Mortgage Professional Australia issue 15.09 by Key Media

MPAMAGAZINE.COM.AU ISSUE 15.9

AGGREGATORS ASSEMBLE We reconvene our aggregator roundtable for 2015

ALSO IN THIS ISSUE:

TOP 10 COMMERCIAL BROKERS OF 2015

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SEPTEMBER 2O15

CONNECT WITH US

CONTENTS 52

Got a story or suggestion, or just want to find out some more information? twitter.com/MPA_Australia facebook.com/Mortgage ProfessionalAU

UPFRONT 04 News and tips

Market intelligence for the cuttingedge mortgage professional

08 Hot topic

Who will fill the void left by property investors?

10 News analysis

FEATURES

Talking to brokers in Australia’s struggling mining towns

How five companies are helping new brokers overcome the most difficult time their careers

62 The data

NEW RECRUITS

20 COVER STORY

14 HEAD TO HEAD

32 A new winner and new records smashed in our annual survey

48 Andrew Kelly

This multi-award-winning veteran broker has no plans to slow down Watch dawn over the Sydney harbour bridge with eChoice general manager Paul Liccione

Leading aggregators come together to discuss regulation, white label and more

TOP 10 COMMERCIAL BROKERS

MORTGAGE INSIDERS

60 Day in the life

AGGREGATOR ROUNDTABLE

COVER STORY

International bank regulation’s threats and opportunities for brokers

64 Favourite things

JAMES SYMOND

Take a ride in FBAA chief Peter White’s dream 1932 Packard Deluxe Eight soft-top

MPAMAGAZINE.COM.AU

Aussie Home Loans’ new CEO on continuity and change in the national franchise

NOW ONLINE: Sneak previews and magazine extracts in Business Strategy BUSINESS STRATEGY

FRANCHISING YOUR BUSINESS How to decide whether your business model is suitable

Top brokers and brokerages in Leading Mortgage Professionals Aggregator roundtables and MFAA convention coverage on MPA TV Results from our Brokers on Aggregators, Consumers on Brokers and Brokers on Banks surveys

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FEATURE / BROKER EDUCATION

EDITOR’S LETTER

New-school broking

ike any profession, broking has a healthy concern about attracting new entrants. Brokers are worried that, as a group, they’re too old – and only getting older. Luckily, the strength of the housing market and brokers’ share of it is changing this situation, and the average age is coming down – to the high 30s for FBAA membership, according to Peter White, compared to mid-40s previously. Although bank executives might not have noticed the rise of mortgage brokers, their younger and more ambitious employees certainly have. Standout finance professionals are now making the switch in their 20s, recognising that their skills will be financially and professionally rewarded better in broking than within banks’ restrictive corporate hierarchies. That’s not all – increasingly, new brokers are coming from outside the banks. That includes accountants, financial planners and other specialists, but also pure entrepreneurs, who see this as an industry that rewards innovation. What

You can’t assume your new employees will have the same approach or professional background as you do this means is, as a brokerage leader, you can’t assume your new employees will have the same approach or professional background as you do. For this issue of MPA, journalist Maya Breen talked to several awardwinning brokerages about how they induct and instruct new industry entrants. All have different methods of doing so, but all have dedicated and structured programs in place; they don’t expect new brokers to just ‘get it’. The reward is not only high retention rates, but also new brokers who reach high settlement targets after just months in the job. Even if you’re not considering taking on new employees, the influx of new talent into broking does raise some big questions. Arguably, the original brokers form a distinct generation: old-school bank managers who felt, from the 1990s onwards, that they could no longer provide personal service within bank structures. For the new school, ‘personal service’ might have a different meaning – whether that means offering convenient smartphone web apps or connecting through social media. This is where quality on-boarding comes in: combining the best of old-school customer service and new-school convenience to push brokers’ market share well beyond the 50% mark. Sam Richardson, editor, MPA

www.mpamagazine.com.au SEPTEMBER 2O15 EDITORIAL Editor Sam Richardson Journalist Maya Breen Production Editors Clare Alexander Moira Daniels Roslyn Meredith Carolin Wun Contributors Iain Hopkins Jim Kouzes Barry Posner Michael Bunting Stefan Kazakis

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

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 NEGATIVE GEARING

NEGATIVE GEARING: A TRUE AUSSIE ICON? Like kangaroos, Aussie rules football or a Golden Gaytime, negative gearing is on track to becoming something you will find only in Australia. In July, the UK’s Conservative government announced drastic restrictions on negative gearing as part of its 2015 summer budget, reducing landlord tax relief from up to 45% to around 20% over the next two years. With similar right-wing governments dedicated to cutting taxes, and similarly exuberant housing markets in London and Sydney, the UK’s change is relevant for the negative gearing debate in Australia. At the Parliamentary Inquiry into Home Ownership, the RBA’s submission noted that “Australia’s treatment of property investors was at the more generous end of the range of practice in other industrialised economies, but not overwhelmingly so”. It said “the tax

system also advantages owner-occupiers, particularly those with little or no debt”, and has the effect of “encouraging leveraged investment in property”. It pointed to the increased proportion of property investors claiming a net rental loss growing to two-thirds in 2012–13 and concluded that “there is a case for reviewing negative gearing, but not in isolation”. The RBA’s intervention pushes the government closer to the tipping point on negative gearing, but there’s still a long way to go. For Treasurer Joe Hockey, negative gearing

“There is a case for reviewing negative gearing, but not in isolation” is a question of principle: “Individuals should be able to deduct the expenses of a business or an investment against their primary income,” he said. “By removing negative

GOVERNMENT

BUSINESS

INQUIRY INTO HOME OWNERSHIP GETS GOING Countries with similar home ownership rates to Australia

Ireland Sweden Australia Canada Netherlands

Sources: ABS, Eurostat, RBA, Statistics New Zealand, US Census Bureau

gearing on real estate as some are suggesting . . they are creating an exception to a standing rule in taxation law, and that is that you can deduct the losses against another form of income.” In addition to further hearings of the Home Ownership Inquiry, two events in July will have important consequences for negative gearing: the Labor Party conference and Tony Abbott’s meetings with state premiers to discuss local taxes. At the time of writing, neither had yet taken place. Until the next election, however, it looks likely that negative gearing will have a home in Australia.

The first public hearing of the Parliamentary Inquiry into Home Ownership took place on 22 June, examining supply and demand in the housing market, property investment, tax policy, and how these affect home ownership. Already, the inquiry has come under fire from the industry, particularly from Mortgage Choice boss John Flavell, who complained that “witnesses in the public hearing were exclusively employees of government departments; consumer voices were not heard, and their opinions were not sought”. The inquiry was more about “political grandstanding” than action, he added, comparing it to a similar inquiry in 2004 that “produced 255 pages of findings with no practical outcomes or actions”. SA government lender HomeStart argued that more states should adopt its policy of subsidised lending to the less privileged, commenting that “HomeStart’s experience shows that the market does not meet the needs of all, and that our role in the market is one that complements the mainstream rather than competes”. On the other side of the divide, the Australian Bankers’ Association warned that “while such policies to increase demand have some political appeal, in reality they are counterproductive. Such issues can only be resolved through policies which increase supply”. They argued that putting demand-side policy in the hands of the federal government, while allowing state and local governments to control supply-side policy, had produced a damaging “dichotomy in responsibility”.

Conditions UP 5 points Now on par with October 2014 Strongest in service sectors Weakest in mining, wholesale and manufacturing

Confidence UP 2 points Now on par with 2014’s post-election peak Highest in retail Lowest in mining

Source: NAB Monthly Business Survey, July 2015

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STATE OF AUSTRALIAN CITIES REPORT

IT’S NOT WHAT YOU KNOW; IT’S WHERE YOU LIVE It won’t come as news to first home buyers, but the newly released State of Australian Cities 2014–15 report has linked the housing market to long-term inequality. The research paper, from the government’s Department of Infrastructure and Regional Development, characterises city development as low-density growth on urban fringes and high-density growth in CBDs, which has resulted in “concentrations of social disadvantage being pushed further towards city peripheries”. The reason is the combination of high CBD wages and poor infrastructure connections. “Educated workers gain from being in close proximity to others,” the report declares, “so human capital flows to where it is abundant, not where it is scarce” – ie the CBD. Meanwhile, those relying on public transport in the outer suburbs “may find accessing the high-skill, high-paid jobs in the city centre too difficult and be locked out of that employment market, reinforcing the spatial divide”. Given the high price of housing nearer the CBD, those without top jobs find themselves pushed further out of town, creating a cycle – a particularly vicious cycle as those with better jobs are in fact much better suited to relocation: “It has been found that individuals with high levels of human capital, education, experience or training have the capacity not only to respond to work opportunities in a wide variety of locations, but also to

access the search networks and institutional support that enables them to relocate regionally, nationally and even internationally.” Presently, the sheer strength of Sydney and Melbourne’s housing markets is pushing workers – rich and poor – to the outer suburbs. But in the longer term, brokers in the outer suburbs should keep an eye on the direction in which their suburb is moving and adjust their business accordingly. Fastest-growing areas Outer suburbs:

South Morang (Melbourne) +5,700 Inner city:

Melbourne CBD +5,400 Source: State of Australian Cities 2014–15

LOAN TRENDS

INVESTOR LENDING

LOANS FOR HOME BUILDING

36.9% of total in July

Sharpest slide in 5 years

DOWN from a peak of 43.1% in April

DOWN 8.3% in May

FIXED RATE LOANS

AVERAGE LOAN SIZE

14.2% of total in July

$357,500 in May

DOWN from 15.2% in May

UP 10.1% from last year

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ROUND-UP

NEWS AND TIPS YOUNG BUYERS

BROKING FOR THE YOUTH OF TODAY For all the claims that home ownership is now ‘out of reach’, Gen Ys are getting into property, and the property industry is scrambling to adapt to them. The latest effort comes from professional services firm KPMG, which looked at the younger generation’s attitudes towards finance in its report Banking on the Future: The Expectations of the Gen Y Professional. Young professionals are vital, of course, not only because they have more money to spend but also because they can be more demanding of service providers. Bear in mind, however, that KPMG is not talking about just any young professionals – they conducted this survey on more than 1,400 KPMG employees in Australia. This doesn’t make the report irrelevant – they’re still young professionals and potential homebuyers – but it does help explain the results. Two findings really stand out: 84% of respondents claim they ‘do not need financial advice’, while 65% ‘would like to have financial coaching to help them make smarter investment decisions’. On face value, these results seem somewhat contradictory, so MPA asked two brokers who specialise in younger buyers to take a look. Theo Jansen of Mortgage Choice Melbourne agreed that the results were unclear, believing they reflected

distrust of financial advice in the ‘financial planning’ sense. He did understand the desire for financial coaching; he has integrated an educational aspect in his meetings with all buyers: “It definitely all comes down to education. When I speak to clients, it’s not ‘This is what we’re going to do’; that’s a bit of an old-school approach. It’s ‘Here’s what we could do’.” Meanwhile, Bianca Long of Sydney-based Mortgage Choice Glenwood was particularly sceptical of the 84% figure, dismissing it as “hogwash”. In her experience, Gen Y clients want more advice, not less, due to their desire to rapidly build investment property portfolios. “The Gen Ys coming in who are so investment-savvy … what I am seeing is a lot of the younger guys wanting to sit down and discuss things with accountants, and I don’t think I’ve ever seen the young guys saying ‘I’d better get myself a good accountant’.” Clearly, the 84% statistic may be misleading because of its wording. However, the desire for ‘financial coaching’ is relevant, and suggests that brokers need to involve Gen Y clients more in the reasoning behind their decisions. As Jansen points out, this requires a balancing act: “From my perspective, and considering the market is flooded with brokers, you do need to be the nice guy and give as much information as possible, without being too nice and not trying to close the deal.”

NOT SO TECH-SAVVY AFTER ALL

UNDERSTANDING THE KIDS OF TODAY

84%

of Gen Y buyers ‘do not need financial advice’

65%

of Gen Y buyers ‘would like to have financial coaching to help them make smarter investment decisions’

Interestingly, 70% of respondents didn’t see themselves using social media for banking – but whether that also applies to dealing with a broker is less clear.

Young people seeking a home loan still overwhelmingly prefer face-to-face branch visits. 79%

Online

66%

Mobile Call centre 47%

Video conference

41%

In your home Branch visit 20% 8%

7% 3%

Getting a home loan

8% 3%

Opening a bank account

4% 0%

Applying for a new credit card Source: Banking on the Future: The Expectations of the Gen Y professional

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UPFRONT

HOT TOPIC

Who will replace property investors in the real estate market?

Brett McKeon

Gerald Foley

Matt Lawler

Managing director Australian Finance Group

Managing director National Mortgage Brokers

CEO Yellow Brick Road

“Any good business should always consider looking at other opportunities to grow. There will still be plenty of investment lending opportunities and potentially, as some of the heat comes out of the market, more opportunities for upgraders and first home buyers. The fundamentals of the Australian economy will continue to support investment loans. Our growing population, low unemployment rates and the tax advantages of negative gearing are all sound. We would need these to shift significantly off track to see a broader cooling of the market. It is also important to remember that we have more than a million Australian workers linked to housing and the construction sector, so a managed outcome is desirable for everyone in the debate. This debate highlights the importance of diversification. Take the time to invest in yourself by upskilling with opportunities like car lending and insurance referrals.”

“As APRA demands banks reduce their overall lending levels, with a particularly strong focus on slowing the level of investment lending, banks now need to increase loans to owner-occupiers. As investment lending becomes subject to tighter credit rules, increased carded rates and removal of pricing discounts, we will start to see corresponding interest rate discounts and other sweeteners such as ‘cash back’ deals to home buyers and those looking to refinance existing home loans. And with fewer local and overseas investors in the market, prospective home owners – who recently have been left feeling largely excluded from the property game – should feel more confident and inclined to make an offer to buy or bid at auction. Additional tightening for lending on residential development sites also will see more realistic prices for houses that will be retained as homes.”

“With the property investment space changing rapidly, brokers need to look for the low-hanging fruit. Yellow Brick Road recently conducted research of Australians who had obtained a home loan more than two years ago. The findings were very surprising. Despite the well-publicised historically low interest rates, 83% of Australians said they hadn’t refinanced in years. Even more shocking, 40% had never refinanced, and almost 20% hadn’t in over five years. There is still a huge opportunity for brokers to refinance existing loans. We found people don’t switch because they don’t think they will save, they worry the fees and charges will outweigh the benefits, and it just seems too hard. For many people, this is simply not true. Low rates make it an ideal time to boost the refinancing portion of your business by educating consumers on the savings and benefits.”

