MPAMAGAZINE.COM.AU ISSUE 18.03
BROKERS ON BANKS The banks that are winning your business – and losing it
PRODUCTIVITY COMMISSION The majors get questioned on broker remuneration
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MARK HARON On the inquiries that could alter the industry and where aggregators fit in
A NEW WAVE OF VISIBILITY Empowering women brokers to lead their profession
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MARCH 2018
CONNECT WITH US
CONTENTS
Got a story or suggestion, or just want to find out some more information? twitter.com/MPA_Australia facebook.com/Mortgage ProfessionalAU
UPFRONT 04 Statistics
How to protect your business against cyber crime
SPECIAL REPORT
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28 FEATURES
TECHNOLOGY
From comprehensive credit reporting to cloud-based working and cyber crime, we explain the key tech trends of 2018
Connective’s executive director, Mark Haron, talks about the two big inquiries underway and how they might affect brokers and the industry
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08 Head to head
Three leading brokerages on ASIC’s shadow shopping exercise
09 Opinion
SocietyOne’s Jason Yetton on being one of the first to share data
38 Construction finance
Learn the foundations of construction finance with La Trobe Financial and help raise the next skyline
You voted and had your say on which banks are winning your business and which are losing it. Don’t miss the big reveal
THE BIG INTERVIEW
The Productivity Commission pressures banks on broker remuneration
FEATURES
BROKERS ON BANKS
PEOPLE
06 News analysis
34
FEATURES
DIVERSIFICATION
Suncorp’s extensive education program gives brokers the tools they need to succeed in SME lending
42 Productivity
Break your distraction addiction with these quick tips
PEOPLE
44 Brokerage insight
When borrowers visit Entourage Finance they don’t just get an appointment, they get to feel like a VIP
46 Career path
Macquarie legend Frank Ganis on pioneering securitisation
48 Other life
Hungry? Join Aussie’s James Symond for a red-hot CEO CookOff
36 FEATURES
WOMEN IN BROKING
ANZ works to empower and encourage women brokers to lead in their profession
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UPFRONT
EDITOR’S LETTER www.mpamagazine.com.au MARCH 2018
Rally the troops
D
uring a recent interview with the MFAA’s Mike Felton to talk about his first year as CEO, he told me about his career highlight of 2017: seeing the coming together of the industry in an unprecedented way to form the Combined Industry Forum. A few months into 2018, it doesn’t look like this year will be any less eventful for the industry. The unity and cooperation that Felton spoke so proudly of will be needed now more than ever as the third party channel faces the scrutiny of the Productivity Commission and the banking royal commission. Sure, the banks and competition in the financial system broadly are the major intended focuses of these inquiries, but brokers and the home loan market will not escape unmarked. Already there have been questions about the relevance of trail, conflicts of interest within bank-owned aggregator structures, and the price benefits brokers provide consumers. If brokers want to protect their livelihoods and how they’re paid, it will be up to them to step up and make sure their voices are heard. This is something ANZ’s Simone Tilley is working on through her soon-to-launch program, ‘Doyenne of Women in Broking’, which is all about encouraging women brokers to speak up and increase their visibility (see p36). While new reports are released, public hearings are held and industry leaders deliberate on how to respond, most brokers are carrying on business as usual, trying as hard as they can to best serve their clients. That’s why it’s good to
Instead of dreading what changes are to come, look at this as an opportunity to shape the future of the profession you want to have hear about grassroots projects like broker Belinda Gibson’s Ladies Who Lend, a networking, support and mentorship group for women in the industry. Then there’s National Finance Brokers Day founder Dino Pacella’s Facebook group, Why Brokers, which is all about sharing positive client stories on why consumers are choosing brokers more often than not. So instead of dreading what changes are to come, look at this as an opportunity to shape the future of the profession you want to have. And just know that you’re not alone in this pursuit. As the industry grows and changes, so have we here at Key Media HQ. A year ago when I started as the editor of Australian Broker, I was the only woman on the mortgage titles and in the editorial team. Now, all the reporters covering mortgages are women. Times are changing in the broking industry and elsewhere, and we’re going to be there as it does. Otiena Ellwand, editor, MPA
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EDITORIAL Editor Otiena Ellwand Journalists Paolo Taruc Sam Richardson Abel Riototar Contributor Amantha Imbert Production Editor Roslyn Meredith
ART & PRODUCTION Designers Loiza Caguiat Martin Cosme Traffic Coordinator Freya Demegilio
SALES & MARKETING National Sales Manager Claire Tan Account Manager Simon Kerslake Marketing and Communications Manager APAC Michelle Lam Marketing Executive Emma Kemmery
CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil
EDITORIAL ENQUIRIES
tel: +61 2 8437 4792 otiena.ellwand@keymedia.com
SUBSCRIPTION ENQUIRIES
tel: +61 2 8011 4992 • fax: +61 2 8437 4753 subscriptions@keymedia.com.au
ADVERTISING ENQUIRIES
claire.tan@keymedia.com simon.kerslake@keymedia.com.au
Key Media Regional head office Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 • fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, London, Toronto, Manila, Singapore, Bengaluru
Mortgage Professional Australia is part of an international family of B2B publications and websites for the mortgage industry CANADIAN MORTGAGE PROFESSIONAL justin.darosa@kmimedia.ca T +1 416 644 8740
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 the magazine can accept no responsibility for loss.
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UPFRONT
STATISTICS
The threat online
WHY SMALL BUSINESSES SHOULD FEAR CYBER ATTACKS
Small business is the target of
Reports from CISCO, Symantec, Telstra and the Australian Government highlight the danger that small businesses face from cyber attacks FROM WANNACRY to Wikileaks, the past 12 months have seen a number of devastating and high-profile cyber attacks. Yet cyber crime is not confined to big business or governments; small businesses and particularly brokers could be vulnerable, given the large number of client-identifying documents stored on broker systems. Small Business Ombudsman Kate Carnell
27%
of third party apps are at high risk
$1bn
is the annual cost of cyber crime to the Australian economy
43% of all cyber crime
warns that “cyber criminals are becoming more sophisticated and small businesses are particularly vulnerable. Online threats are just as real as physical threats. Cyber security needs to be taken seriously, like having locks on your doors and a burglar alarm.” Concerned? The Australian Government’s Department of Defence website lists various strategies to protect your business.
76%
$1,077
of websites have vulnerabilities
is the average ransom amount Sources: Symantec/CISCO/Acumen Insurance
GROWTH OF CLOUD COMPUTING Increasingly, client information is stored online in the cloud, because of the use of cloud-based CRMs, document collection apps such as DocuSign, or popular services such as Dropbox. Organisations using cloud services
SPOTTING A DANGEROUS EMAIL Malware spam involves an email asking you to download or open a file, which then infects your computer. Symantec listed the subject-line keywords most likely to be in malware emails. invoice
26%
document
13%
scan
12%
mail delivery failure
10%
order
9%
payment
63.6%
2015
79.6%
2016 Source: Telstra Cyber Security Report 2017
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7%
fax
6%
bill
6%
emailing
6%
doc
5% Source: Symantec Internet Security Threat Report, 2017
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1 in 3 businesses with fewer than 100 employees don’t take proactive measures against cybersecurity breaches
3 in 5 small businesses that experience a significant cyber breach go out of business within the following 6 months
87% of small businesses believe their businesses are safe from cyber attacks simply because they use antivirus software Source: Australian Small Business and Family Enterprise Ombudsman, The Small Business Cyber Security Best Practice Guide, January 2018
FREQUENCY OF CYBERSECURITY ATTACKS experience an attack weekly experience an attack monthly experience an attack quarterly experience an attack half-yearly or less
SHOULD YOU PAY A RANSOM?
24.3%
30.6%
Telstra asked businesses how often they experienced cyber security attacks, with disturbing results
Telstra’s Cyber Security Report 2017 polled Australian businesses that had been targets of ransomware attacks in which attackers demanded ransoms for stolen information. No, and the files were not recovered Did you pay a ransom, and did you get your data back? No; however, we managed to recover the files through back-up
3.6% 8.9% 30.4%
18.8%
17.1% 25.0%
Yes, and the files were recovered Source: Telstra, Cyber Security Report 2017
38.4%
No; however, we managed to recover the files through other means (ie decryption tools)
Yes; however, the files were not recovered Source: Telstra Cyber Security Report 2017
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UPFRONT
NEWS ANALYSIS
PC pumps up the pressure The major banks have had their turn in front of the Productivity Commission to discuss how brokers are remunerated. Their feedback could have a big impact on the industry’s future. Otiena Ellwand reports THE PRODUCTIVITY Commission is taking a hard look at how brokers are remunerated, whether they serve their clients’ best interests, and what conflicts may exist as a result of working for bank-owned aggregators. Two of the big four banks, CBA and NAB, addressed the Productivity Commission in Sydney on 1 March to discuss these matters, with NAB agreeing that trail commission could be further scrutinised and CBA saying the ‘best interest’ duty could be a positive move. The Productivity Commission’s draft report raised concerns about lenders’ ownership of aggregators potentially exacerbating conflicts of interest for brokers and giving consumers “an illusion of choice”. The commission recommended that brokers who work under
home loan origination, the financial incentives of brokers are skewed in favour of the banks that pay them,” it stated. In CBA’s opening remarks, chief financial officer Rob Jesudason said the bank objected to the recommendation only being applied to aggregators owned by lenders. “We support equal treatment,” he said. Angus Sullivan, CBA’s executive general manager of retail sales and service, explained the bank’s ownership of Aussie, saying it ran the franchise “quite independently of CBA”. He said this ownership was clearly disclosed on the Aussie website. But he did accept the commission’s charge “that there’s the potential for the perception of a conflict of interest”. “We’re supporters of growing the standards
“The best interest duty that you outlined, we’d see that as a positive development if it were applied consistently across the industry” Angus Sullivan, CBA bank-owned aggregators – even if they operate as independent subsidiaries – should have a legal responsibility to act in their clients’ best interests. As it stands now, nothing obliges brokers to act in a client’s best interests. Under the NCCP Act, brokers are only required to not suggest unsuitable loans to consumers, the report said. “Undesirably for the dominant form of
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of the industry as a whole and, for the broker segment in particular, the best interest duty that you outlined, we’d see that as a positive development if it were applied consistently across the industry,” Sullivan said. He said it would be “peculiar” for consumers to expect and be assured of the ‘best interest’ standard with one set of brokers and not another. “I think that would be highly
counter-intuitive to your average consumer.” If this change were to come into effect, NAB would be one of the main targets as the owner of three major aggregators, PLAN, Choice and FAST. When asked about this at the public hearing, NAB’s chief operating officer, Antony Cahill, said one of the issues around ‘best interest’ was defining it. “How would you actually validate what constitutes best interest? Is it price, is it other factors, and how would you work that through?” Cahill said. “I think the idea of requiring brokers to put customers’ interests first is appropriate, and I think the vast majority of brokers within Australia would absolutely argue they do put their customers first.” At a later public hearing in Melbourne, ANZ CEO Shayne Elliott said that while ANZ didn’t own a broker network, it did “believe the integrity of the channel is critical”. He said the best interest duty could support the existing law to promote consumer interests, but he urged the commission to
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PC’S DRAFT RECOMMENDATIONS
There should be duty-of-care obligations for lenderowned aggregators to act in the consumer’s best interests
APRA should collect monthly data from lenders on median interest rates for different home loans
take three matters into account: the need for trust in brokers as advisers; whether consumers will pay for loan help; and brokers’ role in levelling the playing field for banks without branches.
