Mortgage Professional Australia (MPA) Issue 9.09 by Key Media

www.brokernews.com.au issue 9.9

growth of franchises

Fact, figures, fees and figureheads

FEE FOR SERVICE IS IT THE FUTURE?

OFC_SPINE_final.indd 2

SAGE ADVICE INSPIRATIONAL TIPS FROM INDUSTRY’S BEST

PROFILED WESTPAC’S HUW BOUGH

10/08/2009 4:31:32 PM

Editor’s letter

Pearls of wisdom

9. 09 issue

The best advice I have ever received was from a good friend. During a particularly difficult time in my life she told me “the only way out is through”. What she was saying was you can’t avoid your problems; you have to face them to get through them. Since then, I’ve used this motto to help me get through a lot of life’s difficulties – the impact of the GFC for instance! Unfortunately it doesn’t make my problems any easier to deal with, but it reminds me that if you work at something eventually you’ll come out on the other side. Often the best advice is very simple. In this issue, we asked the industry’s top representatives to share some words of wisdom. As you would expect, some of the lessons were derived from their experiences in business, but many shared lessons that were gleaned from personal events outside the boardroom. Also in this issue, MPA takes a special look at franchises. The 2009 Franchise Report is a comprehensive look at what it costs to own a franchise and what you can expect in return. We’ve broken down company stats, start-up costs, initial and on-going training, marketing and branding support and territory rights, to give potential franchisees a leg-up in researching their options. Happy reading,

Andrea Lavigne Editor

MPA 2.0 Our multimedia edition features on-camera interviews with the industry’s biggest players. Visit Brokernews. com.au/MPA to hear their thoughts on the hottest issues facing mortgage brokers.

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contents

cover story

34 The MPA Franchise Report 2009 facts, figures and fees, a comprehensive look at the franchising sector

Look for extras in MPA's 2.0 eMag edition. On-camera interviews with:

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David Fox 18

Graham Mendolowitz 66

Peter Bromley 34

48 fee for service Brokers, mortgage mangers and aggregators debate the industry’s hot potato

9. 09 issue

contents

Features

52 Diversification: MPA asks aggregators what they are doing to help brokers grow their business

PUBLISHER Justin Kennedy

SALES MANAGER Rajan Khatak

Education

DIRECTOR Claire Preen

Account MANAGER Simon Kerslake

REGIONAL MANAGING EDITOR George Walmsley

HR MANAGER Julia Bookallil

18 Top tips: industry leaders on the best advice they ever received

22 Opinion: consultant David Fox on how brokers can transition to client advisors

EDITOR Andrea Lavigne

JOURNALIST Tim Neary

46 eMarketing: the winning aspects of a great website

MPA LENDER 62 News: a review of news in the world of non-bank lending and mortgage management. 66 Industry profile: MKM Capital

9. 09 issue

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70 Opinion: how innovation will save non-banks

PROFILES 28 Leaders: Huw Bough 30 Brokers: Lisa Sanders

PRODUCTION EDITOR Tim Stewart DESIGN MANAGER Jacqui Alexander

BOOK EXTRACT

20 Roger Mendelson’s Business Survival Guide

MARKETING COORDINATOR Jessica Lee TRAFFIC MANAGER Stacey Rudd

DESIGNER Ben Ng Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as MPA magazine can accept no responsibility for loss

LIFESTYLE 72 My favourite things: Kevin Conlon

MARKETING MANAGER Danielle Tan

This magazine is printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry

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News brokers

More brokers tackle insurance The number of mortgage brokers adding insurance to their services is set to rise as aggregators reveal new alliances with major insurance groups. Mortgage Choice announced it has set up a strategic partnership with Lifebroker in early July. “Securing Lifebroker as an insurance partner is a deliberate step to broaden the range of services that Mortgage Choice customers can access,” said Michael Russell, CEO. Meanwhile, Aussie Home Loans announced it was also expanding into insurance as a means of helping its brokers diversify their businesses. The home loan provider now promotes a range of life, funeral and accident insurance products with premium rates fixed for the first three years. “I was shocked to learn the penetration rate of life insurance in Australian is so low. We often take things for granted and we don’t plan for the future. Young Australian families should think about what would happen if the worst were to happen to one of the breadwinners,” said John Symond, chairman of Aussie. “We all place a high value on insuring our car or our house, yet we are complacent when it comes to insuring our most important asset – ourselves.” The insurance push coincides with a major re-launch of the Aussie brand with a new slogan “Put yourself in a better place”. Mortgage Choice also launched a “brand refresh” aimed at franchise owners, business affliates as well as new and potential customers. The ‘Let’s make the right move’ campaign was developed after a marketing review earlier this year.

Part-time brokers can stay: Citibank

Mortgage Choice profit correction

Part-time brokers with professional standards will always have a place in the industry, according to Citibank’s head of mortgage distribution, Peter Hayward. “It’s not about whether you are part-time or full-time, but whether you are professional or not,” he said. However Hayward added that part-time brokers who were also working in a “wildly different industry” would have a tough time. “But why not be an accountant or financial planner and also a broker?”

The profile Russell’s turn to deal in MPA 9.7 referred to a net profit decline of up to -45% for the full year to June 2008. The figure was from the Australian International Financial Reporting Standards guidance that was submitted by Mortgage Choice on 18 November. Mortgage Choice had since updated its profit guidance which reaffirms a 20–25% reduction in the AGAAP profit against 2007/08 and affirms a 20-25% reduction in AIFRS profit against 2007/08.

News banks

ING Direct on track to meet growth targets

ING Direct reported a record profit for 2008 and is on track to report yet another record profit for 2009 across all of its business lines. The retail bank has grown its deposit base by more than $1bn since January 2001, bringing its total retail deposit base to $20bn. Contrary to a report which appeared in The Herald Sun and MPA 9.8, rumours that ING Direct Australia is for sale are unfounded. Readers should also note that ING Group has not sold it Canadian Direct Banking arm, as previously reported.

Finance sector sheds jobs Regional banks are slashing jobs and looking at employee’s hours in a bid to cut costs. Suncorp Metway announced in mid-July it was axing 250 jobs, including 50 managers. The announcement came just days after Bendigo and Adelaide Bank revealed it is urging workers to take 10 days of unpaid leave over the next year. Mid-tier banks are not the only ones juggling human resources. ANZ announced it was restructuring its mortgage processing operations, affecting 250 staff.

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Fegan joins AMP board Paul Fegan, former boss of St.George bank before its merger with Westpac, has been appointed to the board of AMP. Fegan, 48, will join AMP as a non-executive director. He left St. George in November 2008 after shareholders approved its merger with Westpac.

Paul Fegan

Australian exit fees “substantially higher”: law firm Australian borrowers feel they are “being ripped off” by exit fees, according to law firm Financial Redress. Managing director of the consumer compensation firm, James Middleweek, said exit fees being charged by lenders in Australia are substantially higher in every respect compared to those charges in the UK.

Westpac backs industry’s top awards night Westpac has agreed to be the official event partner of the 2009 Australian Mortgage Awards. The annual event attracts hundreds of the industry’s biggest and brightest players to celebrate members who have demonstrated excellence throughout the previous financial year. The awards night follows months of research. Finalists are handpicked from hundreds of nominations by industry insiders, so that only the cream of the crop are awarded on the night. Winners will be chosen by a panel of judges composed of some of Australia’s most respected players. The awards are split into 25 categories, such as Franchise Operation of the Year, Brokerage of the Year, and Best Bank BDM. “This is an exciting key annual event that recognises the best in achievement and performance of individuals and businesses in the Australian mortgage industry,” said Huw Bough, general manager, Westpac mortgage broker distribution. This year’s event will be held 25 September at the five-star Westin in Sydney’s CBD. Visit the official website and secure a table at this sell-out event: www.australianmortgageawards.com.au

10, 000 Since October almost 10,000 jobs have been axed in the finance sector.

News Property

Australians demonstrate love for property Australians are borrowing less for everything except property, according to ABS statistics. Many households are tightening their belts by putting away their credit cards and avoiding borrowing for shares. But the demand for new loans for houses and renovations remains high. Lending for housing rose by 3% to more than $17bn in May. Personal loans dropped by 2.9% overall in May to just over $6bn – the lowest level since November 2005. ABS statistics also revealed credit card borrowings were down by 4.8% for the same month. The RBA reports that overall credit card balance fell for the first time in 14 years. The average outstanding credit card balance is about $3,000. The increase in borrowing for property coincides with significant cuts to interest rates. Of the loans approved in June, 88% were variable.

3% The percentage lending for housing rose in May

Investors eyeing market Investors are being lured back into the property market by strong rental yields and an overall improvement in confidence and market conditions, reports RP Data. “Investors are likely to be waiting for first homebuyer activity to start winding back before returning to the market. There is a considerable overlap between investor and first homebuyer buying preferences, with both segments often targeting similar properties,” said Tim Lawless, PR Data’s national research director.

New home construction numbers weak New residential building work fell sharply in the March 2009 quarter, according to ABS figures. The weak start to the year reinforces the importance of government initiatives to stimulate new home construction, said the Housing Industry Association.

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Astute would like to congratulate our broker members who are finalists in the Australian Mortgage Awards 2009:

■

B roker of the Year – Independent Peter Trethowan, Pinnacle Finance Brokers roker of the Year – Commercial Finance B Scott Smith, Cairns Finance Joanne Wall, Pinnacle Finance Brokers B roker of the Year – Commercial Real Estate Danny Adams, Cairns Finance Commercial Brokerage of the Year Cairns Finance Young Gun of the Year – Independent Kandi Hughes-Sparrow, Dynamic Finance Solutions B rokerage of the Year =<5 staff Definitive Finance rokerage of the Year >6 staff B Pinnacle Finance Brokers est Customer Service from an Individual Office B Niche Lending

HOME LOANS • COMMERCIAL • EQUIPMENT FINANCE

CALL 1 3 0 0 A S T U T E www.astutefinancial.com.au

news analysis

Who’s next? First homebuyers are dwindling – will investors step up to the task of propping up the property market? Prime Minister Kevin Rudd foreshadowed the slow fizzle of the first homebuyer boom in April when he said “All good things must come to an end”. The First Home Owner Grant did a commendable job in propping up the Australian housing market, stimulating activity in the building and construction industries, supporting employment and helping first homebuyers jump into the property market. But it was not intended to be a permanent fixture of government spending. While the government agreed to extend the full First Home Owner Grant ($14,000 for established and $21,000 for new housing) until 30 September and offer a reduced bonus ($10,500 for established houses and $14,000 for new homes) for the three months to 31 December, it is clear that the first homebuyer bubble is about to expire regardless. AFG figures for June demonstrated that mortgage sales to first homebuyers fell by 30.6% from their peak in March. The index revealed that 19.5% of all mortgages in June were sold to first homebuyers, compared to 28.1% three months earlier. Confirmation of the slow decline in first homebuyers can be seen in the LVR statistics, which fell from 73.7% in April to 66.9% in June. “We’re seeing a number of encouraging signs that the mortgage market is normalising. First home buying, investor activity and LVRs are all reverting towards the long-term trend after a period of turmoil,” said Mark Hewitt, general manager of sales and operations. But the AFG index did find investor confidence was rebounding. The proportion of loans to investors rose to 29%, up from 24.5% in March. The data prompts the question – will investors take first homebuyers’ place in propping up the housing sector? Weak returns from shares and superfunds could force older investors to consider investment properties as a reliable source of income. An economist for ANZ, Alex Joiner, told The Sydney Morning Herald that investors are likely to consider juggling their portfolios in favour of property. The Real Estate Institute of Australia’s David Airey has also indicated that increasing rental yields and low interest rates are luring investors back to the property market. “Based on median

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house prices and median rents, investors in six of the eight capital cities can expect a positive return if they have a 25% deposit and use an interest-only loan,” Airey said. And in April, the seasonally adjusted value of finance commitments for investment housing increased for the second consecutive month – for the first time since mid 2007. “History shows that fortune favours the brave, and astute investors may see this as a great opportunity to invest in quality property with great long-term growth prospects,” he said. RP Data’s research also indicated investors would be the ones carrying the torch going forward. The research group found high rental yields, combined with improved confidence and market conditions, are luring investors back. “Investors are also likely to be waiting for first homebuyer activity to start winding back before returning to the market. There is a considerable overlap between investor and first homebuyer preferences, with both segments often targeting similar properties,” said Tim Lawless, RP Data’s national research director. He added that rental rates have increased by 34% over the last three years and now appear to be peaking.

Astute would also like to congratulate our Club Financial Services members who are finalists in the Australian Mortgage Awards 2009: ■

■

Broker of the Year – Franchise Joshua Egan, Club Financial Services Gippsland Young Gun of the Year – Franchise Paul Bieg, Club Financial Services Norwood Brokerage of the Year =<5 staff Club Financial Services Maitland Brokerage of the Year >6 staff Club Financial Services Gippsland Best Customer Service from an Individual Office Club Financial Services Gippsland Best New Office on the Block Club Financial Services Norwood Franchise Operation of the Year Club Financial Services Adelaide

Committed to quality. To find out what sets us apart, call now.

Quality mortgage broking franchise

Quality aggregation services

Club Financial Services

Astute

1300 CLUBFS

1300 ASTUTE

news analysis

What will the government do now?

Left to right: Wayne Swan, Iain Forbes , Garry Driscoll

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It wasn’t extra competition as much as the advent of securitisation that has saved “billions for millions” over the last 15 years, according to Iain Forbes, director of Australian First Mortgages (AFM). And in the last year the AOFM’s $8bn funding program has kept that securitisation market alive. The program is now on the verge of drying up, with nothing remaining for second-tier authorised deposit-taking institutions (ADIs) and not much left for non-bank lenders. “The AOFM initiative has provided a number of non-banks and smaller banks with additional lending capacity when securitisation markets have been effectively closed due to the credit crunch and ensuing financial crisis,” Forbes said. Before the onset of the credit crisis the Big Four accounted for less than 70% of new lending. Now, including the mergers, they have around 90% of it. The scheme was launched by Federal Treasurer Wayne Swan on 26 September last year “as part of the Government’s commitment to strong and effective competition in Australia’s mortgage markets”. Forbes called the $8bn a meaningful contribution – in that it kept the lights on while the industry waited for the securitisation markets to return to normality.