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NEWS ANALYSIS

MINING TOWNS

BROKING UNDER A SETTING SUN The housing markets of Australia’s mining towns are going in the opposite direction to those of Sydney and Melbourne. MPA editor Sam Richardson asks three regional mortgage brokers what this means for their businesses

AUSTRALIA HAS a fixation on growth, and the housing market is right at the centre of it. Brokers in the capital cities have built their businesses – and in many cases entered the industry – on the promise of successive year-on-year house price growth. But far from the bright lights and inflated settlements of the east coast cities you’ll find another Australia, where all that growth began in the first place, and where broking now requires a different set of skills. It’s no secret that mining is struggling; NAB’s June Business Index records mining as having the lowest confidence and conditions of all industries. We wanted to find out how the industry’s travails and tumbling commodity prices were affecting local housing markets and local brokers; to go beyond a simple ‘doom and gloom’ view of what is a complex set of local and international problems. MPA talked to three brokers covering the areas around Karratha (WA), Mackay (QLD) and the Hunter Valley (NSW). These are three areas which saw particularly severe falls in house prices, of up to 23% in 2014. However whilst their economies are dominated by mining, these places are far

from the worker camps of frontier legend; they’re established towns – and occasionally cities – with functioning, if struggling, housing markets.

Mackay Mackay is the gateway to central Queensland’s coal mining industry and, for Mortgage Choice broker Graham Bowling, his base for almost 20 years. 2015 is proving one of his tougher years, and he explains: “The [RBA interest] rate cuts didn’t really have a huge impact on the region, the resources-reliant sort of spots, so business is probably down about 50% on the previous

“Vendors are realising people aren’t prepared to pay the prices they were five or six years ago, so they’re adopting or accepting what people are willing to offer” Graham Bowling, Mackay year, 2014-15, predominantly due to the downturn in the resources sector.” Seventy per cent of the Mackay’s economy was

dependent on mining, directly or indirectly, Bowling estimates, as it was a hub for drive-in drive-out workers. Those workers were now

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COMMODITY PRICES AND HOUSE PRICES Over the 2014-15 financial year The RBA Index of Commodity Prices

fell 17.9%

Total employment in mining

fell 7%

Prices changes in 2014: Karratha ..................................................................................... 14% Muswellbrook (Hunter) NSW ..................................... 9% Moranbah (near Mackay) QLD ...............................23%

leaving town, leaving empty properties behind: “mining companies started employing fly-in-fly-out people; they said we’ll only employ you if you fly in from Brisbane or Cairns so a lot of people left Mackay, and it left a huge surplus of houses.” As well as reducing the number of new clients through the door, the downturn has put many of Bowling’s existing clients under pressure: “We have had a number of clients who’ve lost their jobs in the mining industry or are moving away from town, and it’s

affecting their ability to borrow or repay.” For those seeking new loans, lenders’ postcode restrictions are making life harder as “there’s very few lenders now who will lend above 95%. A couple of the major banks don’t have postcode restrictions, but most do.”

Hunter Valley Unemployment is also the main problem for LJ Hooker broker Ben Eick. The housing market in the Hunter is far from stagnant; it rose during the RBA’s rate cuts earlier in the

year, but underlying local economic realities have dragged it back down: “It might have just been a knee-jerk reaction to the positivity around the rate cut. The problem around here is still employment; a lot of contractors are being laid off, so there’s a lot of uncertainty in the market.” Eick deals with clients over a wide area, from mining-reliant towns in the upper Hunter to the Newcastle metropolitan area. However, the mining industry’s difficulties and decline is pulling down prices “even in Newcastle itself. The closer you go to downtown, the less reliant you are on the mining industry of course, it’s a lot more stable; the further out you go, the more reliant it gets; the vacancy rates out there are phenomenal – I think they were 20-25%, although that’s pulled back lately.” As a broker, uncertainty is one of Eick’s biggest challenges, as “you’re talking to clients and they tell you ‘I’m finding out about my job next week, whether I’m going to be made redundant’. It’s a constant chase for me to find out what people are up to and whether we can do something or not”. It’s a stark contrast from the situation two years ago, he notes when “even your average labourer would be on $140,000 and still enjoy the country lifestyle and country prices… the more they earned the more they’d spend.”

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NEWS ANALYSIS

MINING TOWNS Karratha

CAPITAL CITY REPERCUSSIONS The decline in commodity prices and mining employment isn’t just a problem for regional areas. In Perth, prices dropped by 0.9% over 2014-15, compared to an average rise of 9.8% for capital cities nationwide. Darwin did even worse, with prices falling 2.9%. Cities with a higher proportion of FIFO workers and associated services have been worst hit, according to RP Data/Corelogic’s Cameron Kusher, whereas Brisbane has fared better as its economy is less reliant on mining.

The Pilbara is perhaps the region which most epitomises Australian mining, and Karratha – alongside Port Hedland – functions as a hub for the local mining industry, as well as oil and gas extraction. The region has been hard hit; local real estate agent John Briggs described the combination of lender restrictions and absence of buyers as ‘blood on the streets’, in an interview with news.com.au. It was therefore quite a surprise when local

“A lot of us think we have to earn more but you’ve got to look at both sides of it… when things get tighter it’s something I monitor more than my income” Cheryl Underwood, Karratha Smartline broker Cheryl Underwood told MPA that she remains positive about what she describes as a steady market. Underwood argues that whilst commodity prices will continue to fluctuate, the current situation is part of a natural cycle: “Karratha is going through a phase where we’re no longer in construction but in the maintenance fields now. Business has slowed down but they’re diversifying a lot more so they’re less reliant on the mining and gas industries.” For Underwood, affordability is the silver lining of the mining slump: “I have still been fairly busy because of the drop in the value of the properties. I’ve got a lot of people coming out of rentals into first homebuyer scenarios, so they’re able to purchase their own property.” Indeed, Karratha has been named one of just two affordable towns in Australia by Demographia and, combined with refinancers, there is still demand for Underwood’s services in the town.

The national perspective MPA asked Cameron Kusher, senior research analyst at RP Data, if the trends our brokers described were commonly found in mining

towns. “Even in these towns, the yields are still fairly strong; they’re still 8-9%,” Kusher explains. “There are still workers in these towns, and there’s still jobs, just not as many as there were.” However, two years ago yields were 15-20%, and the subsequent fall has scared some investors and made selling properties extremely difficult. Kusher is sceptical that improved affordability through low prices alone will tempt buyers back to these towns: “I think that’s quite a few years ahead, and I think it

really depends on employment; the people who own the mines in these markets actually expanding them.” Having acquired a bad reputation with property investors, what mining towns need is an organic recovery based primarily on employment, believes Kusher. “At the moment, I think the prospects for these towns are really not quite strong; they’re pretty high profile at the moment, and people are quite cautious about moving to them… you’re unlikely to see a significant increase in demand any time soon, I would think.”

The show must go on Given there’s no miracle recovery around the corner for Mackay, the Hunter Valley, or Karratha, we wanted to know how those brokers still operating in these areas were adapting their businesses. Reducing support staff might seem an obvious solution, but the only brokerage to do so of the three was Mortgage Choice Mackay, when the team went from six to four members. That option isn’t open to Cheryl Underwood, who’s already a sole operator, and Ben Eick’s office has in fact taken on more staff. What all

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of these brokerages have done, however, is concentrate on maximising efficiency. Mackay broker Bowling believes he had a headstart when it comes to efficiency, as he’s been ‘tinkering away’ since the GFC cut commission levels. At the centre of his strategy is “technical efficiency, improving the way we submit applications electronically, through the use of efficient software. Instead of having loan processors, we’ve actually been able to deal with the process ourselves, so we’ve been able to let go of employees in that respect.” Putting efficient procedures into practice does requires a shift in perception, believes Underwood, talking about her own experience in Karratha. For brokers under pressure, “minimising their costs would be the main thing. A lot of us think we have to earn more but you’ve got to look at both sides of it; obviously keeping up your income stream but also minimising where your costs are. When things get tighter it’s something I monitor more than my income.” Both Hunter broker Eick and Bowling’s brokerage have diversified their businesses. For Eick, that means making the most out of the region’s diversity, concentrating on areas in Newcastle and around Lake Macquarie which are showing better performance. “Diversification is a necessary precaution,” he warns. “Don’t put all your eggs in one basket

and rely on one area or region based around coal.” For Bowling, it means offering equipment finance, commercial finance and financial planning, “although the core business is still home loans”.

In the Hunter Valley, Eick thinks the problems with unemployment and cautious lenders, combined with new regulation, could actually help: “People need brokers more than ever because the rules are so

“Diversification is a necessary precaution… don’t put all your eggs in one basket and rely on one area or region based around coal” Ben Eick, Hunter Valley Green shoots Ultimately for these brokers, working in a mining town means identifying the green shoots in the local economy, however small. After two years of falling, prices in some areas are beginning to stabilise, a necessary precondition for confidence to recover. “For us, it’s a case that there could be opportunity,” notes Bowling. “[The housing market] seems to have steadied off now in the property market up here in Mackay, and vendors are realising people aren’t prepared to pay the prices they were paying five or six years ago, so they’re adopting or accepting what people are willing to offer.”

different.” Mining’s not going away, he notes, but the region is trying to move away from reliance upon it, with 15,000 new homes being built at Huntlee after years of delays. For Underwood in Karratha, there’s no reason the good times can’t return to the city: “People seem to think the north-west is doneand-dusted, but it’s far from that. It’s just taking a deep breath in the short term.” A new international airport and planned port development will bring people back to the city, she reckons: “We’re just in a bit of a lull but we’re still steady business-wise, and when things start to pick up in the next 18 months or so, the whole cycle will start again.”

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HEAD TO HEAD

JAMES SYMOND

“Aussie has been on a very successful track for a long time. So it’s not a business that needs revolution; it needs evolution”

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James Symond:

NOT SO NEW ON THE BLOCK Aussie Home Loans and the Symond name and have been almost synonymous for years, so many interpreted James Symond’s appointment as CEO to mean business as usual. If only, he tells MPA editor Sam Richardson

MPA: Given your long association with

MPA: You’re bringing your call centre

the franchise, does your appointment as CEO mean real change for Aussie? JAMES SYMOND: The good news is that Aussie has been on a very successful track for a long time. So it’s not a business that needs revolution; it needs evolution, which is really important. I’ve been very fortunate to be here from day one, the day when we started the business, and for me, coming into the CEO role has been a real privilege. [It’s] something I’m really excited about, to be able to give back to the broader group of Aussie, not just the distribution channels. So for me, it’s about ensuring my focus on the back room, on head office, on finance, and HR and IT and compliance and parts of the business with which I might not have been so intrinsically linked in the past. They’ve really come front and centre in my world, and I really have this one-team focus across the business, which I’ve really tried to push. So for me, it means evolution rather than revolution, but change is what this team is seeing – good change, which is making them feel more part of the business and part of the sales culture than ever before, because we are a sales and distribution business at the end of the day.

back in-house this year; what was the thinking behind that move, and what results have you seen since then? JS: The most important person ultimately in our business – in any business – is the customer. So for me, it was absolutely integral

brand – and what does that mean for brokers? JS: Where we believe we can add strong value, we’ll try to have a more intimate relationship with that process. We believe from a core standards point of view, we can add even more value to the consumers by

“We only have a 5% market share across the country; there’s 95% market share across the country that is open to business for us” to bring the customer as close as possible to the business, as close as possible to our thinking, to be at the front of our thoughts and minds. Being able to bring the call centre back in house, back into being an integral part of the team, was so important. Having it outsourced to another company was not satisfactory anymore. Bringing it to head office and having immediate and daily visibility, for me and the whole team, was absolutely essential.

MPA: Are you looking for more control of other peripheral areas under the Aussie

bringing it in-house, and that’s why we’ve done exactly that. In some cases there’s a different situation – for example, IT. We’re not IT experts; we still outsource much of our IT, and I can’t see that going away any time soon. It’s like mortgage brokers – mortgage brokers are, across the industry, commission-only, selfrun, self-energised business people. That model works; having a model where it’s PAYG hasn’t worked in the past, and is unlikely to work in the future, because bringing those guys closer, in that sort of way, is not what is best for the customers.

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HEAD TO HEAD

JAMES SYMOND THE FIRST 100 DAYS James Symond was appointed Aussie’s CEO on 16 March 2015, and has made a number of changes since then. Appointments Quentin Boyes, previously of CBA, fills the newly created chief operating officer position Marketing Continues ‘Smart to Ask’ TV advertising campaign Sales Aussie gets 16,000 customer enquiries in March, beating the previous monthly record by 7% Recruitment • Adds 1,000th mortgage broker in June • Wins award for Best Career Development Program at the 2015 Asia-Pacific Banking and Finance Magazine Awards Services Promises to bring call-centre operations in house in late 2015

MPA: How are Aussie helping your brokers deal with rapid regulatory change and avoid being caught out? JS: Our training – our ongoing and our upfront training – is best in class. And it’s not just training in selling a home loan; it’s training and education ongoing about regulatory changes as well. So we’re putting more effort, more time

country, is very strong, and particularly in the eastern seaboard and Sydney and Melbourne, it is off the charts.

MPA: Aussie are well known for on-boarding new-to-industry brokers. What can you offer to more experienced brokers considering joining?

“We have brokers who are extraordinarily successful, and they know it’s about going away and sharpening the axe” and more money into ensuring that our brokers are educated and trained to meet this new regulatory strong world.

