THE BUDGET NOT SO BORING FOR THE HOUSING MARKET SMALL BUSINESSES UNDERSTANDING THEIR CONFIDENCE, CONDITIONS AND CHALLENGES
MPAMAGAZINE.COM.AU ISSUE 15.7
GLOBAL MORTGAGE INNOVATION THREATS AND OPPORTUNITIES BEYOND OUR BORDERS
BROKERS ON
BANKS It’s time for the industry’s most important results to see the light of day
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JULY 2O15
CONNECT WITH US
CONTENTS 32
Got a story, suggestion or just want to find out some more information? twitter.com/MPA_Australia facebook.com/Mortgage ProfessionalAU
UPFRONT 04 News and tips
Intelligence for the cutting-edge mortgage professional
08 Hot topic
Increasing consumer awareness
10 News analysis FEATURES
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GLOBAL MORTGAGE INNOVATION
BUSINESS STRATEGY
Mortgages are changing, and not just in Australia
When to unveil strategic initiatives
42
Create content that begs to be shared
COVER STORY
BROKERS ON BANKS
14 Mortgage Choice’s new CEO on changing the franchise’s message
54 Social media videos
58 Stress: the silent assassin
Keep stress from taking over your life
MORTGAGE INSIDERS Commercial broker and entrepreneur extraordinaire
COMMERCIAL
JOHN FLAVELL
52 Driving change
38 Sharryn Huggett
Individual banks ranked and overall trends analysed in our biggest survey of the year
HEAD TO HEAD
What the budget means for housing
TALKING BUSINESS
What Australian SMEs want, and how commercial brokers fit in
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61 Day in the life
Sandi Sims of MyState and her fourlegged friend
64 Favourite things
Join ME Bank’s Lino Pelaccia on a trip to Old Trafford
MPAMAGAZINE.COM.AU NOW ONLINE: Sneak previews and magazine extracts in Business Strategy Top brokers and brokerages in Leading Mortgage Professionals
BUSINESS STRATEGY
CORPORATE VOLUNTEERING
Are your initiatives really making a difference?
Bank roundtables and MFAA convention coverage on MPA TV Results from our Brokers on Aggregators, Consumers on Brokers and Brokers on Banks surveys www.mpamagazine.com.au
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FEATURE / BROKER EDUCATION
EDITOR’S LETTER
Barbarians at the gates
B
elieve it or not, this issue of a MPA is first and foremost a celebration – of the top performers and encouraging results of our Brokers on Banks survey. If you know Brokers on Banks, then you’ll appreciate our brand-new design, which not only reports the individual winners and industry trends, but analyses them as well. If you haven’t read Brokers on Banks before, then welcome to one of the industry’s longest-running surveys – 12 years now – that reveals both the top banks in each performance category and wider lending trends. Not only do we have a new bank of the year, but it also seems product ranges and pricing, turnaround times and technology have improved considerably over
It seems product ranges, pricing, turnaround times and technology have improved considerably over the last year ... the last year, according to our respondents. However, segmentation strategies continue to prove divisive, and there were some very real concerns over the quality of BDMs and channel conflict. Look out for the next issue of MPA, where the banks will respond your concerns. I’d also like to draw your attention to another feature in this magazine – rather a pet project of mine – aimed at those professionals who prefer to look forwards rather than backwards for inspiration. There’s a whole new world of mortgage innovations happening outside Australia, churning out new products and practices that I fully expect to see appear on the Brokers on Banks surveys in the next few years. Looking to Europe and the US for mortgage products undoubtedly sounds unwise for reasons made abundantly clear over the last few years. However, as one expert told me, “adversity breeds innovation”, and these markets are coming up with very different ways to sell mortgages, using smart data and partnerships to package the entire home buying process. It’s true that no system is identically similar to ours – any budding disruptor will need to put an Aussie spin on their business model – but changes in the products we sell, and more important, the way we sell them, are most definitely on their way here, so don’t get too comfortable. Sam Richardson, editor, MPA
www.mpamagazine.com.au JULY 2O15 EDITORIAL Editor Sam Richardson Journalists Maya Breen Production Editors Clare Alexander Moira Daniels Contributors Iain Hopkins Jim Kouzes Barry Posner Michael Bunting Peter Baines Marcus Seeger Timo Topp
ART & PRODUCTION Design Manager Daniel Williams Designer Loiza Caguiat
SALES & MARKETING National Sales Manager Rajan Khatak Account Manager Simon Kerslake Marketing and Communications Manager Lisa Narroway Traffic Coordinator Lou Gonzales
CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Associate Publisher Rajan Khatak Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil
EDITORIAL INQUIRIES
tel: +61 2 8437 4787 sam.richardson@keymedia.com.au
SUBSCRIPTION INQUIRIES
tel: +61 2 8011 4992 • fax: +61 2 8437 4753 subscriptions@keymedia.com.au
ADVERTISING INQUIRIES
rajan.khatak@keymedia.com.au simon.kerslake@keymedia.com.au
Key Media Regional head office, Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 • fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, Toronto, Manila
Mortgage Professional Australia is part of an international family of B2B publications and websites for the mortgage industry CANADIAN MORTGAGE PROFESSIONAL vernon.jones@kmimedia.ca T +1 416 644 8740
P.S. You may have noticed a discrepancy in the Consumers on Brokers survey in MPA 15.06. The percentage of respondents who would consider paying a broker is in fact 41% - not 14% as was mistakenly printed – hence our argument that the fee-for-service debate needs to be revisited. 2
Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as the magazine can accept no responsibility for loss
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ROUND-UP
NEWS AND TIPS INSIGHT
WHAT YOUR CUSTOMER IS THINKING Nearly 1 in 5 would choose a broker for convenience and/or for the best interest rate
70%
would use a broker again 25- to 34-year-olds and households earning $100,000+ want credit cards and insurance product offerings
47%
thought brokers gave access to a wider range of products than banks
38%
thought brokers better matched products to their needs
Source: MFAA/EY, “Observations on the value of mortgage broking,” May 2015
MARKET GROWTH
BROKERS DRIVE MORTGAGE GROWTH
CATALYSTS OF INDUSTRY GROWTH: 1 Record low interest rates
2 Competitive pricing from lenders
3 2011 ban on mortgage exit fees
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Research commissioned by the MFAA shows 71% of residential mortgage market growth was thanks to brokers, when comparing the twelve months that ended March 2014 are to the twelve months that ended March 2015. Results revealed that brokers accounted for $31.2 billion of the $44.2 billion increase in mortgage lending based on ABS housing finance commitments. “The 71% contribution to growth is testament to the tide of consumer attraction to the broker channel and deflates the unsubstantiated comments that consumers receive poor customer service,” said MFAA CEO Siobhan Hayden. “The research also shows that brokers are offering the consumer real choice and driving competition; 30.2% of broker initiated home loans went to smaller lenders, which is a true indicator of competitive behavior.” The MFAA report, “Observations on the value of mortgage broking,” says that “many lenders believe that the broker channel could account for as high as 60% of system growth in the future.”
Proportion of mortgages originated from brokers (both new and refinanced)
50% today
25%
in 2003 Source: MFAA/EY, “Observations on the value of mortgage broking,” May 2015
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BROKER VALUE
DID YOU KNOW?
PREPARING FOR THE FUTURE
The Australian home loan industry has grown for nearly
100 straight quarters
Brokers add significant value to lenders and customers and will keep on doing so if they continue their focus on customer needs and business innovation, according to the MFAA’s “Observations on the value of mortgage broking” report, which relied on an online qualitative customer survey, face-to-face interviews with selected lenders and desktop research. The report highlighted the shifting position of the broker from a phase of rapid customer acquisition to working alongside lenders and increasing retention of existing customers. “Those that continue to be transactionally focused, looking to churn customers, are unlikely to succeed, as it is out of sync with the needs of customers and destroys value for lenders,” the report stated. “Those that remain will have created a sustainable model that will see them well into the digital age. In addition to evolving the business model, brokers should be looking to address the potential succession planning issue. “Key to this will be to understand how to attract the younger generation, possibly through a professional qualification, and long-standing brokers taking practical approaches to the sale of their large back books.”
despite the
Australian economic post-resources slowdown Asian crisis Dot-com bust Global financial crisis
REGIONAL MARKETS
RESOURCE-DRIVEN AREAS MISS OUT AS REGIONAL MARKET MAKES A COMEBACK The CoreLogic RP Data quarterly regional report showed that regional property market conditions are turning around for the better, a result senior researcher Cameron Kusher says is caused by the ‘ripple effect’ from buoyant market conditions in the capital cities. “These results are especially significant considering the lacklustre performance of many of these markets since the financial crisis, when both capital growth and sales volumes across these regions were declining.” However, the results show these favourable conditions are not extending to resource-driven areas. “While low interest rates have contributed to consumers being more confident in property purchase decisions, not all regional centres are enjoying a boost, with areas closely linked to resources sector still seeing deteriorating property conditions.”
Home value increase over the year (houses)
Median value
No. of days on market
Illawarra region
9.3%
$516,000
56
Newcastle & Lake Macquarie
7.4%
$458,000
64
Sunshine Coast
6.3%
$508,000
87
Gold Coast
4.8%
$528,000
74 Source: CoreLogic RP Data Regional Report May 2015
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ROUND-UP
NEWS AND TIPS EMERGING THREATS
BORROWERS
5 BIGGEST THREATS FOR BROKERS
TYPES OF BORROWERS IN THE MARKET
An MFAA-commissioned survey carried out by Ernst & Young revealed five main threats brokers will have to contend with.
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Digital threats come from lenders investing heavily in digital capability to improve customer experience and the tech-savvy younger generation becoming the core mortgage consumers
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Regulatory threats stem from the current scrutiny of commissions in Australia and globally, where a commission ban is still a possibility
3
Revenue concentration was named a concern because brokers providing a single product can create risk
4
Competition was included because of the industry’s fairly low barriers to entry, which make it vulnerable to threats from digital businesses also partnering with lenders.
5
Intergenerational change may be a cause for concern, as many brokers are small businesses, and their legacy could be in question if there is no succession plan in place.
According to lenders, the industry can respond to these disruptors in time. They said brokers could shift to a more educational role and incorporate data-driven digital marketing into their business models. To avoid issues associated with revenue concentration, lenders said brokers could expand their product offerings. The logical extension would be products associated with insurance, which would gain them MFI market share via transaction and savings accounts. For successful brokers to operate well into the future, lenders suggested raising the education level needed for qualification providing support for brokers who want to sell their business and retire from the industry.
Investors
40.5%
Owner-occupiers
37.0%
First-home buyers
14.0%
Commercial borrowers Other
6.0% 2.5%
Source: IBISWorld; MFAA/EY, “Observations on the value of mortgage broking,” May 2015
HOME BUYING
WHY CONSUMERS MIGHT WANT TO BUY IN THE NEXT 12 MONTHS Reasons why the next 12 months is the best time to buy
No 61%
Is the next 12 months the best time to buy?
Yes 39%
Interest rates have gone down this week, there is a perception another cut will be applied in two to three months
The interest rates have just gone down
Price is going to be higher if I wait too long
Property prices are constantly increasing these days
Source: QBE Barometer Report 2015
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PEOPLE
HOT TOPIC
How can non-bank lenders increase consumer awareness?
Mario Rehayem
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Ray Hair
David White
Director of sales and distribution Pepper
General manager of sales Homeloans Ltd
Managing director Australian First Mortgage
“As a non-bank lender, it is important not to assume that consumers will understand the benefits of a non-bank offering. Non-banks have the advantage of being able to be more nimble and flexible, and in many cases, can provide a superior service delivery. Unfortunately, until consumers start to recognise the value proposition of a non-bank lender, we will continue to struggle to successfully compete with the majors. The only way to do this is to raise the profile of non-banks by advertising and raising awareness/profile in the market. In an effort to increase consumer awareness, Pepper has recently launched an educational campaign, ‘Absolutely Positively Pepper’, aimed at helping more Australians understand how a specialist loan from a non-bank lender can help them to achieve their financial goals, whatever their circumstances. To deliver this message, Pepper has adopted a multimedia strategy, from local print and online advertising to strong community sponsorships (Western Sydney Wanderers and Pepper Stadium in Penrith).”
“There are two elements to mortgage managers raising consumer awareness: promoting the sector overall, as well as the individual brands within it. Collectively, mortgage managers need to do a better job at promoting their offering to enhance borrowers’ awareness and understanding of the sector. We need to be consistent about the message that we are communicating to the market. Are we non-banks? Are we mortgage managers? We need to ensure that the messaging we all use resonates with consumers. Consequently, as the individual brands promote their respective propositions, they also promote the mortgage management sector as a whole. Homeloans largely conducts its consumer promotion via sponsorships, such as our sponsorship of the Perth Scorchers in the T20 Big Bash League and a number of smaller sporting clubs and associations around the nation. We believe that our promotional activity would be more effective if the consumer market had a greater understanding of the mortgage management sector.”
“To increase consumer awareness, nonbank lenders should identify their preferred markets and then communicate to them on the platforms where they already spend most of their time. At Australian First Mortgage, we understand that the majority of property buyers in Australia use platforms like Facebook and Twitter for something like 20 minutes a day – every day. These platforms have a diverse geographic and demographic reach, and have become significantly influential in guiding popular opinion. Another effective way to build brand with consumers is through sports and community sponsorship. Some well-known mortgage managers and non-bank lenders have had success with mainline sponsorships with high profile AFL and other football teams. Don’t forget about the opportunities that both traditional and digital media still provide. Digital media in particular provides some inventive opportunities for direct consumer brand building with innovations like remarketing, audience lookalike and recent purchasing options.”
