Mortgage Professional Australia magazine Issue 14.08 by Key Media

S K N A B ON MPAMAGAZINE.COM.AU ISSUE 14.8

S R E K O R B ON S K N A TB S E B RS E S ’ K A O I R L B A AUSTR G PLANS FOR I THEIR B

WHOLESALE FUNDING A SILENT SUCCESS

RAEL BRICKER A BUSINESSMAN AND A GENTLEMAN

FINDING YOUR FEE CHARGING WHAT YOU’RE WORTH

EDITOR’S LETTER / 14.8

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THINGS CAN ONLY GET BETTER

If there’s one thing mortgage brokers should take away from this issue of MPA, it’s this: the banks are hearing your feedback loud and clear, and the future – for you – looks bright. For the ‘glass half empty’ types, this may sound overly optimistic. However, I’m not speaking to them. Instead, I’m speaking to the entrepreneurial brokers that I’m sure make up more than 50% of this industry. These are the types who are not afraid to put skin in the game day-in and day-out, who recognise the progress the broking channel has made thanks to its army of savvy business owners, and who see a future that only holds promise. In this issue, MPA first asks the heads of broker distribution at the top five banks – as rated by you – what they are planning over the next year, and what this means for brokers. The upshot? They are listening to you, they are planning ahead with you in mind, and they want to see you – and the entire mortgage broking channel – continue to grow and thrive in years to come. We also encounter a more human story, as we follow the journey of one courageous individual from refugee to the top of the US mortgage industry. It’s a tale of risk and beating seemingly insurmountable odds that’s sure to convince even the most committed pessimist of one thing. That things can only get better. Ben Abbott, acting editor, MPA

2 | AUGUST 2014

COPY & FEATURES

EDITOR Ben Abbott PRODUCTION EDITORS Roslyn Meredith, Moira Daniels CONTRIBUTORS Sarah Megginson, Stefan Kazakis, Peter Szilagyi, Michael McQueen, Danni Hocking

ART & PRODUCTION

SR. GRAPHIC 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: ben.abbott@ 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.

CONTENTS / MPA 14.8

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S K N S R BOA E K O R B N 18

INTERNATIONAL PROFILE

Katherine Le

How this one-time refugee rose to the top of the US mortgage industry

COVER STORY

Banks on Brokers 2014 MPA asks the broker channel’s top five lenders about their plans for intermediaries

NEWS 4 | News and tips Intelligence and tips for the cutting-edge mortgage professional 8 | Data The latest statistics from MPA sister site Your Mortgage 10 | News analysis Is LMI killing your loan book?

WEEKLY INVESTIGATIONS NOW ONLINE: Client retention Social media mpamagazine.com.au

36 FEATURES

Wholesale funding The quiet success of wholesale lenders

FEATURES

BUSINESS STRATEGY 46 | Time and value Figure out what you are worth – and charge for it 50 | Outsourcing How to manage growth in your contingent workforce 54 | Change management Re-engineering your business to ensure success in changing times 57 | Employment How to be effective in utilising an ageing workforce

MORTGAGE INSIDERS

14 | Steve Kane An inside look at NAB’s Homeside and commission decisions

63 | Day in the life Tanya Sale’s busy day at the helm of Outsource Financial

32 | Rael Bricker A businessman and a gentleman

64 | Favourite things Darren Stratford, Bluestone Mortgages’ BDM for Qld/NT

AUGUST 2014 | 3

ROUND-UP / NEWS AND TIPS

SALES

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STATS

THE 3 MAJOR SINS OF SALES

The model of a traditional sales team might look appealing, but the author of Hyper Sales Growth, Jack Daly, has spotted three major sins that should cause brokerage owners to think twice before copying the standard model of management. It’s a simple fact of business: without sales, no one else downstream can do their job. But because of how vital sales are to a company, CEOs and managers frequently tend to misuse their best people. “There are three sins that minimise the sales management role, which ultimately holds the company back from achieving its growth,” said Daly. “When they misallocate key players, small to medium-sized businesses tend to go in one of two directions. They either stay small to medium, or they go out of business. When you ask why, it most often comes down to a violation of one or more of these three sins of sales management. Having the right people in important spots is absolutely the secret to success.” To ensure continued growth, Daly said the people at the top must avoid the following: Sin No. 1: When the owner wears the hat of the sales manager. If you are doing that, you’re essentially relegating both the top job and the sales manager job to part-time status. In effect, you’re saying, “I’m going to grow my business part time.” If you want your business to grow, you must grow your sales force, and you need someone doing that full time. Sin No. 2: Making the best salesperson the sales manager. It can work, but seldom does. A salesperson’s role is to win new customers and nurture the ones you have, thereby differentiating you from your competitors. The sales manager’s job involves recruiting, training, coaching, building and developing. Being effective at one of those jobs is not an indicator that a person will be equally effective in the other. Salespeople are used to immediate gratification, involving a deal-to-deal routine. Sales managers, by contrast, must take their time to recruit, train and coach. A salesperson might easily become disenchanted with the pace of the new role and look for another sales job, perhaps with your competitor. Sin No. 3: The most grievous of all sins is when the best salesperson is made a sales manager, but he or she is also required to continue booking business. It’s absolutely ruinous. The person’s focus will remain fixed on the customer, as that is how their compensation is driven. Accordingly, the sales team will be underserved, missing the opportunity for leveraged growth. The key to growth is to put the right people in the right places, Daly said. “Since sales drive business, it’s essential to match skills and personality types to the jobs, and to ensure the people can focus on their roles.”

59%

The percentage of businesses concerned about the impact of the Federal Budget on their operations Source: Dun & Bradstreet Business Expectations Survey for Q3 2014

MONTH

MAY 2014

1,006,975

The number of SMSF members in March 2014, the first time the total has broken one million Source: ATO March 2014 SMSF statistical report

10.5%

The percentage year-on-year increase in house prices nationwide to the end of April 2014 Source: CoreLogic

4 | AUGUST 2014

RISE OF THE INVESTORS: MID-YEAR MORTGAGE BREAKDOWN

AVERAGE SIZE

$429k

PROPERTY INVESTORS

40.0%

FIRST-TIME BUYERS

10.2%

% REFINANCE

34.7%

ROUND-UP / NEWS AND TIPS

PRODUCTIVITY

THE 5 KEYS TO UNLOCKING YOUR TIME

There are simple changes that can be implemented in practices right now that will help brokers unlock large time, money and productivity savings, according to Kameleons Developing Leaders founder and principal Michael Peiniger. “Business leaders and managers are often looking for the ‘next big thing’ when it comes to managing their staff, whether that is a program, an app or a product, when in fact the simplest ways to improve productivity may be right under their noses,” he said. Peiniger lists five ways that planning businesses can become more productive using what they already have: 1. Prioritise your day into urgent versus important tasks Stephen Covey, author of The Seven Habits of Highly Effective People, introduced the concept of urgency versus importance to managing the work day more than 20 years ago. Many brokers will lurch from one seemingly urgent task to the next, not focusing on what is important. Peiniger says, “It is staggering how much time is wasted in a day by a lack of prioritising tasks. Focus on the important tasks first and give them the time that is needed.” 2. Use the people in your firm more collaboratively Repeatedly, people at the same level of a business have to write similar reports, work in the same spaces and are managed by the same individuals, yet will work individually to get tasks done. Peiniger recently observed the workflow of a group of supervisors as they managed their teams. Each of them had a major end of month report to write, but were constantly interrupted by their direct reports with mundane tasks. A report that should have taken 20 minutes took four hours to complete. Alternating the time they wrote the report and directing their own reports to another supervisor for a short period of time would have saved hours, said Peiniger. 3. Develop and follow meeting protocols for all internal meetings Peiniger suggests the following six protocols for meeting effectiveness: •

Clearly identify and state the objective of the meeting

•

Only invite those people that can help in achieving the objective – observers and ‘for information’ attendees waste time

•

Set a realistic time for the meeting and stick to it

•

Start and end the meeting on time – don’t wait for stragglers and don’t repeat what has been covered

•

Control discussion so that it doesn’t deviate from the objective

•

Assign tasks to specific individuals with realistic timeframes – you don’t have to wait until the next meeting to follow up and complete things.

4. Develop and follow email protocols for all internal email communication Email has become one of the most relied upon communication tools, yet brokers can drown each other with overuse and poor practices. Peiniger says, “Email is often used poorly in businesses but by teaching people to only send clear emails to those that need it can unclog inboxes quite quickly”. 5. Use your day-to-day programs more effectively Most brokers are not using the Microsoft Office suite of Word, PowerPoint, Excel and Mail to their potential. Because of the pace of work, people haven’t taken the time to work out many of the short cuts that save time within these programs. Peiniger suggests a tool like KeyRocket to help, which once installed will passively instruct users on more efficient ways of using day-to-day programs, which in turn saves hours per week. “None of these ideas are new or sexy, so they often get forgotten. But businesses that apply rigour to these areas have dramatically greater productivity than those that don’t,” added Peiniger. “I received feedback from a client who said by implementing just the meeting protocols for his team, they were saving eight hours a week. Can you imagine creating an extra eight hours a week to focus on core tasks?”

6 | AUGUST 2014

WHAT’S CONCERNING SMES THE MOST RIGHT NOW?

71%

GENERAL ECONOMIC CONDITIONS

62%

COMPLIANCE & BUREAUCRATIC ISSUES

53%

CASH FLOW

WHAT TRENDS DO SMES THINK WILL IMPACT THEM MOST OVER 5 YEARS?

18%

GLOBALISATION

17%

OFFSHORE MANUFACTURING

14%

COMPETITIVENESS OF BUSINESS THROUGH TECHNOLOGY

13%

GROWTH IN ONLINE & E-COMMERCE Source: SME Association of Australia (SMEA)

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A ‘SLICE’ OF LIFE

The proportion of household income required to meet monthly mortgage repayments declined slightly in the March quarter, and is showing significant improvements year-on-year. So how much does a mortgage cost now?

AUSTRALIA WIDE

$1,918 $1,560 $1,884

26.5%

28.3%

$1,416

26.4%

$1,553

$1,576

27.4% $1,520 MEDIAN WEEKLY FAMILY INCOME

30.6%

Source: REIA Housing Affordability Report, March 2014

$2,499

PROPORTION OF FAMILY INCOME REQUIRED TO PAY LOAN

34.6%

19.8%

32.3%

$1,293

ACT

25.2%

AUGUST 2014 | 7

THE DATA / YOUR MORTGAGE INDEX

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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 May

Jun

Aug

Jul

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

HOW SOON MORTGAGE IS REQUIRED 50% 40% 30% 20% 10% 0% May

Jun

Jul

Aug

Not immediately

54% First home

Sep

In the next few months

Right now! Hurry!

TYPE OF MORTGAGE REQUIRED

buyers

50% 40% 30%

PURPOSE OF MORTGAGE

20% 10%

16% Refinance

to get a better deal

12% Move home

Intro

May

Apr

Mar

Feb

Standard variable

Basic variable

Visit www.mpamagazine.com.au/consumer-borrowing-data for all the latest borrower trends

8 | AUGUST 2014

Jan

Dec

Nov

Oct

Sep

Aug

Jul

investment property

Jun

Give my home a makeover

May

17% To buy an

Fixed

NEWS ANALYSIS / LMI

LMI

IS KILLING YOUR LOAN BOOK? Where LMI premiums were once a small expense in a homebuyer’s budget, they’re now accounting for up to $20,000 on a standard house purchase. But, according to brokers, it’s not just escalating premiums impacting on their loan books: it’s also the LMI insurers’ increasingly tight credit policies Brokers are reporting that insurers are becoming even tougher with their credit approval policies, resulting in applications passing credit assessment through banks and lenders, before falling over due to LMI knockbacks. “I think that, like a lot of lenders post-GFC, the insurers’ policies have got a bit tighter,” says Greg Mitchell, general manager of Homeloans Ltd. “The biggest issue is the credit scoring that has come into play. It could be the fact that it’s a single applicant; it could be savings, where they live, or the number of enquiries on their file – it’s often so grey, with no definitive reason for a decline.” Of course, when a loan is declined from an LMI perspective, it’s not always the policies of two major LMI insurers in the market, Genworth and QBE, which are to blame. 10 | AUGUST 2014

It could be the case that the deal is on the skinny side to begin with, but the broker submits it anyway in the hope that it might just skate through. “From a credit policy point of view, the insurers are never far from the lender, so if a broker is thinking, ‘This is borderline, but let’s see what the insurer says’, then there’s a good chance they

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already know what the outcome is going to be,” says Peter White, CEO of the Finance Brokers Association of Australia. “There’s a very old anecdote that still stands today: LMI doesn’t make a bad deal good, and if the loan really wasn’t good from a credit perspective initially, LMI doesn’t make it any better.”

LMI LOADINGS In recent years it has become more common for insurers to charge a higher LMI premium for customers considered ‘higher risk’. According to Homeloan Experts in Burswood, NSW, the types of applicants who may attract an LMI premium loading include:

WHY IS LMI IMPACTING ON LOAN APPROVALS?

• Self-employed customers: 10%

Sometimes considered as a ‘necessary evil’, LMI is actually “an important part of our finance structure”, says White. “I’m pro LMI; I believe in it and I think it’s a good thing, so long as the insurers do the right thing by everyone,” White explains. “It’s done wonderful things for the banking system in this country for pricing competitiveness and diversification. It’s brought about big changes and reforms. But what I’m not in favour of is ripping people off – it should be fair play, and at the moment it’s not.” White cites a lack of portability between lenders and securities as one of the main issues, along with the inability of borrowers to get a refund of their premium if they move on. “What I want to see is fair and proper refunds,” he says. “The insurer makes an assessment of risk based on a 30-year loan, and if that loan discharges within the first year or two, you’re entitled to a

• Investment property as security: 12.5% • Refinance from another bank: 5% • No genuine savings: loadings range from

0% to 30%

partial refund. It’s a dirty little secret, buried in their credit policies; it’s ridiculous and it’s just not fair.” Fair or not, the system as it stands does allow thousands of Australians with smaller deposits – borrowers who would otherwise miss out – to buy homes and investment properties each year. And while reports of LMI-influenced knockbacks appear to be on the rise, rigid credit policies are only part of the problem, says Greg Carlson, a career banker and mortgage broker and commercial lending consultant with Finance-iT. “Ten years ago, they were called credit guidelines; you can liken it to a three-lane highway, where you

LMI AROUND THE WORLD: HOW AUSTRALIA STACKS UP Australia is the only nation listed that has no government participation in LMI. See how our LMI system compares with that of other comparable nations around the world.