“And it’s been especially meaningful for the non-banks who’ve received half of the investment capital, but their total AOFM funding of $4bn is just $1bn more than the $3bn in monthly volume of loans they were writing pre-GFC,” he said. Forbes pointed out that the major banks had raised around $120bn of wholesale funding subject to the government guarantee, with around $1trn worth of retail deposits being guaranteed. Swan is yet to announce an extension to the scheme, though it has been reported that government was considering expanding this program to $30bn. Forbes said that the ideal next step would be to put cheaper home loans directly into the hands of Australian families through a government guarantee on AAA-rated RMBS. “It can be used by banks, non-banks and other ADIs. Economically it’s much smarter, but it’s a tough concept to sell to the electorate,” he said. The next best option for Forbes would be for the government to go ahead with the expanded scheme. Originally the scheme was launched to garner greater competition, and CEO at Mortgage Ezy Garry Driscoll said that it had done so. But he warned that these initial efforts were just the tip of the iceberg of what was required. “It is always going to be extremely difficult for the non-banks to compete head-to-head with the banks when the government guarantees their depositors and also their wholesale funding. There needs to be a more level playing field, and this requires the government to provide greater support to non-banks in the short term,” he said. Like Forbes, Driscoll felt that the initiative had made a meaningful contribution to the mortgage management sector since it had enabled some organisations to keep their funding going in these challenging times. “Without this government support, life for the non-banks would have been a lot tougher,” he said. Driscoll said the commitment from government needed to be maintained – even increased. He added that the government had to look at more innovative ways to encourage competition and stimulate the economy at the same time. He felt that government would do well to work hand in hand with mortgage insurers, non-bank funders and the mortgage management industry “to come up with solutions that will encourage competition in the home loan market and provide a means to stimulate the economy.” In July the AOFM invested $299.5m in Wide Bay Building Society RMBS and $190m in Australian Central Credit Union securities, bringing its total investment in prime RMBS up to $6.693bn with $3.24bn in RMBS issues sponsored by ADIs and $3.453bn in RMBS issues sponsored by non-ADIs.

news analysis

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news analysis

Time to buy With house prices likely to lead the way out of the downturn, potential investors ought to move on the right property rather than wait for a rebound in the overall economy Mortgage brokers should be prepared for an increase in business from investors looking to take advantage of any upturn in the housing market, according to industry experts. In the past, house prices have led the way out of a downturn and are more affected by consumer confidence than any other factor, according to RP Data senior analyst Cameron Kusher. He says that house prices and consumer confidence have historically shown a very high correlation. “What we’ve seen over time is that sales volumes and the consumer confidence index trend together closely. So sales volumes and consumer confidence have been very low, right up until the most recent months when it has bounced back a bit,” he says. Kusher also points out that property is the biggest asset class in Australia, with many people having most of their money tied up in it. As a result, when prices start to rise confidence increases – and the two feed into each other. Consumer confidence is measured by Westpac, which puts out a monthly survey to see how people feel about spending their money. If the resulting number is above 100 then optimists outweigh pessimists, if it is under then vice versa. From January 2008 and May this year the index fell from 103.1 to 88.8 and never broke that allimportant 100 mark. In June and July, however, it has surged upwards.

Kusher says that six months of high confidence will be enough to breathe life back into the sagging property market. “Once consistent confidence returns to the market for over six months we’ll see these sales volumes start to pick up,” he says. Time to buy ANZ economist Alex Joiner agrees that house prices reflect the economic cycle, and will therefore lead the way out of the downturn. He also agrees that consumer confidence has a strong impact on property prices – and recent reports have been very positive for the housing market. Recent news of ‘green shoots’ within the broader economy is credited with part of that confidence, but another aspect is the Reserve Bank’s willingness to hold interest rates at exceptionally low levels. The good news for investors is that Joiner expects rates to stay low for another 12 months at least. With the economy far from out of the woods, Australia’s central bank will not start lifting rates until late next year – and even then not as high as in recent years. “I expect the Reserve Bank to increase interest rates some time in the second half of 2010, and that will certainly start to put the brakes on the housing market – it always does. Historically, it just slows growth in house prices – it hasn’t caused significant falls before,” Joiner says.

Consumer Sentiment Index

120.0

50,000

100.0

40,000

80.0 30,000 60.0 20,000 40.0 10,000

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Oc t-0 0 Ap r-0 1 Oc t-0 1 Ap r-0 2 Oc t-9 02 Ap r-0 3 Oc t-0 3 Ap r-0 4 Oc t-0 4 Ap r-0 5 Oc t-0 5 Ap r-0 6 Oc t-0 6 Ap r-0 7 Oc t-0 7 Ap r-0 8 Oc t-0 8 Ap r-0 9

Oc t-9 8 Ap r-9 9 Oc t-9 9 Ap r-0 0

Oc t-9 5 Ap r-9 6 Oc t-9 6 Ap r-9 7 Oc t-9 7 Ap r-9 8

Ap r-9 4 Oc t-9 4 Ap r-9 5

20.0

Monthly Sales Volumes

60,000

140.0

6mnth average sales volumes

6mnth average consumer sentiment

Education opinion

making

the move

Industry commentator David Fox explains how to make the transition from loan writer to client advisor see the interview live David Fox reveals why its necessary for brokers to move beyond loan writing on Brokernews.com.au/MPA

Many brokers have difficulty positioning themselves as a client-focused adviser meeting the priority financial-related advice needs of the client. It is not difficult to understand why many find this concept difficult. For ten, twenty or even thirty or more years brokers have been thinking about their businesses in a certain way – and typically their core business activity has been to satisfy a want expressed by a client and in doing so making a sale. So changing the approach to engaging the client in conversation on what is important to them, and exploring that advice to help them achieve what is important, often seems too difficult and challenging. But since our clients are changing, brokers must change their approach. More demanded from brokers Clients now have a greater realisation of their need for advice, are far more demanding, and will no longer respond to or accept advice that is not specific to their needs. Many are not yet aware of the increasing power they have, and do not appreciate how many providers are competing for the privilege of servicing them. Given this major influence on our industry in the immediate future, brokers will need to interact differently with clients tomorrow than the typical loan writer does today. As depicted in the table (see right), those making this transition will shift their focus from product to client; from managing wants to uncovering needs; from completing transactions according to the business capability to satisfying the advice needs of the client; from focusing on costs to delivering value; from doing it all themselves to leveraging specialists and advice partners; from feeling responsible for everything to working as a team; and from being challenged to

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find new clients to being selective in the clients they deal with. To support this transition, brokers must redesign the client engagement process. Listen to your client The engagement process of the client adviser focuses on uncovering what is important to the client, and identifying the components of advice that the client needs to help them achieve what is important. This process begins with listening to the client! Give the client a chance to tell their story, and then asking probing questions to determine if their wants and needs are aligned. These questions often uncover issues that the client had not considered, and this may affect their advice priorities. The client adviser then prepares and delivers advice – not merely a solution for what the client thought they wanted. This may require an introduction to another advice professional who would be positioned as a specialist adviser of the mortgage broking business. The advice would be delivered along with a clear presentation of the value of that advice. After the advice is accepted and implemented, the client adviser will continue to build the trust and confidence in the relationship. They will deliver a structured client care program which will include meeting with the client at least once per year, providing a brief report on their progress to achieving what is important to them and communicating by phone or email on a monthly basis. Successfully changing the client engagement process is the most important step of this challenging journey. mpa

Today’s loan writer

Tomorrow’s client adviser

product-centric

client-centric

managing wants

uncovering needs

transact according to business capability

advice according to client priority needs

focusing on value

focusing on cost

doing it themselves

leveraging specialists

doing everything

working as a team

challenged to find new clients

selective in the clients they deal with

Education business survival

Post-crisis plan Roger Mendelson’s Business Survival Guide: How to steer your business through the recession provides invaluable tips for brokers looking for guidance. In this excerpt, Mendelson details a few tips for businesses looking to plan for the postrecessionary period (PRP). Mendelson’s book gives a complete 10 tips, but we’ve only highlighted a few to give brokers a taste. Failure of leadership Good leaders can be developed. They are not simply born that way. There are techniques which will enable anyone with basic people skills and drive to become an excellent business leader. Sustainable, profitable businesses need many leaders, not just one. They need to develop leaders from within, so that the company creates its own future leaders who understand the business, believe in its culture, ideals and goals – and can develop successful leaders below them. During the PRP, successful business leadership is going to become more important than ever, because surviving businesses will need to adapt quickly to change. Not handling staffing issues properly As discussed earlier, the recession is going to provide a real testing ground for the way a business handles its human resources. There is nothing more testing of business skills that having to implement various strategies which have the intention of significantly reducing labour costs. Many companies will fail because they are unable to reduce costs significantly. During the PRP it is going to be crucial for businesses to attract and retain the type of people they want to have working in the business without paying them too much money. During the recession, the fear factor comes into play. It will be possible to get the most out of your employees by using the stick. That is, ‘if you don’t do what we want, you won’t be here.’ During the PRP, jobs will become more plentiful and this approach will not work. Companies that get this right will prosper during the PRP, and those that don’t will revert

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back to the situation they were in previously: burdened with an overpaid workforce which neither likes nor respects the company. Failure of financial controls Companies burderned by excessive debt are akin to a swimmer who has weights attached to his arms and legs: he may be able to thrash around for a while, but the swimmer will ultimately sink to the bottom. During PRP, your business must plan to grow organically, and to do this it must operate tight financial controls. This way, not only does it make a satisfactory profit on paper, but that profit translates into cash at bank and part of this cash at bank will be used to fund growth. Poor billings and account collections Businesses with poor billings and account collections processes will be among the early casualties of the recession. It will be almost impossible to survive the added pressures of the recession unless your business has excellent billings and account collections processes. During the PRP, the business will again focus on development and growth. However, the two must go hand in hand. Growing, developing new products and services and developing the business must be carried out in conjunction with tight business processes. Failure to set and adhere to goals At this point, your focus is on riding out the recession. During the PRP, your business still must be have defined, achievable goals. The single-minded focus which you will be putting into surviving the recession must migrate, without diminishment, toward the goals which you set during the PRP. During the PRP, business life is going to be much tougher that it was during the good times, so the sense of urgency and focus must continue into that period. The foremost goal of every business must be to maximise profit on a sustainable basis. mpa

About the book Business Survival Guide: How to steer your business through the recession by Roger Mendelson is published by New Holland Publishers: www. newholland.com.au

Education best advice

Tips from

the top

The idea that everyone can benefit from the wisdom of others prompted MPA to ask a collection of the mortgage industry’s leaders about the best advice they had received along the way and that still stands them in good stead today

e were surprised at how much of what inspires the industry’s most recognisable faces originated from outside of the board room. Some of best business advice these leaders picked up along the way is hard nosed, as you would expect, but then some of it came from more simple walks of everyday life. Yet no matter what its source was, what is on offer here is a definitive collection of the Australian mortgage industry’s most valuable business advice – directly from the horses’ mouths.

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Gerald Foley Managing director, National Mortgage Brokers The greatest business advice I’ve ever come across was discovered when my youngest daughter was five and she spent a lot of time in hospital. Spending sometimes days and nights sitting in the Royal Childrens’ Hospital you start to observe the workings going on around you. What became very clear to me was that every person had clearly allocated roles and responsibilities; they were trained and all performed to an extremely high level. There was a lot of respect shown from the top doctors through to all the ward staff. Everyone knew that their role was important and how to do it. They all also knew that if any of them didn’t do

All roles are important; everyone should execute to the highest standard –Gerald Foley

Act with integrity, always –James Symond

their job properly, the results for the patients could be extreme. Now in business, obviously the outcomes of things not going right aren’t as serious as in a hospital, but the lesson to learn is to define roles and responsibilities, that all roles are important and everyone needs to execute theirs at a high standard. Thankfully, my daughter is now a healthy 16-year-old who loves life! James Symond Executive director, Aussie Home Loans There are all sorts of excellent pieces of business advice about surrounding yourself with awesome people, being absolutely passionate, communicating effectively and always ensuring that you are a part of change rather than a victim of it. These are all correct, and appropriate. However, at the end of the day, integrity in business (as in life) is the big one for me. If the people around you trust you, then you can grow to where you want to be. The opposite is also true. If they don’t, you have no chance. Kathy Cummings Executive general manager of third party banking, Commonwealth Bank One of the best pieces of advice I have come across was in Stephen Covey’s Seven Habits of Highly Effective People. I first read this book some years

In all interactions, look to first understand then focus on the things you actually can influence for mutual benefits –Kathy Cummings

ago, and at the time I was dealing with a difficult 16-year-old daughter. I found his advice of ‘seek first to understand, then to be understood’ very useful in dealing with that situation. I also like his circle of influence concept. By separating the things we have no control over we can concentrate on influencing things that lead to more powerful and effective leadership. His win/win philosophy which he sees as a frame of mind – and heart – that constantly seeks out mutual benefit in all interactions is also very appealing. Lisa Montgomery Head of marketing and consumer advocacy, Resi Homeloans At the age of about six, I heard my father telling my mother: “You have to speculate to accumulate.” It was the first time I’d heard him say this, but while I was growing up I’d hear him say it again and again to all of us in the family. Now when I look back on my life’s so-called milestones, I can see how often I have reverted to that simple piece of advice. And, how it has served me to reach the successes I might never have got to without it. The most profound way that it has impacted my life was when I moved from Newcastle to Sydney to take the job with Resi. At the time, I was really unsure and couldn’t make up my mind. I was caught in a comfort zone. Then I remembered my father’s words. I did it, and really haven’t ever looked back.

Sometimes you need to take a chance –Lisa Montgomery

Garry Driscoll CEO, Mortgage Ezy The best advice I ever got was: get the right person on day one and you will reap the rewards. But pick the wrong one, and your problems will be only just beginning. Everyone says that the greatest asset in your business is your staff. It’s true; and they are also the most expensive and the most time consuming. As with property, you make your money when you buy; with staff you make your money when you hire.

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Education best advice

Martin Lynch Head of reverse mortgages, RBS Group (Australia) I assume this will lead to a deluge of things along the line of ‘work on something you love and are passionate about, and everything else will flow’. So, in 23 years of working in financial services my top five recommendations are: “Don’t worry about the staff who wear cardigans; it’s the ones with MBAs that will destroy your business.” This has been proved true time and time again. “If a competitor is pinching your worst clients, they will get your best ones in the end.” Apparently a dictum that Hewlett Packard held true. “If you have to go back to the contract, the relationship is dead. If you spend more than a week negotiating the contract, walk away.” I wish I had – a few times. “If you don’t understand what someone is saying, keep asking questions until you do. Odds are that they don’t understand either or something is terribly wrong.” Could have saved the sub-prime crisis, this one. But you have to be older to be willing to look stupid. By the way, I do agree about working on something that you are passionate about – just remember to be practical and work your butt off, then you have a reasonable chance of success in the end. Steve Weston General manager for distribution, broker platforms and lending, Challenger Funnily, the best business advice I ever received only partly relates to business.

Being practical and work hard will improve your chances –Martin Lynch

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Having been involved with competitive sport for many years and now handling the demands of the fast moving corporate world, one of the key pieces of advice that guides me today is: make sure you look after yourself – and your team members. Many of us spend a lot of time planning for our business but we fail to create a vision of what we should be doing regarding our own health, our wealth, our family life, and our happiness and peace of mind. Any one of these things will, if absent, sabotage your business aspirations entirely. Having a balanced life is not just about you, it’s about the wellbeing of your team as well. It is possible to take a leadership role and make it okay to live a life beyond work. This will make the team more balanced and less stressed, and the business will benefit. Chris Acret Managing director, Smartline I had to wrack my brain for this as I think you learn most things the hard way – through experience rather than following someone’s advice. Then again, maybe that’s just me! There are thousands of pieces of advice that all have their place. Things like: systemise everything and focus on the process, make sure you have the right people in the right roles or question everything. I could go on, but the one thing that took me ages to learn in business but remains the most useful is: trust your gut instinct. It’s almost always right.

Less stress + more balance = better business –Steve Weston

Trust yourself –Chris Acret

Peter Hayward Head of distribution and marketing, Citibank Mortgages The best advice I ever received has come mainly from sayings. These are the ones I still use at various times in my business. I think they sum up beautifully how one acts, works, understands and develops. 1. Whatever you say or do, you must be prepared to have it written on the front page of a newspaper. 2. Bite off more than you can chew and chew like hell. 3. Stay close to your competitors as your best referral source is another bank. 4. Work on your strengths if you want to improve. Work on your weaknesses if you want to be average. 5. Seek first to understand then to be understood.