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NEWS ANALYSIS
THE BUDGET
A NOT-SOBORING BUDGET Housing might not have been on the agenda of the federal budget, but it could still significantly impact the market. MPA editor Sam Richardson argues that brokers should take a second look
HOW EXACTLY is the federal budget like entertainment? If anything, it’s a dramatic farce – a succession of plainly intentional ‘leaks’, reporters being locked indoors for an entire day and the questionable suggestion that watching the budget on TV is a genuine evening leisure activity. Labelling the budget boring is permissible for media commen tators, but for financial professionals, it’s a cop-out. Certainly, the budget is subdued compared to last year’s, and admittedly, the 2015 budget
CONFIDENCE IS RISING In the week following the budget, the ANZ/ Roy Morgan Confidence Index rose
+ 3.6%
Over the month of May, The Westpac-Melbourne Institute rose
+ 6.4%
In stark contrast to 2014’s budget, which reduced confidence
- 6.8 %
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is not particularly housing-centric. Indeed, there is only one provision that directly relates to property: the introduction of fees for foreign buyers. The budget’s ‘headlines’, such as the support for small businesses, childhood care subsidies and the ‘Netflix tax’, won’t have much in the way for direct consequences for mortgage brokers. You’ve got to delve deeper, and take a wider view of the context of this budget, to see why brokers really should pay attention to it. We’re seeing a change in the government’s austerity rhetoric at the very time that APRA are tightening lenders’ criteria; ramifications for commercial and
“The fragility of confidence over the last 18 months or so suggests that a continuing improvement cannot be taken for granted, even in the presence of rising asset markets and low interest rates” investment specialist brokers; and finally, the prospect of ‘downsizers’ creating major shifts in the housing and reverse mortgages
market. Clearly, it’s time to think of the budget less as primetime entertainment and more as essential reading.
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THE INQUIRY INTO HOME OWNERSHIP The House of Representatives announced on 13 May that they’d undertake an inquiry into the following: Current rates of home ownership Demand and supply drivers in the housing market The proportion of investment housing relative to owner-occupied housing The impact of current tax policy at all levels Opportunities for reform They’re inviting submissions until Friday, 26 June. Read more on their website: www.aph. gov.au/homeownership.
Confidence With a tagline of ‘jobs, growth and oppor tunity’, this was quickly dubbed a confidence budget, in stark contrast to last year’s ‘budget emergency’. That reaction was deliberate, explains ING Direct’s head of treasury Michael Witts. “Last year it was, ‘We’re going to hell in a handbasket ... this time round, Hockey was saying – before the budget and on the back of the RBA rate cut – ‘Now’s the time to spend’ … it was almost inciting people to recklessly borrow money. So the rhetoric around the
government has completely changed.” At the time of writing, early indicators did suggest confidence had increased amongst the Australian public. The ANZ/Roy Morgan Consumer Confidence Index increased from 111 to 115 in the week of the budget, the highest level since November 2014. Whilst sentiment is now above its long-term trend, and retail spending has improved, surging confidence is not guaranteed, warns ANZ chief economist Warren Hogan: “The fragility of confidence over the last 18 months or so suggests that a continuing improvement
cannot be taken for granted, even in the pres ence of rising asset markets and low interest rates.” What initial confidence surveys can’t tell us is the difference between relief at the budget and the sort of genuine confidence that prompts increased spending and investment. The ABC’s post-budget polling found that although the majority of people saw this year’s budget as better than last year’s, they’re still heavily divided on whether the economy is heading into right direction (40% no to 35% yes). Rhetoric still matters in persuading Australian households to start spending again, ING’s Witts argues. “Australian con sumers are so pessimistic, you’d swear they’re in Greece,” he says. “We’ve got record-low interest rates, those who own or our buying houses have seen their wealth go up considerably, and 6% unemployment means 94% employment. We’re in a very good position, but that message hasn’t been getting through to people.” The only danger, he notes, is that debates over the budget in the Senate could distract public attention from the budget’s positive message.
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NEWS ANALYSIS
THE BUDGET Foreign buyers
NORTHERN AUSTRALIA INFRASTRUCTURE As part of the budget, the government has promised $5 billion to northern regional areas of NT, WA and QLD for major infrastructure projects like ports, railways and electricity generation. ING head of treasury Michael Witts suggests that the investment could have consequences for the housing market: “What this fund is trying to do, I would suggest, is get people moving from the south east to the north west. That might give some growth in Darwin and other places, from an infrastructure and potentially housing perspective.”
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The issue of foreign buyers and application fees was discussed extensively before the budget, and indeed is covered in detail by our News Analysis piece in MPA 15.05. The plan is for the Australian Tax Office to draw up a comprehensive register of foreign ownership of land and real estate, although it won’t cover all land until July 2016. A system of fees also will be introduced, starting at $5,000 for properties valued at under $1m, then $10,000 for properties valued at $1–2m, rising from there in increments of $10,000 per additional $1m. These are rela tively small sums – commenting on these numbers prior to the budget, leading broker Justin Doobov of Intelligent Finance noted that “it looks like they’re just trying to recoup the administration costs”, whilst 2014 No. 1 Top 100 broker Raymond Xue of ACA Mortgage Solutions believed the fees would only put foreign investors off if multiplied by 10. The $5,000 fee is the result of a number of calculations, chief amongst them the desire of the government to show to the public it is controlling foreign investment, whilst in prac tice encouraging as much of it as possible. Most of the foreign investor specialist brokers we spoke to believed they had succeeded in that; Donald Tang of Alliance Mortgage Solutions argued that “the regulation reforms are actually helping brokers to have fair com petition and a better working environment … by stopping the black sheep [who] continue ruining the market and spreading negative messages”.
can; he claims this change could cause a flood of ‘downsizers’ – older people trading the family home for a small property and poten tially an investment property on top. This will cause major turbulence in the market, he argues. “There’s significant weight in these downtraders’ sector – there’s 1.2 million down traders at the moment who are thinking of doing something in a little while. It may bring forward some of that activity, just at the time when up-traders, those who are those looking to buy a bigger property, are actually reducing in number.” Whilst the family home is excluded from the $823,000 threshold, many retirees pre viously on the state pension will need to find a new source of income. Selling the family home and acquiring an investment property would provide that income, hence North’s argument. With many perceiving the housing market at its peak, the urge to sell has never been higher,
Downsizers
“There’s significant weight in these downtraders’ sector – there’s 1.2 million downtraders at the moment who are thinking of doing something”
It’s some of the apparently unrelated pro visions in the budget that could have the biggest impact on the housing market. You may have overlooked changes to the age pension wealth threshold; the maximum assets you can own whilst still being eligible for a state pension are down to $823,000 for couples. The ABC estimates that 91,000 people will lose their pensions and another 235,000 will have their pensions reduced. Can you see the link with housing yet? Martin North of Digital Finance Analytics
pushing those who were just considering selling up into action. Of course, there are other ways to release equity from the house; a revival of the reverse mortgage market now looks much more likely. Downsizing won’t be such a smooth tran sition, however – as North hinted, up-traders are facing considerable challenges. “The banks’ lending criteria are being tightened slightly, their income isn’t growing so fast, and they haven’t necessarily the ability to buy those big
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properties,” he says. “So there’s potentially dis equilibrium between supply and demand in this sector of the market – more people trying to sell than people trying to buy – and that can have an impact on the market.” North’s theory is exactly that – a theory. However, he claims that DFA’s weekly House hold Survey of 26,000 households is starting to show a shift in attitudes, as more people consider downsizing since the budget. Com bining that data with assumptions about tightening lending criteria, the DFA’s modelling forecasts the number of downtraders will increase by 12%. It also predicts the number of up-traders to fall by 16%.
Putting the budget in its place For the housing market, it’s not the budget but the timing of the budget that stops it being boring. A budget focused on raising confidence
couldn’t exactly cool the housing market at the same time, and housing affordability issues weren’t tackled at all. These will be investigated by an inquiry about home ownership by the House of Representatives’ Economics Com mittee, reporting at the end of this year.
cause for concern as people increasingly turn to property investment for a decent return on their savings. Finally, when it comes to interest rates, we may have reached the bottom of the trough. Peter Jolly, global head of research at NAB,
“The regulation reforms are actually helping brokers to have fair competition and a better working environment ...” That doesn’t mean regulators will reduce the pressure on lenders. In fact, if the budget does prompt an increase in confidence and thus spending, then regulators will be called upon even more to restrain investment in Sydney and Melbourne. Yet if the economy continues to slide, regulators will still have
argued that, following the budget, the RBA will be highly reluctant to cut interest rates again, and he expects them to sit at the 2% mark until 2016. By that point, Australians will be able to judge for themselves whether the budget really was so boring for the economy after all.
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HEAD TO HEAD
JOHN FLAVELL
“I think as far as quality and quantity are concerned, we’ll never compromise quality for absolute quantity”
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John Flavell:
BRANCHING OUT Mortgage Choice’s CEO might be new to the job, but he’s certainly not new to the industry. He walks MPA through his plans to take the franchise in a new and diversified direction
MPA: What are your plans for Mortgage Choice over these first 12 months? JOHN FLAVELL: There are five stakeholders that I’ve focused on in the first 26 days. The first is consumers, making sure we’ve got a proposition that delivers value to them, and I’ve certainly spent a lot of time looking at the data we’ve got from our mystery shopping and understanding where things work and where we might improve. The second group is shareholders, as we’re a publicly listed entity, and making sure that our institutional investors, funds managers and analysts understand me, the business, and what our plans are, and are supportive of that. We have a very competent board that’s there to make sure the management team is making prudent decisions about growing a productive business, and in addition to that, we have lender partners … I’ve spent a lot of time with lender partners. And finally, but certainly not least, is the team within head office. I’ve spent a lot of the time in the field with our franchisees one-toone, and also smaller groups, getting feedback from them in terms of what’s really urgent, what’s important and where there are oppor tunities for the future. And that’s really enabled me to get some clarity on where our focus should be, and where our broader strategic opportunities will be.
MPA: Are there any plans to expand Mortgage Choice’s loan writer numbers,
and what is your proposition to potential members? JF: I think as far as quality and quantity are concerned, we’ll never compromise quality for absolute quantity. So we’re very focused on being able to meet the needs of mortgagees consistently, and that can come through providing efficiency gains to the network, allowing them to get in front of more people and be more productive when they’re there, and also through growing out the size of the network as well. Yes, we expect to increase the number of loan writers and the number of franchisees in the network, but we’re not going to compromise the quality to get there. You put one and one together, and you get something more than two – so profitable, sustainable market share growth, and delivering really strong customer outcomes.
MPA: So are you aiming for a similar
MORTGAGE CHOICE’S INTERIM RESULTS For the second half of FY 2014-15: Net profit
up 3.3% Revenue
up 11% Share of home loans
remained constant at 3.9% Total number of franchises
up by 7 to 412
growth in broker numbers to last year?
JF: No, I’d say not. If you look at what we do, only two out of three things we do are mort gages; the remainder is broader diversified financial services. The proportion of our activity in diversified services will be increased as the year goes on. The other thing is that the market’s grown pretty significantly from a mortgagee’s perspective, from a protection perspective and from an investment per spective, so it’s not really good enough for us to hold market share; we want to do more than that.
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HEAD TO HEAD
JOHN FLAVELL MPA: Diversified services only made up
PLUS ONE PROGRAM The Plus One Program was a recruitment drive that offered Mortgage Choice brokers a monetary incentive to take on an extra loan writer. It was combined with additional head office support for the new brokers. By July 2014, it had resulted in 57 new loan writers joining the company, beating the target of 50. In launching the initiative, Mortgage Choice’s then CEO Michael Russell said: “We know how hard it can be for our franchisees to find the time and the resources to recruit an additional loans consultant. While many of our franchisees could do with more staff, hiring the perfect person for the job is often easier said than done, which is why we have launched the ‘Plus One’ incentive. We want to make it as easy as possible for our franchisees to grow their business in this ever improving property market.”
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11% of revenue in your interim results – isn’t that a very small proportion? JF: The proportion of revenue that’ll be gen erated from diversified services will increase over time, I have no doubt. And then if you have a look at it, what is the basic nature of the services we’re providing? There are really basic additional services such as personal loans, car loans, insurance, commercial lend ing and then, obviously, what we do in terms of financial advice – meeting people’s needs in terms of protection, and their investment needs as well. So that proportion will increase over a while. The revenue you might generate from a personal loan or a general insurance policy relative to a mortgage is obviously [smaller]. If you meet 100% of customers’ needs 100% of the time, the proportion of revenue that’d come from those diversified services is still smaller than what would come from the mortgage space. I think the focus for us is actually on saying, ‘How do we make sure all of our customers’ needs are met every single time?’ Every conversation we have is about everything from debt to protection to investments to whatever their needs are, because we’ve got some great solutions from them.