Australia

Canada

Hong Kong

New Zealand

The Netherlands

United Kingdom

United States

Extensive use of LMI

Yes

Government participation in LMI

Yes

Yes (a)

No (b)

Yes (a)

Mortgages fully insured

Yes

No (c)

Mandatory for certain loans

Yes

Capital relief for insured loans

Yes (d)

Yes

Yes (d)

Yes

(a) Socially targeted mortgage insurance (b) The UK Government plans to insure up to 15% of certain mortgages from January 2014 (c) Only the government insurer’s policies typically cover the whole mortgage (d) Smaller lenders have lower capital requirements on insured mortgages Sources: Joint Forum; RBA; national sources

AUGUST 2014 | 11

NEWS ANALYSIS / LMI

25% 20% Market penetration LMI penetrates 20% of all loans written in Australia, according to Peter White from the FBAA. “When the FHOG is running hot,” he says, “it bumps up to 25% of market share. That’s a hell of a lot of loans”

AVERAGE LMI PREMIUM – $500,000 PURCHASE Loan amount

LVR

Premium

$425,000

85%

$4,400

$450,000

90%

$7,900

$475,000

95%

$15,700

Source: www.yourmortgage.com.au/calculators/mortgage_insurance/

could drive down that highway and get to your end destination by weaving and ducking and diving along those three lanes,” Carlson explains. “Now they’re called credit policies, which means it’s a much straighter route. If an application doesn’t tick a box, it’s deferred or declined, no further discussion.” Housing affordability is also getting tougher for new entrants, and new homes aren’t being built at the same rate because of land availability, Carlson adds, which is prompting new entrants to buy into newer, higher-density complexes. This is where things start to become complex. With only two major LMI insurers in the market, risk can only be spread so far, and in any particular 12 | AUGUST 2014

building, street, suburb or neighbourhood, they are determined to limit their risk exposure. “Genworth and QBE LMI talk to each other and they know pretty much down to the street level how much LMI exposure exists in each area,” Carlson says. “They will only take a concentration level of 30% inside any suburb or even that building, so if they’ve got more than one-third LMI exposure, the loan is declined – it’s that simple.”

HOW INSURERS ASSESS LOCATION RISK Level 1 – Region This takes into account the state or territory, nearest capital city, the local population and the percentage of mortgage-insured homes in the area. Level 2 – Postcode If the region’s exposure is less than 30%, the insurer drills down further to assess the postcode. If an applicant wants finance to buy a property located in an undesirable or overexposed postcode band, “it doesn’t even get past this point”, Carlson says. Level 3 – Street Assuming the postcode is deemed acceptable, insurers will assess the street to ensure it stacks up from a risk perspective (think: crime rates, historical growth, average incomes, etc.) before checking the street’s LMI concentration. Level 4 – Building For purchases of apartments and townhouses, insurers will also assess the building’s LMI exposure. “The suburb might not have an issue,” Carlson says, “but if that particular building has already reached 30%, that’s too bad.”

HOW CAN BROKERS GET LMI DEALS APPROVED? First and foremost, as a broker it’s your responsibility to be aware of potential LMI red flags, so that when you have a client looking to borrow over 80% of a property’s value, you can make them aware of any potential issues that could derail their loan application. It’s ideal if you can have this conversation before they settle on their dream property. “Each insurer may look for slightly different things; QBE LMI might accept something as reasonable that Genworth may not. But, generally

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speaking, there are certain factors that could cause a deal to fall over,” explains Jessica Darnbrough, national spokesperson, Mortgage Choice. “Anything that can impact the resale value of a home, by putting its appeal in question, is what they are interested in.” These include properties that are: • situated near high-voltage power lines • located in a flood-affected area • heritage-listed, due to the difficulty in changing them • considered high-density – “Insurers tend to shy away from apartment blocks with more than 30 units,” Darnbrough says • smaller than 40sqm in size – “Brokers should check with the lender, as they might include a balcony or car park in the square footage,” Darnbrough advises Remember, too, that the deciding factor as to whether your client is approved or denied may have nothing to do with them, and everything to do with the specific property they’re trying to buy. Carlson recalls a situation when he was working in-house at a major bank where this was precisely the issue. “We had ins with the developer and builder, a fairly large name, who had just put out an estate. A bulletin came out from the LMI insurer and they said, ‘We will not accept another loan in this particular street, as we have too much exposure in this one street already ’,” he says. Carlson adds that if an applicant’s loan was approved by a bank but rejected at LMI level, the borrower could look for a property with different features or in a different location, and their outcome could be more positive. “Be careful, though; the more enquiries a borrower makes, the worse off their credit rating will be,” he says. You can also work with lenders who offer facilities with alternatives to LMI, such as in-house risk fees. The cost to the borrower is usually comparable to a standard LMI policy, but, crucially, they’re able to skip the insurer’s credit evaluation process. “We do have funders and products that we can use to do up to a 95% lend, without credit scoring, and it can absolutely make all the difference,” explains Homeloan Ltd’s Greg Mitchell. “The reality is that prior to these products coming on board, the deal is dead.”

"I think that, like a lot of lenders postGFC, the insurers’ policies have got a bit tighter." Greg Mitchell, Homeloans Ltd.

AUGUST 2014 | 13

HEAD TO HEAD / STEVE KANE

We recognise the value brokers provide when they introduce customers

STEVE

KANE

ADDING FAIR VALUE 14 | AUGUST 2014

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NAB’s head of broker distribution says the bank’s move to reinstate year-one trail is about recognising the value brokers add NAB recently surprised the market with a pair of big announcements. First, the Homeside brand, long the target of broker criticism for the customer confusion it could cause, was shelved. NAB’s broker products were rebadged under the bank’s branding in a move to make them easier for brokers to sell. Then the lender also announced it would reinstate year-one trail, paying brokers 15bps on loans settled from 1 October. NAB general manager of broker distribution Steve Kane talked to MPA about the reasoning behind the major announcements.

MPA: Brokers have often argued that the Homeside branding muddied the waters when trying to introduce NAB products to their clients. Why has NAB now decided to do away with the brand? Steve Kane: We’ve been taking a lot of feedback from brokers over the last little while. Certainly, in the sales process when the mortgage broker sits down with the customer, even though it’s Homeside powered by NAB and even though everyone understands that Homeside is a subsidiary brand of NAB, the customer still had to ask questions of the broker like, ‘Who is Homeside actually, and what does that mean for me?’ One of the key findings we had is that it would be much simpler if it was an NAB brand that brokers were dealing with for their customers. Having the Homeside brand out there has not really been able to leverage off that mainstream brand and the iconic household name of NAB, so that’s a key benefit to us. It also simplifies the process so everyone knows who they’re dealing with. There’s been a little bit of noise in the mainstream press around bank brands and who you’re really dealing with. This clarifies that position. The customer knows they’re dealing with NAB.

MPA: What changes can brokers expect to see as a result of the rebranding? SK: All facets of the offering into the marketplace for brokers will remain exactly as they are today,

THE KEY CHANGES AT NAB • NAB has put an end to Homeside, bringing its broker products under the NAB brand • The bank has reinstated year-one trail for brokers, and will pay 15bp from 1 October

and that extends to our price for risk strategy and LVR pricing, and it extends to our relationships with [brokers]. Nothing changes other than the rebranding of the products. We will also still offer the Red Star products, which are our stand-alone products that NAB offers into the broker fraternity. Those products don’t draw trailing commission, but they are available for brokers where their customers’ needs suit that particular product type. All the advantages that brokers have in dealing with NAB and the specific broker proposition will remain in place.

“One of the key findings we had is that it would be much simpler if it was an NAB brand that brokers were dealing with for their customers” MPA: What about the timing behind the commission changes? Why has NAB now chosen to reintroduce year-one trail? SK: It really is recognising that, as part of the overall NAB strategy and our business strategy going forward, we recognise that 50% of the Australian marketplace seeking a home loan are going through the third party to get it. We need to make sure for our own business and the benefit of our customers that we’re playing a significant role in that channel. This is about the longevity of the channel; it’s about support for the

AUGUST 2014 | 15

HEAD TO HEAD / STEVE KANE

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WORKING HAND IN HAND FOR CUSTOMERS MPA: The increasing digitalisation of the mortgage sector means that consumers are now looking for ‘instant satisfaction’ on their queries. How can brokers cope with changing customers? SK: That will flow through into the mortgage channel, so it’s that working together hand in hand between the mortgage broker and the bank that we’re trying to achieve a fair outcome and a fair value for the customer. A mortgage broker may have a good relationship with a bank, and that mortgage broker and bank will work together to service the needs of the customer, but it’s about that integration and it’s about the customer of today wanting to be able to touch a lending institution in any way that they can to satisfy the needs they have at the time. The immediacy and intimacy of what customers require today is very different than, say, five years ago. The nature of the proposition has not changed. It is really about the relationship between the individual broker and the customer, and then that customer, the individual broker and the lender of choice, and ensuring a professional outcome at all times and that the customer is at the centre of everything we do.

channel and it’s about making sure that we are well aware of the professionalism of the channel. The legislation is asking brokers to do much more, and we’re asking them to do much more in terms of managing the customer relationship. This is a recognition of that value. We’re very keen to ensure that it is a partnership that goes forward forever, that we’re involved in the mortgage broking and third-party introduction channel, because we believe in the channel and because we understand it is going to be here for a long time. We recognise the value of brokers as they introduce customers – many of whom are new-to-bank customers – and we recognise that there are costs involved in that.

MPA: We’ve seen a number of lenders begin to make moves on the commission front. What’s changed about attractiveness of the broker value proposition to make lenders so much more eager to win the channel’s business? SK: I think it’s really the economics of the business. It’s also the realisation that at the end of the day consumers are choosing to use third-party brokers to satisfy their needs in the mortgage space. As a business, if we didn’t want to play in 50% of the market, that would be a detriment. In the mortgage market today, they say there’s no competition. But there are so many products, so many variances on products and so many offers out there in the market either fully displayed or not 16 | AUGUST 2014

fully displayed, that the mortgage broker is fulfilling that need for the customer as a trusted adviser, providing real advice on where they need to go.

MPA: NAB performed very well in MPA’s Brokers on Banks survey, taking out the Bank of the Year rating. The bank performs a lot of internal surveying as well to track broker satisfaction. How is the business performing on that front? SK: It’s actually tracking very well. Our broker satisfaction records are almost highest on record at around 83.6%. That involves a number of assets across our business. We’ve worked very diligently to combine our processing area under David Barry with our sales channel and BDMs in the NAB Broker business and with the brokers themselves. We’ve streamlined that and we’ve opened up communication channels much more in terms of the credit decisioning. We’ve enabled brokers to really be having a strong relationship with the whole value chain in the process, and that’s what’s feeding into the broker satisfaction. They’re now seeing that

“All the advantages that brokers have in dealing with NAB and the specific broker proposition will remain in place” we’re treating the business as a holistic business, and we realise that they need to be able to interact with us across the whole value chain and not just from a sales perspective. That satisfaction has been building. A testament to that is the Brokers on Banks Bank of the Year award. We’re very proud to get that award, but it’s a testament to a number of areas in the bank. It’s not just about product; it’s not just about what we do for brokers; it’s about how we’ve rearranged our business internally to reflect what the needs of the broker and their customer are in every decision we make around what we do in this channel.

SPECIAL REPORT / BANKS ON BROKERS

S K N S R BOA E K O R B N 4 1 20

kers o r B s â&#x20AC;&#x2122; MPA n i d e t p five e a r o t e e r e h t w They s survey as , but what ar t k t on Ban in the marke sked the bes s lender nking? MPA a their value s e i they th anks to defin al the change of the b tion, and reve he year ahead i propos planning in t e they ar

18 | AUGUST 2014

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PA’s Brokers on Banks 2014 survey provided the market with an annual update on how the banks are performing in the eyes of a key distribution channel – mortgage brokers. Asking over 600 brokers to rank banks across 10 different criteria, MPA delivered a formidable data set that will – as always – make the banks sit up and take notice. So what did we learn? First of all, nothing is guaranteed. Though lenders may have impressed brokers with their consistent value proposition over a number of years, competition is fierce, and brokers are always open to new offerings that satisfy both themselves and their clients. As a result, MPA published a new top five this year, with NAB/Homeside overtaking perennially dominant CBA (by a small margin) to be rated

Bank of the Year. Other lenders also saw their fortunes shift, depending on the independent voices of our broker readers. In this year’s Banks on Brokers report, we ask the top five lenders – as rated by you – how they’ve managed to stay ahead of the rest of the pack. We ask them to explain their core value proposition, and define how that has been changing in recent times. We also ask them to reveal their future plans for the ever-more-important mortgage broking channel. As brokers will see, none of these banks are truly satisfied with standing still. Instead, they are focused on converting your feedback into demonstrable progress in broker service. And that – brokers and banks will agree – can only be a good thing.

BROKERS ON BANKS 2014: THE TOP FIVE Bank

Score

NAB/Homeside

3.30

CBA

3.28

Westpac

3.27

Macquarie

3.26

ANZ

3.24

Note: Banks were scored by brokers out of 5 across 10 different criteria. Their scores were then averaged to achieve a final (overall) score out of 5, to obtain the Bank of the Year.