MPA: Aussie reached the 1,000-member mark in June. How are you ensuring sustainable growth when taking on new brokers? JS: We’re very experienced with very, very strong growth. We have a diversified distribution strategy, and it’s a very thoughtful one where we have a mobile broking channel, we have a senior mobile broking channel, and we have a retail franchise channel. And we do that so they all complement each other, and we have plenty of business out there for everyone. Even though last year, as a group, we settled just under $2bn, we only have a 5% market share across the country; there’s 95% market share across the country that is open to business for us. The blue sky open to us across the country is enormous. Our sustainability and track record speaks for itself; our retention is greater than ever before. The average broker and the average loan that they write are greater than ever before. Last month alone, our retail channel settled just over a billion dollars. The average store settled $5.7–6m a month – that’s the average store! These people are writing great business; the number of customer enquiries is greater than it’s ever been. We all know that the marketplace, as a general rule across the

JS: Our retail channel is the channel that is probably attracting more experienced brokers than every other channel we have. You’ve got brokers out there in the marketplace who are experienced brokers who want to take the next step and run a shopfront. [They] want to have a brand on that shopfront, want to have those walk-ins and eventually want to have a business that in five, 15 or 20 years’ time, they want to move on and sell. We have stores that are attracting 18-25 fresh walk-ins every week; consumers are seeing the Aussie brand across the door, walking in and saying, ‘Hi, I need a home loan.’ That’s forgetting over-the-phone, forgetting local area marketing or community involvement – these stores generate activity. MPA: So in practical terms, how can you help brokers who may be reluctant to do more formalised training? JS: We have some very senior brokers at Aussie – I’ve got brokers who have been with me for 20 years; I’ve got brokers who settle $35m every single month, as is the case with Parramatta. We have brokers who are extraordinarily successful, and they know it’s about going away and sharpening the axe. I’ve got a massive sales conference in two weeks’ time – the BE conference in Melbourne – with 500 brokers alone, plus 70 lenders. And it’s three days of what basically is retraining – three days of motivation, three days of fun. These brokers know they need to walk away and sharpen the axe to come back harder

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HEAD TO HEAD

JAMES SYMOND

JAMES SYMOND’S CAREER TIMELINE

1992

Joins his uncle’s company as a credit advisor

1995

Becomes Aussie’s QLD/VIC state manager

1996

Appointed as national sales manager

2000

Heads up Aussie’s distribution arm

2005

Takes on an extra executive director role at Aussie

2007

Elected MFAA president for two years

2015

Announced as Aussie’s new CEO

EDUCATION

1998–1999

Harvard Business School

2007

Columbia Business School

and sharper than ever before. So I think that it’s a bit of a falsity to say that these brokers don’t want to be told what to do; sometimes when you’ve been in the business for a long time, you actually do need to step aside, retrain yourself, jump back into the game and be better than you’ve ever been before.

MPA: How are your Aussie Select whitelabel products performing?

JS: We started this business as a non-bank lender; we had a singular Aussie product. We became a mortgage broker in the early 2000s, but we always still had our own home-brand product; we never lost what we first had. The last two or three years, we’ve decided to dial that product up and have it compete. And it’s really as a reaction to our customers’ enquiries. Our customers and our brokers were, more and more, asking for an Aussie product. Our customers would walk into an Aussie-branded store, speak to an Aussie-branded broker and ask about an Aussie product; it just made sense. So for us, the main thing was to make sure that product was a competitive product out there, which we have, and certainly that product has fared very favourably on the panel, and it’s an important part of the toolkit for an Aussie broker.

MPA: Where’s the main take-up of the Aussie select product – is it from mumand-dad owner-occupiers? JS: The average Aussie customer is the average mum and dad; the average Aussie customer is that first and second and third home buyer. So our average customers are those average mums and dads; our average loan is $370,000, which is very similar to the four major banks. The profile of the Aussie loan is very similar to what we have – those average mums and dads, that average loan size; it’s a product that competes directly with mainstream lenders.

MPA: How is Aussie going to look a year from now?

JS: We’re rebuilding our head office and support capabilities behind the scenes, and

that’s probably a 12-month journey for us, because we know we can support our brokers even better than we do; we know we can add value for our customers even more than we do.

“We know we can support our brokers even better than we do; we know we can add value for our customers even more than we do” So for us, it’s always about evolving – it’s never stopping, and we’ve spoken about the core skills piece as part of that. You’ll see over the next 12 months, our brand will probably go through another reiteration of evolution, in terms of our campaign and our reach out there and our voice to the consumer. We’re putting more marketing dollars in than ever before. We have large-distribution mouths to feed, for want of a better term, who we need to make sure we focus on, and over the next 12 months you’ll see us step up another gear. In terms of our store strategy, as I said before, we only have 5% of the market share of the country, when you talk about some of these banks, like Commonwealth Bank and Westpac, having 20%. Five per cent means we have so much headroom. Mortgage broking might have 52% of the market space, but it has 48% still to go – those consumers who aren’t using a mortgage broker. So I think that our own market share is not where I want it to be; I think the mortgage broking market share has plenty of room to grow. It wouldn’t surprise me if mortgage broking, over the next four years, hit 60–70% in terms of the share. Consumers are voting with their feet, and mortgage brokers and the proposition they offer to the consumer deserves a greater share still.

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SPECIAL REPORT

AGGREGATOR ROUNDTABLE

AGGREGATOR ROUNDTABLE 2015 Take a seat alongside five of Australiaâ&#x20AC;&#x2122;s biggest aggregators as they discuss how brokers can weather a year of rapid market and regulatory change, and what the industry will look like at the other end

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AGGREGATORS EXCEL at many things, and debating the future of the industry is definitely one of them. Nowhere else in the mortgage business do you get such divided opinions on everything from IT to independence, and even fundamentally differing conceptions of what an aggregator’s job is. So the chance to get the heads of Australia’s major aggregators together in one room is an opportunity not to be missed. This is the second aggregator roundtable we’ve run; the first was published in September 2014. The intervening 12 months have been amongst the most eventful in years, posing major challenges for our roundtable to discuss. Most notably, APRA’s effort to restrict investor lending and the stagnant state of Australia’s economy means the long rise in property prices may soon be slowing down (although Sydney and Melbourne don’t seem to have noticed). Not only could the market be challenging for brokers – and thus aggregators – but an increased focus from regulators and the mainstream media on brokers’ compliance procedures means brokers need aggregators’ help in this area more than ever. Aggregators, who were previously invisible outside the industry, have seen a vast increase in public interest following AFG’s listing on the ASX back in May, as well as concern about industry consolidation in the Financial Services Inquiry. With Sydney’s Woolloomooloo wharf as a backdrop, we asked the leaders of Choice, Connective, Outsource Financial, PLAN Australia and Vow Financial to give their views on the industry’s future direction.

HIGHLIGHTS FROM THE 2015 BROKERS ON AGGREGATORS SURVEY Our annual on Brokers on Aggregators survey took place earlier this year (MPA 15.05) and played an important role in setting the agenda for this roundtable. Brokers’ top three aggregator services: Commission payments Lending panel IT and CRM support

Top reason to leave an aggregator Poor IT and CRM support (24.5%)

Top obstacles to leaving Data migration/IT issues Contractual obligations Clawbacks/trail issues

APRA and responsible lending Given aggregators’ roles as advocates for the broking profession, the recent increase in regulatory pressure was first on the agenda.

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SPECIAL REPORT

AGGREGATOR ROUNDTABLE Whilst elements of APRA’s efforts to curb investor lending are beyond brokers’ control – the 10% growth threshold, for instance – there has been an increased emphasis on responsible lending and vetting applications as a responsibility for both banks and brokers. Our aggregators certainly were keen to point out they hadn’t been caught off guard by the regulators. “When regulation first came out, we at Outsource didn’t wait for APRA,” said Tanya Sale, CEO of Outsource Financial. “We went out and developed a quality assessment tool, which we give to our members to encourage them to drill down on responsible lending.” Choice CEO Stephen Moore didn’t find regulator pressure surprising, arguing that it was indeed a natural consequence of brokers’ increasing market share, and both regulators and consumers are raising expectations. Whilst unsurprised, our roundtable did seem genuinely concerned about the changes. There’s work to be done when it comes to compliance, noted Vow Financial’s Tim Brown: “The problem with brokers is that they’ve, in the past, relied heavily on the banks’ own income calculations, whereas under NCCP, they can’t do that, so we’re trying to make sure that’s being properly documented, because that’s an area we feel will come under more scrutiny in the future.” Compliance was his members’ top priority, Brown added, so Vow is running a series of workshops and webinars specifically on the topic. Whilst all our respondents noted action needed to be taken, their approach to helping brokers with compliance differed considerably. Vow’s approach encouraged brokers to attend sessions and share experiences and expertise with other brokers, whilst Outsource and Connective emphasised improving compliance with minimum disruption to the business. Connective offers this through their Mercury platform, Mark Haron explained, which “allows our compliance surveillance to be done in an automated way – the only time physical files are needed is when there might significant issues. It’s done in such a way that brokers are not distracted from their day-today activities, because we’re looking at the file, making sure they’re meeting their compliance regulations and providing feedback as well.”

“The increase that we’re seeing at Outsource is where the consumer is asking about our ACL and ownership: Are we bank-owned?” Tanya Sale, CEO, Outsource Financial The overriding message about compliance from our roundtable was nevertheless positive. In the words of PLAN Australia CEO Phil Quin-Conroy, “We think some of the changes with relation to investor lending growth are probably going to constrain credit growth slightly in the future, but our view is that it’s going to drive up brokers’ market share. Where there’s a lot of complexity and change, that’s where customers are looking for advice and guidance to make decisions,

and that’s a key part of what brokers bring to the table.”

Disclosing ownership structures Compliance, particularly with regard to investors, was an immediate priority for our roundtable. In the medium-term, however, another issue loomed large: the recommendations of the Financial System Inquiry, published in December 2014. Recommendation 40 called for regulation to

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SPECIAL REPORT

AGGREGATOR ROUNDTABLE “require advisors and mortgage brokers to disclose ownership structures”, potentially including “branded documents and materials”. So we put the issue to our roundtable: Should a broker’s aggregator be part of this disclosure? The responses were split down the middle. In the pro-aggregator disclosure camp sat Vow, Outsource, Choice and PLAN, yet even within this group, there were sharp differences in reasoning. Vow CEO Brown believed disclosure wouldn’t make any difference: “We’re an ASXlisted company as part of the YBR group, which is well-known and on the website. In terms of products, I have no issues with people knowing who our product providers and funders are. For me, I don’t think it would make a difference at the end of the day, if the product and the pricing are fitting consumers’ budgets and [suiting] their needs.” However, Outsource’s Sale argued that disclosure would make a difference: “Consumers have become very well-educated on this topic because of the media. The increase we’re seeing at Outsource is where the consumer is asking about our ACL and ownership: Are we bank-owned? Now we’re getting demands from our membership base to come up with a tagline for them to say we’re an independent.” Choice CEO Moore also believed disclosure would make a difference, but wouldn’t necessarily promote independence. “Anything that puts consumers in a more educated position is a positive,” he said. Interestingly, today, a number of Choice brokers right around the country already disclose to clients that they’re with Choice, and that Choice is owned by NAB. And the reason they do so is the strength and stability that comes with being owned by a very stable company like NAB.” However, both Moore and PLAN’s QuinConroy sounded a note of caution: The wholesale nature of aggregation should be properly understood by consumers, they argued, because aggregators do not own brokers’ businesses. As Quin-Conroy explained, “The wholesale aggregator they use might be owned by an institution, but the broker’s business is not; it’s privately, independently owned. That’s the distinction that often gets missed here. We talk very

“Some brokers in the past have been able to do their own white-label offerings themselves; by doing it via an aggregator, they can get considerable cost savings and maintain commissions” Mark Haron, director, Connective

openly about that with our network and remind them of the fact.” Connective chief Haron came out more strongly against disclosure. Although disclosing financial incentives was reasonable, he argued that “disclosing ownership probably takes it too far. You get a publicly listed company; do they have to disclose every listed shareholder that sits on the register across all financial products? That takes it too far. It’s about the broker giving advice – when they’re sitting across from the client, they should be very mindful of brokers as disclosing any financial incentives or conflictof-interest incentives to ensure they’re giving the right advice.”

White label’s profitability The discussion around disclosure, incentives and independence didn’t end there; our

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roundtable then turned to the issue of whitelabel products. For us at MPA, white label was a topic we were particularly interested in talking to aggregators about – if you’ve glanced at the news recently, aggregators haven’t been talking so much about lender panels or IT or clawbacks; instead, we’ve seen a stream of white-label product launches and re-launches. We wanted to know whether profit in the aggregation business was now all about white-label lending. Unsurprisingly, our roundtable participants weren’t eager to disclose their revenue streams amidst their rivals. However, for the majority of the group, white label was a ‘key part’ of their offer, as Choice boss Moore put it: “It’s an award-winning solution; it’s offered to brokers without any conflict, so it’s an important part of our offer – but I’d emphasise ‘part of our offer’. First and foremost, we focus on aggregation and helping our members’ businesses.”

“Having the revenue off the back of our white-label solutions,” Moore added, “means we’re able to, in a sustained way, continue to invest in the business, which means continue to help members grow their businesses in turn.” PLAN’s Quin-Conroy and Vow chief Brown also cited the economic benefits of white label – and for Quin-Conroy, white label had some additional benefits: “It creates that brand affiliation as well, which in some respects we probably underestimated initially.” Whatever the return from white label, our roundtable cautioned, the product had to be right for brokers and customers. Connective’s newly relaunched white-label product was yet to become a significant revenue stream, explained director Haron, but their predominant focus was on developing “stronger, more unique products for our brokers to give their customers, as opposed to

the standard banking offerings”. Similarly for Vow, having three funders was important in offering white-label products with “niche components”. Part of getting the product right, noted Haron, was getting the price right, too. “Some brokers in the past have been able to do their own white-label offerings themselves; by doing it via an aggregator, they can get considerable cost savings and maintain commissions because of the scale we can offer.” In his opinion, aggregator white-label brands balanced the original benefits of white label – to bypass the banks’ networks – whilst remaining competitively priced. Our roundtable was certainly not united around white label, however. Outsource CEO Sale struck a strong dissenting note: “We don’t have a white-label product, and we won’t go down that path in the future. The benefit for us

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SPECIAL REPORT

AGGREGATOR ROUNDTABLE “Our members learn from the best; it’s great to read about how to run a marketing campaign, but it’s far better if you hear from someone firsthand who’s absolutely nailing it” Stephen Moore, CEO, Choice

is not muddying the water. We’ve been approached time and time again, but not by our membership, that’s for sure. Our membership has actually no interest in the white-label concept.” For Sale, white label was a threat to consumer trust: “If we go back our membership and offer white label, then questions start being asked whether we’re pushing our own white label for the benefit of remuneration.”

