrow your focus onto a specific niche market that actually has a need for insurance, and then market to people just like them. If your ideal prospect is an apartment renter paying $1,500 plus per month, then find a
policy that suits their lifestyle and resources. Your response rate will go up and your cost of acquisition per client will go down when you begin to target your market. Go narrow, deep and rich in your niche!
SIN #8 – NOT DIFFERENTIATING YOURSELF Did you know that your prospect receives, on average, over 3,000 marketing impressions a day? With all that clutter you have to compete with, how do you make your insurance business stand out? How do you differentiate your business in a way that separates you from the competition? Obviously, it’s not going to happen by following the herd and touting the usual ‘best rates’, ‘best service’ and ‘unbiased advice’. It’s like marketing incest out there — everyone else is doing the same thing with ever-decreasing results! You need to differentiate your business in a way that makes you stand out from the clutter and get noticed. A simple way to do that is to keep a close eye on the marketing that really captures your attention, and make a note of it. Then borrow and modify those strategies and ideas to create your own unique and compelling message. When in doubt, notice what everyone else is doing, and do the opposite.
The only way to invest in your marketing efforts with confidence is to test a campaign, track it, and measure your results CONCLUSION Let’s face it, most insurance pros are committing one or more of the above marketing sins. If you fall into that category, there is hope — you can repent and improve. My challenge to you is to take just one or two sins that are costing you the most in terms of profits and productivity, and focus on improving them first. Once you have them handled, move on to the next, and so on. Extraordinary business success is often the result of small incremental improvements over time.
Read Mortgage Professional Australia anywhere, anytime
NEW S
E / COM
MER CIA
L LEN DIN
IS / HOM
EBU YER
CON FID
ENC E
MORTG ST AGE
CI A L R E M COM ING
FEA TUR
ANA LYS
G
R E SS
LENISDING
A GRO WI G ISSUN E?
AR TIDE
8 | MAY
08-11_New
2014
sAnalysis.i
14/04/2014
42 | MAY
PM 1:13:53
ndd 8
2014 14/04/2014 dd 42
1:30:39
PM
mercial.in
42-51_Com
FREE
DOWNLOAD YOUR APP FROM THE iTUNES STORE TODAY om inlab.c
www.k
aish
inlab.c 速 aish om www.k Australia magazine iPad app is designed The Mortgage Professional for Mortgage professionals on the go. Packed with all the features, insights, news and analysis from your favourite magazine. This is your www.kaishinlab.com opportunity to keep up-to-date wherever you are. Take a look at the current emag, or download previous issues.
For all the latest news and industry developments - download your free Mortgage Professional Australia iPad速 app today!
www.mpamagazine.com.au
THE DATA / BANKING BRANDS
GLOBAL BANKING BRAND VALUES
HSBC GLOBAL TOP 500 BRAND RANK: 20 BRAND VALUE (US$M): $26,870 BRAND RATING:
AAA Wells Fargo
Bank of America
Citi
GLOBAL TOP 500 BRAND RANK: 15 BRAND VALUE (US$M): $30,242 BRAND RATING:
GLOBAL TOP 500 BRAND RANK: 21 BRAND VALUE (US$M): $26,683 BRAND RATING:
GLOBAL TOP 500 BRAND RANK: 24 BRAND VALUE (US$M): $24,518 BRAND RATING:
AAA-
AA+
Where do Australia’s banks rank among the globe’s 500 most valuable brands? Here’s how they performed compared to the top 10 banks, according to this year’s Brand Finance rankings
Country
Santander
GLOBAL TOP 500 BRAND RANK: 28 BRAND VALUE (US$M): $23,157 BRAND RATING:
GLOBAL TOP 500 BRAND RANK: 43 BRAND VALUE (US$M): $20,021 BRAND RATING:
AAA-
TOP AUSSIE BRANDS
The highest-ranked bank in the top 500 most valuable brands list was Wells Fargo at 15th. So who are the non-banking brands that dominated the top 10? Here’s how the global top 10 shook out: Name
Chase
AA+
TOP GLOBAL BRANDS
Rank
AA+
Brand value (US$m)
Brand rating
Australia’s big four banks made it into the country’s top 10 most valuable brands list, but none of them made the top three. Here are the top 10: Rank
Name
State
Brand value (US$m)
Brand rating
1
Apple
US
104,680
AAA
1
Woolworths
NSW
10,823
AA+
2
Samsung Group
South Korea
78,752
AAA
2
Telstra
VIC
8,302
AA+
3
US
68,620
AAA+
3
BHP Billiton
VIC
6,586
AA+
4
Microsoft
US
62,783
AAA
4
Coles
VIC
6,335
AA+
5
Verizon
US
53,466
AAA-
5
ANZ
VIC
5,926
AA+
6
GE
US
52,533
AA+
6
CBA
NSW
5,475
AA+
7
AT&T
US
45,410
AA
7
NAB
VIC
4,998
AA
8
Amazon.com
US
45,147
AAA-
8
Westpac
NSW
4,901
AA+
9
Walmart
US
44,779
AA+
9
Rio Tinto
VIC
4,582
AA
10
IBM
US
41,514
AA+
10
Optus
NSW
3,569
AA+
62 | JUNE 2014
MPAMAGAZINE.COM.AU
Source: Brand Finance Australia 100 2014/Brand Finance Global 500 2014
ICBC
China Construction Bank
GLOBAL TOP 500 BRAND RANK: 30 BRAND VALUE (US$M): $22,803 BRAND RATING:
GLOBAL TOP 500 BRAND RANK: 51 BRAND VALUE (US$M): $18,954 BRAND RATING:
AA+
AA+
BNP Paribas GLOBAL TOP 500 BRAND RANK: 42 BRAND VALUE (US$M): $20,206 BRAND RATING:
AAA-
Agricultural Bank of China GLOBAL TOP 500 BRAND RANK: 58 BRAND VALUE (US$M): $17,783 BRAND RATING:
AA+
Westpac GLOBAL TOP 500 BRAND RANK: 275 BRAND VALUE (US$M): $4,901 BRAND RATING:
AA+ NAB GLOBAL TOP 500 BRAND RANK: 269 BRAND VALUE (US$M): $4,998 BRAND RATING:
CBA GLOBAL TOP 500 BRAND RANK: 235 BRAND VALUE (US$M): $5,475 BRAND RATING:
AA+
AA
ANZ GLOBAL TOP 500 BRAND RANK: 214 BRAND VALUE (US$M): $5,926 BRAND RATING:
AA+
JUNE 2014 | 63
OPINION / FIRST HOME BUYERS
MPAMAGAZINE.COM.AU
WHERE HAVE ALL THE
FIRST HOME BUYERS GONE? Are foreign investors really driving first home buyers out of the market? Deposit Power general manager Keith Levy thinks not Debate around the property market is always spirited given the importance of this market to most Australians. Calls to blame the rising property prices in our capital cities on the wave of Chinese nationals scooping up all our homes for investment are highly exaggerated, and the real cause is actually much closer to home.
It would appear that many potential first home buyers continue to sit on their hands
Keith Levy is the general manager of Deposit Power, who have recently launched a deposit guarantee product to assist first home buyers in buying off-the-plan apartments and properties under construction with longer settlement terms. Visit www. depositpower.com.au or call 1800 678 989.
64 | JUNE 2014
While there is no doubt that rich cashed-up foreigners are targeting our capital cities for investment, particularly in Sydney and Brisbane, the vast majority of that activity is in the market for newly constructed high-end luxury apartments and developments. Given the fact that most of the houses sold are existing dwellings – around 90% in NSW alone, according to ABS data – it is hard to comprehend how a relatively small group of cashed-up foreign investors targeting high-end new dwellings could be causing all of our first home buyers to be priced out of their local markets. The truth is in the home buyer data, which suggests the real reason first home buyers are feeling priced out of the market is the stimulated local investor market. Historic low interest rates and a generally positive market outlook have created a frenzy of property investors at the low to mid-range first home buyer level. And who could blame them?
UPGRADE ACTIVITY Adding to the woes of the current generation of first home buyers is the previous generation of not too long ago who, due to property price increases of around 20% over the last three years in Sydney, are now upgrading en masse, pushing prices of existing
dwellings in the mid to high levels skyward. Adding fuel to the fire are mortgage interest rates, which have fallen from around 8% to 5.5% during this period, making upgrading all the more affordable and attainable for the previous generation of first home buyers. Potential first home buyers should also look at their own expectations of home ownership. The desire of the current generation of first home buyers to buy in areas where they want to live rather than areas they can actually afford, is also strangling some first home buyer activity. The convenience of these areas for travelling to work and living close to family members is often their main consideration. While aspirational thinking should be encouraged in our youth, previous generations of first home buyers – usually armed with a good dose of common sense advice from their parents – typically targeted modest and affordable first homes, built up equity and moved into their suburbs of choice once they had the means and financial stability to actually afford living in more expensive areas.
A LONG WAIT It is also relevant that the announcement of the scrapping of first home buyer incentives for existing dwellings by the NSW government in 2011 caused a stampede of activity, with almost 34,000 properties sold to first home buyers in the period leading up to the 30 September 2012 deadline, according to ABS loan data. This brought forward the opportunity to buy for those who were perhaps not quite ready. And I bet most are glad they took the plunge when they did, with double-digit price increases experienced over that time in most markets. So it would appear that many potential first home buyers continue to sit on their hands, waiting for the market to drop so they can afford to live in the suburbs of their choice. With no sign of a slowdown in local investor activity, and interest rates at a historic low and only tipped to rise in the future, it could be a long wait!
Friday 17th October 2014 Sydney Town Hall “With so many awards now being conducted throughout the industry, the AMA’s still shine as the pinnacle event. Winning Best New Brokerage has been a massive profile boost for us locally and has opened more opportunities up for us going forward with new referral partners. Our existing clients and partners are even more proud to be associated with us too. It has truly been an honour to be recognised amongst such strong businesses in our industry.” -Brad Quilty, Tungsten Home
Loans
New Brokerage of the Year
Nominations now open
www.australianmortgageawards.com.au
13th Annual Australian Mortgage Awards