Rank

2013 rankings

2012 rankings

2011 rankings

CBA

NAB/Homeside

ANZ

Bankwest

Macquarie

ING DIRECT

NAB/Homeside

Suncorp

Bankwest

ING DIRECT

AUGUST 2014 | 19

SPECIAL REPORT / BANKS ON BROKERS

On being

the best

NAB Broker general manager Steve Kane is thrilled brokers ranked NAB best of the best, and says the bank is still listening to brokers who pick up the phone

20 | AUGUST 2014

Congratulations! NAB has been named Bank of the Year. What’s your take on the win? Steve Kane: We’re absolutely thrilled. It’s been a big year for us and we’ve been continuously working hard to drive improvements across the board. One year ago I said NAB Broker would lead the market by continuing to invest in the broker channel, and I think the result speaks to our dedication to constantly improve as a lender.

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What do you think has tipped the balance for brokers to rank you first this year? SK: Over the years we’ve worked hard to improve across all areas of our broker proposition, and I think over time this has tipped the balance, with brokers now seeing the long-term results and recognising the advances we’ve made. Some have been major initiatives – like price for risk, which really led the market at the time – and others have been small improvements in process such as streamlining lodgements to reduce documentation for brokers. We have also aligned our back office with our BDM teams and opened communication lines with credit teams, ensuring a consistent and reliable service proposition.

Brokers seem particularly impressed with your turnaround speeds and BDM support? SK: It’s fantastic brokers have rated us on top when it comes to turnaround speeds and BDM support, particularly as brokers identified them as the two most important factors for them. Working on our turnaround speeds has been a gradual process as it’s really about looking at how the loan process works for brokers on a practical, daily level. When we look at our broker proposition we are looking not only at the product and rates, but also where we can make sure we can tighten our processes, deliver a competitive product, as well as better, faster service to make sure our brokers and their clients are happy. There’s no magic bullet, so it’s great to know all the changes we’ve made in our service and process are making a difference to brokers and they are seeing improvements in our turnaround times. Over the past two years, we’ve also made it a key priority to support brokers better through new BDM teams with dedicated roles. It was a priority for the majority of the past 18 months to offer support to our brokers around the clock throughout the whole loan process, from lodgement right through to post-settlement. We also invested heavily in training our BDMs and in making sure we are able to assist brokers and their clients at all touchpoints.

Are there any other areas the bank has focused on in the last 12 months? SK: In addition to constantly reviewing and refining our overall broker proposition, NAB is strongly committed to the broker channel. We are committed to supporting brokers towards a common goal of

NAB/HOMESIDE’S TOP FIVE RANKINGS, BROKERS ON BANKS 2014 Bank of the year

Turnaround speed

BDM support

Commission structure

Communications, training and development

Interest rates

Product range

Service levels

Credit policy

Online platform and services

Product diversification opportunities

continuing to grow the broker share of the market, and have consciously made efforts to support the industry through training and development, recognising the achievements through dedicated events as well as playing the role as a broker’s advocate.

How will you keep NAB at the top? Any plans for the next 12 months or so? SK: We’ll continue to listen to what brokers want and deliver on that. This was the original line of thought when we first launched Homeplus – a product designed for brokers based on what brokers want and need, available exclusively through brokers, with a compelling and competitive product, price, commission and trail. We’ll also continue to invite feedback so we know what brokers like about our product, and where we can evolve and improve.

‘‘We’ll continue to listen to what brokers want and deliver on that’’

What is your key message to those brokers who haven’t been as engaged with NAB as they could have been? What would you tell them? SK: Pick up the phone and tell us what you think! We’re proud to be voted Bank of the Year, but we recognise there’s always room for improvement as a lender and as a business – after all, we’re only as good as our last loan. Brokers have voted us top for a reason and we hope the results speak for themselves, as we’ve worked alongside brokers to get their input so that we know what we are doing well and where we need to improve. What we do guarantee is to continue to work hard at improving all aspects of our business, making improvements whenever we can, no matter how large or small.

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SPECIAL REPORT / BANKS ON BROKERS

CBA has been rated highly in this survey for some years. How have you managed such consistency? Sam Boer: We have, I believe, an overall service proposition – from lodgement to settlement – which is sharper than our competitors’ and which we deliver on consistently. We have a great postsettlement process for brokers, enabling them to continue to work with their customer. I also believe our credit team is more responsive to broker enquiries and are keen to make a deal work, while we make better use of technology than our competitors: for example, our new pricing tool and Customer Ordered Valuations.

What are some of the most exciting developments for brokers in the last 12 months?

Making

productivity

pay

CBA’s general manager of broker sales, Sam Boer, says it is a ‘sharp’ proposition focused on productivity that continues to pay dividends for the bank 22 | AUGUST 2014

SB: One of the biggest developments was the launch of our Everyday Offset feature. This is unique in the market because there are no limits to the number of transaction accounts a customer can link to their home loan. This has been a great product for brokers to attract new customers. The recent roll-out of our new Home Loan Pricing Tool is also a great win for brokers. This tool allows them to submit requests and receive an immediate response, 24 hours a day. In some instances they receive an approved offer immediately, no waiting time.

The bank scored particularly well in the online platform and service category, and has done so for some time. How important is this to CBA and why? SB: Online technologies bring efficiencies for both us and the broker, efficiencies which improve the customer experience. We have invested heavily in COLA, our online application platform, and in online tracking so brokers can lodge anytime and track their loans in real time. Our other online tools such as enhancements to our upfront valuations system, our Automatic Valuation Method, and the new pricing tool are adding to the way we are using technology to make things simpler and better for the broker.

Is there anything that the bank feels it could still improve on? SB: We are always listening to our brokers and use

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“One of the biggest developments for us has been the launch of the Everyday Offset feature” that feedback to improve our service proposition, whether it’s credit policy or documentation require ments. The survey results are interesting for us because they include input from a wide range of brokers; some of them may not use us very often but we are keen to know their opinions and to work with them so they get to know our systems and processes.

What are CBA’s plans for the broker channel in the year ahead? SB: We will continue work to enhance the profes sional reputation of mortgage brokers. We do this by providing consistency in service, allowing brokers access to credit managers in their local market, utilising technology to make things simpler, and keeping brokers top of mind with their customers by printing their names on home loan statements and on NetBank’s home loan page. We will continue to be consistent in our credit decisions and mortgage processing so brokers can be confident that our turnaround times from lodgement to settlement will be the best in the market.

CBA’S TOP FIVE RANKINGS, BROKERS ON BANKS 2014 Bank of the year

BDM support

Commission structure

Communications, training and development

Product range

Service levels

Credit policy

Online platform and services

Product diversification opportunities

What would you say to brokers about the future of the CBA-broker relationship? SB: Brokers can be confident that CBA will continue its commitment to the mortgage broking industry. We were one of the first lenders in the mortgage broking market and we supported brokers during the GFC. In addition, we are working to improve our processes and we have recently reduced the documentation requirements for income verification, changed the way we release equity for construction home loans, which reduces the turnaround time, and we now accept the contract of sale for purchases up to $1,500,000 without a valuation. Moving forward, I would like to see brokers increase their productivity, and we are willing to assist with our Kaizen productivity workshops. Remember, if you get a loan approved faster, your customer gets approval faster and they enjoy a better customer experience. In addition, if documents are processed more efficiently in the office it results in less rework for brokers and/or their staff and frees up time to do more selling.

AUGUST 2014 | 23

SPECIAL REPORT / BANKS ON BROKERS

One bank,

one team Westpac general manager of broker distribution Tony MacRae says the bank’s ‘one team’ approach is bringing it closer to brokers rating it No. 1 Westpac has made significant gains in the Brokers on Banks survey this year. Were you pleased with the results? Tony MacRae: At one level, we’re extremely pleased with the movement from ninth to third across the last 12 months. It represents a substantial improve ment not evidenced in any previously. However, we have been open and transparent in our approach to being No. 1 for overall broker service and value, so from that perspective we are not satisfied with this result. More brokers are experiencing the direct benefits of Westpac’s proposition, and we have a team that is open and willing to do things differently to provide brokers with the contemporary and tailored services that will take us into the future. We believe we have good momentum towards reaching our goal of being No. 1 for value and service and helping brokers grow their businesses.

Why do you think Westpac has achieved such an improvement this year? TM: Whilst it’s tempting to believe that there is a magic bullet for success, there isn’t. Over the past 12 months Westpac has garnered feedback about its mortgage broker operations, and armed with this information we were able to put in place changes which will deliver long-term benefits to brokers. 24 | AUGUST 2014

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The feedback revolved around providing better access to the right people to help brokers grow their businesses. This resulted in recruiting more BDMs, providing access to credit managers, and delivering better platforms and technology, amongst many other initiatives both undertaken and underway. The teams across Westpac’s mortgage broker value chain remain committed to getting things right across the board – if it’s worth backing, we’ll back it. The work that we are doing forms part of our broader approach around supercharging our ‘service revolution’ in the third party mortgage industry. As a result, you will see fundamental changes to our operations brought about through better use of mobile technology that will help address key issues plaguing brokers and lenders.

Are there any areas the bank has been particularly proud of over the last 12 months? TM: Our progression towards digital innovation, in particular online and mobile, continues to form a key part of Westpac’s strategy and is changing how our customers interact with us. Our innovation in this area has enabled us to do business wherever and whenever our customers want through mobile, tablet, online and the rollout of our Bank Now branches. We also continue to maintain a lead on areas that carry the most influence for brokers when dealing with their clients. Our Platinum service model continues to go from strength to strength, and our credit assessors have been given increased authority limits to approve more loans at the first touchpoint.

You ranked highest in terms of diversification opportunities: why is this so critical to your broker partners? TM: More brokers now understand the importance of diversification and consolidating a client’s financial products with a single provider. The reality is that if a broker doesn’t meet the broader financial service needs of a client, then someone else is going to do it for them. Over the past 18 months we have continued to roll out opportunities for brokers to earn additional income through the introduction of new product offers and services. With consumer usage of the broker channel currently sitting at 50%, this presents a lucrative opportunity to further grow the business of a broker by discussing the broader financial needs with their clients.

WESTPAC’S TOP FIVE RANKINGS, BROKERS ON BANKS 2014 Bank of the year

Turnaround speed

BDM support

Communications, training and development

Product range

Service levels

Credit policy

Online platform and services

Product diversification opportunities

We have a ‘One Team’ approach at Westpac and have been proactive in bringing together the expertise of Westpac segment teams to offer more to brokers. Through key areas such as Westpac Premium’s Industry Specialisation and Self-Managed Super Fund Investment Property Loans, we have the ability to provide a whole of wallet service through our One Team specialists. And of course the work we continue to do with our branch network through broker squads allows brokers and their customers an excellent onboarding experience.

If you had to tell brokers what’s different about Westpac’s proposition in 2014, what would you say? TM: Westpac continues to strengthen its value to brokers though harnessing our One Team approach. It’s an exciting time to be a broker, and we continue to invest in our local strategy to introduce brokers to all our local teams to create new business opportunities that will benefit both brokers and their customers. Brokers are seeing some new offers on the table and are being introduced to Westpac teams they have not had exposure to previously. Over recent months, for example, we have introduced brokers to our Industry Specialisation teams, in particular Westpac Sports & Entertainment, our dedicated sports and entertainment segment, the first dedicated offering of its kind across any financial institution in Australia. Our One Team approach also includes our personal bankers in our Westpac Retail Broker Squad Hubs, industry specialist teams from Westpac Premium, local business bankers in Westpac Small Business, insurance BDMs from BT Financial Group, and Westpac private bankers.

“We believe we have good momentum towards reaching our goal of being No. 1”

AUGUST 2014 | 25

SPECIAL REPORT / BANKS ON BROKERS

Building on

the basics

Macquarie Bankâ&#x20AC;&#x2122;s head of mortgage sales, Doug Lee, says the small things make all the difference, and the bank will continue to focus on getting the basics right Macquarie has once again made it into the top five. Were you pleased with the result? Doug Lee: We are pleased to be ranked among the top five again this year, which we see as a direct result of our dedication to working collaboratively with brokers. Intermediaries are a critical part of the industry and we concentrate our efforts on providing solutions and support that make a real difference to them and their clients.

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Macquarie has been consistently rising in brokers’ estimations over a number of years in the Brokers on Banks survey. Why do you think this is the case? DL: We have an ongoing focus on collecting regular feedback and being responsive to that feedback. And, having just received very strong results in our own half-yearly broker satisfaction survey, we believe this approach is working. We invest in engaging with our national broker advisory board, as well as holding state-based feedback sessions where we gather a group of brokers together to get their views. Those discussions tend to focus on five key areas – people, product, process, policy and price – with the conversation feeding into an action plan that helps shape our business into the future. We see it as a cycle of continuous improvement. In addition, we have invested in the growth of our BDM team around the country to grow our market footprint and further deepen and strengthen our relationships with brokers.

Are there any areas that have been a particular focus over the past 12 months? DL: A core focus for us has been on training and development for brokers and their back office teams. We have established a new product engage ment team which is responsible for helping them to become more familiar with our products and processes, and more importantly to capture feedback to initiate the small changes that make a real difference to our brokers’ day-to-day lives. This training has been provided in a number of ways, from face-to-face and webinars, to online videos and our Mortgages Little Black Book app.

The bank ranked highest in ‘commission structure’, ‘communication, training and development’, ‘product range’ and ‘credit policy’. What makes you most proud? DL: It has been great to see our investment in communication, training and development paying off through these results. When it comes to our product range, we are focused on taking a complete solution-based approach, while keeping it simple. Late last year we launched the Macquarie Flyer Home Loan Product Suite, which has resonated well with brokers and their clients. Borrowers can earn Qantas Points at the time of settlement and each month for the entire duration of the loan period, which is proving popular.

MACQUARIE’S TOP FIVE RANKINGS, BROKERS ON BANKS 2014 Bank of the year

Commission structure

Communications, training and development

Product range

Service levels

Credit policy

Core to our business and service proposition is that brokers have access to our credit team directly. This is a two-way interaction, with our credit team proactively contacting brokers to discuss aspects of an application in need. We see this as a key driver of our success in this area, as brokers appreciate this direct interaction. In terms of commissions, we actually haven’t changed anything here, and feedback from brokers – as reflected in our ranking – indicates an ongoing appreciation of the structure’s consistency and transparency.

