MPAMAGAZINE.COM.AU ISSUE 16.2
FACING THE FUTURE Our 30 Young Guns for 2016 and beyond
PARTNERSHIPS Brokers and real estate agents
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COMMERCIAL LENDING Throughout the life cycle of a business
GERALD FOLEY NMB’s 2016 business philosophy
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FEBRUARY 2O16
CONNECT WITH US
CONTENTS 32
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
An update on the first home buyer market
08 Hot topic
P2P lending – a real disruptor or a flash in the pan?
60 The data FEATURES
18 COVER STORY
YOUNG GUNS 2016
THE PERFECT PARTNERSHIP
Having a formalised link with a real estate group can deliver much more than leads
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Addressing consumer ignorance about broking
MORTGAGE INSIDERS 56 Ruan Burger
Double-AMA winner on building winning brokerages – twice
62 Day in the life
BMM’s Paul Cameron on life in the Sunshine State
64 Favourite things
Join CBA’s Sam Boer for a fresh-caught seafood BBQ
Australia’s best 30 young brokers revealed
FEATURES HEAD TO HEAD
GERALD FOLEY
14 How NMB will help brokers take their businesses to the next level
A LIFETIME OF FINANCE
We look at commercial lending opportunities across the life cycle of a business
10 MPAMAGAZINE.COM.AU NOW ONLINE: UPFRONT
NEWS ANALYSIS Why the industry needs to sort clawbacks before regulators do
Sneak previews and magazine extracts in Business Strategy Top brokers and brokerages in Leading Mortgage Professionals Our free Business Education Webinar Series
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FEATURE / BROKER EDUCATION
EDITOR’S LETTER
Something doesn’t add up
Y
ou can use all the sales techniques you want with a client, but so often it’ll come down to getting out the calculator and showing them how much they could save – in other words, showing them the numbers. Yet for an industry in which numbers make the news, whether a 25bp rate rise or a 5% price drop, it’s surprising how poor the quality of data can be. This starts with the misreporting and misuse of numbers. Is that muchtrumpeted nationwide economic growth statistic you saw on TV really relevant to your business? With Australian states performing markedly differently, I’d argue you’d be better off looking at unemployment statistics in your town and the types of properties that are being built in the area. A new gas project in the Northern Territory might sway national numbers, but it probably won’t affect your clients. Conversely, in many cases data could be far more useful than you think. If you’re surveying past or potential clients, why not segment your results? You could do so by age, for example; it could be that your Gen Y customers love
Is that much-trumpeted nationwide economic growth statistic you saw on TV really relevant to your business? your Facebook updates, but your older customers can’t stand them. If you don’t segment your database, all you’ll see is a neutral result, which won’t help you target your marketing efforts. Aggregators can provide a helping hand here. What’s most frustrating is when there’s no data available whatsoever. In this issue of MPA, we look at clawbacks – one of the most contentious debates in the industry, with sweeping statements made by both sides. But when we asked industry bodies for data on the prevalence of clawbacks, all we got were anecdotes: ‘a broker told me this’ or ‘the room applauded at that’. Anecdotes are great, but for an issue this serious you’d expect decision-makers to have concrete data, compiled with the assistance of lenders. Just as your client wouldn’t be satisfied with a vague ‘ballpark’ figure for their monthly repayments, you shouldn’t be satisfied with vague or misleading numbers, whether in industry or your own reporting. This year, see if you can make your data count for more. Sam Richardson, editor, MPA
www.mpamagazine.com.au FEBRUARY 2O16 EDITORIAL Editor Sam Richardson Journalist Maya Breen Production Editor Roslyn Meredith
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
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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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ROUND-UP
NEWS AND TIPS – FIRST HOME BUYERS UPDATE NEWS BRIEFS Possibility of ‘permanent change’ in Sydney home ownership
The architect of a major housing report has warned that first home buyers’ present difficulties in getting onto the housing ladder could have long-term consequences. BIS Shrapnel managing director Robert Mellor told the audience at the launch of QBE’s Housing Outlook 2015–2018 that “there are signs we’re moving to a permanent change, in places like Sydney, when it comes to home ownership”. With Sydney prices unlikely to decline enough to let FHBs back in, it could take government intervention in the form of grants or stamp duty reductions, which could be prompted by a generational fall in home ownership, he added.
FHB loans increase in ACT, Vic and Qld Statistics from the ABS show that the number of loans to first home buyers increased between the June quarters of 2014 and 2015 in the ACT (30.4%), Victoria (6.8%) and Queensland (4.7%). However, numbers fell in every other state, most sharply in the NT (-30.6%) and Tasmania (-21.5%). The fall in these two states can be attributed to their recent removal of state grants for existing dwellings; Tasmania ended these grants in July 2014 and the NT in January 2015. Given the negative impact that the reduction of grants has on demand, it’s worth noting that the ACT, NSW, WA and Tas will all be reducing FHB grants in January 2016.