MPA: How are you going to drive diversification through the network – particularly for less willing brokerages? JF: I don’t think it’s about willingness; it’s about people saying, ‘How can we make a really robust process?’, so every time I talk to a customer in terms of their debt needs, I have a conversation about protection, general insurance, credit. So it’s about getting that con versation out there and letting people know that we offer so much more than just mortgages. We’ve been at it for 23-odd years in mortgages, but as far as diversified services, it’s only been a very short period of time. We didn’t have financial planning three years ago, as the business was started from scratch, and now we’ve got almost 40 financial planners out there, which is wonderful, and it’s great we can meet more of our customers’ needs.
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MPA: So is there support out there for brokerages that do want to diversify? JF: Sure, but having said that, the approach we take in relation to financial planning and mortgage broking in particular is they’re both highly specialised areas, and they’re highly specialised skill sets, so we have loan writers and we have financial planners, and we don’t have people trying to do both. The value that we can deliver to customers by having specialists
an adviser face-to-face, whatever the case – then having a system that sees you as one customer is wonderful, as opposed to a frac tured relationship.
MPA: Are there going to be any changes to Mortgage Choice’s marketing to consumers, particularly in the message you want to convey? JF: If you have a look at the opportunities for an
“It’s about having data, then you pull that data together and create knowledge, and then with some insight, you can start to anticipate people’s needs and work with them” in their chosen field speaks for itself in terms of the outcomes we’re giving to customers.
MPA: What is the Project One CRM system, and how will it help your brokers?
JF: We’ve been re-platforming the entire operation over the last three years, and we’ve developed Phase 1, which will be completed by May, and by November this year, we’ll deliver the second phase. And what that will do is give the network the ability to have an integrated single view of all our customers across all our services. It’ll deliver an efficiency dividend to the network, which means they can deliver quality outcomes to their customers, seeing their customers more and being more productive. And it’ll give us the ability to turn around and say, ‘I have a complete view of you from a debt perspective, from a wealth perspective, and as your needs change over your life cycle, I’ve got a comprehensive and complete view and can anticipate and work with those needs.’ It’s one comprehensive view, and it’s about having data, then you pull that data together and create knowledge, and then with some insight, you can start to anticipate people’s needs and work with them to deliver a fantastic value proposition over their entire financial life. Whatever your needs, whatever channel you want to use – online, on the phone, with
enterprise like Mortgage Choice to let consumers know what we do, then there are more options now than ever before. There are more places to make contact and put our message out to consumers. And like any enterprise, we’ve got to make sure we optimise that and get the best outcomes we can for the resources we have. As far as our proposition is concerned, Mortgage Choice has been around for 23 years, and it comes back to delivering a good, strong value to consumers, and in more recent times about saying, ‘Mortgages are at the core of what we’ve done, but we’re taking that same principle and value and expanding it across a broader range of financial solutions.’ So, yes, it’s mortgages, but it’s more than mortgages. It’s Mortgage Choice, but there are more choices than ever before.
MPA: Where would you like Mortgage
JOHN FLAVELL’S CAREER TIMELINE
1992
Starts at Westpac as a mobile home lending manager
1993
Becomes state manager of VIC, TAS, SA for RAMS
1997
Moves to Telstra as NSW’s general manager of media & IT
2002
Becomes Aussie Home Loans’ general manager of sales, NSW
2007
Hired to head NAB’s broker distribution arm
2013
Transitions to executive general manager of wealth advice at NAB
2015
Replaces outgoing Michael Russell as Mortgage Choice’s CEO
Choice to be in 12 months?
JF: I think from a directional perspective, continuing to increase our capability to meet the broader financial needs of more customers. And so I suppose that is growth in market share, growth in share of wallet, and developing and delivering more value to customers, which means building a more profitable franchisee network, which means delivering better outcomes to our lender partners, which means we’re delivering really strong positive outcomes to our shareholders as well.
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FEATURES
BROKERS ON BANKS
BROKERS ON
BANKS 2015
You gave us your verdict on Australian banks – see who hit the mark on everything from turnaround times to interest rates, and which banks missed the point entirely
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WE BELIEVE brokers are defined by two relationships – your relationship with your current and potential customer base, and your relationship with your lender panel. Last month we investigated the former in our Consumers on Brokers survey; this month, we’re moving onto the latter relationship – perhaps the most fraught in the industry. Our Brokers on Banks survey asked brokers to score banks on a number of fronts, nominate outstanding banks and products, and provide comment on a range of issues. It was open for six weeks between April and May, and publicised to readers of MPA and Australian Broker magazines. (Checks were taken to ensure respondents were active brokers.) Generally, the bank-broker relationship has been defined by conflict. As the narrative goes, broking arose from consumer distrust of the banks, and thus banks have only grudgingly accepted broking’s place in Australian finance. And from the results here, it certainly appears channel conflict is indeed a real issue – one that banks should be more vocal in tackling. Yet we believe it’s time to stop talking about conflict and start talking about service. Brokers are customers, too, expecting good service from credit teams, good commission levels and fair interest rates, amongst other things. There are a number of awards for products out there, but this survey is unashamedly about banks’ service to brokers. We believe measuring this service is incredibly important, given brokers’ share of the market – if a broker is badly served by a bank, then so is their client, through no fault of their own. Another part of moving away from conflict is open dialogue. We’ve published your scores and comments here, and next month we’ll be featuring replies from the top banks mentioned in this survey. We believe the banks take this survey seriously, and a major reason for that is its longevity – we’ve continuously measured broker sentiment for 12 years. We thank all this year’s respondents for supporting this survey, and we’d appreciate your feedback to make future Brokers on Banks surveys better than ever.
OUR TYPICAL RESPONDENT Is aged between 36 and 45 Has an annual volume of $20–40m Has been a broker for more than 10 years
WHAT DO BROKERS WANT? 1 = not important, 5 = very important Turnaround times 4.74 Overall service 4.66 BDM support 4.63 Credit policy 4.60 Interest rates 4.50 Online platforms and services 4.19 Product range 4.07 Commission structure 3.97 Communications, training and development 3.80 Product diversification opportunities 3.51
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FEATURES
BROKERS ON BANKS
10 YEARS OF BROKERS ON BANKS A decade is a long time in the mortgage space, and Brokers on Banks shows how much the banking balance of power has shifted FIRST, SOME DISCLOSURE: Our Brokers on Banks survey has in fact been running for 12 years. Unfortunately, the results of the first two years have been ‘lost in the mists of time’, so we’ve had to start our timeline from 2006. Nevertheless, what emerges is a fascinating reflection of the evolving Australian mortgage industry, particularly in its pre- and post-GFC stages. Taking a decade-long view also reveals
how much individual banks move around. Westpac was this year’s leading bank, topping five performance categories and top product, but two years ago, they weren’t even in the top five. Similarly, NAB Broker appears to have been leapfrogged by its major bank competitors after being last year’s top bank. Evidently, brokers do respond to genuine change and investment by banks in the third-party channel.
We took an average of the 10 key performance indicators to produce an overall score. Scores go from 1 (very bad) to 5 (very good)
Westpac .......................................................3.73 CBA ................................................................. 3.61 ANZ .................................................................3.54
(UN)CHANGING PRIORITIES Four years ago, the Australian banking sector was still in post-GFC recovery mode, and you could still attend a conference without hearing the words ‘digital disruption’. Whilst the bankers assure us we’re in the middle of a ‘consumer revolution’, it seems some things stay the same:
2012
2015
Turnaround times
Turnaround times
Diversification opportunities*
Overall service to brokers
BDM support
BDM support
Overall service to brokers
Credit policy
Interest rates
Interest rates
*It’s notable that ‘diversification opportunities’ was ranked the least important criteria this year – perhaps given the booming housing market, brokers feel pushing other products is a distraction?
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THIS YEAR’S TOP BANKS
Macquarie...................................................3.53 NAB Broker ................................................. 3.51 WHERE ARE THE NON-MAJORS? A non-major bank hasn’t topped MPA’s Brokers on Banks since 2009 – a depressing fact that requires some explanation. Non-majors still perform strongly on certain categories; this year, Bankwest and ME Bank jointly triumphed on interest rates, whilst Macquarie topped BDM support and commission structure, coming in fourth overall. Yet they don’t have the consistent performance across all 10 categories required for a winning overall score. You could put this down to non-major’s struggles since the GFC, but also to the majors’ sheer size. Brokers are far more likely to have dealt with the big four banks, and many non-majors simply don’t get enough scores either way to be fairly represented in the survey.
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10 YEARS OF BROKERS ON BANKS
A TURBULENT DECADE FOR THE INDUSTRY NCCP regulations come into force 1 2 3 4 5
2006
2007
1 2 3 4 5
Macquarie ING ANZ Westpac St George
1 2 3
Global Financial Crisis
1 2 3 4 5
2008
Macquarie ING Bankwest NAB Westpac
AMP ING Citibank
2009*
1 2 3 4 5
ING ANZ CBA Bankwest AMP
2010*
CBA ANZ Bankwest NAB Broker ING DIRECT
2011 Macquarie re-enters third party channel
1 2 3 4 5
2012
2013
1 2
1 2 3
ANZ ING CBA
3 4 5
CBA NAB Broker ANZ ING DIRECT Bankwest
CBA NAB Broker ANZ Macquarie Suncorp
1 2 3 4 5
2014
Westpac CBA ANZ Macquarie NAB Broker
2015
1 2 3 4 5
NAB Broker CBA Westpac Macquarie ANZ
The Financial System Inquiry publishes its final report *In 2009–10, MPA only recorded the top three performers overall
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FEATURES
BROKERS ON BANKS
PRODUCTS AND PRICING Non-majors are driving down interest rates, but the majors continue to dominate on product offerings
IN A YEAR of cascading interest rates, you’d be quite shocked if brokers weren’t enthusiastic about pricing and product – the vast majority of brokers certainly believed both had improved. Nevertheless, 2014–15 provides a number of individual banks several reasons to celebrate. Most strikingly, non-major banks’ competitive interest rate offers certainly seem to have paid off, with what can only be described as complete dominance of the category. Bankwest and ME Bank share the top spot, and ING Direct came in third. Indeed, you have to go to fifth to find a major bank (NAB Broker), and Westpac, so strong in other areas, languishes at 10th. Note that it hasn’t always been this way – NAB Broker won this category for three years running before AMP triumphed last year. Yet outside of interest rates, the majors
performed strongly – CBA and Westpac came to the fore in product range, credit policy and diversification opportunities. Westpac’s Rocket Repay – in both its home loan and investment manifestations – took the title of top product and most innovative for a second year, whilst CBA’s Mortgage Advantage package also scored strongly. One exception was Bankwest’s Superstart Home Loan, which came second in brokers’ estimations of the most innovative product. Explaining Westpac’s and CBA’s success can be done in a number of ways. In terms of diversification, Westpac’s ‘One Team’ approach brings together disparate areas of the bank, including commercial and SMSF, to be more readily accessed by brokers, whilst CBA has its CONNECT referral program. CBA’s Diamond Brokers have access to local credit teams in
PRODUCT RANGES AND PRICING Have product ranges and pricing improved or worsened over the last year?
Improved
Worsened
95%
5%
HIGHLIGHTS
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Interest rates
Product range
Credit policy
Product diversification opportunities
1st
Bankwest/ME Bank
CBA
CBA/Westpac
Westpac
2nd
N/A
Westpac
N/A
CBA
3rd
ING Direct
ANZ
ANZ
ANZ
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PRODUCTS AND PRICING
each state, which may well have contributed to the bank’s strong showing in credit policy. You also can ask the brokers themselves. Rocket Repay was “not the best rate nor commission but best for the clients”, according to one of its proponents, mainly because of its flexibility and features. Indeed the product’s offset and interest-only options were popular with many respondents to our survey,
what brokers wanted to see from banks over the next 12 months – service and BDM issues predominated. Banks have clearly been working hard on product ranges and pricing and brokers have noticed, with 95% saying product ranges had improved over the past year. Indeed many brokers commented that RBA cuts had spurred interest, but it was actually competition between
“Pricing’s improved as lenders chase market share. Several lenders whisper, ‘Whatever shows on our screen, take 0.1 off it’ and such. There are ‘secret offers’ everywhere” particularly when combined with Westpac’s Premier Advantage Package. One major issue for respondents was inconsistent pricing – whilst some celebrated being able to get discounts after asking, others noted that having to haggle over every single loan was dramatically increasing their work load. However, this didn’t seem to factor into
lenders which had really driven discounts and innovation. There’s one point that needs to be mentioned here: When this survey closed, the debate around major banks not handing over full RBA rate cuts (such as lowering by 20bp rather than 25bp) had not quite got started. Perhaps if we’d run this survey a month later, broker opinions could have been quite different.
TOP PRODUCT 2015 Rocket Repay Home Loan, Westpac Mortgage Advantage Package, CBA Homeplus, NAB Broker
CREDIT POLICY AND APRA This survey may be the last of its kind; it took place just as APRA’s pressure on lenders over investment lending – which they want to reduce as a proportion of the total – really resulted in major changes to credit policy. It appears that few respondents were feeling the effects of these changes when they took the survey, given 69% felt service levels and credit policies had improved over the past year.