Are there any particular areas to improve on over the next 12 months? DL: Looking to the future, our program of continuous feedback will shape where our focus is directed. We want to keep providing a streamlined and marketleading experience for brokers and their clients.

What are the bank’s plans more broadly in the broker channel in the next year? DL: Over the next 12 months we will roll out our product engagement team to more brokers, which will also be supported by interaction with our broader BDM team. We see this as making a real positive difference in the next six months.

If you had to tell brokers what you thought was different about Macquarie’s proposition in 2014, what would you say? DL: Communication and engagement. A lot of our work has been centred on not making significant changes but looking at where we can make small amendments that make a big difference. If we focus on getting the basics right, we can continue to ensure brokers and their clients have a positive experience with our products and processes. Our success is a result of the dedication of our whole team and the relationships they continue to build with brokers.

AUGUST 2014 | 27

SPECIAL REPORT / BANKS ON BROKERS

Banking on brokers

ANZ’s head of third party, Keiran Evans, says the bank’s ‘Banking on Australia’ push includes making banking easier for the customers of brokers

28 | AUGUST 2014

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ANZ has again been rated in the top five. What’s your take on this year’s results? Keiran Evans: We are always listening to our brokers to receive feedback on what’s working well, and what we need to improve to ensure we are meeting the needs for brokers and our customers. It’s encouraging to hear that our service levels have been ranked No. 1 by brokers, which validates our investments this year to strengthen our team and make banking easier. We are also pleased that our focus on helping brokers diversify their businesses to spot and support commercial opportunities has been well received. We back brokers from the beginning and all through out their careers, and so communications, training and development are vital ingredients to our overall service offering.

Why do you think ANZ regularly features near the top of this survey?

ANZ’S TOP FIVE RANKINGS, BROKERS ON BANKS 2014 Bank of the year

Communications, training and development

Service levels

Product diversification opportunities

“Continuing to deliver the best possible support to brokers and customers is our main focus”

KE: We’ve been backing brokers from the start and we have a very consistent approach to supporting brokers and the industry. At the same time, ANZ products sell themselves on quality and consistency, which is reflected in ANZ being Australia’s most awarded home lender.

to brokers and customers is our main focus. We are now midway through our five-year, $1.5bn ‘Banking on Australia’ program and we will continue to introduce new initiatives that make banking easier.

Are there any areas that have been a focus over the past 12 months?

KE: Brokers tell us they expect more from their BDMs and so we are investing in our team, increasing resource levels and developing the capabilities of our people to provide the best possible service and support. We are applying greater focus on training and development for our team, and ensuring our BDMs leverage all of ANZ’s resources for brokers and their customers, from branch, to commercial, to GoMoney. As part of this, we are encouraging our BDMs to complete a Diploma of Finance and Mortgage Broking Management recognised by the MFAA, and we provide ongoing support through relationship coaching and product knowledge training.

KE: We are investing in the channel and have increased the size of our BDM team by over a third this year, a further testament to our commitment to brokers. In growing our team, we’ve recruited a number of resi BDMs with broad experience, including past exposure to commercial and/or asset finance. We are also committed to making banking easier for our brokers and their customers. We recently introduced a new process for loan renewals for existing customers, which means they don’t need to reapply to vary their loans with us. This is delivering much faster service for the customer and saving countless hours of paperwork for the broker and ANZ. In addition, we’ve recently introduced electronic lodgement of documents, which means customers can receive emailed documents, avoiding postage delays.

Are there any areas in which the bank aims to improve over the next 12 months? KE: Continuing to deliver the best possible support

What are the bank’s plans for broker channel development this year?

What will be different about ANZ’s proposition in 2014, in your view? KE: Brokers tell us they expect more from their BDMs, and so we are investing in our team, increasing resource levels and developing the capabilities of our people to provide the best possible service and support. We’ve also been working hard to make banking easier by streamlining our processes, which empowers brokers to better service customers.

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SPECIAL REPORT / BANKS ON BROKERS

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What are they planning? The banks have big plans for the broker market in 2014 and beyond. So what are the key changes they have revealed that will impact on broking businesses? “We’ll continue to listen to what brokers want and deliver on that. This was the original line of thought when we first launched Homeplus – a product designed for brokers based on what brokers want and need, available exclusively through brokers, with a compelling and competitive product, price, commission and trail. We’ll also continue to invite feedback so we know what brokers like about our product, and where we can evolve and improve.”

“We will continue work to enhance the professional reputation of mortgage brokers. We do this by providing consistency in service, allowing brokers access to credit managers in their local market, utilising technology to make things simpler and keeping brokers top of mind with their customers by printing their names on home loan statements and on NetBank’s home loan page. We will continue to be consistent in our credit decisions and mortgage processing so brokers can be confident that our turnaround times from lodgement to settlement will be the best in the market.”

“Looking to the future, our program of continuous feedback will shape where our focus is directed. We want to keep providing a streamlined and market-leading experience for brokers and their clients. Over the next 12 months we will roll out our product engagement team to more brokers, which will also be supported by interaction with our broader BDM team. We see this as making a real positive difference in the next six months.”

Steve Kane, NAB Broker

Sam Boer, CBA

Doug Lee, Macquarie Bank

“Underpinning our approach is what we call our ‘service revolution’. We remain tightly focused on driving our mission to be No. 1 for overall broker service and value, and will continue to work towards transforming the broker experience at every touchpoint. Progression of digitisation will see our Westpac Broker business transformed through the roll-out of mobile tablets, new smartphones and social media tools. This will create amazing opportunities for our BDMs, providing them with smarter ways of working that will enable them to be more efficient, resulting in more face-to-face conversations with their broker partners. We’ve also revised the different ways our products and campaigns can be produced, marketed and distributed to brokers, through the use of digitization.”

“Brokers tell us they expect more from their BDMs, and so we are investing in our team, increasing resource levels and developing the capabilities of our people to provide the best possible service and support. We are applying greater focus on training and development for our team, and ensuring our BDMs leverage all of ANZ’s resources for brokers and their customers – from branch, to commercial, to GoMoney. As part of this, we are encouraging our BDMs to complete a Diploma of Finance and Mortgage Broking Management recognised by the MFAA, and we provide ongoing support through relationship coaching and product knowledge training.”

Tony MacRae, Westpac

Keiran Evans, ANZ

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PROFILE / RAEL BRICKER

RAEL BRICKER

A businessman and a gentleman 32 | AUGUST 2014

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His brokerage has settled in excess of $1.8bn in loans and his loan book is growing by the month, but Rael Bricker would walk away from finance if his heart wasn’t in it. “You have to be passionate about what you’re doing,” Rael says simply. Sarah Megginson reports Rael Bricker became a finance broker by circumstance rather than by design, but his background in raising funds as a venture capitalist more than prepared him for a profession in raising debt. “I strongly believe in loving what you do,” says Rael, who launched his first mortgage business in 2001 after a diverse career that included engineering, consulting, education and management. “I tell my staff that if I wake up and dread coming in to work, then I shouldn’t be there. The same goes for them. If you don’t do something you love, or something you’re passionate about, then there is nothing driving you to succeed and to keep improving.” Fortunately, within his businesses Rael sees plenty of passion. Rael owns his brokerage, House & Home Loans; his finance company, House & Home Life; and he co-owns Rate Detective Finance with partner Warren Dworcan. Together they oversee more than two dozen mortgage managers, personal assistants and support staff. “I see that passion in my staff,” he says. “I often get emails at 8 or 9pm from admin and support staff, querying a file. They’re not expected to attend to email after hours, but the fact that they do shows me the passion they have.” This can perhaps be credited to the fact that Rael actively and purposefully creates a positive workplace culture, in an effort to create an environment in which everyone wants to give 110%. “I’d never ask anyone to do something that I wouldn’t do. It could be as simple as making tea or coffee for someone who has arrived for a meeting, through to loan lodgements and making difficult phone calls,” Rael explains. “If I’ve got to phone a client with bad news, which isn’t very often – but let’s say I have to tell

RAEL’S VIEW Brokers should always... 1. Ensure fantastic customer service – first time, every time. “Your clients should feel like you care, and that you’ll make sure that they’re looked after,” he says. “By having super customer service at our core, we’re able to have repeat clients and high rates of referrals.” 2. Have an efficient support team and system. “By having efficient office management systems, we’re able to ensure proper and timely workflow practices, meaning happy clients and less stressed brokers,” Rael says. 3. Have a positive attitude. “I’m always the optimist,” Rael says. “No matter what the doomsayers might be saying, I always believe that there will be opportunities and that even if we go through tough times, we will be better for it in the end.”

AUGUST 2014 | 33

PROFILE / RAEL BRICKER

someone their valuation has come back lower than expected – in that case, I will always phone them from our open-plan workspace rather than from my office. I want my staff to learn and see how to relate to clients, so in this way I can demonstrate how to relate to clients and how I deal with objections.”

CREATING THE DREAM TEAM

CAREER TIMELINE

Rael’s team comprises 12 brokers and around 15 support staff, including his four personal assistants. Although he now confirms that he couldn’t function properly without them, he admits he resisted getting a personal assistant for many years in a futile effort to retain 100% control. “To have a PA, you have to give up control; it’s a critical path in the evolution of a successful business, but one I was hesitant with at first,” he reveals. “I now have four PAs and we meet a few times a week; it’s an informal meeting and each person goes through every file they’re working on. It’s a learning experience to see how to deal with potential issues and problems, but it’s also a way of ensuring that if one PA is sick tomorrow, the others can pick up with those files.” Rael adds that virtually none of his staff – including Rael himself – have a background in banking. Instead, he recruits finance graduates from university so he can teach them the business of selling mortgages. One such graduate was Ameesh Pattani, who completed his university degree back in 2005 and joined House & Home Loans as his first job.

34 | AUGUST 2014

1985

Graduated from the University of the Witwatersrand, Johannesburg, with a Bachelor of Electrical Engineering degree

1986

At the age of 21, worked underground as an engineer at a gold and diamond mine

3 MOTTOS FOR SUCCESS • Love what you do • Give up control • Be prepared to work hard

“We hired him and he’s still with us now; he’s our team manager, leading our young brokers,” Rael says. Ameesh recently went overseas for three weeks, and in his absence three other staff members covered his workload. “They really stepped up to the plate, so when he returned to work I said to the three women who had filled in: ‘Go and take the afternoon off. I’ll pay for the three of you to go to a spa, so dump everything on his desk and go and relax’,” Rael laughs. “We expect our staff to work hard and play hard, too. My aim is to ensure that all my employees are happy; that they love what they do and will regularly go the extra mile for clients. “That’s why we’re not clock-watchers: if someone’s running late or their child is sick, there’s no one docking their pay.” A happy workforce is an efficient workforce, something Rael recognised a few years ago when it became clear that some staff were becoming overwhelmed. It wasn’t the volume of work that was the problem, Rael realised; it was their haphazard system for processing it. He developed the ‘Monday to Friday’ system as a result. It’s a

1990

Graduated with a Master of Science in Engineering from the University of the Witwatersrand (June)

1990

Graduated from the University of the Witwatersrand Business School, Johannesburg, with a Master of Business Administration (December)

1990

Started a management consulting and education business called Innovative Management Development. Rebranded as IMD Education Centres in 1992

1996

Grew business from 20 students to 4,000 students across six campuses; sold that into a small listed company in South Africa

MPAMAGAZINE.COM.AU

simple yet effective process for ensuring that staff focus only on immediate tasks. “I was noticing my staff coming in with 25 active files on their desk, and the hardest ones would be pushed to the bottom day after day. I needed to find a way to help them manage their workflow,” Rael explains. “I invented a system where they mark up a whiteboard with five columns, labelled Monday to Friday, then install five shelves and mark each one from Monday to Friday. If an employee picks up a file today and the lender says, ‘We’ll come back to you on Thursday’, the staff member physically picks up the file and moves it onto the Thursday shelf, then writes the client’s name in the Thursday column on the board.” Consequently, when an employee arrives for work each morning, they’re faced with 10 files that need action – much more palatable than 25 files, all competing for attention. “Obviously, if a bank calls early and wants to discuss a client, they’re going to work on that file earlier – they deal with it on a responsive basis,” Rael adds. “But as a proactive process, this system really works.”

Rael, who recently celebrated his 50th birthday, says he has enjoyed the challenge of continually evolving his business to meet his customers’ needs. For instance, his main brokerage, House & Home Loans, primarily deals with investors, but when clients began seeking his help to get their children

into homes, he realised a targeted finance offering for first home buyers could meet a niche in the market. In 2009 he began working with Warren Dworcan and Rate Detective Finance, which aimed to target internet-savvy Generation Y homebuyers. “We then looked at diversifying in two ways, horizontally and vertically,” Rael explains. “On the horizontal side, I’m thinking, ‘How do we expand the market where we work?’ That’s the Rate Detective business. In a vertical sense, that’s how we began branching out into other areas, such as financial planning and asset lending, as it provides a more diversified range of products for each client.” This prompted the launch of the House & Home Life financial planning business in 2010, “focusing mainly on risk and superannuation”, and earlier this year Rael partnered with Asset Line, which helps high-net-worth individuals arrange lines of credit against designer jewellery, boats, luxury cars and art collections. “It’s pawnbroking for the wealthy,” Rael jokes. It’s all part of Rael’s philosophy to broaden his business offering and look after his clients’ growing needs – not just for their home loan but also their long-term investment goals, risk strategies and retirement plans. “Diversification is key, as is ensuring that all our staff are kept up to date with industry changes and training,” Rael adds. “Having a great team certainly does help; without my team, I would not be where I am today.”