First home owners unconvinced by refinancing A total of 59.1% of first home owners are not considering switching loans despite recent rate cuts, according to
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Mortgage Choice’s annual First Home Owner Survey. While numbers fluctuate by state – with NSW owners being the most inclined to refinance and Qld owners being the least – just 7.5% of first home owners nationally have changed both their lenders and loan products. This could be explained by first home owners feeling comfortable in the current low interest environment, Mortgage Choice suggests – over 60% say they could afford at least a 2% cash rate rise. “It is for this reason that so few first home owners have actually refinanced or are thinking about refinancing their mortgage,” Mortgage Choice CEO John Flavell commented.
8 out of 10 FHBs say housing is unaffordable Of those purchasing property for the first time, 80.6% consider it unaffordable, according to Mortgage Choice’s First Home Buyer Survey, released in mid-November. The problem is centred in Sydney and Melbourne, where 86.9% and 85.7% of FHBs, respectively, feel that housing is unaffordable; but it is also a problem nationwide, with 75.4% saying housing is unaffordable in Queensland, the lowest percentage of any state. The average loan size in Australia has grown by 18.5% since 2013, but the average wage has grown by just 3.6%, the report noted, with the result that the average loan size is now 4.5 times bigger than the national wage; in 2013 the figure was 3.9. Affordability is a widespread problem, Mortgage Choice CEO John Flavell argued: “If property price growth continues to outstrip wage growth, how can we expect our children or our children’s children to buy property and achieve what many of us consider to be the great Australian dream?”
RISING TO THE OCCASION Market shifts alone won’t do enough to help FHBs; governments need to take action, recent research suggests
‘Grants’ remains a dirty word in the Australian housing vocabulary, eliciting furious cries of ‘distorting the market’, and being accused of driving up prices, especially by those within the third-party channel. However, in recent months a number of prominent industry figures have changed their tune, arguing that government should assist Australians in buying their own homes. Commenting on a recent Mortgage Choice report on FHBs, CEO John Flavell observed that “with property prices rising steadily across most markets, a lot of first-time buyers are finding themselves priced out of the market. To rectify this problem, the government really needs to act. Now we have a new prime minister in place, I would like to see the plight of first-time buyers receive the attention it deserves.” Mortgage Choice’s report found that 42.5% of FHBs would like the government to reintroduce grants for established properties, and a further 30.6% supported the removal of stamp duty on FHB purchases. State governments don’t seem to have noticed, however, with several planning further reductions on already curtailed grant schemes in 2016. The problem is twofold: wages aren’t keeping up with house prices, and house price growth isn’t likely to sharply decline any time soon. “Until we get to flat price growth, small declines, or income
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growth gets to 3–4%, we won’t see an increase in first home buying,” noted BIS Shrapnel’s Robert Mellor, presenting QBE’s Housing Outlook 2015–2018 report. Even as Sydney price growth slows, NSW’s strong economy will prevent prices from falling to a level that is more affordable for FHBs, he added. The Turnbull Government has already identified stamp duty as a significant problem. Social Services Minister Christian Porter noted that “housing affordability and access is one of the great challenges we face as a nation” and argued that stamp duty pushed people to go for larger properties too early. Australian new-build houses are among the
“I would like to see the plight of first time buyers receive the attention it deserves” largest in the world, he added, at 215sqm compared to 76sqm in the UK. With state governments already struggling to make ends meet, it seems unlikely they’ll part with stamp duty revenue so easily, let alone introduce new grants for FHBs. Assistance for FHBs may depend upon a change of opinion at Federal Government level, explained BIS Shrapnel’s Mellor, as generational shifts in home ownership become more apparent. Unfortunately, despite the calls of Flavell et al, it may be some time before we see FHB prospects improving.
Q&A
Keiran Evans Head of third party relationship channels ANZ
Fast fact More than 56% of first home buyers are making additional mortgage repayments on a regular basis, according to Mortgage Choice’s annual First Home Owner Survey. In fact, 63.4% said they contributed to their repayments as much as their salary allowed
FIRST HOME BUYERS What is the most common impediment to people getting their first home? Undoubtedly, for most people the biggest challenge in buying their first home is saving for the deposit. ANZ offers the ability for parents/relatives to assist by using the equity they may have in their property to try to overcome this hurdle by way of a Security Guarantee. While this may not be a solution for all, it is certainly something we expect to become more prevalent in the future as first home buyers seek entry to the housing market and look for more non-traditional ways to do so. Would you recommend any particular marketing strategies for brokers targeting FHB clients? Buyers need guidance and support when purchasing a home, especially first home buyers who are new to the process and can find the experience daunting – so it’s always a good time for brokers to become the subject matter experts in this area. Any education that can be offered by brokers is of great benefit to potential buyers, and becoming a trusted adviser can help lock a customer in for life. What features of ANZ’s products make them particularly appropriate for first home buyers? Life is never predictable and ANZ’s features are designed with this in mind, in assisting not only first home buyers but customers overall in entering the market or building their assets. With the deposit often being the biggest challenge for first home buyers, ANZ’s Security Guarantee feature can assist by offering other means of attaining the required deposit. Often, the first home comes before or soon after the first child, and ANZ’s Parental Leave Policy allows customers the flexibility they may need at this time in their life.