Education

best advice

Paul Eldridge CEO, Intellitrain The best advice I ever received was that if you’re irreplaceable, you’re un-promotable. Many people who start out in business end up buying themselves a job. By that I mean that they work hard and put in long hours. The problem with this is they, in effect, become the business. Without them, the business does not function. Those who truly succeed in building great businesses are the ones who get it right for it to function efficiently independently of them. They look to replace themselves with systems, technology and people. This enables them to work on the business, not in it. My first mentor told me I was the best salesman he’d ever seen. But, he said, unless you learn to replace yourself a salesman is all you’ll ever be. He was right. As soon as I stopped trying to feed my own ego and looked to actually build my business, I started on the path to growing a business, not just buying myself a job.

Grow a business rather than buy a job –Paul Eldridge

Negotiate in good faith; better an air-tight relationship than an airtight contract –Steven Ramage

Steven Ramage Head of mortgages, Citibank Mine came from a very senior executive at a major bank that I was working for. I was negotiating a contract with a software supplier. He made it very clear to me that despite the very big size of the bank against the very small size of the supplier, the contract needed to be negotiated on a basis that would be fair to both parties.

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Education best advice

Safety first –Paul Gollan

Know more about your customers’ business than they do –Bob Hall

The best outcome would be that we would spend six weeks negotiating, and then execute a contract that we would put into a drawer – never to be referred to again. The most important thing was that the price we were paying enabled the supplier to provide the service we required; otherwise the arrangement would be forever doomed. He stressed that the relationship between the two parties was much more important than anything contained in the contract. I have seen on many occasions where a customer has screwed a supplier down on price only to see the entire arrangement turn into a disaster for the customer. Paul Gollan CEO, Australian Mortgage Brokers Be very careful who you take advice from is my number one rule in business. Bob Hall CEO, Sandstone Technology Seven years ago I was interviewing a bright young consultant to join our company. I asked him what he thought he could add to the business. He said: “If you are going to sell lending systems to banks, you will need to understand lending better than they do.” At that time, we were a software company that prided ourselves in being able to produce software quickly and efficiently. We worked with our lender customers and they would tell us what to build. The problem was that each lender was doing things in a different way and this was dragging our product in multiple directions and leading to

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Stay focused, execute your plan well –Gus Mendez

expensive customisations. I took his advice and started to recruit specialised lending skills into the company, targeting those that were thought to be leaders in lending transformation. Having this expertise on board proved revolutionary. Instead of offering our customers a system that could be heavily customised to handle their existing lending processes, we were now in a position to offer our customers something of substantially higher value: a consultancy-lead program to transform their loan processing.

Director and CEO, Loan Services Australia (LSA) When I first started LSA, a successful businessperson whom I considered to be a bit of a mentor said this to me: “Stay focused on the original plan and ignore the noise around you”. I have never seen a bad strategic plan or at least one that didn’t make some sort of sense, but have seen plenty of examples of bad execution. Mostly, this is due to a loss of focus. Give me a business with a poor strategic plan with focused execution over a great strategic plan with poor execution any day. Joe Sirianni Director, Smartline My dad often told me “The ones that love you most make you cry”. My father was extremely strict and tough on me. As a kid I wondered why, but as I grew older I realised that his guidance and leadership provided me some valuable lessons. We all know as parents it’s often easier to give in to the kids’ demands to

No substitute for tough love in the long run –Joe Sirianni

Education

best advice

keep the peace, but we should never underestimate the value of tough love. He also used to pull me close and remind me of this old Italian saying: “Se sei un martello devi martellare! Se sei un chiodo devi ascoltare se srae zitto.” This basically means: “When you’re a hammer, you hammer! When you’re a nail, you shut up”. Paul Lahiff CEO, WD Scott Global As a teenager, you are often confronted with a range of choices. My father told me at the time to “always be able to look at yourself in the mirror each morning” to help me make the right decisions – and be able to live with their outcomes. I often still draw on that wisdom – in both life and business. The modern business variant would be: “Would you be prepared to see this as a headline on the front page of The Australian Financial Review?” John McGrath CEO, Oxygen Homeloans Too many businesses start with low expectations and therefore low standards. Once you’ve aimed high, ask yourself: “What will it take to create the best business on the planet in my space?” Then go and do it. mpa

Make sure you can live with your actions –Paul Lahiff

Think much bigger and aim for world best –John McGrath

Mark Hewitt General manager of sales and marketing, AFG While working in the bank 20 years ago, a very cynical credit manager told me: “If it seems too good to be true, it probably is.” When you are young and fresh and full of enthusiasm, every deal that you come across looks good. His advice allowed me to view each opportunity with clear eyes; to sit back and consider whether it is as good as it seems. Dig around a bit to find out all the facts first, rather than accept everything at face value.

Temper enthusiasm with a dose of reality –Mark Hewitt

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Profile leaders

building trust When he left a long cold British winter behind at the tender age of 19, Westpac’s Huw Bough had the image of an endless Aussie summer on his mind – not a lifelong career in mortgage broking

uw Bough has truly sat on both sides of the fence in mortgage lending. Before taking up his current role with Westpac as head of broker sales, Bough performed for 11 years in a range of roles in the broking space. This included running his own mortgage origination business for seven years, and heading up RAMS’s broker division for four. Today the experience gives him valuable insight into how the current Westpac broker strategy will work to the best benefit of its broker partners. Bough’s business philosophy is straightforward. “In order for a business to be successful it is essential to understand the customer,” he says. His broking experience puts Westpac in pole position to understand the important motivators for brokers. The key is to build a foundation of Westpac’s mortgage broker operations through collaboration and, in his own words, establishing a track record of trust. Forward thinking Regarding the pending national regulation of the sector, Bough says: “I think it is one of the biggest changes to the industry. It acknowledges our coming of age as service providers.” He believes it is a very important step forward for the industry, and one that will deliver challenges. “New requirements will see a real drive to quality, and we will maintain our focus on developing relationships with brokers who take responsibility for the future of their businesses and aspire to best-practice broking,” Bough says. And since he expects the number of mortgages written by brokers to be as high as 50% in the near future, it is little wonder that he gives brokers credit as an important force in the mortgage distribution channel. The industry has matured in a number of other ways too. “Particularly the aggregation sector, which continues to play an important role in providing brokers with the resources to build their businesses, and the MFAA industry

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association, which now provides an essential role in advocating the role of brokers,” Bough says. Shifting goal posts The mortgage broking industry’s ground rules have changed. And, according to Bough this has limited the range of new entrants to the industry and it has caused lenders to alter their positions. “Volume is no longer the driving force for many lenders, whose mortgage broker distribution strategy has become about through quality businesses and partnerships.” This new mindset comes with a built-in upside. “The benefits for partners will be considerable as lenders will be in a better position to deliver faster turnaround times and provide stronger levels of support.” He warns it won’t all be plain sailing, and adapting to the new rules of engagement will be the highest fence for brokers to hurdle. But they can expect superior levels of service from lenders, including a well constructed range of products to meet the needs of borrowers. Strong brand Westpac has long been recognised by Australian borrowers as a strong brand. “And so in the current crisis, borrowers have turned to brands they trust and recognise,” says Bough. And while he says the sharp rise in demand for Westpac’s products has put a smile across Bough’s face, it has also created challenges. “The increased flow of business placed considerable pressure on our pipeline and this resulted in slower turnaround times. Westpac has addressed this issue and we are once again on top of applications but we have also learnt from our experience.” As part of its strategy development, Westpac is asking itself what still needs to be done. “This very much revolves around forging and driving partnerships with our priority segments of the market – in particular those brokers that drive quality business and are advocates of our brand.”

Profile leaders

Personal File + Age: 46 + Family: wife, four children and a dog + Favourite musician: Bruce Springsteen + Sports: Soccer and Rugby Union + Movie: To Kill a Mockingbird + Self described: Workaholic + Hobbies: share market + If the house was burning, and the family was safe: My car + Retirement plans: To travel + Most satisfying achievement: Looking back on my time in mortgages there’s a number of achievements that spring to mind, however in terms of my most satisfying it falls outside of my professional life – establishing a happy, blended family. + Toughest challenge: There’s been a few. However one that stands out is the six months following the RAMS float, in particular keeping our team and business partners informed of developments within the business.

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Profile brokers

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Profile brokers

Lisa Sanders first entered the MPA Top 100 brokers contest in 2008 and shot straight to #2. Can she take the top spot in 2009?

ladder leader B

usiness is booming for Lisa Sanders. The mortgage industry’s second most successful broker in 2008 has just gone through a massive restructure of her business. In addition to moving Loan Management Services into a new office in the financial sector on the Gold Coast, Sanders recently acquired a new business partner. “It’s all part of my growth strategy,” she says. Her short-term goal is to streamline her existing business model, so the company can double its loan book size in the near future and maintain its existing new business volumes. The figures for MPA’s Top 100 brokers in 2009 have yet to be compiled, but the smart money will be on Sanders to crack the number one spot this year. Back up Sanders started her career at the CBA, where she worked from 1990 to 1996 in Gladstone and Rockhampton. She left the bank to run a small business for four years, but returned to the industry in 2000 when she joined a mortgage origination company. Sanders started as the receptionist, but she quickly climbed the ladder and was promoted to Credit Manager in 2002. She says it was a career-changing role that “gave me the grounding that has been instrumental to my success.” It was at this time that she began to work direct with clients and started to operate as a

broker. It was also where she learned that she had the skills and the drive to succeed on her own. The transition to working in the broking industry was easy, she says. “Finance and working with the customers in general has always been something that I have found comes naturally. I found that moving from working in someone else’s business to taking the step to expand and operate my own business in the brokering market was quite easy. I was always working and relating to the needs of my clients as if they were my own anyway,” she says. “Having an understanding of a client’s financial needs and empathising with their personal situation is integral to any industry. For many years this has been lacking in the finance industry. It’s something that I pride myself in to this day.” Sanders draws a lot of confidence from her own experience as a property investor. She built up her own personal portfolio of more than 10 properties in just two years. This has given her first-hand experience of the challenges clients face It is no surprise that her empathy for clients played a big part in one her best deals. The deal involved two clients who were MIPs (mortgagee in possession), but not actually in arrears on their loans. “The situation was compounded by overzealous banks and their restrictive internal systems. Had we not been able to negotiate a settlement with the banks and refinance these clients out to non-bank lenders, it would have cost them their

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Profile brokers

homes. We had to work with non-banks who understood the clients’ individual positions and were willing to work with them to ensure that they survived. And these clients are still with us today.” From the start, Sanders saw opportunity in working with property investors. “I identified that there were a number of loan products that were better suited to these clients other than the standard ‘home loan’ products that they were being directed to as a matter of course. This quickly created further opportunities and set up a system of repeat business and our company flourished.” She started with two employees, but now has five within the brokering division of Loan Management Services. The key to successful management, she says, is clear and open communication on all levels. She says staff should feel comfortable approaching the company’s directors at any time to discuss their opinions without fear or trepidation. She works approximately 60 hours per week over five or six days, but the long hours have paid off. To date, Sanders has settled $673m and averages from $8–$10m a month. As far as time management, Sanders says it’s important to delegate. “Implement specific task delegation and duties to your key people, and realise that you do not need to control everything all of the time. Allow your staff to use their own informed judgment by keeping them fully updated about your direction and the rationale behind it.” “You should empower them, while ensuring that they remain accountable for their actions,” Sanders adds. Standing out Sanders and her team have carved a reputation of being brokers and educators. She says it is important to educate clients from the initial meeting and provide ongoing education throughout the relationship. Loan Management Services strives to show its clients how to control and correctly access their equity with the right loan product, and then gives them the tools to practice mortgage minimisation and the opportunity to build a property portfolio that they can service. “This ensures that our clients can build their wealth, and it is a constant source of repeat business. When we teach clients to build and then

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maintain their wealth, they become raving fans for life,” she says. Too many brokers and customers focus on the rate, according to Sanders. Sanders compares the broking by rate method to “selling a ute to a family of eight.” “I find that everyone’s goal is to get a good interest rate. And the success of our business is educating our client about what the loan doesn’t offer you, rather than the interest rate.” Issues The biggest issue at the moment, Sanders says, is the regulation of the industry. “That’s going to mark a new era for the industry,” she says, adding that it is long overdue and that it is “going to clear away a lot of dead wood”. But the whole industry is due for a shake-up, she says. “Some of the policies and procedures we’re following are based on a knee-jerk reaction. There’s a lot of different things that could be changed that would allow Australians to borrow more easily, making it safer for the lender.” Sanders expressed frustration at the tightening of bank policies. She says clients are forced to provide two to three times the paperwork than was required 12 months ago. “Once upon a time you could argue a deal. You could have a conversation with both the mortgage insurers and the funders and explain the merits of the deal. But I find that credit scoring has taken away the person-to-person contact.” Clients are also frustrated by the new policies. “Brokers used to be able to say why the application had been declined. But these days we’re not able to give clients anything that concrete, because the information is unavailable.” Sanders decried the over-reliance of brokers on the major banks. “I personally think the volume that is going to the major banks at this time is definitely going to impact the broker industry. By supporting the big banks the way that they are at the moment, brokers are ensuring their own demise really. “The non-bank lenders are the ones competing for the brokers’ business – they’re the ones supporting the brokers. If they disappear then the banks will really reign supreme and they will make their own rules.” Sanders business sends about 80% to nonbanks and 20% to banks. MPA

Random facts Lisa Sanders + Company name: Loan Management Services + Top monthly volume: $50m + Worst deal: The client was caught between a change of ownership of mortgage insurer. They were unconditional on a contract and their LMI policy expired before settlement. Due to the restructure of the LMI company the policy could not be renewed at same LVR and client could not settle. The client was forced find additional funds to settle at the last minute – extremely stressful for everyone concerned. + Funniest deal: Sorting out a home loan for a guy who was in jail at the time! + Biggest failure/setback: Choosing the wrong business partners early on in my career. It taught me the importance of having partners who share your vision and have the same ethical standards. + Most satisfying achievement: The transition of moving from a small business to a successful national prudential and corporate organisation. + Long-term goal: The continued expansion of new business through the introduction of new products and services. We also want to diversify into other niche areas in the finance industry to satisfy the changing needs and focuses of our clients, while remaining grounded by the stability of our core products.

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The MPA Franchise Report2009

Looking to buy a franchise? MPA has compiled the latest information from some of the biggest and brightest players in this space, including how much it costs and what you receive in return

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pting for the franchise model is like choosing to ride a bike with training wheels. It places some restrictions on you, but it also provides you with a degree of security – and at this juncture in broking history, everyone could use a little more peace of mind. Mortgage Choice’s third annual Potential Franchisee Survey revealed that almost half of all Australians planning to purchase a franchise in the next three years have been motivated by the difficult economic climate. Of the 680 respondents looking to move into franchising by June 2012, 24% were already self-employed, 50% were white collar, 19% were blue collar and 7% were unemployed. A total of 11% were retrenched during the past 12 months. “Many Australians looking to buy a franchise in the next three years are turning to this sector in the hope it will dissolve uncertainty over their job security and enhance their ability to make a decent wage while satisfying their need for stimulation and personal growth,” said Kristy Sheppard, corporate affairs manager for Mortgage Choice. For new brokers, mortgage franchises are particularly attractive. They provide education, training, marketing and ongoing support. Essentially, it’s a sound platform from which to launch your small business dreams.