1997

2004

DIVERSIFICATION: THE KEY TO SUCCESS

Moved into venture capital in South Africa, consulting for funds on sought-after IT acquisitions

1999

Migrated to Perth from South Africa. Joined Loftus Pooled Development Ltd (now called Clime Investment Management) as investment manager. Managed the listing process on the ASX in December 2000

2001

Launched the finance brokerage Mansion Capital

2002

Became a qualified finance broker

2003

Renamed the business House & Home Loans Group (HHLG); settlements reached $20m

Signed a referral agreement with the Investors Club to be a preferred broker in WA

2009

Partnered with Rate Detective’s Warren Dworcan to target first home buyers/rate chasers

2010

Expanded into financial planning with the launch of House & Home Life

ALL WORK AND SOME PLAY A keen golfer and fitness enthusiast – he enjoys running, cycling and swimming – Rael is training for the Conquer Cancer Ride in WA in October. The 220km, two-day ride aims to raise funds for vital cancer research.

2014

Partnered with Asset Line, which arranges a flexible line of credit against valuable personal assets for high-end clients

2013

The group’s residential loan settlements exceeded $340m

2014

Residential settlements expected to exceed $450m

AUGUST 2014 | 35

FEATURE / WHOLESALE

A silent partner The wholesale funding market is enjoying a period of sustained growth and buoyancy. But it’s the opportunities in the white label space that has the industry most excited. Sarah Megginson reports

Over the last 12 months, the wholesale mortgage market has done more than simply plod along. Rather, it’s fared “pretty well, actually”, says Damian Percy, general manager third party lending, Adelaide Bank – despite the fact that the wholesale business faces the same challenges as the rest of the mortgage market. “We’ve got modest credit growth, exacerbated by the nation’s housing affordability problems and the lack of a coordinated national housing strategy; the competitive distortions brought about by the implicit government guarantee of the majors; the difficulty of innovating in the current regulatory environment; and the race to the bottom on margins that the preceding points tend to lead to,” Percy explains. Yet, despite all of this, Adelaide Bank’s wholesale lending division has enjoyed solid growth.

36 | AUGUST 2014

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MORE THAN A MORTGAGE “We’ve grown strongly the last couple of years, reflecting the flexibility and entrepreneurship of the mortgage management and origination businesses we deal with,” Percy says. “I can’t be sure our experience reflects the entire market, but in broad terms I suspect it does.” Indeed, the broader industry is experiencing a general upswing, according to APRA’s Quarterly ADI Property Exposures, which evaluates the commercial property exposures, residential property exposures and new housing loan approvals for all Authorised Deposit-taking Institutions (ADIs) with greater than $1bn in housing loans. For the year ending 31 March 2014, total ADI domestic housing loans amounted to $1.2trn, an increase of $90.4bn or 8%. There were five million housing loans outstanding, with an average balance of $235,000. ADIs’ commercial property exposures totalled $224.8bn, an increase of $14.3bn (6.8%) over the year. Commercial properties located in Australia totalled $183.8bn, accounting for over 80% of all commercial property exposures. RESIMAC chief commercial officer Allan Savins says the business has witnessed this positive shift first-hand. “The RMBS [residential mortgage-backed securities] markets have continued to improve over the past 12 months, as evidenced by RESIMAC’s recent RMBS transaction. “This recent issue was oversubscribed and eventually upsized from an initial $500m to $750m due to strong investor demand, and the overall pricing was superior when compared to the prior transaction we undertook in 2013,” says Savins. “Given the stability in our wholesale funding platform and our ability to raise term funding efficiently, we’re able to actively compete with the majors on product and price in what is a highly competitive market.”

“People tend to define a mortgage as a product – but the product is more than the mortgage itself. It’s about the overall offering, including BDM service, turnaround time, and post-settlement services such as online access. It’s important to listen to your customers and act, because as wholesalers everything we do is based on what our customers want and need” Brett Halliwell, general manager, Advantedge Distribution

AUGUST 2014 | 37

FEATURE / WHOLESALE

CHANGING REGULATORY REGIMES TO IMPACT CONSUMERS

“Wholesale funders still face challenges that were not apparent before the crisis. Most notably are that the changing regulatory regimes directly impact funding structures, such as the emerging pattern amongst regulators globally that may require funders to hold a larger amount of their funding structure for risk retention… At the end of the day, it will impact pricing to the consumer” Allan Savins, RESIMAC chief commercial officer

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FINDING THEIR NICHE Wholesale lenders are focused on quietly yet efficiently supporting their mortgage managers in meeting the needs of their customers. Just because they aren’t public-facing, however, doesn’t mean that they aren’t proactively and purposefully carving out their own unique slice of the market. At RESIMAC, for instance, they believe their core strength lies in their ability to offer mortgage originators “flexible lending alternatives within niche segments of the market, such as the selfemployed and the credit-impaired,” Savins says. “Operating in an industry controlled by the major banks and impacted by the more conservative approach to credit by consumers, RESIMAC continues to provide our customers with the tools to offer a competitive and flexible home loan solution to Australian borrowers,” he explains. “It’s important to consider that interest rate alone is not what a borrower is necessarily looking for. We have a range of specialist lending products that provide the right lending solution for borrowers when they need it most, and those solutions are certainly not driven by interest rate.” Meanwhile, for Advantedge Distribution (backed by NAB), their risk appetite is geared more towards lower-risk lending, which has coincidentally been a growth area for the business. “We’ve noticed some thing of a shift or a drive towards lower-LVR loans in particular, and this has really worked enormously to our favour. Our historical strength has been in the better-quality loan space, so with the market moving more towards that space, it’s moving towards our strong suit,” explains Brett Halliwell, general manager at Advantedge Distribution. “There has been another interesting trend in that there has been a shift within the market to the Australian-domiciled ADIs and also to

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securitised funders. That, we believe, has been a good thing, because we do have a big parent and the market shifting towards Australian-domiciled banks means we can to continue to be committed to the market.” As for Adelaide Bank, it’s all about leveraging their ability to flex and pivot to meet the needs of the market. “Personal service and people-focused lending never goes out of style, and I think consumers are increasingly interested in dealing with businesses that they can have more of a one-to-one relationship with,” Percy says. “Smaller lending businesses – particularly managers and originators – tend to meet those needs better than the monoliths, so we’re quietly optimistic.”

WHITE LABEL LOANS A ‘RUNAWAY SUCCESS’ While the wholesale funding side of the industry has been ticking along very nicely, it’s the white label market – where ‘home brand’ loans are proffered through broker networks – that has generated even more excitement in recent times. White label loans have had “phenomenal growth in the last 12 months”, according to Halliwell. “It’s an absolute runaway success story,” he confirms. “Everything we do is geared towards brokers and their customers, and brokers have absolutely embraced us to the extent that white label as a category within the market is now a very serious and major part of the market in its own right,” Halliwell says. “A few years ago, it was simply about creating the space in the market. Now it stands in its own right.” Savins, too, reports continued growth in this segment for RESIMAC. He attributes it to the fact that white label products offer a genuine alternative to the mainstream banks. “As brokers seek to strengthen relationships with clients, many are looking at innovative ways to stay ahead of the competition. White label loans are all about the relationship you have with your customers, how you look after your customers and how you service them,” he says. Essentially, they allow brokers to position themselves as the primary contact and to leverage their brand, or that of their aggregator, as the key institution in the loan process.

ADI PERFORMANCE AND PROFIT*

12-month profits after tax

$32.1bn Increase on 2013 figures

$5.5bn

Annual growth

20.9%

Total asset value

$3.96trn Total capital base

$204bn *Authorised Deposit-taking Institutions for the year ending 31 March 2014. Source: Australian Prudential Regulation Authority

AUGUST 2014 | 39

FEATURE / WHOLESALE

MPAMAGAZINE.COM.AU

HELPING BORROWERS PAY OFF THEIR DEBT

As a result, Savins adds, smart brokers are becoming less reliant on the banks and they are focusing more on customer care and postsettlement follow-ups. “In short, brokers and aggregators are valuing their brand more than ever, and white labelling allows them to take their brand to the next level,” he says. That’s not to say there’s no room for improvement. Percy points to a measure of homogenisation in the white label market that Adelaide Bank is trying consciously to address. “What’s interesting, I think, is the extent to which white label has become so generic and commoditised. Most white label programs today seem indistinguishable from each other and I think some of the potential wider benefits to broker groups have been lost as a consequence,” Percy adds. “We think there’s an opportunity to bring greater flexibility and customisation to the white label space, and it’s something we’re working on as we speak.” 40 | AUGUST 2014

“The underlying infrastructure we provide to our wholesale partners is key to the way they are perceived by their customers, so we make sure anything we build for ourselves is rolled out concurrently to them. We also think lenders should spend as much time developing tools that help borrowers pay off their debt as we do on building products to encourage them to borrow. This is a priority for us” Damian Percy, general manager third party lending, Adelaide Bank

INTERNATIONAL PROFILE / KATHERINE LE

UNSTOP As a teenager, she escaped from communist Vietnam and learned to make her way in a new country. As an adult, she helped build one of the USA’s top lenders from the ground up. All her life, Katherine Le has made a habit of doing the impossible In the second quarter of 2007, US mortgage lender Stearns Lending was faced with a challenging decision about its stance on the Alt-A product. At the time, the Santa Ana-based mortgage lender was losing business to its competitors who were still accepting the popular Alt-A product. Stearns’ volume was at an all-time low. Founder and chairman Glenn Stearns and company president Katherine Le made the difficult decision to dump Alt-A, before other lenders and the industry felt the burn and followed suit. This game-changing decision was rooted in Katherine’s experience and expertise in pioneering pre-funding QC to gauge loan risk. Stearns Lending’s foresight and formula would soon prove to be its saving grace and launch pad for remarkable boom growth when lenders across America were going bust. The decision to shift the product mix to only government agency loans did not come easy. With Alt-A volume lost to other lenders, Stearns Lending was faced with grave risk. But Glenn and Katherine were not giving up. With confidence the sunset of Alt-A was on the horizon, it was a matter of holding on and buckling down. As company president during an industry crisis, Katherine was familiar with the fear of taking risks and facing seemingly insurmountable odds. After all, that was her path to America. Katherine was born in Vietnam to a family of survivors. In 1978, her mother’s courageous attempt to sneak Katherine out of the communist country was put a stop to by Vietnamese authorities. As punishment for trying to escape, Katherine, at just 42 | AUGUST 2014

15 years old, was sentenced to one month in a prison camp. Katherine’s mother, never one to fail her children, became even more determined to find a better life for her family. She defied the warnings, tried again, and succeeded. With high hopes for their freedom and future, she sent Katherine and her siblings out to sea. After two harrowing days on a crowded wooden boat in the open ocean, the young refugees were rescued by a Taiwanese fishing vessel. From there, Katherine bravely continued to make her way to the United States. “What you’ve been through leads you to be the person you are,” Katherine shares. “When I first came here in 1980 as a ‘boat person’, I was 17 years old and came with younger siblings, with a language barrier and no money – we left without our parents. I became head of the household.” Katherine knew she had a deep responsibility to honour her family’s sacrifices and dreams. She was determined to make the most of her new freedoms and didn’t waste a minute getting to work, despite overwhelming culture shock. “I didn’t give myself any chance to feel sorry for myself,” Katherine reveals. “I needed to adapt and adapt quickly. For the first six months, I wouldn’t leave the house without a dictionary in my hand. You do what you have to do and you adapt. There was no job too low for me. I worked my way through college, working in a recycling centre while going to school full-time. Hard work makes you the person you are.” Katherine was the first in her family to graduate from high school and college, and she did so with

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PABLE “What you’ve been through leads to the person you are. When I first came to the US in 1980 as a ‘boat person’, I was 17 years old and came with younger siblings, with a language barrier and no money. … I didn’t give myself any chance to feel sorry for myself. I needed to adapt and adapt quickly”

honours. After receiving a degree in business administration from Cal State Fullerton, she began her career as an underwriter. In the meantime, Glenn Stearns was dreaming of founding his own lending company. It was 1989 when Stearns Lending opened its doors. Glenn was on the search for a detail-minded, driven person to lead his executive team and carry out his vision. He wanted one person and that was underwriter Katherine Le. He spent two years recruiting her. Katherine recalls, “He was honest, charming, and enthusiastic. But details were not his strength. He needed me.”

AUGUST 2014 | 43

INTERNATIONAL PROFILE / KATHERINE LE

Katherine was eventually swayed by Glenn’s persistence and joined Stearns Lending in 1995 as chief of operations. Ultimately, the opportunity to be hands-on in building a new customer-focused lending institution was a career dream she couldn’t pass up. “When I first came to Stearns there were 30 employees,” she says. “There was a focus on talent. You had to dig in and get your hands dirty. There were not a lot of capital resources.” Katherine quickly built the infrastructure and practices that would eventually make Stearns one of the nation’s top lenders. One of her first innovations, in 1997, was creating a revolutionising system for rapid and, most importantly, accurate pre-funding quality control. “I cut my teeth in underwriting, so analysing risk is my expertise. If you don’t focus on quality, it can take a company down very quickly,” Katherine says. “I pioneered the pre-funding QC process back in 1997, when no one else in the industry had that process yet.” Pre-funding QC was a novel process that stemmed from Katherine’s knowledge of risk and efforts. The process allows for a preliminary set of control points to identify any issues, or prevent issues before they occur. The goal was to implement a system that would not affect normal production turn times, and one that was seamless on the back end, so as not to alter the customer service levels for borrowers. It wasn’t until 10 years later, post the mortgage meltdown of 2007, that this was adopted readily and anxiously by the rest of the industry. In 2000, Katherine became the president of Stearns Lending, which under her leadership grew by hundreds of employees to take advantage of the mortgage boom. Stearns Lending paid a short-term price for discontinuing Alt-A loans. Glenn estimates that by September 2007 the company had lost 85% of its revenue and was down to 70 employees. But their call based on integrity, Katherine’s foresight and formula, came around to be their key to survival and even greater success. “None of the warehouse lenders lost a dime with Stearns,” Katherine says. “Stearns was in a much better position because of the foundation we built over the years. Buy-back and repurchase represented a very small number of loans. We focused on quality of loans. That’s how

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“Do the right thing. If it’s the right position for you to give someone a loan, make it happen. If you’re not doing the borrower a favour by giving them a loan, don’t give the loan”

we managed to stay in the game. We thrived as a company: 2008, 2009, and 2010 were record years for Stearns. The others were folding.” While other lenders were running from the fire, Stearns Lending recognised a unique opportunity to expand its talent pool. “There were outstanding mortgage teams that worked together for 10 to 20 years that unfortunately no longer had a home,” Katherine says. “It was the perfect time for us and for them. People thought we were crazy hiring during a major downturn. But we felt it was an investment to hire the talent suddenly available. Some were only out of work one or two days before joining our team. “Glenn has the vision, and I have the talent to execute,” Katherine says. In September of 2007, Stearns Lending became one of the top lenders in the nation. In 2013, with more than 1,500 employees and $13.1bn in loan volume, Stearns Lending was the number one wholesale lender in America. Katherine says her four-point business philosophy is her key to success. “Number one is integrity,” she says. “It is how I start my relationships, from when I was an under writer to today. Do the right thing. If it’s the right position for you to give someone a loan, make it happen. You’re not doing the borrower a favour by giving them a loan if they’re not qualified. “Number two is treat people with respect. Number three is teamwork. I am where I am today because of the team. Number four is leading by example. I would not expect anyone to do something I wouldn’t do myself. This has served me well as a leader.” And after all the years of overcoming obstacles and coming out on top, Katherine also shares this advice to those just entering the mortgage industry: “You must love what you do. In this industry, if you don’t love what you do, you should get out, or it will get really tough for you. It is a complex but fantastic industry. I learn more and more every day.” With the addition of Brian Hale, as CEO of Stearns Lending, and his team of experienced executives, Katherine has found herself with a leading team to face the new world of complexity which focuses on quality control and risk manage ment. Katherine has never felt more confident in her role as president and her ability to make a difference in today’s ever-changing mortgage landscape.

