Mortgage Professional Australia issue 15.11 by Key Media

MPAMAGAZINE.COM.AU ISSUE 15.11

TOP 10 INDEPENDENT BROKERAGES Meet some extraordinary businesses that are going their own way

GENERATION Y What younger buyers want from a broker

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NON-CONFORMING LENDING Spotting and engaging non-conforming clients

STEVEN HEAVEY On Connectiveâ&#x20AC;&#x2122;s move into retail aggregation

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FEATURE / BROKER EDUCATION FEATURE

EDITOR’S LETTER www.mpamagazine.com.au

In it for the long haul THIS MONTH I’ve been incredibly privileged to talk to Australia’s top independent brokerages and ask what’s so different about their businesses. Clearly there are many things they excel in, but the one unifying factor was their relationship with clients. To use the technical term, they are service-based, not transactional. Providing a service is not just keeping in contact via the occasional newsletter; it’s about giving the client a reason to come back to you – and giving you the financial rewards to continue seeing the client. Some brokerages encouraged clients to build investment portfolios, partnering with financial planners and buyer’s agents to provide 360-degree service and keep clients

Cradle-to-grave service is not a new idea, but it is a profitable one from going to competitors. Other brokerages offered multiple services in-house, adapting their processes to run an efficient one-stop-shop without compromising on quality. All were rewarded with returning clients and client referrals, often allowing them to scale back on costly marketing. Cradle-to-grave service is not a new idea, but it is a profitable one. The oldschool bank manager, from whom brokers are in some sense descended, would also provide you a range of services as the years went by and your needs changed. In our News Analysis for this issue, we look at the increasing financial power of mature female clients, and how brokers must engage with this consumer segment. These women want trustworthy advice to help them with their finances over the long-term – advice from a whole range of financial professionals, of which the broker is just one part. We’ve also indulged in some myth-busting this issue, tackling the vast amount of questionable techno-babble concerning the much-maligned Generation Y. It turns out that younger borrowers don’t want to Facebook update a home loan into existence through their Apple Watch – they want face-to-face ‘financial coaching’, which a broker is ideally positioned to provide. Yet another reason to be in this industry for the long haul. Sam Richardson, editor, MPA

NOVEMBER 2O15 EDITORIAL Editor Sam Richardson Journalist Maya Breen Production Editors Clare Alexander Moira Daniels Roslyn Meredith Contributors Iain Hopkins Jim Kouzes Barry Posner Michael Bunting

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

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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

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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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NOVEMBER 2O15

CONNECT WITH US

CONTENTS 36

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

Will brokers be next in the regulators’ line of fire?

10 News analysis FEATURES

20 COVER STORY

HIDING IN PLAIN SIGHT

How to spot, engage and transform the finances of a non-conforming borrower

TOP 10 INDEPENDENT BROKERAGES 2015

14 On why Connective are moving into retail aggregation with iConnect Financial

Taking your partnership with property investor clients to the next level

MORTGAGE INSIDERS 48 Tracey Kearey

The director of award-winning brokerage Home Loan Connexion on why confidence equals success Can you keep up with Finance Broker of the Year Mark Davis for 24 hours?

FEATURES

STEVEN HEAVEY

62 The data

61 Day in the life

How Australia’s top brokerages are combining independence and innovation

HEAD TO HEAD

The rise and recognition of the mature female consumer in financial services

KEEPING UP WITH GENERATION Y

64 Favourite things Join Teachers Mutual’s Mark Middleton on the break at Culburra Beach

Tips on delivering the face-toface financial coaching the new generation of buyers expects

MPAMAGAZINE.COM.AU NOW ONLINE: Sneak previews and magazine extracts in Business Strategy

BUSINESS STRATEGY

BE LESS BORING Presenting financial content needn’t be boring; here’s how to engage your audience

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

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ROUND-UP

NEWS AND TIPS INTEREST-ONLY LOANS

ASIC INTEREST-ONLY LOANS REVIEW PUTS PRESSURE ON LENDERS The Australian Securities and Investments Commission released a review following the 80% increase in demand for interest-only loans since 2012. The review found that lenders are not reaching the mark in their responsible lending obligations when providing interest-only loans. “Interest-only loans may be a reasonable option for some borrowers,” said Peter Kell, ASIC deputy chair. “However, lenders must have robust processes in place for assessing a customer’s ability to afford a loan, taking into account the increased repayments once the interest-only period ends. They should lend responsibly, and in a way that does not result in consumers taking on debt that they cannot afford, especially if interest rates rise.”

Interest-only loans are more popular with investors and higher-income earners Delinquency rates are currently lower for interest-only home loans ASIC reviewed more than 140 consumer loan files from bank and non-bank lenders and found: In 40% of files, affordability calculations assumed the borrower had longer to repay the principal on the loan than they actually did In more than 30% of files, there was no evidence that the lender had considered whether the interest-only loan met the borrower’s requirements In more than 20% of files, lenders had not considered the borrower’s actual living expenses when approving the loan, but relied instead on expenditure benchmarks

HOUSING AFFORDABILITY

HOUSING AFFORDABILITY LOOKS BRIGHT OVER THE JUNE QUARTER NT

Australia wide $1,952

WA $1,936 24.4%

$1,622

QLD

24.9%

$1,596 27.3%

$1,454 25.5%

NSW

$2,539

35.6% $1,554 32.1%

Median weekly family income Proportion of family income required to pay loan Repayments based on data for new borrowers

ACT $1,620

VIC

All states (except TAS and NT) increased number of loans to FHB over June quarter; ACT came top with a 20.9% hike

30.3%

ACT Most affordable state to buy or rent a home

19.5% TAS $1,310 22.9%

Housing affordability has improved nationally over the June quarter, according to the Adelaide Bank/Real Estate Institute of Australia Housing Affordability Report. The months between April and June saw a 0.5% decrease, to 30.3%, in the proportion of income required to meet loan repayments. South Australia showed the biggest increase in affordability. “The improvement in housing affordability is attributable to the rise in the national median weekly family income and a drop in interest rates,” said Damian Percy, general manager for Adelaide Bank. Whilst average loan size for first home buyers fell, Percy added, “all other states and territories record[ed] increases”.

NSW Least affordable state – biggest year-on-year increase in average loan size

SA Most improved in housing affordability, as income required to meet loan repayments dropped 2.9% to 25.5%

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COMMERCIAL MARKET UPDATE

ECONOMY LOSING MOMENTUM THINKTANK’S AUGUST COMMERCIAL PROPERTY OUTLOOK City

Rating

Outlook

Sydney

Good

Improving

Melbourne

Good

Improving

Adelaide

Weak

Deteriorating

Brisbane

Weak

Deteriorating

Perth

Weak

Deteriorating

The economy looks to be losing momentum as 2015 continues, according to specialist commercial lender Thinktank’s September Market Focus. The Westpac - Melbourne Institute (W-MI) Leading Index continued to fall slightly to -0.49 in July, slowing down from the more positive outlook in the first four months of the year. However, the AiG-PMI has maintained its pace for the second month in a row, climbing 1.3 points to 51.7, indicating stable conditions hold across the sector. Manufacturing exports also fell by 7.1 points to 44.8, despite a low Australian dollar.

CONSUMER TRENDS

CONSUMERS ARE PAYING OFF LOANS MORE QUICKLY At Mortgage Choice’s FY15 annual results presentation, data showed a shortening of average loan life terms as a result of the current low-interest-rate environment. Their core broking business reaped strong results for FY15 – the company’s loan book grew 4.6% to reach $49.5 billion.

Data showed a shortening of average loan life terms Home loan approvals grew by 10.5% to $13.4 billion, and settlements rose by 10.6% to $11.5 billion. CEO John Flavell said their solid growth in loan writer and franchise numbers was a significant contributor to achieving the strength in their core business. “Throughout the 2015 financial year,

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AVERAGE LOAN LIFE (YEARS) New loans

Existing loans

FY 15

4.7

4.0

FY 11

5.9

5.0

we appointed 41 loan writers, taking our total loan writer count to 575. In addition, we sold 23 greenfield franchises and 14 existing franchises to reach a franchise footprint of 422,” he said. “We can do more to grow the core broking business. Heading into FY16, recruitment will become a focus for the business, as the more feet we have on the ground, the better placed we will be to help more Australians make informed financial decisions.”

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ROUND-UP

NEWS AND TIPS APRA AND REGULATION

WHAT MAKES INVESTOR LENDING RISKY? Working at the Australian Prudential Regulatory Authority requires detailed financial knowledge, a head for numbers and, increasingly, a thick skin. APRA have come under a huge amount of criticism recently, from both mortgage franchises and banks, for their approach to curbing investor lending. For example, ANZ’s submission to the Parliamentary Inquiry into Home Ownership disputed the dominance of investors outside the metropolitan centres: “Regulators are currently focused on not increasing leverage in the system. [ANZ analysis] shows that outside Melbourne and Sydney, investment activity as a share of total lending remains around 40–42%.” Looking for an expert view on APRA’s approach, MPA talked to Paul Kennedy, honorary fellow at Macquarie University Applied Finance Centre. With experience in risk management at top banks in Europe and Australia – including CBA and NAB – and time at ASIC, he’s spent years assessing what constitutes risk, whether investor lending is as ‘risky’ as APRA claims, and why the banks don’t seem to agree. “I think APRA presumably have been a little bit concerned about hot money, and typically the precursor of financial problems has been rapid growth,” Kennedy notes.

“They’re concerned about excessive gearing; they want to ensure people aren’t jumping in on the premise that property prices will move one way and only one way.” Many brokers see the 10% mark – the limit APRA advises banks to keep investor lending growth below – as picked out of thin air. But Kennedy believes the 10% mark was a tactical decision by APRA. “Ten per cent is around

argues, is accelerating a change in perception towards investor lending that would have happened anyway. “The challenge is deciding when it’s time to turn the dials, and APRA wants to ensure that question can’t be fudged or deferred too long – that banks act on the information they receive.” Increasingly bank regulation is doing the job the RBA used to do in managing

“Banks absolutely manage risk. The idea that they’re entirely revenue-driven and don’t think of the future is completely incorrect” Paul Kennedy, Macquarie University where all the majors are, excluding Macquarie, in terms of growth … it doesn’t feel like a cut; it feels like a break.” It’s not that APRA are avoiding rocking the boat, Kennedy cautions, but that 10% growth in investment lending is the limit of APRA’s appetite, which in turn is based on historic data. Crucially, this data differs from what the banks see: “APRA has access to all of the banks’ information; it’s more of a difference in perspective.” “Banks absolutely manage risk,” Kennedy adds. “The idea that they’re entirely revenuedriven and don’t think of the future is completely incorrect. What APRA is doing, he

the economy, Kennedy believes. He thinks we’ll see more use of fine-tuning, such as countries like China already regularly use, as interest-rate changes become less effective in managing the economy. The danger is in APRA going too far, he concludes. “The more intrusive and more interventionist the regulator is, the more they risk insourcing risk management to themselves and not encouraging the banks to develop their own risk management … they must not become accountable for everything.

LATEST INVESTOR LENDING STATISTICS 15% APRA’s guideline 10%

12% 9% 6% 3%

Total investor credit growth in FY15 slowed to 11.4% annual growth, just above APRA’s guideline of 10%

Westpac is the only major bank whose investment growth was under 10%, at 9.6%, in July 2015

Commonwealth Bank’s growth was just over APRA’s limit at 10.1%

ANZ’s year-on-year growth was 11.8%

NAB’s year-on-year investment lending growth was 14.3%

0% Source: APRA’s Banking Statistics

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UPFRONT

HOT TOPIC

Are brokers the next target in the regulator firing line? As regulators crack down on investment and interest-only lending, will mortgage brokers will face increased scrutiny?

John Flavell

Tim Brown

Kim Cannon

“I don’t believe brokers are the next target in the regulators’ firing line. The broking industry has already gone through significant change over the years with the introduction of NCCP. All brokers have a very clear obligation to ensure customers can service their debt without substantial hardship. Moving forward, I think we can expect to see continued growth in broker market share. Recent changes to home loan pricing and policy have made the home loan environment more complex than ever before. As a result, buyers increasingly need expert advice to help them navigate the home loan maze – which is where mortgage brokers come in. Brokers not only have access to hundreds of home loan products from a variety of lenders, but they have the expertise, knowledge and ability to help buyers find the right loan.”

“The mortgage industry is very different to the financial planning industry. We are giving the consumer money to buy assets, which, in 99% of cases, are selected by the client and not the mortgage broker. This alone generally does not put the broker into a conflict situation. Most mortgage brokers do not collect a fee, but are paid by the financial institution. Again, more than 90% of all loan transactions are completed with a major bank or one of its subsidiaries. Therefore, commissions are relatively the same and do not influence the broker’s decision on where the loan is lodged. Add to this that the mortgage broker does not make the credit decision, again removing any conflict in whether the client’s loan is approved or not. APRA and ASIC shouldn’t have a reason to target mortgage brokers when they aren’t conflicted. All a mortgage broker does is ensure the client gets the best product at the best price.”

“Brokers are already highly regulated in their compliance with the NCCP Act, licencing and the professional accreditation they are expected to hold. These days, the educational standards expected of brokers are much higher than in past generations. Diploma qualifications, mentoring from industry bodies, and other product and policy training requirements of lenders have increased the professionalism of the sector. It’s an industry that moves fast, and most brokers know they need to keep up if they want to build their business. In all likelihood, ASIC will take a closer look at brokers in the future, particularly niche sectors of the industry, because brokers are such a significant part of the home lending industry in Australia. But most brokers should have no cause for concern if they’ve kept their house in order.”