Taking on trail Productivity Commission chairman Peter Harris said it shouldn’t come as a surprise that attention was being paid to how brokers were remunerated, considering that more than $2.4bn was currently paid annually for mortgage broker services, with trail commission worth $1bn per annum. The commission did not make a recommendation on trail in its draft but said it was considering this for its final report to the government. It is now seeking feedback on the “rationale for how commissions are structured”. The industry argues that trail is in place for good reason: to prevent churn. But the commission countered that this could discourage refinancing if the work involved in getting a marginally better rate for the customer exceeded the benefit for the broker.
“[Trail] creates perverse incentives for mortgage brokers by rewarding them for keeping customers in their existing loan” and skews their loyalty towards the institution and not the customer, the commission said. Based on ASIC’s findings, lenders pay brokers an upfront commission of $2,289 (0.62%) and trail commission of $665 (0.18%) per year on an average new home loan of $369,000. At the public hearing, Harris questioned why trail still existed in Australia when that was not the case for most brokers abroad. “Overseas we know that, where brokers do exist, this particular proposition [trail] doesn’t. … It doesn’t suggest that the world will collapse if this proposition isn’t there, and the question is, what incentive structures would be preferable?” According to a research paper on commission conducted by the FBAA last year, most other countries with broking markets similar to Australia’s don’t have trail commission, but generally the upfront is worth more as a result. The estimated average upfront
Mortgage brokers should make disclosures to consumers on such things as how they’re paid, ownership relationships, their role and products they can offer
ASIC should allow consumers to compare this data using an online tool
commission in Canada is 1%; in South Africa it’s 1.4% and in the US 2–3%. Commissioner Stephen King also said the argument that trail was necessary for the ongoing engagement and servicing of a client didn’t make “a great deal of logical sense” because the broker was guaranteed this payment whether they did anything or not. NAB’s Cahill said the bank expected its brokers to cultivate an ongoing relationship with customers as part of their work for earning trail, but he acknowledged that there could be better ways of ensuring this was done appropriately. “Personally, I would be happy to see a more structured agreement requirement put in place,” he said. “I think how that would play out and how it would be structured, implemented and tested, that’s the area I’d like to have a greater understanding of.” But Cahill was also quick to point out the importance of brokers to the competitive home loan landscape. “Brokers in Australia, they are a force of good.”
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UPFRONT
HEAD TO HEAD
Are you concerned by ASIC’s shadow shopping? The leaders of three large brokerages explain how ASIC’s shadow shopping will – or won’t – affect their businesses
Otto Dargan
Alan Hemmings General manager Oxygen
Managing director Home Loan Connexion
“Shadow shopping is something that lenders, aggregators and ASIC have been doing for some time. I know that we’ve been mystery shopped several times and likely several more that we’re not aware of. “Stepping up these kinds of activities is something we should welcome, as if we’re not meeting ASIC’s expectations it’s better to know sooner rather than later. “It’s likely that ASIC, aggregators and lenders will do more to monitor the industry; however, if they want to raise standards, then this is a misallocation of resources. They need to start focusing on reducing complexity. Where policy, process, pricing and compliance become unworkably complex, then even the best brokers will struggle, let alone somebody new.”
“I tend to agree with the associations, in that any process that demonstrates the good work that our brokers do should be welcomed. I understand the concerns regarding disruption to business; however, speaking to one mystery shopper who can then provide feedback on the excellent work our brokers do is worth the time, particularly if it overcomes this continued negativity about dealing with brokers. “Regarding misinterpreting comments, etc, provided the brokers are following correct processes and documenting conversations, ensuring they can support recommendations for products and lenders, I do not believe we have anything to fear. “Ultimately, I believe the mystery shop will have a minimal impact on our business.”
“Well-educated and professional brokers who are doing the right thing have nothing to fear from ASIC’s shadow shopping exercise or media speculation. After all, the concept is nothing new, with many industries before us having faced similar scrutiny. “The education and training standards we have in place, along with compliance monitoring measures, ensure brokers in our network document the entire loan process and address all disclosure requirements. Experienced brokers who follow the correct processes – being thorough with their questioning, fully considering their clients’ objectives, verifying financials and presenting product choices that match the needs of their clients – should see no disruption to their businesses.”
Managing director Home Loan Experts
Tracy Kearey
ASIC’S SHADOW SHOPPING Brokers will be shadow shopped by ASIC as part of the same process that led to last year’s Review of Mortgage Broker Remuneration. The objective was to better understand how brokers operate, ASIC senior executive leader Michael Saadat told MPA-sister title Australian Broker. “While broker remuneration practices may have an impact on home loan choice, ASIC recognises that a range of other factors influence which home loan products are purchased.”
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UPFRONT
OPINION
GOT AN OPINION THAT COUNTS? Email otiena.ellwand@keymedia.com
CCR could tranform lending in Australia Jason Yetton, CEO of SocietyOne, on the marketplace lender’s experience with data sharing, and CCR’s huge potential
AT SOCIETYONE, we were delighted with the federal government’s plans to extend the existing legislation on comprehensive credit reporting (CCR) last year, and we strongly support moves to introduce a mandatory comprehensive credit reporting regime by mid-2018. The benefits for consumers are huge, as this will transform the opportunities for them to get a better deal when applying for loans and enable them to shop around for a better interest rate. Better credit information will enable lenders to tailor products for consumers with, for example, lower interest rates or better loan terms. The big four banks will need to have 50% of their credit data ready for reporting by 1 July 2018, increasing to 100% a year later. Of the big four, National Australia Bank began providing comprehensive credit data in February, while Commonwealth Bank has said it will do the same for its home loan customers before the end of the year. Both Westpac and ANZ intend to join the regime this year but have not announced any specifics. Having access to comprehensive credit information and making it available to other credit providers on a secure and confidential basis allows lenders to consider the positive attributes of a consumer’s credit history when assessing an application for credit, not just negative information such as payment defaults, court judgments and the number of credit enquiries. By sharing comprehensive credit data, the industry is ensuring that contributing lenders
have a thorough and holistic view of a consumer’s financial situation and are better placed to understand their financial needs and therefore to meet all of the requirements under the rules of responsible lending. As a pioneer and Australia’s biggest marketplace lender, SocietyOne began sharing comprehensive credit data in November 2017, and currently we are just one of a handful of consumer credit providers in Australia to now make positive credit data available. Since SocietyOne launched five years ago, we have used a customer’s credit score to tailor an interest rate on a personal loan to their particular financial circumstances. We
prevalent on the consumer radar. We also know that a large number of our customers back these changes. We carried out a customer survey in May last year and the results were overwhelmingly in support of the government’s measures, with 88% backing the plan to give consumers more control of their data and 72% saying that banks – who currently control it – should share that information with other financial providers such as SocietyOne. CCR also means that those who are just starting to build their credit history, such as younger Australians or migrants, will be able to build it more quickly by incorporating comprehensive data. That means that when they need a new home loan or other personal financing, they will be in a better position to negotiate. While there are understandably some consumer advocate groups concerned about what this means for those with less desirable credit histories, CCR also gives consumers the ability to repair their negative credit history faster and to highlight their positive behaviour on a monthly basis. Comprehensive credit reporting has been available in the US and UK for almost two decades, so it is a system that has been tried and tested. Consumers in these countries can use their credit history to seek out the best
“Those who are just starting to build their credit history, such as younger Australians or migrants, will be able to build it more quickly” want to reward responsible behaviour rather than adopt the one-size-fits-all approach of traditional banks. In SocietyOne’s experience, offering customers personalised interest rates ensures that it is in a better position to assess their needs and meet all requirements under the rules of responsible lending. In September 2016, SocietyOne reported that we had reached a milestone of $150m in lending, and by the end of 2017 announced that lending had more than doubled to $400m, indicating that personalised loans products were becoming increasingly
deal possible. At SocietyOne, we will continue to strive for changes that give us the ability to better service our customers and offer them the best products for their needs, and urge the banks and other lenders to follow suit to give Australians a fair go. Jason Yetton is the CEO and managing director of SocietyOne, a pioneer of marketplace lending in Australia. He previously worked for Westpac as group executive of retail and business banking and has also held roles at BT Financial.
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PEOPLE
BIG INTERVIEW
MARK HARON: LEADING THE CHANGE Connective’s executive director on the big changes that will shape the year ahead, and what aggregators need to do to step up to the task of improving industry standards. MPA editor Otiena Ellwand reports AGGREGATORS HAVE for years played an integral behind-the-scenes role in the home loan process, providing brokers with technological and compliance support, training and education, accreditation and commission, yet most consumers are unaware of their existence. It looks like that could change. With the publication of the Combined Industry Forum’s reforms for a stronger governance and oversight framework, ownership disclosures and data collection, and the Productivity Commission looking at bank-owned aggregators, the middle agent between brokers and banks will be expected to become more transparent and accountable to the public. Mark Haron, director of Connective and the CIF’s deputy chair, is one of the aggregator heads driving that forward. In an interview with MPA, Haron gives his insights on the big changes that will shape the year ahead and what aggregators need to do to improve industry standards.
The spotlight is on The CIF’s reforms were intended to deal with the concerns expressed by ASIC in its broker remuneration review in the least intrusive and destabilising way possible for the industry. But if brokers think they can breathe a sigh of relief with self-regulation in motion, think again.
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The Productivity Commission and the banking royal commission have raised the level of scrutiny of the mortgage broking sector to new heights, with potentially industry-altering proposals and information requests underway. The worst-case scenario is not far-fetched: it could recommend removing commissions entirely. At the last public hearing on 6 March, Productivity Commission chairman Peter Harris said a fixed broker fee was perhaps a better proposition than the current commission structure. Haron believes there could be negative consequences of putting the financial burden on consumers. “If we remove broking commissions
its reforms. This year it plans to implement changes to commission structures based on the facility utilised net of offset; change tiered-service models and the eligibility of non-monetary benefits; introduce the new ownership disclosure and public reporting framework; and commence work on an industry code. The governance framework is slated to be completed by 2020. Haron says the CIF’s progress won’t be delayed as a result of the ongoing commissions. But he does say that, depending on the outcome, the CIF reforms may have to be revisited and tweaked down the track. “We’re very confident that what we [the
“The focus should be on putting the customer’s interests ahead of the broker’s, and I think the majority of brokers today pass that test with flying colours” and a significant number of brokers leave the market, we’re not going to be in a position to deliver on those improved customer outcomes, particularly to a whole segment of customers who can’t afford the advice.” While the two commissions are just ramping up their inquiries, the CIF will plow ahead with
CIF] have proposed are correct measures and when implemented they will make the changes and the improvements, and we think that the regulators and the government will look back and say, ‘Yes, this is what we wanted to see’,” Haron says. The fact that the CIF was formed last year
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PROFILE Name: Mark Haron Title: Executive director Company: Connective Years in the industry: 22 Career highlight: “Becoming a director and shareholder of Connective. I genuinely believe we have played a positive and influential role in shaping the industry over the past 15 years, and I’m very proud to be part of that.” Career lowlight: “While I’m sure there have been a few bumps and lows along the way, nothing specific comes to mind as they are far outweighed by the many wonderful experiences.”
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PEOPLE
BIG INTERVIEW
and worked its way through the ASIC and Sedgwick reports, coming up with a balanced set of reforms, should be reassuring to brokers, he adds. “Having that forum in place and functioning very well puts the industry in a good position to respond collectively to the Productivity Commission and to what comes out of the royal commission.” At the time of writing, the CIF had not made a submission to the Productivity Commission but was reviewing whether to submit one.
by their customer, while also earning another upfront commission. He and other industry figures have said the reason it’s so important to have a healthy upfront and a healthy trail structure is to prevent churn. “Churn is when a broker refinances a client when there’s been no obvious benefit to the client … and that’s an important part of making sure that we don’t have an upfront and trail out of whack,” Haron says.