And joining a franchise can help more experienced brokers to expand their businesses and grow their volumes. It may also be the answer for those who are missing greater interaction with professional peers. The 2009 MPA Franchise Report focuses on both single and multi-lender franchisors and compares size of loan book, year commenced, no. of units, projected units by end of 2009, territory and panel size (where applicable). There are also comparison charts on cost, training and business support, marketing, and territory rights. The report is by no means exhaustive of the entire sector, but we hope it gives potential franchisees a starting point.

what is a franchise? The International Franchise Association defines franchising as a “continuing relationship in which the franchisor provides a licensed privilege to do business, plus assistance in organising training, merchandising and management in return for a consideration from the franchisee”. MPA would like to thank all of this year’s participants, but asks readers to note that some participants represent a variation on the franchise concept. BEAT Home Loans and Mortgage House tick several of the boxes that define franchises, but from a legal standpoint are not considered as such. In the case of BEAT Home Loans, members of the BEAT network are owners and operators of BEAT Association Ltd., while in the case of Mortgage House, members are business partners that are licensed to use the brand.

Company stats Company Name

Size of loan book

Year commenced franchising

No. of units

Projected units by Territory end 2009

Panel size (where applicable)

BEAT Home Loans

n/a

2005

Australia-wide

2008

National

AFG panel – approx 27

CENTURY 21 Home $172.8m Loans Club Financial Services

$2.4bn

2007

Australia-wide

LJ Hooker Financial Services

$3.2bn

2004

45 franchises, 27 licensees

47 franchises, 30 licensees

Australia-wide and New Zealand

PLAN panel of lenders – approx. 24

Mortgage Choice

$34.4bn (as of 31 Dec 08)

1994

350

As many as possible

Australia-wide

Mortgage House

$2.7bn

Business est. mid-1980s, 41 branch network 2001

NSW, Vic, Qld, SA, Tas. WA

RAMS

n/a

2003

44 franchisees, 80 RAMS home loan centres

55 franchisees

Australia-wide

–

Smartline

$10.2bn

1999

200

220

National

Zobel

$545m

2007

Regional SA, 35+ metro Adelaide

Note: All figures as of 10 July 2009, with the exception of Mortgage Choice’s loan book Special note: * BEAT Home Loans is not a Franchise. Members (Associates) of the BEAT network are owners and operators of BEAT Association Ltd. brokernews.com.au

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BEAT Home Loans Name: John Mohnacheff Years in industry: 25+ No. of years with enterprise: Since its inception. How did you get started in mortgage business? This is a very long story! Suffice to say that I’ve had, and continue to John Mohnacheff have, the most fantastic journey in the financial services industry: five years with CGU, 17 with Westpac, seven with Liberty and now with BEAT Home Loans. It’s been a wonderful experience. How has your career evolved? I’m quite conservative and don’t jump from job to job. I like to develop myself within a company, learn and contribute as much as I can, and that has proven to be a very rewarding strategy. I firmly believe in trust and loyalty, and in the long run I believe that this approach generates greater returns and results – both personal and financial. What makes your enterprise special? BEAT Home Loans is unique. It is a genuinely innovative alternative to anything else in the market place. What’s been your biggest obstacle? Tradition and inertia. The world is rapidly changing, especially in the finance sector. We know what’s happening in the mortgage and finance broking sector – we hear the chorus of complaints daily – yet there is still resistance to exploring new possibilities and seeking alternative ways of doing business. If this wonderful business sector is to grow and flourish, it must create and embrace innovation, be prepared to invest in itself, and stop being reliant upon someone or something else. In other words, stop whinging, be proactive, stake a claim and make a difference by doing something different. What’s been the highlight of your career? There have been so many fantastic moments in my career, but the absolute standout is the honour and privilege I’ve had to meet and work with so many wonderful and talented people. It’s always through them that my career has flourished. What’s your long-term goal? To create a successful business that everyone who’s associated with is proud to be a part of. We are aiming to build a business that our competitors view with envy and that mortgage professionals want to join.

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Costs Company name

Required investment (including GST)

BEAT Home Loans Up to $50,000 dependent on location

Profit split

Length of contract term

95% of commission for branded and non-branded products

Equity ownership & license with right to sell

CENTURY 21 Home Loans

n/a

3+3

Club Financial Services

$30,000

Franchisees can receive up to 91% of commissions dependent on volume

7+7+7

LJ Hooker Financial Services

No upfront fee required from new franchise owners

LJ Hooker Financial Services Originated – Upfront 75% Trail 63% Self Originated – 89% Upfront and Trail

5+5

Mortgage Choice

$35,200 + 6-12 months working capital.

• Upfront payment of 0.3978% of the amount borrowed by the borrower. • Ongoing fee per annum, calculated on the balance owing by the borrower. This fee is determined by a number of variable factors, however it will fall in a range between 0.0202% and 0.0745% of the loan balance owing at any given time, payable in arrears, monthly

5+5

Mortgage House

No upfront or ongoing fees.

Branded Loans: 0.60% Upfront commissions and 0.15% trail commissions 3rd Party Loans: 80% of Upfront and 50% Trail

2+ option

RAMS

-Application fee $3,000+GST -$20,000+GST once application approved -Approximately $175-$250k working capital

n/a

5+5

Smartline

$13,200

Between 70% to 85%

5+5

Zobel

$45,000

80% of upfront, 70% trail

5+5

Special note: * BEAT Home Loans is not a Franchise. Members (Associates) of the BEAT network are owners and operators of BEAT Association Ltd.

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CENTURY 21 Home Loans Name: Warren Stapleton Years in industry: 26 years No. of years with franchise: 2 How did you get started in mortgage business? I joined LJ Hooker Financial Services in 2000 after a 15-year career in consumer lending and Warren Stapleton collections. This was in the early stages of the real estate bulking group model, and there were some hard yards to go in positioning the mortgage product as part of their sales process. How has your career evolved? In 2003 I was given the opportunity to move into a series of senior sales management roles with both LJ Hooker Financial Services and First National Home Loans. These roles allowed me to work more closely with the senior management teams in these organisations and gain a greater understanding of the overall sales process and trigger points to leverage finance opportunities. What makes your franchise special? • Branding – The strength of the brand has been a major component in the decision making for most people signing on, as it is already well established and highly regarded. People moving from overseas also identify quickly with the brand as it is global. • Opportunity – When you join a group such as ours, you have the ability to work with a dedicated group of offices every day and hunt for

business where you are accepted as part of the team. What’s been your biggest obstacle? As a result of the GFC we have seen shrinkage in the number of lenders, a tightening of credit guidelines, and consequent pressures on pricing and service levels. I don’t think the current environment is particularly fun for any broker that prides themselves on delivering quality service 100% of the time, but the upside is that the financial markets will eventually recover. Then we will start to see some of the non-bank lenders re-enter this space and provide greater levels of product choice and service. What’s been the highlight of your career? This is the biggest challenge I have taken on in my career to date so I guess I have two highlights: • achieving a national footprint in March of 2009 with the opening of our WA office • recently receiving recognition from AFG for being in the top 20 groups in Australia What’s your long-term goal? In 2004 I spent some time working back in the consumer and equipment finance space and working with motor vehicle dealers. I was blown away with the depth of finance and insurance penetration they had to units sold. I promised myself when I came back into the mortgage industry in late 2007 that I would work towards achieving the same culture with CENTURY 21 where we offer 100% of the customers the finance 100% of the time.

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Club Financial Services Names: Simon Norris – director sales & marketing, Andrew Clouston – managing director, Meredith Adam – director, David Garner – director commercial lending. Collective years in industry: 66 Simon Norris No. of years with franchise: All directors have been with Club since its inception in 2008 (Club started in 2002 and converted to a franchise system in 2008). How did you get started in mortgage business? David Garner: Left banking as it was Andrew Clouston too bureaucratic and joined a mortgage broking firm. How has your career evolved? Andrew Clouston: I have gone from working long hours as a mobile mortgage consultant in a booming market, to working even longer hours as a director of a growing mortgage Meredith Adam broking and mortgage management business in a challenging market – never a dull moment! What makes your franchise special? Simon Norris: The people. There is a genuine feeling of ‘family’ which translates into the relationships David Garner we build with our customers. We have a tremendous focus on service and are genuinely a ‘one-stop shop’ operation that cares. What’s been your biggest obstacle? Meredith Adam: Letting go of the smaller picture in order to grow the business (establishing a macro vs a micro view). DG: Extricating myself from previous broking firm. What’s been the highlight of your career? Andrew Clouston: The highlight has been watching the growth of some of the individuals who have come into our business. It is very satisfying to see an individual who joined us six years ago from a low-paid salaried position now running their own independent business and earning 10 times their former income.

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Training Company name Initial training

Mentoring

Ongoing training

BEAT Home Loans

Two-week induction.

Business executives coach and share best practices with associates. External business mentoring also provided on a regular basis.

Ongoing one-onone training and support, operating committee representation and annual network meeting.

CENTURY 21 Home Loans

Induction course and practical training with the franchise development manager.

Mentoring with franchise development manager.

Aggregator training, PD workshops, industry training, business partner training and events.

Club Financial Services

One-week induction course – the 'Club Academy', includes Cert 4. Franchisees are assigned a Club coach, who assists with all initial setup and training requirements.

Club coaches make regular onsite visits and determine what areas of training and development would be beneficial at an individual level. Club coaches track this activity on an ongoing basis. Each month each franchisee receives comprehensive reports from coaches.

Weekly training sessions and online webinars. As well as lender training, annual conferences and ongoing contact with Club coaches.

LJ Hooker Financial Services

Induction course + 12 month training program covering marketing, business management and loan writing.

Access to state sales managers in all states + business coaches, LJH marketing team and PLAN BDMs.

Mortgage Choice

Pre-induction course e-learning program then two-week induction course at Mortgage Choice head office, before the lender accreditation process begins.

Franchisees partner with established, franchisees (rookie program). Opportunities to have regular sales meetings with other Mortgage Choice franchisees and specialist field development and field marketing managers.

Annual national conference and bi-annual state conferences plus regular lender forums, pod meetings, leadership groups and business development forums. We always provide access to e-learning courses on our intranet.

Mortgage House

Comprehensive induction training session – normally four days.

Direct interaction with branch development manager/branch support via various channels including telephone and e-mail.

Teleconferences initially daily then weekly. Regular training and development programs.

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RAMS

Orientation Supported and coached by program, includes state franchise managers accreditation in and sales managers. key RAMS processes and policies, face to face meetings with RAMS management and self-directed learning via tools such as on the job activities, on-line learning, DVDs.

Bi-monthly state franchise meetings. Annual franchise conference, seminars and various interactive workshops throughout the year. Ongoing training, accreditation and self-development through the RAMS online learning curriculum.

Smartline

One week induction course (facilitator led, in house residential training program) Structured 12 week start up program.

Formal mentoring program (approved and accredited by MFAA) Boot camp training sessions (specialist sessions for new starters focusing on core business and lending skills) state manager & franchise development manager support (independently accredited business coaches) Dedicated group office support teams (lending, marketing, finance, IT).

Quarterly professional development days Focus team meetings (bi-monthly meetings of peers to share ideas and experiences) Annual conference Internal file checking and auditing.

Zobel

Two-week induction course industry accreditations & qualifications.

We provide a Business Development Manager for initial and ongoing support.

Annual conference, bi-monthly managers meetings, ‘tradies days’ meetings.

RAMS Name: Clive Kirkpatrick – Head of Franchising Years in industry: More than 25 years in the financial services industry. No. of years with franchise: Less than one year with RAMS. How did you get started in Clive Kirkpatrick mortgage business? Began financial services career more than 25 years ago when started as a graduate at Westpac. How has your career evolved? General banking through sales, financial services and franchising What makes your franchise special? Passion for the brand, resilience, specialist home loan providers, wide range of products and services, simple, flexible and innovative home loans, local professionals who are down to earth, approachable. What’s been your biggest obstacle? GFC and its impact on the local mortgage market which has meant rethinking mid/long-term strategy What’s been the highlight of your career? Consecutive personal bests being achieved in the RAMS franchise network this year despite challenges presented by the market. What’s your long-term goal? To drive a successful franchise business and be recognised in the financial services industry as the franchisor of choice.

Special note: * BEAT Home Loans is not a Franchise. Members (Associates) of the BEAT network are owners and operators of BEAT Association Ltd.

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Mortgage Choice Name: Michael Russell, CEO Years in industry: Over 20. No. of years with franchise: Commenced as Mortgage Choice CEO in early 2009. How did you get started in the mortgage business? I worked as a branch banking Michael Russell lender in the 1980s for ANZ in Melbourne. How has your career evolved? I wrote my first loan in 1986 when I was with ANZ. I worked there for many years before moving to National Mutual Royal Bank. Seven of my most exciting years were spent in mortgage broking with an aggregator (Choice Aggregation Services). Now, I am really enjoying the transition in my career as I settle into my role as CEO of Mortgage Choice, an iconic mortgage broking franchise business. What makes your franchise special? I think this is a great question to ask some of our longstanding Mortgage Choice franchisees and loan consultants. I believe they would be unanimous in saying they are very proud to be working under such a strong brand that has been supporting Australian borrowers for almost 17 years. What’s been your biggest obstacle? I have always loved my work and in the last seven or eight years have become a very passionate advocate of the service that mortgage brokers provide. But I also love my family, so the biggest obstacle for me is getting the equilibrium right when it comes to work/life balance. What’s been the highlight of your career? The highlight of my career has been and continues to be the friendships I have made along the way, both with people I work/ed alongside and with dozens of other mortgage brokers within the industry who I am pleased to say are friends. The fact that I enjoy what I do – working with mortgage brokers, within an exciting industry – is very important to me. What’s your long-term goal? I never set long term goals. I generally restrict my goals to 12 months and then three years in terms of business plans. This stands true with Mortgage Choice, where my 12-month goal is to restore some financial value in the company with growth drivers, following a challenging year. This will position the business to reach the three-year goal: for Mortgage Choice to be the number one branded mortgage broker in Australia.