Unique value propositions One peculiar irony of modern aggregation is that whilst aggregators now help brokerages with marketing, pinning down an aggregator’s own unique value proposition can be a frustrating process. All profess a commitment to excellent service, but some can be reluctant to market their particular strengths, making it

more difficult for brokers to choose between them. We pushed our roundtable participants to each nominate a point of difference that distinguished their business. Sale was up first, and she picked the Outsource’s loan processing service. The service allows brokers to outsource their processing and was created as a response to regulatory demands. “We built this for our brokers, but we’ve made it very, very costeffective for them,” she explained. “It encourages them to use it because they can spend their time going out and getting more business in – collecting the documentation, but then handing it all to a team where they input it for them and get it all the way to settlement on their behalf.” PLAN’s approach was less about a particular service and more about a particular type of

broker, Quin-Conroy explained. “I think the first point to make is we don’t go out there and try and ram a particular service down brokers’ throats; it depends where they’re at in their business life cycle. One of themes that’s coming through from our businesses that are in growth mode – and we try to focus on businesses that are in growth mode – is that they want more ideas at a business-owner level, ideas on how to run their businesses better.” In response, Quin-Conroy and his team have turned to research to give brokers those ideas. Using their own member database, they found profit per principal was 300% higher for brokers who held most of their appointments in office premises. Another finding was that brokers were still underutilising existing clients as referral sources; although 90% of clients said they would recommend their broker, only 60–70% of brokers were asking for referrals from those clients. For Haron, Connective’s unique value proposition was about the nature of the broker-aggregator relationship. “[Brokers] truly own their businesses and own their trail income with Connective and our agreements; that makes such a difference. As more and more brokers are getting smarter about running their businesses and wanting to control their exit and succession-planning

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SPECIAL REPORT

AGGREGATOR ROUNDTABLE you hear from someone firsthand who’s absolutely nailing it.” Vow took a similar approach in their previously mentioned compliance sessions, aiming to “take the fear out of the unknown”. They invited brokers to bring difficult cases to the sessions, where other members could provide guidance and suggestions. These sessions – and associated compliance training – will only become more vital to brokers, according to Brown: “I think this is going to be the most important thing for brokers over the next couple of years, especially given the extra scrutiny from APRA and ASIC.”

Making data migration easier

“Where there’s a lot of complexity and change, that’s where customers are looking for advice and guidance to make decisions, and that’s a key part of what brokers bring to the table” Phil Quin-Conroy, CEO, PLAN Australia programs, they’re finding they can’t do that because their aggregator controls who can buy their trail book off them and [controls] ownership of the customer and customer data.” Making data freely available was particularly attractive to entrepreneurial brokers, he added. (See below for more on data migration.) For Choice and Vow’s representatives at

our roundtable, their value propositions were about education. Choice’s Moore emphasised the role of peer-to-peer lending. “[The] tools are only as good as what you do with them, and what we do is we line up like-minded individuals, including some of the best individuals within Choice. Members learn from the best; it’s great to read about how to run a marketing campaign, but it’s far better if

With so many issues to discuss, raising the topic of data migration might appear a questionable move. However, on analysing the results of our recent Brokers on Aggregators survey, it became apparent that this seemingly niche issue was in fact a source of increasing frustration to brokers. ‘Data migration/IT issues’ was the biggest single obstacle deterring brokers from changing aggregators, picked by 30% of respondents, just beating contractual obligations (28%) and clawbacks/trail issues (20%). So what were our panel of aggregators doing to make data migration easier? “Our policy is that a broker owns their data,” said PLAN’s Quin-Conroy. “If they want to have an extract of data at any time, we’ll provide that to a broker.” To overcome technical difficulties, he added, PLAN would provide upfront support, but the aggregator also runs ‘digital summits’, webinars and a YouTube channel to help brokers adapt, arguing that “it’s one thing to provide technology off the shelf and expect the broker to know how to use it within their business”. Choice, who also utilise the Podium system, have a similar approach, according to CEO Moore. “Support is certainly a key part of our offer when broker joins Choice … we’ve provided support to hundreds of brokers moving data over the past few months, including multiple databases consolidating into one and very large records; indeed, I believe a database of 40,000 records was transferred recently.” Because a broker’s

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“I don’t think full disclosure would make a difference at the end of the day, if the product and the pricing is fitting consumers’ budgets and suiting their needs” Tim Brown, CEO, Vow Financial database is increasingly at the centre of their marketing drive, IT support in using it is increasingly important, Moore said. For Vow, efficient data migration was a crucial part of a wider on-boarding process, according to Brown. “Probably about two and a half years ago, we recognised that to grow broker numbers by a greater number than we then were, we needed to improve our on-boarding process.” The solution was to be more proactive with data migration, sorting out technical glitches even before the broker officially terminates their agreement with their current aggregator. “When they do terminate, everything then falls into place;

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SPECIAL REPORT

AGGREGATOR ROUNDTABLE

their accreditation moves, their data moves, and they’re up and running within a couple of days, so their downtime is minimal.” Because a large number of their members come from financial planning and accountancy backgrounds, getting data migration right was vital for Outsource, Sale said. Again, the answer lay in their independence: “Because we’re … independent, we believe our members should have independent software, not proprietaryowned software – that then alleviates everything we’re talking about.” Whilst they recommend certain software, Outsource allow members to pick the software they ultimately use, she explained. Connective also have adapted their system to help incoming planners and accountants, providing simple import and export functions through the Mercury software platform, Haron noted, although additional support is always available.

Recruiting over the next 12 months Coming to the end of this year’s roundtable, we asked our participants to look to the future and tell us about their recruitment plans for the next 12 months. Recruitment has been a prominent topic in recent months, as a surge of new brokers, lured by the booming market, has increased attention toward on-boarding procedures. The MFAA recently changed its requirements for new members, allowing them to defer getting a broking diploma if they could complete a fast-track

assessment. We asked the roundtable if they were also looking to make on-boarding easier. In response, several of our panellists were keen to point out that recruitment was a joint process, including attracting new brokerages to join and encouraging existing brokerages to take on extra staff. This was especially true for Connective, according to Haron; of the 394 new brokers recruited in the last calendar year, 247 came through existing member businesses. He argued that making on-boarding easier meant helping those existing businesses: “We’re really focused on putting infrastructure in place behind the scenes to allow the quick induction of those brokers and [their] quick accreditation, and also helping them with the mentoring arrangements they’ve got out there.” PLAN took the same ‘dual focus’; of the 201 brokers who had joined in the first six months of 2015, they found those with established businesses “get up and running quicker”, said Quin-Conroy. But recruitment wasn’t just about numbers, he added; new entrants are changing the broking landscape. “One of the interesting demographics that we’re seeing is that there are a lot of degree-qualified females joining these businesses as new entrants to the industry. I think that’s really adding to our diversity, and that’s fantastic.” Some of our aggregators did pride themselves on running specialist programs for new-to-industry brokers. Sale told us the

popularity of Outsource’s new entrant program justified running it at no cost to members. “The reason we built that was because of the demand coming from our core membership base, and our core membership base are these accountants and planners. We’re not interested in charging a fee for it, and that’s what I think is attracting more and more [people] to the industry.” Similarly, Vow, who have been steadily reforming their on-boarding strategy, run a large amount of training themselves, Brown said. “We’ve recruited 240 brokers to the industry in the last 12 months, and we’ve done that from a strategy we adopted two years ago, which was to start running our own Certificate IV and mentoring programs.” He also pointed to several successful brokerages that have partnered with Vow, which were set up by new industry entrants. Finally, Choice’s Moore reminded us that recruitment isn’t just restricted to inexperienced brokers: “We certainly attract brokers right across the spectrum, from very experienced national businesses to new brokers starting out. In Choice Home Loans, it’s been in our focus for the last 12 months, and we’ve put on 50-odd new-to-broking members. I think that’s exciting – as an industry, we can’t have continued growth in customer demand unless we’re matching that with enough supply of good-quality brokers in the industry.”

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FEATURES

TOP 10 COMMERCIAL BROKERS

MPA TOP 10 COMMERCIAL BROKERS 2015 With record-breaking settlement totals and productivity, commercial broking is moving into unexplored territory. We talk to this year’s standout performers THERE’S NO point pretending otherwise: Commercial broking is a different game, at least at the top end. The 10 brokers in this report are specialists who have vast reserves of technical knowledge and experience, and they deal with equally high-end and knowledgeable clients – the opposite end of the spectrum to mums and dads. So why is MPA – a magazine for all topperforming brokers – running this report? The reason is because commercial broking is becoming a laboratory for serious innovation, which we believe will filter through to the residential side and impact your business. This Top 10 is ranked by total value of commercial settlements over the past year, as verified by aggregators, and we’ve seen a stunning increase in those totals compared to last year’s report. We think it’s time residential brokers took notice. Commercial broking drives innovation, because when a deal takes months of negotiation and strategy, the payoff for excellence can be far more noticeable. When you’re dealing with a select group of seasoned

property developers – all of whom know each other – maintaining ongoing client relationships means far more than a monthly email. When you’re working with a team of specialists, professionalism and an advisory approach are vital to make yourself stand out. In short, there’s a huge amount of tips any residential broker could take from this report and put into practice tomorrow. However, if you’re thinking of writing some commercial loans yourself, then check out our new centrespread, where we’ve collected useful data and advice on getting into the commercial market. Finally, thanks to all those brokers who took the time to apply in what has been a competitive and record-breaking year.

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Sponsored by

A MESSAGE FROM OUR SPONSOR It is our very great pleasure to be associated with the MPA Top 10 Commercial Brokers for a third year. We wish to extend our congratulations to each of the successful brokers profiled in the pages ahead and resoundingly acknowledge their outstanding achievements this year in settling a combined $1.14bn. Indeed, special congratulations go to George Karam of Byblos Finance in Parramatta for setting the pace with 30 deals and $160.9m in settlements, a huge accomplishment in a growing, competitive and fast-paced market. The average loan size was $2.38m, and, aided by a strong contribution from residential construction lending associated with the surge in east coast housing development activity, three members of the Top 10 averaged more than $7m per loan. Yet, at the other end of the scale, Daniel Green of the Green Finance Group in Brisbane worked incredibly hard for $115.7m across 142 settlements and an average of $815,000, while Jamie Giles from the same office was only $1m behind across 80 deals. One noteworthy observation across this select group is the contrast in commercial broking experience among them. Exactly half the Top 10 have been in commercial broking for five or fewer years, three of them for just two years â&#x20AC;&#x201C; and it goes to highlight the enormous potential on offer in this part of the market for all brokers. We encourage you to read each of the stories behind those who made the list this year. Whether as a matter of general interest or as valuable case studies for aspiring commercial brokers, the following pages offer insights into the varying traits, skills and strategies that have led to extraordinary results in the field of contemporary finance broking. The commercial property market across the country is performing strongly, lenders are striving to support the broker channel, and borrowers are turning to brokers more than ever. At Thinktank, not only are we greatly encouraged by the record results reported here, but we hold even greater confidence for the potential within the commercial property finance sector in the years ahead. Jonathan Street CEO, Thinktank Commercial Property Finance

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FEATURES

TOP 10 COMMERCIAL BROKERS

FAY BAKER Sky Financial Group, Merrylands, NSW

Total value of commercial loan settlements 2014–15

$73.83m

Fay Baker is a credit advisor, insurance advisor and financial advisor who set up Sky Financial Group in 2003, having previously worked in financial services. She prides herself on providing a stress-free and rewarding service to her clients, and also was featured in 2013’s Top 10 Commercial Brokers.

MPA: Do you see opportunities in your area of broking over the next 12 months, or is it time to consolidate? Forming a relationship with customers that includes the highest moral, ethical and professional standards offered will assist to continue providing finance broking solutions to meet clients’ needs.

MPA: What distinguishes you from an average

Number of commercial loans settled

commercial broker? I am skilled in identifying the issues faced by clients and finding the quick solutions to overcome the complications. I keep myself well informed of all relevant financial products and market updates. I am highly experienced when it comes to arranging funding for large, complex transactions that require an in-depth understanding of client business.

MPA: Do you focus on any particular area of

Average commercial loan value

$2.73m

commercial lending? Why? With many years of lending experience across a broad range of lenders, I work with all kinds of commercial loan customers across all parts of Sydney. I specialise in arranging lending solutions for commercial, industrial, retail, and residential or commercial developments; restructuring existing debts; and consolidating borrowings.

MPA: What is your advice for brokers looking to enter the commercial market? Build relationships with experienced commercial bankers. Keep yourself informed with the commercial financial products that are made available to market, and team up with an experienced commercial broker if you don’t have commercial banking background.

“In my opinion, to succeed in commercial broking, you need to have the skills with the highest moral, ethical and professional standards”

MPA: From your experience, is it essential to

Years as a commercial broker

have run a business in order to succeed in commercial broking? Not necessarily. In my opinion, to succeed in commercial broking, you need to have the skills with the highest moral, ethical and professional standards.

MPA: Is every loan different, or are there similar scenarios you frequently encounter? Each client has specific needs in relation to their finance. Solutions structure is on individual deals, according to the client’s need.

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Sponsored by

JASON ARNOLD

Quattro Commercial Property Finance, St Kilda, VIC

Jason Arnold has been writing commercial loans for 15 years, but 18 months ago established Quattro Commercial Property Finance with business partner Belinda Gibson. Quattro specialises in the commercial property finance market and assists clients to restructure debt and find solutions for both simple and complex commercial loans.

MPA: What distinguishes you from an average commercial broker? • Fifteen years of experience specifically in commercial property and development finance • Strong relationships with a vast array of bank and non-bank lending institutions in both the senior and mezzanine markets • Strong relationships with property industry experts • Regularly consulting experienced finance and property industry mentors

MPA: Do you focus on any particular area of commercial lending? Why? Construction finance and structured investment lending. It is a satisfying process watching and experiencing a project start from a set of plans on paper to a completed product, whether that be apartments, shopping centres or office buildings. Finance is a large part of this process and involves ongoing communication and networking with various consultants, including developers, investors, builders, architects, lawyers, accountants, quantity surveyors, project managers, etc. Learning never stops.

MPA: From your experience, is it essential to have run a business in order to succeed in commercial broking? [It’s] helpful but not essential.

For certain clients, my role is debt advisor – typically on larger transactions where more extensive analysis on existing positions and proposed debt structures involving senior, mezzanine and equity options from bank and non-bank lending institutions is required. In the mainstream and specifically the sub-$10m debt market, it is more a commercial broker model, where the banks are the primary lender and the role involves comparing the most suitable loan facilities for the client’s needs and settling in an efficient and effective manner.