CEO Mortgage Choice

CEO Vow Financial

Managing director Firstmac

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ADVERTORIAL

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Providing training and coaching sessions for those seeking to develop their commercial lending skills, which carry PD points recognised by the peak industry bodies; and Enabling higher deal conversion ratios through our team being available and accessible at all times to workshop and structure transactions with brokers, and with clients where preferred. Earlier this year, we modified our operating structure to further improve our service proposition and turnaround times. The change now sees each sales team relationship manager working directly with a credit manager, which enables expedited feedback on transactions in the early stages as deals are structured, followed by swift execution of approval and documentation. Importantly, Thinktank’s commercial property products are clear and simple to understand and have a lot in common with residential loans in offering up to 30 years set and forget with no ongoing fees, annual reviews, property revaluations or onerous loan covenants. The types of security property we accept include all mainstream retail, office, industrial and also residential where the purpose is commercial or investment. This includes mixed-use retail/resi, accommodation, multiunit apartments and professional rooms in residential areas. We also lend against some specialised securities such as hotels, motels,

Peter Vala, head of sales and distribution at Thinktank

function centres and purpose-built childcare centres. We will lend up to $3m per property at up to 75% LVR for full-doc and SMSF loans. Our self-certified and alternate verification loan options go up to $2m, with LVRs of 65% and 70% respectively. Finally, we offer fully flexible upfront (to 1.0%) and trail commission (to 0.50%) options on all loans at the election of the broker, irrespective of experience or accreditation level. If we can be of assistance in any way with commercial accreditation, prospecting, skills development or a commercial property transaction, please contact Peter Vala and he will look forward to seeing how Thinktank can help.

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NEWS ANALYSIS

WOMEN IN FINANCE

A NEW FORCE IN FINANCE A huge shift in wealth and demographics, highlighted by recent research, means older women are becoming the clients brokers can’t afford to miss, writes MPA editor Sam Richardson

GENDER IS coming back into Australian financial services in a big way. Brokers and lenders will be accustomed to categorising their clients by certain attributes: wealth, location, age and risk appetite. But now gender is re-emerging as a factor in business decisions with the identification of a new ideal client type: the mature female consumer. Of course, the mature female consumer has always been there; what’s changed is in the last few months is that lenders have started to notice. A new report from ING Direct claimed that “women will be the main beneficiaries of a massive intergenerational transfer of wealth” and criticised the development and marketing of financial products “through a predominantly male lens”. Other banks and mortgage franchises have also got in on the act; ANZ have a dedicated advice service for women, while Choice Home Loans partnered with the Mamamia Women’s network to host an event for women who wanted to learn more about finance. Lenders are finally waking up to the possibility of women as sole financial decisionmakers, but are brokers also guilty of overlooking women? Thirty-three per cent of women now own their own home, and 40% of women surveyed by ING said they’d be the primary decision-maker in any property purchase today. Furthermore, women are increasingly choosing to live alone; 1.1 million women over 60 will be living alone by 2031, according to the Australian Bureau of Statistics.

But it’s not as simple as comparing your client base to these statistics, or even aiming for a 50/50 split. As MPA has found, there are many reasons women are more likely to use a broker’s services – and recommend that broker to others.

Female consumers and female brokers For some brokerages, an increase female consumers is a reason to hire more female brokers. Jason Back, managing director of The Australian Lending and Investment Centre, MPA’s number-one independent brokerage,

“Women have a wider range of what they’re looking at and probably do a bit more research, and as such, value the model of a broker more than a man does in that couple scenario” Bianca Long, Mortgage Choice Glenwood revealed why ALIC are hiring with consumers in mind: “We believe that our industry suffers from both the issue of an ageing workforce as well as a poor ratio of women in finance. With over 54% of our population being female, why would we not look to engage with the majority demographic through the talented and empowered women in our business and look to grow that model into the future?” This opinion was not shared by all the

brokers MPA talked to. Bianca Long, principal of Mortgage Choice Glenwood, said that women approaching her because of her gender is a rarity. “The reality is, overall, men and women don’t care what your gender is, and they’re not overly concerned about your age. They just want someone who’s good, who knows what they’re doing and someone they can trust.” MPA also talked to Brendan Wright of

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HIGHLIGHTS FROM THE “WOMEN & FINANCE” REPORT ING Direct’s “Women & Finance” report, published in September, argued that financial service providers need to recognise mature women as a major financial force, and adapt marketing and product development accordingly.

Women who are married or in a de facto relationship: 66% are joint financial decision-makers 27% make the majority of financial decisions 6% make some of the financial decisions 1% defer to their partner aggregator FAST, who have run their Women in Business seminars since 2013. The industry does have a problem, he believes: “Whilst progress is being made, we are in an industry where the ratio of males to females is tilted fairly significantly towards males.” Building rapport is important, he argued, but “the benefit to our industry in having a good representation and balance in gender, ethnicity, experience and thinking, is that we can cater to a broader range of consumer and business owner preferences. This will enable sustainable growth for many years to come.” MFAA CEO Siobhan Hayden took a similar view. “In certain situations, men build stronger relationships with men, and there are occasions where women are better at building relationships with women, but I’d never use that as a general yardstick.” She believes the MFAA’s role should be identifying the barriers keeping

the broking profession from better reflecting the composition of Australia’s consumers.

Switch on the referral machine Brokerages where hiring isn’t an option, or isn’t necessary, should take notice of the ING Direct report’s conclusions on the marketing and presentation of financial products. Lisa Claes, executive director of customer delivery at ING Direct and the architect of the “Women & Finance” report, picked out communication as “the greatest opportunity for the industry”, and argued financial providers should address “female nuances seeking greater access to information, simple and straightforward communication, and clear advice.” All of these characteristics also happen to be highlights of the traditional broker proposition. However, brokers may still need to adapt their processes, beginning by recognising the

Financial issues women are concerned about: Feeling financially secure 59% Having enough for a comfortable retirement 57% Concerned about what will happen if something happens to their partner 41% Getting out of debt 26% Source: ING Direct, “Women & Finance,” September 2015

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NEWS ANALYSIS

WOMEN IN FINANCE BROKING’S GENDER (IM)BALANCE Whilst broking has a number of forward-looking brokerages and highly successful female brokers, the overall statistics for the industry’s gender balance don’t look good – a fact perhaps connected with its high average age. However, as the MFAA’s statistics show, women are making up a high proportion of new entrants to the industry. MFAA total membership in June 2015

74% male

26% female

34.2% female

Just nine of MPA’s Top 100 Brokers in 2014 were women

Source: MFAA

Direct’s report, which found that 66% of women surveyed said they were a joint financial decision-maker, and 27% said they made the majority of financial decisions in their relationships.

Dealing with financial conservatism One archetype of female consumers – which the ING Direct report did little to dispel – is that they are more financially conservative than

“I’ve got accountants, solicitors, developers, restaurateurs, right through to a female cattle rancher. These women tend to be quite powerful and focused” Sharryn Huggett, Huggett Enterprises

MFAA new members September 2014 – June 2015

65.8% male

importance of referrals for female consumers. ING’s report quoted Kathleen Burns Kingsbury, who suggested brokers are ‘referral machines’ who “enjoy giving feedback and making recommendations on social networks”. MFAA chief Hayden agrees with this view. “We inherently do ask our peers and share our experiences more often than our male counterparts.” Mortgage Choice’s Bianca Long also agrees “wholeheartedly”: “Women are

typically more inclined to discuss their personal business with their friends than men.” With 54% of new business at her brokerage driven by referrals, she finds certain women provide multiple, regular referrals, whilst referrals from men are more scattered. There are two different types of referrals, according to Sharryn Huggett, an experienced commercial broker operating in Canberra. She works with professional women, often executives, and find they come to her through either professional or social referrals. “Business people tend to refer other business people, because they’re in the same industry. If you’ve got someone working in the government, they’ll be talking to people they associate with on weekends.” Business leads “tend to be a little more experienced” in finance, are aware of their own financial power and want strategic advice. Whilst not strictly referrals, women often exert a large amount of influence within couples who choose to use a broker. Long finds that in owner-occupied scenarios, “typically it’s the woman driving the appointments, driving the purchase prices … women have a wider range of what they’re looking at and probably do a bit more research, and as such, value the model of a broker more than a man does in that couple scenario”. Add to that some of the statistics in ING

their male counterparts. The report claims that women don’t necessarily value getting the highest return on investment: “They prioritise safety, capital protection and predictability of returns over the possibility of earning a higher return.” It also suggested women tend to take more time, ask more questions and are less inclined to make decisions on the spot. In Glenwood, Long typically sees female clients with deposits two to three times bigger than those of their male counterparts – sometimes unusually high given their salaries. “The women are certainly more conservative,” she says. “They want to look at the numbers; their risk appetite isn’t as high as with the men.” Whilst these women going into property investment were strategy-driven, they were typically looking to try first with one property, unlike men, who “are very goal-oriented – five properties, 10 properties; they can almost always give me a number”. However, with couples, she notes, the tables are turned, and women often drive the home-buying process. The experience of Canberra commercial broker Huggett illustrates the diversity within the mature female consumer category. “I’ve got accountants, solicitors, developers, restaurateurs, right through to a female cattle rancher,” she says. “These women tend to be quite powerful and focused.” Her clients aren’t

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financially conservative. Quite the opposite – being used to putting assets and income on the line, they were very confident in the strategies they were taking, whether building a property portfolio or expanding their businesses. Such high-net-worth women don’t operate independently, Huggett says. “They look to their accountants, solicitors and advisors; they tend to take on board as much information as they can to assist in their business. They tend to have more of an eyes-wide-open look at investing in their portfolio.” It’s hugely important to work as part of this team of professionals, she adds, in a long-term partnership with the client rather than a transactional relationship. “You’re working together as a team, step-by-step as they grow, and understanding their business is a very important factor.” Given the huge differences between female property investment clients, it pays to be cautious with generalisations, MFAA CEO Hayden says. In some cases, adapting the look and feel of a product can be useful in order to relay a message that resonates with a gender, she notes, but “women from 35 to 55 relate very differently to women below 35 or above 55, as do men. It’s not about ‘let’s make it a pink colour and simplify the language’. Let’s segment the market to the targets we’re after.”

Room for improvement When it comes to addressing the mature female consumer, lenders are certainly jumping on the bandwagon, but there’s no

reason brokers shouldn’t do the same. Evidently, specific research is thin on the ground; ING Direct’s report was useful but addressed the full spectrum of financial services, not just mortgages. For brokerages to radically change their hiring, marketing and processing more research would encourage them to take that step. This certainly isn’t a trend that brokers can ignore, as everyone interviewed for this piece agreed. “The female consumer in 2015 is driving huge changes in the property market,” says ALIC managing director Back. “Women are looking for choice in how and who they receive their advice from.” Long sees the changes as the culmination of long-term trends: “As the generations come through, women as a whole are becoming more money-savvy, savings-savvy and investmentsavvy.” That doesn’t mean differences in risk appetite will disappear overnight, so the traditional model of broking – whilst attractive to women seeking advice – won’t provide the best methods for presenting options like property investment. The new wave of savvy female clients won’t be the same as their male counterparts, which is why there are opportunities for brokers who make the leap first, as Huggett concludes. “I can see more and more business in executive women seeking finance, and seeking finance in their own right. Women should be seeking to be leaders in their own destiny, and it’ll be important that they can direct their own financial future.”

EVENTS FOR WOMEN IN BROKING MFAA WIMBN The MFAA’s Women in Mortgage Broking Network [WIMBN] has recently been relaunched with a broader mandate, covering social responsibility, opportunities for women, lifestyle/ mental health, and diversity and inclusion (hence the new acronym, SOLD). WIMBN will now address both gender and ethnic diversity as well the mental health issues affecting both male and female brokers, explains MFAA CEO Siobhan Hayden. Opening up WIMBN was a vital step, she argues. “In an area where we wanted to promote opportunity, we had disenfranchised some of our member base: men. I challenged my team to make it more encompassing.” FAST Women in Business FAST’s Women in Business seminars are run across five states and bring together female commercial brokers and guest speakers, explains FAST CEO Brendan Wright, “as part of our commitment to empowering women and to highlight the value of diversity in the industry”. They claim to be the only aggregator to have a dedicated professional development programme for female brokers.

1300 130 538

primefinance.com.au loans@primefinance.com.au

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HEAD TO HEAD

STEVEN HEAVEY “We’ve identified that there are some brokers, especially moving into this new age of digital disruption, who could use more support”

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STEVEN HEAVEY:

TAKING A PUNT Connective are betting their new retail aggregation service will revolutionise the industry. Their general manager of strategy, distribution and digital tells MPA editor Sam Richardson why

MPA: How do Connective define ‘retail

MPA: What brand are you trying to build

aggregation service’, and how will this differ from the industry’s traditional franchise models? STEVEN HEAVEY: I suppose the definition is fairly similar to the traditional retail aggregators out there – the Aussies, Mortgage Choices and Smartlines of our industry. We’ve been very successful in wholesale aggregation, but we’ve identified that there are some brokers, especially moving into this new age of digital disruption, who could use more support. It could make sense to actually use a common brand for certain brokers so we can leverage digital, SEO and social in a way that puts the responsibility on us to develop goodquality content for consumers who are online doing research for home loans. That is taking a different approach to how banks look for consumers, as first home buyers or investors. We’re playing in this digital space where we’re looking at consumers who are looking for a trusted brand, process, products and policy. Some are looking at price, some for comparison, and some just want to establish a relationship with a local broker. With the multiple platforms that we plan to roll out, we believe we’ll be able to access those clients on behalf of the brokers and distribute leads to them.

here – the iConnect Financial brand or the various other brands you’re launching? SH: The iConnect brand is the flagship, the brand we’ll be using for all of our above-theline spend, the brand that’ll be used in localarea marketing campaigns and for individual brokers. We are investing in a digital sense in those other four brands; we’ll be doing it purely online. We’ll be investing heavily in social media, and the appointment of Jane Hill, joining us from Loans.com.au on October 7, will be critical in leveraging those digital brands to be able to infiltrate that 80% of consumers online who are looking for information.

MPA: Will iConnect Financial have separate leadership and resourcing within Connective? SH: This is just another choice that brokers can make when [they] want to join Connective. We’ve been one of the fastest-growing wholesale aggregators in the country, and we’ve realised that there’s not a solution for people who may want more support or leads. We’ve surveyed a lot of our existing members, and they’ve told us that lead generation is very important to them. So we’ve decided to develop this particular channel and put it

iCONNECT FINANCIAL

Connective’s new retail aggregation service will provide brokers with digitally generated leads, marketing and Connective’s Mercury CRM platform. In exchange, brokers will be required to adopt iConnect’s branding, come under a single credit licence and agree to an 80/20 commission split. Connective claims iConnect members will be free to switch back to a wholesale aggregation agreement with Connective at any time. Existing Connective members can now join iConnect and will receive leads; the national rollout will take place in April 2016, when all brokers will be able to apply to join.