Broker accreditation Best interest duty The commission has recommended that brokers should have a legal responsibility to act in their clients’ best interests. This would be imposed by ASIC on aggregators owned by lenders and would also apply to the brokers operating under them. Based on that preliminary outline, Connective would be included. Macquarie Bank has a 25% stake in the aggregator,
At MPA’s Major Bank Roundtable in February, some of the broker chiefs spoke about aggregators needing to be better at meeting their responsibilities around accreditation. When asked if aggregators are doing enough, Haron says that while some are, improvements should be made to training and mentoring newcomers so that banks can be confident in their abilities and longevity in the industry. Broker businesses are also part
“[Aggregators] need to do more … we’ve got to have a higher standard of requirements of brokers and their training” something Haron says they are completely transparent about and which doesn’t influence their brokers or where their loans go. Haron echoes comments made by CBA that, if a best interest duty was warranted, it should apply across the board. And as NAB pointed out, he says the challenge will be defining what ‘best interest’ means. “I think the focus should be on putting the customer’s interests ahead of the broker’s, and I think the majority of the brokers today pass that test with flying colours,” he says. As for whether trail discourages brokers from assisting their clients in refinancing to a better rate – an issue the commission has raised – Haron says this is unlikely because there is a benefit for the broker in doing the right thing
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of this equation, he says, and aggregators need to work with the bigger groups to make sure their training and hiring standards are sufficient. “The banks should have complete confidence in the aggregator’s ability to accredit a broker and ensure that a broker’s performance on an ongoing basis is at a reasonable standard. I think that’s really important. We need to do more, and we’re letting the industry down. We’ve got to have a higher standard of requirements of brokers and their training, without a doubt.” It’s incumbent on aggregators to set these standards, Haron says. “We have to be the change of the industry, otherwise we will be changed.”
CONNECTIVE BY THE NUMBERS
More than 20% of brokers in Australia aggregate through Connective
4,000+ Connective members
1 in 10 Australian home loans written by a Connective broker
$117bn loan book as at Oct 2017
$41.5bn total settlements estimated for FY17
14 years in the industry
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SPECIAL REPORT
BROKERS ON BANKS
BROKERS ON BANKS
This year’s survey gives a clear indication of how difficult the changing regulatory environment and the banks’ tightened lending policies have been on brokers. The general mood of broker responses has taken a turn, and not in the banks’ favour
THE RESULTS of this year’s survey came as a bit of a shock. The total ratings for the top 10 banks were significantly lower than last year – so low, in fact, that they wouldn’t even have qualified against the top 10 contenders in last year’s survey. The companies in the top 10 haven’t changed significantly since 2017, and neither has our survey, now in its 15th year. The number and types of respondents were consistent with last year’s, as were the themes and questions covered. Brokers’ priorities also remain the same, with their top concerns being BDM support, turnaround times, credit policy and interest rates. Despite those constant variables, the results
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were anything but. Westpac’s overall score in 2017 was 3.72. This year, the winning bank scored a total of 2.76. That shouldn’t diminish that bank’s accomplishments during challenging times, but it does beg the question, why are brokers grading so low? We all know 2017’s major hits and dips by heart now: APRA cracked down on interestonly and investment lending; ASIC and Sedgwick scrutinised broker remuneration; and the banks reined in their appetites for lending and tightened their serviceability requirements, making it harder for some applicants to qualify for a loan. The lending landscape changed and brokers were required to do more work, sometimes for
less reward. So it’s perhaps not surprising that they didn’t review the banks as favourably as they have in the past. Despite the mood shift encapsulated by this year’s results, the same trends have emerged: the banks that are listening to and working with brokers, and who are delivering fast and efficient service and turnaround times, are the ones brokers want to work with. In the end, brokers and banks need each other. If banks want the end customer to have a good experience so they remember who made the biggest purchase of their lives stress-free, they should be thinking of how they can also serve the broker who brought them there.
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OUR TYPICAL RESPONDENT
Writes $20m–$40m worth of mortgages a year
Aged between 46 and 55
Has been a broker for between 6 and 15 years
Is most likely to work in NSW and Vic
WHAT DO BROKERS WANT? 1 = not important; 5 = very important BDM support
4.76
Turnaround times
4.76
Credit policy
4.69
Interest rates
4.46
Online platform and services
4.09
Product range
3.96
Communications, training and development
3.93
Commission structure Product diversification opportunities
3.84 3.54
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SPECIAL REPORT
BROKERS ON BANKS
PRODUCTS AND PRICING This past year proved to be a mixed bag of pricing and policies, especially in regard to investors and banks’ fluctuating appetites. The only consistent theme? The same majors dominated across all categories DO YOU BELIEVE CHANNEL CONFLICT EXISTS?
18%
22% 2017
IT’S BEEN a year since APRA tweaked interest-only lending limits, reshaping the landscape for borrowers, brokers and banks. In March 2017, APRA told banks to limit new interest-only lending to 30% of new residential mortgage lending. At the time, interest-only lending accounted for 39% of all new lending, so a 9% cut would have been potentially quite disruptive for some banks. What followed was a flurry of price hikes and then rate slashes – so many it probably set brokers’ heads spinning.
60%
Despite regulatory changes and instability, the majority of brokers, 68%, actually said product ranges and pricing had improved over the last year, versus 32% who said it had worsened. Surprisingly, this was a somewhat more positive score than in 2017, when 51% said this area had improved, and in 2016, when 65% said likewise. While non-majors may have dominated in the interest rate category in the past, that wasn’t the case this year. ING, Suncorp and Bankwest were knocked out of the top spots
HIGHLIGHTS: PRODUCTS AND PRICING
15%
Interest rates
34%
Product range
Credit policy
Product diversification opportunities
2018 1st
Westpac
ANZ
ANZ –
2nd
St. George
CBA –
CBA –
3rd
ANZ
ANZ
51%
Westpac –
Not a problem Minor problem
Westpac –
Westpac
CBA
Major problem Key:
16
Went up a position
Went down a position
— Stayed the same
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by the majors, with Westpac leading the way, followed by St. George, ANZ, and then CBA in fourth. ING, which last year was in first place for interest rates, slipped to eighth place. The top three banks for credit policy were again unchanged for the third year in a row: ANZ, CBA and Westpac. While respondents may have been more positive about overall products and policies this year, when asked which bank offered the most favourable policies and interest rates for interest-only borrowers, there was no clear consensus. Many brokers said they had stepped back from interest-only loans and expressed frustration with the banks’ fluctuating appetites for these borrowers. A broker from Kilsyth, Victoria, said he was not targeting IO borrowers. “Given the interest rate differential, I’m recommending clients to take on P&I as the repayments in a lot of cases will be the same to reduce debt as it would be to sit on interest-only.” Brokers also spoke about the difficulties
of dealing with banks’ rapidly changing pricing policies. “[I] can’t pick a particular bank as their appetite for this type of lending fluctuates. One minute they want this business, the next they don’t,” said a broker from Croydon, Victoria. “Customers choose a bank based on pricing, then that bank puts up rates more
than the other as they hit limits imposed, then that affects that decision,” he said. As for product diversification and opportunities, ANZ, CBA and Westpac were again in the top three. Strangely, though, ANZ and CBA didn’t even make the top five for best mortgage product, outdone by the non-majors.
HAVE PRODUCT RANGES AND PRICING IMPROVED OR WORSENED OVER THE LAST YEAR?
65%
Improved Worsened
2016
68%
51%
2017
35%
2018 32%
49%
BEST PRODUCTS Place
Westpac (1)
St. George (2)
Suncorp (3)
Notable product
Flexi First Option Home Loan
Basic Home Loan
Home Package Plus
What brokers said
“Competitive rate great for first home buyers “Helps first home buyers get a good package “No bells and whistles, minimal set-up costs or refinances (which will also qualify for a for no cost and the five-year sub-4% fixed and great rate on owner-occupier” cashback of $1,250)” rate gives peace of mind”
“Cheapest discounted two-year variable rate with no upfront or ongoing fees”
“Low cost and from a major provider who has thrown a lot of support at the broker channel”
“Letting first home owners take advantage of all the benefits a package offers while waiving the annual package fee”
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SPECIAL REPORT
BROKERS ON BANKS
BROKER INCENTIVES Commissions will continue to be in the spotlight as the Productivity Commission and banking royal commission hone in on the sector. Our survey shows that brokers aren’t too impressed with where things are going THE NUMBERS speak for themselves: this year, the top bank’s score in the category on commissions was so low it wouldn’t even have made it into the top 15 in last year’s survey. In fact, it was lower than every other score from 2017 – out of 52 lenders – except for one. What has gone so wrong? The results could be a reflection of the scrutiny brokers’ commissions have endured this past year following ASIC’s Review of Mortgage Broker Remuneration. ASIC pointed out in its report that brokers’ commission structure could be incentivising them to potentially encourage borrowers to
take out larger loans in order to earn a bigger pay cheque themselves. With a significant
“Commissions should be for the net amount borrowed as that is what the broker worked tirelessly to provide for the customer and is entitled to receiving for the work done” Survey respondent variability in the value of commissions paid by different lenders, ASIC said brokers could
HIGHLIGHTS: INCENTIVISING BROKERS
Commission structure
Communications, training and development
1st
ANZ
ANZ
2nd
Westpac
Westpac
3rd
CBA
CBA Key:
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face a higher level of “lender choice conflict”. In response, the Combined Industry
Went up a position
Went down a position
— Stayed the same
Forum came together to tackle the commission issues ASIC identified. It proposed that lenders should pay upfront commission on a utilisation basis based on the facility limit drawn down by the customer and net of any offset account balances. It has pledged to achieve this across the board by the end of this year. Brokers spoke up clearly on this point, with more than two thirds saying commissions should not be based on facility drawdown net of offset, versus only a third who agreed with the CIF’s proposal. Brokers argued that there were many legitimate reasons why they offered their clients offset accounts. “If funds are not used immediately there is usually a good reason, for example they are going to spend the money shortly on renovations or a car. Sometimes clients are just keeping a small amount of funds in case
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of emergency. Why penalise a broker for that?” asked a broker from Balcatta, WA. Many banks have embraced the CIF’s proposal to move away from bonus commissions and soft-dollar benefits. In January, ANZ was the first lender to announce commission structure changes in response to the reports from ASIC, Sedgwick and the CIF. The bank said it would begin paying brokers an upfront commission of 62.5 basis points, up from the current 57.5 basis points, but would no longer give brokers volume-based incentives. But it’s not exactly clear how other lenders have already – or how they plan to – change their commission structures going forward, leaving brokers in the dark about the future of their salaries. Former auditor-general Ian McPhee’s independent report assessing the progress the banks have made on implementing the Sedgwick reforms found that many banks were still in the planning phases. “It is acknowledged that changes to remuneration and incentive arrangements are a complex and significant undertaking, and this is the first status report on a program of work that is scheduled for completion in 2020,” McPhee noted. While so much was weighing on the outcomes of the ASIC and Sedgwick reviews, it seems the inquiries into broker incentives are only just beginning. The Productivity Commission and the banking royal commission have both recently projected the spotlight back on brokers and how they are paid, suggesting this will continue to be an area of contention. So if brokers are already ranking the banks poorly on commissions, it’s likely to be just the tip of the iceberg.