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GFC safe? MPA also asked franchisors to describe what they’re doing to help brokers weather the current crisis. Many stressed their focus on diversification. Club Financial Services says it places significant emphasis on recruiting, training and developing high calibre specialists in fields such as financial planning, insurance and accounting. “This means brokers can refer clients in house to these specialist areas, creating multiple income streams. We recognise that in today's market it is important for brokers to continue to grow their businesses by concentrating on core business while at the same time expanding their product ranges through the development of new and effective income streams,” it says. Another big component of Club’s survival plan is forward planning. The franchise has developed a Business Projection Tool for Franchisees which considers future cash flow, income, and business value. This tool allows franchises to make business projections three to five years into the future. “Understanding your business is essential in today’s economic environment, so we provide our franchisees with very detailed monthly reports to help them understand core business information to ensure important decisions can be made. This information is more detailed than similar data offered by other franchises, and this means they can address the issues that are having the biggest impact on their business now. This financial data is collated in our data warehouse to give our franchisees meaningful information which both highlight trends and allows for predicative forecasts to be made. It includes settlements, lodgments, conversions, run off rates, cross selling ratios, data about which clients and referrers are contributing to their growth, profitability, et cetera.” LJ Hooker Financial Services is tackling the GFC on behalf of its franchisees by placing a special focus on marketing. In addition to providing marketing advice and assistance with local area marketing and community events, it is offering franchisors an extensive range of marketing collateral for its network to choose from. LJ Hooker Financial Services is also working in partnership to develop a strategy with training group Intellitrain, “to enhance further education of our mortgage brokers and franchise owners on how to increase business in these tough economic times.” Mortgage Choice says it is doing everything possible to help its brokers through the economic crisis. The company recently launched a “brand refresh” to “better express our brand essence and encourage a greater number of customers from our desired target audiences to engage the services of Mortgage Choice”. In addition, Mortgage Choice says it is encouraging collaboration between network members “so they understand they are part of a family whose members work together and support each other, rather than being business owners who stand on their own”. Smartline says the GFC has pushed the organization to keep closer to its people, especially with the loan processing frustrations. “During the boom times, we focused on the fundamentals, such as an effective client care program to generate ongoing quality referrals to ensure that we would succeed during the tougher times. We have focused for many years on providing our lender partners with the highest quality applications, which places us in a very strong position.” (continued p42)

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Mortgage House Name: Ken Sayer Years in industry: Over 25 years. No. of years with franchise: 23 years How did you get started in mortgage business? My career in the mortgage business Ken Sayer commenced after the deregulation of the Australian financial system. I was working in equipment and auto finance before being approached by Citibank. They had just designed and pioneered a fully transactional revolving line of credit (Mortgage Power). How has your career evolved? Founder of Mortgage House in the mid 1980s. Mortgage House commenced operations as a broker (broking loans for Citibank, St.George, ANZ, ING, Mercantile Mutual and a myriad of other lending institutions). In 1998, Mortgage House established itself as a mortgage manager/originator, responsible for the ongoing prudent management of the life of each loan. Today, Mortgage House is a lender in its own right, and is recognised as one of Australia’s largest independent mortgage providers. It has maintained its brokerage function so as to provide a complete array of lending services. What makes your franchise special? Mortgage House is dynamic, alive, resilient and above all has survived two substantial recessions. What’s been your biggest obstacle? Broker fraud and the synchronised global recession have been the two biggest obstacles I have faced. What’s been the highlight of your career? Recent emerging statistics have revealed that Mortgage House is the number one real nonbank (self-funded) prime B2C mortgage lender in Australia. What’s your long-term goal? Continuously strive to build, strengthen and maintain our relationships with our clients, local communities and business partners, and ultimately become the leading participant in the mortgage industry.

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Territory Company name Rights BEAT Home Loans

Exclusive rights to all customers within a specific territory in addition to exclusive rights to operate and market in a broader marketing territory. Territories are postcode based.

CENTURY 21 Home Loans

A typical franchise will consist of somewhere between three to five dedicated offices with a minimum of 15 salespeople to work with.

Club Financial Services

Each state has been broken up into territories. A professional demographer was used to analyse all the geographic and demographic aspects in order to develop territories with adequate assessed lending volume and business drivers for success.

LJ Hooker Financial

Each Franchise/Licensee is allotted a specific number of LJ Hooker Financial Services real estate offices to service. The size of each territory varies across Australia.

Mortgage Choice

Franchisees are not restricted from dealing with a client located anywhere who is part of the franchisee's existing network of contacts or who is introduced by referral. Local marketing activity is restricted to an assigned group of postcodes (a marketing area). Leads received by the national Mortgage Choice customer service centre from these postcodes will be distributed on a rotational basis to franchisees located in the marketing area.

Mortgage House

Exclusive use of trading name.

RAMS

Marketing areas based on postcode list.

Smartline

No territory restrictions.

Zobel

All franchises have territory rights which are postcode driven. Metro franchises work out to approx 60,000 households each. Regional franchises can vary depending on geographical location. In addition to operating rights – exclusive boundaries gives franchisees override commission for any loan writers in their territory.

Special note: * BEAT Home Loans is not a Franchise. Members (Associates) of the BEAT network are owners and operators of BEAT Association Ltd.

GFC safe? (from p40) Zobel has tackled the GFC by focusing on products. “We have dedicated a great deal of resources and training to ensure we are armed with niche lending products to fully understand which bank has which appetite. More importantly, we want to provide our clients with the turnaround times required to ensure a smooth transaction and therefore a genuine benefit in using our services. In times of lenders dropping out of the market, we have actually increased our consumer loan suite of products to accommodate that section of the market,” it says. And RAMS is tackling the GFC by improving its franchise distribution model. The new model is more flexible and offers franchisees a performancebased commission structure and improved scalability. RAMS chief executive Melos Sulicich says these strategies “provide value and simplicity along with competitive pricing in a localised, small businessbased distribution network with expert customer service”.

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LJ Hooker Financial Services

Smartline Name: Chris Acret Years in industry: 16 No. of years with franchise: 15 How did you get started in mortgage business? Joined up with the Higgins brothers in the early days of Mortgage Choice. How has your career Chris Acret evolved? Started with Ernst & Young, worked overseas and travelled for a couple of years, joined Mortgage Choice in 1993, established Smartline in 1999. What makes your franchise special? Smartline has is a really positive and supportive team culture, smart marketing and exceptional software and systems. What’s been your biggest obstacle? For a while there it felt that we were swimming upstream, trying to build a quality business and a team culture in an industry that was all about volume and aggregation. But the tide seems to be turning. What’s been the highlight of your career? Seeing people come into business and make a real success out of it and the confidence that gives them is really gratifying. Also seeing the friendships that develop and the way our people get behind each other when they’re in need. It feels like we’re building something that people care about and makes a difference. What’s your long-term goal? It’s always been to build a quality business with 300 (happy) franchises that really stands apart.

“Although Peter Bromley is the general manager of LJ Hooker Financial Services and is seen as the founding member of developing the business since 2004, LJ Hooker Financial Services chose to highlight its top founding franchise owner, Sarah Dougan: As LJ Hooker Financial Services is a franchise business, we prefer to highlight the successes of our network rather than our corporate members” – company spokesperson.

Name: Sarah Dougan Years in industry: 6 No. of years with franchise: 5 How did you get started in mortgage business? I initially spent seven years with the lending arm of Associated Press (now Genesys Wealth Advisors) Sarah Dougan before making the transition to work within the real estate sector of finance with LJ Hooker Financial Services. I was working in lending from the financial planning side of things as I thought it was more interesting. I was then introduced to the team at LJ Hooker Financial Services and moved across to this franchise model. How has your career evolved? When I first started working under the LJ Hooker Financial Services banner I had one assistant working two days a week. From there I have expanded the business to the North Shore, Northern Beaches, the Hills area and Outer West. I now employ over 20 mortgage brokers writing $50m per month, and have even launched a financial planning pilot plus commercial franchise. What makes your franchise special? The trusted LJ Hooker Financial Services brand opens the door every time. You do not have to explain your background and who you are because of this. It’s also great to belong to the LJ Hooker Financial Services “family” instead of being out on your own. What’s been your biggest obstacle? The move across to real estate finance was a steep learning curve, made even more difficult by the fact that I was on my own. It was definitely harder and took a lot longer than I expected for me to get things moving. And I had to fund everything myself. What’s been the highlight of your career? I would have to say winning Business of the Year the first time for PLAN Australia and LJ Hooker Financial Services – the first time is always such a shock and shows that you are building a viable business that’s not totally reliant on just you alone! What’s your long-term goal? I would like to continue to build a great team and sustainable business model offering a ‘one stop shop’ solution for LJ Hooker Financial Services clients.

franchise facts The Franchise Australia 2008 Survey found that business confidence in the franchising sector remains high. Key findings of the survey include: • An impressive continued 14.6% growth rate in franchise systems from 2006 to mid 2008. • Business format franchised units represent some 3.7% of all small businesses in Australia. • Growth rate of franchise units is 15.4% up again from the 14.6% reported from 2004 to 2006. • Total sales turnover for the franchising sector was estimated to be $130bn • Total number of people employed in business format franchise systems is estimated to be 413,500. • Disputes in the franchise sector have declined with franchisees in dispute estimated at only 2% – these disputes tend to be in larger, older and more complex systems. • There is evidence of stability in the sector with 93% of franchising units remaining under the same ownership.

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25th September 2009 The Westin, Sydney

the countdown has begun

New leaders of the mortgage industry empire: finalists announced in this issue

Book your table online at www.australianmortgageawards.com.au

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10/08/2009 12:33:04 PM

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Marketing Company name

Marketing and branding

BEAT Home Loans

Dedicated marketing team supporting national brand building across online, print, outdoor and radio campaigns. Assistance and support with individual and collaborative local marketing campaigns and public relations.

CENTURY 21 Home Loans

While we maintain an annual marketing budget to assist with brand positioning and sales and marketing incentives, our advertising dollars are reinvested back into our referral partners in the form of commissions.

Club Financial Services

Various national marketing activities funded by the franchisor: online advertising, public relations campaigns & creation of local PR tools, web development including creation of individual franchisee web subdomains and the development of marketing materials. Provides ‘communications centre’ – an online web/IT facility which houses resources for use throughout our broker / franchisee network. Local marketing support. Regularly research potential marketing tools for use throughout the group that link to core values.

LJ Hooker Financial Services

A dedicated marketing coordinator works with our brokers to develop key marketing campaigns across a variety of mediums – advertising, direct marketing, internet, digital marketing, events and public relations. Internally, campaigns are run to help drive the business and increase recruitment opportunities.

Mortgage Choice

The company is spending 5.5% of gross revenue (including recruitment advertising, consumer research for media stories, and white and yellow pages) over the next year on marketing. We also provide extensive public relations/corporate affairs support. Widespread consumer, franchise network and staff focus testing and research, after which following a “brand refresh” to better express brand essence and encourage desired target audiences to engage the services of Mortgage Choice.

Mortgage House

Mortgage House invests substantially in infrastructure and the implementation of successful lead generation tools/marketing campaigns and advertising (radio, print, online and industry related magazines).

RAMS

There is a minimum local area marketing spend required per territory. Online local area marketing tool kit with templates to engage with local networks and community via in-store posters, promotional material, press advertising and letter templates. National brand campaigns to promote products and brand awareness including significant television, online and print advertising presence. RAMS provides ‘expert voice’ in media relations commentary and is proactive in its public relations.

Smartline

Relationship marketing and building client referrals. Provide tools, processes and marketing support to generate ongoing quality client referrals and build a strong local referral based network. National marketing program, primarily focused online, as well as provide each franchisee with a fully optimised and personalised website and a national PR consultancy.

Zobel

Marketing/public relations spend exceeds $200k annually.

Special note: * BEAT Home Loans is not a Franchise. Members (Associates) of the BEAT network are owners and operators of BEAT Association Ltd.

Zobel Name: Andrew Zobel Years in industry: 10 in broker industry, 25 years in finance. No. of years with franchise: 3 How did you get started in mortgage business? Like everyone else, I had a vision to Andrew Zobel sell home loan options rather than just the banks suite of products. How has your career evolved? Given that our origins are in regional SA, our impact in the state market has been significant. We believe the decision to diversify service offerings from day one has attributed greatly to our expansion and stood us in excellent stead to prosper in recent weaker economic times. What makes your franchise special? Our brand is young, fresh and dynamic. Offering all financial services under one name but serviced by experts makes us the ultimate one stop financial shop. We are not about price and will never advertise as “cheapest in the market”. By being able to service the clients’ financial needs under one roof means we can truly boast a business that is relationship driven. What’s been your biggest obstacle? Brand exposure in the capital city on a moderate marketing budget. What’s been the highlight of your career? In 2005 our home loan business was invested into by Satisfac Credit Union who, after an extensive due diligence on the operation, took a 50% equity holding in the company. Satisfac Credit Union is a long standing reputable financial institution who does not deal with brokers which made the investment even more credible. The investment paved the way for us to franchise the business and expand statewide. What’s your long-term goal? National expansion, and then a nice long holiday!

see the interview live LJ Hooker Financial Services’ Peter Bromley breaks down what makes franchising particularly attractive in a special interview. Visit Brokernews.com.au/MPA

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websites that work Want to know if your website is waste of cyber-space? Sam Benjamin breaks down the winning aspects of a good site

ne of the fundamentals of sales, and the reason why so much money is spent on branding by large businesses, is that people buy emotionally – not intellectually. Subconscious factors will often come into play when making the decision to buy. When you meet a potential client, you have the opportunity to interact with that person and hopefully make a good impression – giving you a good chance of writing a loan at some point. How do you create the same opportunity with your website? For the online visitor, your website is the next best thing to that in-person conversation with you, your colleagues or employees. And since so many people are researching products and services on the internet, it is critical that your site can persuade them to take the next step with you. Connecting emotionally So how does your website connect emotionally with your visitors? Do they feel that your business understands their needs? When you talk with customers or prospects, it is important to show very quickly that you understand their issues and needs, and that you have the expertise, knowledge and solutions to address them. The most important task for your home page is to accomplish this initial introduction. If you do not engage a visitor within the first few seconds, you will lose them. So, does your home page really tell people what you do? Is it specific in terms of the services you provide, and what type of customers or clients you work with? Does it use language which is clear, concise and not full of industry specific jargon?

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There are an astounding numbers of websites that fail to provide basic information on the home page. If your goal is to get the potential client to call you to make an appointment, does your home page clearly state your contact phone number? Every time you force the visitor to make a decision, such as having to click on the ‘contact us’ page to find your phone number, you open up the possibility that they’ll make the wrong choice (from your viewpoint), or worse still, they’ll just leave. Think of every click the visitor has to make as a step in the sales process. The less steps the easier the sale! Drawing them in Your website has to make the visitor feel drawn in, so that they want to know more about your business, your products and your services. But it must be from the viewpoint of their needs and interests. And you have to give the visitor a clear sense that you want to find those points of connection, and to learn more about them. Do not overwhelm or confuse the site user, or they will simply lose interest and leave your site. It has to be about their needs. There are three important elements of a website that will help instill confidence about your business in potential clients. Offer a frequently asked questions (FAQ) page that guides visitors through some commonly asked questions. You may even present content in a question and answer format which demonstrates your awareness of the issues that matter to them. One of the most important elements in establishing a connection with potential clients is

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to show the ‘faces’ of your business. There are a lot of websites that do not name any of the business owners, or the people that customers will interact with. It’s much easier to connect when you know who you are dealing with! Customer testimonials offer critical elements in establishing trust – they say far more about you than your own marketing statements. Include client quotes and success stories in your site. The call to action! Finally, too many web pages end with no ‘call to action’ or directions about where to go next. If you do not issue a clear invitation, you again leave it to the visitor to work out what to do – and you run a big risk of losing them. So at every point on every page where the visitor might be thinking “Tell me more”, or “How do I get this?” provide a clickable link to the next step, to your newsletter subscription page, or to

whatever you want them to do. Lead them through the site and always back to you. It is important to have the right ingredients in your website to create a rapport and conversation with your website users, so that you make a good first impression. By getting it right, customers will spend significantly more time on your site, which in turn will mean more calls from pre-qualified leads, more signed deals, happier repeat customers and attention from new markets. Ultimately, it will become an asset to your business.