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HEAD TO HEAD

STEVEN HEAVEY iCONNECT FINANCIAL’S LEAD GENERATION STRATEGY Whilst digital lead generation is not new, iConnect Financial claim they’ll do it differently, by collecting information to customise offers for clients, rather than using traditional first home buyer/investor classifications. They’ve set up a variety of platforms: iconnectfinancial.com.au The core website for the brand offers options to apply for a loan, educational resources and financial calculators. ratewatchers.com.au For education-orientated clients, this comparison site will keep users updated with the latest rates whilst collecting client information for iConnect Financial. onlinehomeloans.com.au Similar to Loans.com.au, this site will target price-conscious and digital-savvy consumers looking to apply online. Leads will go to iConnect brokers. brokerfind.com.au This straightforward search platform is targeted at time-poor consumers looking to find a local iConnect broker to do the majority of an application for them. Connective also will be marketing through real estate websites Domain. com.au and RealEstate.com.au and drawing data from RP Data/CoreLogic and credit-scoring agency VEDA.

alongside our wholesale aggregation offer for brokers to choose, whether they’re part of Connective or not. To be able to do this effectively, we’ve had to develop our own infrastructure and resources – the appointment of Leith Wickstein as our head of iConnect, and our head of strategy and performance planning, Andrew Gannon, who’s responsible for developing a whole raft of data and information around the industry for our digital assets. They’ll be fullblown infrastructure. Similar to other retail aggregators, they’ll be state-based franchise development managers, of which we already have some. They’ll be digital experts and marketing people building and developing content for our digital assets on a regular basis.

an opportunity to participate in this model. We’ll switch on leads from day one in the second week of October, from all of those digital sources and above-the-line advertising. There is absolutely no change to the arrangements for existing Connective brokers, in terms of commission and compliance and licencing. Over the course of the next six months, we’ll be investing heavily in a raft of marketing initiatives and lead-generation strategies and investing in building brand equity around the iConnect brand. Then next year, the brokers who are with us will have to make a decision about whether or not they want to go down a commissionsharing model, as against a fee-based model. If they do, they will no longer have to pay the

“If we haven’t demonstrated our value within the first six months, then brokers are quite within their rights to stay with our existing wholesale arrangement” I think what’s really important for success, and something that you have to do in the digital age, is actually having relevant content. The key to this will be making sure we have enough resources that are building and driving content that we can serve up to each of those digital assets.

MPA: Should existing Connective members who don’t join iConnect Financial be concerned that resources will be pulled away from them? SH: No, it’s a totally new team of people [at iConnect]; there’s no impact on the existing business. All of the resources are in addition to what we already provide our network through wholesale aggregation.

monthly fee – they go down a commissionsharing model, which is an 80/20 split. They will make that decision; if we haven’t demonstrated our value within the first six months, then they’re quite within their rights to stay with our existing wholesale arrangement, and they can go back. However, it’s important to remember that every single broker – if they’re earning 100% of the commission – still needs to have a website, still needs to build content, still needs to generate leads and still needs to train staff members. This is about understanding the 20% and determining what sort of time you as a small broker are investing and what that costs you … and deciding in your own mind whether this is right for you. And it won’t be for everyone.

MPA: Could you explain how the commission structure will work, both before and after iConnect Financial’s national rollout next year? SH: We’ve launched the business today to only Connective brokers, and are giving them

MPA: Why won’t brokers be locked in to arrangements with iConnect Financial?

SH: The culture of the organisation is a fairer agreement. And we want to provide a fairer arrangement to brokers; there are

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HEAD TO HEAD

STEVEN HEAVEY

Joins ANZ as executive general manager of mortgage solutions

those horror stories you hear from most of the people who have been with multiple franchises or retail aggregation businesses, who have had to leave loan books behind. What we’re providing is cradle-to-grave; you come in at a certain level, and at some point you may or may not outgrow the iConnect Financial brand. If you do, and you want to revert back to your own brand or the business becomes more about you than the brand, then we would welcome you back with open arms to the wholesale aggregation. No fees whatsoever will be involved.

2006

MPA: Why is iConnect Financial

STEVEN HEAVEY’S CAREER TIMELINE

1994

Starts finance career at Mortgage Choice, eventually rising to national lending manager

2002

Moves to St George Banking Group as general manager of distribution

2011

Appointed Suncorp’s general manager of intermediaries

2014

Moves into consultancy with Credo Consulting Group, dealing with Coles, iSelect and Steadfast

2015

Becomes Connective’s new general manager of strategy, distribution and digital, heading up the development iConnect Financial Education

1999–2004

Bachelor of civil engineering, Queensland University of Technology

launching in New South Wales and Victoria first, and when will it be available to brokers in other states? SH: The national rollout is in April of next year, and we wanted to look [first] at our two largest markets. There has been significant interest outside of those areas, so we will be taking on some brokers in other states, because obviously when you’re running a digital platform, you cannot control where those leads come from. We will be going to other states and having small groups able to fulfil some of those leads that we get. Part of the whole value [judgment] the broker will have to make after these first six months is about the quality of those leads and their ability to convert those leads, and we wanted to invest in those two markets first, take those learnings and apply them nationally.

MPA: When will training arrangements for new staff and new-to-industry brokers become available? SH: When the national rollout happens [in April 2016]. So far we’ve only talked to Connective brokers; they already have all of their licencing requirements, and they’re already writing loans today. We’ve already appointed a training manager for iConnect; we’ll have in a place a full induction program, a bit like what you see with Aussie and Mortgage Choice – a three-week initial induction program. That offer will be made to existing people in iConnect who want to employ staff; we’ll train them on their behalf.

MPA: Is there a conflict between Connective’s traditional emphasis on flexibility and iConnect Financial, which appears to be all about committing to the brand? SH: It’s really about maintaining a really good customer experience that’s consistent with the brand. Certainly some of the large organisations we’ve been talking to about fulfilment, organisations that are getting into the industry, [are concerned that] there’s a risk to them in opening that up to potentially

“What we’re providing is cradleto-grave; you come in at a certain level, and at some point you may or may not outgrow the iConnect Financial brand” hundreds of different brands without any structure about how that customer experience will play out. Being able to define best practice, being able to educate brokers on our expectations around response rates and getting back to customers [is therefore important]. That experience for all of the participants and lead-generation sources, we can control under the iConnect banner far more efficiently then we can if it’s out in the open.

MPA: Where do you want iConnect Financial to be 12 months from now?

SH: In a year’s time, if we had 100 brokers nationally, we’d be very happy. Part of what we’ll learn over the next six months is what sort of volume of leads we will be able to generate from those platforms. It will be about what sort of volume we’ll have to generate to keep brokers happy so they can see the value of the commission-split arrangement.

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SPECIAL REPORT

TOP 10 INDEPENDENT BROKERAGES

TOP 10 INDEPENDENT BROKERAGES 2015

With higher settlements than ever before, this yearâ&#x20AC;&#x2122;s leading independents are setting new standards for all Australian brokerages

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Sponsored by

A MESSAGE FROM OUR SPONSOR WHEN YOU start mistaking settlement totals for phone numbers, you know you’re dealing with some serious operators. That was our immediate reaction at MPA on receiving applications for this year’s Top 10 Independent Brokerages – there were more applications than ever, of better quality than ever. We’re confident the brokerages that made it into our Top 10 are amongst the best in Australia. Over the next few pages, you’ll read the secrets of some incredibly talented brokers, as ranked by a combination of performance metrics. However, this report is also about teams – we only accepted nominations from brokerages with a minimum of five brokers. In fact, some of the most interesting insights in this report concern topics like uniform processing, internal referrals and performance tracking. In our centre spread, you can read about these metrics and see stats about the entire Top 10 on issues like lead generation, back-office staff and reasons for going independent. It’s not easy to go it alone. Not only do the big franchises wield enormous marketing budgets, but a number of aggregators and even lenders, such as Connective and Liberty Financial, are moving into franchise-come-retail aggregation models. However, these independent brokerages aren’t looking for TV airtime or walk-in clients; they want to be known to the right people. Whilst some brokerages target specific groups of clients, such as investors, all rely heavily on referrals and have cultivated long-standing links with other financial professionals to better service clients. It’s not MPA’s place to give a verdict on the franchise versus independent debate; you can read these top brokers’ thoughts for yourself and see the merits of both models. However, we do believe this report shows that success as an independent brokerage is certainly possible, and demonstrates how freedom to innovate can pay off handsomely. Finally, we’d like to thank all those brokerages who took the time to apply this year, whether or not they appear in this list.

NAB Broker is proud to support MPA’s 2015 Top 10 Independent Brokerages report, recognising Australia’s best independent broking businesses. By providing quality service and expert advice, the brokerages you will see in these pages have distinguished themselves in their industry and with customers to become the best in their field. As a committed supporter of the broker channel, NAB Broker understands the importance of a broker’s role as a trusted advisor in his or her community, helping clients to navigate through changes in lender product and service offerings that are even more prevalent in today’s market. We also value the innovative entrepreneurial spirit that helps get these high-performing businesses where they are today. In support of this, NAB Broker are committed to empowering our broker partners with shared research and knowledge, flexible products, and efficient processes to help facilitate their continued business growth. With more than half of all mortgages now written through the third-party channel, it’s an exciting time to be a broker, and we expect to continue to see great things from this year’s winners, and from the industry as a whole. NAB Broker would like to congratulate all the brokers named in this report for their hard work, and we look forward to working with you in future. Steve Kane General manager NAB Broker

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SPECIAL REPORT

TOP 10 INDEPENDENT BROKERAGES

N1 FINANCE & LEASE

EPENDEN T IND

KER AGE 201

Established in 2011 Based in Sydney, NSW Managing director: Ren Wong

Total loan book

$530m

Total settlements FY2014/15

$396m

Number of brokers/loan writers

Average annual volume per broker

$49.5m

Conversion rate

88%

A new entrant to our Top 10, and one of the most dynamic brokerages out there, N1 Finance and Lease are not afraid to try new things. “In the last 12 months, we’ve done two different things,” explains director (and number seven in our Top 100 Brokers) Ren Wong. “We’ve focused on our digital strategy, and we’ve diversified into other areas of finance – car loans, equipment finance, financial planning and accounting.” Diversification helps with client retention, and they’ve taken on new staff to help with the transition, including a qualified accountant, planner and other specialists. When it comes to lead generation, the launch of a new Chinese-language comparison site for Australian finance – possibly the first of its type – has made a significant difference. Notably, the leads it has brought in have mainly been from Australia, according to Wong: “They don’t actually come from overseas – we don’t do any marketing in China. They mainly come from Australia, although we do get some leads from China.” Whilst N1 Finance were established in Sydney, Wong is finding that “more and more [leads] are coming up from Melbourne; in the last two weeks, we’ve seen some from Brisbane”. In fact, they now have a broker based in Melbourne, and the clients they’re

getting are looking to buy locally. Wong is confident in being able to attract clients nationwide. “The clients we’ve spoken to don’t actually care about being local; it’s more about reputation,” he says. That reputation has certainly been on the rise recently, Wong adds. “There’s a bit of luck in there, and good timing; the market is good and we do the right thing, and luck strikes.” N1 Finance also do things differently within their office; all their brokers and staff are PAYG, the only brokerage to do so in our Top 10. Wong says this model “gives us more control … everyone works in the office, and we have the same way of doing things; we work nine to five, Monday to Friday”. Wong admits the system does have its drawbacks – namely, that you have to pay everyone “no matter how many deals they have”. Nevertheless, they’ve been running their PAYG model for two years now and aren’t looking back. In many ways, N1 Finance and Leasing, with their unique approach to broking, are a good example of why brokerages should go independent. Wong himself used to be in a franchise and can see the difference. “It’s more about building your own brand. It’s more control, I would say … running your own business, you can do things your own way, without any restrictions.”

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Sponsored by

ACCEPTANCE FINANCE Established 2002 Based in Balwyn, VIC CEO: Daniel Di Conza

EPENDEN T IND

KER AGE 201

Total loan book

$1.11b

Total settlements FY2014/15 Changing a brokerage takes time – 18 months, in the case of Melbourne’s Acceptance Finance. Back in 2013, the brokerage implemented some major changes, says CEO Daniel Di Conza. “What we did was change our business model so we were all pulling in the same direction. The results we see this year are a direct reflection of the changes we made.” One part of the shift was changing brokers’ incentives, standardising commission splits. “What that meant was there was no preferential treatment for any type of client,” Di Conza explains. They also provided all overheads, such as administrative staff and office premises. “We got rid of all the paperwork,” Di Conza says. “We used to have a system where everyone got invoiced for services. [Now], we’ve got a process and a system that every advisor has to adhere to. What that led to was a massive increase in efficiency for our back-office team; they went from being able to process $50m a year to $100m.” They now have three client services personnel for their team of 12 loan writers, and “they’re all incentivised in the same way, conflict almost evaporated, which is interesting given we’ve got so many people”. Acceptance Finance gets around half of their

leads from referral links – accountants, financial planners, property professionals – who are situated all over Australia, so naturally their clients are also nationwide. “Geographical location isn’t a major issue,” Di Conza says. “The only challenge is when you have a lender that wants you to see the clients’ IDs.” Getting clients from referral sources means Acceptance Finance need to offer several types of finance – “refinance, funds for their business, buying a business, any myriad number of services”, according to Di Conza, only half of which are property purchases. Although some referral partners put forward similar types of clients, having a good blend of referral partners results in a varied client base. “We continually evolve,” Di Conza says; the staff have quarterly meetings to discuss the brokerage’s strategy, which helps keep it constant. “Our biggest success has been cultural – getting everyone on the same page,” Di Conza adds. “We’ve spent six years on staff education, on being authentic … we’ve got a culture where people are comfortable saying what they think, and their ability to work in a team has improved by leaps and bounds.”