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FEATURES
BROKERS ON BANKS
INCENTIVISING BROKERS Commissions are clearly improving, but segmentation strategies are a divisive topic for brokers
COMMISSION OCCUPIES an awkward space in the bank/broker relationship; it’s the lifeblood of broking, yet the often negative portrayal of commission in the mainstream media means major banks often shy away from discussing it openly. Sam Boer, CBA’s general manager of broker sales, told our major bank roundtable last year that incentives “are going to play less of a role moving forward”, whilst NAB and ANZ pointed to rebranding and BDM initiatives as more important than incentives. Such attitudes evidently haven’t stopped commission ramping up over the past year, with the reintroduction of first year trail by CBA, and this is reflected by the vast majority of brokers, who believe commission structures had improved. Top of the pile is Macquarie, for the second year running, but NAB Broker and Westpac also scored highly. Interestingly, Macquarie hasn’t made significant changes in the past 12 months, and the same was true for last year’s survey. Head of mortgage sales Doug Lee told MPA in 2014 that “in terms of commissions, we haven’t actually changed anything, and feedback from our brokers … indicates an ongoing appreciation of the structure’s consistency and transparency”. Consistent performance, rather than well-publicised improvements, makes the difference when it comes to commission, Macquarie’s example suggests. Whilst Macquarie topped commission charts, Westpac won the ‘communication, training and development’ category, and had the most popular incentives program, beating CBA (second) and Suncorp (third). Many Westpac supporters pointed to a $1,000 cash-
24
back offer for refinancing and specific incentives for certain aggregator groups. Segmentation strategies were probably the most divisive aspect of the entire survey, splitting our respondents almost down the middle. Proponents of segmentation tended to have a relatively simple reason, saying it
rewards top and loyal brokers. Opponents suggested a number of problems with it, including disguising poor service levels for non-premium brokers and discriminating against younger brokers who require more help to get started. Perhaps the most worrying complaint is
CHANNEL CONFLICT Do you believe channel conflict exists?
23%
48%
29%
Not a problem
Minor problem
Major problem
HIGHLIGHTS
Commission structure
Communication, training and development
1st
Macquarie
Westpac
2nd
Westpac
CBA
3rd
NAB Broker
Macquarie
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INCENTIVISING BROKERS
that segmentation strategies penalise certain customers without their knowledge. In light of increased media interest in brokers and their remuneration, the fact that broker volumes determine customer service from banks could be deeply unpopular, and indeed many brokers advised banks with seg mentation options not to ‘shout loudly’ about them. With almost half of our respondents supporting segmentation strategies, however, the possibility of banks ditching them entirely
seems highly unlikely. We also asked brokers what they’d like to see from the banks over the next 12 months, and whilst commission did often appear, it’s notable that turnaround times, reducing channel conflict and reducing clawback predominated – perhaps a bank making a major push on these issues could be the most effective incentive of all. Finally, channel conflict is the problem that is not going away, although many re-
COMMISSION STRUCTURES
spondents seem resigned to live with it: 23% of respondents didn’t believe it was a problem, a similar proportion to the 32% who believed channel conflict didn’t exist in last year’s survey. This year we asked those who did see channel conflict to identify whether it was a major or minor problem, and the majority saw it as a minor problem. That said, plenty criticised banks for dealing poorly with channel conflict situations in the comments sections of the survey.
SEGMENTATION STRATEGIES
Have commission structures improved or worsened over the last year?
Improved Worsened
83%
17%
55%
45%
NO
YES Are you in favour of segmentation strategies?
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FEATURES
BROKERS ON BANKS
TECHNOLOGY, TURNAROUND AND SERVICE Turnaround times and service levels are at the top of brokers’ wish lists, and a handful of banks are clearly taking this fact to heart
TURNAROUND TIMES were ranked by our respondents as the most important criteria for a bank – more important even than overall service – so it’s hugely encouraging that brokers believe they have improved over the past 12 months. Indeed, that’s just one piece of good news amongst several: Brokers also believe service levels/credit policies have improved, and are noticing the beneficial effects of improved websites and mobile apps. What’s also noticeable is that top performers in this category come from relatively few banks – ANZ, Macquarie and Westpac feature heavily; CBA and NAB Broker also appeared. So what are these banks doing differently? To answer that question, you’ve got to look at where these banks invested in 2014. ANZ’s Keiran Evans declared at MPA’s roundtable that “the jewel in our crown will continue to be turnaround times … we will push on turnaround times”, and indeed, ANZ has risen to the top of that category,after not even appearing in 2014’s top five. Westpac recently announced a partnership with Deakin University to train up their BDMs, and won an AMA for their Internet presence back in October. Finally, Macquarie’s Doug Lee declared in the aftermath of last year’s Brokers on Banks survey that giving brokers direct access to the credit team was essential, and correspondingly, his bank performed strongly in BDM support and overall service. Why these banks rose to the top becomes even clearer when you look at the comments
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TURNAROUND TIMES Major worsening
1%
Major improvement 14%
Worsened 15% Have turnaround times improved or worsened over the past year?
41%
29% Improvement No difference
HIGHLIGHTS
Turnaround times
BDM support
Online platform and service
Overall service to brokers
1st
ANZ
Macquarie
Westpac
Westpac
2nd
Westpac
Westpac
CBA
Macquarie
3rd
NAB Broker
ANZ
NAB Broker
ANZ
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TECHNOLOGY, TURNAROUND AND SERVICE
brokers made when asked how they’d like their banks to improve. Two issues in particular came to the fore, the first of which was lack of access to credit officers. One broker asked for “more consistent access directly to the credit officer handing an application. Some banks do it well, but others still make them ‘anonymous’”. Other respondents argued that having a con sistent point of contact made them much more likely to send a deal to a bank, and that outsourcing service, particularly abroad, made this far more difficult. The other issue was education of bank staff. “The best improvement would be developing the experience and confidence of their credit teams”, one respondent noted; another wanted their BDMs to be able to “work outside the square”, whilst noting ANZ and NAB Broker did this particularly well. A couple of re- spondents complained that the same group of BDMs appeared to rotate around the banks, and that younger brokers often got overlooked. It’s clear that brokers have a real desire for more professional BDMs and credit teams, and those banks that are stepping up are being rewarded.
STRAIGHTTALKING TECHNOLOGY
Bankwest’s Broker Online Chat service was endorsed by several respondents, who pointed out its time saving potential. The service is available during normal business hours, and allows brokers to make non-complex inquiries, such as deal status and valuation inquiries.
TECHNOLOGICAL DEVELOPMENTS
40%
60%
No difference/ made worse
Improvement Have technological developments such as improved websites, mobile/ tablet apps and social media improved dealing with banks?
SERVICE LEVELS/CREDIT POLICIES Have service levels/credit policies improved or worsened over the last year?
Improved
69%
Worsened
31%
ENTRIES
NOW
OPEN
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FEATURES
BROKERS ON BANKS
WHAT YOU’RE SAYING The bank-broker relationship can be amongst the most contentious in the industry, producing a number of thought-provoking comments
OUR BROKERS on Banks survey attempts to fairly represent all banks, and this section is no exception. Featuring comments is a great way to highlight specific and serious problems that our scoring questions couldn’t highlight. We selected the most articulate comments, which reflected views voiced across the survey – thus clawbacks, BDMs (good and bad) and channel conflict are heavily represented. As we’ve noted with other surveys (such as Brokers on Aggregators), it’s wrong to assume that commenters necessary have a grievance to voice; as per usual, we got a good balance of positive and negative comments, and a number of individual BDMs were celebrated. You’ll also notice we’ve identified individual banks. Whilst many of the problems above
STAR COMMENT
apply to all banks, some of the problems below relate to specific banks and policies. Whether those banks decide to take these comments on board is, of course, up to them.
Banks going above and beyond “BDM Sam Hurren is second to none in support – best BDM from all 30 banks I deal with. His ability to help assessors see common sense with policy and his assistance with pricing has been superb. Has won business for me based on both of the above.” “Refi settlement on a Friday at 3 pm, and TMB was able to complete a same-day transfer of the cash out to a car dealer (funds received in their account by 4 pm) to allow my client to pick up her car on Saturday morning. She loved their service, and her smile was priceless.”
BDM ROLL OF HONOUR A number of BDMs were favourably mentioned by brokers, including: Megan Jeffrey (Westpac)* Edward Kidd (Westpac)* James Shacallis (CBA) John Loukadellis (Macquarie) June Liu (Westpac) Sam Hurren (NAB) Sharron Gibbons (Westpac) Trent Clyne (Bankwest) *Mentioned twice
We asked brokers: If rate and commission were the same, what would make you more likely to recommend a particular bank? The answer was very much to the point: Customer service, hands down. Having poor customer service and relationship management directly affects my reputation and business, and thus future client interactions.
“Westpac refunded a significant ‘claw back’ that came about through no fault of theirs or ours and did it basically on the relationship we have. That impacted our business greatly and also strengthened an already strong relationship.” “Some big banks have been happy to warmly welcome our clients in a branch even though the deal has been written through a broker – a very nice change considering the competitiveness of the market.” “At Macquarie, the level of support is out of this world. I have mobile numbers for senior credit team leaders, who are always happy to take my call. BDM is extremely
28
knowledgeable and will always, always take my calls, or return the call as soon as possible.”
Banks falling well short of target “It is my belief that the broker channel is still hampered by the in capacity of the banks to offer a credit style that is available through their direct channels. There are deals that are too complex for the broker channel, and these have to be run through a business/ personal banker, and you end up losing the client to the network.” “I still have a deal going through [at Westpac], was conditionally approved today
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WHAT YOU’RE SAYING
after six weeks and six assessors looking at it. No one [assessor] would take ownership of it, every assessor telling me something different/ changing the numbers. If not for our new BDM (Megan Jeffrey, who is excellent), the whole thing would have fallen apart.” “NAB and NAB Broker still don’t under stand to tolerate one another. They behave like abominable siblings, and it affects the outcome to the client. Due to recent experiences, NAB Broker have demoted themselves as my ‘last choice’ lender.” “Suncorp totally underestimated the impact of their pricing prior to Christmas. The state manager has explained this well, and I understand the situation, but it certainly had the biggest negative impact on our client relationships this year.” “Not listened to logic by shutting them selves inside their little boxes. I have lost count of the number of lenders whose excuse is ‘it’s policy’. It’s like dealing with a 3-year-old who thinks ‘because’ is a reason. “Heritage Bank accepted applications up to cut-off time for special offer. Three weeks later, they advised they wouldn’t be assessing any AIP applications. If you can’t handle the volumes when there’s a special offer, don’t make them!”
Fresh thinking “I believe lenders need to adjust to the new pricing environment, and provide an efficient online method of requesting and receiving pricing offers on a deal-by-deal basis. CBA have really hit the nail on the head here, and I am generally receiving pricing offers/declines in real time. This is very important to the client experience.”
“It is my belief that the broker channel is still hampered by the in capacity of the banks to offer a credit style that is available through their direct channels. There are deals that are too complex for the broker channel, and these have to be run through a business/ personal banker, and you end up losing the client to the network.” “Broker incentives – perhaps a portfolio management program. The BDM can come out with some of your clients’ names and ask, ‘What can we do to retain these customers?’” Rate drops, incentives to purchase another property – focus should be on retention for the banks as well as brokers.” “Banks should guarantee variable rate change announcements within a week of RBA announcement and implement the rate change within the next week.”
DECONSTRUCTING COMMENTS We asked brokers how they’d like banks to improve, and counted the top technical terms that came up. Whilst word analysis has its limits, the results give us some idea of what gets brokers talking:
Service
Turnaround [time]
Policy
Support
Online
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FEATURES
GLOBAL INNOVATION
A WHOLE NEW WORLD OF INNOVATION
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Having a strong and stable banking system doesn’t guarantee development: Australian finance professionals need to look to the US and Europe for the next wave of disruptors, writes Sam Richardson MODERN AUSTRALIA is predominantly an immigrant nation, and importing new people and ideas is second nature here. But in financial services, that attitude is reversed. The demise of Lehman Brothers on 15 September, 2008, when the US’s fourth biggest investment bank literally closed its doors to employees, could be marked as the turning point in the Australian outlook – signalling a retreat to the big four banks, to prudence, conservatism and stability. That was seven years ago, and a lot has changed since. Whilst the European gov ernment debt crisis reminds us to balance the budget, we can now see that Australia’s economic miracle owed more to iron ore prices than the excellence of its financial institutions. Meanwhile, tough markets have forced innovation in US and European financial services, and like it or not, the products of that innovation are coming to the land down under. It’s time to reopen our minds to financial products and processes that aren’t ‘made in Australia’. Why you should think again To investigate global innovation, MPA talked to two experts with truly global outlooks. Mike Abel is managing director of credit services at Accenture Australia, consulting closely with banks, focusing on
MORTGAGE PROVIDERS OF THE FUTURE Mike Abel of Accenture Credit Services has put forward three business models for financial firms of the future. Firms must adapt to one of the three categories or face relegation to the status of commodities provider, he warns.
Advisers “Advisers work across that value chain, advising customers”
Access facilitators “A one-stop shop that will allow consumers to transact across the value chain. They can connect consumers to a lender, a real estate agent, a removals firm”
Value aggregator “[Their proposition is], ‘If you come to me, I can get you a better deal across the value chain … a reduced rate on your mortgage, plus a discount on other services’”
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FEATURES
GLOBAL INNOVATION mortgages, commercial lending and pay ments. Lisa Claes is executive director of distribution at ING Direct Australia, and thus works closely with brokers. She also chairs the bank’s Global Mortgages Forum and sits on its Retail Council; given that the ING Group spans over 40 countries, she gets a wide ‘helicopter view’, as she puts it.