1300 130 538
primefinance.com.au loans@primefinance.com.au
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ROUND-UP
NEWS AND TIPS
REFINANCING RELUCTANCE New data shows that the main reason Australians haven’t switched their home loans is that they are happy with their current lenders. But a broker who specialises in refinancing tells MPA’s Maya Breen that a few quick questions will soon change a borrower’s mind
Aussies are not rushing to switch home loans. About two in five mortgage holders (39%) have stayed put with their loans over the past decade (about 1.17 million households), according to a survey by comparison website Finder.com.au. This reluctance among households translates to a potentially wasted combined $27.4m per month, $328.2m per year, or a staggering $9.9bn over 30 years. Of the 1,351 respondents surveyed, only 6% were currently considering a switch, while just 21% have switched to a better deal within the last five years. NSW Loan Market finance broker Renee Robins told MPA why refinancing loans was big business for brokers, despite the recent data showing reluctance among borrowers to switch. The major reason respondents said they hadn’t switched was that they were content with their lenders (54%), but Robins says it’s
more a case that they don’t know what they’re missing out on. “I am amazed how often I sit down with clients who are paying 5% or 6% or higher and are happy with that,” says Robins. “They do not realise they are paying so much more than what is currently on offer. That money is better spent on paying off their mortgage, not giving it to the lender.” The majority of Robins’ business is refinancing loans, and she agrees with the Finder pie chart (see boxout) on the four reasons given by consumers for not switching their loans. But she says a few quick questions will soon change their minds. She asks her clients who are hesitant about refinancing questions such as: “What are the features of your loan and do you use them all? If you are not using this feature why do you keep paying for it in your annual fee? Are you aware
your current interest rate is higher than what other lenders are currently offering and it is higher than what your lender is currently offering new customers.” She says she makes the refinancing process as easy as possible for clients, collecting all documents in one go and then the signature on application. “Lenders want customers to be confused with their choices,” says Robins. “One of the greatest tools available for consumers looking for loans is the comparison rate. Most clients I see do not know what the comparison rate is. Lenders keep this a secret. If everyone was aware of this tool they would be challenging their lender for better rates.” Even though it is more affordable now to switch lenders since the banning of excessive exit fees to variable home loans in 2012, Robins says clients aren’t aware that these exit fees no longer exist. “No lender tells their customers what the fees are to get out of a product. When I advise them they only really have an administration fee and some small government charges, they are very surprised. “Refinancing is such a great source of business for brokers as the lenders are making it way too easy for clients to get better service from a broker. The market has never been so competitive; brokers have more options than any one lender can offer – we are in a position to educate our clients whilst giving them fantastic service and saving them money. This is a win-win situation that will generate clients for life.”
REASONS WHY BORROWERS HAVEN’T SWITCHED Who’s not switching loans, state by state? 9% 24%
13%
I couldn’t find time for all that paperwork I’m happy with my lender It would cost too much It’s too hard to compare
54%
TAS Most likely to have never switched lenders (66%) VIC Least likely to have never switched (54%)
SA
QLD
64% have never switched NSW
WA
63% of households in both states have never switched lenders
59% have never switched ACT 55% have never switched lenders Source: Finder.com.au
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UPFRONT
HOT TOPIC
What impact is peer-to-peer lending going to have on the mortgage industry?
Peter White
Sunil Aranha CEO ThinCats
CEO Century 21 Home Loans
I am always looking at where the next level of innovation in our industry will come from. P2P is quite well established overseas in Europe and the US, so it is a natural progression that we would see its growth here in Australia. It is something we all need to embrace as it is having and will continue to have a positive impact in our industry. Brokers need to think ‘outside the box’ about how their businesses can benefit from P2Ps, as we’ve already seen the likes of Uber strategically looking to expand their business here through a P2P lender. Consumers can also benefit from P2P, with competitive interest rates for unsecured personal loans which are processed in a very quick timeframe and can benefit many broker clients. We need entrepreneurs and strategic thinkers to keep pushing the boundaries of our industry and bring new, exciting and innovative lending structures to the table that can benefit everyone in the broking sector.
The emergence of peer-to-business lending is a wonderful opportunity for business, commercial and residential mortgage brokers to access yet another funding source for small and medium-sized businesses. As banks’ business loans are primarily based on real estate asset values, there are numerous instances of SMEs being unable to finance business growth through bank finance when sales growth outstrips the value of their real estate LVR limits. This is a classic instance of when brokers can offer a solution to their clients by including a peer-to-business lending platform such as ThinCats Australia. Loans arranged by ThinCats are generally for terms of two to five years, with principal and interest payments at competitive interest rates between 12% and 15% per annum. And as ThinCats is not a bank, the loans are flexible, with borrowers being able to return to the platform for further finance if cash flows support, as well as repay the loans at any time with no early penalties.
P2P lending won’t really affect the mortgage market as P2P investors don’t have the credit skills or sophisticated funding structures to make 30-year mortgages, at 4% per annum, a worthwhile investment. There are better returns elsewhere for the P2P marketplace, for example venture capital and micro lending. P2P will and has in my opinion begun disrupting venture capital finance and micro lending. The risk return with smaller investments appears to be more aligned.