$297m

Number of brokers/loan writers

Average annual volume per broker

$24.8m

Conversion rate

90%

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SPECIAL REPORT

TOP 10 INDEPENDENT BROKERAGES

ACA MORTGAGE SOLUTION

EPENDEN T IND

KER AGE 201

Established in 2008 Based in Sydney, NSW Senior managers: Raymond Xue and Canna Cao

Total loan book

$876m

Total settlements FY2014/15

$443m

Number of brokers/loan writers

Average annual volume per broker

$55.4m

Conversion rate

82%

Amongst its many distinctions, ACA Mortgage Solution is home to Raymond Xue, Australia’s current number-one broker, according to both MPA’s Top 100 and the Australian Mortgage Awards. However, the force behind the brokerage – a constant performer in both MPA’s and AFG’s awards – is in fact Xue’s wife, Canna Cao. Having found a system that works well, ACA Mortgage Solution hasn’t changed too much over the past year, she explains; they’re just keeping up the hard work: “We’re just very attentive to detail, every day.” The team at ACA Mortgage Solution don’t just work hard, they work smart. Xue attributed his success in last year’s MPA Top 100 Brokers to changing the way the brokerage processes loans. “One case officer might look after 10 clients at the same time,” Cao explains, “but they will look after that client from application to settlement – and even after settlement, if clients want to top up.” The brokerage has both a local and international focus. “Locality is very important,” Cao says. They get a large amount of business from Sydney’s southern suburbs, she notes, and from central Sydney, due to referrals from estate agents, but not much from other states. The brokerage advertises in China Daily and

other Chinese-language publications, but there’s also a huge amount of repeat business, Cao says. “As people go from owning one property to owning 10, they always come back to us.” They’ve also taken their use of social media network WeChat to new heights. “After Raymond won the AMA, we ran a story on WeChat; 48,000

“We just work very hard; there’s no secret here” people read that update,” Cao says. But they’re selective with what they put on WeChat, she adds. “It’s not about promotion; it’s about telling a story about me and Raymond setting up the brokerage, working very hard, overcoming difficulties.” Despite all of ACA Mortgage Solution’s innovations in improving lead generation and processing, Cao is insistent that the brokerage’s success comes to down to relentless effort. “We just work very hard; there’s no secret here,” she says. “Raymond and I, Monday to Friday, work 12–14 hours per day and sometimes Saturday. We’re serious about this business, and we make our clients’ interests our number-one priority.”

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Sponsored by

TRILOGY FUNDING

Established in 2003 Based in Canberra, ACT Director/owner: David Thomas

EPENDEN T IND

KER AGE 201

Total loan book

$939m

Total settlements FY2014/15 You might not believe it, but sleepy Canberra is home to not one but two brokerages in this year’s Top 10. Trilogy Funding are a new entrant to the list, but a very well-established brokerage with a particular specialty in investor clients and an emphasis on performance management, director David Thomas explains. Even a casual visitor to Trilogy Funding’s website will have no doubt what the brokerage is about: They’re ‘the property investor’s mortgage broker’, as their homepage proclaims in large orange type. There’s also a number of videos of Trilogy staff providing expert guidance on TV and a large number of downloadable e-books that teach clients about topics such as calculating equity and avoiding crosscollateralisation, as well as various financial calculators. In fact only 70% of Trilogy’s clients are investors; the remaining 30% of owner-occupiers mainly come from friends and family referrals, according to Thomas. Nevertheless, the brokerage is set up with property investors at its centre, specialising in complex loans and loan restructuring, although Thomas notes that they’re happy to deal with a wide range of investor clients, from mum-and-dad investors to more serious portfolio-builders.

The brokerage’s specialisation in property investment has been painstakingly built up over the years; what’s changed over the past 12 months is the introduction of rigorous performance management procedures. With a uniform and systematised sales process, they’re now able to collect statistics on each broker, closing ratios, new clients, converted clients, and the stage of each and every application. Not only does this help management, Thomas explains, it saves a huge amount of time in the application follow-up stage. Knowing where every application is helps brokers and support staff make fewer and more effective follow-up calls to clients and lenders. Efficiency is also the watchword in Trilogy’s back office. In Canberra, they have three support staff for managing the brokerage and solving complicated cases. The majority of processing is actually done by a seven-strong offshore team, which is particularly costeffective, Thomas says, allowing them to hire more brokers back in Canberra. However, they’re not planning to open any more offices with these extra brokers; they find Canberra’s relatively wealthy population provides a sufficient client base of potential investors.

$262m

Number of brokers/loan writers

Average annual volume per broker

$52.4m

Conversion rate

93%

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SPECIAL REPORT

TOP 10 INDEPENDENT BROKERAGES

WHAT AN ELITE INDEPENDENT BROKERAGE LOOKS LIKE IN 2015 1

EXPANSION

6 out of 10 brokerages were planning to open new offices soon

Most planned to open new offices in the capital cities of states different to their own, mainly to cater to existing client demand in these cities and to harness growing property markets

LEAD GENERATION STRATEGIES

We asked the Top 10 brokerages how they found new business. What immediately stood out was the importance of links with financial professionals – i.e., referral relationships – and the universal use of database marketing. Indeed, many told us that referral relationships with financial planners, accountants and others were their main source of business. However, the high proportion of brokerages that do advertise comes as somewhat of a surprise, given how much brokers pride themselves on referrals. The brokerages that advertise tend to do so in specific publications, either for minority-language groups or niche industries that might require their services. Advertising

Sponsorship of community groups/charities

7 8

Social media Links with other financial professionals

Database marketing

CONSIDERING GOING INDEPENDENT?

“You have the ability to be agile and make decisions in real time; we run a very test-and-learn environment here, where we try lots of new ideas … being independent allows you to do that. [It] allows you to really spread your wings with the type of business you want to run and develop”

“I think it comes down to skill sets: If you’re a first-timer or new to the industry, you might sink if you go out on your own. It comes down to the support requirements of each broker. We’ve got a lot of experience, so I don’t think an affiliation with an Aussie is required”

“Independent brokers can be more robust, run the business how they choose, and they own the business at the end of the day – however big or small it is, it’s theirs. There are reasons for both models, and they’re both successful; it’s about what the brokers want”

Jason Back The Australian Lending and Investment Centre

Daniel Green Green Finance Group

Jeremy Fisher 1st Street Home Loans

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Sponsored by

HOW OUR TOP 10 INDEPENDENT BROKERAGES COMPARE TO MPA’S OTHER REPORTS Top 10 Independent Brokerages vs Top 10 Franchise Brokerages

Top 10 Independent Brokerages vs Top 100 Brokers

On average, independents had a far bigger total loan book – $1.21b as opposed to $737m for the franchises

Six of the top 10 brokers from our Top 100 Brokers report work at the brokerages in this year’s Top 10 Independent Brokerages report

Their total settlements over the preceding 12 months were also bigger – although the property market changed significantly between the publication of the two reports

The average broker at the average independent brokerage in this year’s Top 10 – writing $58m worth of business – was not far off last year’s entry point for the Top 100 brokers ($62m)

On average, independent brokerages are bigger, with nine loan writers as opposed to five loan writers at franchise brokerages

METHODOLOGY This year we opened up applications for the Top 10 Independent Brokerages to all brokerages with clearly independent branding and with more than five staff in a single office. (Previously we asked aggregators to nominate high-performing brokerages.) The insistence on limiting applications to five or more writers in a single office was so our report would highlight examples of excellent management and team-building, rather than the brilliance individual brokers, although you’ll find a

number of such brokers at these brokerages. The ranking of brokerages resulted from a combination of metrics, including total loan book value, performance over the past financial year, average volume per broker/loan writer and conversion rate. Of these, we placed particular emphasis on the last financial year’s performance to favour brokerages that had continually improved their business and give newer brokerages a fair chance.

Rank

Brokerage name

Total loan book

Total settlements FY2014/15

Number of brokers

Average volume per broker

Conversion rate

The Australian Lending & Investment Centre

$1,983,500,000

$639,951,000

$71,105,667

96%

Tiffen & Co

$1,822,754,036

$493,587,528

$82,264,588

98%

1st Street Home Loans

$1,576,352,032

$507,412,802

$56,379,200

95%

Apple Home Loans

$1,749,758,504

$749,513,385

$68,137,580

83%

Alliance Mortgage Solutions

$1,048,294,000

$858,225,000

$61,301,786

88%

Green Finance Group

$476,650,853

$331,202,638

$66,240,528

95%

Trilogy Funding

$939,570,468

$262,011,246

$52,402,249

93%

ACA Mortgage Solution

$876,824,748

$443,904,412

$55488052

82%

Acceptance Finance

$1,110,000,000

$297,500,000

$24,791,667

90%

N1 Finance & Lease

$530,000,000

$396,000,000

$49,500,000

88%

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SPECIAL REPORT

TOP 10 INDEPENDENT BROKERAGES

GREEN FINANCE GROUP

EPENDEN T IND

KER AGE 201

Established in 2010 Based in Hawthorne, QLD Director: Daniel Green Overall they have three arms of the business – finance, insurance and wealth – which operate out of their single Queensland office but have a national reach. These services make a real difference, Green says. “That’s where a lot of other brokers are falling down. They might be providing the client’s home loan, but for financial planning, the client talks to a planner with affiliations to other brokers, and before you know it, that relationship has been diluted.” Having many brokers in different areas of finance means internal referrals are absolutely crucial for Green Finance Group. Therefore, the brokerage

Total loan book

$476m

Total settlements FY2014/15

$331m

Number of brokers/loan writers

Average annual volume per broker

$66.2m

Conversion rate

95%

Green Finance Group and its founder, Daniel Green, have appeared in MPA before, but usually as commercial broking specialists. This was the first time they’ve entered a general broking report, Green says. “I didn’t realise how big our figures had got … for the first few years, Green Finance was basically me working from my house.” Understanding Green Finance’s success means understanding its construction. It started from a common challenge for new brokers: “I realised you can’t write 30 loans a month without support, and that’s when I started branching out into specialist areas: the residential division, the specialist division,” Green says. In short, his strategy is built upon diversification through specialisation – he’s a specialist in hotel and childcare finance, and all his brokers and support staff are also specialists. Customers do know the difference between a jackof-all-trades and a specialist, Green insists, and this shows in Green Finance’s success over the past 12 months. “Clients are still looking for a one-stop shop,” Green says, which is why the brokerage has been constantly expanding and hiring more specialists – in financial planning, general insurance, even introducing a car-buying service for individual clients.

“I realised you can’t write 30 loans a month without support, and that’s when I started branching out into specialist areas” proactively encourages these. “At the end of the month, we’ll meet, look at different parts of the business and their draw-downs, and ask what opportunities there are to cross-sell,” Green says. One initiative has been going to the offices of business clients and offering to review staff members’ home loans. A lot of approvals are subject to getting insurance, which means Green Finance’s in-house insurers can provide a value-add by saving clients’ time. Green Finance Group isn’t going to stop expanding – they’ll be hiring new support staff and opening a new office in Sydney’s Pyrmont district before the end of the year. Green is undoubtedly optimistic about the brokerage’s future. “My view is, I would rather put on staff with a view to growing the business than growing the business and panicking about timeframes.”

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Sponsored by

ALLIANCE MORTGAGE SOLUTIONS

Established in 2012 Based in Sydney, NSW Managing director: Cissy Fang

EPENDEN T IND

KER AGE 201

Total loan book

$1.05b

Total settlements FY2014/15 Top 10 Independent Brokerages may be the only competition Alliance Mortgage Solutions [AMS] hasn’t yet appeared in – they were the Australian Mortgage Awards’ New Brokerage of the Year, and are led by Top 100 Brokers Eric Cui (sixth) and Donald Tang (ninth). All this was achieved in less than three years; AMS was established in November 2012. This year was as fast-moving as ever, Cui says. “We brought six brokers on board, and we designed our own training programme, starting from day one.” They also launched their website and established themselves on Facebook and WeChat, the network utilised to great effect by brokers working with Chinese-language clients. They’ve also been working hard to establish referral links with local estate agents. “Alliance’s brand is now much more famous within the mortgage broking industry,” Cui says. “Our awards are particularly recognised within the Chinese community, and they approach us … including very official Chinese media.” Around 20–25% of AMS’ clients are international, but that still means around 70% of clients come from Sydney, although enquiries from Melbourne are growing in number.

Within AMS, there are three supporting departments – marketing, accounting and administration – that are worth the accompanying costs, Cui says. “These people make our sales team much more effective, doing a lot of the pre-sales work for us. The sales consultants focus on their jobs, [and] we can win more business.” In fact, AMS recently established an office in Hurstville exclusively for their administrative staff. The division of responsibility also applies at the top of the brokerage – Cui and Tang are working brokers, but third co-founder Cissy Fang is exclusively administrative. AMS certainly aren’t resting on their laurels. From May onwards, they’ve been offering commercial and asset finance, and constant training is at the core of the brokerage’s philosophy. “We put a lot of effort into training,” Cui says. “Brokers are required to get 30 CPD points per year, but our internal policy insists on at least 50 points.” They bring lenders and aggregators into the office to train the staff and attend personal development days whenever possible, Cui adds. “We want the clients to think our brokers are very professional and knowledgeable – not just about mortgage broking, but also other industries.”

$858m

Number of brokers/loan writers

Average annual volume per broker

$61.3m

Conversion rate

88%

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Sponsored by

SPECIAL REPORT

TOP 10 INDEPENDENT BROKERAGES

APPLE HOME LOAN

EPENDEN T IND

KER AGE 201

Established in 2005 Based in Sydney, NSW Senior lending manager: Roger Guo

Total loan book

$1.74b

Total settlements FY2014/15

$749m

Number of brokers/loan writers

Average annual volume per broker

$68.1m

Conversion rate

83%

Headed by Roger Guo, Apple Home Loan are consistent performers in MPA’s Top 10, thanks to their simple emphasis on good customer service. This year they’re taking that approach to commercial lending, getting accredited and designating a broker to focus on increasing their commercial business. “It’s basically coming from the customers’ requirements,” Guo says. “We got a lot of enquiries; we cooperated with the bank to provide commercial funding for our customers.” Guo believes Apple Home Loan’s customer-servicecentred approach also assists them with lead generation. “We haven’t been doing any new marketing,” he says, “just providing good customer service and getting more customers to come back and get more finance from us.” He estimates that 98% of the brokerage’s clients are from Sydney and looking to buy there, which he puts down to the brokerage’s Sydney location: “Of course the customer is looking for a local broker, because most of the time they want a face-to-face conversation about their financial needs.” Being local has its costs, though, specifically when it comes to the back office. Apple Home Loan have a team of support staff shared between brokers. “Our process team works for every broker,” Guo says, “but some [high-performing] brokers also have a personal

“We rely mostly on the local community, so we don’t think being a franchise would be useful” assistant working for them.” They’ve been considering options for reducing back-office costs without resorting to offshoring, Guo adds. “We’re still looking for a local support team. To save on costs, we ask that the broker also shares the cost of the company.” Apple Home Loan have close links with specific communities in Sydney, and their brand is well-known within these communities. “Most of our leads are from the Chinese community and other Asian communities,” Guo says, “[and] we think being independent helps with that.” For Guo, Apple Home Loan’s independence is a significant advantage specifically because of its localised approach. “We’ve never been a franchise before, as franchises may have a lot of restrictions. We rely mostly on the local community, so we don’t think being a franchise would be useful.”