Total value of commercial loan settlements 2014–15

$84.61m

MPA: Is every loan different, or are there similar scenarios you frequently encounter? Each loan has its own intricacies and should be treated independently.

Number of commercial loans settled

MPA: Do you see opportunities in your area of broking over the next 12 months, or is it time to consolidate? Opportunities exist to provide a whole [range] of relationship solutions – i.e., commercial loans, home loans, equipment finance and insurance.

Average commercial loan value

$2.35m

Years as a commercial broker

MPA: Would you term yourself an advisor? How do you present yourself to clients?

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FEATURES

TOP 10 COMMERCIAL BROKERS

MARK CHURCHILL Allfin Finance, South Melbourne

Total value of commercial loan settlements 2014–15

$95.96m

Number of commercial loans settled

Average commercial loan value

$1.24m

Years as a commercial broker

Mark Churchill specialises in commercial finance for the healthcare market, including pharmacies, dentists and doctors. He set up Allfin Financial Services in 2010 after a decade of healthcare finance at NAB and then Commonwealth Bank.

MPA: What distinguishes you from an average commercial broker? Allfin are predominately brokers to the healthcare segment. In order to compete in the market, we have had to be specialists – not only just in general healthcare, but also in modalities under this banner. We started with specialising in pharmacy predominately, and only when we got that right did we move to dental and now general medical. Each modality has its challenges, but the theory remains the same across the board, so what we learn in one modality we can adapt to another.

MPA: Would you term yourself an advisor? How do you present yourself to clients? I believe we now have to be more than an advisor, given the long-term relationship we want to build with the clients. It’s not just about advising them on the initial acquisition or refinance, but to be there when their covenant reporting is due, in which case you become a business coach, negotiator and advisor.

MPA: Is every loan different, or are there similar scenarios you frequently encounter? In theory, most transactions will follow the same methodology, but essentially every transaction has its own intricacies. There is no such thing as a ‘cookie cutter’ approach anymore in an ever-changing regulatory environment, but I guess that is why [brokers] will always be valuable contributors to the industry.

MPA: Do you focus on any particular area of

MPA: Do you see opportunities in your area of

commercial lending? Why? Most of our lending begins with the goodwill component of the business. We have set up a systematic approach where we can look at any healthcare business and understand the security value of the business and serviceability based on cash flow to determine the likely bank appetite for the transaction. The attraction to the client is that we can review any new business purchase without the client having to go through the cost of engaging accountants and valuers in the initial stages, while insuring speed to market so the client can make a confident bid for the business. Engaging the client at the early stages not only gives them confidence, but also allows us to ensure that the transaction is set up properly from the start so we can move the process through to settlement in a timely manner. This builds confidence with the client and allows us to build a long-term relationship, which in turn gives us the opportunity to review their other facilities.

broking over the next 12 months, or is it time to consolidate? I still see plenty of opportunity, and there are segments that are calling out for commercial brokers; however, there may be a need for some consolidation so that we have the capital to finance these segments.

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FEATURES

TOP 10 COMMERCIAL BROKERS

WHAT AN ELITE COMMERCIAL BROKER LOOKS LIKE IN 2015 REFERRAL SOURCES

AREAS OF INFLUENCE

In addition to satisfied clients, we asked our Top 10 which were their most valuable sources of referrals. Accountants emerged as the top choice, although industry specialists also were mentioned.

In terms of where their clients come from, it seems this yearâ&#x20AC;&#x2122;s Top 10 are relatively localised, particularly those specialising in property development. Those involved in equipment finance and with specialties (i.e. healthcare) tended to have a wider national reach.

Accountants

Financial planners Other commercial brokers Sales agents

My city ............................. 40%

Architects My state ..................20% Quantity surveyors Australia wide ........... 40%

Lawyers

Developers

International ..................... 0%

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Sponsored by

SERVICES OFFERED Whilst this survey focused on commercial property broking, we asked our Top 10 what other services their brokerage provides. The popularity of equipment finance and leasing is to be expected, but it appears that more than half of these brokers still offer home loans. However, it should be noted that in many cases, another broker in the brokerage deals with residential lending.

Home loans

Equipment finance and leasing

Financial planning

Personal loans

Insurance

Other*

TIMELINE OF A COMMERCIAL LOAN Our brokers were almost evenly split on how long an average loan takes to settle, with half picking 1–3 months and the other half picking 3–6 months. Only one said the average loan takes longer to settle. Interestingly, there doesn’t appear to be any clear correlation between the type of business a broker is writing and how long a loan takes to settle. For example, Daniel Green, who wrote 142 loans over the past year, noted that an average loan still takes 3–6 months to settle.

50%

50% 1

3 4 Months

One said the average loan takes longer than 6 months to settle.

*Car buying service and real estate services

CONSIDERING COMMERCIAL? If you’re thinking about moving into commercial broking, then have a look at a selection of advice from our Top 10 brokers. The overriding emphasis is on developing a specialty, which will help you stand out from competitors. “Do your research. The transition from residential to commercial is hard work. Find a mentor – a broker with a proven track record in the space, someone who is willing to help you develop your understanding. If you decide to go your own way, pick a specialty area or industry and focus, focus, focus. You can always diversify later. Pay attention to building relationships with other professionals working in the same industry (i.e., accountants, solicitors, quantity surveyors, business brokers) and develop your networks with a view to being able to offer your clients a better service.” Daniel Green

I think specialisation has been a big piece to making our business a success. If you look closely enough at the Australian market, there have to be business segments that are looking for commercial brokers to become specialists. By specialising, you can spend less time and money on marketing; you can concentrate your impact through industry bodies and also gain a reputation with the lenders, which makes it easier to place finance. It does limit your market, but at the end of the day, once you master one segment, it can be used as a stepping stone to associated segments.” Mark Churchill

“My advice would be the same for anyone entering into any new market: Take time to understand the market. Develop relationships with the right people who know the market (such as bankers) and speak with people who are already in the space (brokers). I have found that brokers are happy to share their knowledge and feedback with others, and that will be the quickest way to get up to speed.” Marshall Condon

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FEATURES

TOP 10 COMMERCIAL BROKERS

MARWAN RAHME Kanebridge, Sydney

Total value of commercial loan settlements 2014–15

$110.58m

Number of commercial loans settled

MPA: Is every loan different, or are there similar scenarios you frequently encounter? Every loan, every property is different, and that is a mistake many others make. Each property is unique and has its own set of rules; tailoring a loan to that property is what increases the success of that development.

MPA: What distinguishes you from an average commercial broker? Having an understanding and speciality in property development. We have a unique skill set in this area as we develop in our own right, as well as arranging finance for other developers. For many developers, we are their first point of call not only for finance, but also for assistance on the acquisition and which are the best planning consultants to use for that given area. Having such a developed network both in finance and other consultants such as planners, architects, valuers, quantity surveyors, traffic, etc., is where the most value is gained from using our services. Our vast network in development and planning means that most of our clients get increased values in their development the moment they start dealing with us.

Average commercial loan value

MPA: From your experience, is it essential to

$8.50m

have run a business in order to succeed in commercial broking? Unless you have worked in all facets of residential development, you will encounter hurdles you don’t know how to get around. We also have a number of commercial brokers who get us to assist them with their loans, as they don’t have enough experience in this area.

Years as a commercial broker

MPA: Would you term yourself an advisor? How

Sydney broker Marwan Rahme is making the most of all Australia’s boom town has to offer, moving up to seventh after coming in eighth in 2014’s Top 10. The Kanebridge group of companies specialises in all things property, from development to capital finance.

MPA: Do you see opportunities in your area of broking over the next 12 months, or is it time to consolidate? There are always opportunities in any market, and it’s about being financially prepared to get the best out of it. I think this is where we specialise, as we always take a longer-term view with our clients, as opposed to a shotgun approach of just getting the one loan approved. We are preemptively gearing up and ensuring that our back-end systems and structures cater to the increasing growth in Sydney.

MPA: What is your advice for brokers looking to enter the commercial market? Know your game inside and out. Our specialty is residential properties for development, so if you want the very best residential deal, it’s a good idea to talk to us.

do you present yourself to clients? We are more than an advisor – we are like a partner with our clients. We are an open book; we help our clients where we can because we know the more we are able to assist them upfront with every aspect, they will continue to keep coming back.

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Sponsored by

JAMIE GILES

Green Finance Group, Hawthorne, QLD

Joining the Green Finance Group in 2013 after a career at Westpac, Jamie Giles also brought over his specialist skills and network in the area of healthcare finance. As head of the bank’s Queensland healthcare arm, he managed a combined lending portfolio of $1.2bn, and he continues to specialise in equipment finance and leasing for healthcare professionals.

MPA: What distinguishes you from an average commercial broker? I basically deal with clients that I know a lot about; that’s my understanding of the healthcare sector. Primarily 95% of my business is done within that particular specialisation, and it’s what I know, and what my contacts know me as.

and make sure they go to the specialists, the professional partners – the external business partners, you could call them – in order to get advice.

MPA: Is every loan different, or are there similar scenarios you frequently encounter? I think every loan is different, because people are looking to fund for different reasons; however, the familiarisation of the industry is always the same.

MPA: From your experience, is it essential to have run a business in order to succeed in commercial broking? Most definitely. Without having commercial acumen yourself, you can’t go in and expect, just because you’re talking to people, to make a living out of this sort of thing. You need a high level of commercial acumen to run your own business because otherwise, why would other people come to you asking for advice on how to run their own businesses appropriately?

MPA: Would you term yourself an advisor? How

$114.6m

MPA: Do you see opportunities in your area of broking over the next 12 months, or is it time to consolidate? I’m still in a growth phase with my business. The market will most definitely still be there over the next 12 months.

MPA: Do you focus on any particular area of commercial lending? Why? Most of my business is with the medical centre, dental practice and pharmacy areas of healthcare. It’s equipment finance; there’s a commercial property lending aspect to it, and also goodwill lending – i.e., cash flow – parts.

Total value of commercial loan settlements 2014–15

Number of commercial loans settled

MPA: What is your advice for brokers looking to enter the commercial market? The best piece of advice I could give would be that it’s not only important to have a network, but it’s also important for you to be able to leverage off that network and make it a commercially viable proposition.

Average commercial loan value

$1.43m

Years as a commercial broker

do you present yourself to clients? I don’t give advice; my role is a consultancy type role, and I basically guide them through certain processes

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FEATURES

TOP 10 COMMERCIAL BROKERS

Total value of commercial loan settlements 2014–15

$115.7m

Number of commercial loans settled

142

DANIEL GREEN Green Finance Group, Hawthorne, QLD

Whilst most of this year’s Top 10 pride themselves on big-money deals, Daniel Green has achieved astonishing productivity in specialist markets. He set up Green Finance Group in 2010.

MPA: Do you focus on any particular area of commercial lending? Why? Whilst my lending experience spans most industries, pub and hotel finance is my personal specialty. I’ve worked hard over the last few years to develop my name in this space, working with a diverse range of clients, from small-business owners and family-owned local pubs and high-end wine bars to some of Australia’s largest hoteliers, developers and investment groups. It’s a dynamic industry with elements of tradition and transition, particularly as larger players continue to expand their holdings. Add in the intricacies around liquor licensing and gaming, and it makes for an interesting work environment. And yes, there are some perks of the amber variety!

MPA: From your experience, is it essential to

Average commercial loan value

$814,835

Years as a commercial broker

have run a business in order to succeed in commercial broking? It’s definitely advantageous, and I think I’m a better broker because of it. My hands-on business experience and interests over the years (pubs, construction, childcare, food distribution) have given me a better understanding of the challenges faced by my clients, from managing staff to cash flow to and everything in between. From the finance perspective, I am definitely better able to provide workable solutions as opposed to theoretical fixes, and clients respect that.

invested in the success of my clients’ business long term. The long-term approach sees me provide regular reviews, monitoring adherence to banking covenants, reviewing interest coverage, debt servicing and profitability, and management strategies where needed. It’s an approach that has worked well for me, with eight out of every 10 deals referred by existing clients.

MPA: Do you see opportunities in your area of broking over the next 12 months, or is it time to consolidate? There’s always opportunity. There’s no denying the statistics, particularly when it comes to the mining sector, but there’s also no point in a doom-and-gloom approach. Rates are low, lenders are looking for business, and there are savings to be had and efficiencies to implement. Our clients are looking at ways to work smarter. My team is growing, and we will continue to add experienced finance specialists who can focus on additional market segments, our latest being health, beauty and gyms. Our established in-house financial planning and insurance divisions offer efficiency our clients appreciate and a business strategy that only strengthens our relevance.

MPA: Would you term yourself an advisor? How do you present yourself to clients? I’m not hung up on terminology. I see my role as more of a business partner. There’s more to the client relationship than the initial finance approval, and I’m legitimately

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Sponsored by

MARSHALL CONDON Mortgage Choice, South Yarra, VIC

Having started mortgage broking whilst at university, and after spending time as a Bankwest BDM, Marshall Condon set up Mortgage Choice South Yarra just over two years ago. He aims to provide an end-to-end service to off-the-plan property developers.

MPA: What distinguishes you from an average commercial broker? Having access to a variety of lending options. I have developed a great network of quality bankers from a variety of banks who understand property and who work with me to obtain the desired outcome. I also have established a sound network of reputable mezzanine funders and private sources of equity that allow me to offer a structured solution for the developer.

MPA: Do you focus on any particular area of commercial lending? Why? We have targeted the construction and development space, as this has been a growing area. To mitigate the market risk, we have relationships with longstanding developers, and their site locations and product are of such quality that they will continue to develop when the market is not as buoyant.

against. This is, in my opinion, a business skill that one would need to successfully run a profitable business.

MPA: Would you term yourself an advisor? How do you present yourself to clients? Yes and no. I present myself to clients as a partner in the project and ultimately as a source of finance. I will show them different structured options for them to consider and let them make an informed decision. I find that by being seen as part of their team and another resource to their business, I have a deeper relationship with my customers.

MPA: Do you see opportunities in your area of broking over the next 12 months, or is it time to consolidate? In my space, there is certainly going to be reduction in the amount of construction, thus reducing the need for finance, as APRA continues to monitor investment lending. In saying that, the developers that I assist developed through the GFC, and, as mentioned above, the type of product they deliver will always have a level of demand.