CEO FBAA
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James Green
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NEWS ANALYSIS
CLAWBACKS
BARBARIANS AT THE GATES Clawbacks provoke intense debate but little firm data or genuine change. The industry needs to step up before regulators step in, writes MPA editor Sam Richardson
ARE WE really still talking about clawbacks? It’s been over four years since exit fees were abolished and clawbacks came into force, but in 2015 the debate was as heated as ever. For the FBAA, reports on bank profits in early November were the straw that broke the camel’s back; CEO Peter White argued that “brokers now write more than half the new loans in the marketplace and are a pivotal part of a bank’s business and it is time they are correctly rewarded for their efforts and not punished”. In response, the MFAA took a more conciliatory view: “Clawback is directly linked to how lenders price their product within our channel, and the MFAA accepts that it is not reasonable to expect clawback provisions to be removed altogether”. And, as usual, brokers themselves were divided, with comments on Australian Broker’s forums labelling clawbacks as anything from daylight robbery of hard-earned cash to fair punishment for dishonest churning. All of this makes the industry sound like a broken record playing the same story of broker discontent and lender silence. MPA set out to explore why this time it really was different, talking to the FBAA, the MFAA, lenders that have clawback fees, and one that doesn’t. What quickly became clear was that clawbacks might not have changed but the surrounding industry and regulatory landscape is rapidly being transformed.
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What makes 2016 different When trying to understand clawbacks, bank profits are a distraction. Clawbacks do matter, Suncorp’s head of intermediaries, Steven Degetto, told Australian brokers; they matter to commissions. “Without reasonable clawback provisions, there could be challenges to maintaining upfront commissions as they are,” he said. However, when it comes to full bank profits, clawbacks aren’t a blip on the radar; profits reflected a combination of RBA rate cuts and out-of-cycle rate rises, according to the Australian Financial Review. As the FBAA’s Peter White told MPA, “there’s a time to and time not to [talk about clawback]. Historically, we haven’t gone further than saying ‘this isn’t right’.” What’s
“We have our solicitors looking at this and have had for some weeks … there’s a whole host of changes in law that bring this even more into focus” Peter White, CEO, FBAA prompted the FBAA may have less to do with profits and much more to do with having the legal grounds (or at least believing they do) in order to move against clawback. “We’ve got more evidence than what we need right now to continue with this,” White claimed. “We have our solicitors looking at
this and have had for some weeks, prior to us talking about it … there’s a whole host of changes in law that bring this even more into focus.” Indeed, days after MPA spoke to White, he met Assistant Treasurer Kelly O’Dwyer and afterwards stated that “the minister’s office is
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MPA’S BROKERS ON BANKS SURVEY ON CLAWBACKS Clawbacks paled in comparison to turnaround times as brokers’ main concern when it came to lenders, although there were some insightful comments on the issue. What is the worst thing a bank has done for your business, or client, in the last 12 months?
1.9% Mentioned clawbacks
4.3% Mentioned slow turnaround times How would you like to see banks improve in the next 12 months?
1.7% Mentioned clawbacks
11% Mentioned turnaround times
worst-case scenario, in which regulators take it upon themselves to determine clawbacks.
How the industry could deal with clawbacks
going to review my historic submissions and data on this issue, and we are hopeful of a positive outcome soon on this potentially nasty issue”. Tellingly, White also connected the meeting with ASIC’s forthcoming review of brokers’ remuneration, confident that further discussions “will help all parties find the best outcomes”. ASIC’s remuneration review may well be the game changer for the clawback debate. When MPA originally asked White whether clawbacks could become part of the review – given they factor into commission, as Degetto argued – White noted that “it is an issue they
need to be thinking about”. Similarly, MFAA CEO Siobhan Hayden’s view was that “I suppose if you do look at the remuneration model it does form part of it, so it would be reasonable for it to be reviewed as part of it”. At the time of writing, ASIC’s remuneration review had not begun (it’s scheduled for late 2016), nor had specific areas of inquiry been outlined. Whether clawbacks could count as ‘conflicted remuneration’, which is the Treasury’s stated target, is open to question, as clawbacks are designed to prevent clients from changing lenders, even when a better product could become available due to rate rises. Either way, the industry will have to prepare for a
One attempt to collaboratively address the issue of clawbacks is the MFAA’s ‘broker best practice’ procedures for lenders. ANZ and NAB Broker were named as lenders that redirected broker clients back to their brokers if they made enquiries direct to the bank, to avoid brokers suffering clawback for internal bank refinancing. Additionally, aggregators including Connective, FAST and AFG confirmed they would intervene and support brokers in harsh cases of clawback, such as 23 months into a 24-month clawback period. NAB Broker recently released a report, Engaging Consumers and Empowering Brokers, which highlighted the damage brokers could be doing to customer relations by not providing a post-settlement service.