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SPECIAL REPORT

TOP 10 INDEPENDENT BROKERAGES

1ST STREET HOME LOANS

EPENDEN T IND

KER AGE 201

Established in 2003 Based in Sydney, NSW Director: Jeremy Fisher

Total loan book

$1.57b

Total settlements FY2014/15

$507m

Number of brokers/loan writers

Average annual volume per broker

$56.3m

Conversion rate

95%

The past year at 1st Street Home Loans hasn’t been about change at all, explains director Jeremy Fisher; instead, it’s been about consistency. “It’s always been our motto – being consistent from a client perspective,” he says. The hard work has already been done, he adds. “A year or so ago, we did a few different internal workshops to streamline our processes. Everyone was doing similar things, [so] it was about taking the best from everyone and putting it in one place.” It certainly helps that 1st Street’s head office is ideally positioned in Sydney’s property market, which has defied regulator jawboning and continues to grow. Their typical client hasn’t changed much, Fisher says. “It’s always been owner-occupiers and upgraders, but we still get investors.” Refinancing only makes up 20–30% of the brokerage’s business. “We don’t churn our book,” Fisher says. “It’s not something that we do.” Given 1st Street’s huge increase in annual settlements from last year, the Sydney market is clearly making a difference in a number of different ways. “Most clients are Sydney-based, looking to buy in Sydney,” Fisher says, “but now we are seeing clients, from an affordability perspective, looking elsewhere.” That focus further afield isn’t an issue for the brokerage,

he adds. “I’ve always been a believer that the client comes for the brand; they don’t come because of the location. They come for the relationship with that broker, and I don’t think that’s changed.” For a 13-year-old business, 1st Street has relatively few back office staff – just one office manager and one supporting staff member in the Sydney office. That’s a deliberate strategy, Fisher explains. “We’re very light on that side. Basically the philosophy has been that the brokers will manage the process from start to finish, and that really hasn’t changed.” Taking this approach means the broker will know exactly what’s going on at every stage in the application, improving communication with clients. Whilst their client base has remained consistent, 1st Street have been proactively building their capability in non-mortgage services, offering financial planning and taking on a dedicated commercial broker and a dedicated SMSF expert. “I think there’s huge room for [these services] still to grow,” Fisher says. “We wanted to be in a position that when a client asks, we can say, ‘Yes, we offer it,’ rather than, ‘No, we’ll have to refer you.’ There’s still upside, there’s no question about it; we’re not experts in that space, and there’s still a lot to learn and a lot to grow.”

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Sponsored by

TIFFEN & CO

Established in 1995 Based in Canberra, ACT Managing director: Gerard Tiffen

EPENDEN T IND

KER AGE 201

Total loan book

$1.82b

Total settlements FY2014/15 “It’s business as usual, really” is how managing director Gerard Tiffen sums up the past year at his brokerage. But when business is usual is writing $493m in a city renowned for its sleepiness, you wonder exactly how Tiffen & Co do business. Whilst the office has been revamped, notes Tiffen, a more important driver has been the Canberra market and a certain ‘Mr Fluffy’. This peculiarly named scandal involved the government being forced to buy back 1,100 asbestos-riddled properties, putting a corresponding number of buyers on the market. “From a terrible situation,” Tiffen says, “the positive side is it has created a lot more work.” In operation for 20 years and appearing in MPA’s various reports for a decade, Tiffen and Co continue to be a relatively localized brokerage. “Canberra can be quite a transient town,” Tiffen says. “Clients will be here for one to three years and then might sell and move to Perth. They’ll still talk to us via Skype, and we’ll do their application.” Nevertheless, these clients are mostly looking to buy in Canberra, he says: “I think people like to get belly-to-belly and face-to-face with their broker.” Being an established brokerage means Tiffen & Co’s brokers have a considerable customer database

to market to – so large, in fact, that they’ve hired someone specifically to contact past clients. “We don’t do this generic stuff,” Tiffen says. “We write the articles ourselves; we’re specific to Canberra; we’re specific to our clients and referring to what’s happening in our area on a daily basis.” The brokerage contacts clients once a month through newsletters, birthday cards and phone calls. “It’s important you target you actual marketplace with real information,” Tiffen says. Tiffen & Co sponsors and rides in a bike team, and the brokerage attends charity fun runs and balls. “We stay involved in the local community,” Tiffen says, “because most of the time they’re existing clients who have asked for our help.” The brokerage’s small marketing budget is mostly spent on entertaining local professional groups. “You create links over time, but there’s nothing formal in place,” Tiffen says. “We don’t pay for leads.” Back office is a continual concern; the brokerage utilises a system where each broker is paired with an assistant and must account for the pair’s costs. It’s about tying costs to income, Tiffen says. “We’re service providers in a results driven-business. If you succeed, you get paid well. If you’re a bum, guess what?”

$493m

Number of brokers/loan writers

Average annual volume per broker

$82.2m

Conversion rate

98%

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SPECIAL REPORT

TOP 10 INDEPENDENT BROKERAGES EPENDEN T IND

KER AGE 201

THE AUSTRALIAN LENDING & INVESTMENT CENTRE Established in 2009 Based in Melbourne, VIC Managing director: Jason Back

Total loan book

$1.98b

Total settlements FY2014/15

$639m

Number of brokers/loan writers

Average annual volume per broker

$71.1m

Conversion rate

96%

In an industry already envied by the rest of the Australian economy, The Australian Lending and Investment Centre [ALIC] sit at the top of the pile. In short, ALIC are definitely not like any other brokerage. Whilst brokers are now beginning to wake up to the benefits of a service-based – rather than transactional – relationship with clients, ALIC have been doing this since their inception six years ago. They look for a long-term relationship with a client, even asking clients to sign a document committing to this relationship, or be charged if they go elsewhere. Moreover, ALIC’s clients take responsibility for their side of the loan-writing process. Managing director Jason Back told MPA how they made this possible. “We ask for that commitment, but we’re not chasing the entire market … we’re very specific about the type of client we’re involved with.” These clients are 80–85% investors, not necessarily professionals but “middle managers, executives, mum-and-dad investors who are growing their portfolios.” ALIC, in partnership with a range of other professionals, draft a strategy for a client, and whilst clients can be charged if they break the agreement, this has only happened “two or three times” in ALIC’s history, according to Back. If anything, ALIC are somewhat reluctant to promote themselves – with good reason, according to Back: “We’re very sensitive to the business’s ability to process volume; if we try and be all things to all people, that could denigrate the quality of the service to our clients. We’re starting to get known in the right circles for the right quality clients.” They’ve needed to adapt to cope with demand, Back says. “Over the last 12 months, the thing that we’ve focused on is process efficiency … focusing on

reducing waste and being able to process more volume.” This has been done by introducing a client relationship roadmap, “which outlines when certain things need to happen and who’s responsible for them and what actions are required at every single stage of the loan”. The past year hasn’t all been good news; obviously, APRA’s actions to curb investor lending have been a bit of an issue for a brokerage so focused on investors. It has been challenge to keep up with the number of lender changes, Back admits, but ultimately, “we’re not overly concerned. Most of our clients are equity based-clients; they have large amounts of equity in their property and strong cash flow. We’re not relying on positive gearing to run a portfolio … they’re healthy clients.” Within the office, ALIC pool their support staff, but “we are starting to look at a one-to-many model, which means at any stage, any time, a staff member can grab a file and process for that client, and we’re starting to look further afield at how hub-and-spoke models can support our business”. Hiring is an important part of ALIC’s future strategy, Back adds. “We’re proud of hiring locally, and we’re developing an educational academy here, taking them from relationship managers to brokers. We want a lot more females in our business, a lot more youth, to really build the next generation.” From loan writing to hiring, ALIC’s success is built on a clear identity. As Back puts it: “We’re more than a transactor. The reality is that the transaction is the last piece of the puzzle; the education and the structure and the strategy is where the value is, and we feel we’ve got something very different to what the market offers.”

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Sponsored by

From left: Jason Back, managing director; Blake Albones, head of NAB Broker, VIC/TAS; Kevin Agent, principal; Mark Davis, principal www.mpamagazine.com.au

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FEATURES

NON-CONFORMING CLIENTS

HIDING IN PLAIN SIGHT Non-conforming clients are a lost opportunity for many brokers, especially when the definition of such clients is in constant evolution. MPA asks top lenders in the sector how to spot a non-conforming client in 2015

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WOULD YOU know a non-conforming client the moment they walked through your door? Chances are you wouldn’t, because they look much like any other client – and like any other client, they want a loan. Unfortunately, the moment many brokers realise a client is nonconforming is also the moment they turn them away, missing out on a valuable business opportunity. MPA has asked Australia’s top nonconforming lenders how brokers can identify, assist and make a long-term difference to nonconforming clients, whilst creating valuable referral networks.

WHAT MAKES A CLIENT NONCONFORMING? Unusual income

Credit impaired

Self-employed

An opportunity lost It’s likely you’re already missing out on nonconforming clients. Pepper’s director of sales and distribution, Mario Rehayem, certainly believes so: “Brokers will always come across nonconforming clients; it’s whether they’re aware of it, or want to acknowledge it, or want to partake in that transaction. The way we envisage nonconforming, it should be a percentage of a broker’s business.” Pepper suggest that with the right procedures in place, 5–15% of a broker’s business should be non-conforming clients. Today, according to Pepper’s estimates, 24% of non-conforming clients don’t even apply for finance because they think they’ll be rejected, and 16% are told by brokers they can’t be helped. Non-conforming lenders believe that latter statistic should be far lower. As Liberty Financial national sales manager John Monacheff puts it, “Australians from all walks of life deserve to be considered to own their own home, car or business”. So what’s stopping them getting finance?

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Need a high LVR

Non-genuine savings

Require loan for debt consolidation

Uncommon employment

Alternative documentation

Uncommon property

Source: Pepper

25/09/2015 11:23:14 AM

FEATURES

NON-CONFORMING CLIENTS POSITIONING A SPECIALIST LOAN Murray Cowan, owner of Better Mortgage Management, advises brokers to use the following process in their consultation with a non-conforming client: 1

Create a positive environment for the applicant

2 Educate the client on what a

specialist loan looks like and why it could be a solution 3 Offer the repayment before the

rate 4 Sell the specialist loan with

long-term objectives; it’s not intended to stay with them forever 5 Proceed with the application

What non-conforming means now One reason many non-conforming clients get turned away is because ‘non-conforming’ encompasses a vast array of situations, many of which do not make clients bad borrowers. What all lenders told MPA is that the traditional definition of non-conforming clients as credit-impaired – with all the negative connotations that carries – is no longer useful for brokers. For a start, many non-conforming clients aren’t credit-impaired at all; they just lack the documents required by the banks. Bluestone

ill, or they had to use the money in an emergency and have got in problems with the ATO … a lot of people that are PAYG can get themselves into similar situations.” It’s vital to separate clients from individual life events to appreciate the diversity in the space, as Pepper’s Rehayem notes. “From our perspective, a non-conforming client has the same characteristics as a conforming client. That can range from blue collar to an affluent investor looking to purchase a refi, home or property.” Ray Hair, general manager of sales at

“It is important for the broker to understand and be able to articulate the client’s story as to what happened, how it has been managed and why it will not be an ongoing problem” Ray Hair, Homeloans

Adapted from a slideshow provided by Better Mortgage Management

Mortgages specialise in small-business borrowers whose tax returns just “don’t show what the business is actually earning”, according to Royden D’Vaz, national manager of sales and distribution. They also deal with new businesses whose owners don’t have the 24 months’ credit history required by some lenders, as well as entrepreneurs whose previous business didn’t succeed, D’Vaz explains. “They have the business acumen, but the business didn’t work, and they have to start again.” Similarly, self-employed people are “at the top of the list” for non-conforming business at Resimac, according to Allan Savins, Resimac’s chief commercial officer, who argues that “with over 2 million self-employed people in Australia, the opportunity for brokers to target these borrowers is evident”. Small-business owners also make up a sizeable proportion of Better Mortgage Management’s customers, and the reason is tax debts. “Paying tax debts is a good one for us,” says BMM owner Murray Cowan. “We pick up quite a lot of business. The bookkeeper’s falling

Homeloans, says common situations include “marital breakup, long-term illness, loss of employment, and a failed business or investment, all of which can contribute to payment arrears, defaults, tax debts and insolvency or bankruptcy”.

Prime is a moment in time It’s not only personal crises that turn prime clients into non-conforming clients. Recent shifts in regulatory policy – reflected in banks’ LVR and serviceability requirements and assessments – have left many borrowers on the wrong side of lenders’ policies, providing opportunities for brokers. Just as this article was being compiled, regulator ASIC published a number of recommendations on interest-only loans, such as requiring banks to utilise borrower-specific living expenses. BMM’s Cowan believes that measure will help his business. “We and our funders already required more investigation; I think the ASIC release means banks will have to change their customers. At times we would have a customer [who would] ask for

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FEATURES

NON-CONFORMING CLIENTS THE OPPORTUNITY GAP Pepper estimate that six out of 10 non-conforming clients are missing out on getting a home loan. Why? 34% unsuccessfully apply to a traditional lender

24% do not apply because they think they’ll be knocked back

16% of borrowers have been told they can’t be helped

an increase, and we’d say they don’t qualify, and they would go to a bank and they would qualify, and we wouldn’t understand how.” Moreover, the year’s biggest development in the mortgage industry – APRA’s crackdown on investor lending – has changed the status of many investors. Pushing banks to keep investor lending growth to 10% resulted in many banks both raising rates for investor borrowers and lowering maximum LVRs. Many would-be or current investors can no longer qualify for such loans, particularly younger investors who lack the deposit. However, non-bank lenders, who aren’t tied to APRA’s 10% limit, can still offer the higher range LVRs. Looking to the future, the prospected increase in banks’ capital requirements may lead to more borrowers being pushed over the line, says Bluestone’s D’Vaz. “As banks and mortgage insurers get tighter in their lending, with the capital requirements coming up, this part of the market is becoming bigger.” The 2014 Financial System Inquiry recommended increasing capital ratios for major banks, which could both level the playing field and make lending more expensive for the majors. The incoming Basel III and proposed Basel IV regulations would set international standards with similar effects.