Sam Benjamin works for Finance Tools. To contact Finance Tools visit www.financetools.com.au or call 1300 300 790

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passing the buck It is hard to complain about commission cuts if brokers refuse to accept them in the first place. But is charging a fee for service the future for mortgage brokers?

ho is buttering your bread? For most brokers that would be the banks. And at the risk of overusing alliteration – does this result in a bias that hurts consumers? If a mortgage broking utopia is based on fair payment for services rendered and unbiased information for customers, then is the fee-for-service model the magical rainbow leading the way? Some brokers think so While the fee for service versus commission debate has raged for years, the argument really heated up in 2008 when lenders announced commission cuts. At the time, banks dealt a major blow to brokers’ bottom line and many were left wondering how to protect their earnings. This year, decreased competition and consumers’ flight to brand quality has resulted in 92% of brokers’ business going to banks – despite lingering resentment about commission cuts. The growing reliance on the majors has many brokers speculating that commissions are at an even greater risk. Some conspiracy theorists even believe recent service delays are an attempt by banks to get rid of brokers altogether. Suddenly, the prospect of receiving a payment independent of lenders has become a whole lot more attractive. Questions But the fee-for-service model raises many questions: are customers willing to pay? Will customers receive better advice as a result? How much can brokers charge? How will the model fit in the new regulatory environment? MPA asks

mortgage industry participants from all sides of the issue to respond. Brokers debate Cube Home Loans business development manager Scott Beattie says his business is considering implementing a fee-for-service model. “Provided that we are offering value, I don’t have a problem with fee for service. Though if the banks are no longer paying commissions, I would like to see a cheaper delivery rate than is currently available through the branch network.” The question, says Beattie, “is how does a broker add value that will make a client pay a fee rather than going to a bank? Don’t forget that banks can have one of their salaried mobile lenders see clients with no fees at the same rate.” Cube Home Loans is considering charging customers a $500 commitment fee – $200 of which is refunded if the brokerage can get an approval and the customer proceeds with the loan. The other $300 would be refunded if the customer didn’t feel Cube Home Loans added at least $300 worth of value to the transaction. Beattie says some customers are ready to accept fee for service loans, but for straightforward deals it might be a harder sell. Some fee-for-service proponents have argued that people expect to pay for professional services and charging a fee raises customers’ opinion of the broker industry overall. Beattie disagrees. “I don’t feel that a car repair man is more professional if they charge more.

Mark Turnbull

Scott Beattie

banks on fee for service CBA’s head of third party Kathy Cummings: “Commonwealth Bank remains agnostic in its view on business models for brokers, and no head group has approached the bank to discuss the ‘fee for service model’. If brokers are considering charging a ‘fee for service’ I suggest they carefully consider what they are charging for. Are they charging a fee for advice or service or a combination of both? I suggest once a broker answers this they need to ensure they have the qualifications to align with their business model.”

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aggregators on fee for service One of the biggest outstanding questions regarding the fee-for-service issue is how the widespread implementation of this model would affect aggregators. The response from major players in this space has been mixed. Smartline’s managing director Chris Acret says the adoption of fee-for-service is a natural progression in the business model. “We believe if the advice you provide is valued, and the service offered is strong, then there is room for a fee-for-service model.” Loankit’s managing director Kym Rampal took a more middle road view. “I am more of the opinion that a hybrid fee for service alongside a lender commission model would become the norm over time.” As such, he says, Loankit’s model would remain unaffected. Principal Mark Haron, similarly, says Connective could easily adapt to a fee-for-service model. “Unlike our competitors this is not a threat to our sustainability. Connective brokers who choose to adopt a fee-for-service model will receive 100% of any fees they charge. The challenge for our competitors is how will they deduct their 20% from the fee that the customer is paying the broker. The question for brokers is why should I have to give my aggregator a percentage of any fees I charge?” Other aggregators acknowledged it would result in some changes to their model, but stated they were ready to adapt to should the industry travel down that road. “This is an interesting development for the industry and will need to be financially modelled. And business value offerings will need to be realigned for the members if this were to eventuate,” says National Brokers Group CEO Steve Lambert. Choice is also on board with the possibility that fee for service may gain greater traction. “We would fully support it, and we are currently working on this. We are talking to all stakeholders industry-wide about the issue,” says CEO Brendan O’Donnell. While others also seemed ready to accept the fee-for-service model if it were to develop, they were less sure about consumers’ reactions. “Whichever model you go with, variable commission or service model, it doesn’t really matter so long as LJ Hooker Financial Service brokers are providing value to customers and the real estate network. However, one can argue that offering a fee will limit the amount of customers that come through the door, whereas now you are likely to find more business offering a free, no obligation proposition to customers,” says Peter Bromley, general manager of LJ Hooker. General manager of finnconnect, Tanya Sale, stated that while fee for service already exists in some parts of lending – most commonly with commercial or business loans along with asset finance – there would be no need to see this being extended into the residential area if the lenders are paying an adequate upfront and trail commission for work being undertaken. “The potential problem with introducing a fee for service for residential loans is that the Big Four could easily take full control of lending at a retail level, resulting in an even further diminution of competition. Ultimately the consumer would lose out.”

What is more likely to harm the industry is someone charging a fee that is unreasonable. Perhaps the MFAA could set a standard fee which we could then be used as a guide.” He says he can foresee brokers reasonably charging 1% with a minimum of $1,100 (including GST). Beattie’s price is slightly lower than what Vanilla Loans’ managing director Geoff Brieger is recommending fee-for-service brokers charge.

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Brieger is intent on creating a “new third party channel” or fee-for-service brokers, who refuse lenders commissions in lieu of a receiving a fee from customers. He is recommending that brokers charge between 1–1.5% (without GST). As for Brieger, he will be charging 1.2% plus GST (1.32%), with a minimum fee of $2,750 and a maximum of $5,500. “We also have a guarantee in place: if clients refinance we will do it for free to ensure they do get a better deal. The ‘square off point’ under the existing system and what we’re proposing is about 3.5 years. The longer the client keeps the loan, the more savings they make on the fee for service; but if they do refinance under three years then perhaps they could have done a better deal under the existing model. That’s not to say it shouldn’t be done for fee for service, because their loan will be free from commercial pressure. But to ensure that our customers do make savings, we will do the same loan again for them for free within four years,” he says. Brieger launched Vanilla Loans in late June. The company, which operates as a mortgage manager and a broker, was met with a flurry of both criticism and praise when it announced it was releasing a fee-for-service product. “I wasn’t necessarily expecting the ferocity of the attacks – you know ‘hang Geoff out the window’ type stuff. I knew what I was suggesting was controversial, and from that point of view I’d have to say I’m not surprised there were people feeling threatened. But I think at this point they’re still trying to understand where I’m coming from. There’s been a lot of support behind the scenes.” The main game for Vanilla Loans is as a mortgage broker, not a fee-for-service lender, Brieger says. But he launched his fee-for-service product (funded by FirstMac) first as a prelude to his bigger quest – putting together a fee-for-service brokerage team. Brieger isn’t new to the industry. The former owner of Greater Freedom, a boutique lender, did over $1bn worth of loans between 1997 and 2005, (when he sold the business). “So having sat on the sidelines watching I saw the industry get twisted and the value proposition of brokers and aggregators become diminished. I thought: ‘if I’m going to come back into this, I don’t want to play by these rules. I don’t like being told the rules about what I’m going to earn, and I don’t like clawbacks, hand cuffs on trails. I certainly don’t like some of the things I’m seeing now, with

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individual banks wanting their own accreditation and then holding guns to everybody’s heads.’ ” The current model is fundamentally flawed, he says, adding that brokers can never truly act in customers’ best interest while being paid “and consequently controlled” by lenders. Some argue the industry is years away from adopting a fee-for-service model, but Brieger says the timing is perfect. “Brokers are out there screaming about service levels and all the rules and diminishing incomes, but they’re not doing anything about it. You will never ever be in control of the game, and you will never be a legitimate broker in the eyes of customers if you accept fees from lenders. “We’re a true mortgage broker: we negotiate the best deals for our customers.” Brieger intends to use software to determine the best loan for the customer’s needs, then with their authority, walk into the branch to secure the loan. “I believe we can save 0.2 to 0.3% off the rate by refusing any commissions. And as a result we will save money for the consumer.” Brieger says he is in talks with lenders to determine the prospect of receiving reduced rates for the new fee-for-service broker channel. He met with two major banks in July to discuss options. According to Brieger, there was no commitment from the lenders to create speciallypriced products for fee-for-service brokers but the sentiment was “let’s keep talking”. “The problem is that they cannot go out at a retail level at a price that is lower for mortgage brokers than for customers through the branch network. That’s the sticking point. The best suggestion, he says, would be the creation of a different brand – or one that could be aligned with a new online lodgement with directto-customer self-service pricing. “That was probably the best decision, but that’s probably two years away even if we decided we wanted to do it.” Australia’s top commercial broker two years in a row says the industry is much further away than two years from embracing the fee-for-service model. “The financial planning industry has taken over 10 years to introduce this and I can’t see why the broking industry would be any different,” says Mark Turnbull, principal of Horizon Financial. He adds: “It constantly amazes me that people are promoting this idea when 50% of the public still go to the banks directly. This means that 50% of the public aren’t even sold on the broker proposition let alone the broker charging a fee for the service.”

Turnbull says its his belief that fee for service will only become viable once the broking industry has evolved further into a full financials proposition, which is where he believes the industry is heading. “If you can offer finance, insurance and financial planning then I think a fee-for-service model will work,” he says. But having owned a financial planning practice he witnessed first hand how difficult it was to introduce a fee-for-service model. “I believe that the only reason fee for service is becoming acceptable in the financial planning industry is because the FPA is promoting the intricate knowledge that a financial planner has to have. They have effectively conveyed that it is a specialist field with specialist knowledge.” Turnbull says customers aren’t ready yet to pay for the services of mortgage brokers. “If the specialist nature, study and qualifications are promoted effectively to the public, then I think a fee-for-service model may become acceptable. But this is a role for the MFAA – like the FPA and the CPA have played for their respective industries. The MFAA must show some leadership. Accreditation and study are a start, but they must continue to implement changes.”

Geoff Brieger

Phil Naylor

MFAA And what does the MFAA think? CEO Phil Naylor says it has been debating the merits of the fee-for-service model for the last six months. “I think it’s fair to say there are differing views within the industry depending on people’s perspective,” he says. Naylor points out that the National Consumer Credit Protection legislation that is before parliament (at the time of writing) lets brokers use both the commission and fee-for-service models. “The regulation allows that to happen. Some do it already. Whether more want to do it is really up to them, but at least the law will allow it. There are lots of considerations that individuals need to take into account and these are some of the things that our various committees are working through at the moment to give brokers the best information so they can make their own decisions,” he says. Naylor adds that the MFAA hasn’t done anything to educate consumers on the model yet. “We want to make sure our membership is totally 100% clear as to what their options are and what the implications are before we educate consumers. We will be educating consumers if the industry moves down that track.” mpa

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feature diversify

Expanding yourself The message of diversification has started to take root with many brokers. MPA asks aggregators what they are doing to help brokers grow their business in the downturn

t doesn’t pay to be a one-trick pony in the mortgage industry. Reduced commissions and lender service delays mean brokers need more than one skill up their sleeve in to earn the same amount they made 18 months ago. The good news is that the majority of brokers have diversified their services. Choice CEO Brendan O’Donnell says almost 90% of the aggregator’s members now provide services or products as well as residential loans. “We are now working on helping them increase the percentage of their revenue that is derived from a diversified product offering,” he says. National Broker’s Group CEO Steve Lambert boasts similar numbers. “The percentage of members that have picked up the message is growing. At this point approximately 80% of our brokers are offering diversified services.” NBG has been so successful partly because it has driven the diversification message home. “We take this message out to the network via e-mail, conferences, newsletters, BDMs, our training manager and the regular professional development days across Australia. The recurring message is that diversification is a key aspect of any business.” Firstfolio put a different number to its diversification goals. “Our strategy is to target approximately 15% of revenues from outside of our mortgage operations.” Aggregators’ offering Aggregators have been talking about the need to diversify for several years. And many have sharpened their services in the last 18 months to help brokers incorporate a wider range of services into their business seamlessly.

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AFG executive director Kevin Matthews says its major focus this year has been on its SMART CRM program. “We act as the members’ marketing department and communicate with their customers on their behalf, using their name and brand at different stages of the customer cycle. This helps our members stay close to their customers, get that next loan and receive other referrals. It also leads to complementary product sales like insurance and personal loans.” So far, more than 500 AFG members have embraced the service. An effective CRM system has also been a key focus for Choice and the springboard for its diversification programs. “Choice has placed considerable emphasis on diversification for a number of years. We continue to drive diversification through ongoing training and accreditation sessions and we work with members specifically in relation to their own business plans – highlighting alternative revenue stream opportunities,” O’Donnell says. “Underpinning all this is a focus on client relationship and building ‘stickiness’. We achieve this through a focus on CRM, and by building an effective broker software platform (which we have in Podium). We also drive this by continually looking for opportunity to add new revenue streams to our panel.” A number of aggregators stressed their commercial offering. Principal Mark Haron says Connective has offered leasing and equipment finance for years, as has Mortgage Choice. National Brokers Group has been very active in expanding its members’ commercial knowledge and skills. “We have developed Commercial Lending and leasing/commercial higher purchase (CHP) workshops for our members, along with a

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diversify

range of practical training solutions aimed directly at business improvements,” Lambert says. Managing director Kym Rampal says Loankit is using its software to help brokers place commercial deals. “We are in the process of building a ‘commercial scenario ready reckoner’ to help residential brokers to quickly place commercial deals via referrals.” Insurance is also a popular branch of diversification. “Not only do we have a large panel of residential lenders, there is comprehensive panel of commercial, leasing and insurance products available,” says Loan Market executive director John Kolenda. He adds that the aggregator has a track record of working with other service providers and has a number of non-residential products with the majority of brokers involved in cross selling or direct selling. “We have had greater interest in risk products from the broking team and have a number of models operating in the business currently from referral through to full licensing,” he adds. Connective has also added a number of insurance and investment providers to its panel to give its brokers a number of options for diversification into these areas, Haron says. In addition to home and contents insurance, Mortgage Choice is also piloting a life insurance offering through its franchisees – and participating franchisees have begun to offer personal loans for the first time. CEO Ray Hair says PLAN promotes intelligent diversification, and specifically added: “We are seeing increased insurance activity.” Franchise group Smartline boasts an excellent strike rate introducing insurance through its brokers. “Each of our brokers are accredited to provide insurance to their clients, with over 75% achieving sales in diversified products such as insurance over the last year,” says managing director Chris Acret. “Given we are a franchise system, we build a consistent client offering across all of our brokers. We are fostering diversification by incorporating it into our client proposition and processes, to ensure that the conversation on additional products occurs in every case, as part of each loan application and each regular client review.”