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NEWS ANALYSIS
CLAWBACKS CLAWBACK LEVELS ACROSS AUSTRALIA’S BANKS
% of trail clawed back
Although there’s much similarity in banks’ clawback arrangements, there are exceptions, most notably those of Macquarie and Bankwest.
100 90 80 70 60 50 40 30 20 10 0
We NAB B stpac & St Ge roker orge
0
3 Mont 6 9 hs af ter se ttlem 12 ent
15
18
ANZ Macq uaire 24
Sunco rp ME ING D Bank ir ect AMP Adela id e Bank CBA
100 90 80 70 60 50 40 30 20 10 0
Westpac & St George NAB Broker Suncorp ME Bank ING Direct AMP Adelaide Bank CBA ANZ Macquarie
Note: Bankwest operates a pro rata agreement in which clawback = no. of months (since settlement) divided by 18 x commission paid Source: NMB Broker Fee Schedule, publicly available online, correct as of 6 November 2015
General manager Steve Kane claimed that “we’ve saved a significant amount of trail for a significant number of brokers, simply because we’ve acted, keeping the broker primacy front of mind. Providing the customer doesn’t say, ‘I don’t want anything to do with that person ever again’, then we don’t do that”. As Kane indicated, the broker best practice approach does require brokers to prove they’ve provided a high level of postsettlement service. And as the MFAA’s Hayden insisted, “maybe five years ago you could have waited 12 hours to get back to a customer, in relation to a query; you just can’t do that any more. You’ve got to get back to them fairly quickly, and for those brokers who aren’t doing that, that’s where they’re losing the deals”. There are other issues with the MFAA’s approach. For a start, not everybody is convinced of its necessity. ME Bank’s Lino Pellacia told MPA that “we do not need to manage contentious clawback cases as our offerings are always transparent – our
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advertised rate is the same in all channels, and we stand by our principal of not undercutting”. Moreover, there’s no actual broker best practice charter or written agreement. Hayden explained that “we don’t have people signing on the dotted line if they’re going to do it; it’s more about tacit approval and engagement and cooperation”. Broker best practice sits uneasily with the FBAA’s goal, which is the end to clawbacks if the circumstances are beyond the broker’s control. A customer could decide to refinance with another lender even if the broker was keeping in regular contact and urging them not to. However, the FBAA’s campaign has no involvement from lenders – so presumably would have to be forced upon them – whereas Hayden argues that the MFAA’s lender forum and aggregator forums are bringing together major players. “When it comes to clawbacks I’ve engaged lenders and said, ‘wouldn’t it be great if we all took a leadership role and worked together in a partnership model?’ ” she says.
It’s possible that lenders could take their own action on clawbacks, independent of brokers and industry bodies. La Trobe Financial is a rare example of a lender that has never introduced clawbacks. Vice president Cory Bannister blames clawbacks on “supercharged upfront commissions … which are only profitable for that lender if that loan remains in place for at least two or more years”. La Trobe says they pay a “reasonable upfront fee … reflecting the true economic value of the loan based on expected loan revenue and term, to compensate the broker for work done”. Correspondingly, La Trobe’s upfront commission is slightly lower than other lenders’, at 0.50% (at the time of writing). They claim churn isn’t a problem due to competitive products and brokers now being highly unwilling to damage the client experience, and certainly La Trobe’s arguments will resonate with brokers. However, it’s highly debatable whether brokers would accept an across-the-board reduction on upfront commission in return for an end to clawbacks.
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Finally, despite the ban on exit fees, brokers are still legally allowed to pass clawbacks on to consumers, if they write it into their client agreements. This has proved to be disastrous: Home Loan Experts found themselves in a media row back in September 2014 when they tried to claim back from a young family, and although Home Loan Experts still have the rule on their books, major franchises Aussie, Mortgage Choice and Yellow Brick Road have publicly disavowed this policy.
Need for clarity Rather than wait for regulators, the industry has the means and institutions to create its own rules for clawbacks. What’s desperately lacking is concrete data to give decisionmakers the confidence to take action. The MFAA originally claimed that 1–2% of total loans transacted within a year were normally exposed to a clawback. When MPA asked Hayden where this figure came from, she replied that “that’s from the last 12 months going around the country and talking about clawback at every single ‘Paving the Road’ session; it’s universally accepted it’s only 2% of your loans in a year”. It isn’t just the MFAA that is guilty of presenting anecdotal evidence as fact. The FBAA’s White played down the need for a proper study of clawback, claiming they
already had enough evidence to support their case. “I got bombarded with emails from people who support what we do,” White said. “I talked about this at our conference and the whole room stood up in applause.” NAB Broker’s above-mentioned report, which talked to consumers, gave brokers some idea of what’s expected of aftersettlement service, as did MPA’s own Consumers on Brokers report. NAB Broker’s
Reports are admirable, but lenders need to be willing to share their data on clawbacks – how many, how much and how long after loan settlement they take place. It may be, as Hayden puts it, that clawbacks are “a minor environmental issue” affecting an incompetent minority of brokers. Or they could be tweaked to protect responsible brokers: White concedes that “it may even be that a loan needs to go longer than three
“We’ve saved a significant amount of trail for a significant number of brokers, simply because we’ve acted, keeping the broker primacy front of mind” Steve Kane, general manager, NAB Broker report showed that 29% of broker applicants wanted to hear about new products related to their service and 28% wanted to hear about refinancing, while MPA’s report found that 77% of consumers who had used a broker wanted at least an annual check-up, if not more frequently, and 52% wanted to hear about refinancing. The MFAA’s Hayden advises brokers to schedule, standardise and then document their engagement with clients, to provide protection in the event of clawback.