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BUSINESS STRATEGY / FEE-FOR-SERVICE

Hourly rate

identity crisis

If you are a sole operator or business owner who is working every hour available to you but still have your back up against the wall, this excerpt from the book From Deadwood to Diamonds by Stefan Kazakis is for you

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Have you thought about the investment you are putting in to your business? Are you working for nothing? Or are you satisfied with the return on your personal exertion investment? I find that about 75% of small business owners have a disconnect here. The issue of maximising the return on each hour you work can be a tricky one and it can be another thing that is holding you back. I call this the Hourly Rate Identity Crisis. To see whether you’ve hit this crisis, answer the questions below: Q. How much do you charge out for your time an hour? Q. How many hours on average do you work a week? Q. How much did you pay yourself last month? Q. Is there a disconnect?

Chances are you have worked out what an hour of your time is worth, based on your skills and experience and the industry you are in. This isn’t where the problem usually lies. The issue is, how many hours a week do you actually earn that rate? Time is a finite resource so it’s crucial that you put it to good use. If you have an identity crisis here it can spell trouble. What activities should you be doing to give your business the best outcomes for each hour you work? Be clear about who you are, what you do, and why. Think about your #1 Big Outcome. The best opportunity for your business is to build one reputation for doing one thing, then add to it. Ask yourself, what’s my one thing? What am I actually worth an hour? Why? What are the activities that I do daily, weekly and monthly that help me ensure I achieve that rate? The next question is, how many hours a week do you work on average? Now you can calculate the following equation: What you are worth per hour × How many hours you work on average per week. Consider the answer carefully. Now, here’s the kicker: when was the last time you took home a weekly pay cheque close to that amount? Sadly, for some business owners the answer is never. If this is you, this is a huge wasted opportunity for your business. So if you’re not taking home close to that amount each week, or even some weeks, or even occasionally, what’s the problem? If you’re not skiving off and going to the beach then clearly you’re spending time at the office doing tasks you shouldn’t be

doing. Yes that’s right, you shouldn’t be doing! I’m not saying those tasks don’t need to be done, just that they don’t need to be done by you. What about if you are achieving this every week? Does that mean everything is peachy? Not at all. If you are reaching this target every week your hourly rate is too low! Nobody can work at their maximum achievable hourly rate every single hour for a whole week, let alone week after week, so if you think you are doing this you need to increase your hourly rate. There is clearly room for you to do so and you are currently missing out on this opportunity.

FOCUSING ON YOUR STRENGTHS Once you start asking some brutal truth questions and facing up to reality you will realise that a lot of time you spend in your business is wasted opportunity. Too many small business owners spend time on things that earn a low hourly rate for their skill set. It’s a very common problem. Many entrepreneurs start out alone with little cash, and so they get into the habit of doing everything themselves and trying to cut costs while they do so. This can be okay – and is often necessary – in the very early days of getting the business off the ground but, once you are past that stage, having a Lone Ranger complex will be a massive hindrance to the growth of your business

AUGUST 2014 | 47

BUSINESS STRATEGY / FEE-FOR-SERVICE

DELEGATION IS A WONDERFUL THING

Stefan Kazakis is a business strategist, sought-after presenter and speaker and author of the new book, From Deadwood to Diamonds (Major Street Publishing, $29.95). He is a futurist and an inspiring communicator with the voice of experience. For more information please visit www. stefankazakis.com or email info@ stefankazakis.com

48 | AUGUST 2014

Have a look at what you are doing each day. For each activity you do that is not at your maximum hourly rate, you have four options. Delegating: You need a great team around you. Not good, great. And what’s the point of a great team if you don’t delegate to them? Outsourcing: You can outsource just about anything these days without too much expense and you can trust that the job will be done right. Some small business owners see this as a cost they can’t afford, but your maximum hourly rate will be more than the hourly rate you pay for outsourcing, so you come out in front and you can be spending your time more productively. Terminating: Sometimes you’ll find that a task can simply be done away with altogether. Plenty of businesses have old habits and systems that they could get rid of but nobody has stopped to look at them closely. Or maybe there’s something you do five times a week that really only needs your attention twice a week. Systematising/automating: Can you set up processes that reduce or eliminate time spent on a task? For example, can you set up your website so that orders go direct to your suppliers and you don’t have to send products out? Delegating and outsourcing are essential to the growth of your business but these are two areas people often struggle with. Let’s have a look at some common challenges to outsourcing and delegating.

I don’t know what I don’t know Sometimes we just become so caught up in the day-to-day craziness that we don’t even stop to consider other options. Make the time to stop, look and listen; find out what the issues are in your business and how you can address them. You can’t solve a problem that you don’t know about.

Trust This is a common problem for entrepreneurs. They are so used to being experts in their field and doing everything themselves that they are reluctant to hand responsibility to others. If you want something done properly you have to do it yourself, right? Wrong! The tasks for which you

earn your highest hourly rate are best done by you, but let me tell you something: for most other tasks in your business there are people out there who are better at it than you – and that’s fantastic! Chances are you are not an expert bookkeeper, or warehouse manager, or marketing manager, or customer liaison, but too many small business owners try to wear too many hats and don’t perform any of these tasks as well as they could be done. You need to trust your staff and service providers. You don’t need to be afraid of outsourcing to Bangladesh or maybe even Russia.

Too busy As a business coach this response drives me nuts! The reason you think you are too busy today is that you didn’t stop and make changes yesterday. You must make the time to improve things today; that’s the only way you’ll be less busy tomorrow. Got it? Putting things in a format people can follow because small business owners get used to doing everything themselves they often develop their own unique methods and this becomes an impediment to delegation. But this is an easy problem to overcome – you just need to spend some time developing processes that you can easily pass on. It may take a bit of extra effort now but I guarantee it will save you time in the long run.

We can’t afford it Let me dismiss this one for you here and now – if you want to grow your business you can’t afford not to delegate and outsource. Even if you are outstanding at what you do, if you don’t let go of managing the day-to-day issues in your business you are putting a ceiling on how much you can grow, and that ceiling is how many hours you can work in a week. If you think you can’t afford it, can you afford not to? If you are this close to the edge something has to change. If any of these are holding you back you have to address them – now. You need clarity about where your best work is done and what is getting in the way of growth. It might be you. The sooner you do this, the faster you will build a business that gives you the outcomes you deserve.

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HOW TO BEST SPEND YOUR TIME? To work out what you should be doing with your time, just figure out the three to five activities that are your strengths. It can’t be more than this or you’ll just start getting bogged down again. Most of my clients have about five activities that they are really good at within their skill set and are their highest hourly rate activities. For most small business owners these activities will be related to the skills that got them into the business in the first place. If you’re a graphic designer you didn’t go into business to spend time doing the accounts, chasing new clients or firefighting problems as they arise. There are other people who will be better at these things than you so let them do it; then you can spend your time doing what you do best. Even if you are on your own you can still find somebody to help keep you accountable. I’ve been getting coached for 22 years. I still get coached today. I still write a cheque for somebody to help me improve my business. Once you’ve identified these activities, answer this question: how much of your time each week as a percentage is invested in these specific tasks? The difference between how much time you could be spending on these tasks and how much you are spending on these tasks is your gap to creating a business that at some point will give you freedom of time and freedom of money. Your long-term goal is to spend 80% of your time on your highest-rate activities. No matter how well you do you won’t get to 100%. As the leader and key decision-maker in your business you will always be required to spend some time on more mundane decisions and tasks. The most successful business people I know are at 80% and that’s great. Even if you are on your own this is achievable. There are all sorts of excellent outsourcing services that cater to small businesses. Trust yourself to find the right people and guide them well, and then trust them to do the job for you. Give them good systems, wind them up and let them go. The world has become a smaller village and the days of dodgy overseas outsourcing are long gone.

Once you start to address these harsh truths about how you’re spending your time and you start walking the walk you will quickly learn that you shouldn’t be making the coffee, going to the post office and chasing unpaid bills. It’s about having a strategic mindset. How will your next hour best be used to grow your business? You have to hold yourself accountable, and this can be tough because it can mean facing the fact that you haven’t been working as well as you could have been. I see it all the time: people think the solution to a struggling business is to work harder, but it’s not. It’s to work better.

AUGUST 2014 | 49

BUSINESS STRATEGY / TALENT MANAGEMENT

Building engagement with a contingent workforce Mortgage brokers are using growing numbers of contingent workers, yet an â&#x20AC;&#x2DC;us and themâ&#x20AC;&#x2122; mentality still prevails in many businesses. Peter Szilagyi provides his tips on managing the complexities of a contingent workforce

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Over the past decade businesses, including mortgage brokers, have dramatically increased their use of contingent workers, from virtual secretaries to loan processing providers. The reasons behind this increase are many and varied. On the one hand, the need to reduce cost and improve productivity and flexibility has driven greater demand. On the other hand, contingent work is now widely recognised as an attractive career path both in the short and long terms. It can offer greater financial rewards and opportunities that may not be readily available through permanent employment.

CONTINGENT WORKFORCE GROWTH While there is no common definition of a ‘contingent worker’, this segment includes individuals who work on a non-permanent basis and could be called independent professionals, temporary workers, independent contractors or consultants. The ABS estimates that up to 9% of the workforce is classified as ‘independent contractors’, and this is only one type of contingent worker. Taking a more global view, a recent survey by Kelly Services found that in the US the number of contingent workers could be as high as 35% of the labour market. With such a large and growing workforce, are we doing the right things to manage and engage contingent workers in our own organisations? How can we improve the performance of this workforce without blurring the lines between employee and contingent worker?

KEEPING THEM FAR! DEFINING THE CONTINGENT WORKER... There are important reasons for differentiating between employees and contingent workers, the most fundamental of which is that contingent workers perform work under a contract for service as opposed to a contract of employment. This distinction has different legal obligations in relation to employment law, superannuation, workers’ compensation, health and safety, intellectual property and taxation. If incorrectly defined and managed, the blurring of the line between employee and contingent worker could easily happen. For example, a line manager focused on the performance of their division could easily keep an individual contractor for longer than planned or pay someone contractor

Building contingent worker engagement starts with understanding what is important for this workforce rates and call them a contractor without intending any employment relationship. Common law courts may treat custom and practice differently to a contractual agreement and use a variety of tests to determine whether an individual is a true contractor or in reality an employee. For many reasons it is vital to have a clear contingent worker strategy. This strategy should have definitions of the different types of contingent workers and outline business practices that sit under them. These business practices would include how these workers are defined, engaged (ie contracted), managed, reported on and exited out of the business. The table below shows an example of the range of different contingent worker relationships a business may face and the means to classify them. Central to good business practice are clear contracts to cover the relationship between the ‘employer’ and the ‘supplier’ of the service (ie individual contractor, an agency or consulting firm, etc). Key provisions include the nature of the service provided, duration, rates, performance standards and termination provisions.

KEEPING THEM CLOSE? BUILDING CONTINGENT WORKER ENGAGEMENT...

Did you know? Baby boomers (1946–1964) are the largest segment of ‘free agents’ (ie contingent workers), making up 52% of surveyed workers. Gen X (1965–1979), on the other hand, was surprisingly the smallest segment at 9% Source: Kelly Services report, The New Workforce: Insights into the Free Agency Workstyle

Notwithstanding the need to differentiate, there

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BUSINESS STRATEGY / TALENT MANAGEMENT

POTENTIAL CONTINGENT WORKER CLASSIFICATIONS Freelancer

POTENTIAL CONTINGENT WORKER PRACTICES

Description

Independent contractor

• A broad category • Independent of worker who is contractors run their self-employed and own businesses, hiring not committed to a out their services particular employer for to clients or other any long period organisations of time • These individuals • Typically not registered will typically be as a business entity. registered under Exchange of service a business entity is usually through • Exchange of service is an invoice and not typically through a formal contract a formal contract

Agency contractor • Agency contractors are sourced through an agency and work on behalf of that agency for the client • They typically provide labour for temporary purposes • A formal contact is between the agency and the client

for service

Consultant

Outsourced supplier

• Consultants • Outsourced suppliers work on behalf provide a ongoing/ of their company operational service (typically in through a contractual teams) to agreement. Employees provide services of these companies to a client for a work for the client to specific project provide that service or objective • This work is typically • They typically nontechnical and can provide relate to the local site professional or operations across services sites (see below) outlined below • Consultants are engaged through a formal contract for consulting services

Type of work performed?