HOW BANKS WIN AND LOSE BROKERS Why I’ve given more business to this bank
Bank
Why I’ve stopped using this bank
ANZ
“Generally find their pricing is non-competitive and I think their servicing is stricter. I can get greater borrowing capacity with other lenders”
“Better service. Products offered are easily explained and it offers the client seemingly more options”
CBA
“They are an absolute disgrace on many fronts and they do not and never have respected the broker market”
“They are proving willing to lend, their pricing is great, their service levels have improved massively and their BDMs are fantastic”
St. George
“Excellent turnaround, good rates, great credit policy”
“They consistently provide my clients and me with a better service offering. Lender handover is crucial and most people at Suncorp get that”
“Confirmed outcomes prior to submission with speedy turnaround times and competitive pricing”
“Poor BDM support, inconsistent decisions, horrible turnaround times”
Suncorp
“Worst experience ever, can never make an escalation or meet deadlines on time, horrible wait times on a call to speak to bank representatives”
Westpac
“They have lost their way and the internal process reflects a sausage factory rather than a loan processing unit. What can go wrong does go wrong with Westpac, and they have no accountability to broker or client”
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SPECIAL REPORT
BROKERS ON BANKS
TURNAROUND, TECHNOLOGY AND SERVICE Only a quarter of brokers think turnaround times worsened over the last year, far fewer than in 2017. But brokers say there’s still plenty of room for improvement to the banks’ communication, credit teams and technology CBA’S head of third party banking, Sam Boer, has called turnaround times the “Holy Grail” of the mortgage process. That’s true for banks and for brokers. Turnaround times can make or break a bank-broker relationship, as the broker comments in the previous section show. This year’s survey found that the majority
of brokers were generally satisfied with banks’ turnaround times – at least more so than they were last year. In 2018, 45% of survey respondents said turnaround times had improved, versus 37% in 2017. However, brokers were still much more satisfied with turnaround times two years ago. Have banks hit a snag in terms of how far
HIGHLIGHTS: TECHNOLOGY, TURNAROUND AND SERVICE
Turnaround times
BDM support
1st
ANZ
ANZ
ANZ & CBA (tied)
2nd
Westpac
Westpac
Westpac
3rd
CBA
CBA
St. George & NAB (tied)
Key:
20
Online platform and services
Went up a position
Went down a position
— Stayed the same
their technology platforms can improve turnaround times? According to brokers, some of the improvements on the tech side include digital document signing, application tracking, upfront valuations, online chat, and being able to upload documents directly to the lender. Those who said turnaround times had worsened thought changes to credit policy and compliance were making the process more cumbersome and convoluted. Some also said that brokers were now doing all the data entry for lenders. “Lenders have all overcomplicated, overinterpreted, over-engineered the home loan process, product, credit requirements, rates, and checklists, all under the guise it’s APRA and/or ASIC,” said one broker from Leederville, WA. A broker from Narellan Vale, NSW, said BDM support and communication were key factors when it came to turnaround times, and urgent files should be prioritised. “If there are extensive delays within divisions in the bank then that should be communicated to the brokers as it may not suit the turnaround times of what the client needs,” the broker said. The major bank heads admitted during MPA’s roundtable in February that there was still plenty of room for improvement in reeling
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in turnaround times. But what some also said was that the quality of a bank’s output also depended on the quality of a broker’s input. “Turnaround times are a two-way street. It’s actually the whole industry’s problem, not just the bank’s problem. What goes into a bank has as big an impact on turnaround times as the actual operation in the back office,” Tony MacRae, Westpac’s general manager of third party distribution, said during the roundtable. Boer said it was about continuously investing to improve education, communication and training, as well as the systems needed to make the process seamless. A broker from Ermington, NSW, said that while she understood turnaround times were dictated by the volume of loans being received by the funder, it was up to them to make sure they had enough experienced staff in place to assess loan applications quickly and that they were providing brokers with enough training. While the banks are quick to point out the changes and updates they’re making to improve turnaround times, brokers want action, not talk. “We are always told that work is being done to improve turnaround times, but in reality nothing has happened,” said one Sydney broker.
HAVE TURNAROUND TIMES IMPROVED OR WORSENED OVER THE LAST YEAR?
56%
Improved
2016
No difference
Worsened
2017
28%
37%
45%
2018
23%
29%
16%
26%
40%
WHAT MAKES OR BREAKS TURNAROUND TIME?
“A lot of data beginning to get transferred from old deals, which saves plenty of time”
“Lack of trained staff appears to be a growing issue”
“Communication between the broker and the credit analyst allows for faster response times and keeps expectations to reasonable levels for everyone involved”
“Constant credit policy changes have made it difficult for the bank staff to assess and process”
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SPECIAL REPORT
BROKERS ON BANKS
WHAT YOU’RE SAYING Brokers weigh in on a sticky subject: Are they really offering consumers a wider range of lender options? BROKERS’ contribution to consumer choice is a topic that ASIC tried to evaluate in its remuneration review last year, and the matter has come up again in the recent Productivity Commission draft report on competition in the financial system. ASIC found that, on average, broker businesses sent almost 40% of loans to their most commonly recommended lender. Despite aggregators having large panels of lenders, overall 80% of brokers’ loans went to four lenders, most commonly the major banks. The Productivity Commission raised concerns about consumer choice being jeopardised by vertical integration in the broking sector. It also suggested that trailing commissions encouraged broker loyalty to the financial institution rather than the customer. While our survey was conducted before the release of the Productivity Commission’s report, we did ask brokers whether they
ARE YOU IN THE CLUB? Lenders have agreed that elite broker clubs ‘should not entitle brokers to preferential customer discounts or to additional payments or commissions’, and brokers must disclose their membership to customers. Would you want to be part of an elite broker club under these conditions?
Yes
39% 61%
No
22
agreed with ASIC’s finding that most of their loans went to four lenders. Brokers were understandably split on the matter. Those on the ‘yes’ side said it was largely because the majors offered the right products and consistent service to match the needs of the majority of their clients. Those on the ‘no’ side said lenders were decided case by case, depending on clients’ needs, circumstances and eligibility, balanced with lender policy and pricing.
Whether it was a yes or no, a lot of the survey comments really amounted to the same thing: brokers are trying to do the best by their customers, but their work isn’t easy when lenders are regularly changing policies and procedures. We’ve highlighted as our Star Comment (see box below) one response from a new broker that reveals the hurdles brokers are up against. All five brokers will be sent a Google Home Mini for answering the question.
PRIZE QUESTION: BROKERS ON LENDER CHOICE ASIC found that the average brokerage sent 80% of loans to four lenders. Is this true for your business? “Yes, the majority of our business goes to the major four banks as there has been more predictability around turnaround times and the majority of my clients are self-employed so we try to use a bank that the client is accustomed to, whilst [finding] the right solution/product for the client.” Star comment “Yes, I believe that’s true. Unfortunately, I didn’t think I would be that type of broker when I first started and tried training myself with all lenders, which I found overwhelming. I’m at about four lenders now and 18 months into my broker career. I try and learn two new bank policies per year in order to increase my knowledge, but struggle and usually end up where I’m most comfortable. The major lenders have what the clients need; it’s just figuring out which lender suits best. When it doesn’t fit, it becomes a lot more work with other lenders because the process of processing takes longer. This becomes extremely difficult if you have a short time frame to ensure you meet the needs of the client.”
“I would say we average about six banks, but are not exclusive and will always try and make the deal work even if it means using other banks. The main reason behind this is because it is next to impossible to be familiar with every lender’s niches and policies. I also find we use banks where we get the most support from BDMs and broker services.” “Not at the moment as we have steered away from the majors – there are better options out there with the smaller players like AMP. The majors have won plenty of business from us when they are priced well. Not sure ASIC’s findings are up to date and accurate.” “No, my business is predominantly investors. We will look at different strategies to provide the best result to our clients. Some may change to P&I and others may want to remain on interest-only. We have, in the last 12 months, also funded loans for first home buyers and first-time investors with family guarantees, so we have sourced different lenders to assist.”
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WHERE YOU STAND ON ELITE BROKER CLUBS “As an elite broker, I am only looking for better processing times and better service from processing staff due to the volumes I do with the lender. Not interested in monetary benefits.” “There are significant targets to meet prior to being asked to be a member of a said club. Provided the customer’s loan requirements are met and the broker is placing the customer with the lender that meets their mortgage needs, there is nothing wrong with being rewarded for being good at your job, and customers should feel comfortable in the knowledge that their broker is respected by a lender for the good work he or she provides, not only to the customer but also the lender.” “We have always explained this to customers, so the changes in our view have been unnecessary. Clients feel great knowing that we are experienced brokers who are recognised by lenders, and they want to be a part of that. Quite frankly, if we are at that level of recognition we deserve it.” “I think these programs favour long established broker/broker businesses and can influence placement of loans to meet qualifying criteria. Any perceived influence can mean the client may not be receiving the correct recommendations on lenders as it might not suit the broker to use a lender who doesn’t treat them like kings.”
COMMISSIONS BASED ON FACILITY DRAWDOWN “A lot of clients are parking funds in the offset outside of the direct purpose of the loan, ie small business owners using it as a holding account for funds that are not currently utilised. If it is net of offset we are getting paid on, then we will not truly be paid for all the work that we do for the client.” “I believe the facility requested by the client is what brokers should be paid for. However, I’m happy with whatever makes the regulators feel like they are doing their jobs.” “Usually where there is an initial difference between limit and drawdown it’s because funds are being made available for a future use, such as the purchase of a new car. If it takes a couple of months for the client to find the car, why should the commission on that amount not be paid too? Perhaps if the additional amount has not been used in 12 months there could be a clawback.” “Primary reason for leaving clients with funds in offset is to provide them a cash buffer to pay living expenses should they hit trouble (health, job, repair, vehicles, etc.) for responsible lending reasons and to allow brokers to sleep at night! Not to maximise upfront commission. Trail is calculated net of offset so no advantage there either!”
EXPERIENCE WITH CHANNEL CONFLICT “It’s not fair if a branch is able to achieve a lower interest rate than a broker. We should all be able to confidently give our clients the best possible product and rate.” “Direct sales leave consumers insufficiently advised when it comes to correct lending structures, insurance and investments. Whilst many believe they are ‘experts’, my experience has been that they do not cover in any way sufficiently the ‘what if’s’. This occurs both in direct sales and branch-written business where the client’s needs are given secondary importance over what is right for them.” “Due to offers from some banks that are only made available to first party and not to third party, which creates channel conflict and can negatively affect clients who choose to use third party brokers.” “I have found that channel conflict can exist. I have had instances from a couple of banks where clients have walked in and had other lending with different lenders (all written by me). These customers were offered to refinance all loans through the bank direct when the lending manager had no concept of the overall objectives and structure of that customer’s requirements.”