Total value of commercial loan settlements 2014â&#x20AC;&#x201C;15

$118.72m

Number of commercial loans settled

Average commercial loan value

$9.89m

MPA: From your experience, is it essential to have run a business in order to succeed in commercial broking? I think parts of running a business assist in commercial lending. Commercial lending has its own segments within the broad name. You have construction, you have property investment, and you have cash flow lending. For the latter, it would be important that you have a sound knowledge of financial statements and that you can analysis a profit & loss and balance sheet to determine the strength of the business that youâ&#x20AC;&#x2122;re lending

Years as a commercial broker

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FEATURES

TOP 10 COMMERCIAL BROKERS

DANIEL ZADNIK Hawthorn Finance (Bentleys Group), Hawthorn, VIC

Total value of commercial loan settlements 2014–15

$131m

After 18 years at ANZ, Daniel Zadnik joined professional services firm McLean Delmo to establish its finance division. Now part of the national Bentleys Group of independent accountancy firms, Hawthorn Finance’s relationship with other professional service firms is a key part of their offering.

MPA: What distinguishes you from an average

Number of commercial loans settled

Average commercial loan value

$3.11m

Years as a commercial broker

commercial broker? We treat all our clients in a professional manner, whether they are large or small. Relationship managers come and go at banks, but we are always there for our clients, and if we do our job well, we ultimately become the ‘relationship team’ for our clients. That is, our clients ring us first for advice, and we negotiate the deal with the bank on their behalf. Being part of the national Bentleys Group provides us with access to financial information and some incredibly knowledgeable accountants in the fields of tax, property, industry specialisation, etc. We stay involved with our clients at annual reviews, etc., so we don’t just write the deal and forget about the client.

MPA: Do you focus on any particular area of commercial lending? Why? We provide a wide range of commercial lending, ranging from working capital and cash flow solutions, property investment lending, as well as construction and development finance. Our asset finance business has continued to grow, and we can offer our clients a wide range of options in this highly commoditised space. Our commercial lending expertise also has really assisted our residential lending business. Once our commercial clients are completely satisfied with the solution we have found for them, we then assist the directors and employees with their residential lending needs.

commercial broking? I don’t think it is absolutely essential to have run a business in order to succeed in commercial broking. I ran regional businesses for ANZ with large sales teams and high revenue targets; however, in banking, you are largely insulated from the cost side of the business, being part of a publicly listed company. When you run your own business, you learn very quickly that every expense incurred comes straight off the bottom line. That said, it is largely common sense, and the commercial and residential broking models are extremely attractive businesses when you get the model right.

MPA: Do you see opportunities in your area of broking over the next 12 months, or is it time to consolidate? We see the opportunity to continue to grow organically through the Bentleys network; however, the commercial broker segment does seem to be an ageing demographic. We would definitely consider acquiring or consolidating the business if we found the right business partners. At the end of the day, this business is all about having the right people.

MPA: From your experience, is it essential to have run a business in order to succeed in

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Sponsored by

JAYDEN VECCHIO

Discovery Finance Group, Brisbane

Whilst studying for a degree in business and information technology, Jayden Vecchio got matched with a mentor to show him what ‘real world’ business was like. That mentor happened to be MFAA chairman and Vow Financial CEO Tim Brown, then at Macquarie Bank, who helped Vecchio get started in the industry. Since then, he’s had a rapid rise, featuring in MPA’s Young Guns and Top 10 Commercial Brokers 2014. He maintains a blog on broking, Top Broker, and has just finished writing a book on the subject.

MPA: What distinguishes you from an average commercial broker? I think having worked within the banks for a few years, I have a good understanding of what they are looking for on applications, how they want information presented and the types of clients they will take – and the ones they don’t.

MPA: Do you focus on any particular area of commercial lending? Why? Development finance and some commercial property investment.

MPA: From your experience, is it essential to have run a business in order to succeed in commercial broking? No, not at all – it is more about having an understanding of the asset class you are lending against and having access to the banks and bankers that also specialise in that area – in commercial lending, it’s not only what you know, but who you know in the banks!

MPA: Would you term yourself an advisor? How

MPA: Is every loan different, or are there similar scenarios you frequently encounter? Yes, they are all fairly unique.

MPA: Do you see opportunities in your area of broking over the next 12 months, or is it time to consolidate? I think there are always going to be opportunities for those willing to take them. For example, in the residential broking side of things, even though some banks are tightening criteria and LVRs on investment lending, I think this could present a terrific opportunity for brokers because suddenly customers’ banks are going to be unable to help them achieve the outcomes they are seeking.

MPA: What is your advice for brokers looking to enter the commercial market? If you’re going to do it, make sure you do it properly. Learn the products, make the contacts in the banks, and understand the various asset classes, financial structures, lease requirements, etc., because you aren’t going to be able to give your clients the service they require if you try to do it in halves.

Total value of commercial loan settlements 2014-15

$136.74m

Number of commercial loans settled

Average commercial loan value

$7.19m

Years as a commercial broker

do you present yourself to clients? No, I consider myself a finance broker. Really I just present myself as a specialist.

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FEATURES

TOP 10 COMMERCIAL BROKERS

GEORGE KARAM Byblos Finance, Sydney

Total value of commercial loan settlements 2014–15

$169.69m

Number of commercial loans settled

Average commercial loan value

$5.65m

Years as a commercial broker

Australia’s top commercial broker for 2015 hasn’t appeared from nowhere. You might recall George Karam from last year’s list, where he reached fifth place in what itself was a competitive year. The intervening 12 months have not only seen Karam move up four places, but he’s almost doubled his annual settlement total, from $83m to a stunning $169m. So what has changed? Byblos Finance is a different brokerage than it was last year, but Karam is arguably still the same broker. He’s still insistent about his value proposition: “We’re a property broker – we don’t do local business banking; we don’t do cars or leases, or that sort of thing.” And he’s still based in Parramatta in Sydney’s flourishing west; most of his developer clients come from the surrounding area. Karam wasn’t responsible for the area’s property boom – and doesn’t claim to be – but he did plan for it. “We are in the right place in the right time, but having said that, we were kind of preparing from 24–36 months out for an improvement in the market conditions,” he says. Preparation has meant taking on four extra staff, including administrative staff and ex-business banker Matthew Patterson, taking the total team to seven. Understanding Byblos Finance means understanding its clients. “Our service and our offering are aimed at high-net-worth groups, individuals, families and established people who are looking for a better way to conduct their loan banking than they would be able to do themselves,” Karam explains. “They’re the type of guys who don’t really need an introduction to the bank, but what we try to do is add value to the way they’re used to dealing with the financier.” For Karam, adding value means involvement across the entire development process. Karam described

himself as a ‘private property banker’ in last year’s survey and has adopted an account-management structure for dealing with clients. Right from the start, he advises on project feasibility, equity return and how much cash a client will need, in order to “show them what the loan is likely to be like before they’ve even acquired the site”. In essence, Karam adds the financial perspective to the team of advisors required by any large-scale property developer. Karam maintains relationships with professional solicitor, quantity surveyor and valuer associations, and is himself one of the founding members of the Western Sydney Developers Forum. His contacts in the construction industry provide a steady stream of referrals without the need for fees. “Our referrers refer to us because they know their client is going to be looked after; they’re going to get a value-added service no matter what,” he says. Byblos’ success owes much to Karam’s relationship with banks, and again, it comes down to a ‘value-add’ approach. “Using our own expertise, we’ll do as much of the credit preparation work for a lender – not just do the introduction and wait for them, but actually execute the deal,” Karam explains. “The way I run the business is we see ourselves as an extension of our preferred lenders, and we try to integrate as much of their supply chain as we can.” Looking forward, Karam is positive about western Sydney’s property market and believes the number of returning clients shows his time spent working on the business is paying off, allowing him to resume a full client-facing role. Nevertheless, preparation remains at the core of his strategy: “As our business is growing, we’re again investing for the next 12–24 months out. We think there’s going to be a further increase, and that’s what I’m preparing for.”

“What we try to do is add value to the way our clients are used to dealing with the financier”

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MPAâ&#x20AC;&#x2122;s Top Commercial Broker for 2015, George Karam (right), is presented the trophy by Peter Vala, head of sales and distribution for Thinktank.

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PROFILE

ANDREW KELLY

“I think when you start up a brokerage, you’ve got to have internal belief and some type of internal fortitude; I felt that I was doing the right thing”

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A BROKER FOR LIFE Andrew Kelly, managing director of Anasta Finance Consulting, is a multi-award-winning broker who has no intention of slowing down, he tells MPA’s Maya Breen

ANDREW KELLY’S CAREER TIMELINE

1982-1996 ANZ Bank

1996-2003 St George Corporate INDUSTRY VETERAN Andrew Kelly is a broker who thrives on a challenge and what he can learn from it, particularly when it comes to raising projects from the ground up and turning them into highly successful operations. Kelly’s career in banking began in 1982 and spanned the next 20 years, after which he built a lucrative mortgage broking business for a large private firm, bringing together a team of 10 brokers within 18 months, which went on to settle more than $1bn in facilities over three years. After that, he further challenged himself by founding Anasta Finance Consulting in 2006. To date, the company has written 1,100 loans and settled $670m. Kelly has won numerous awards during his time as a broker, but the one he is most proud of receiving is the 2015 MFAA National and State Finance Credit Advisor of the Year, which highlights the longevity of his clients and referring partners. “It didn’t recognise … volume; it recognised what it is that I do, how I do it and the type of results that I get,” he explains. “It also recognises that all of the lenders I deal with know who I am, and they respect what I do.”

Building long-lasting relationships Creating strong relationships with clients and lenders is what broking is all about for

Kelly; he says he doesn’t have a single client he hasn’t personally met. “It’s really quite satisfying that I can put my hand on my heart and say I’ve met every single one of my clients – that’s a lot of people!” Kelly established Anasta Finance in Sydney’s inner-west suburb of Concord, specialising in residential, commercial and equipment finance. He has a predominately mature client base across a broad spectrum, from company directors and owner-occupiers to developers and manufacturers – and it’s evident he enjoys the variety and challenges each type of client brings. “You’re going to get very different questions, but you’ve got to treat them all with the same amount of respect and the same amount of time,” he says. “One thing I always do is never walk out of a meeting with anyone in that meeting not being sure of what it is we spoke about, discussed and agreed on.” He is also a home owner and active investor in the property market himself, having bought and sold many properties over the last 20 years – something his clients appreciate. “I think you need to practice what you preach,” he says. “You need to know your market; you need to know your area. My investor clients know me, and they have known me for a long time, so they know that I don’t just simply write loans. I’m part of the

2003-2005 Established commercial and residential broking book of a large broking firm specialising in equipment finance

2006 Founded Anasta Finance Consulting

2011–2014

MPA Top 100 Broker for four consecutive years

2015 Named MFAA National and State Finance Credit Advisor of the Year

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PROFILE

ANDREW KELLY ANDREW KELLY’S BROKING TIPS

Learn as much from funders as possible

Gain experience from like-minded brokers in your market

Listen to the client: “If you don’t listen to the client and what it is they have to say, then you really are starting at a disadvantage. They know their business – I don’t ever presume to know their business”

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buying and selling of the property market, so they appreciate that because I put my money where my mouth is.” But when it comes to loan writing, the commercial space is what he enjoys the most. “It tests me. It makes me really get involved in the client’s business and get a

Going independent Kelly made the decision to start his own brokerage because he wanted to explore finance further and leave the management of large teams behind. But making the transition from employee to self-employment is never easy.

“The saying is, ‘If you love what you do, you’ll never work a day in your life,’ and I enjoy what I do” full and true understanding of what they have, what they want and where they’re going.” Although he has offered commercial, residential and equipment finance services from the beginning, Kelly is looking at diversifying into insurance premium funding instead of financial planning, as he feels this will be most beneficial to his clients. “It’s just having an awareness that the clients have got more needs than what it is they’re asking for, and if you don’t ask the questions, you don’t know.”

“It was a massive leap of faith,” he says. “I’d never been in a situation where I was cutting my own cheques, so it was something that I had belief in and really felt that, with the support of my referring partners, I could do it. I never doubted myself, and I think when you start up a brokerage, you’ve got to have internal belief and some type of internal fortitude; I felt that I was doing the right thing. I felt that the clients were really responding to me, and I was confident that by kicking off my own business, they would come with me for the ride – and they did.”

AND THE

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Kelly says his banking background and ability to relate to customers on all levels is something that gives his clients a fair degree of confidence. “I think what sets me apart to a point is that I understand banking right from the first day to the last, but I also have a good relationship with a number of the major funders and the senior management who respect what I do and understand what I do,” he says. “I get asked my opinion as to where the market is and what types of challenges are out there – what type of competition, what type of product needs to be tweaked, and what type of product would do well and be relevant.” Kelly is also proof that adversity makes you stronger: In 2011, he fell onto his shoulder during a football game, damaging the nerves and losing the use of his left arm. After two and a half years of intensive physiotherapy, was he able to regain 50% of mobility. Now, four years later, he is more driven and passionate about his profession and life than ever. “That was very trying … it was just coming out of the GFC and a very critical time in my

life. It certainly made me sit up and smell the roses,” he says. The injury affected his whole life, including work, impacting his ability to type, hold the phone and handle files, but he is grateful that he’s still able to move his arm. “I’m in constant pain, but it’s pain you just put up with,” he says. “I can use my arm. There are a lot more people worse off than me.”

Not slowing down Such a setback – one that might have made others pack up shop – hasn’t kept Kelly from his pursuing his passions. Unlike most people who have reached his level of experience, he’s not thinking of slowing down anytime soon. “The saying is, ‘If you love what you do, you’ll never work a day in your life,’ and I enjoy what I do.” He says you get good days and bad, but overall, mortgage broking is a good business. “It’s a very good industry – it’s a great lifestyle,” he says. “It allows you to work as much or as little as you like, for as long or as little as you like. I’m going to work for as long as I possibly can. I can be a broker into my 80s – there’s nothing stopping you doing it.”