CPR NUMBERS, DENMARK An extreme example of integrating services comes from Denmark, where a single identification number works for almost all government and banking services, whether you’re going to the doctor to making a transaction. The 10-digit number is from a list curated by the government, and is 2backed up by10:35:57 AM AMA ad for MPA15.08.pdf 9/06/2015 the NemID system, which is for logging into to both banking and government websites.
tinction between these markets, pre- and post-GFC. “These are post-GFC innovations, and these are what happened in response. They’re working in a very tight environment. So these aren’t cowboy or cavalier types of capabilities that people are launching; these are real innovations that will find their way here.”
“I think adversity breeds innovation … some of the innovation that’s occurred in the markets in which we operate has certainly been remarkable” Both understand people’s uneasiness with US and European innovations. “I think adversity breeds innovation,” says Claes.” I certainly have some rational sympathy with that objection, but with my ‘helicopter view’, some of the innovation that’s occurred in the markets in which we operate has been certainly remarkable.” Abel believes we need to draw a dis
The Australian consumer So what is coming here? The dis cussion begins with the Australian consumer, and his or her openness to getting a mortgage in a different way. “I’d classify the Australian consumer in two ways,” says Abel. “In their expectations around banking products and mortgage products, Australian consumers are very
AND THE
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sophisticated. So they’ve grown accustomed to offset accounts; they’ve grown accustomed to having multiple accounts linked – mort gages, credit card accounts, etc. From a digital/online perspective, the market in Australia is a bit behind where it is in other areas – the US and the UK.” However, Claes insists that digital deficiency in financial services is not a problem of demand. “I don’t think we’re conservative … to the contrary, the digital comfort of Australians – and I’m talking generally, beyond financial services – is one of the most advanced in the world. We have a very strong appetite and comfort with interacting digitally in financial services.” You don’t need to look outside your own home to see validation of Abel’s and Claes’ arguments: Australia is infamously amongst the world’s top illegal downloaders per capita, yet US streaming service Netflix only arrived here in April 2015, a full eight years after it started streaming in the US. Some examples might seem remote to finance, but consumer behaviour crosses industries, Abel cautions, and it’s not
coincidence that the US is well ahead in digital finance: “[There is] the speed in the US at which they’ve adopted online as a medium for commerce – they’ve had things like Amazon and eBay for a long time; American consumers are used to buying goods and services online, and banking is an obvious extension.”
Capturing data Meanwhile, Australian consumers are missing out, starting from the moment of application. An increasing target for banks abroad – and one that brokers can certainly empathise with – is automatic collection of client data. A practical example of why this is popular comes from an example of how not to do housing markets – Spain. Current account customers of ING Direct’s Spanish sub sidiary are eligible for the Orange Mortgage, or, as Claes puts it, ‘the Spanish easy mortgage’. It requires the absolute minimum of form filling, because the bank already has most of the data it needs. “They use the data from these customers
“From a digital/ online perspective, the market in Australia is a bit behind where it is in other areas – the US and the UK”
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FEATURES
GLOBAL INNOVATION to offer them a mortgage,” Claes says. “They know, based on your income into that transaction and account whether they are able to offer credit, which then needs to be secured by real property.” There’s an enormous amount of data about your customers already available – it’s just not being shared. UK lenders also have been more effective at this, according to Abel.
NATIONWIDE, UK Nationwide Building Society is the world’s largest building society and the UK’s second largest mortgage provider. Accenture’s Abel points to Nationwide as an example of where extensive internal restructuring (as part of a five-year plan) has produced an integrated value chain with corresponding pay-offs – underlying profits increased 32% in 2014/15, the Financial Times reported.
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via external sources, APIs and external databases.” At the moment, this is being done for SMEs, but she expects similar processes to appear in retail.
Integrated value chains Global innovation means more than investment in IT, both our experts insist. “Products are only part of the value chain; customer experience is becoming more
“Once someone else comes along and works out how to own that customer in an end-toend home buying process – not the home loan process – then the banks run the risk of being regulated to commodity provider” “There’s been quite a lot of innovation in the UK market, and some of that was driven by a very sharp turn in the regulatory environment.” When new regulations de manded investment from lenders, they also took the opportunity to invest in other areas and rethink their value chain. “They’re capturing data once throughout the entire life cycle and process; they have intelligent expert systems at the front end, helping customers choose product; they’re running end-to-end, mostly paperless processes,” Abel says. “They’re giving cus tomers a full interactive view of what’s happening with their mortgage.” He cites Nationwide, a building society in the UK, as a prominent example. Crossing the channel back to Europe, smaller Fintech companies are demon strating that collecting data can be useful for more than the standard home loan. They’re extending it to the entire financial life cycle, Claes says. “A customer will get digitally verified, and then all the data you usually seek on a step-by-step, sometimes painful process with customers, to verify their income and expenses, the valuation, etc, can all be done
important,” Claes says. For Abel, a more fundamental mind shift is required: “We don’t think of it as the mortgage market; we think of it as the home buyer’s market, because at the end of the day, that’s what customers want to do. They want to buy or sell a house, not get a mortgage; that’s just one of the steps in the process.” The home buying process of the future truly will be end-to-end, Abel claims, com bining everything from finding a home to the removals truck. But integrating the many component parts of the home buying process isn’t just a matter of expensive IT. “There’s some partnering [involved]; it’s figuring out how to leverage that trusted relationship that the banks have to go further in the value chain and try and sell additional services,” he says. “The banks aren’t going to be doing removals, but they can certainly partner with a removals firm.” And beyond the banks, there will still be a number of roles in the process. As is also highlighted in our boxout (see page 31), players will have to fit into three roles: advisers, access facilitators or value aggre gators. All three transcend this value chain, whether advising, becoming a ‘one-stop
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GLOBAL INNOVATION
QUICKEN LOANS, USA For Abel, Quicken is an example of the sort of disruptor Australian financial services are about to see: an external company (accounting software) moving into financial services. “They’ve done a fantastic job at creating a really great online experience,” Abel notes, “and they’ve done a fantastic job of focusing on specific segments” – refinancing first and foremost.
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shop’ or putting together deals for several different services in order to get a better rate. Whilst a firm operating across the entire chain has yet to appear, Abel points to the US for ‘green shoots’ of such organ isations emerging. “A bank in the future can’t just be a lender of funds,” he emphasises. “Once someone else comes along and works out how to own that customer in an end-to-end home buying process – not the home loan process – then the banks run the risk of being regulated to commodity provider.” ING’s Claes has come to a similar con clusion, and is aiming for the “full-service offering … a mortgage provider can move to providing an end-to-end service that goes from finding a home to inspection, through to loan, to settlement, even to moving in. So you bring the entire experience together in a smooth customer journey.”
Banks and non-bank players If financial service providers can’t adapt to the new end-to-end experience, they’ll be vulnerable to organisations with better customer service and loyalty. Claes urges financial professionals to look at the ‘macro-consumer trend’ – non-financial businesses – “because when customers interact with service providers, their expec tations are set on a highest common factor basis”. Selling mortgages doesn’t stop you being compared to Apple and Amazon, she insists. More directly, the commoditisation of financial services means new competitors, Accenture’s Abel notes. “Something that you’re not really seeing in Australia yet is disruption coming from a non-bank or different types of organisations,” he points out. In the US, Costco has taken its warehouse club retailing model into mortgages, whilst in the UK, major retailer Tesco has built on existing loyalty schemes to also offer financial services. Abel also mentions Coles – the supermarket already offers insurance and has been inconclusively linked with moves into the mortgage market. However, it’s not only the largest organ
“Australian consumers have a higher product expectation and a lower distribution expectation. But that’s probably going to change, and when it does change, it’s going to change quickly ...” isations that will get a slice of the financial services pie, Abel says. “I don’t think smaller disruptors are necessarily shut out. I think the smaller disruptors – if you go back to those three roles in the future ecosystem – might not be able to play one of those roles themselves, but might be able to partner with someone to facilitate someone moving into that.” He believes online comparison sites and other Fintech organisations are the most obvious fit for this role. Complacent markets are ripe for dis ruption, and continually pointing to the supposed unique characteristics of the Australian market may well be an example of that complacency. Both Abel and Claes emphasise that these changes are coming here; what the Australian market will do is tweak them to fit local conditions, and those players that do the tweaking stand to profit handsomely. “Australian consumers have a higher product expectation and a lower distribution expectation,” Abel concludes. “But that’s probably going to change, and when it does change, it’s going to change quickly; it’s not going to be two to three years when people get a chance to respond. Things that are working well in other markets will find their way into Australia … lenders in Australia really need to be watching what’s going on overseas.”
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PROFILE
SHARRYN HUGGETT
Sharryn Huggett: A BUSINESSWOMAN THROUGH AND THROUGH Sharryn Huggett has been part of the finance world for 40 years – but she’s also a keen entrepreneur herself, as she tells MPA’s Maya Breen
PEOPLE OFTEN talk about goals and plans but, more often than not, fail to see them through to fruition. You don’t have to talk to Sharryn Huggett very long until it becomes apparent that she’s a person who has set her mind to many such goals and realised them all with flying colours – and she has a shining portfolio of achievements in business and broking to prove it. Huggett held senior banking roles before branching into broking, all while running wholesale and retail businesses parallel on the side. She ran the businesses with her husband while raising a family and training as a photographer, which would lead her to create a multiaward-winning photographic studio. “I guess you’d say, ‘Where does photography work into finance?’” Huggett says. “Well, the long-term plan was that when you have photography and retail shops, you get to know the businesspeople; one portion of the photographic studio we had was weddings, and of course weddings have young people who want to buy homes.”
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Armed with her background in finance and experience establishing and running businesses, Huggett delved into broking 18 years ago. Only in the last seven years has she sold some of her other businesses to focus on her brokerage, Canberra-based Huggett Enterprises.
Commercially inclined Huggett Enterprises offers clients many different services, but the one Huggett enjoys most is the commercial loan. “Commercial loans are very different to residential loans. I find [commercial loans] extremely interesting because you might be financing a business, a development, cars or machinery. It is more time-consuming, but I think it’s very rewarding.” She has found her brokerage has expanded with her commercial clients as they grow their own business, often needing financing for cars and homes alongside commercial property. Huggett argues that commercial lending is an important sector for brokers to consider, and she believes more people will seek out brokers
THE EXPERTISE OF HUGGETT ENTERPRISES Home and investment loans for new and established properties Commercial and business loans Commercial property loans Chattell mortgages and leasing for equipment and vehicles Refinancing of commercial and residential loans SMSF loans
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A BUSINESS MIND It’s always been about business, finance and people for Sharryn Huggett At 18, she bought her first investment property; at 26, she project-managed her first build Multi-business owner with more than 40 staff, including a multi-award-winning photography business, which has had photographs printed both nationally and abroad Forty years of industry experience Invited guest of the FAST VIP conference and on the FAST advisory council Regularly a guest of CBA’s Women in Commercial summits
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PROFILE
SHARRYN HUGGETT LOYAL CLIENTS FOR LIFE Describing one of her clients, Huggett says she’s looked after their four residential properties, three commercial properties, the property in their SMSF and financed 28 of their vehicles. “I’ve actually worked with them from the day they opened their business.” And she’s continued to work with them side by side, helping them to diversify. “I’ve gone with them the whole way, and they’re one of the largest businesses in their area now.”
for commercial lending in the future. “I think there’s going to be more and more commercial lending. Small business is encouraged more so there are people buying franchises or opening their own businesses.” While Huggett enjoys the complexity of commercial loans, she also notes the importance of striking a balance of offerings within
For the love of broking No matter what you’re bringing to the table, starting out as a broker is tough, and Huggett stresses that new brokers must focus as much on the business side as on the broking. “They’ve got to learn how to run their
“Brokers are taking over larger proportions of the lending areas, and our percentages are getting higher and higher. It’s a very exciting time ...” your business. “If, for instance, residential lending went quiet and people aren’t buying as many homes, you’ve got commercial lending still going – there’s a balance.” She has worked with many clients longterm and still has many from the brokerage’s early days. “I have a great rapport with them. I touch base with them by giving them interest rate reports or newsletters or just doing reviews with them or a chat on the phone. I try and keep that relationship going. I love to get involved with the clients to see what they really want. I love to listen to them to make sure that whatever their goals are, I’m there with them.”
Industry involvement Huggett is also involved in the industry outside of her brokerage, and in the last few years, has been a guest of CBA’s Women in Commercial Broking summits in Sydney. She says it’s great to see more women joining the industry. “I find it extremely interesting, and it’s great to speak to women brokers who have come in from all over Australia, to hear their stories and the way they run the business, as everyone runs it a little differently.” FAST has been her aggregator for seven years, and she has been invited regularly to the FAST VIP conference and is a part of the FAST advisory council. “FAST is a great aggregator,” she says. “I think without a good
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aggregator, a broker can be a bit lost.”
business as well, and they’ve got to have patience in knowing they’re going to have to work hard to create their own client base. They’ve got to know that ahead of time if they don’t want to give up six months later – they’ve got to go in with their eyes open.” She advises young brokers to tell themselves: “‘I can see where I’m going. I have to get there. I’ve got to set my goals. I know it’s going to be difficult, but I know it’s going to be very rewarding.’” In her own case, “we did work seven days a week for 25 years, and you’ve got to have goals and dedication to do that,” Huggett adds. Today, her business is split into 70% residential loans and 30% commercial plus SMSF, but she is looking to expand further into the commercial side. “I’d like to get to a balance of about 50/50 – 50% commercial, 50% residential, and probably getting to do more work with developers.” The biggest reward in broking for Huggett is seeing her clients go forward and realise their goals, and being there to support them every step of the way. “At this time in my life, I just want to enjoy my greatest passion, which is the brokerage – being able to be a part of that area is wonderful,” she says. “Brokers are taking over larger proportions of the lending areas, and our percentages are getting higher and higher. It’s a very exciting time, and I think brokers have so much to offer people.”