One-stop shop Several aggregators suggested that their entire model is based on the one-stop-shop philosophy which provides a wide range of home loans and related financial services products to clients who deal with the network. Towards the end of 2008, LJ Hooker Financial Services diversified by introducing its first financial planning office. In addition to financial planning, the office provides advice on insurance products. LJ Hooker Financial Services is now focusing on establishing key partnerships with insurance providers. “LJ Hooker Financial Services has in recent years formed key partnerships with several Financial Planning/Insurance providers such as Guardian, Vero, Australian Life Insurance and PLAN Financial Planning,” says general manager Peter Bromley. Another business initiative on offer to LJ Hooker Financial Services brokers is the integration of its business into the LJ Hooker ServicePlus offering that provides clients with the ‘one stop shop’ concept. “ServicePlus essentially helps the customers beyond just buying, selling, renting and investing. We offer additional services that the client can use at no additional charge, whether this is conveyancing, settlements, or financial services. In an effort to further develop client relationships with LJ Hooker offices our brokers offer free, no obligation consultations to all LJ Hooker clients,” Bromley says. The aggregator finconnect has a similar approach. As a wholly owned subsidiary of financial planning group Count Financial, it is able to offer through its members a comprehensive range of services. “Products/services such as asset finance/leasing, wealth protection and risk insurance have enabled our members with a growth strategy which revolves around creating genuine and significant value for members’ businesses through offering products and services which complement lending. In addition finconnect is able to offer a full range of lending products such as residential, commercial/business, private funds, margin lending, and so on” says general manager Tanya Sale. “The global credit crisis has meant that all our members are actively incorporating additional services/products within their business.” MPA

Brendan O’Donnell

Kevin Matthews

Steve Lambert

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Profile leaders

the chosen ones finalists 2009

ver the eight years since its inception, the Australian Mortgage Awards has well and truly established itself as the mortgage industry’s leading annual event. Usually sold out and packed with up to 800 of the industry’s most successful and preeminent personalities, the Awards always proves to be much anticipated, much talked about and much enjoyed. No wonder then that some of the biggest names in the mortgage world have signed up to support the annual event. Event partner Westpac and award sponsors Commonwealth Bank, Royal Bank of Scotland, St.George Bank, Finance Tools, Mortgage House and Australian First Mortgage are the first in line to show their dedicated support to the industry, with many more to come. The Australian Mortgage Award, are the culmination of a months-long, in-depth research process and will celebrate and recognise the key players who have triumphed in the face of global economic adversity and

continued to strengthen their business and customer relationships. And in 2009, in line with its heightened profile, the event moves up a notch to the swish confines of the main ballroom at the five-star Westin Hotel in Sydney’s CBD. The following pages showcase our stellar line-up of 2009 Finalists who have been hand-picked from hundreds of nominations by members of the general public and industry insiders. Winners will be chosen by a panel of judges composed of some of Australia’s most respected mortgage and finance players and will be announced on the night. Event organiser and MPA publisher, Key Media would like to congratulate all of the 2009 finalists and wish them the best of luck on the night, which promises to be an evening filled with live entertainment, fine food and wine and plenty of anticipation with the announcement of the winners in a fun science fiction inspired event.

best industry advertising campaign Commonwealth Bank of Australia

St.George Bank

QBE

Liberty Financial

National Brokers Group

Challenger

Citibank

Mortgage Ezy

54 australianmortgageawards.com.au

EVENT PARTNER

print/digital/tv

EVENT PARTNER

Profile leaders

most effective internet presence Commonwealth Bank of Australia www.commbroker.com.au

St.George Bank www.partners.stgeorge. com.au

Westpac www.westpac.com.au

Royal Bank of Scotland www.rbs.com.au

ANZ www.anz.com.au

BankWest www.bankwest.com.au

best industry service FrontRunner Consulting Group

Loan Tracking Services

Deposit Power

Finware australia

Your Client Matters

Stargate Group

Intellitrain

Valuation Exchange

best customer service

from an individual office

LENDING

Australian First Mortgage Homebush

Club Financial Services Gippsland

Niche Lending Sydney

Intelligent Finance Bondi Junction

Loan Market home finance brokers Cranbourne

Metropole Finance Knox Park (formally known as RJA Financial Services)

Vision Finance and property services Sydney

Midwest Home Loans Group Parkes

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Profile leaders

Australian First Mortgage

sponsor bio

best new office on the block WHO Finance QLD

Great Aussie Dream Penrith

Smartline North Adelaide

Club Financial Services Norwood

Australian First Mortgage P/L (AFM) is an award winning non bank lender with offices in Sydney(HO), Melbourne, Gold Coast, Adelaide, and Perth. AFM offers residential mortgages as well as leasing and commercial property finance. The AFM Directors have been in lending for over 100 years and are dedicated to providing their clients with competitive products, and focus their efforts in providing “excellence in service”.

Contact

At the 2005 Australian Mortgage Awards, Australian First Mortgage P/L won the award for “Best Customer Service”.

Central Choice Footscray

Loan Market home finance brokers Goodna

CVG Finance Newcastle

franchise operation of the year Smartline

RAMS Home Loans

Club Financial Services

Mortgage Choice

the Mortgage Gallery

Refund Home Loans

Choice Home Loans

commercial brokerage of the year Specialists in business lending

Cairns Finance Cairns

Wells Partners/ Mortgage Link Sydney

LJ Hooker Financial Services East Perth

Mortgage One australia Sydney

Southshore Finance West Perth

Balmain NB Corporation Melbourne

56 australianmortgageawards.com.au

Mildura Finance Limited Mildura

‘AAA’ Commercial Mortgages Sydney

Aussie

Iain Forbes founding director P 02 9643 4301 E iforbes@australianfm.com.au W www.australianfm.com.au

EVENT PARTNER

Profile leaders

brokerage of the year

(< 5 staff)

Definitive Finance Caloundra

Intelligent Finance Bondi Junction

Lending Solutions Group St Kilda

PLAN2day Mortgage Strategies Baulkham Hills

LJ Hooker Financial Services Hunter Region

Smartmove Neutral Bay

Club Financial Services Maitland

Priority Home Loans Tamworth

Mortgage House

Clarity Home Loans Canberra

Oxygen Home Loans NSW

Club Financial Services Gippsland

Choice Home Loans Berwick

LJ Hooker Financial Services Sydney

Mortgage Street home loans QLD

Eastern Financial Solutions NSW

sponsor bio

Seniors First

Mortgage House was established in the mid 1980’s. With a network of representatives nationwide and having secured several business/industry awards for excellence, Mortgage House always strive to excel in customer service. They are a funder in their own right and in addition, have access to 34 other major banks, building societies and other financiers in order to arrange a solution for their customers’ needs.

Contact

Pinnacle Finance Brokers Brisbane

(> 6 staff)

Sean Bombell general manager

sponsor bio

brokerage of the year

Finance Tools are specialist web designers for the mortgage broking sector. Finance Tools product suite incorporates complete websites (including all copywriting), interactive mortgage calculators, email newsletters and newsletter systems, online e-learning courses and interest rate reports.

South Coast Business & Financial Solutions Ulladulla

P 02 9407 3000 E seanb@paladin.net.au W www.mortgagehouse.com.au

Finance Tools

best aggregator bdm

Bruce Mawson National Mortgage Brokers

WendI Kent Choice Aggregation Services

Stephen Doyle FAST

Bryce Deledio Australian Finance Group

Josette Loje Finconnect Australia

Fiona Brown Connective

Finance Tools can help you to establish your online presence with an expertise and knowledge gained by being the largest provider of mortgage broker websites and online tools to the mortgage and finance industry.

Sam Zammit PLAN Australia

Lyn VellacoTt National Brokers Group

Contact

Marcus O’Brien The Mortgage Professionals

Sam Benjamin director P 1300 300 790 E sbenjamin@financetools.com.au W www.financetools.com.au

Profile leaders

best non-bank BDM

including mortgage managers

Craig Mowbray Australian First Mortgage

Paul Concannon Liberty Financial

Lisa Daley Mortgage Ezy

DonOvan Blanch RAMS Home Loans

Sally Hillman La Trobe Financial

Julie Saliba Homeloans Ltd

Dean Mathieson Professional Mortgage Providers

Sof Tsialtas BEAT Home Loans

Kate Day FirstMac

best bank BDM Rebecca PhillipsVasilescu Royal Bank of Scotland

Gerard Rolfs Commonwealth Bank of Australia

Phil Bennett Westpac

George Srbinovski St.George Bank

Tom Brazier Adelaide Bank

Lana Moy ANZ

Ian Jeffries Bankwest

Mick Ruhle ING Direct

Helaine Wilesmith AMP Bank

Ross Cacozza Citibank

Commonwealth Bank

franchise sponsor bio

young gun of the year Alex Lambros LJ Hooker Financial Services - Sydney

Paul Bieg Club Financial ServicesNorwood

Greg Whitton Loan Market Home Finance Brokers – Goodna

Jodie Skelton Smartline – Taylors Lakes

Martin Castilla Smartline – North Adelaide

58 australianmortgageawards.com.au

Stewart Syron Raine & Horne Financial Services – Northern Beaches

In the broker community they set industry standards in quality and provide their broker partners with unique initiatives. Commonwealth Bank’s vision is to be the finest financial organisation through excelling in customer service, and sharing their values of great service and excellence with the whole community.

Contact

Guru Prasad Oasis Home Loans – Parramatta

As the bank for all Australians, Commonwealth Bank are actively involved in the lives of more than half the population on a regular basis.

Broker Assist P 13 25 88 (option 3) E brokerassist@colonial.com.au W www.colonialfirststate.com.au

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Profile leaders

Commonwealth Bank

young gun of the year

independent

Kandi Hughes Dynamic Finance Solutions – Brisbane

Brett Compton Oxygen Home Loans – Terrigal

Sonia Rohlf Choice Home Loans – Berwick

Haley North Smartmove – Neutral Bay

Jimmy Bowler Mortgage Force – Kalgoorlie

David Thomas Trilogy Funding – ACT

Hany Pham Central Choice – Footscray

Ruan Burger Home Loans Etc – Gladstone

broker of the year Danny Adams Cairns Finance

Greg Wells Wells Partners / Mortgage Link

Mark Turnbull Horizon Financial

John Carrasco Property Source Finance

commercial real estate

Danny Masri Mortgage One Australia

broker of the year

Jacqui Williams Advanced Finance Solutions – Central Coast

Kelvin Smith Smith Finance Group

non-conforming

visit the official website and secure your table at this sell-out event australianmortgageawards.com.au.

Richard Galvin Mortgage Balance

Graham Doessel Mortgage Now

Paul Mitchell Mortgage Helpers Australia

Scott Vine Lending Solutions Group

David Smithers Gemstone Finance

Graham Reibelt Oasis Home Loans

Profile leaders

broker of the year

COMMERCIAL FINANCE

Scott Smith Cairns Finance

Bruce Williamson Westminster National

Danny Masri Mortgage One Australia

Michael Coombes Southshore Finance

Paul Ireland Tracfin

Scott Woodhouse Healthy Lending

Mike Burton MoneyCare Solutions

Royal Bank of Scotland

equity release sponsor bio

broker of the year Roger Stride Seniors Finance, WA

Jason Allen Australian Pensioner Equity Finance

Helen Walsh H.G. Walsh Financial Solutions

The Group delivers a full range of high-quality advisory, financing and operational service solutions tailored to best meet their clients’ needs. RBS teams have a thorough understanding of their clients’ business objectives and unique sector challenges, from conducting complex IPOs, to helping the Government maximise the benefit of public private partnerships. Contact

Darren MoffaTt Seniors First

RBS Group (Australia) is a leading provider of corporate and investment banking products and services. RBS works on some of the local market’s largest and most complex transactions and infrastructure projects for their corporate, institutional and public sector clients.

Martin Lynch director of reverse mortgages P 02 8259 5000 E martin.lynch@rbs.com W www.rbs.com.au

Winners of the national awards are entered as finalists for these categories. The winners will be announced on the night.

australian COMMONWEALTH BANK

rookie of the year australian

bdm of the year 60 australianmortgageawards.com.au

australian WESTPAC

broker of the year

EVENT PARTNER

Profile leaders

St.George Bank

franchise sponsor bio

broker of the year

Joshua Egan Club Financial Services

Tracie Palmer LJ Hooker Financial Services

Sarah Dougan LJ Hooker Financial Services

Founded in 1937, as a housing based financial institution, St.George is now Australia’s fifth largest bank and one of the top 15 publicly listed companies in Australia. Employing over 8,500 people, its national operations span all aspects of the financial services industry including; retail banking, institutional & business banking, and wealth management. At the Bank’s core is a close relationship with its customers and this remains the cornerstone of future strategies, an important tradition that differentiates St.George from other Australian banks.

Daniel O’Brien Raine & Horne Financial Services

Mark Winter Loan Market Home Finance Brokers

Contact

St.George work hard to maintain excellent customer service and consistently exceed service expectations. That’s why they’re proud to say “we’re good with people and we’re good with money too”.

Cathy Anderson Smartline

Emma Howard marketing manager Intermediary Distribution - Retail Bank P 02 9236 2953 E howarde@stgeorge.com.au W www.stgeorge.com.au

St.George Bank

broker of the year

independent

Peter Trethowan Pinnacle Finance Brokers

Joanne Kous Choice Home Loans

Ismail Ozsoy Touch of Finance

Lidia Sherwin Lidia Finance

Laurie Parkes

Tony Cottam

FrontRunner Mortgage Group

South Coast Business & Financial Solutions

Peter Ellis Oxygen Home Loans

sponsor bio

David Brell Smartmove

Westpac is Australia’s first bank and first company. They have 192 years’ experience helping customers to achieve their financial goals through good times and bad. With a strategic focus on Australia, New Zealand and the near Pacific, the Westpac Group provides a broad range of banking and financial services – including retail, business and institutional banking.

Contact

Westpac are passionate about, and extremely proud of their deep heritage. However today, Westpac strives to offer its mortgage broker distribution partners, first class service and a broad range of award-winning home loan products, with focus firmly on the future and delighting the 10 million customers they put at the centre of everything they do.

Katrina Rowlands Mortgage Success

golden morgie

for lifetime achievement in the mortgage industry

Neville Anitelea manager communications & marketing, Mortgage Broker Distribution, Westpac P 02 8254 8133 E nanitelea@westpac.com.au W www.westpac.com.au

mpa lender news

contents 62 A review of news in the world of non-bank lending and mortgage management 66 In profile: MKM CAPITAL 70 Opinion: Innovation

Government rejects ‘People’s Bank’ The Federal Government has rejected calls for the establishment of a ‘People’s Bank’. Six economists, including Nicholas Gruen who is also a mortgage broker – urged the government to set up a “publicly-owned entity, akin to KiwiBank in New Zealand, to offer essential services in Australia’s finance sector that leverage off unique government infrastructure (eg, Australia Post, the tax system, and the government bond market)”. The People’s Bank would provide an alternative to the major banks. In a signed letter, the economists argued that the major banks were the biggest beneficiaries” of the sub-prime “chaos” due to receiving “the most favourable regulatory treatment under the existing system”. The open letter said it remained uncertain to what degree Australia’s successful navigation of the “catastrophe” was due to “our own regulatory foresight or just good luck”. “We would do well not to discount the possibility that a ‘good roll of the dice’ left us without more significant system failures such as those seen in the UK. In future crises, we may not be so lucky,” it said. The economists warned that “Australia is a nation with a large foreign debt that has continually increased its liabilities via enormous current account deficits. Our vulnerability to foreign shocks is greater than most of our peers.”

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It questioned what effect “whole or partial nationalisation of banking systems around the world” would have on Australian institutions’ ability to source foreign credit. The paper also pointed to recent actions by the UK government, and to the new regulatory regime in the US under president Obama in particular. They called on the government to thoroughly review the existing system and evaluate whether changes need to be made to it. The New Zealand version of the People’s Bank – Kiwibank – has been heralded as an example of success. Launched seven years ago, the state-owned Kiwibank has attracted 650,000 customers. Total assets stand at nearly NZ$10bn (A$8bn), including a loan book of NZ$7.7bn (A$6.2bn). Last year the bank reported a tax-paid profit of NZ$36.8m (A$29.5m). It is now New Zealand’s fifth biggest bank and is competing directly with the country’s four biggest banks, all of which are Australian-owned. Executives in NZ believe the idea could work across the Tasman. The first Kiwibank branch opened in Palmerston North. The concept was the brainchild of politician Jim Anderton. It was promoted as a New Zealand-owned bank that would look after ordinary New Zealanders and keep profits in New Zealand.