“Clients have got more needs than what it is they’re asking for, and if you don’t ask the questions, you don’t know”

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FEATURES

NEW RECRUITS

GIVING NEW RECRUITS THE BEST CHANCE IN BROKING The first six to nine months are the toughest for new brokers â&#x20AC;&#x201C; and often a telltale indicator as to whether they will ultimately succeed. Maya Breen talked to five top brokerages to find out how they help their new recruits become confident brokers and counteract an ageing industry

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NEW-TO-INDUSTRY

brokers usually have to face some tough realities when starting out: learning the industry, how to write loans, client interaction, sales and leads – and often on a tight budget before they start to make an income on a commissiononly structure. Whether they’re part of a big franchise or a small brokerage, it’s fair to say that all new brokers will find starting out a challenge. The industry has its own challenges, too – namely, finding effective ways to combat its ageing

money. The traineeship solution definitely provides a base income for that proposition, which I think is critical to success.” A number of brokerages also have taken on the responsibility of helping new brokers cope financially and gain industry knowledge, developing strategies that give brokers the best chance of remaining in the industry longterm. MPA spoke to five of those brokerages and the leaders who are dedicated to bringing on board new-to-industry recruits. We wanted to know how they transform new entrants

“Without our methodology under ALIC, I have no doubt we would not have written $635 million last year as a business” Mark Davis, ALIC community. The high turnover of new entrants has prompted industry associations to seek new ways to attract talent – the FBAA has its apprenticeship program, and the MFAA recently launched a traineeship program. “The whole point of what we do is to mitigate that ageing population, and there is a good swell of people starting to take interest in coming into the industry,” says FBAA CEO Peter White. He says the biggest challenge for brokers is compliance and obtaining the base knowledge. “Once you get the basics right, everything is a lot easier, but if you don’t get it right, everything becomes extremely hard. It’s like building a house; if you don’t build the foundations right, it topples over and crumbles.” On the other hand, MFAA CEO Siobhan Hayden points to the initial lack of income as the hardest part for new brokers. “You do need strong support for new entrants, given the barriers to success ... that long lag time with

into successful, confident brokers through in-house training programs, financial support, mentoring and individually tailored experiences. We also talked to new recruits from each brokerage to get their perspective.

The Australian Lending & Investment Centre The Australian Lending & Investment Centre [ALIC] is an independent brokerage in the heart of Melbourne’s CBD that specialises in investment lending. Winners of the 2014 Australian Mortgage Award for Brokerage of the Year, ALIC have fine-tuned their highly effective training program and expect $60m a year from their second- and third-year brokers. Principal Mark Davis explains their new recruits undergo an 18-month training and mentoring program before they operate as a broker under ALIC. “We then blend them into

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FEATURES

NEW RECRUITS NEW BROKERS RIVAL THE VETERANS AT TRILOGY FUNDING Boutique brokerage Trilogy Funding’s new training program is testament to how new brokers can quickly succeed beyond expectations if they have a great support program. In June 2015, Trilogy’s new recruits wrote just as many loans as the brokerage’s experienced brokers, according to CEO Ed Nixon. The investor specialist brought on three new-to-industry brokers last September, and after completing Trilogy’s in-house training program, the trio logged $12.5m worth of loans in June, just shy of the three experienced brokers’ $12.9m. Trilogy’s training program includes a series of 40 videos provided by their referral partners, covering contracts, auctions, banking acronyms, types of loans, the basics of financial planning, capital gains tax and self-managed super funds. “The videos provided a huge shortcut for those who had no exposure at all to the world of mortgage broking to get a real handle on things – and quickly,” Nixon says. Also included in the program are twiceweekly sales meetings, a role-play session once a week and a dedicated business mentor who visits the office from Sydney twice a month for one-on-one coaching.

a role that combines getting some salary with building up sales slowly to get them financially comfortable,” Davis says. “The transition of training 60 hours a week to [suddenly being] in a 90% sales role is the hardest to get your head around, but after six weeks, this is normally all forgotten due to the training received.” The intensive course has a very high retention record – the home loan division saw zero dropouts during the first two years, and only a few dropped out in the investment

“That is the hardest if you’re new to industry – figuring out what the lenders want and all the different aspects to products” Lynda Harris, Aussie lending division. “During training, we have had a couple who have been in shock after two weeks with the workload and have chosen other careers, which is fine by all parties,” Davis says. “That is the time you want them reneging.” He points out how vital the training program is to ALIC’s success: “Without our methodology under ALIC, I have no doubt we would not have written $635 million last year as a business.” But Davis says he would like to see more support from industry associations regarding recruitment and retention within the industry. “The Industry bodies need to look at ways of attracting more educated and experienced people to this great industry that services 55% of the lending requirements nationally.”

Aussie Home Loans Aussie Home Loans won the Best Career Development Program award at the 2015 Asia-Pacific Banking & Finance Magazine Awards in May. Lynda Harris, Aussie’s general manager for people and culture, told MPA about the multi-layered training program each new recruit goes through, guided by a team of marketing consultants, credit coaches and sales leaders. “They have a very strong focus in the first six to nine months with brokers,” she says.

“That is the hardest thing if you’re new to industry – figuring out what the lenders want and all the different aspects to products. Our model is such that we can take someone without a financial services background, and we provide the sufficient training and coaching and support to provide the skills and experience to make them into successful mortgage brokers.” Upon joining Aussie, new recruits embark on a three-week induction program and then an intensive two-year training program under

the franchise’s in-house accredited mentors. “There’s a structured program of workshops, one-on-one coaching sessions, online training, discussions with peers around best practice, and meeting with that marketing person or with that credit coach person,” Harris explains, pointing out that the percentage who pull out is falling year-on-year, which she credits to the company’s focus on retention during the crucial six- to nine-month mark. “In those early days, someone in our model is learning about a home loan and then learning to run their own business,” she says. “They’re working for the first time in a commission-only environment, so they’re worried about how they’re going to put food on the table, and it’s quite an emotional roller coaster. It’s that one-on-one support that makes a huge difference to how quickly they learn to be an effective mortgage broker.”

N1 Finance Based out of Sydney, Brisbane and Melbourne, N1 Finance came seventh in MPA’s Top 100 Brokers in 2014; earlier this year, they launched the first Australian mortgage comparison website in Chinese to cater to their growing mainland Chinese client base. N1’s new training program has been up and running for a few months, and managing

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“We have fine-tuned the program to also include commercial lending, basic accounting and financial planning knowledge” Ren Wong, N1 Finance director Ren Wong says the response has been great. N1 provide a structured eightweek program with a two-week induction that covers the essentials of the loan cycle, including case studies, role-play scenarios, business plans and relationship-building, plus a mentor to guide each broker along the way. “[Mentoring] is probably the most important element to keep them motivated and sustained through the steep learning curve,” Wong says. Many new-to-industry brokers are overly optimistic and need to adjust their expectations, he points out. For example, they’re largely unaware of how much compliance work is required alongside the sales component of the role. “A lot of them

VALAN REDMOND, AUSTRALIAN CREDIT AND FINANCE As a new-to-industry broker, Valan Redmond was initially challenged by gaining all the knowledge required, but she says ACF’s great support network was invaluable. “ACF have thought of and implemented all the necessary support structures. They’ve made the transition into the industry very simple, straightforward and enjoyable.” Redmond says the most helpful aspect of the training was her mentor. ”In my first few weeks, I shadowed a senior broker, who showed me step-by-step how to settle a loan from the initial interview right through to signing loan docs. When I began dealing with my own clients, the process was not too overwhelming. “The company structure allows for significant volumes of customers and lending interactions, which contributes to rapid learning – a great opportunity when you’re new to the industry.”

CRISTINA MA, N1 FINANCE Cristina Ma was in admin with N1 Finance before she decided to become a new broker, and she’s found the transition exciting so far. “N1 is by far the friendliest environment I’ve ever worked in,” she says. “We have a young and energetic team here; it’s a lot of fun to be with these guys. Everyone is team-oriented, and it makes work very motivating.” She found converting leads to be one of the hardest aspects initially, realizing the importance of building rapport and trust with potential clients. “Over time, my knowledge and experience accumulated, and so did my confidence; client meetings are one of my favourite things now.” Ma notes that associations could provide more scholarship opportunities to support talented brokers in their first year. “The brokerage industry is somewhat difficult to get into due to the remuneration structure being commissions. I am on the PAYG model, which I believe is why N1 can retain talented individuals.”

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FEATURES

NEW RECRUITS “A great human being with excellent product knowledge is an unstoppable force in an industry like mortgage broking” Domenic Circosta, ACF

realised it’s not what they expected. Apart from the face-to-face communication they need to do, learning how to use CRM, apply online and proper compliance checks actually takes up most of the time.” N1’s training is focused on equipping new brokers with the ability to become more than residential brokers. “We have fine-tuned the program to also include commercial lending, basic accounting and financial planning knowledge,” Wong says. He feels the industry can improve retention by making mortgage broking a corporate-style job. “Our brokers are PAYG; once they have gained their relevant qualification, they’re entitled to regular wage,” he says. “Unlike some, the level of wages we are offering is not minimal plus commission – we actually offer a standard wage.” Wong adds that finding recruits is still a major issue. “I don’t deny the importance of retaining successful brokers, but we need new blood and young talent, especially in the digital age.”

months, but can be stretched as long as the new broker requires. “We want to support them; we don’t leave them out to dry,” Nochar explains. “Ultimately, they don’t go out on their own until they’re in a position to do so and they’re comfortable to do so. Everyone’s different, and the key to it is understanding that person and their situation and guiding them through so they do get through it.” The training program itself involves a month of initiation; recruits are then teamed up with a senior broker to understand the back office component, the lending process and systems. Then they move onto lead generation and sales, all before sitting in front of a client. “We let them work alongside the senior brokers for four to six months so they can understand all the aspects of the business before they start having a go on their own,” Nochar says. “They come in with their eyes open fully, understanding what’s expected of them and what they need to do to get themselves in the position to be financially independent. I

“Ultimately they don’t go out on their own until they’re in a position to do so and they’re comfortable to do so” Alex Nochar, Shore Financial Shore Financial At just two and half years old, Shore Financial, located in Sydney and Melbourne, has settled more than $1bn in mortgages – and the average age of their brokers is only 26. Managing director and MPA Top 100 broker Alex Nochar explains all their new recruits had no experience in broking, and what they look for above all is the right attitude – a driven, positive person with a willingness to learn. “The attitude is absolutely critical. Because you can teach any skill, but you can’t teach a good attitude.” Shore Financial’s new recruits are on a part salary/part commission structure while they undergo training to help them through that time of limited income. The training program itself is highly tailored to each individual recruit; it lasts a minimum of four

think that’s the key to it – I think you’ve just got to be absolutely crystal clear about the whole process of what’s involved.”

Australian Credit and Finance The training model at Australian Credit and Finance breaks down the loan settlement process into separate components, akin to an assembly line. According to Domenic Circosta, executive manager for sales, culture, and development, this allows brokers to develop a higher skill level by focusing on fewer tasks. Circosta says lead generation is usually one of the hardest things for new brokers industrywide, so Australian Credit and Finance have effectively removed it from brokers’ responsibilities and transferred it to their sales team so brokers can spend more time on lender policies. “We have doubled our team

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size since last year and are on track to triple the size of the broker team by the end of 2015,” Circosta says. He says their focus on mentoring is the most important aspect of their program and what sets them apart in the market. “A great human being with excellent product knowledge is an unstoppable force in an industry like mortgage broking.” But although mentoring is a vital component in training confident brokers, Circosta says training programs need to be more reflective of the industry. “Collaboration, one-on-one coaching and mentoring are imperative, but gone are the days of telling a new-to-industry broker to join a sports club to generate business.” The majority of their brokers also receive a base salary plus commission, and Circosta delivers an upskilling session each morning after induction to all new and existing brokers. “The training and collaboration with colleagues not only fast-tracks the learnings of the recruits, but also builds strong teamwork and a culture of assistance, which is unusual in a traditionally competitive sales environment.” Together, these five brokerages showcase that a well-thought-out training program is a valuable investment that results in very high retention rates and not only guides new brokers to success but also leads them to write loan volumes to be reckoned with by their second or third year. Their training is an intensive, all-encompassing marathon, which can include 60-hour-plus weeks, lasting between four to 18 months, often before they even begin operating as a broker. The forward thinkers behind these training programs acknowledge how important they are to each brokerage’s overall success; all consider the base salaries to be worth the payoff and mentoring to be the most important contributor to seeing brokers through those crucial first six to nine months. Although these brokerages vary in size, many of the training concepts they have implemented can be applied across the industry, from specialist brokers to one-stopshops. If more new-to-industry recruits are guided in this way, it will only strengthen the future of mortgage broking.

RUTH VAN EEKELEN, AUSSIE BELLARINE Aussie was highly recommended to Ruth Van Eekelen, who has now been a franchisee for more than a year. “We liked the idea of being in business for ourselves, but not by ourselves,” she says. Van Eekelen says she didn’t think it would take as long as it did for her to get settled as a broker. “I found it extremely challenging to start with. My income expectations were off; it took longer to generate a substantial income than I thought it would, but I keep telling myself this is a five-year plan, and the rewards will come.” Van Eekelen says Aussie’s on-boarding process and being part of a great team were invaluable. “These people have been and continue to be a power of support to me,” she says of her facilitators, sales managers, fellow brokers and franchisees.

NATASHA CHOI, AUSTRALIAN LENDING & INVESTMENT CENTRE New broker Natasha Choi has found her time in the industry extremely rewarding and also challenging, but it came as no surprise to her. “Having invested myself and as a former client of ALIC, I knew what I was getting myself into and what I wanted to learn from it.” Choi says ALIC are always one step ahead of the game. “In an environment where there have been regulatory changes, particularly in the last few months, ALIC have taken a proactive approach and been on the front foot with meeting with banks to understand consequences of credit policy changes.” Choi steered away from starting her own business specifically to learn the investment lending business model. “My primary focus is on educating clients and growing my portfolio; hence, I am less interested in the regulatory, compliance and license requirements involved in setting up your own business.”

HARRY FAVETTI, SHORE FINANCIAL The youngest broker within Shore Financial, Harry Favetti has found the industry both a joy and a challenge, but he thrives on the energy and drive of the brokerage’s young team. “Everyone is constantly looking for new ways to grow their business further or approach situations from a different angle to be more efficient – there’s no complacency,” he says. Favetti was director Theo Chambers’ assistant for nearly a year before trying broking himself, so he had a good idea of what he was taking on. “Theo gave me a pretty good insight into what to expect when I was going through the interview and start-up process – most notably preparation for the workload and the attitude and approach I’d need in order to do well and get around the ‘long corner’” – the major hurdle of learning the industry and finding your feet. “The mentor program for new brokers is undoubtedly the biggest help,” Favetti adds. “New loan writers are assigned to one of the established brokers within the firm, who teaches them everything they need to know, from product knowledge to back-end processes.”