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SPECIAL REPORT
BROKERS ON BANKS
FINAL RESULTS And the Best Bank of the Year prize goes to… Here we reveal the winners and the losers in this year’s overall survey results
WESTPAC
ANZ Position in 2017: 2nd Position in 2016: 3rd ANZ did a stellar job this year, overthrowing Westpac’s attempt at four golds in a row to secure the title of 2018 Bank of the Year. The bank earned consistently excellent results, appearing in the top three in every category. That reliability struck a cord with brokers, especially during a year when regulatory expectations and bank appetites were constantly shifting. It particularly outshone the other banks in the categories of BDM support, credit policy and turnaround times, lifting its results in the latter category compared to last year, when it didn’t make it into the top three. Brokers mentioned all of these things when asked which bank they had given more business to in the last 12 months. ANZ also did better in the commission structure category, which had been identified
as an area of weakness last year. It will be interesting to see how ANZ being the first bank to remove volume-based incentives will affect brokers’ opinions in next year’s survey. The one area the bank didn’t do as well in as expected was the ranking for brokers’ top mortgage product. ANZ didn’t break the top five, but it still came in first place for overall product range and product diversification and opportunities. It doesn’t seem like much is holding ANZ back, not even with the clampdown on interest-only and investor lending. The bank grew its Australian residential mortgage book by 10% annualised to $98bn in the December 2017 quarter, largely driven by owner-occupier loans, estimated to be 1.2 times faster than the system rate. It looks like ANZ is in good stead to continue that growth, especially with brokers on board.
Position in 2017: 1st Position in 2016: 1st It will come as a disappointment to Westpac that it didn’t clinch the leading position this year, but the major still has a lot to be proud of (not to mention that hat-trick from last year). It took second place in most of the categories usually by only a small margin. It also finished first, far ahead of the rest, for top mortgage product, with brokers again pleased with its Flexi First Option Home Loan and its Rocket line. This probably explains why brokers also selected Westpac as the number one bank for interest rates, and for having favourable policies for interest-only clients. But if Westpac wants to beat ANZ next year, it will have to boost its BDM support, credit policy and turnaround times.
CBA Position in 2017: 3rd Position in 2016: 2nd Considering CBA’s rocky relationship with brokers of late, the bank really didn’t do that badly, maintaining its third-place finish. The numbers show brokers still rate its online
24
platform and services highly, as well as its product range. But CBA’s results for turnaround times, interest rates, communications, training and development and BDM support sunk a lot lower than its other major competitors’.
The numbers might put CBA in third place, but the comments from brokers reveal deep criticism of the bank. Brokers didn’t hold back, with many calling the major out for channel conflict, poor turnaround times, arrogance and lack of respect for the broker market.
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4th
Position in 2017: 7th Position in 2016: 7th St. George Group, which includes the Bank of Melbourne and Bank SA, made massive gains this year, rising from seventh place over the last two years to fourth place, just behind three major banks and ahead of NAB. It came in second for interest rates
5th
and third for top mortgage product. St. George Group was the reigning non-major this year, leaping ahead of Suncorp and Bankwest. Whatever changes St. George Group has made, brokers have noticed, with many of them commenting on its “improved” service levels, BDM support and competitive rates.
To generate the overall results, we took an average of the results for every category of service. This means every category had an equal impact on the final result. Flip through the previous pages to read more about which banks excelled where. Bank
Overall score
ANZ
2.76
Westpac
2.60
CBA
2.45
4th
St. George Group
2.23
5th
NAB
2.21
6th
Bankwest
1.94
7th
Suncorp
1.76
8th
ING
1.55
9th
Macquarie
1.44
10th
AMP
1.34
NAB
Position in 2017: 6th Position in 2016: 6th NAB still isn’t playing in the major leagues, but it did show some improvement this year in regard to BDM support and commission structure. But the major still lags behind the top three when it comes to turnaround
6th
OVERALL RESULTS
ST. GEORGE GROUP
times, product diversification opportunities and interest rates. Some brokers did remark on a lack of consistency in service and assessment decisions, and many complained that channel conflict still seemed to be a problem despite being an area that the bank had tried to address.
BANKWEST
Position in 2017: 5th Position in 2016: 8th Bankwest remains stuck in the middle of the pack. While last year it made a big leap forward to fifth place from eighth in 2016, it wasn’t able to stay ahead of NAB this time around. Unlike CBA, Bankwest’s owners, the non-major is “significantly third party focused”, according to Ian Rakhit, the bank’s
head of third party business, who was recently interviewed by MPA. Last November, it launched a new “one-stop shop” website based on brokers’ feedback. This might explain why it did much better than the other non-majors (excluding St. George Group) in the online platform and services category. If the bank continues to listen to brokers, that will pay dividends.
Note: Scores go from 1 (very bad) to 5 (very good)
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SPECIAL REPORT
BROKERS ON BANKS
HOW ANZ STOLE THE SHOW ANZ’s investment in training and developing its team, being transparent about changes and keeping brokers in the loop has given the bank lots to boast about in this year’s Broker on Banks survey
Why did brokers pick ANZ as their favourite lender this year? Winning this award is a huge privilege for everyone on the team at ANZ, particularly in a year of transformative change. Our retail broker BDMs work tirelessly to improve how we do things and ensure we’re always producing the best results for customers. This award is also a reflection of our investment in training our team and our consistency in the way we openly communicate with the market. ANZ dominated in the commission structure section. What has ANZ done to ensure brokers are being compensated fairly for their work, and how does it plan to amend or retain its commission structure going forward in response to the CIF proposals? Government and community expectations have changed and the expectations we have of our own industry have also changed. The CIF was a key stepping stone to building a stronger reputation for our profession. We believe that the recent changes will provide a simpler commission structure which delivers on ANZ’s and aggregator and broker requirements, and is more transparent for the customer.
26
In the last 12 months, we’ve had a focus on transparency in the marketplace, alongside further investment in our training and development program. We recognise we have a tremendous amount of work to do, and we need to improve on communicating change as early as possible. In the environment we’re currently all operating in, change is the new normal, but we’ve been partnering with aggregators and brokers to lead with insights to shape our training programs, to ensure all industry participants are equipped with the skills to respond.
ANZ came up from third place last year in the communications, training and development category. What has ANZ done to improve communication between itself and brokers? It has been a goal for the ANZ team to be known as the most innovative and the most educated in the market, and to really take the education of our BDMs, brokers and our partnerships with aggregators to a new level.
ANZ also excelled well above the other lenders for BDM support. What makes a great major bank BDM? Successful partnerships generally are based on trust, respect and a broader understanding of each other. The most crucial element is ongoing communication and the importance of being responsive. Our entire BDM team works with 16,800 brokers across Australia, serving approximately 300-plus brokers/BDMs each. Our BDMs are famous for their policy knowledge and are skilled at navigating deals due to their specialist expertise. But above all, they know how to connect and collaborate to get customers into homes.
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WESTPAC
CBA
MPA: How does Westpac stay competitive when it comes to offering brokers a sharp rate, and why is this important to the bank?
MPA: How has CBA changed or improved its online platform and services over the last year to better respond to brokers’ needs?
Westpac: Our relationship with brokers is about so much more than a sharp rate. Our competitive offering is about a good deal for the customer, exceptional service and reasonable turnaround. Most importantly, it’s about partnering with brokers to help them grow their business, not just deliver a transaction. We do that in many ways, including by leading in education, training and support. We know there is a lot of change in the market today and we’ve been working hard to help brokers adapt and ensure we’re all meeting our responsible lending obligations for the benefit of our customers.
CBA: The broker channel is important for customer choice, and we are committed to ensuring great outcomes for customers who apply for a CommBank home loan via a mortgage broker. It is for this reason that we constantly review our online platform and services to see where improvements can be made. We will continue to review our systems and services to see where further enhancements can be made in a bid to deliver even better outcomes for our brokers and their customers.
ST. GEORGE GROUP MPA: St. George made massive gains in this year’s survey, taking fourth place just behind three major banks, up from seventh place last year. How did St. George have such a good year with brokers? St. George Group: We’re really proud of the St. George result and pleased to have two Westpac Group brands in the top four. We’ve been doing a lot of work at St.George to improve service levels and turnaround, as well as system and process delivery. We’ve also done a lot in the education and training space. Our focus is on becoming a more trusted business partner for brokers. We’ve supported our BDMs with training to help them help brokers transform their businesses and meet the needs of customers of the future. We also launched the industry-first broker content platform, Learning Lab, last year with great feedback.
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12/03/2018 2:38:49 PM
FEATURES
TECHNOLOGY
Top priority In a year of regulation, the time and cost-saving benefits of technology – and the threat from cyber crime – cannot be ignored. MPA speaks to those at the cutting edge BROKERS CAN be forgiven for not prioritising technology. At present, smart phone apps cannot beat a human being explaining a client’s best options, despite the banks’ best efforts. And the promised gains in turnaround times still seem as fanciful to most brokers as John Maynard Keynes’ predicted 15-hour working week. This year, however, investing in technology has taken on a higher priority. Not because of new inventions – for all the hype around blockchain and cryptocurrency they still have little relevance to brokers – but because of new regulations. The government, APRA and ASIC are demanding more detail on borrowers than ever before, stretching brokers’ resources. With an increasing amount of confidential documentation required and stored, the threat of cyber attacks looms. This article brings together leading technology providers and aggregators, including Connective, CoreLogic, Finsure, MSA National and NextGen.Net, to explain which apps, software and systems should be top priority for your business over the next 12 months.
Comprehensive credit reporting A “slow-burn” development, as Connective director Glenn Lees puts it, comprehensive credit reporting (CCR) will finally become a reality in 2018. This is because the government has finally lost patience with
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the banks and ordered that, by July, 50% of customer data will be shared. Treasurer Scott Morrison claims that “for borrowers, this regime should lead to one thing – a better deal on your mortgage, your personal loan or business loan”. For brokers, CCR, otherwise known as open banking, “gets down to a whole new granular way of assessing a deal that you can’t do now”, says Lees. More data allows better profiling of customers and, eventually, customised interest rates. The change may not be difficult to notice at first, Mortgage Choice CEO John Flavell tells MPA: “Some [customers] will
“My premium will be different to your premium, even if we live next to each other, because my house and the characteristics of my risk are slightly different to yours,” Suncorp’s banking and wealth CEO, David Carter, explains to MPA. Mortgage Choice’s Flavell expects this confusion to further enhance the broker proposition. Tony Carn, director of sales at NextGen. Net, says, “What CCR might bring is a moving forward of credit checking to the point of sale”, directly involving brokers. For now, “there’s no immediate action or immediate development, but we are in consultation with credit reporting bureaus”, he says. NextGen.Net is already heavily involved in credit reporting, but Carn warns that “there are a number of hurdles, from a participation perspective, that make it a very important thing on the horizon, but not immediately”.
Cloud-based working Perhaps the biggest change to a broker’s day-to-day routine this year will come from relatively simple software. John Kolenda, managing director of Finsure, says “companies like ZipID, Proviso, Breezedocs and DocuSign are allowing
“Brokers who fail to invest in anything that will bring business efficiencies may find that the cost through lost business is much more significant” John Kolenda, Finsure definitely notice a difference and others may not. It all depends on their unique financial situation.” The Consumer Action Law Centre has warned that some already-disadvantaged customers could become more disadvantaged by higher interest rates. One likely effect of CCR will be confusion.
regular mortgage brokers to minimise the time spent on administrative processes and spend more time focused on enhancing the customer experience”. This year will see technology providers take on two pain points in particular: client identification and document collection.
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FOUR BROWSER EXTENSIONS TO HELP YOUR BUSINESS Nathan Vecchio, director of brokerage Hunter Galloway, has picked out four extensions for the web browser Google Chrome that can save you time.