Managing referral partners

Pepper’s Mario Rehayem believes non-conforming borrowers should make up 5–15% of a broker’s total business.

Once you’re aware of the diversity of nonconforming clients, you can adjust your processes to increase non-conforming leads. As with prime lending, referrals are a crucial conduit of business, particularly as satisfied non-conforming clients are more active referrers. However, in some situations, referral partners can become a hindrance to non-conforming loan-writing if not properly managed. According to D’Vaz, referral partners can make the same mistake as brokers by turning away clients who could be helped. The solution, he argues, is to encourage them to refer on more clients. “It’s a matter of letting referral partners – people who give or refer business to them – be aware of stuff they can do. Say, ‘Don’t become my gatekeeper; tell me

everything.’ [Brokers should] train referral partners first.” When it comes to finding referral partners, Resimac’s Savins advises brokers to target accountants and solicitors. “Accountants will often have clients who are seeking finance to help fund growth or pay taxation liabilities

“Australians from all walks of life deserve to be considered to own their own home, car or business” John Monacheff, Liberty Financial arising from recent growth, and solicitors may have clients who are going through a relationship breakdown where a property transfer and debt consolidation is required.” Savins believes brokers can get more nonconforming business by expanding their relationships with referral partners. “For example, most brokers will call on the local solicitors and conveyancers, asking for purchase contract referrals. If you want to take this business relationship a step further, you could ask for a referral for anyone going through a divorce who needs to refinance the family home or consolidate some debt.” For divorcee clients, Savins notes, brokers might also wish to ally with specialist family law practitioners. In fact, there are as many referral sources as there are non-conforming scenarios, says Homeloans boss Hair. “Brokers [should] align themselves with the professionals who provide assistance to clients experiencing marital breakups, long-term illnesses, involuntary unemployment, financial hardship/counselling, business failures and restructures, tax debt negotiations, or similar services [so] the broker can build effective referral relationships.”

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FEATURES

NON-CONFORMING CLIENTS “As banks and mortgage insurers get tighter in their lending, with the capital requirements coming up, this part of the market is becoming bigger” Royden D’Vaz, Bluestone Mortgages REFERRAL SOURCES FOR NON-CONFORMING CLIENTS In many ways, getting non-conforming leads is similar to the process for prime business. However, there are some specific referral partners who can make a significant difference: Accountants Financial planners Insolvency practitioners Credit repair agencies Specialist family law practitioners Local business associations

Getting pre-assessments right Getting non-conforming leads is one thing; turning them into satisfied customers is quite another. One area where you can lose many non-conforming clients is their very first encounter with your brokerage: the preassessment stage, which a number of busy brokers now assign to their personal assistants. For Pepper’s Rehayem, this stage is more important than marketing. “The first area I would concentrate on – before I go and advertise for non-conforming – is to concentrate on our preliminary assessment.” The danger is delegating decisions to PAs who are merely following a spreadsheet, he says. “Where a lot of brokers fall short is getting a PA to tick boxes to pre-qualify a client before they sit in front of a broker. Effectively that’s like a credit scoring model; they are looking to knock out clients so they don’t waste an experienced person’s time.” What’s required is a change of attitude; PAs need to delve a little deeper into the client’s story and reason for being creditimpaired, and also consider the requirements of all lenders, rather than just those of the major banks. This does need to be done with care, of course, because of regulatory requirements around providing borrowers the right product. BMM owner Cowan urges brokers to be cautious. “Leaving a PA to do the fact-find part might be a bit risky, considering ASIC [are] encouraging lenders and brokers to thoroughly investigate a client’s situation.”

Meeting the client By the time you actually sit down with a nonconforming client, much of the work is already done; you’ll have some understanding of their particular situation and what stops

your client being prime. However, the assessment is still important – first, for finding documentation when standard documentation isn’t available, and second, for customising the product to the client. Above all, you need to document the client’s scenario, Savins says. “The complexity of the scenario will determine the level of background information and documentation required in support of the application. There really is no substitute for good-quality submission notes.” Collecting such information isn’t much different to the process for a prime loan, says Hair; the key step is identifying the singular life event that has made the client nonconforming. Accuracy here helps prevent further delays down the track, when credit reports and investigation by the lender can uncover details that could affect the success of the application. In terms of financial documents, Rehayem points out lenders have a “multitude of ways” in which they can assess clients. Given that the financials required by banks can be up to 18 months old, BAS statements and evidence of outgoing expenses can fill gaps and provide an alternative. Lenders can be flexible, says Liberty boss Monacheff. “We employ a considered and subjective underwriting process so we can ensure that we always offer a product ‘fit’ for each client, and also so we do not exclude many great customers simply because they did not fit a rigid set of criteria.” The assessment helps brokers match clients to products, which is important because nonconforming products are generally specific to the customer – “risk for rate”, as Bluestone’s D’Vaz puts it. You can find basic details of lenders’ products on the final page of this feature, but note that the rate and LVR often will depend on the client’s specific circumstance. Some lenders now offer a range of nonconforming, prime and near-prime products and use the information from the assessment to suggest a suitable product. According to Homeloans’ Ray Hair, having a single application form allows the process to work the other way. “Should a broker submit an application to Homeloans

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MAGAZINES

SPECIAL REPORTS

ARTICLES

Shop MPA online today at

shop.keymedia.com.au

FEATURES

NON-CONFORMING CLIENTS COMPREHENSIVE CREDIT REPORTING In March 2014, comprehensive credit reporting [CCR] was introduced in Australia. It differs from traditional credit reporting, where only clients’ credit applications and credit defaults could be shared between lenders. CCR could empower lenders to offer more customised and potentially cheaper rates by sharing details such as: Account open date and close dates Type of credit account Credit limit Monthly repayment history At the time of writing, CCR was still voluntary, and the major banks were resisting the move on the ground that it would force them to share important details with smaller competitors. The Financial System Inquiry’s Recommendation 20 regarding CCR noted that “if, over time, participation is inadequate, government should consider legislating mandatory participation”.

“The complexity of the scenario will determine the level of background information … there really is no substitute for good-quality submission notes” Allan Savins, Resimac for a prime loan and the credit report reveals an event that would impact on their ability to qualify, with the same application form, we are able to match the client to an appropriate product from our specialty range.”

Improving the client’s financial future The payoff for non-conforming clients goes far beyond the upfront commission. With the broker’s help, clients can improve their credit rating and ultimately make the move to prime products, which lowers their repayments and gives the broker additional business through refinancing. The timeframe for this rehabilitation can be shorter than you might think – Hair suggests that six to 12 months of on-time repayments on a specialist product can move the client to prime or near-prime territory. In time, the customer’s defaults also will be removed from their record, adds BMM’s Cowan. “In two or three years’ time, the defaults won’t be there any more on the report, and they’ll be able to qualify for a prime loan. The broker can get upfront commission for writing that loan, and we offer discounts to customers for moving from a specialist loan to a prime loan.” As Cowan implies, in order to keep their clients, non-conforming lenders are placing an increased emphasis on their prime products. Pepper are working with brokers to make the transition from non-conforming to prime as easy as possible, Rehayem says. “The only reason our customer would leave is if we cannot accommodate them with a conforming loan with a corresponding lower interest rate, hence the reason we created Pepper Prime.” Lenders differ on how much the broker needs to be involved in clients’ financial

rehabilitation. Bluestone’s D’Vaz suggests it’s important to keep all parties in the loop, and to tell clients “[to] make sure you look after the loan, make sure your payments are paid on time, and when the time is right, they can refinance to a typical home loan with a much better rate”. Modern CRM software can make the job of reminding clients about loan repayment dates easier than ever, as well as alert the broker when the client may be eligible for prime products. Acting sooner rather than later could make the most difference, concludes Resimac’s Savins: “You only need to look at the Sydney market, where property prices have increased 18.4% over the previous 12 months. Had a client who considered a purchase 12 months ago delayed that decision [because they couldn’t get finance], they would now require a substantially higher deposit and require a much larger loan. And all this after paying an additional 12 months’ rent.”

Uncover the opportunities Savins’ point works both ways – nonconforming loans that don’t get written are a missed opportunity for brokers and clients. What’s needed is an understanding of nonconforming clients as a product of changing market conditions, rather than one underlying reason, as Pepper’s Rehayem argues. “The borrower profile has not changed for many years. What has changed is the lenders’ appetites, regulatory changes, and we’ve got to be mindful that ‘prime is a moment in time’.” By optimising their processes – from lead generation to pre-assessment and beyond – brokers can uncover the business opportunities in a changing landscape and provide clients they solution they’ve been looking for.

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FEATURES

NON-CONFORMING CLIENTS

FEATURED NON-CONFORMING PRODUCTS We asked non-conforming lenders to provide details of their non-conforming products. This list should be viewed in the context of nonconforming lending – rates and LVRs are tied to the clients’ individual situations and can therefore vary; these details are for guidance only. Note that all details are correct to the best of our knowledge at the time of writing.

BETTER MORTGAGE MANAGEMENT Product name

Initial rate

Comparison rate

Term

Variable/fixed

Max LVR

Flexi Ultimate Alt Doc

5.09%

5.33%

not provided

70%

Premium Power Pack Alt Doc

5.48%

5.61%

not provided

80%

Initial rate

Comparison rate

Term

Variable/fixed

Max LVR

Lite Blue

5.89%

6.08%

15–30 years

Variable

85%

Clean Slate

5.64%

5.83%

15–30 years

Variable

85%

Business Easy

6.39%

6.58%

15–30 years

Variable

85%

Initial rate

Comparison rate

Term

Variable/fixed

Max LVR

Homeloans Accelerate Red

5.49%

5.76%

10–40 years

Variable

95%*

Homeloans Accelerate

5.64%

5.91%

10–40 years

Variable

95%*

Homeloans FlexiChoice

5.84%

5.89%

15–30 years

Variable

90%*

Initial rate

Comparison rate

Term

Variable/fixed

Max LVR

Pepper Essential

4.24% (up to 55% LVR)

4.43%

10–30 years

Variable

85%*

Pepper Easy

5.49% (up to 65% LVR)

5.79%

10–40 years

Variable

90%**

Pepper Advantage

5.64% (up to 55% LVR)

5.99%

10–40 years

Variable

90%***

BLUESTONE Product name

HOMELOANS Product name

*Higher rate applies

PEPPER Product name

*Full doc rate is 4.99%, comparison of 5.24%

**For purchase – full doc rate is 6.99%, comparison of 7.49%

***For purchase – full doc rate is 8.40%, comparison of 8.95%

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PROFILE

TRACY KEAREY

TRACY KEAREY:

IT’S A LONG WAY TO THE TOP Tracy Kearey puts her journey from PA to director of leading Queensland brokerage Home Loan Connexion down to backing herself, and she wants other brokers to do the same

SO OFTEN, a successful career can hinge on a single decision. For Tracy Kearey, that moment arrived on 29 November 2013. She was already a successful broker at Home Loan Connexion – in fact, the number-one loan writer in the group – when she sat down with owners Ian Cain and Mark Harris to negotiate higher commission and ask where the business was going. She walked out of the room a director of the company, having agreed then and there to buy Mark’s share. “I shook his hand and then sat in my car and went to pieces and thought, ‘Oh my God, what have I done?’” Kearey recalls. However, she’s never regretted the decision, as becoming a director opened up a whole range of possibilities. “Once you make the decision, everything falls into place,” she says. “When you sit indecisively, nothing moves or changes.” Kearey is now one of Australia’s top brokers and a member of AFG’s elite Chairman’s Club, and Home Loan Connexion is amongst Queensland’s biggest brokerages. Kearey’s actions as a manager – not just a broker – have played a major role in that shift. “I thought it had lost some enthusiasm and energy over the years,” she says, “and I thought I could bring that.” For those brokers who want to make the step to management, Kearey’s advice is to go ahead and ask the big question. “I don’t know

if there ever is a wrong time,” she says. “I think you have to back yourself if that’s where the conversation is going. I guess if you don’t ask, you don’t know. For me, I think it’s simple: If you ask and they say ‘no’, then it’s a ‘no’ right now. If you don’t ask, you’ll always be wondering.”