months or six months, although I don’t think that’s necessary”. Clawbacks aren’t a direct threat to the industry’s reputation, but they are a crucial test of whether the industry has the ability to regulate itself. If regulators find they need to step in, or clawback disputes end up in court, it could set a precedent for regulator intervention in other potentially more important areas of the third-party channel. To avoid this, the industry needs to recognise that vast gulf between spirited debate and real action.
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HEAD TO HEAD
GERALD FOLEY “We’re not just saying ‘here’s what we do’; we show them ‘here’s the model: how you can get from broker to broker business, to better broker business’”
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GERALD FOLEY: BUILDING UP BROKERS’ BUSINESSES With a new IT platform and business philosophy, National Mortgage Brokers is poised for a busy 2016. Its managing director tells MPA why NMB is still defiantly orange MPA: Could you characterise NMB’s typical broker?
GERALD FOLEY: It’s a broker that has a strategy to build a successful broking business. It’s a broking business where the principals have got a view to grow a successful business model. We’re an aggregator that’s very comfortable bringing on a person who wants to be a mortgage broker; we’re comfortable with that model and it’s good. We get really excited when we’re talking to a potential broker and they engage with business development and benchmarking – value that we believe we can deliver. It’s not just saying “here’s what we do”; we show them “here’s the model: how you can get from broker to broker business, to better broker business”; we visualise and try to verbalise everything. It’s that broker that has a strong desire to build a successful mortgage broking business. MPA: Would you regard NMB as becoming a division of Aussie?
GF: No. The types of brokers that are coming to us are very different to the types of brokers that are going to Aussie. We’re a destination for an independent branded broker business
model that wants to build its own identity. Will there be room for a crossover of models? Absolutely, and there’s a bit of that already. … we tap very well into Aussie at the front end of people exploring the mortgage broker market. When people look at entering the market, Aussie is the most well-known brand and they do a great job of attracting potential mortgage brokers. But when people look at the market and try to understand it, what they quickly work out is they don’t want the brand, they want the model. Those who have an existing financial services business are a classic example. We get a really strong flow of leads from Aussie’s information evenings, people wanting to explore the market, and they’re often accountants or financial planners. We’ve had some input into that presentation.
MPA: For Aussie brokers who’d like to join NMB, has the crossover process been made any easier? GF: We have established what we call switching protocols. Where there’s an Aussie broker who’s formed a view they want their own branded business, we have a process where Aussie will introduce that person to us
NMB’S NEWTO-INDUSTRY PROGRAM In much of its marketing, NMB promotes itself as a home for elite brokers, in particular Jeremy Fisher, Gerard Tiffen and the 1st XI club. However, managing director Gerald Foley insists the aggregator is aiming to attract far more new-to-industry brokers. “We target that at people who are accountants or financial planners,” he explains. These firms are often looking to offer mortgage broking but don’t want to give up their brand to join Aussie. NMB has a training program for staff within these businesses, including the Cert IV and lender accreditation, in addition to a 12-part training program. NMB then goes over the first 10 to 12 loans the broker writes, asking them to explain all their decisions. Overall, Foley claims NMB’s program is “an entry point that’s not overly expensive, as some of the external mentoring programs are”.
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HEAD TO HEAD
GERALD FOLEY GERALD FOLEY’S CAREER TIMELINE
1981
Various lending roles at Westpac, RESI Building Society, Security Pacific Central Mortgage Limited as a lending manager, and National Mortgage Market Corporation Ltd
1994
Moves to AIDC Ltd as associate director mortgage finance
1996
Appointed manager of originator services at ANZ Bank
1997
Joins Mortgage Choice as state manager Victoria and international lending manager
2000
Appointed managing director of Johnson Taylor Potter Mortgage Plus
2001
Takes over at National Mortgage Brokers as managing director
and we’ll have a conversation. Generally they are lining us up against the market, and that’s good, because we’ll back ourselves on a competitive basis. To put some context around it, if a broker joins Aussie and they’re good at it, and
“The types of brokers that are coming to us are very different to the types of brokers that are going to Aussie” they develop their own leads, they’ll come to the view fairly early that ‘I don’t think I need the branded model’. That’s probably around the 12-month mark where they start considering that. … Yes, we have switching protocols, and we work very closely with Aussie state offices, and where there’s a discussion when someone says they want to go down their own path with their own business, there’s an introduction to NMB and then we have a smoother transition from Aussie to NMB.