Miscellaneous (refer to links below) could include administrative support, customer service, software development or translations services

How procured? Online examples: www.odesk.com www.elance.com www.guru.com

Project management, Administrative support, systems integration and customer service, implementation, advisory specialist function roles services

Direct engagement (agency or individual)

Examples: Kelly Services, Examples: Manpower, CXC, Chandler McKinsey, IBM, Macleod Accenture, Deloitte, E&Y, CGI, KPMG

are important reasons to build engagement. Research by Deloitte and Manpower shows the importance of contingent workers yet highlights that organisations could do a lot more to build engagement. A lack of engagement can result in inflated costs, poor productivity and noncompliance with policy. Furthermore, the flexibility offered by contingent workers is not a one-way street. Contingent worker attrition is costly, both financially and operationally. Building contingent worker engagement starts with understanding what is important for this workforce. If companies measure the engagement of their permanent workforce, and regularly action this feedback, there are opportunities to apply similar techniques to contingent workers. 52 | AUGUST 2014

Strategy and planning project management, systems integration and implementation, other advisory services

Site: Security, cleaning services, onsite technology support Operations: Business process outsourcing teams, off-site customer support, etc. Examples: Serco, Veolia, ADT, IBM, Accenture, Infosys, HP, Oracle, ADP

Interestingly, ask yourself whether contingent workers completed your organisation’s last employee engagement survey. Based on the commentary above, is this a good thing? A risk averse method to gauge contingent engagement is to assess the leaders who are managing contingent workers. Do leaders on the ground feel they have the right contingent talent in place and are they engaged and motivated? Another approach is to survey the supplier account managers to understand engagement drivers. The drivers of contingent workforce engagement will differ for many reasons, not limited to the type of workforce, skill base (ie niche vs transactional), generational factors, national culture, and years of experience. There are, however, key principles

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of employee engagement that apply, regardless of classification, including effective leadership, interesting work, opportunity and rewards. The most important way the business can build greater engagement and productivity is to build the capability of line managers. Line managers need to understand the different types of contingent workers, their role in relation to them, and the risks of non-compliance. Ultimately, contingent workers will want to feel included and part of a productive team. Applying the same company values for employees to contingent workers (ie respect, teamwork, accountability, etc) is an essential starting point. The tools managers use on a day-to-day basis, including regular and open communication, coaching, feedback and delegation, should all be used for contingent workers. Unfortunately, too often supplier arrangements are viewed in binary terms, as ‘us and them’. The nature of a contractual relationship can easily lend itself to this outcome. It doesn’t need to be so. Engagement should not only be viewed operationally, and strong relationships need to be nurtured through the account management tree for both client and vendor (ie contract negotiators, account managers, line managers and operational staff on both sides of the contract). A good example of the impact of this relationship management is delivery of regular feedback and annualised feedback. Line managers should look to provide feedback to both the vendor and the contingent worker. Not only does this help course correct and improve performance but it is also central to the concept of engagement between line manager, vendor account manager and contingent worker.

WORKFORCE PLANNING FOR CONTINGENT WORKERS Matching skills and interest to the requirements of the role is a crucial means of building contingent worker engagement. Many contingent workers are completing an assignment or contract to build a certain skill set. From a strategic perspective, workforce planning plays an important role here. Workforce planning should not only forecast contingent worker numbers but also outline the process in which requirements are collected and provided to agencies procuring contingent labour. The more refined the requirements, the closer agencies can match capability and interest to business need. This

helps build the conditions for a motivated and engaged contingent workforce. From a practical perspective, managers play an important role here, and these requirements should be regularly calibrated, not set and forgotten. To do this, managers need to understand the contractual scope of work enough to make changes to better align interest and opportunity through an assignment. Again, strong engagement with the vendor account management teams is important. A quick win with respect to HR practices and consistency in line management behaviour is to build greater structure in the onboarding process. As we know, the first three months of any worker’s time in a role is crucial to success. If there are tools used for onboarding employees, these should also be leveraged for contingent workers. Too often contingent workers can be viewed as a ‘temporary fix’, and therefore they are not afforded the same opportunities to ramp up and become effective. This is particularly true for knowledge workers who need the right context, tools and access to perform effectively their roles. Inaction here can set the tone for poor engagement from day one.

Peter Szilagyi, CAHRI, GPHR, HRMP, is an experienced HR practitioner who currently works as recruitment and talent manager of global projects at Rio Tinto.

REWARD APPROPRIATELY Finally, rewards play a crucial part in building engagement and motivation. As contingent workers are under contract, there are opportunities to tailor terms to lead to targeted outcomes. One approach for individual contractors is staggering bonus payments to timeframes or outcomes. For agency contractors, utilisation of the vendor relationship is essential, and regular performance feedback should be provided. As always, the small things are the big things, and making individuals feel part of the team through invitations to social events and the like is important. The contingent workforce is contractually unique but increasingly as critical as the regular workforce in delivering business outcomes. The trend of using contingent workers will only accelerate in the future. Managing the complexities of the contingent workforce requires an enterprisewide approach with agreed accountabilities between the business, HR, legal and procurement. Ultimately, a contingent workforce strategy needs to be part of a broader workforce strategy. This strategy needs to balance legal compliance and business accountability with engagement and operational effectiveness. HR is in the driver’s seat!

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BUSINESS STRATEGY / BUSINESS RE-ENGINEERING

Change or die

5 ways to keep your business relevant Even the greatest and most successful brands and businesses need to adapt and change in order to stay relevant, or else face obsolescence. Itâ&#x20AC;&#x2122;s about anticipating, preparing for and embracing change when needed, and Michael McQueen reveals how to do it

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In the early 1930s, with the world in the grip of economic depression, a Danish widowed father of four had a vision. Despite the grim fiscal outlook, Ole Kirk Christiansen purchased a small toy shop in the town of Billund and launched a modest business with the name Leg Godt (Danish for ‘play well’). Christiansen was a pioneer from the outset – his being the first toy business to embrace a new technology called plastic. Within a few short years Lego, as the company was now affectionately known, had become the toy of choice for children worldwide. In the years that followed, Lego evolved and grew. From simple plastic blocks to the release of playsets and the invention of the little yellow man, the company innovated its way to the position of undisputed leader in children’s play. Until the late 1980s that is. As new generations of children began opting for video games rather than plastic playsets, Lego was faced with a dilemma. The company began an 11year loss-making stretch – losing $500m in just two years at their worst point. By the late 1990s, the casual observer may have been justified in predicting that Lego had run its course and was a dead brand walking. And yet, the story was far from finished. Recognising the need to embrace the digital age, Lego’s strategy was informed by the old adage: if you can’t beat them, join them. Lego entered a series of licensing arrangements with well-known movie franchises such as Star Wars, Batman and Indiana Jones to create their own co-branded video games. Buoyed by the success of this new direction, Lego expanded their digital offering with the 2010 release of a massively multiplayer online game (MMOG) Lego Universe. More recently, they have developed smartphone apps which allow users to build Lego shapes while sitting on the bus. There is little doubt that Lego today is more powerful, profitable and relevant than ever – the recent release of their blockbuster movie is testament to this. In contrast, Lego’s one-time rival Meccano has faded into obscurity.

WHAT CAN WE LEARN FROM LEGO? So, what can other brands and businesses learn from this story of adaptation and re-invention? I would suggest that in order to win the battle to stay relevant over time, organisations and leaders must consistently be willing to do the following:

Re-calibrate. While an appetite for change is critical to staying ahead of the curve, it is important to discern which fundamentals in an organisation should never change. Just as it is necessary to determine which walls are loadbearing when renovating a house, leaders must identify the non-negotiable values, principles and purpose which must never change. Tamper with these ‘load bearing’ fundamentals and everything may come crashing down. Before embarking on any change agenda, it is vital to first re-calibrate an organisation with its core DNA and allow this to be a guidepost for strategy and a touchstone for decision-making. In the case of Lego, the company’s leadership never lost sight of Lego’s core purpose of inspiring play, creativity and imagination amidst their digital reinvention.

Re-fresh. Any gardener knows that regular pruning is necessary to maintain the health and vitality of a garden. In the same way, organisations require regular pruning of initiatives, traditions and even people who are inhibiting future growth. While pruning can be painful and even disruptive in the short term, it is nonetheless critically important. Consider how Sony CEO Kazuo Hirai has embarked on a series of necessary pruning initiatives recently. In the face of $6.4bn loss for 2012 and a dramatic downgrade of Sony’s credit rating, Hirai recognised that he would need to act quickly to turn around his ailing tech-giant’s fortunes. His first step was to end Sony’s decade-long marriage with Swedish mobile phone company, Ericsson. Next, Hirai spun off any Sony-owned non-core companies, dramatically streamlined manufacturing processes and cut Sony’s global workforce by roughly 10,000 employees.

Re-frame. We were all raised to believe the lie that great minds think alike. Nothing could be further from the truth! The greatest and most creative minds have always thought very differently from their peers and the prevailing wisdom of their era. Being able to view the world from a different frame of reference is in fact the key to innovation and invention. Leaders must pay particularly close attention to the views and perspectives of those who have fresh

Just as it is necessary to determine which walls are loadbearing when renovating a house, leaders must identify the nonnegotiable values, principles and purpose which must never change

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BUSINESS STRATEGY / BUSINESS RE-ENGINEERING

eyes in an organisation – often owing to their lack of experience. Such fresh eyes have no trouble thinking outside the box and seeing creative alternatives to the status quo because they have no idea what the ‘box’ even looks like yet.

We were all raised to believe the lie that great minds think alike. Nothing could be further from the truth! The greatest and most creative minds have always thought very differently from their peers

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SHAKY TIMES: 10 ENDANGERED BRANDS Every year, 24/7 Wall St, which provides critical online analysis and commentary for US equity investors, identifies 10 brands sold in the US that it predicts will disappear within a year’s time. Among the selection criteria are: declining sales and losses; disclosures by the parent of the brand that it might go out of business; rising costs that are unlikely to be recouped through higher prices; companies that have lost the great majority of their customers. For 2014 this list includes:

Re-engineer. Keeping pace with change will require leaders and organisations to continually re-engineer their internal systems and processes. Too often, being ‘in a groove’ can easily turn into a rut and simply repeating the habits that have worked in the past can set you on a collision course with inefficiency and irrelevance. Speaking to this point, chief executive of electrical retailer GameStop, Paul Raines, said it well: “In order to survive, a company’s internal rate of change has to be greater than the external rate of change.”

Michael McQueen is a leading business commentator and four-time bestselling author. His most recent book “Winning the Battle for Relevance” explores the critical importance of re-inventing an organisation or brand before you are forced to. For more information, visit www. MichaelMcQueen.net

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Re-position. As times and needs evolve, so must the positioning of businesses and brands. This could mean developing new products and services, tapping into new markets, or completely overhauling a brand’s messaging. To see a brilliant example of a re-positioned brand, look no further than 160-year-old glass manufacturer, Corning. In 1908, half of Corning’s revenue came from making glass bulbs. Over time, the Corning brand extended beyond these roots and became known for its high quality cook- and kitchen-ware. Today, however, many of Corning’s most lucrative products are ones that didn’t exist 10 years ago. The company now specialises in cathode-ray tubes, fibre optics for high definition TVs, and laser technology that enables mobile phones to be fitted with micro projectors.

Corning is a great example of a company rich in tradition and history that has stayed relevant by not being afraid to embrace new products and services as times have changed. Setting a brand or organisation up for enduring relevance involves a principle that every experienced surfer understands well. In order to catch the perfect wave, a good surfer knows the importance of keeping their eyes firmly on the horizon. While a wave is still forming a long way off in the distance, surfers know that this is the time to move – to paddle out and get in position. Move too late or not at all and you’ll simply get washed up as the wave crashes over you. In much the same way, winning the battle for relevance is about anticipating, preparing for and embracing change – no matter how uncomfortable or confronting it may be. As Charles Darwin once observed, “It is not the strongest that survive, nor the most intelligent. Rather,” he said, “it is those who are most responsive to change.”

BUSINESS STRATEGY / CORPORATE WELLBEING

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Age should not

weary them

How to profit from an ageing workforce An increase in the Australian retirement age and possible incentives to hire older workers is set to change the way small businesses think about their workforce. Danni Hocking dispels some of the myths about mature age workers

With change the only constant in global markets, businesses of all sizes are facing challenging operating conditions – and Australian companies and SMEs have not been immune. Many are struggling against the backdrop of a strong dollar, sluggish economic growth and weak consumer sentiment. And while staying profitable in unstable times is a challenge, it’s one companies must face head on if they want to succeed. One key to increasing productivity – and with it, profitability – is attracting and retaining the best

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BUSINESS STRATEGY / CORPORATE WELLBEING

people. In fact, recent Best Employers research undertaken by Aon Hewitt, reveals organisations that invest in people, manage them well and contribute to their overall wellbeing, achieve double the revenue growth of other organisations, and 9% more profit per employee.1 It is therefore no surprise that more and more employers are seeking the best ways to invest in their employees and increase their chances of attracting and retaining great people. It sounds simple, but it isn’t always.

DEMOGRAPHIC REALITY

Did you know? According to the Intergenerational Report, Australia to 2050, the number of traditional working age people to support each retiree is expected to fall from five people today, to 2.7 people in 2049-50. In 1970, there were 7.5 working age people for each person aged over 65 years

Australia’s workforce is ageing. The retirement age is climbing and in May 2009, the Federal Government announced eligibility for the Age Pension will increase from 65 to 67 by 2023, with the first increase taking effect in 2017. This means more and more Australians are likely to continue in the workforce as they grow older, which presents new challenges for employers seeking to get the best from their employees. Despite some stereotypes to the contrary, an older workforce is not the death knell for productivity. Far from it. Older people are not necessarily less engaged or less productive than their younger counterparts; in some cases, their experience and knowledge leads to greater productivity. Many older employees have more to contribute to workplace profitability than some of their younger colleagues. At the same time, it’s true that age is, in itself, a risk factor for a range of health conditions, particularly chronic conditions such as diabetes, cardiovascular disease, musculoskeletal disorders and even cancer. All of these are conditions that may affect an employee’s ability to perform – or even attend – work. For an employer, that spells a potential negative impact on the bottom line. That’s why it makes good sense for employers to actively address the risk of conditions such as Type II diabetes, which can be dramatically reduced by lifestyle factors such as diet, exercise and smoking status. When it comes to injury and recurrence of injury, the same principle applies. Older workers in manual labouring jobs are more susceptible to injury than younger workers. And the chance of old injuries recurring is also higher. So, how should employers achieve this?