Broker and director Kearey’s relationship with the industry goes further back, however, and helps explain how she’s steered Home Loan Connexion. At 30, a recently divorced young mum, she took a job as an assistant at Aussie Home Loans in order to make ends meet. Her boss was Ian Cain, and when he left to found Home Loan Connexion, Kearey went with him and eventually moved into broking. Today, Home Loan Connexion occupies several offices across Queensland, and can best be described as a sub-aggregation model. Brokers are free to market themselves and follow their own specialities – they service owner-occupier, first home buyer, investor and commercial clients. Kearey herself notes that “across the board, I have a very diversified client base”; recently, her business has been split between owner-occupiers and investors. She acknowledges that being a director means having a dual focus. “I’m very customer-focused, so I normally like to write

HOME LOAN CONNEXION Tracy Kearey is co-director of Home Loan Connexion, a brokerage originally based in Queensland that has expanded to other states: Brisbane Cleveland Enoggera Curl Curl (NSW) Toowomba Gold Coast In 2012, Home Loan Connexion was AFG’s Champion Business of the Year. the loan and be involved in that process, but I realise that being a director of a group of brokers means I need to put more skills into managing the team, helping with their referrals, their clients, systems and processes.” Until recently, Kearey was managing two offices – a branch office in Cleveland and the head office Woolongabba – but she recently decided to focus on the latter. With limited time and a database of satisfied clients, Kearey relies on referrals as her core source of business. “I don’t really

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“I think you have to back yourself if that’s where the conversation is going. I guess if you don’t ask, you don’t know”

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PROFILE

TRACY KEAREY advertise,” she says. “Most of my business industry, Kearey explains. “I think that comes from my existing clients, and I do work WIMBN could give women a voice to share with real estate agents and planners, their successes and challenges and let them businesses and [an] investment group.” To know they’re not on their own. Sometimes form a relationship with the latter, a female when you are successful, you don’t know who investors’ group known as Property Women, to go to for help and assistance because Kearey drew on both her own experiences as a you’ve made it; you’re at that point in your hard-pressed mum and her technical career. So I think with WIMBN and a lot of knowledge as a broker. networking groups, it is Oddly enough, she met PROPERTY WOMEN about support for women. the group through some We all have challenges, and male colleagues who had Many of Kearey’s referrals come dealt with the directors of from the property investors’ group Property Women. “They Property Women. were looking for a female broker to come to their event and help them, and they approached me,” A women-only property Kearey recalls. “The first investors group event I went to, I wrote four or five home loans from.” She regularly speaks to the group about the state of sometimes we maybe feel Founded in November 2006 the market and the that we can’t ask for help, financing available. “Now but it’s OK to.” with the changes under In an article for Switzer APRA, it’s important I get Broker, real estate icon Runs presentations, lunches, out there and let them John McGrath identified webinars, workshops and know I can still borrow women as the key decisiona national conference money, but the goalposts makers in getting a loan, have changed,” she says. and Kearey thinks this could give female brokers Women in broking an advantage. “When I sit Slogan: “Property is a girl’s best friend” Not only does Kearey help with my clients, the female female investors, but she’s does often make the also intent on raising the status of women decision. You know, women do think within the broking industry . She was recently differently, so maybe there’s compassion or a appointed to the advisory panel of the Women different understanding when you’re in front in Mortgage Business Network [WIMBN], the of people. So it couldn’t hurt to have more MFAA networking group that was originally women in this industry.” set up for female brokers but is now expanding She’s keen to make that happen by its scope to focus on mental health and lifestyle mentoring younger female brokers – having a issues for brokers of both genders. As part of female mentor, Kearey argues, could help the panel, Kearey helps determine the group’s those young brokers overcome confidence or strategy. “I’ll be active in the broking community self-esteem issues by giving them a role in Queensland, discussing any shortcomings in model they can relate to. “I would really like the industry like cultural diversity, opportunities to give back to an industry that’s afforded me for women, work-life balance and mental a really great career,” she says. “I’m definitely health issues.” interested in mentoring, and if I can WIMBN has a crucial role in supporting encourage someone to join the industry, women in what has been a male-dominated particularly a young female, then that would

be great. I think this industry can offer so many rewards, not just financial.”

Expanding Home Loan Connexion Kearey may get her chance to mentor sooner than later: Home Loan Connexion is planning to expand. “We’d like to be at the top of our game,” she says. “We are looking at bringing on new younger brokers, and potentially women. Bringing new people into the industry is something I’m passionate

“Sometimes when you are successful, you don’t know who to go to for help and assistance because you’ve made it; you’re at that point in your career”

about; it helps with succession planning, and they can also learn from the mistakes and lessons I’ve learnt.” Home Loan Connexion already has brokers in Sydney and Melbourne, and is planning a more extensive move into these booming housing markets over the next few months. Employing younger brokers will help engage a younger clientele, Kearey believes. “Our client base is changing, and we definitely need young people that are tech-savvy,” she says. “The way that young people think about lifestyle and money is different to older people. If you’re being given advice by someone in your own age group, it might feel less like it’s your mum or dad telling you what to do.” Expansion will create more work for Kearey, which leads to an interesting dilemma: The promise of a good work-life balance, which encouraged Kearey to join the industry as a young mum, is becoming harder and harder to maintain. But for Kearey, that’s just part of the challenge, and she continues to lean in to the industry: “I put a lot of expectation on myself to deliver to my brokers, my clients and my staff, and I take a lot of it on-board. I’m invested in this industry – I put forward the money to buy the business – so when you’re backing yourself, you need to go out there and do it.”

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FEATURES

GEN Y BORROWERS

FOREVER YOUNG:

KEEPING UP WITH GENERATION Y Gen Y buyers are now in the market, and they expect modern communications and financial coaching â&#x20AC;&#x201C; not technological gimmickry. MPA partnered with Commonwealth Bank to explore how you can engage the next generation

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Sponsored by

EVERY GENERATION claims to be misunderstood – we’ve all been the spotty teenager slamming the door on our clueless parents. Yet we’re now reaching the point where misunderstanding of one generation is becoming a business problem; the spotty teenager has grown up to be the cashed-up client sitting right in front of you. It’s time to factor Generation Y into your brokerage’s strategy, or risk slamming the door on potential clients.

YOUNG PROFESSIONALS AND FINANCIAL ADVICE

Wake up to Generation Y Oxford Dictionaries defines Generation Y as “the generation born in the 1980s and 1990s, comprising primarily the children of the Baby Boomers and typically perceived as increasingly familiar with digital and electronic technology”. Take note of the dates: a Gen Y client could be aged 35 and own a string of investment properties by the time you meet them; most will at least be in their 20s. In fact, today’s children actually fall into another category, Generation Z. At Commonwealth Bank, customer demographics are seen as a ‘pipeline’, explains Sam Boer, general manager of broker sales. “As one group moves to retirement, a new group is entering the market to start what will be a 40to 50-year journey as savers, borrowers and investors.” As many brokers orient themselves towards a service-based proposition – as opposed to acting as a transactor for a single home loan – understanding the different generations’ requirements and marketing appropriately is not only forward-thinking, it’s essential. It’s essential because there’s also a considerable transfer of wealth taking place, according to Boer. “Gen X and Y’s share of

Professional service firm KPMG surveyed 1,400 of its young employees to find out what young professionals think about financial advice.

84%

of young professional buyers ‘do not need financial advice’

65%

of young professional buyers ‘would like to have financial coaching to help them make smarter investment decisions’ Source: “Banking on the Future: The Expectations of the Gen Y Professional”

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FEATURES

GEN Y BORROWERS HOW GEN Y GET FINANCE KPMG also asked its respondents which channels they felt most comfortable using for various financial services, with surprising results. Getting a home loan 11% 79% Opening a bank account 49% 47% Applying for a new credit card 74% 20% Online & mobile

Branch visit

70% of respondents didn’t see themselves using social media for banking Source: “Banking on the Future: The Expectations of the Gen Y Professional”

financial assets is expected to rise from 36% back in 2010 to 70% in 2030 – the next 15 years will see many Gen Y men and women entering the home loan market.” Whilst Gen Y was hit hard by the GFC and housing affordability problems, property nevertheless remains important to them; Boer insists that “brokers who are developing their strategy for the future should be thinking about how they can work with and win these customers”.

Get your eyes off that screen What’s also notable about the above-mentioned definition of Gen Y is the emphasis on “digital and electronic technology”. The relationship between this generation and their smartphones

and often the most emotional purchase that someone can make,” he says. “I think the need to take the utmost care and consideration is inherent and won’t necessarily change from generation to generation.” As use of brokers continues to grow, Boer believes “there is a huge opportunity for brokers who are able to position themselves to service this group”. KPMG’s report certainly doesn’t mean digital channels are irrelevant; servicing Gen Y clients requires engagement through several platforms. For categories like day-to-day banking, making a payment and changing details, respondents overwhelmingly preferred online channels. “Gen Y has learnt to expect highly sophisticated digital capabilities and shows little interest in anything less than

“As one group moves to retirement, a new group is entering the market to start what will be a 40- to 50-year journey as savers, borrowers and investors” (and computers, tablets and smartwatches) is one of the most comprehensively misunderstood areas of marketing, and it is vital brokers consider the available statistics before blindly investing in digital tools. Consider this: Four out of five Gen Y borrowers want to speak to a real person, faceto-face, for their home loan. Surprised? So were we, when we first read the “Banking on the Future: Expectations of the Gen Y Professional” report by professional services firm KPMG. The report surveyed 1,400 young KPMG employees about their expectations of different financial services and their favourite channels for different types of banking activity. Home loans stuck out like a sore thumb – 79% of respondents would visit a branch to get a home loan, while just 11% would prefer to go through online and mobile channels. In comparison, only 20% of respondents would go into a branch to apply for a credit card. For CBA’s Boer, the 79% figure is “great news for brokers” and not entirely surprising. “Buying a home is the largest, most important

seamless,” Boer says. “The research reflects the experience at CommBank, where we have more than 3 million active users on the CommBank app, which processes more than $2.5 billion in transactions a week.” Interaction through online and mobile channels is no longer an optional value-add; it’s non-negotiable in the eyes of Gen Y consumers. When asked which banking features were most important to them, Internet banking services, low fees and mobile/tablet banking services were the top three options chosen by respondents in the KPMG report. Given the dichotomy between preferred channels for home loans and other banking, CBA’s strategy is to offer consumers their “channel of choice”. That means investing in online home loan channels proactively, explains Boer. “Digital mortgage origination is growing but still low; however, we understand that preferences can quickly change, so we are working toward being able to deliver an endto-end digital process.”

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Sponsored by

Consider this: Four out of five Gen Y borrowers want to speak to a real person, face-to-face, for their home loan Financial coaching, not advice Not only do Gen Y clients expect to deal with a broker using different channels, but they expect those dealings themselves to be different. One example of this involves social media, a muchhyped channel that can often be used in the wrong way. KPMG’s “Banking on the Future” report found 70% of respondents didn’t see themselves using social media for banking, a worrying find for brokers who spend time and money on their Facebook, Twitter and LinkedIn platforms. However, whilst social media might not be an ideal forum for actual transactions, Boer believes its role is still significant with regard to customer insight, marketing and education. “Brokers can use these channels to build a reputation as an expert, which will create trust and opportunity to deepen the relationship with the Gen Y customer. The CommBank Blog has some fantastic articles and insights that brokers can use and share on their own platforms and channels.” Beyond social media, brokers should be aware of Gen Y’s fundamentally different understanding of financial advice. KPMG’s report asked about financial advice in the context of financial planning; however, the broader findings are still relevant to brokers. While 84% of Gen Y clients ‘do not need financial advice’, 65% ‘would like financial coaching to help them make smarter investment decisions’. How can we make sense of these two statistics? It’s worth pointing out, in regard to the 84% figure, that KPMG’s respondents were young professionals working at an international firm; they may have been

SIX GEN Y BUYING TRENDS LJ Hooker’s “Youth White Paper”, published in June, identified six buying trends amongst buyers aged under 30. Rentvester Rather than disrupt their current lifestyle, these buyers purchase a property in a more affordable part of the city or country, and rent that property out while they remain as tenants in their current location. Team up Younger buyers have looked to overcome the affordability challenge by splitting and sharing the cost involved in purchasing a property. Mr and Mrs fix it Young families have looked to get into a larger house in their preferred area by purchasing an older, smaller home that usually sits at the bottom of the price scale for the area. Build it up Another more affordable way for young families to get into a new house is for young buyers to move out of their local area and into a newly built suburb, or build within their current area. Buy now, pay later Buying off the plan has been popular with the under-30s, as it allows them to keep saving or maintain their lifestyle in the short term until they move into their new property. Thanks, mum and dad For the majority of first home buyers, this is the quickest, most secure and best long-term financial solution to get a foot on the property ladder. Source: LJ Hooker, “Youth White Paper”, Q3 2015

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FEATURES

Sponsored by

GEN Y BORROWERS HOW GEN Z GET FINANCE Born between 1994 and 2000, you’d think Generation Z would be even more digital-minded than Gen Y. However, a survey earlier this year by Randstad, in collaboration with Ipsos Reid, suggests face-to-face communication is still important to them:

Top forms of communication for Gen Z 45% face-to-face 26% email 11% phone 9% instant messaging 8% social networking 2% video conferencing Source: Randstad/Ipsos Reid

disproportionately financially literate, which may have led to them feeling like they didn’t need advice. It’s also possible that the wording of ‘financial advice’ is a problem, given the high-profile scandals involving financial planners in recent years. You can’t ignore the financial advice/ financial coaching divide, however. Boer explained to MPA where he believes the difference lies: “Financial coaching focuses on education, growth and the decision-making process, as well as overcoming the obstacles that are keeping the customer from reaching their financial goals. It is a light touch, where the customer remains in control by learning how to manage their money smarter and make better-informed decisions, while also being held to account.” Perhaps focusing on that interest in financial coaching would be a more constructive response to KPMG’s report, particularly as the idea of coaching fits better with a long-term, service-oriented approach. At a basic level, this involves making customers aware of the tools to help them manage wealth – Boer points to CommBank’s app and Netbank as examples. It’s also possible that the proposition of a diversified one-stop-shop brokerage – with financial planners, buyer’s agents and the like – could find particular popularity with Gen Y clients. The key is to start early, Boer says. “There’s an opportunity for financial professionals like brokers to have that conversation with them about their savings plan and provide high-level home loan advice – but, more importantly, build that relationship early.” Brokers who do go down such a path should take note, however: Gen Ys don’t appear willing to pay for financial coaching, KPMG suggests. How much this applies to brokers is somewhat unclear, given most of the survey relates to financial planning and simple banking transactions rather than home loan advice, an area Gen Ys evidently continue to take seriously. What brokers should note is that Gen Y wants to pay only for what they need, as one respondent described to KPMG: “a low-touch, low-cost product with fees and interest rates aligned

to how much interaction I want (none) and the type of service I actually need (digital only)”.

The broker’s generation of choice With slogans abounding along the lines of ‘adapt or be left behind’, it can be easy to see Gen Y clients as a challenge, perhaps even a problem for established brokerages and their processes. Instead, Gen Y may be the generation that values brokers more than ever, for two reasons. The first is that Gen Ys are more disloyal to lenders than ever; compared to KPMG’s 2012 survey, the proportion of financial professionals holding products at four or

“Gen Y has learnt to expect highly sophisticated digital capabilities and shows little interest in anything less than seamless” more banks has tripled, and the proportion using just one bank has reduced. Given Gen Ys are reluctant to rely entirely on online sources for their home loan, brokers will have the edge on comparison sites in providing a guide to an ever more complicated market. The second reason is that brokers are better than ever, and Gen Ys will take notice. Gen Ys are coming of age (in financial terms) at a time when broking is more professional than ever and brokers offer more services than ever, so Gen Ys may be less likely than their parents to see you purely as a source for mortgages. In turn, you need to appreciate the diversity within Generation Y, utilising different channels to get in contact – but keep in mind that, like you, they appreciate the continuing value of face-to-face, trustworthy broking.