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UNDERSTANDING BUSINESSES
TALKING BUSINESS Small and medium enterprises are the lifeblood of a commercial broker’s business, so it’s vital you understand the challenges they’re facing in 2015
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OUR BUSINESS EXPERTS
AS A BROKER, you already wear plenty of hats – product guide, negotiator and gateway to a host of other services. So we can see why adding ‘business expert’ to the mix might not seem worth the effort. But if you’re looking into commercial broking, or even just dealing with self-employed clients, it’s vital you have an understanding of the challenges Australian businesses are facing – and how you, the broker, can be an indispensable asset.
Brendan Wright, CEO, FAST
Glenn Mitchell, head of commercial and leasing, Vow Financial
Cory Bannister, vice president and head of distribution, La Trobe Financial
Cosi DeAngelis, general manager of commercial origination, ANZ
Mark Woolnough, head of broker distribution, ING Direct
Peter Vala, head of sales and distribution, Thinktank
Confidence, or lack thereof You’d have to have been living in a cave the past few months not to understand the first reality of Australian businesses: They’re lacking confidence. That, not the state of the housing market, is what has caused a succession of RBA rate cuts and a surprisingly toneddown budget. Business confidence slumped throughout late 2014, according to NAB’s Business Confidence Index, stabilising in April at +3 index points. Small and medium enterprises have slightly lower confidence, at +2 for the March quarter. Both measures were at their lowest level since mid-2013. Why does confidence matter? As NAB’s April business survey notes, “until confidence lifts significantly, it is difficult to see a sus-
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UNDERSTANDING BUSINESSES BUDGET 2015 One of the headlines of the federal budget was a $5.5 billion jobs and small businesses package, including a 1.5% reduction in the tax rate for small businesses with turnover under $2m and an immediate deduction on every asset worth under $20,000. Simon Mesne, partner at accounting firm KMPG, reckoned the tax changes would have a “meaningful impact on entrepreneurs and small businesses” – thus creating more opportunities for commercial brokers.
tained economic recovery developing – to date, rate cuts have not appeared to do much”. More specifically, however, the confidence of the businesses you cater to should dictate your approach to marketing and the products you’re offering. Alongside confidence lies business conditions, a measure that should correlate with confidence but in reality can fluctuate. Business conditions include labour costs, purchase costs and product price growth, amongst others, and they fell in April after
Commercial property One area highlighted by several lenders was SMEs that are pur chasing their own premises. For specialist commercial lender Thinktank, commercial
“While confidence and conditions have been mostly flat, business lending and asset finance for SMEs, written through brokers, has grown from 8% to circa 20% over the past four years” rising considerably in March, according to NAB’s April survey. However, in trend terms, conditions are still improving, as they have been since the beginning of the year. You need to understand the context of flat confidence and business conditions, but it shouldn’t put you off, says Cosi DeAngelis, head of commercial origination at ANZ bank. “Evidenced by the growth we have experienced in our commercial broker business, it’s clear that Australian businesses, whether seeking to start or in growth mode, are increasingly using brokers to source their funding.” FAST CEO Brendan Wright points to the numbers. “While confidence and conditions have been mostly flat, business lending and asset finance for SMEs, written through brokers, has grown from 8% to circa 20% over the past four years.” “From a broker perspective, it’s about having those conversations with your clients,” adds Wright, “particularly at a time where it’s advantageous for them to think about investing in commercial assets – get them thinking about where they want to be from a business growth perspective and how you
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may be able to help them get there.” In order to help you start those con versations, MPA asked a variety of com mercial lenders what they’re funding, and the areas of growth and contraction brokers should look out for.
property purchases made up the majority of destinations for their funding, considerably outstripping refinancing, according to Thinktank’s head of sales and distribution, Peter Vala. Both Thinktank and ING Direct reported that commercial property purchases have been highly important over the last 12 months. What’s really driving commercial property purchases are SMSFs, Vala notes. “There has been a definite increase in demand for financing the purchase of a commercial property under an SMSF structure, which is consistent with the taxation benefits to small business owners and investors.” Whilst the Financial System Inquiry questioned the suitability of allowing SMSF investment in residential property, its role in commercial property acquisition is well established. Cory Bannister, La Trobe’s vice president of sales and distribution, believes SMSFs require a very particular marketing approach from brokers. “[SMSF] is something we are actively promoting to brokers, encouraging them to review their database for self-employed clients
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UNDERSTANDING BUSINESSES to see if they are interested in purchasing commercial property via their SMSF,” he says. “Feedback from our brokers has been encour aging as to the level of untapped potential sitting in their CRM systems.” In the long term, both domestic and foreign investors may continue driving com mercial property investment. La Trobe observed a return of investors to small and medium commercial property (under $3m), suggesting those buyers are “looking to take advantage of the higher yields commercial property is generating in comparison to residential assets, which are performing at or just slightly above cash at present”.
Construction Connected with commercial property investment is the con
struction industry. Construction was a major driver for commercial brokers in 2014; in fact, five of our Top 10 Commercial Brokers last year were construction specialists. However, NAB’s recent SME survey described construction as an ‘under performer’. Con struction at the top end is also suffering – NAB’s May ASX 300 report (of Australia’s 300 biggest listed companies) noted that “sentiment is particularly weak around very big construction firms”. Of course, when you’re talking about construction, you do need to draw a very clear distinction between commercial build ing projects (offices, hotels, etc) and resi dential construction, which, being tied to the housing market, thus remains strong. The Housing Industry Association’s National Outlook, which was released in May, claimed
SME BUSINESS STRATEGIES Firms remain focussed on less disruptive (and sometimes costly and/or risky) strategies to improve competitiveness 70% 60% March quarter 2014 March quarter 2015
50% 40% 30% 20% 10% 0%
Website
New product
Online marketing
Reduced pricing
Offline marketing
R&D
Outsource
New location
None
Moved location
Other
Strategies empoyed over the past 12 months to improve competitiveness Source: NAB Quarterly SME Survey, March Quarter 2015
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The leading magazine for the mortgage broking industry Mortgage Professional Australia continues to be the key resource that mortgage brokers and industry professionals turn to for in-depth industry issues, market trends, business analysis and intelligence. Each issue is packed with updated relevant information such as all the latest mortgage products, diversiďŹ cation strategies, sales and marketing tools, career education and training, regulation and legislation updates.
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UNDERSTANDING BUSINESSES MOST SIGNIFICANT CONSTRAINING FACTORS FOR SMES The constraining factors that worsened most in 2014 were Cash flow
Demand
Staffing
house building was at record levels, although it admitted that growth was more narrowly concentrated than last year. HIA chief economist Dr Harley Dale com mented that “super low interest rates are doing their job, but there is a lack of complimentary policy reform … the detached house construction cycle has peaked well below its potential because households can’t pay the cost of waiting up to 14 months for titled land, or multiple months for a simple building approval, or borrow the additional amount required to cover government-imposed gold-plating of user pays infrastructure”.
Manufacturing According to Thinktank’s Vala, “there is no doubt parts of the manufacturing sector are benefitting from rising home-building activity”. Indeed, NAB’s SME survey saw conditions in manufacturing ‘notably’ improving, albeit only to the neutral mark. That said, manufacturing firms were amongst the most confident SMEs. FAST also nominated manufacturing as an area to look at for the coming few months. Not everyone is so confident about manu facturing: La Trobe Financial listed it as one of several sectors – including retail and transport – struggling because of ‘inadequate capital capacity’ as a restraint on profitability. They suggested brokers working with these sectors “may wish to focus on ways of releasing capital or consolidating business debts with a view to reducing cash flow drag on the business until conditions improve.”
Long-term challenges The sectors above represent a small proportion of businesses out there; we picked them for their particular traits and relevance. Whilst it’s impossible to understand the situation of all industries, many businesses – SMEs in particular – do face similar challenges over the long term. Bankwest’s recent Business Leadership Report contains a vast number of insights into the priorities and fears of small and medium-sized business leaders, which any trusted adviser should know. For example,
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“Irrespective of the level of confidence within the consumer or business environment, a broker should be positioned as a member of a client’s circle of trusted advisors” productivity leadership – increasing profit through improving process and structural efficiencies – is the most popular managerial strategy, selected by one in five businesses. Another indication of strategies being utilised by businesses comes from NAB’s SME report, which looked at strategies adopted in March quarter 2014 and March quarter 2015 in order to increase competitiveness. The relevant statistics here are much more obvious – just over 10% of businesses had a ‘new location’, whilst around 6% ‘moved location’ – and both statistics were up from 2014, encouragingly. The NAB SME report also looked at the long-term constraints facing SMEs, and found that cash flow, demand and staffing were the biggest constraints in 2014. These reduced in 2015, now that government policy and tax are perceived as more restrictive, as well as interest rates and credit “showing signs of becoming more restrictive”. Commercial brokers are, of course, expertly placed to respond to the latter two concerns. Finally, ANZ’s De Angelis points to Australian businesses expanding abroad as an area of opportunity. “Research has revealed that 25% of Australian businesses operating internationally require additional debt funding every year, whilst 62% of those businesses said they found it difficult to source this funding from Australian financial
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COMMERCIAL
UNDERSTANDING BUSINESSES SPECIALIST COMMERCIAL BROKERS FROM OUR TOP 10 These are just a few of the best – read about the rest of them in MPA 14.10, in print and online. Diana Liu Wealth Connected Pty Large commercial property developers Daniel Green Green Finance Group Hotels, pubs and nurseries Jayden Vecchio Discovery Finance Group Residential property, construction Think you’re a Top 10 commercial broker? Ask your aggregator to nominate you for MPA’s Top 10 Commercial Brokers 2015, in MPA 15.09, on desks late August.
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institutions,” he says. “Australia has nego tiated a number of significant free trade agreements with key trade partners, and there is huge potential for the country to broaden the mix of its export base.”
Knowing the cycle It’s important to know your current and potential business clients inside out – their industry, challenges, constraints and management philosophy. Some of that knowledge can come in useful when picking
broker should constantly be considering where they can bring value to the table for their customer through the various cycles.” FAST CEO Wright holds a similar view: “We’ve had brokers have great success in all sorts of industries, such as manufacturing, retail, healthcare, agriculture – the list goes on. I would advise brokers that, rather than picking a specialty based on which is easiest, they go with what feels most comfortable for them – both in terms of the customers they tend to speak to every day, and the industries
“Brokers dealing with SMEs in these weaker sectors may wish to focus on ways of releasing capital or consolidating business debts with a view to reducing cash flow drag” clients who suit your specialty, and many of our Top 10 Commercial Brokers are extremely selective; Adam Slade-Jacobson of Monark Property Finance, who came in second, wrote $93 million in 2013-14 over just three loans. Lenders also can help provide you and your client with specific business intelligence. ANZ point to their ‘A-Z reviews’ of com mercial clients, which they provide to brokeroriginated clients whilst utilising the exper tise of business bankers. La Trobe Financial have senior credit analysts, and Thinktank and FAST have specialist BDMs, often with a credit background. However, it’s not about picking a ‘winning’ industry; the commercial broker is there for the long term, Thinktank’s Vala argues. “Irre spective of the level of confidence within the consumer or business environment, a broker should be positioned as a member of a client’s circle of trusted advisers,” he says. “The broker is there to help facilitate any financial changes the client is seeking within their business, from either raising debt for expansion purposes or assisting with the restructure of debt to better terms and conditions. Rather than focusing on specific industry segments, looking for opportunity, a
that are most significant in the economy of their local area.” For ING’s Woolnough, the broker plays a valuable role as a mediator between banks and SMEs. “Brokers can serve as a conduit in observing and experiencing the challenges that SMEs face and communicating these to the banks and wider industry for an oppor tunity to address these challenges. “Similarly, over time, banks are required to change processes and request more of SMEs during the banking relationship,” he continues. “Whilst we try to accommodate this as much as possible by streamlining processes, a broker is vital to the customer experience, as they will work to simplify the overall finance process by acting as the dedicated intermediary, put more time back in the customer’s day, and allow the customer to focus on other issues and opportunities at hand in their business. “ And whilst knowledge is vital, it’s the broker’s core skills that make the difference, Woolnough concludes: “The key here is that regardless of which industry the customer is in, the commercial broker will navigate through their challenges and make what some people see as a rather daunting process simple.”