ZipID and MSA National now provide smartphone apps that allow brokers to verify a client in person. MSA National’s app IDyou also enables clients to verify themselves without being in the same place as the broker. For brokers dealing with clients in other states and who are fed up with relying on Australia Post for verification, remote identification could have huge benefits, MSA National managing director Sam Makhoul believes. At present the Australian Registrars’ National Electronic Conveyancing Council (ARNECC) conveyancing rules mean that NAB is the only major to allow remote identification, along with most nonmajors, but Makhoul says “there is a strong push to get ARNECC to actually approve
Evernote An online notebook and mobile app that allows you to save notes and articles you find online and read them on any device
Momentum Personalises your tab pages on Google; potential uses include writing your tasks for the day on the tabs, or even motivational quotes
Boomerang For Gmail users, this allows you to schedule emails to be sent out later, for maximum impact. It can also send you a reminder for emails to be sent
Rapportive Also for Gmail users, this integrates LinkedIn profiles into your Gmail, so every time a contact emails you get all their details in your inbox, helping you build rapport
Read more from Nathan Vecchio and Top Broker on our website: mpamagazine.com.au
remote verification, to recognise there are technologies out there where you can still do a face-to-face verification”. With pressure mounting from Australia Post, changes could occur by the end of the year. Document collection will soon change
as brokers use the capabilities of DocuSign and electronic signatures to smooth the application process. MSA National’s New Generation Digital Documents service sends documents electronically to customers for signing and then guides them through the
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FEATURES
TECHNOLOGY
GROWTH OF CLOUD COMPUTING Increasingly, client information is stored online in the cloud, on cloud-based CRMs, document collection apps such as DocuSign and popular services such as Dropbox.
30% 20% 10% 0%
79.6% organisations used cloud services
40%
63.6% organisations used cloud services
70%
50%
2015
2016 Source: Telstra Cyber Security Report 2017
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process for both our internal team and the brokers”, Kolenda explains.
Open API systems The recent explosion in software and apps cannot be entirely credited to established technology providers; an increasing number of new players and even brokers themselves
“Open APIs are like the pipes and cabling below a city; the city that grows on top of them can be as wild as the imagination”
80%
60%
process. “The moment the customer hits ‘completed’, verification is instant,” explains Makhoul. “The broker and lender get an email, we get an email, and the customer gets an email with a copy of the documents.” Furthermore, Makhoul claims that digital documents are less prone to errors and missed signatures, as the documents won’t
Glenn Lees, Connective send until completed and are less vulnerable to fraud given that they are sent directly to the borrower. Lenders therefore have a huge incentive to push this software out to brokers. “The difference between the lenders who are using this and those who are not live on digital is significant,” Makhoul says. Brokers will also see changes from CoreLogic, which is building a platform to power broker workflows. The benefit, says chief technology officer Greg Dickason, is that “we [will] understand that how you will use our data, how you will target new leads and convert existing prospects, will change. This means we are constantly refining our mobile, desktop and direct API offerings to make your job easier”. Dickason also suggests brokers look at the Val Status look-up tool on the RP Data Pro mobile app, and encourages interested brokers to take part in earlier adopted schemes to improve valuation. Even onboarding will change: Finsure has developed a system that tracks new brokers through qualification to document verification and accreditation with lenders. By ensuring the right documentation is collected, “the system takes away a lot of the manual work and enhances the onboarding
are building innovative tools. The reason is open APIs. Put simply, open APIs allow you to connect two pieces of software. To take one example: Connective’s Mercury CRM system can now be paired with popular email tool MailChimp, with advantages for brokers, says CEO Lees. “Rather than us trying to build a marketing tool that might be perfect for one day and then it’s out of date, if MailChimp uses the best marketing tools, we’ll let you connect it up to MailChimp.” It’s not necessary to understand the technology behind open APIs, Lees explains. “Open APIs are like the pipes and cabling below a city; the city that grows on top of them can be as wild as the imagination.” Connective brokers use a program called Zapier to connect more than 1,000 apps together, vastly reducing the amount of time they spend re-entering client details, for instance, or synchronising folders. Most excitingly, open APIs allow brokers to build software too. Connective broker George Samios of Madd Home Loans developed a program that left automated voice messages on potential clients’ phones, which is now integrated into Mercury. NextGen.Net has been using open APIs for years within the business; it is now rolling
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FEATURES
TECHNOLOGY
HOW BLOCKCHAIN COULD SLASH TURNAROUND TIMES In October, HSBC announced it was working with start-up MoneyCatcha to speed up home loan origination. MoneyCatcha uses blockchain technology to flawlessly and instantly link together the processors and brokers that are part of the mortgage origination process, reducing the overall process from 42 days to just five. With 60% of home loan applications currently requiring rework, MoneyCatcha could make a huge difference, CEO Ruth Hatherley believes. “We all but eradicate this issue with our Homechain solution. We go direct to the source of truth for verification and validation and we keep the whole end-to-end process inside one workflow.” MoneyCatcha is currently trialling its software with HSBC and is in talks with other financial institutions.
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out this technology to brokers. It now has an API for brokers to validate certain data such as address and title details, ABNs and ACNs, and serviceability calculations, Carn explains. “Rather than reverse engineering lenders’ Excel spreadsheets and building their own serviceability calculations, it’s far easier and far more accurate and reliable to use an API for those services.” Carn adds that NextGen.Net is “currently
Brokers have good reason to be concerned, given the number of confidential documents they deal with. MSA National’s Makhoul recalls a roadshow promoting the IDyou app. “For the brokers who were reluctant and aren’t using it, I asked: ‘What are you currently doing?’ They said, ‘Ah, I’m really clever; I take a photo of it, convert it to a PDF and send it to the lender’. They had hundreds of people’s identities on their photo stream.”
“There is a strong push to get ARNECC to actually approve remote verification, to recognise there are technologies out there” Sam Makhoul, MSA National in the pilot stage of doing a product API in the broker community”. He expects this product API to be rolled out by the end of 2018.
Cybersecurity The threat from cyber crime is not new, nor is it necessarily exciting, Carn reflects. “It’s a lurking issue; it doesn’t become an issue until someone suffers.” Yet awareness of cybersecurity has been gathering momentum in the broker community, and 2018 will see the topic dominate industry conversations. The catastrophic cyber attacks of 2017 were generally associated with big businesses and governments, but small businesses also suffered. In January this year, Small Business Ombudsman Kate Carnell warned that “cyber criminals are becoming more sophisticated and small businesses are particularly vulnerable”. Nine out of 10 small businesses rely on antivirus software alone, which Carnell warned would not be sufficient. “Online threats are just as real as physical threats. Cybersecurity needs to be taken seriously, like having locks on your doors and a burglar alarm.”
Carn warns that sending documents electronically can also be risky. “I’m still flabbergasted by the amount of email traffic that flows with personal details in it: credit card numbers, financials, tax returns; ‘I’ll email you my payslips’. That’s incredibly valuable personal information when it gets into the wrong hands, and we still see people utilise email, which is bad security, unless of course it’s encrypted.” The technology providers listed in this article all have secure data storage, with 24/7 professional monitoring and tools for brokers available. “That’s how we help brokers,” says Connective’s Lees. “We give them security they couldn’t buy themselves.” However, Lees warns that “most security breaches and lapses aren’t technology based; it’s not some incredibly clever guy in a room somewhere hacking into something – it’s when you do something dumb personally”. The government’s Cyber Security Best Practice Guide lists simple tips such as limiting access to administrator accounts and patching and backing up data regularly. Brokers should also note their obligations
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to securely store data under the NCCP Act. Aggregators can help: Connective will run a cybersecurity training program for brokers early this year.
than made up for by the time saved using the technology. There is also a risk in not investing in technology, Kolenda warns. “Remember that brokers who fail to invest in anything that
The cost of technology For all the potential benefits of the smartphone apps, open APIs and cybersecurity programs out there, brokers as business owners have one major concern: cost. Yet according to the aggregators and technology providers MPA spoke to, brokers need not be concerned. “Modern technology platforms are designed to be scalable, which in turn allows them to be quite cost-effective,” explains Finsure’s Kolenda. “Furthermore, platforms that allow for monthly subscriptions are perfect for brokers who are looking to employ the latest technology, without blowing their budget or cash flow.” The Office 365 suite of products, for example, costs the equivalent of two coffees a month, Lees points out. “To buy the capability is trivial these days; it’s commodity-level price. The real and substantial investment is the human investment,” he says. This means not only training but the discipline to regularly use all the capabilities technology provides. Nevertheless, the time taken training, as MSA National’s Makhoul points out, is more
“I’m still flabbergasted by the amount of email traffic that flows with personal details in it” Tony Carn, NextGen.Net will bring business efficiencies may find that the cost through lost business is much more significant than any initial investment. This is an extremely competitive industry that we work in, and it’s vital to stay ahead.” Making the most out of technology isn’t about investment at all, CoreLogic’s Dickason believes. “It requires curiosity,” he says. “Reading and listening to what’s happening and then intelligently choosing what to work with. Technology is getting cheaper, with the cloud providers making it easier to build, and host solutions. Keep curious! In the end technology won’t replace the relationship with your customers but will enhance it – so always ask, ‘How will this help my customers?’”
COST OF CYBER CRIME FOR SMALL BUSINESSES Small business is the target of 43% of all cyber crimes.
60% 60% of small businesses who experience a significant cyber breach go out of business within the following six months
22% 22% of small businesses that were breached by the 2017 ransomware attacks were so affected they could not continue operating
33% 33% of businesses with fewer than 100 employees don’t take proactive measures against cybersecurity breaches
87%
$1bn
87% of small businesses believe their business is safe from cyber attacks simply because they use antivirus software
Cybercrime costs the Australian economy more than $1bn annually
Source: Australian Small Business and Family Enterprise Ombudsman, January 2018
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FEATURES
DIVERSIFICATION
The opportunities of branching out Suncorp’s small business head, Robynne Frost, talks about the bank’s extensive education program aimed at giving brokers the skills, tools and confidence they need to become an SME customer’s main point person WHILE ACCESS to finance has improved for SMEs since the GFC, not all of these two million businesses think to go to their mortgage broker first for help in finding the best credit solution for their company. Suncorp is trying to change this. Through its extensive education program and team of seven dedicated SME BDMs on the eastern seaboard, the lender is giving brokers the skills, tools and confidence to become an SME customer’s main point person. With about 30% of Suncorp’s existing home loan customer base also being small business owners, Robynne Frost, national manager for small business and commercial, says brokers already have an upper hand. Not to mention the fact that most brokers are small businesses themselves and can relate to their SME customers’ challenges. Instead of letting those clients walk out the door, Frost is on a mission to help brokers diversify so they can capture and convert those leads. “Our education program is representative of our commitment to the broker market and the opportunity that SME lending provides our broker partners,” she says. It all began two and a half years ago when Suncorp recognised the trends pointing to continued strong growth in the small business
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sector in Australia, and the opportunities therein for brokers. As an industry leader, the bank established a dedicated channel for small business and commercial lending through intermediaries. The projection was not wrong. The small business sector in Australia continues to thrive. In February 2017, the ABS reported that the number of active businesses in Australia had increased for the third year in
to remain relevant and competitive. While many brokers have embraced SME lending, the majority still haven’t seized on this lucrative income stream, Frost says. The MFAA’s latest Industry Intelligence Service (IIS) report found that only 2,650 brokers out of 16,000 wrote a commercial loan in the period October 2016 to March 2017. So what’s stopping brokers from branching out? Some brokers think it’s more significant
“SMEs are looking for a trusted adviser who is knowledgeable, understands their needs and can provide the assistance they need to meet their financial requirements. Our team can help brokers deliver in this market” Robynne Frost, Suncorp a row, primarily driven by growth in small businesses, which now total two million. With that many businesses in the market potentially looking for finance at some point, it’s clear that brokers will need to do more than just write mortgages if they want
a step than it actually is, Frost says. “Small business people are busy and timepoor, so what they need is a trusted adviser to help them navigate their way through their lending requirements,” she says. “There is a very real opportunity for brokers to meet this
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Sponsored by
businesses is a loan that goes up to $1m and has a familiar feel to a home loan. It’s a secured product that is not for cash flow lending, so it’s an easy first step for brokers looking to try their hand at writing this type of transaction. In addition to its educational programs, Suncorp has also built a small business hub within its broker portal that is a repository of extended learning resources, tips and guides to improve brokers’ financial knowledge and the conversations they’re having with SME customers.