MPA: Could you give us some examples of how NMB has leveraged Aussie’s resources? GF: We tap in really well to their marketing and media. We get great support from their legal services team, and also their lender relationship team; we have a lot of joint meetings with lenders. So we do leverage off them, and although of course we run our own agreements separate to Aussie, we leverage off the group’s buying power, which has been an advantage for us. Lenders recognise that Aussie and NMB are part of the same group, whilst there are separate lender contracts. That’s probably the key; the NMB board has three Aussie executives plus myself sitting on it, so we certainly tap into their resources that way.
MPA: You’ve been urging your brokers to transition from ‘broker to broker business’; is there really a difference? GF: A broker is a person who writes loans for a living, and that’s a great living, but to really
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be a business model we say it needs four components. The four p’s: people, premises, partners and processes. By people we mean you need an extra person to be classified as a business. If you’re a broker on your own and you go out and
write loans that’s great, but it’s hard to say you’re building a business model when it’s all you. Those people could be admin support or other brokers … our top performers have two support people now; one is a broker who doesn’t write loans but can do anything a broker does, and behind the broker support person is the customer or loan support person. They’re the ones doing the follow-up, chasing the documents; not the technical bit but the admin bit. We have been doing some broker benchmarking. Every quarter now we go out and get some brokers to do a survey on their businesses, and we’re getting some really cool insights around where they spend time with a customer, where their business comes from, what’s the conversion. We’re in our third quarter of doing that now and it’s been a real eye-opener for us; it’s not so much saying to brokers “here’s what you’re doing wrong”; more “this is what you’re doing and this is the result”. One example is we know that when brokers spend more time towards the end of the sales process, between submission and settlement, this results in much higher repeat customers and referrals. That’s where a customer needs brokers to be there, towards the pointy end of settlements … some brokers spend a lot of time getting the approval and then let the rest of it happen on its own. We say to brokers, “This is not us saying so; this is what your peers are saying this is where brokers could get more business.” So benchmarking has been a big success for us. Even brokers doing the survey – before
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they get the results – are already identifying things that they could do better … for example, if you’re a business you’ve got to have established referral networks. It’s not enough to say customers refer; you’ve got to have formal real estate, accountants, financial planner links. The evolution of broker business is better broker business; it’s a good philosophy to bring to brokers and something that’s very easy to explain.
MPA: Are there any recruitment drives in the pipeline, or have NMB’s numbers reached their optimal level? GF: Oh no, definitely not; we’ve got a lot of growth to go, in two to three areas. Our
MPA: Is it essential for NMB to provide better IT infrastructure than competing aggregators? GF: We’re launching our new business platform in January. We’re recognising the difference in business models; we looked at what was in the market and the current Aussie platform, and felt it wasn’t quite structured for our business model. We developed our own platform which is fully iPad-based. We will have a fully functioning, upwards of the best system in the market for our brokers in 2016. At the end of the day a business platform doesn’t go out and write loans; brokers do. But the business platform
“So we had no doubt we’d fallen behind the market on our business platform; it still hasn’t really cost us brokers … but we’ve closed the gap, and significantly” existing brokers are looking to grow their businesses by taking on loan writers; that’s a really key growth area for us – helping their business identify when is the right time to bring on another loan writer, how to do it, and then transition themselves from being a single broker to that broker-business model. [We’re also] targeting brokers in the market who may be operating under another aggregator or broker business and are now wanting to go their own way, and often those brokers want to have a break from the aggregator they’re under. We say, “If you’re looking to go down your own path, come and have a conversation with us.” New-to-industry brokers are a really important area for us, particularly targeting the accounting space. We’ve looked at a lot of research that shows accounting practices that historically provide services to their clients relating to things that have happened – such as tax returns – are now needing to do more things for their clients looking ahead, such as home finance. They’ve got to become more advisory.
enables them to do loans more efficiently, and it’s doing far more to complete loans at the point of sale. So we had no doubt we’d fallen behind the market on our business platform; it still hasn’t really cost us brokers, and we’ve done very well by working hard at the other areas to make up for what was possibly a bit of a gap, but we’ve closed the gap, and significantly … we’re really excited about going down the path of an iPad-based point of sales system. We’ve always had a really strong broker commission system, and that we’ll keep, but it’s about the point of sale system … it’s absolutely important to provide your brokers with modern, front-of-market systems.
NMB’S BROKER BENCHMARKING PROGRAM By analysing brokers’ businesses – down to how they spend every minute – NMB claims it can help brokers make considerable improvements. Here’s an extract from an NMB presentation to a group of its brokers: Average time per loan application (broker + admin): Your business: 12h 0min Group average: 7h 42min Some things to consider: Spending more time in the ‘Enquiry to 1st interview stage’ could potentially reduce ‘waste’ or rework later in the loan process. You could also potentially have time to write more business by delegating the ‘Loan application to submission’ process to an admin support person. Is there an opportunity to upskill admin staff? Lastly, more time spent in the ‘Follow up client’ stage could bring about more repeat clients or client referrals. Source: NMB Broker Benchmarking Program 2015 Q2
MPA: How would you like brokers to perceive NMB 12 months from now?