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BUSINESS STRATEGY
LEADERSHIP
DRIVING CHANGE: WHEN TO INVOLVE THE TROOPS Leadership is always a delicate balance, and knowing when to involve your staff in an important initiative is just one of these balancing acts – and the timing needs to be just right. In this extract from his book, Leadership: It’s a Marathon, Not a Sprint, Gordon Tredgold shares the perfect time to bring in support
WHEN YOU’RE fighting a battle, how long do you have to fight it alone? What’s a duel, and what’s a war? When should you call for reinforcements? When can you expect to find an army at your back? Someone asked me the question: At what point do we need to involve more people – like experts – when we’re shooting for those big goals? This is an interesting and difficult question to answer. I see it as a very tough balancing act that we have to get right. If you involve too many people too early, then your goals run the risk of becoming tempered and watered down. On the other hand, if you involve too few people or involve them too late, people might feel excluded and this can then lead to resistance, tension and lack of commitment. That can be a huge source of conflict. In my opinion, the team defining the objectives and the goals needs to be small. And by small, I mean perhaps one to two people. I’ll explain why I’m so conservative with that number. The more people you have involved in defining the goal, the more reasons they’ll provide you as to why you cannot hit your target. (It’s more ‘natural’ to think initially
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of what could go wrong. Remember when someone turned up late for a date or a meeting? A dozen bad scenarios probably ran through your head – from ‘he doesn’t like me anymore’ to ‘maybe he got into a car crash’. Turned out, he’d just stopped to fill up with petrol.) If there
make the choice. We need to be dedicated and fearless when setting big and ambitious goals, and this is more easily done if we only have to deal with (or convince) a small group. Large groups tend to be more cautious, argumentative and
“If you involve too many people too early, then your goals run the risk of becoming tempered and watered down. On the other hand, if you involve too few people or involve them too late, people might feel excluded, and this can then lead to resistance, tension and lack of commitment” are too many people involved, your goal will be watered down from big, bold and beautiful to small and not-so-impressive. It’s nobody’s fault, per se; it’s just the way of people, for there are as many opinions as there are voices. In the end, it’s your decision, and your voice has to
often lean toward the safe side – not what you need when setting big, bold goals. You need healthy doses of risk, ambition and creativity, and those characteristics can get trampled by the masses. I’ve experienced this in the workplace time
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and time again, like that time when I set one company’s goal for an on-time delivery increase to 80% (as compared to our old average performance of 35%). If I had consulted with a larger group, I am sure we would have tempered the goal and probably set it at 60%; 80% wouldn’t have even been considered, much less reached. In my opinion, keep the team to a minimum when you’re at the first step of defining success and setting the goals for a change. So then, the second step. You have to define the why behind the what: why this goal is important, what the benefits are, the reasons behind it and so forth. The more inspirational the goal, the more convincing your why – and the bigger the buy-in. This is when more people begin to show up. As soon as what and why have been defined, you can begin gathering an army to tackle how. Remember this: The goal is non-negotiable now. There will be those who will try to deter you from it. There will be those who won’t be able to fathom the big picture. But the team’s focus should be on brainstorming and mapping out the road
“Keep the team to a minimum when you’re at the first step of defining success and setting the goals for a change” to success. The vision of success has already been taken care of. All the energy must now be channelled to discovering how to achieve the bold goals – not how to temper or reset them.
THE THREE KEY PRINCIPLES TO DRIVING CHANGE ARE:
1 2 3
Define the problem (the goal) with as few people as possible Create an important and inspiring reason that people can buy into Define the solution (the strategy for success while involving and welcoming more people – the troops)
There will always be some resistance, of course. You need to see beyond that now. The Chinese have a popular proverb: It is better to light the candle than to curse the darkness.
Problems exist to be solved. Your vision must be powerful enough, and your focus must be just as keen. Don’t ask your team: Why shouldn’t we do this? Instead, ask your team: “What do you need to make this happen?” If you can attain the balance, your larger group will not feel excluded. Instead, those people will feel involved. They will take up the challenge and work with you to define the solution. After all, the resulting solution will be their brainchild, too, and involvement breeds commitment. Thus do we set big, bold, challenging goals, while inspiring people and ensuring their commitment. Gordon Tredgold is a specialist in transformational leadership, operational performance improvement, organizational development, creating business value, and program and change management.
www.mpamagazine.com.au
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BUSINESS STRATEGY
MARKETING
THE KEY TO CREATING SHAREABLE SOCIAL MEDIA VIDEOS Your social media video doesn’t have to include babies, celebrities or dancing in order to become immensely popular, according to Marcus Seeger. Read on to find out how to lift your social media presence to greater heights
IT IS CLEAR that social media has grown rapidly over the last decade, and more recently, there has been a significant growth in social media video. YouTube is the leading social media video platform, but 2014 saw Facebook step up and compete, along with others such as Vine and Instagram. Social media videos are typically shared across a single platform, but recent statistics from YouTube, revealing that 700 YouTube video links are shared on Twitter every minute, and that 500 years of YouTube videos are watched on Facebook every day, demonstrate the increasingly highly shareable nature of social media video across different platforms. There are many reasons why someone will elect to hit share, rather than simply like or comment on the video. They might want to be the first to share and be seen as having their ‘finger on the pulse’, or perhaps gain kudos by association, or maybe sharing is coming from an altruistic perspective. Almost half of video shares occur in the first three days after the video is posted, so it’s critical to promote newly published videos as much as possible in those allimportant early days. As Seth Godin says, you need to get early adopters actively campaigning
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on your behalf to get the ball rolling. When planning your content, it is extremely useful to look at audience profiling and determine what elements are most likely to result in the video being shared. What are your audience’s preferences – do they like funny, cute, funky or inspiring? Much also depends on whom your audience is sharing the video with. Who are their friends, and who is in their network? What interests and passions do they share? Can you somehow tap into the zeitgeist? One element popular videos have in common is that they hit emotions very hard. It’s not enough for a funny video to make you smile – you need to be laughing loudly before you even think about sharing it. Think about the videos you personally share on social media, and ask yourself why you shared them. This will help you gain insight into your own experiences, and that knowledge can help you identify triggers in others. Here are five key strategies for creating popular shareable social media videos.
1
Educate your audience
2
Go for entertainment value
The ‘how-to’ genre is often overlooked, but it offers significant opportunities to create popular shareable content. Typical how-to videos are not particularly complex to create and can offer a solid ROI, particularly if you focus on a topic that is in high demand. The popular ‘life hack’ sub-genre is a good example of a successful how-to niche. A proven approach is to share significant insight and provide truly valuable content, as this is more likely to be shared. If you’re concerned about protecting what you know, you must move on from this mindset and share some of your most valuable content if you are looking to create the type of video that will be popular. By sharing your insider knowledge or ‘secret sauce’, you have a good chance of standing out from the crowd.
Video that entertains will, in most markets, have a higher chance of being shared. Can you think of a funny angle on your
industry, or perhaps a clever parody or spoof that can be turned into a video? While these types of videos will have more of a hit-or-miss success rate, if they work, then they typically do very well.
Typical how-to videos are not particularly complex to create and can offer a solid ROI, particularly if you focus on a topic that is in high demand But be prepared for an epic fail if it all turns pear-shaped – can your business (and your ego) handle this?
3
Engage with a story
Storytelling is so incredibly powerful because it’s built into our DNA. If you go back hundreds of thousands of years to early mankind, we used to communicate knowledge through storytelling. Today’s digital campfire hasn’t really changed all that much, and videos that have strong narratives are predisposed to being shared with friends, peers and beyond. Is there an element of your business or product that has a strong story behind it that would engage your audience enough to make them ‘tell the world’? Keep in mind that the key to a good story is to be authentic. Certainly don’t pretend that the story is something that it’s not, because online audiences are very media-savvy and will notice right away if your story is a fake. And remember to make your story enter taining. It is a wonderful opportunity to put some thought into your script. Make it the best that it can be. Your audience will appreciate it, and you will benefit from the results.
4
Become crystal clear on outcomes
Don’t be daunted when you see videos with millions of views or thousands of shares; instead, be inspired. You must have courage, because until you publish your video, you will not know how it will be received. It’s important to set goals and determine how to measure ROI. You will need to set your own standards to measure the success of your video. For a small business start-up, just 100 shares might well offer unmeasurable business opportunities if the right people watch the video. What does success look like for your video?
5
Be remarkable
A video that stands out by going against the grain of audience expectations is often a recipe for success. The 2014 #likeagirl campaign from Always is a good example of developing a theme in a direction that is not immediately predictable. It also picks up on strategies 2, 3 and 4 outlined above. (Watch it at http://youtu.be/XjJQBjWYDTs.) If you want people to share your video, it needs to be unique in some way. The ‘same old, same old’ content quickly gets stale and simply will not be shared. Creating shareable social videos is perhaps more challenging today, as there is simply an avalanche of content, and audiences don’t have the time to consume even a fraction of it. We are experiencing ‘content shock’, which is why Facebook filters out the majority of possible content and serves only what is most likely to be of interest to us. Your challenge is to create original, authentic, entertaining videos that inspire your audience to hit that magical ‘share’ button. It’s a challenge worth aspiring to, as the benefits of a popular social media video that is highly shareable can be extremely profitable.
Marcus Seeger is the number-one Amazon bestselling author of Video Marketing for Profit; 14 Proven Strategies for Accelerated Business Growth. He is also the managing director of video marketing and production agency Video Experts. For more information, visit www.videomarketingforprofit.com.au.
www.mpamagazine.com.au
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BUSINESS STRATEGY
VOLUNTERING
DOES CORPORATE VOLUNTEERING REALLY WORK? Is letting staff go out and volunteer one day a year really create value for the charity? Peter Baines outlines a different approach to corporate volunteering – one that all parties can truly benefit from
I OFTEN get asked the question: Does corp orate volunteering really work? To put it simply, it can, but it often doesn’t – and even if it is working, it’s very unlikely to be reaching its full potential. As a senior executive, partner or director of a business, setting the strategy for the organisation is part of your duty. Maximising returns for the partners or shareholders is also part of your fiduciary responsibility. Getting your corporate social responsibility strategy right can and should be a profit centre back to your company, and how you deploy your resources in this area is very much part of that strategy. Corporate volunteering, in the traditional sense, is when businesses give their staff one work day to volunteer with their charity of choice – a tactic that is probably wasting both the company’s time and that of the charity partner. You may ask, “How can this be a waste of time for the charity? We are skilled professionals working for free to make a difference.” Put yourself in the charity’s shoes, and consider that you have a well-meaning, highly qualified individual turn up for the day to help. Just for one day. Once a year. After you get the introductions out of the way, have shared a coffee and arranged a security pass, the charity has approximately six hours worth of productive time left before
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you leave their office and return again, perhaps, in a year’s time. No one stands to get much value out of this type of relationship because, really, how can they? One of two things is likely to happen when staff members participate in corporate volun teering. Those who take the day off and work productively with a charity have most likely been doing some sort of volunteering for several years, and it is already part of their life. The business giving them the day off just allows
them to go on company time. The other likely scenario is that the employee’s volunteering day is spent at the beach, where they’ll be working hard on catching waves or getting a tan.
So, can it work? The answer is yes, it can work. Just like any other initiative the company takes, if there is a considered strategy behind the program, there is a greater chance of success and a meaningful value exchange between both parties.
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In Doing Good by Doing Good, I share a number of examples as to how corporate volun teering can work, from large firms down to small businesses and even sole practitioners. Often the most effective resource you can offer a charity or not-for-profit is those skills you use on a daily basis. If you are an accoun tant, lawyer or provider of professional ser vices, there is a strong chance that you are better at providing those services than you are at building houses or mending leaking roofs.
vehicle for that program, then the direction of the program is different. The latter is not wrong, just a different approach with a different outcome. Oz Harvest is a wonderful organisation that collects food that would otherwise go into landfill and provides it to those in need of nutritious meals. They not only welcome an army of corporate volunteers on a short-term basis, but their growth and even survival is dependent upon those volunteers.
Often the most effective resource you can offer a charity or not-for-profit is those skills that you utilise on a daily basis and get financially rewarded for Sashi Veale of Sashi Veale and Associates is an accountant who, for years, has been sup porting charity by preparing the financial accounts for a select number of charities on a voluntary basis. She does this above and beyond her commercial work, and, although I haven’t seen Sashi on the end of a hammer, I have a strong suspicion that the value she brings to the charities she supports is far greater through her provision of ‘voluntary’ professional services. After all, this is what the charities she supports need. Part of the argument around the corporate volunteering is, if the firm that I’m a partner of only offers our professional services on a pro bono basis, do we miss out on the engagement and the shared experience of actually ‘getting our hands dirty’? After all, isn’t part of a good corporate social responsibility program the shared experience that leads to higher levels of staff engagement, improved morale and increased staff retention, and if so, how is doing more of what they do, but for no fee, achieving that outcome? This is where a strategic approach is required. Ask those internally who are par ticipating in the program: “Who is this volunteering really for?” If the honest answer is the charity partner, then the provision of professional services they are in need of will achieve that outcome. If it is more akin to a team-building exercise, and the charity is the
group volunteering days when we all put the overalls on and insert a paint brush into our right hand? No, it does not. One of the most memorable days I have had working with a corporate team was when I led 103 members of AIA Insurance into the Khlong Toei slums of Bangkok in Thailand. For close to eight hours, 103 Australians toiled away in a place they had never been and were unlikely to ever return, for people they had never met nor were likely to meet again, but they had one of the richest shared experiences you can imagine.
KEY QUESTIONS If you have volunteering as part of your CSR platform or you are looking to introduce it, ask yourself a number of questions:
It’s about getting the strategy right, and this is where the opportunity to create a mean ingful experience really exists.
Is there a strategy behind our corporate volunteering?
Is one day per year helpful?
Who is it really designed to benefit, and are those who are meant to benefit from the program in fact doing so?