No time like the present
FIVE KEY CHALLENGES FOR AUSTRALIA’S SMALL BUSINESSES Finding new customers Ensuring adequate cash flow Competition from big businesses
need, and we can support them in doing this.” Suncorp has responded to this worry by becoming a leader in education in order to remove barriers to entry and dispel some of the misconceptions brokers have about SME lending. On the back of its very successful three-hour intensive SME masterclass program that saw 1,200 brokers attend last year, Suncorp has begun offering two new educational programs this year that will be more intimate in scale. The small-session intensives will run over the next six to 12 months in Sydney, Brisbane and Melbourne. The Business
Meeting increasing legal and regulatory requirements Keeping up with technology Source: Suncorp
Essentials Program will enable brokers to learn more about Suncorp’s products, policies and processes, and the serviceability requirements needed to get small business loans across the line. The Bridging the Gap program is a more advanced course in which the group will go through two case studies from beginning to end so brokers can see the mechanics of the deal and gain a strong understanding of how to put one together themselves. Frost points out, however, that not all SME lending transactions are overly complicated. One of Suncorp’s key offerings for small
Across the industry, a lot of lenders are talking about diversification. It’s easy to tell brokers to change and adapt, but it’s another thing to actually support and guide them through it like Suncorp is doing. While brokers do need the skills and understanding of financials to effectively complete SME deals, Frost says it’s not just about knowing the numbers. It’s also about understanding the dynamics and the unique needs of these customers. Starting in March, Suncorp will be sharing its research and insights into this area with its broker partners in a new newsletter dedicated to commercial and small business lending. The MFAA IIS report showed that the number of brokers in Australia recently increased by more than 3%, outpacing the value of new home loans being written. Instead of seeing this as a warning sign, brokers should see it as the encouragement they need to shed the ‘mortgage broker’ moniker and become multifaceted finance brokers who can meet the changing needs of an increasingly diverse range of clients. “Ultimately, SMEs are looking for a trusted adviser who is knowledgeable, understands their needs, and can provide the assistance they need to meet their financial requirements. Our team can help brokers deliver in this market.”
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12/03/2018 2:40:41 PM
FEATURES
WOMEN IN BROKING
Women brokers get a greater say As the number of women joining broking grows, ANZ is looking to boost women’s confidence by empowering them to voice their opinions, Paolo Taruc writes
MORE WOMEN are joining Australia’s mortgage broking sector every year, accounting for over a quarter of all brokers. But Simone Tilley, general manager of ANZ’s residential broker division, believes higher female numbers form only one aspect of workplace diversity. Tilley is part of a growing movement to amplify the voices of women in the industry and encourage them to recognise their leadership positions. To that end, ANZ will launch a program called ‘Doyenne of Women in Broking’ by May or June of this year to build women’s confidence in contributing as experts in their fields and increase their visibility. The program’s name comes from the French word ‘doyenne’, which refers to the most prominent and respected woman in a profession. Tilley says ANZ is looking for people willing to participate and will start with a small group at first. “It’s really about an executive leadership program that builds skills and confidence around contributing to internal and external forums, including social media, events and traditional media,” Tilley tells MPA. Tilley’s advocacy is driven in part by her personal experiences in forums and other events where she says she has witnessed poor representation of women.
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Sponsored by
According to figures from the MFAA, women accounted for 27% of all brokers across Australia at the end of March last year. More continue to join the sector, but growth seems to have slowed. Just 28% of brokers recruited from October 2016 to March 2017 were women, marking a 4% drop since the last edition of the report. “Consistent with demographic forces at work in the overarching Australian population, the role of women in the finance broking industry seems not only assured but also a vital ingredient for its longer-term prosperity and the value of the industry’s
half of whom were women – to participate in a secondment opportunity last year. The group created and designed a governance and oversight framework that thinks through how they can be positioned in the marketplace. Tilley was still relatively new to the business at that point, so she says she drew from their expertise. “But most importantly, and especially for the women that we had on secondment, it was valuing the rich skill sets that they have,” she says. “Often I see women have some elements of self-doubt, and I just really wanted to encourage them and praise them and really
“Connecting with empathy is something that a lot of women do particularly well, and I think they’re really adaptive in a changing landscape” Simone Tilley, ANZ proposition to customers in response to generational shifts,” the MFAA said in its report. ANZ is already keeping up with this trend. Tilley says women account for over half of its leadership teams across its national home loans division. Likewise, the majority of new members in its head office are women. “To drive a high-performance leadership team culture, I can’t emphasise enough the importance of having a multitude of career pathways that bring different perspectives and different prisms of thought, which consequently enables us to better challenge the status quo and think through the unintended consequences in a more pragmatic way,” Tilley says. Working with a team of high-performing women herself has resulted in a highly collaborative environment, she says. As part of its empowerment initiatives, ANZ invited its best and brightest BDMs –
build them up so they feel like their voice matters and they can do this.” Apart from the Doyenne of Women in Broking initiative, ANZ also runs ‘Lean-In’ events, inspired by Facebook COO Sheryl Sandberg’s book of the same name. Once a month, senior women at ANZ host open forums where they share stories about their lives and careers, the successes and challenges they’ve experienced in the corporate world, and being business leaders and mothers – and anyone from the bank can attend. Tilley says the point is for women in the workplace to share experiences that create “a culture of ambition and aspiration and support” for one another. These events are intended to encourage and inspire the bank’s workers, and to understand the fact that a career isn’t a straight line – often it has twists and turns. As for growing the number of women in
LADIES WHO LEND Initiated by TM Finance Group director Belinda Gibson in February 2017, Ladies Who Lend is a bi-monthly networking event that brings together like-minded women to flourish in the finance industry by sharing each other’s experiences and skills. Ladies Who Lend is comprised of 10 women brokers in Victoria of various ages, experiences and fields of expertise. The majority of the women in the group are business owners, national and state award winners, and professionals who have a passion for lending, the finance broking industry, and obtaining the best outcome for clients. The networking event takes place bi-monthly and allows members to come together to share not only their successes but also the difficulties they face, in the hope of nutting out a solution. It’s a collaboration of experience and skills.
broking, that also comes with women sharing their stories and being put forward as role models to inspire others to consider broking as a career path. A lot of women already have the attributes that will lead to success in broking, Tilley says, such as being able to connect with empathy and being open to change. “From an ANZ perspective, we want to encourage women in leadership, whether it is in our organisation or outside of it, and just make people believe that they deserve to have a seat at the table.”
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FEATURES
CONSTRUCTION FINANCE
Build the next skyline La Trobe Financial’s head of commercial originations, Mark Hood, gives brokers a foundation in commercial financing and explains how they can add this opportunity to their business offering MPA: What are the first steps a broker should take if they’d like to write a construction loan? Mark Hood: A broker should always understand the needs and requirements of the client by obtaining a detailed summary of the project, including the expected time frame to completion and intentions around holding or selling on completion, as these can often influence the finance required. Once they have a full understanding of the transaction, the broker should contact the respective lenders’ BDMs to ascertain each lender’s appetite for the transaction. Then we would encourage brokers to work with the lender that is most accessible and provides the most support – assistance and accessibility can be worth much more than a few basis points when dealing with construction finance.
MPA: What support or training does La Trobe Financial offer brokers in this area? MH: La Trobe Financial has dedicated senior manager client partnerships with credit skills in each state who are available to walk brokers through transactions as required. In addition, we give direct access to our commercial credit analysts, who understand the complexities of the construction process and who can workshop any scenario on the spot. Recently, La Trobe Financial’s head of credit, Steve Lawrence, conducted a
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development finance webinar that covered the construction process from start to completion. The webinar can be viewed on La Trobe Financial’s website.
MPA: What are four key things a broker should know about construction finance, and who are these loans best suited for? MH: If a broker can source the project’s parameters, gross realisable value, construction costs under a fixed-price or fixed-time contract, and the valuation ‘as is’ of the property to be built, La Trobe
Financial can provide an indicative funding table that determines the feasibility of the finance, along with proposed pricing for the transaction. La Trobe Financial’s construction loans are suited to those developers building a single dwelling, right through to those looking to complete small to medium-rise apartment projects.
MPA: How can brokers benefit from working in construction finance in addition to residential lending? MH: We know of a number of cases where
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FEATURES
CONSTRUCTION FINANCE Sponsored by
FOUR THINGS TO KNOW ABOUT CONSTRUCTION FINANCE
The project’s parameters – location, how many dwellings are being built, the level of presales
brokers have since become specialists in construction finance following a high number of referrals received upon successfully completing transactions for their clients. The short-term nature of construction finance lends itself to repeat transactions
makes La Trobe Financial’s offer competitive? MH: There are a number of product-specific reasons to choose La Trobe Financial, such as our flexible presales requirements that often allow builders to get to site quicker, reducing unnecessary holding costs; as well as the
“We know of a number of cases where brokers have since become specialists in construction finance” Mark Hood, La Trobe Financial
GRV (gross realisable value) – the project’s worth upon completion
Construction costs under a fixed-price or fixed-time contract
Valuation ‘as is’ of the property to be built on, along with details of any debt held against it
that can come on completion of a project. Not only are you likely to obtain the developer’s next transaction but you are also front and centre with the opportunity to obtain business from potential purchasers.
ability to market a completed product which can achieve a greater sale price. Having direct access to key decisionmakers and speedy responses makes La Trobe Financial the first point of call for construction finance, evidenced by its many repeat clients.
MPA: How is a construction loan structured differently from a residential loan? MH: The main difference between a
MPA: What are some of the challenges or changes in the construction finance space that brokers should be aware of? MH: There have been a number of changes
construction loan and a residential loan is that you work off future value, or ‘on completion’ value. With residential loans, you have a finished product to value and you can set your loan advance accordingly. With construction lending, you obtain a value ‘on completion’ that you set your loan amount to. However, we also need to have regard for the current, or ‘as is’, value, along with the cost to complete the build – which we must retain at all times. Construction loans are progressively drawn as the stages are completed, with the final payment made on handover of the Certificates of Occupancy.
MPA: Why should clients go to a non-bank lender for construction finance versus a major bank? What
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to lenders’ construction finance products in recent times, with many significantly curbing their appetite through the introduction of increased presale requirements, minimum and maximum loan sizes, limitations on new-to-bank customers and, in some cases, a complete withdrawal of the product altogether. La Trobe Financial is proud of the reputation that we have built by maintaining a consistent product offering with very few changes made. We are committed to providing construction finance solutions for brokers which are based on an understanding of the transaction from the get-go; and providing quick, clear and concise directions to enable brokers to convert their opportunities.