TAILORING EMPLOYEE OFFERINGS The simple answer is to implement programs that

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increase employee health and well-being. The positive effect of health and well-being on productivity is well documented, but what is less well understood is the best way to tailor programs for older employees. For best results, employers need to track not just injury and health concerns, but workforce engagement. High levels of absenteeism and workers’ compensation claims translate directly to high above-salary costs. Knowing exactly what your absenteeism levels are, the reason for the absences and key compensation costs is a vital step in getting a clear picture of what potentially unnecessary costs an organisation may be incurring – year in, year out. As one would expect, high levels of absenteeism can indicate low levels of engagement. An analysis by research firm Gallup, for example, revealed that disengaged employees have rates of absenteeism that are 27% higher than their peers.2 And with every sick day costing an employer an average of $385, it’s a measure that needs to be understood. Which brings us back to the question of the ageing workforce. Some health concerns, particularly those due to modifiable lifestyle choices, can significantly increase levels of absenteeism. For anyone, being overweight or obese increases the risk of cardiovascular disease, high blood pressure and Type II diabetes – and it’s a risk that intensifies with age. On the other side of the equation, in some companies it’s common for employees not to take their full leave entitlements. If employees are not taking leave, why not? For those not taking sufficient leave, increased stress can result in ‘burnout’ and, ultimately, affect productivity much more seriously than taking a break and not being at work at all.

WHAT’S YOUR ‘APPETITE FOR ABSENCE’? Employers should ask themselves about their appetite for absence. For example, do you encourage employees to take leave, or do you adopt an (even unspoken) ‘presence equals performance’ mentality, which is always counterproductive in the long run? Are you open to offering employees extra leave, with or without pay? Understanding the answers to these questions will help inform effective absence management programs. Once the information is collated, interventions can be developed to address high-risk areas and mitigate costs. A second step can be to engage a specialist to

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A RETURN ON WELLBEING INVESTMENT A health risk management strategy is a holistic approach towards health management of employees, which ensures all health and wellness measures provided by the employer work together effectively to aid any employee at any health status, with any health issue. Employees will fall somewhere on the health spectrum below:

Well

At risk

Illness

Disability

Integration of all health and wellness measures A health risk management strategy allows companies to:

xx understand the health risk profile of their employee population xx identify what risk factors exist within their employees xx develop a plan to address these factors and promote wellness and healthy behaviours When developing a strategy, employers should ensure there is an articulated benefits philosophy in place. This helps develop a holistic vision with measurable objectives. It also helps to ensure the health and benefit plan initiatives are aligned with HR and organisational strategies. Some best practice guiding principles to keep in mind when developing a health risk management strategy are: MANAGE CLAIMS In general, in mature insurance markets, insurers set premiums for coverage according to expected claims plus administrative expenses. For medium- and

undertake people risk profiling. This means looking at the investment an organisation makes in its employees, for example in terms of benefits, superannuation, leave policies and other programs designed to engage staff – of every age. It also means looking at the health profile of employees, including health issues likely to increase with age. Doing so makes it much easier for an organisation to articulate expenditure, understand potential people risk areas and develop tailored interventions most likely to reduce their own organisational risk profile. It’s also important to understand that while initiatives that focus on creating a health and wellbeing culture can positively affect employee health, it’s important to tailor the programs to the workforce in question.

ALL ABOUT ENGAGEMENT For older employees to embrace health initiatives, they must be realistic and suitable for their age and ability. The same goes for injury management, particularly for blue collar workers. If health and safety and even fitness programs are centred on the job the employee is actually doing, and on avoiding injury specific to that job, the outcomes are likely to be better.

large-sized groups, past claims experience is the best indicator of future claims experience and hence, all other things being equal, the higher your claims, the higher your premium. In Australia, insurance premiums are set based on claims experience. Products such as group life and salary insurance are expected to stand on their own financially, which means the insurer expects a loss ratio of well below 100%. Do you understand the loss ratio for each of your insurance policies? MANAGE THE FULL HEALTH CARE SPECTRUM Employees will each fall somewhere along a spectrum within your organisation’s population: you will have employees who are well, at risk (due, for example, to lifestyle practices or family history), ill or disabled/ unable to work. Providing each of them with support to keep them as well as possible will reduce future costs. For example, an employee who smokes could be at risk of developing heart disease or lung cancer as a result. As a proactive measure, their employer may want to consider helping them improve their health through education and personalised coaching. FOCUS ON CHANGING EMPLOYEE BEHAVIOUR All good risk management plans contain strategies to eliminate and manage risks. Managing the risks within your employee benefits plans is no different. Understanding the health risks of your employees, and managing these risks through datadriven initiatives and personalised support that focuses on changing behaviour, can have a long-term impact on insurance premium costs.

Other successful initiatives aimed at increasing the engagement of older workers centre on changing negative stereotypes. Programs that encourage the integration of the different generations can overcome these: older people can be encouraged to work as mentors for younger ones, and vice versa. Of course, older employees do retire, and managing that transition has its challenges as well. For employees whose sense of self-worth and usefulness is tied into their job, career transition and retirement can be very difficult emotionally. Holistic plans that involve families can help make the process run more smoothly. Ultimately, employers should have nothing to fear from an ageing workforce. There is no evidence that older employees have less to offer, or are less productive than younger ones. However, the reality is certain health and well-being concerns do increase with age, so finding ways to manage these appropriately is critical. The good news? Employers that embrace appropriate well-being programs will feel the benefits. 1 Aon Hewitt (2012), Aon Hewitt Best Employers in ANZ study 2 J Robison (2011), The Business case for wellbeing. Gallup Business Journal website http://businessjournal.gallup.com/content/139373/ business-case-wellbeing.aspx

Danni Hocking is principal, people risk solutions, Aon Hewitt

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THE DATA / KEY STATS

AUSTRALIAN HOUSE PRICES Recent research from the International Monetary Fund shows that, according to OECD data, Australia is up there among the most expensive

BELGIUM

8 CANADA

AUSTRALIA

NEW ZEALAND

FRANCE

Lu xem bourg

Switzerland

Germany

Israel

Austra lia

United States

Turkey

Ma laysia

Brazil

Estonia

Colum bia

China

New Zealand

Hong Kong

60 | AUGUST 2014

countries in the world when it comes to our house prices, when measured by house-price-to-income ratios. So, where precisely do we rank?

WHICH COUNTRIES GREW THE MOST IN VALUE YEAR-ON-YEAR? Philippines

THE TOP 5 LEAST AFFORDABLE COUNTRIES

Source: OECD and IMF, figures are for 2013 Q4 or latest

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BUSINESS AND SOCIAL MEDIA Do you have a social media presence? A recent Yellow Social Media Report, produced by the Yellow Pages, is a leading indicator of how businesses – large and small – are adapting to the

new media and marketing landscape. It showed, for example, that four out of five SMEs are ‘blindly’ investing in social media, and are missing opportunities for growth.

PERCENTAGE OF BUSINESSES THAT HAVE A SOCIAL MEDIA PRESENCE SMALL BUSINESS

2014

MEDIUM BUSINESS

2014

SMALL BUSINESSES WHO HAVE A SOCIAL MEDIA STRATEGY LARGE BUSINESS

2014

36% 48% 77% 2013

2013

30% 47% 79% 2012

2012

27% 34% 79%

24% Of the 36% of small businesses that have a social media presence, only 24% of these have a social media strategy

DID YOU KNOW? VICTORIA HAS THE LOWEST NUMBER OF SMEs WITH A SOCIAL MEDIA PRESENCE

AVERAGE YEARLY SOCIAL MEDIA SPEND

PERCENTAGE OF MARKETING BUDGET

12% Medium $4,560 Small

$33,050 Large

$38,800 Medium

6% Large

16% Small

DID YOU KNOW? QUEENSLAND HAS THE HIGHEST NUMBER OF SME INVESTORS IN SOCIAL MEDIA

AUGUST 2014 | 61

THE DATA / KEY STATS

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THE BUDGET AND CONSUMER STRESS 30

Consumer financial stress: Australia

25 20

Actual

Forecast

Index

15 10 5 0 -5 -10 -15

Au g1 Oc 0 t1 De 0 c10 Fe b1 Ap 1 r11 Ju n1 Au 1 g1 Oc 1 t1 De 1 c1 Fe 1 b12 Ap r12 Ju n1 Au 2 g1 Oc 2 t1 De 2 c1 Fe 2 b1 Ap 3 r13 Ju n1 Au 3 g1 Oc 3 t1 De 3 c1 M 3 ar -1 M 4 ay -1 4 Ju l-1 4

Financial stress is expected to rise following the Federal Budget, according to Dun & Bradstreet’s Consumer Financial Stress Index, which improved in the second half of 2013 but rose over the period from January to April 2014. By July – and partly thanks to the Budget – it is expected to hit its second highest level in its four-year history.

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LIFESTYLE / DAY IN THE LIFE OF

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Day in the life of...

Tanya Sale, chief executive officer, Outsource Financial Wow, where do I start? Every day is different – so let me pick a day when I am actually in Sydney! I am up at around 6.00am every morning, to catch up on some emails and then start making fresh juice for the family – having two teenagers, I have to get up this early to keep on trying to get them out of bed to get to school on time! Once breakfast is done and the teenagers are out of the door around 7.20am, I am off to meet my business partner (Andrea Tassis) around 8.00am. I am in the car and the phone calls start and don’t end until my destination. This is a great time as there are no interruptions – thank goodness for Bluetooth as I have learnt the lesson the hard way… I meet with Andrea once a week so we can keep each other up to date on what is happening overall. Andrea is also our CFO – so we have to make sure we keep in the good books with her! The meeting finishes at around 9.00am and Andrea informs me Outsource is going great guns. So we must be doing something right! Most days I have back-to-back meetings and this day is no different. I make a point to meet with every new prospect whether it be a loan writer or referrer (nationally) as it is important to us at Outsource that they realise all members of the management team are accessible, and this includes me. It is now 10.30am and I’ve just finished a great meeting with a financial planning group that wishes to add a lending arm to its business and spent an hour-and-a-half with them going through our models. I have to rush back to the office as I have an 11.00am with Debra Benn, who is our marketing and business strategy manager, to go through and edit a media article that is due. This article is always due every six weeks, but – can you believe it – we always leave it to the last minute and today is the day!

Back in the car now, off to an appointment at 1.00pm with Paul Bakker/Tony MacRae from Westpac to discuss a fantastic opportunity in the medical arena. Thanks boys for the support, it was a great meeting.

3.00pm and yet again in the car – this time I take five minutes just to sit there and let the sun shine on my face as it is such a beautiful day and I have not had a chance to stop yet. Oh Oh – well that five minutes went fast. Jardin, my son, is on the phone asking if he can have pizza money for tomorrow – of course it could not have waited until I arrived home that night – give me a break…

Tanya Sale

3.30pm back in the office and for the next couple of hours I will return phone calls, take calls and catch up on my emails of which there are many. Before I know it, it’s 6.15pm – and I really want to get to the gym. Arrive home to get changed and make sure the house is still safe and standing – children have already been fed so at around 7.30pm I am at the gym – it is heaven as I can feel my body unwinding. After my session it is off to the sauna; nearly fell asleep in there – that would have been dangerous! Finally home at 8.45pm – Jardin received his pizza money, Mahalia is enjoying her one hour on social media and it is time for me to catch up on the daily events with my partner.

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LIFESTYLE / FAVOURITES

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Favourite things

Darren Stratford, BDM - QLD/NT, Bluestone Mortgages

Holiday spot: Tucked away in the Victorian High Country is a little ski village called Falls Creek. It’s an endless love of the crisp air, the natural beauty of snow-covered trees and rugged terrain, challenging ski runs, brilliant hotels, bars, restaurants and après ski. Book: A staple in my book Darren Stratford

collection is Richard Branson The Autobiography; an interesting insight into a truly successful and unique individual of our time.

Drink: I have a real passion for pinot noir, whether it be from Central Otago New Zealand, Santa Rita Hills California or the Mornington Peninsula. It has a complex richness about it that partners beautifully with food or just savoured by itself after a long day at work.

Favourite thing about working in the mortgage industry: Being able to truly value-add to a broker’s business. As a BDM it’s great to help brokers find solutions when they thought they had exhausted all viable options. The bigger satisfaction is when the same brokers contact you to help them with repeat business. Place to be in Australia: Despite not having daylight saving, how can I go past anywhere in my home state of Queensland! Great people who are friendly, passionate and patriotic. Sport: Although obscure

Film: Although not a classic by Hollywood standards, Woody Allen’s Midnight in Paris is such a quirky and imaginative story. Filled with beautiful Parisian scenery, a wonderful cast of actors and a delight to watch and indulge in the thought of bygone eras.

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to many Australians, I am an out an out baseball tragic. I love the fact that the world’s hardest bat and ball sport is as good to watch as it is to play. It’s also one of the few sports that doesn’t have a stereotypical athlete body type to be able to make it at the elite level.

Food: Best enjoyed with friends and family, and a Sunday afternoon institution in my home, is share plates of tapas. Predominantly these are a mix of Mediterranean style foods accompanied by a glass or two of great wine and company.

Music: My iPod is filled with wide and varying styles and genres of music so it’s a hard choice to single out one artist. I would really love to see Michael Bublé in concert.

Join your industry colleagues and see the diamonds take to the stage at the 13th Annual Austr alian Mortgage Awards Friday 17th October 2014 Sydney Town Hall www.austr alianmortgageawards.com.au

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