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BUSINESS STRATEGY

PRESENTATIONS

BE LESS BORING:

PRESENTING FINANCIAL CONTENT ON STAGE Avoid being the speaker who makes the audience’s eyes glaze over and inspires the compilation of mental shopping lists. Communications expert Jane Anderson reveals how

HAVE YOU watched someone speak at a conference and struggled to watch past the first 10 seconds? Maybe they just have slide after slide of graphs and tiny numbers that you can’t even see. (Most often, they will say, “I’m not sure if you can see this on the slide, AMA ad for MPA third.pdf 1 23/09/2015 7:39:50 AM but …”) Dale Carnegie, author of 19 books, once said, “For every presentation you give, there

are three. The one you prepared, the one you gave and the one you wish you gave.” A 2013 Gallup poll found that 70% of people listening to presentations are disengaged. That’s right – 70% of your audience may actually be sitting there thinking, ‘I need to organise the kids, pick up milk, finish that report’, etc. Joe McCormack, a communications

expert, recently wrote that the average person can absorb 750 words per minute, but we can only speak 150 words per minute. Therefore, it may be fair to say that your audience could be completely distracted and bored, and it’s up to you as the speaker to WAKE THEM UP! So, what are you going to do? You’ve spent all last night pulling your slide deck together

AND THE

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AMA GOES TO... AMA

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A 2013 Gallup poll found that 70% of people listening to presentations are disengaged

because you haven’t had time. The problem is that you can’t just email the presentation to your audience to read. You actually need to breathe life into the content for someone to hear it. The truth is that if you don’t get your audience’s attention within 30 seconds, you have lost the opportunity to connect, influence and inspire.

So, what can you do to grab attention and present data, numbers, graphs and other financial content on a stage?

Add humour You don’t have to be a professional comedian, but it is important to lighten up and have a laugh. Humour fast-tracks connection with your audience.

You might be thinking, ‘How can I make data funny?’. Consider things like your personal brand or your background. Perhaps you have a funny story to tell about your time working three jobs to have enough money to get through university. Think about some of your funny experiences with money. Remember, your audience has been sitting all day, so the last thing they want to do is sit through another boring presentation.

Tell stories Use stories to connect with your audience. Keep them punchy and interesting, and don’t let them drag on for too long. Stories connect with your audience’s emotions and feelings and anchor your message. Tim O’Brien once said that “storytelling is the most essential

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25/09/2015 10:59:29 AM

BUSINESS STRATEGY

PRESENTATIONS Each person sitting in front of you is in their own world. The reality is, they haven’t yet made the connection between what you have to say and their world

human activity. The harder the situation, the more essential it is.” Stories are like adding colour to a blank canvas. They bring warmth and light to create interest and insights to your message. Without a story, your content will feel like cardboard to the audience. It will leave them feeling dry and empty, wishing there was more to make it interesting and memorable. Start making a log or journal of stories that you can share when you present data.

Start with why Each person sitting in front of you is in their own world. The reality is, they haven’t yet made the connection between what you have to say and their world. One of the temptations in presenting is to feel like you have to use up your allocated time with as much information as possible. The problem with this is that you haven’t made the connection to why your audience should care. You may well know that what you have to say is important and relevant, but they don’t. It’s up to you to be the conduit between their world and their problems to your world and your solutions. Simon Sinek, renowned TED speaker and the author of Start With Why, says that “people don’t buy what you do; they buy why you do it”. If you can capture that for the audience, then you will truly connect.

more memorable, as you’ll feel more likeable to the audience. Smiling also will force you to become more relaxed and to connect more intentionally with your audience. Even if you don’t feel confident, this is a good way to trick your mind into feeling more so. As Amy Cuddy, an expert in building confidence, says, you need to “fake it till you make it”.

Less is more Reduce the amount of content on your slides. Try not to rely on them too much for your notes, as you may end up speaking to your screen and not your audience. Use images to prompt your message and content for each point. Nancy Duarte, the worldleading expert on presentations, says people remember an image long after your content. Choose an image that represents your point, and then support your point with data if you have to. Try even just using one slide at a time for each piece of information, graph or table of data. You may need to step some of your information out a piece at a time or highlight specific areas on a graph with pointers or circles. Your audience has a hard enough time absorbing what you’re saying and trying to read at the same time, so ensure what they see on screen matches what you’re saying. You may even find turning the screen off works effectively to gain your audience’s attention, depending on the point you’re trying to make.

Smile If you are feeling stressed speaking in front of a group, it’s easy to lose your own personality. Remember, wherever you are in the world, a smile is universal language, and it helps you connect on a personal level. Show your teeth if you have them! In Ron Gutman’s TED Talk on the power of smiling, he describes research that found that smiling creates the same brain stimulation as 20,000 bars of chocolate! The average child smiles more than 400 times per day, so it is no surprise that it often feels joyful to be around smiling children. Unfortunately, research shows that adults smile only 20 times per day on average, so make an effort to put a smile on your face, and you will seem more human and approachable. This will make your message

By putting some time and thought into your presentation, you can make a massive difference to the experience of your audience when they’re trying to absorb financial content. The less data you have, the more effectively you will connect and the more you bring yourself to the stage. This will mean your messages stick, and the audience will be far more inclined to take the action you want them to take. Jane Anderson is a communications expert and professional keynote speaker on personal branding and LinkedIn. Jane is the author of IMPACT: How to Build Your Personal Brand for the Connection Economy and CONNECT: How to Leverage Your LinkedIn Profile for Lead Generation, Business Growth and Networking.

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25/09/2015 10:59:44 AM

LIFESTYLE

A DAY IN THE LIFE OF…

Mark Davis, principal, The Australian Lending and Investment Centre

5.00am: The alarm goes off, and I press snooze once or twice, as I only went to bed at midnight last night. I always start the day with a protein shake with three eggs – and sometimes a green smoothie made by my wife, if I’m in the kitchen at the right time.

sourdough. Snacks for the day are homemade protein balls, nuts, fruit and yoghurt. I try to be health conscious both for day-to-day energy and long-term health. It’s especially important to eat well to maintain energy during my demanding day to maintain focus and attention to detail.

5.30am: Clean up loose ends from the day before; clear 50 or so emails and start to plan for the busy day ahead.

7.30am: ALIC has our weekly management meeting with my business partner, Kevin, and our managing director, Jason. We discuss the business, staff plans and anything that needs to be addressed to continuously grow the business and make it a stronger proposition and experience for our clients.

8.30am: I start the first of seven to nine client meetings for the day. My first meeting is normally with a new customer, which involves positioning who ALIC is and how we can assist a client with their lending structures and strategies.

12.45pm: Two further meetings with existing clients to discuss future lending options and opportunities they may have after listening to their changed circumstances.

same, and it’s a great occupation to have whereby we are very privileged to discuss such detail.

7.00pm: Time to do my audio diary notes for the day, summarising all of today’s meetings, capturing all action and follow-up items. These are typed up and sent back to myself and all relevant staff so the business is ready for the next action prior to my next client meeting.

8.15pm: Time to drive home (10 minutes) to 2.30pm: Monthly business meeting with one of our business partners, who is a major referral partner to ALIC. We discuss better ways to improve business for all parties to gain and create better client experiences.

have dinner with my wife – tonight is salmon and salad. I’m greeted at the door by our two super-excited Maltese Shih Tzu puppies.

9.30pm: Time to turn the laptop back on

“I try to be health conscious both for dayto-day energy and long-term health. It’s especially important to eat well to maintain energy during my demanding day”

9.30am: ALIC has our daily ‘huddle meeting’ with the whole office, which involves discussing the 100-120 files of mine sitting in back office progressing through to approval/ settlement.

3.30pm: Time for my gym session with my

12.30pm: After completing three more

PT. Today we did leg press of >500 kilos for 15 reps to try to beat a PB. He drives me hard, but he knows I love a challenge! Then back to the office, feeling energised and ready to start the second half of my day.

client meetings, it’s lunchtime for 15 minutes (not great for my digestion). I go to the staff fridge and try to remember which is my bag my wife packed for me. I have a healthy lunch of dinner leftovers or a fresh sandwich on rye

5.00pm: Three more meetings with clients who have either been referred from business partners or are similar to my earlier clients today. In saying that, no two meetings are the

and start work on the huge pile of files I have brought home, as there is always work to be completed. I get a good two to three hours of work done, having the footy show playing in the background. (Who says men are not multi-skilled?) Important to keep up to date with how well the Hawks are playing.

12.30am: Bedtime, which is normally a very sound sleep. (There may be a little snoring, but my wife would never tell!)

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25/09/2015 11:06:30 AM

THE DATA

PROPERTY INVESTORS

SAFE AS HOUSES

A MISSED OPPORTUNITY

Most investors stop after their first property Number of properties

Brokers can take a proactive and profitable role in property investment, according to investment consultancy Aviate Group, and they want to show brokers how IN MOST areas of finance, the days when brokers just arranged a loan are long gone, yet property investment remains an area where most brokers are reluctant to explore. Property investment consultancy Aviate Group believe brokers can play a greater role in assisting property investors. They’ve created the Ignition course, which MPA attended, to show how proper research on both clients and properties can improve client experiences and returns – and provide

Percentage of investors Number of investors

new opportunities for brokers. Neither brokers nor investment firms can continue to work in ignorance of each other, says Aviate managing director Neil Smoli. “Technology is changing the industry – it’s no longer just an investment group doing investment property, or a broker just doing finance; it’s about how we can utilise our network to provide a better solution to the client.” Here, we’ve collected some key insights from the Ignition course.

70.87% 1,283,600 1

ASSESSING THE CLIENT

IDENTIFYING AN IDEAL INVESTOR

Clients need to ‘earn the right to invest’, according to Aviate, and brokers should understand the client’s motivations and capabilities before referring them on.

Aviate focus on three types of investors who have the financial ability to act, whilst still being likely to require professional assistance because of their busy schedules.

Improving their wealth Wealth for the future (retirement, legacy for children) Why do they want to invest?

Mum & dad (living with kids)

DINKs (double income no kids)

Income

$85,000+

$120,000+ (combined)

$150,000+ (combined)

Financial objectives and timeframe

Cash deposit/ accessible equity

$40,000 – $50,000

$60,000 – $70,000

Financial literacy and understanding of risk

Borrowing capacity

$400,000+

$450,000+

$650,000+

Financial capacity to invest

What is their profile as an investor?

Single

Fear of missing out

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25/09/2015 11:08:43 AM

6.09% 110,379

0.92% 16,600

5 3

6 4

18.90% 342,312

2.22% 40,283

ASSESSING INVESTMENT FIRMS Before referring any client to an investment firm, Aviate recommend asking the following 10 questions, looking for positive answer to all. Property selection Are all properties priced at or below valuation? Are they selective about project density in the target area? Do they track and measure performance? Due diligence Do they provide research on each property? Do they satisfy risk due diligence requirements of the largest banks? Do they have robust due diligence criteria? Conflicts of interest Are they independent to the developer? Is the commission rate transparent and capped? Is there full fee disclosure? Do they have a record of repeat clients?

0.99% 18,000 BUILDING AN INVESTMENT PORTFOLIO Given a broker’s knowledge of their clients’ finances, brokers are ideally placed to help clients build investment portfolios. Aviate believe a motivated and disciplined client earning $80–100,000 a year could afford to acquire a new investment property every other year; the broker would be involved at every turn. Using CRM tools and a maintained database, the broker can track how much equity the client has available as rising prices on existing properties open up options for refinancing. The broker then can market to the client, encouraging them to leverage that equity by acquiring further properties. Aviate’s role lies in selecting property to fit a client’s profile, and they aim to provide better returns through a 108-point comparison and negotiating with developers. Reviewing clients is the final stage in Aviate’s service-oriented approach, and they promise to pay commission to brokers even if clients later go straight to Aviate. The company plans future Ignition courses in the main capital cities; the course takes two days and provides CPD points. It features a mix of technical property selection tips and sections on marketing and using the CoreLogic/RP Data system. Check Aviate Group’s website for further details.

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25/09/2015 11:08:10 AM

LIFESTYLE

FAVOURITES

FAVOURITE THINGS Mark Middleton, national manager of third-party distribution, Teachers Mutual Bank

Sport: These days I have retired to coaching, mainly rugby (the game they play in heaven) and basketball. Food: Love it – and by the shape of me, anyone would know it. Modern Australian cuisine is my favourite, with a touch of chilli to spice things up!

Drink: Depends on the occasion – beer, whiskey or a red (preferably a Shiraz from McLaren Vale).

Movie: Pulp Fiction or Blues Brothers

Sunday afternoon: Varies from sport, gardening, jobs around the house or running kids just about everywhere. An ideal Sunday afternoon would be relaxing out the back with good friends and good food.

Music: Australian ’80s music – AC/ DC’s Back in Black is always a favourite for a road trip!

Book: Mostly work-related now, but one of the best books I have read in a while is The Road by Cormac McCarthy – the word ‘chilling’ comes to mind.

Holiday destination: Culburra Beach – close enough to Sydney, but just far enough away to be quiet and relaxing. It is a great place to go for a surf without it being crowded with grommets, although I do tend to bump into Tony Carn from NextGen!

TV series: Breaking Bad – sensational.

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25/09/2015 1:20:00 PM

MPA Bu

In partnership with

4 x 1 hour FREE online webinars LEAD GENERATION

5 November 2015, 12.00 – 1.00pm Michael Griffiths, ‘Referral Marketing Guru’

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12 November 2015, 12.00 – 1.00pm Laurel Papworth, Forbes Top 50 Social Media Power Influencer

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CLIENT RETENTION

19 November 2015, 12.00 – 1.00pm Stuart Ayling, Sales Strategist

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SALES STRATEGIES

26 November 2015, 12.00 – 1.00pm Rob Hartnett, Sales Performance Specialist

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• How to win more business • Sales strategies that suit your clients • Improving conversion rates AA AN D F B • Digital channels and social media MF

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25/09/2015 10:35:51 25/09/2015 9:57:39 AMAM

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25/09/2015 9:57:49 AM