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FEATURES
PRODUCTIVITY
Are you addicted to distractions? Amantha Imber, the founder of Inventium, Australia’s leading innovation consultancy, offers brokers three easy ways to break their distraction addiction IT’S 10AM and you are at your desk with a mug of coffee. You don’t have a meeting scheduled so you figure it’s a good time to start working on writing that report you’ve been putting off. The report is critical for moving your most important project forward and securing more funding. It also happens to be due in your boss’s inbox in two days’ time. You open a Word document and write the title of the report. You’re not quite sure what to write next. Just then, a notification flashes up on your screen – you have a new email from a business prospect. “Better just check what they want,” you say to yourself. You hop into your email and read it. The message isn’t actually that important and you don’t really need to respond. However, given that you are now in your inbox, you start opening up emails you have already read earlier this morning, wondering if there is anything you can send a quick reply to and feel a little hit of progress. Fifteen minutes have now passed and you remember that you’re meant to be writing a report. You switch back to the Word document.
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You’re still stuck on the first sentence. You have a few goes but nothing seems quite impactful enough. Just then your phone lights up with a notification that says you have five new likes on the photo of your son that you posted on Facebook last night. You open up Facebook and see who has liked it. You feel smug and popular as your photo now has 40 likes. “I might just have a quick scroll through my news feed,” you think to yourself. Forty minutes, 10 likes, five comments – and one purchase of a gadget you’ll probably never use – later, you shake yourself out of your Facebook fog and get back to your Word document. It’s now 11am and a whole hour has passed, and you’re not quite sure how that has happened. If that sounds like your morning, you may be facing a distraction addiction. But don’t worry – you’re not alone. Research shows that we check our mobile phone an average of 85 times per day. Essentially, we can’t go a measly 10 minutes without just checking our
www.mpamagazine.com.au
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phone for something. In addition, a survey of over 5,000 leaders showed that 78% admitted to checking their emails frequently throughout the day. And most of us are bombarded with notifications from our phones, watches and computers every few minutes. Distractions are everywhere. While you may think this is harmless, research by the University of London has shown that even just the presence of notifications on our screens decreases our IQ by an average of 10 points. That’s the same loss we receive from not having slept the night before, and twice as much as the
2
Go on flight mode
So you’ve switched off all your notifications, but your phone still rings and beeps when people are trying to contact you via the good old-fashioned phone. While you may feel perfectly happy sending that blocked number to voicemail, it’s too easy to pick up the phone when your partner calls and have a little chat. To avoid the temptation of the call or SMS, switch your phone to flight mode. Just like turning off notifications, if you can eliminate the temptation to begin with, it’s far easier to create blocks of distraction-free time in your day.
Research shows that we check our mobile phone an average of 85 times per day. Essentially, we can’t go a measly 10 minutes without just checking our phone for something effect of smoking marijuana. So, if you are ready to beat your battle with distraction, here are three tips on how to do so.
1
Switch off ALL notifications
Oscar Wilde famously said, “I can resist everything except temptation.” Notifications tempt us. They flash up on our screen and scream, “Read me now!” One of the simplest ways to break your distraction addition is to turn off all your notifications. This means across all your devices, not just one. Removing temptations helps make it easier to keep focused on the task at hand. While turning off notifications will probably make you sweat with anxiety for the first few days – who knows what important status updates you may miss?! – in the long run this is the first step towards changing your distraction habits.
3
Turn your phone to grayscale
Have you ever noticed how bright and colourful and fun the screen of your phone looks? Sort of like those bright and colourful and fun slot machines in Vegas? This is not a coincidence. The makers of many of the social media applications you use on your phone employ hundreds of ‘attention engineers’ – the very same people that try to make gambling addictive are also applying the same tricks to your phone. Beat them at their own game by switching your phone to grayscale. As senior editor of The Atlantic James Hamblin says, “Instagram, when everything is in grayscale, looks pretty awful”. Amantha Imber is the founder of Inventium, Australia’s leading innovation consultancy. Her latest book, The Innovation Formula, tackles the topic of how organisations can create a culture in which innovation thrives.
www.mpamagazine.com.au
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PEOPLE
BROKERAGE INSIGHT
Join the Entourage When borrowers go to AMA-winner Damien Roylance and his brokers at Entourage Finance, they don’t get an appointment – they get to feel like a VIP
MPA: What is the idea behind the ‘Entourage’? Damien Roylance: The story goes that
advertising; this allows us to be fairly targeted in who sees our messaging.
I was watching the movie Entourage and was hit by the realisation that an entourage is exactly what people need when they are buying a home. Think about all the different services and support people you rely on to help you through the process of buying, and how often you’re treated as a transaction or number. So the idea behind the business is that every client we act for is a VIP. We’re their entourage. We roll out the red carpet for each and every one of them. And each interaction looks a little different; the way we support them is a little different and our post-settlement service is unique for everyone.
MPA: How does having an in-house conveyancing business assist your brokers? DR: Having our conveyancer sitting in-house
MPA: Who are your target clients and how do you find them? DR: We target a lot of first and next home buyers based in the southeastern suburbs of Melbourne, and we’re very clear on who we don’t want to target too. Our focus is residential owner-occupier and investment loans, and increasingly developments – but we refer out anything that doesn’t fit this description. We have some great personal networks that we leverage. A lot of our business is word-of-mouth (either face-toface or online), and ultimately we find having an online presence helps people talk about our business. We also spend a bit of time and money investing in social media
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just makes everyone’s life a little bit easier. We don’t wait days for contract checks or for return phone calls, which helps compress the time it takes in certain parts of the process. We are also able to offer complimentary contract checks for our clients, making their lives easier
too. Being able to have these two major components of the buying process in one place is a big plus, and I’m impressed when I see my brokers learning elements of conveyancing in aid of expediting the process. In an ideal world we’d control as much as possible – Steve Jobs always talked about a closed environment resulting in a better experience for clients, which we wholeheartedly agree with.
MPA: How do you maintain good relationships with referral partners? DR: Long lunches, of course! I’m kidding;
“In an ideal world we’d control as much as possible – Steve Jobs always talked about a closed environment resulting in a better experience for clients” OPEN VS CLOSED BUSINESS ENVIRONMENTS The open versus closed business environments debate was made famous by Apple co-founder Steve Jobs, who once declared that “open systems don’t win”. Open systems, such as Microsoft or Google’s Android operation system, allow other parties to make hardware and software; in contrast, many of Apple’s products only work with other Apple products. Jobs had a simple argument for this: “When selling to people who want their devices to just work, we think integrated wins every time. We are committed to the integrated approach.” For brokers, the debate is just as valid: should you try to offer several financial services in-house, or refer a customer out and risk them being disappointed? Brokerages have successfully implemented both approaches.
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FAST FACTS Year founded: 2015
we only maintain relationships with referral partners that embody our business ethos too. Maintaining a referrer relationship is not a difficult thing. We don’t pay for referrals in our business. Most of our partnerships are based on mutual respect and benefit for each other and our respective clients. We offer a premium service, and as long as their clients or friends are getting the kind of service they receive and expect of us then they keep referring. If our service drops, then the issue is one for me to address, whether it be an element within my business or an external factor that I need to resolve.
MPA: What is the next step for Entourage Finance? DR: We are planning on getting our broking
Owners: Damien and Amy Roylance plus 10 staff
and leadership team really humming throughout 2018 as we hired three new brokers last year. Beyond that we’ve got some expansion plans to branch into some more interesting target markets, utilising some of the networks our new team members have – we’re really excited to see where the business goes this year. I’d also really like to explore what a closed environment concept might look like for a brokerage business. Who knows where that will lead for Entourage as a brand.
Headquarters: Cremorne, Melbourne, Vic Ownership: Private Services offered: Residential mortgages, conveyancing, development finance and expat finance Income: Brokerage commissions
www.mpamagazine.com.au
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PEOPLE
CAREER PATH
THE MODERN MORTGAGE Over three decades at Macquarie, Frank Ganis brought securitisation to Australia and was involved in the transformation of countless brokerages and aggregators that we take for granted today During the 1980s Frank Ganis worked at several organisations, starting as leasing manager at Burns Phillip Finance before going on to Beneficial Finance, Centrelease Corporation and, in 1988, starting as NSW state manager at Asset Backed Securities. The latter role was significant, Ganis says. “My first exposure to securitisation assisted me to develop my ideas and vision that I took to Macquarie.”
1980
1999
LAUNCHES BRANDED PRODUCTS Ganis founded Macquarie Group’s direct mortgage business, Macquarie Mortgages Limited. He was instrumental in the bank’s investments in AFG, Yellow Brick Road, Connective, Vow Financial, and partnerships with Aussie Home Loans and Virgin Money Australia that were key to better understanding the broker channel. Securitisation had been a success, but working closely with brokers had one major advantage, he explains. “The big banks could replicate what we had built. The real trick was getting access to the consumer.”
2014
FULL RETAIL BANKING In a process that had begun before the GFC, Ganis helped Macquarie transition from simply selling loans to full retail banking, including home loans, transaction and deposit accounts and credit cards. In 2014 he became head of intermediary banking, with responsibilities encompassing the entire spectrum of finance. These years were important as they re-established and repositioned the bank’s retail activities, Ganis says.
“I’ve been prouder of the achievements and successes of the last 10 years since the GFC than what was achieved during my previous 20” 46
ENTERS FINANCE
1991
KICKS OFF SECURITISATION DOWN UNDER Two years after joining Macquarie, Ganis co-founded Macquarie Group’s Mortgages and Securitisation group. In 1994 Ganis began a commercial relationship with a little-known outfit run by John Symond: Aussie Home Loans. It was a stroke of genius that led current Macquarie chief executive Nicholas Moore to describe Ganis as “a pioneer in disrupting the home loan market”. Macquarie’s mortgage settlements eventually grew to over $100bn. “I’ll never forget the Sunday morning I woke up and saw in the Sydney Morning Herald: ‘Mortgage bank [Aussie Home Loans] undercuts big banks by 2%’ .”
2008
SURVIVING THE GFC With securitisation markets shutting overnight, Macquarie was also impacted by the GFC. Mortgage lending was substantially wound back from February 2008 to late 2010, a “challenging” period professionally and personally as Ganis had to shed hundreds of staff across the world. Macquarie turned its focus to retail deposits as a basis for growth. “It redefined me as an individual and redefined my organisation … out of adversity comes opportunity.”
2017
NOT-SO-QUIET RETIREMENT After 29 years of service and establishing a number of market-changing and influencing businesses for Macquarie, Ganis felt it was time for others to influence the future direction of the businesses he had overseen for nearly 30 years. He was briefly a non-executive director at Yellow Brick Road and is keen to take up other board positions. “I’d like to give back to this industry … I want to coach; I want to mentor; I want to open doors and opportunities; I want to help people and organisations be more successful.”
www.mpamagazine.com.au
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PEOPLE
OTHER LIFE
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5,780,076kg Food rescued by OzHarvest in one year
1,249
Number of charities helped per year
17,107,654 Meals delivered over the year
COOKING UP A STORM A ‘CEO CookOff’ led Aussie’s James Symond to form a partnership with food charity OzHarvest LIKE MANY CEOs, for James Symond charitable work meant writing cheques and attending dinners, “but I hadn’t genuinely got my hands dirty”. That changed in 2016 when he was invited to OzHarvest’s CEO CookOff, where Australia’s captains of industry sweat it out in the kitchen in a culinary and fundraising battle.
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Two years on, Aussie’s partnership with OzHarvest has helped feed around a million vulnerable Australians, with 250 leg hams and 340 Christmas hampers donated last Christmas. Aussie’s general manager people, Lynda Harris, helps Aussie brokers and staff get involved in OzHarvest events, including bake-offs, the Night Noodle
Markets, collecting donations at stores, and Cooking for a Cause. “I believe that if you’re in a position to give back, whether it’s with your time, money or other resources, then you should,” says Symond. “And even better if it’s a worthy cause connected to the community you live and work in.”
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