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BUSINESS STRATEGY

FRANCHISING

IS YOUR BUSINESS SUITABLE FOR FRANCHISING? With the right foundation, franchising your business can be a very effective way of expanding your business and growing your brand quickly, according to Stefan Kazakis

WHILE FRANCHISING has in recent years slowed down from the rapid rates seen in the 1990s to early 2000s, it is an exciting method to grow your business. But the decision to travel down this route is often a more ‘bright shiny light’ driven campaign rather than a well thought out plan. And this in turn ends in failure. However, if done correctly, franchising can be a very effective way of expanding and growing your brand quickly. For well run businesses, with systems and processes, procedures and rules, franchising will provide benefits and satisfaction for both parties. However, be under no illusion. This is

not an easy path to take. Establishing a business model that can be considered for franchising has to be undertaken with education, skill, patience and not surprisingly, capital. And I have one bonus tip which I will explore a little further in the article – you simply must have a defined target market. So, what should business owners do if they believe their business has what it takes to become a franchise opportunity? You need to be assertive but fair, and clear on the vision. Who needs to do what by when? You will continue to work harder with even greater focus. You’re accountable to other

IS YOUR BUSINESS READY? So, how do you know when your business is ready to be considered for franchising? Here are my top seven tips: 1 Proof of concept, establishing a franchise system

and preparing it for market can take as long as three years. The business needs to be making a healthy predictable profit – this is non-negotiable.

4 Your business has a predictable operations procedure

with good systems and ‘How to’ manuals for all tasks including the testing and measuring for all activities. 5 Has a defined and proven lead generation system

2 Making a positive cash flow without the key/critical

delivering leads within a cost per lead budget.

staff being present. Having the right management structure is also non-negotiable.

6 Has a progressed and defined sales system to

3 There needs to be uniqueness, however not extreme

uniqueness. The best uniqueness is often found in a customer delight system.

ensure a 60% conversion on all leads regardless of the sales skills of the person selling. 7 Strong culture of open and honest communication.

business owners buying into your vision. Strong ownership of the brand and the ability to share it with a new network of business owners who must and will embrace it as their own. You must be ok with this. You will be okay to not have all the greatest ideas in your business, and more importantly you are okay to encourage this. You will have taken legal advice and have a Franchise Agreement that has been developed with an authentic reputable franchise development and legal team. The investment for this is a minimum $70,000. A training arm needs to be developed for all franchisees that comprises of internal and external consultants/trainers. Having a recruiting system for franchisees that is more about de-selection than selection. Before anyone invests in your franchise you need to be absolutely sure that you can define who your target markets are. You need to be clear about who will buy the product and why. You need to be able to identify them with great clarity. If you are a bookstore owner and someone is considering a franchised book store it’s no good you just saying, ‘I know there are plenty of booklovers out there so you’ll be fine.’ There’s no room for vagueness, guessing, crossing fingers or hopeful estimations when it comes to this stuff. The skills and tools required to create an idea are very different to the skills

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? ?

and tools required to grow market share. It’s the same for someone who is considering a coffee shop franchise in the city centre. If the extent of their strategic planning is that lots of people come into the city, lots of people like coffee, so if they open a nice coffee shop in the city they should be fine, then that’s not great market research. In fact, that isn’t market research, but you’d be surprised how often franchises get started like this. You won’t be surprised to know they don’t last long if they don’t wake up real fast. Having made the decision that you are going to franchise your business, your franchisees are going to want to know that this will provide them with a product or service that they think other people or organisations want to buy. But thinking this and knowing how and why it will happen are two very different things. At some point in their busy lives, with all sorts of other options available to them, you want people to look at the product and say, ‘Yes, this is what I need’. These people or organisations are

referred to as the target market, and you and the franchisee need to know exactly who they are, how you’re going to grow and service them. Why is this so important? Because if someone is investing in a franchise, they have to be focusing on how they can serve your target market; they cannot be everything to everyone or they will actually be no good to anybody.

So, who are they? Now that you know why it’s so important to find out who your target market is, let’s have a look at how you go about doing it. There are six questions you must be able to answer about your target market. If you can’t answer all of these questions you won’t be able to meet the needs of your target market. These six questions are: ? WHO is the person or organisation you wish to serve? You need to be able to define them in detail. For example, ‘parents’ is not a well-defined target market. What age are they? How many kids do they have? Where

do they live? How much money do they earn? Are they married? Are they single? WHERE do they congregate in their greatest concentration? Where are they being influenced? WHAT is their desired #1 Big Outcome? What is the problem you solve for them? WHEN is their highest level of frustration? When will they say, ‘I need to buy this’? One in 10 of your future clients is not ready to buy right now but is thinking about doing so. When do they say ‘now is the time’? WHY will they choose you? This is one of the hardest questions to answer. Whatever your product or service, your potential ‘A’ clients have other options available to them. HOW do you expect them to do business with you? How do you expect them to communicate with you, contact you, and correspond with you? How can they let you know they are interested in your services? Will this be online, face to face, over the phone, or a combination? In our modern, highly connected world it’s more important than ever to make it easy for people to interact with you and buy from you.

The more you understand the who, where, what, when, why and how of your target market the better you’ll be able to shape your franchise. So in conclusion, how do you tell when your business is suitable for franchising? When you know your business inside out! Your business is ready when you are not motivated about the initial capital investment by a franchisee. Ultimately you will be ready when you already have enough money in your bank account; you will continue to invest in the training of your franchisees ensuring the reputation of your brand and concept continues to grow relevance. And the most important piece of advice I give my clients who ask about franchising is, Are you ready? Keep in mind that even the best laid plans will result in failure if the underlying business model is not ready for franchising. Stefan Kazakis is a renowned business strategist, sought-after presenter and founder of Business Benchmark Group. Stefan is also the author of From Deadwood to Diamonds. Visit www. busienssbenchmarkgroup.com.au or email info@businessbenchmarkgroup.com.au

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LIFESTYLE

A DAY IN THE LIFE OF…

Paul Liccione, general manager of sales and distribution, eChoice

5.30am: My body clock wakes me. I’ve never

8.00am: I stop by Kon Shizas’ office.

been one for alarms, as I don’t like to start my day startled. I get up slowly, thinking about the gruelling personal training session ahead. Then I remember I don’t have a personal trainer. Relief.

Kon is the GM for product and services; he I have worked together for five years and bounce around most initiatives with each other. We have completely different skill sets, and it works. We have a lot of respect for each other’s strengths and opinions. Kon is working on a proposal for a potential partner, which will add yet another additional income stream for our brokers. We talk about all the plans ahead for eChoice, and it’s hard not to get excited.

6.20am: It’s dark in the office, with the illuminated Sydney Harbour Bridge taking centre stage. I never get tired of that view. Breakfast is lemon in hot water because breakfast is not the most important meal of the day unless you’re an advertising executive for a cereal company. In fact, it’s not even good for you (Google it).

9.00am: Anna, my PA, comes into my office with a determined look on her face. We run

“Paul’s a Collingwood supporter, and I’m Carlton. Due to the respective ladder positions, I have to be a little more humble than I’d like to be” 6.30am: I read through the news articles of

painful as it could be. Why doesn’t everyone have a second team?!

11.45am: It’s time for lunch. I head down to the food court, wondering which salad I’ll get. I return to my desk and spend 10 minutes reading the general news online while I eat my burger and chips. 2.00pm: The IT development team run through where the many Fleats (our proprietary platform) projects are up to. We move through a list of suggestions by brokers and debate timelines and priorities. I’ve never met a bunch of IT guys more enthusiastic about ideas from people who actually use the system. 3.00pm: I meet with our marketing team to discuss our social media program. We provide this free to our brokers, and I want to review what we’re doing to get the message out to the network. We run through some EDMs and collateral. Looks great.

the day then get stuck into some email responses. I find no better time for this than before anyone else gets to the office.

through the day’s activities, meetings and non-negotiables. That means Anna tells me what to do and when to do it.

7.30am: Quiet time is over. Chris Berry, our

11.00am: ANZ’s Paul Munt calls me back.

6.30pm: I’m on the Cahill Expressway

broker support team leader, pops in to discuss the recruitment pipeline and participants in the upcoming eChoice Broker Academy. The broker support and our dedicated training teams do an amazing job working with new entrants to give them the best possible launching pad for their careers.

I’ve got some eChoice matters to discuss with Paul, but not before tackling the heavy stuff … AFL. Paul’s a Collingwood supporter, and I’m Carlton. Due to the respective ladder positions, I have to be a little more humble than I’d like to be. Fortunately, I’ve got the Swans as my second team, so life isn’t as

heading home, checking out the cruise ship at the Overseas Passenger Terminal in front of the Harbour Bridge. I know it’s just a big harbour and a steel bridge and a boat, next to a funny-shaped opera house, but after 20 years, I still look at this view every day and feel like a tourist.

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THE DATA

BANK REGULATIONS

LEVELLING THE PLAYING FIELD The FSI and international regulations could make lending more expensive for the major banks – but that doesn’t necessarily mean borrowers will suffer RISK WEIGHTS don’t make for exciting conversation, but that doesn’t mean they’re not important, particularly for brokers. Since the GFC, the Basel accords have raised the amount of capital banks need to hold, which has affected the cost of borrowing. Basel III is presently being implemented in Australia, but already proposals for Basel IV have emerged, alongside recommendations in the Financial System Inquiry on narrowing the gap between major banks and other lenders.

J.P. Morgan and Digital finance analytics have produced a report on how pricing, discounting and brokers’ businesses would be affected if the major banks were forced to hold more capital. They’ve also discussed the consequences for non-major banks, as well as the possible strategies major banks could adopt to avoid an across-the-board interest rate hike. However, the most relevant message of the report is about refinancing. Banks will no

HOW BASEL III HELPS MAJOR BANKS Not only do major banks have far lower average risk weights under the current system, but non-majors cannot fully exploit the potential of low-LVR loans, unlike the sliding scale for major banks Major banks

HOW BASEL IV WILL CHANGE THE PLAYING FIELD Major banks will see a near-doubling of porfolio risk weights, particularly at the 60-80% range. Although the risk weights for non-majors will remain largely unchanged, they’ll be better rewarded for lower-LVR loans

Non-major banks

Major banks

80%

70%

60%

50%

40%

30%

20%

10%

Non-major banks

0% 0% – 40%

40% – 60%

60% – 80%

80% – 90%

> 90%

Portfolio average

Sources: BIS, APRA, Company data and J.P. Morgan estimates

longer be able to report their dynamic LVR – i.e., an LVR that has changed with the value of the house. Instead, they’ll have to use an LVR based on the original valuation, meaning homeowners whose properties increase in value will have more reason to switch to another lender who is able to recognise their now-reduced LVR. Through proactive data mining of clients’ property values and consequent marketing, brokers could make refinancing an even bigger revenue stream.

0% – 40%

40% – 60%

60% – 80%

80% – 90%

> 90%

Portfolio average

Sources: BIS, APRA, Company data and J.P. Morgan estimates

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OPPORTUNITIES AND DANGER FOR MORTGAGE BROKERS

HOW INDIVIDUAL BANKS WILL FARE Will have to hold $4bn extra capital

Will have to hold $3.3bn extra capital

115% of existing housing capital base

70% of existing housing capital base

Will have to hold $6bn extra capital

Will have to hold $5bn extra capital

100% of existing housing

90% of existing housing capital base

capital base

J.P. Morgan notes non-major banks also will need to hold extra capital due to their higher concentration of high LVR levels, although the shift would be relatively minor

MAJORS Need to focus on desirable customer segments (i.e., exclusive professionals) and offer discounts accordingly

Should ‘leverage the platform’, providing other financial services and thus better return over a customer’s financial lifetime

LMI PROVIDERS Will suffer as Basel IV ‘provide[s] no credit for the use of LMI, with risk weights only tied to LVRs and DSC inputs’

Market shake-ups are often a good thing for brokers, as they encourage competition and draw welcome consumer attention to the sector. And indeed, the potential for non-majors to become more competitive presents clients with far more financing options, which brokers can guide them through. Buried within the proposals for Basel IV regulations are changes to the calculation of debt serviceability levels. Under Basel IV, DSC levels would be calculated on a dynamic basis, wherein the borrower’s income needs would be tracked in the lead-up to a loan approval. Tracking income would most likely require brokers to have access to clients’ primary transaction accounts – a privilege the banks are unlikely to give up without wanting something in return, J.P. Morgan warns.

NON-MAJORS Can target clients with increasing home values for refinancing, as they can discount for the dynamic LVR

CONSEQUENCES FOR THE MORTGAGE MARKET

FIRST HOME BUYERS Will find it even harder to get financing, as their high LVRs will become even more of a disincentive for banks

BROKERS Should maintain databases, including original and current client property values, to suggest refinance on dynamic (i.e., lower) LVRs

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LIFESTYLE

FAVOURITES

FAVOURITE THINGS Peter White, CEO, FBAA

Sunday afternoon: Relaxing with my beautiful fiancée, Janet – we are getting married in December this year, and many say I’m punching well above my weight. Good for me!

Car: Motor cars from the 1930s have a style and presence all of their own – a beautiful one to be admired is the 1932 Packard Deluxe Eight four-door soft-top. Owning one is another challenge, as they don’t come cheap. Sport: The martial art Zen Do Kai was always my consuming passion, but these days when time allows, golf it is. I used to tick off played golf courses in the Sydney UBD Street Directory with an industry friend of mine many years ago just to make sure diversification kept us keen.

Movie or TV show: I am a diehard Star Trek fan, but I will watch anything in the sci-fi genre. Also, automotive television shows are high on the watch list – my de-stress from long hours of working and children.

Passion: It might sound corny, but I have a deep personal passion for the finance industry. It’s not a job or a career; it’s my life. Meal: Steak and a bottle of red wine. The steak has got to be medium (at best), cooked on a hot rock; the red wine needs to be a Black Pepper Shiraz.

Travel destination: I love travelling around Australia. (Just as well, as the Finance Brokers Association of Australia has me interstate normally three out of four weeks!) What a great country we live in – from the mountains to the oceans, soaking in the breathtaking views, I never take it for granted.

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