$8 bn

The spending cap of the AOFM’s RMBS investment program

mpa lender news

RMBS extension rumours circulate The AOFM’s $8bn spending spree into RMBS is almost over, prompting industry rumours that the government could be expanding the program to $30bn. FirstMac managing director Kim Cannon says there’s lots of talk, but no concrete promises have been made. At the time of writing, government spending in the RMBS market totalled $6.693bn. Recent investments included a $299.5m issue in Wide Bay Building Society and a $190m issue in Australian Central Credit Union. Two other proposals for RMBS issues were expected to be priced by the end of August – one for Greater Building Society Ltd and the other for Suncorp-Metway. To date, the government has invested $3.24bn in RMBS issues to ADIs and $3.453bn in RMBS issues to non-ADIs. The program was intended to boost competition in the banking sector.

Mortgage Choice reviews lender panel Franchise group Mortgage Choice is currently undertaking a review of the residential and commercial lenders on its panel. “We are conducting a review of our panel with the intention being to add some new lenders to the panel to improve the customer proposition,” CEO Michael Russell said. This follows Mortgage Choice adding non-bank lender Homeloans Ltd to its panel at the end of June. Russell said it was currently examining proposals from three to four other lenders, with an announcement expected soon about an addition to the panel. He said the key criteria for selecting new lenders are availability of credit, some surety around the back office, and the uniqueness in the offering.

Seinfeld stars in ad for building society Newcastle Greater Building Society landed heavyweight US comedian Jerry Seinfeld to star in its ad campaign. Seinfeld has only graced two other advertising campaigns in his career – one for Microsoft, the other for American Express. The society’s CEO Don Magin told The Daily Telegraph it was simply a case of “being bold enough to ask”. Seinfeld filmed the campaign in Long Island, which was transformed to look like Newcastle. A spokesman for the bank said they never expected Seinfeld, who was on the top of the building society’s celebrity wish list, to say yes to the offer. But after e-mailing the proposal and making a call, Seinfeld’s people agreed to the campaign. Seinfeld co-wrote the scripts. In the commercial, Seinfeld is seen standing outside a branch and doing his familiar standup monologues. The ad campaign will only be aired in the Newcastle region and Gold Coast.

brokernews.com.au

mpa lender news

Queensland TCU wins award

Mutuals boast higher regulation standards Credit unions and building societies are ahead of the pack when it comes to responsible lending practices, according to the industry body Abacus. While consumer credit legislation was introduced into the lower house last week, certain parts of the legislation will not take effect until January 2011, exposing some consumers to risk, says Abacus CEO Louise Petschler. “Members of credit unions and mutual building societies, however, can breathe easy because they are protected by the responsible lending principles in the new Mutual Banking Code of Practice,” Petschler said. Abacus introduced the code on 1 July. “We would urge consumers to ask whether their lender is committed to responsible, fair and ethical lending practices,” Petschler said. “The mutual banking sector will be imposing self-regulatory initiatives to ensure that all members lend responsibly and that all contract terms, including fees and charges, will be fair and reasonable.”

92 %

of all broker loans are written for the big banks

Fewer Australians falling behind on their mortgage Borrowers have been keeping up with their mortgage payments thanks to successive interest rate cuts and government stimulus actions. Ratings agency Standard & Poor’s reported that the arrears fell from 1.66% in March to 1.62% in April. There’s been a general trend downward after arrears peaked in January at 1.84%. But missed payments on subprime loans remain substantially higher at 16.3%. Many borrowers in this segment of the loans market took out their mortgages in 2005 and 2006. Many are unable to refinance because of tightened credit policy.

brokernews.com.au

The Queensland Teacher’s Credit Union (QTCU) has been named Queensland’s best non-bank lender for first homebuyers by Canstar Cannex. The QTCU beat all Queensland credit unions, building societies and mortgage providers to take out the award for its Smart Starter Home Loan Package, designed specifically for first homebuyers. QTCU CEO Mike Murphy said the win was the result of careful research into creating a product suited to the first homebuyer market. “Queensland Teachers’ Credit Union’s Smart Starter Home Loan Package has been designed to make the process of buying a home that little bit easier for first homeowners,” he said. Canstar Cannex head of research Steve Mickenbacker said although the major banks had the edge when it came to national coverage, state-based non-banks played an important role by providing healthy competition in the local lending market. Murphy said QTCU continued to demonstrate the viability of using credit unions as an alternative to the major banks. “We continuously strive to provide our members with products and services that suit their needs and this award demonstrates our ability to create products that are both relevant and highly competitive.” Canstar Cannex researched 403 products from 115 lenders before choosing QTCU as its winner.

business Profile lender

Mortgage provider MKM Capital is one of the few players to benefit from the global financial crisis. MPA investigates

the

specialist see the interview live brokernews.com.au/mpa

KM Capital is a quiet success story. The specialist provider of residentially secured first mortgages, second mortgages and bridging solutions opened its doors five years ago. And despite its owners coming from worlds outside the mortgage industry, they have adapted and thrived throughout the global financial crisis. Managing director Graham Mendelowitz, who comes from a private equity background, joined forces with his business partner Mervyn Kark and a consortium of offshore private investors in 1994 to talk about entering the mortgage space. “We started out and wanted to see where the journey would take us,” Mendelowitz says. That journey has led to the steady expansion of the business and solid returns. Today MKM Capital has 14 staff, and offices in Sydney and Melbourne. The business has evolved into a distributor of a full range of non-conforming offerings. Mendelowitz says they chose to carve out a niche in the non-conforming market, because they sensed an opportunity to offer something different. “We wanted to focus on that because we sensed that the mainline lenders, both the banks and the non-banks, ran higher volume, ‘cookie cutter’ models. There didn’t seem to be a professional solution for customers who really needed their circumstances managed and taken specifically into account to meet their objectives.” It was a fortunate decision. Mendelowitz proudly notes: “We’ve built a profitable and sustainable business model which is being borne out in these difficult times”.

Graham Mendelowitz

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business profile lender

Early days In 2004, the mortgage industry was a different beast. Mendelowitz says when he joined the industry there was a fair degree of arrogance in the market. “When we entered the market, it seemed there was a ‘join the queue’ attitude. People were saying ‘there are lots of other lenders around and lots of places we can get money, so why should we deal with you guys?’ ” The contrast today is very stark. The GFC has reduced the number of lenders dramatically, particularly in the space that MKM Capital operates in. Mendelowitz says there is also greater clarity between those that actually have the money versus those that are brokers advising their client. “When we first started the market was very crowded and somewhat confused. It was crowded because capital was freely available, so there were lots of lenders. The confused part was that everybody called themselves a lender. It wasn’t clear who actually had the money, where the credit decision rested and who was responsible for it.” MKM Capital started with shareholder funds, but about six months in the company ran a tender to secure an institutional facility. MKM Capital currently has a warehouse with an Australian bank and it subordinates that warehouse with its own equity. “So we’re the first/last reserve in that warehouse and therefore we control the credit completely within the perimeters of that facility,” Mendelowitz says. MKM Capital is not reliant on securitisation because the nature of its portfolio is one that is

broker remuneration MKM Capital pays brokers 0.8% to 1% upfront on settlement of the loan. For loans that are greater than 12 months the broker has the ability to add up to 0.5% trail on top of its rate.

secret of success Graham Mendelowitz, managing director of MKM Capital: “We’ve had a disciplined strategy and a very robust business model. The second point is that the management and the team have been very hands on and are very high quality and professional in their space. So each member of the team is a specialist in what they do. And at a business level we’ve been risk priced from day one. We’ve never chased volume, what we were focused on was a risk-adjusted return on our portfolio.”

churning – the duration on the portfolio is 14 months. Mendelowitz says that while MKM Capital has increased (and will continue to increase its warehouse facility) the company doesn’t “see or foresee a need for securitisation as an ultimate exit for our portfolio”. The third biggest change in the market since MKM Capital first started has been the need among customers. Challenging circumstances and increasingly tighter credit policy from major lenders has been hugely beneficial for MKM Capital, whose niche services suit the present situation of many borrowers. The credit crisis has caused many customers to become wary of trusting smaller lenders, but Mendelowitz says they do appreciate someone who is prepared to listen to their circumstances and tailor a solution for them. “The GFC has affected us positively. Because naturally there’s less competition, fewer lenders around and therefore fewer solutions for customers. Added to that, customers have clearly been under more financial pressure, so our inquiry levels have trebled. But we still have to exercise a high level of care and skill about who we’re lending money to. We have to make sure clients can afford the loan and what is offered to them is suitable for their circumstances.” MKM Capital has tightened its own policies. The company has reduced its LVR from 80% to 75% and reduced maximum loan amounts down from $1.5m to $1.25m. Mendelowitz says they’ve also placed a higher degree of focus on serviceability and affordability. In this respect, Mendelowitz says the company has an edge over private lenders operating in the non-conforming space. “We anticipate some competition from private lenders, and it will be interesting to see how they are going to operate in a soon to be regulated and more compliant environment,” he says. Mendelowitz adds that he thinks activities of asset

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business Profile lender

product mix Over the years, MKM Capital has broadened its product mix. From a duration perspective, the company now has loans from three months to 30 years and also has a range of products that cater for the circumstance of the borrower – someone who needs to recover from the circumstances they find themselves in, through to low-doc loans and full-doc loans. MKM Capital’s newest product innovation is its ‘six plus six’ product which has been on the market for four months. It allows a customer to take a six month loan at 8.25% for a fixed rate, and if they see out the full duration of the six months then there’s no deferred establishment fee. If they wish to extend their loan for a further six months, they can do that at a predetermined rate which will reflect the circumstance of the customer and if they see that out till the end of that six months, there are no exit fees at all.

lenders will be curtailed in the future. As far as MKM Capital goes, Mendelowitz says they are well placed to meet the new regulatory rules. “We’ve always looked at the serviceability,” he says. “And as far as the unsuitability requirements go, we think that those that didn’t think about the kind of product they provided and the circumstance of the customer (the ‘cookie cutter’ volume approach) are going to struggle a bit.” While Mendelowitz acknowledges there is always a risk of overregulation, the danger lies not in the legislation but how it is interpreted. “Are there going to be some unintended consequences of that regulation? Unfortunately some of that is only going to be borne out when those matter end up in courts of law.” Mendelowitz admits the monetary and jail penalties sound harsh. However, he adds: “When one considers the free-wheeling environment in which we were operating and the pain caused in that process, perhaps the industry does need to have that big stick to make sure people take that action seriously.”

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Broker bonds MKM Capital has a database of 2,500 brokers, but like many in the business is subject to the old ‘80/20’ rule. About 80% of its business comes from 20% of its introducers. The ‘Holy Grail’ for the company is to develop a core group of 100 brokers who have deep and meaningful business relationships with MKM Capital and really understand its products and the way it operates. Currently it has a fairly even spread across the country, with a strong base in Victoria and South Australia. It has a good introductory base in Queensland and WA and it trying to bolster its relationships in NSW, which is its largest market. MKM Capital employs relationship managers that focus on what it calls its ‘meaningful relationships’ that it’s built over the years. The balance of brokers are managed through aggregation panels, mortgage manager representation, and MKM capital’s database management through which brokers are contacted electronically. Mendelowitz says the company is invited to professional development days and conferences, and it is currently running a series of breakfast seminars with one aggregator. MKM Capital does some level of sponsorship and advertising as well. The recent push by aggregators to expand their panels has been good for the non-bank sector, but tricky for MKM Capital. “We’re on two major aggregation panels and we find there is a greater level of interest on us being on the panel. The reality is our products tend to not be in the mainstream of where the main banks are writing their business and the volume is being written through the aggregation panel, says Mendelowitz. “So there’s a slight disconnect – there is an interest in us being on the panels, but we’re not a volume player. Therefore that flow through for us is not the same as a mainline trading bank.” MPA

see the interview live Graham Mendelowitz discusses how the GFC is affecting MKM Capital. Visit Brokernews.com.au/ MPA to watch the video

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innovation FirstMac’s Kim Cannon has managed to survive and thrive in the home loans business by evolving with the times

Kim Cannon

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f necessity is the mother of invention, then the mortgage industry – particularly the non-bank/ mortgage management sector – is just around the corner from making a major discovery. Somewhat of a Godfather in the non-bank sector, Kim Cannon, managing director of FirstMac, believes the industry is undergoing a real period of innovation. “It’s in times of adversity that the greatest innovation takes over,” he says. “In the last recession in the early 90s, a bunch of us who were in commercial lending suddenly had no funding, so off we went and started the home loan business. That’s the innovation that came out of it.” Cannon is no stranger to reinvention. He started as a lease broker, then moved into commercial lending. In the early 90s he became a mortgage manager using the broker channel, but later broke from that strategy to start a retail lending business. Cannon moved back into the broker market again at a later date, and eventually turned FirstMac into funder in its own right. FirstMac started using securitisation as a vehicle in 2002, but Cannon says it is time to look at something new. “We believed for years that securitisation was a great thing, but nobody ever looked at it and said ‘are we overexposed to that sector?’ And you know that you are when the market isn’t there.” Cannon added that FirstMac is now looking at managed investment schemes and acquisitions to stem the company’s 100% exposure to the securitisation market. “People like me just reinvent themselves every six or seven years. We might be in the same business, but working in a different sector. My

business has grown because we innovate and reinvent.” Cannon says that of the dozen or so mortgage managers that opened shop in the early 90s, only two or three from that ‘first generation’ are still around. “The others were probably out on the golf course and they were making good money and things were rolling along, but now the world’s collapsed,” Cannon says. “They’ve been so out of touch with the business, and they think that what they did 15 to 20 years ago is going to work again and it won’t.” “A lot of these guys have got to wake up to the fact that the world has changed and they need to address a high volume, high service, low margin business of the future and that means they can’t do everything in house. They’re going to have to change their business model.” The problem with both mortgage managers and brokers, Cannon concludes, is that there’s an over-reliance on one-product. “I think that our industry as always been a one-product industry and the next round of innovation for us will be expansion into other products. We’re already looking at credit cards at the moment,” he says, adding that others (such as Aussie John and his move into insurance) are doing the same. Another innovation is the fee-for-service model – love it or hate it. Cannon says it’s just another example of evolution in the industry. “We had 17 years of great home loan lending – it was boom times. But it got a bit stale out there, it was the ‘same old’, same old’. You can’t just be a salesman doing the same thing all day, every day all your life.”

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lifestyle favourites

Kevin Conlon + CEO + SEQUAL

Favourite things Vacation Spot Exploring the Dordogne Valley in southwest France.

Hobby Ocean yacht racing. This is definitely not ‘mucking about on boats’.

Star Michael J. Fox (some would say for obvious reasons).

Sport Anything in the pursuit of quiet achievement. I am completely over the relentless media focus on so-called ‘sport heroes’.

Book A Pattern of Islands by Sir Arthur Grimble. Tales of life as a British colonial administrator on a desolate atoll in the South Pacific.

Place to be In the driver’s seat: it’s the best place to influence the outcome!

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Music/Band Boomers rule, OK? Nothing written since the ‘70s is worthy of taking up room on my iPod. Sorry kids, I deleted P!NK.

Drink Anything red and French.

Food Comfort food or any variation on that theme – no works of art, please! The ‘Two Fat Ladies’ come to mind.

Movie Perhaps not the most politicallycorrect choice but Wall Street – the financial markets at their best… or worst?

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18/05/2009 4:33:32 PM