Let’s return to the concept of volunteering one day per year. You might be the senior executive or director of an organisation with 400 people. You offer each of them one day off a year to volunteer with their charity of choice, or perhaps with the charity your business supports. The first question to ask is how many of those 400 staff actually avail them selves of the day and use it for the intended purpose? Of those, how many are providing meaningful assistance to the charity they are working with? And finally, how many of those who don’t take it would be happy to see it used by someone who was interested and did have the relationship? This is where we can leverage some real value. If two-thirds of the staff donated their day back to the organisation, and those days were taken consecutively by one person to work at one organisation, this would give the charity a dedicated full-time worker for the entire year. Now we start to see real value to the charity. What flows back to your business? A story of meaningful change – one person working full-time leading a project within a charity can bring about real change. So, does this mean there is no place for the
Is it aligned to our values?
Can we re-engineer our volunteering to create a multiplier effect or shared experience? What is the return to our business, and how are we measuring it? If you can answer the last of the questions above in the affirmative and clearly articulate the program’s positive return to your business, then you are well ahead of 90% of organisations who are engaged in corporate volunteering. If your answer to the final question is in the negative, then you are missing opportunities and are failing to capitalise on the returns you could be bringing in. It’s not only in the communities’ interests for you to get this right – it is in your interests as well.
Peter Baines, OAM, became passionate about sustainable leadership after he was part of the natural disaster response team for the 2004 Boxing Day Tsunami. Today, he helps businesses build effective sustainable leadership. He is the author of Doing Good by Doing Good. Find out more at www.peterbaines.com.au.
www.mpamagazine.com.au
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BUSINESS STRATEGY
WORK/LIFE BALANCE
STRESS: THE SILENT ASSASSIN You work long hours and are often tired, stressed and overwhelmed. You just don’t have time to look after yourself. Sound familiar? Timo Topp provides some tips on work/life balance
STRESS IS like a silent assassin. You don’t see it coming or know that it is there, but it has you in a headlock, and before you know it, you’re on the mat. It has been stated that stress is the cause of 90% of illnesses. Your body tells you how well you are doing. You just need to be more aware of the signals it is sending you. They start off as minor warning signs, but if left unchecked or ignored, they can progress to more serious health issues and ultimately life-threatening problems. You can manage your stress to feel and per form at your best with simple strategies per
formed on a daily, weekly and monthly basis.
Daily Daily strategies to minimise stress simply mean following the basics of health: • Drink plenty of water and limit coffee to two cups • Be more conscious of better breathing, and breathe deeply into the abdomen, not just the upper chest • Eat healthy, fresh food instead of processed, quick, convenience food • Keep active – walk more and move more throughout the day
STRESS WARNING SIGNS
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MINOR
MEDIUM
MAJOR
Headaches
Moodiness
Anxiety or depression
Muscle aches
Irritability or short temper
Feeling isolated, unsocial
Forgetfulness
Digestive problems
Behavioural issues
Poor concentration
Frequent ill health
Insomnia
Poor sleep patterns
Ongoing worry
No sex drive
Irritability
Drinking more alcohol
Racing heart rate
Weekly Invest a small amount of time in nurturing yourself and prioritising some downtime: • Exercise three to four times per week for 30-40 minutes • Make a commitment to turn off your phone and emails at a set time each day • Have one complete work-free day, e.g. Saturday • Make time for friends and family, and make it equally as important as a work meeting • Have a laugh – watch a funny movie or TV show • Get outside into a local park for sunshine and fresh air
Monthly and beyond • Once a month, get a massage/bodywork treatment • Pursue a pastime that is purely for fun, as opposed to achieving or attaining something
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PROACTIVE STEPS A new study reveals that stressed and micromanaged employees are more likely to call in sick. The study, which examined more than 7,000 middle-aged healthy people in Norway, found that those who work in stressful environments and are micromanaged by their bosses are more likely to take extended sick leave – defined as more than 16 days off in a row. Additionally, they are also more likely to experience chest pain, nausea and shortness of breath. According to the research results, one in every 15 cases of extended sick leave could be avoided if employers took steps to make their workplaces less stressful. Examples include: LOOSEN THE REINS Introduce small measures that give employees some control over their work, such as when they can take their breaks, or even just empower them so they can speak up about great ideas. A fresh perspective, or even taking suggestions from frontline employees, can result in more efficient and effective processes – resulting in less stress for everyone. • Once a month, get out into nature for a day to walk on the beach or hike in the woods • Every 90 days, get out of town for a long weekend • Once a year, have a holiday for two weeks or more
Schedule your ‘me plan’ The key to managing yourself and handling stress is to prioritise ‘you’ by developing a ‘me plan’. This is a plan that includes a selection of the strategies mentioned above. Don’t just leave it to chance; book the strategies into your schedule like any other important appointment. If something comes up, reschedule it. Isn’t that a worthy investment for a sig nificant return? Timo Topp is founder of Well for Work, which helps busy professionals feel better and work more productively with simple and feasible strategies they can do at their desks. Visit wellforwork.com
SLEEP YOUR WAY TO SUCCESS Develop a sleep routine. Go to bed at a similar time each night One hour before bed, avoid work, computers and TV Dim lights and/or use candles Write down thoughts so they aren’t in your head Sleep in a completely dark room with a window slightly open for fresh air Do some deep, meditative breathing If you cannot sleep, get up, read a book for 15 minutes in a different room and return to bed
PROVIDE SOME DOWNTIME Setting a time for employees to put down work and interact with each other not only gives them an opportunity to de-stress, it helps develop workplace relationships. For example, when Anthony Merlin, managing director of architectural firm i2C, converted an old pub into his firm’s office, he included breakout areas in the renovations. EDUCATE MANAGEMENT Provide team leaders with basic training in identifying the signs of stress. Law firm Holding Redlich is one example of an employer that has positioned employee well-being at the heart of its EVP. The company promotes health and well-being programs for all employees, and hosts regular mental health, stress and burnout presentations.
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LIFESTYLE
A DAY IN THE LIFE OF…
Sandi Sims, head broker, MyState and The Rock
6.00am: I’m greeted by my American Staffy, Jetta, who gives me a smooch and tries her hardest to jump up on the bed for a snuggle. Before I get up, I pick up my iPhone and get stuck into reading and replying to emails. 6.30am: I jump out of bed and get ready for the day.
7.00am: I get a coffee and read through the industry updates to make sure I’m on top of the latest. By this time, the builders have turned up. My husband, Kurt, and I have been doing some major renovations to our home since the start of the year – fingers crossed they’ll be done by September.
7.30am: I review the new Daily Application Leaderboard, our list of application numbers made in the previous day, and send a note out to team members acknowledging their strong performances. I also get an update on how we are tracking to service levels and review the lending pipeline reports – and tackle more emails.
9.30am: Time to hit the road. Generally I’m nibbling on a muesli bar or piece of fruit to keep me going until lunch. I catch up with Martin, one of our broker relationship managers, and we visit one of his key brokers together. One of the advantages of being a small business is that I have the ability to get into the detail and have a relationship with all of our key broker business partners.
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11.00am: Martin and I debrief on how the appointment went. Open and honest feedback as well as coaching are really important - I believe in helping my team to ensure every broker meeting counts. We talk about how we can build a deeper relationship with our brokers, and we take some time to brainstorm any ideas or thought starters that have come up in the meeting. We talk about what strategies Martin has employed over the past week and how they are working. My philosophy is that we treat our job as though it were our own business and therefore constantly look for ways we can improve.
emails and check in with my team to see how their day is going. I also work on strategy ideas – there’s a lot going on.
5.00pm: Where has the day gone? Jetta puts her head in my lap and pleads with me for a walk – how can I say no to those big brown eyes? She gets me every time! 5.40pm: Back from my walk with Jetta, and I have a quick look at the progress made our
“Open and honest feedback as well as coaching are really important – I believe in helping my team to ensure every broker meeting counts” 12.00pm: I catch up on more phone calls and emails and grab a bite to eat – typically I go to an Asian soup kitchen for a spicy laksa or wonton soup.
2.00pm: At a meeting with the project team, we discuss whether our new initiatives are working and what we can do better. At the moment, we often discuss the start date for our full electronic lodgement and process improvements. It’s exciting to think about where we’re heading and what’s possible! 3pm: Again, I catch up on phone calls,
renovation. Now that my head is clear, I can reflect on the day’s events to make sure I haven’t missed out on any opportunity. I put in a couple more hours of work before I start getting ready for dinner. I love cooking, so I like to take the time to relax in my kitchen.
7.30pm: Kurt arrives home, and we talk about our day and the renovation while tucking into our dinner. 9.00pm: More emails and watch a little TV in the background. 11.00pm: Time for lights out, and Jetta gets a kiss good night.
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FEATURE / BROKER EDUCATION
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THE DATA
BROKER AND BANK CLIENTS
UNDERSTANDING YOUR HALF OF THE MARKET Recent research by LMI giant Genworth reveals how the clientele of brokers and banks differS, and shows the inroads brokers are making in the first home buyer market YOU CAN take two approaches to under standing the broker value proposition. The first starts at the beginning of the process, asking potential home buyers what they think of brokers as opposed to banks. Genworth have taken the opposite approach: They looked at current applicants, both those who went through brokers and those who went directly to banks. Examining characteristics rather than comments provides a number of insights into what sort of customers are attracted by the broker proposition. Broker applicants are overall less confident, particularly about getting loan approval from a lender. They’re likely to have lower deposits, often because they’ve been saving for a shorter period of time. Indeed, broker applicants draw their deposits from a much wider range of sources. The danger with this sort of report is getting drawn into a debate about the actual quality of broker versus bank applicants. This
report makes no such claims – its value lies in understanding the situations and attitudes that have driven some applicants to look for a broker. However, it also underlines how much brokers have to offer those currently going to a bank, providing they tailor their value proposition to these prospective buyers. In one area of the market, brokers appear to be doing this particularly well, the report suggests. Just 11% of first home buyers intending to buy in the next 12 months said they would use a broker. Yet 65% of FHBs who had recently purchased did go through a broker. “The data suggests that the decision to use a broker is not made early in the process for most people,” said Genworth chief com mercial officer Bridget Sakr. “As prospective first home buyers learn more about the different channels available to them to acquire finance, mortgage brokers often become part of the decision process.” If brokers can counter consumer ignorance
market-wide, as they’ve done for FHBs, than pushing beyond the 50% market-share mark becomes a real possibility.
SIZE OF DEPOSIT Applicants with less than 20% deposit:
73%
Broker applicants
66%
Lender applicants
Applicants who have saved for fewer than 3 years:
71%
FROM ZERO TO HERO: FIRST HOME BUYERS AND BROKERS
63%
Prospective first home buyers intended to use the following channels:
47%
Bank branch
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28% Online
11% Broker
52%
of recent successful first home buyers did use a broker
Broker applicants
Lender applicants
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BARRIERS TO HOME OWNERSHIP 7%
7% 5% 8%
3% 31%
8%
Broker applicants
Lender applicants
38%
24% 19%
Property prices too high
Getting loan approval from a lender
Difficulty of saving a deposit
The associated costs of purchasing a property
Uncertainty about future employment
Source: Genworth Streets Ahead Homebuyer Confidence Index March 2015
GETTING TOGETHER THE DEPOSIT
Broker applicants 66%
I saved up
80% 17%
I inherited the money
8% 31%
I borrowed it from my parents or family
11% 17%
I took out a personal loan
3% 28%
It was a gift from my parents or family I borrowed it on a credit card I won the money in a lottery/competition Other
Lender applicants
10% 12% 1% 13% 1% 5% 7%
www.mpamagazine.com.au
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LIFESTYLE
FAVOURITES
FAVOURITE THINGS Lino Pelaccia, general manager broker, ME Bank
Holiday destination: To celebrate a milestone birthday next year, I have organised a boy’s trip to England to watch a Manchester United game at Old Trafford stadium. Looking back, my favourite destination of all time was Paris − an incredible place with culture and history. Every year, my family and I also enjoy spending time in Bali − we love the weather and people.
Book: Stand Your Ground: Life & Football by ex-Essendon coach Kevin Sheedy. It’s a great memoir and sporting drama with many parallels to the business world.
Things to do: My preferred ‘zone-off’ time is running. No marathons or anything – just listening to the radio and running a circuit around the neighbourhood. Otherwise, my family and I enjoy feasting at our local Vietnamese restaurant. So delicious and spicy – plus, the kids love it.
Drink: A good Shiraz from the Adelaide Hills region. Heathcote Estate, based in Victoria, also does a great drop.
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Photo of Manchester United vs Arsenal by Gordon Flood
Sport: I support Essendon and Manchester United, and particularly admire the AFL skills of Gary Ablett Jr and James Hird together, and the slick soccer skills of Portuguese professional soccer player Cristiano Ronaldo.
Weekend activity: Most of my weekends are spent supporting my kids’ sporting pursuits. I referee for my 14-year-old son’s soccer team and was volunteered by my daughter to manage her netball team. Hail, rain or shine, it’s great to encourage the kids to stay active – don’t mind the sideline banter, either!
Music: I’m a big fan of the British rock band Coldplay. I saw them for the first time a few years ago when they played at Etihad Stadium. It was an electric atmosphere and so entertaining − and ever since, I’ve been hooked. Their music is timeless and appeals to all ages – I even brought a DVD of their concert in Paris recently to play on rotation on the TV at home.
www.mpamagazine.com.au
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