GF: I’m going to presume they see us today as a strong business support model, and I see that continuing; in 12 months we’ll continue our strong broker focus. There’ll be a lot more practical delivery of benchmarking and business planning platforms.
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SPECIAL REPORT
MPA YOUNG GUNS 2016
YOUNG GUNS Thirty young brokers who reveal the future of the third-party channel – more professional, more entrepreneurial, and attracting the best and brightest from Australia and beyond
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IT’S MUCH easier to convince doubters of the third-party channel than ever before. There’s brokers’ 51% market share, of course, and the increasing attention even the biggest banks are paying to the channel. But we think the most effective tool by far is simply to introduce the pessimists to one of MPA’s Young Guns. Our long-running annual Young Guns survey is first and foremost about recognising Australia’s top 30 leading brokers aged under 35 with less than two years as accredited brokers and more than $15m settled over the past year. All have been highly recommended by superiors, peers and referral partners. And that’s not all that unites our Young Guns; they also share a very high level of professionalism. The importance of this can’t be overstated, given increased regulatory monitoring of the broker channel. Whether we like to admit it or not, these Young Guns demonstrate how much more professional the industry has become, as many of their recommendations make clear. They also compare favourably with those in other industries – real estate and perhaps stockbroking come to mind – in which young recruits have been accused of cutting corners in the fight for promotions and other rewards. It also appears that broking is now attracting recruits from a wide range of career backgrounds, beyond banking. Talented and entrepreneurial young people are leaving elite graduate schemes to come to broking – risking all in the process – a situation that was unimaginable a few years ago. As Theo Chambers, director of Shore Financial, told MPA, it’s that diversity that counts; he’s looking for “young, ambitious, forward-thinking, dynamic, bright, intelligent people from different backgrounds, and I think it makes a difference”. This rapid change in our industry is why we believe MPA Young Guns 2016 makes for essential reading. Young Guns aren’t ranked, and there’s no ‘winner’, although we have featured some longer interviews with a few Young Guns. To pick Young Guns, we rely on recommendations, and so we’d like to thank all those in the industry who nominated and recommended Young Guns, and all those brokers who applied, whether or not they appear in this list.
29.7
$37,480,389
The average age of our Young Guns
Average total annual settlements of our Young Guns
A MESSAGE FROM OUR SPONSOR Suncorp Bank prides itself on being the genuine alternative for brokers. As Australia’s fifth-largest bank and a core part of the top 20 ASX-listed Suncorp Group, Suncorp Bank is an intermediaries channel expert with distribution channels across personal and business banking as well as life insurance. Our strength and size allows us to focus on satisfying customer needs through a full suite of products. Investing in the future is also essential; that’s why we’re proud to support MPA’s Young Guns for 2016. The MPA Young Guns feature recognises talent and excellence among the future leaders of the mortgage broking industry. Each individual has been nominated by industry professionals and has been acknowledged for their customer skills, outstanding performance and overall business growth. We know it takes perseverance, bravery and focus to be a star broker, and this depth of talent is highlighted in this year’s MPA Young Guns. It gives us great pleasure to celebrate their excellence and support this fantastic initiative. Congratulations to all of the nominees, and the team at Suncorp Bank looks forward to building a long-term partnership as you excel in your careers as brokers! Steven Degetto Head of intermediaries, Suncorp Bank
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SPECIAL REPORT
MPA YOUNG GUNS 2016 JASON GUO, 31
SZE CHUAH, 34
CENTUM MORTGAGE GROUP, SOUTH MELBOURNE, VIC $104,139,673
YELLOW BRICK ROAD PARRAMATTA, NSW $48,000,000
“For near two years, we have been a business partner with Jason Guo and Centum Mortgage ... Jason takes great pride in servicing and supporting his clients. From the inception of every application, the service is unique. He listens to the needs of the borrower and carefully matches the right loan product to accomplish the desired objectives.” Michael Wang, CPA director of KPMC Accountants
DANNY CHEN, 29 MORTGAGE CHOICE IN SUNNYBANK HILLS, QLD $15,166,781 “Danny has worked in the role as loans processor prior to commencing as a broker. Danny has always made the client experience his number one priority and it was very early in the piece that we knew Danny would move into the broker role. Since taking this on in only July this year, he has well and truly exceeded our expectations, as we knew he would.” Matt Cunliffe, franchise owner and manager, Mortgage Choice
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“Sze is definitely one of our brightest ‘Young Guns’. He joined Yellow Brick Road for a career change, moving out of a promising IT management role. Staggeringly, in less than two years from a standing start, Sze has become one of our most successful branch stories … Clients love him! The referrals and repeat business he is getting in his first two years shows a very promising future … He makes a sensational nominee for the MPA Young Gun award.” Will Taweel, national manager branch development, YBR
HUNG CHUY, 28
CHRIS HUYNH, 34
YELLOW BRICK ROAD RANDWICK, NSW $56,652,917
THE FINANCIERS GROUP, NORTH MELBOURNE, VIC $33,477,277
“Hung Chuy is definitely one of our youngest and brightest talents – a bona fide ‘Young Gun’ within the YBR network … Since joining Randwick (not even 18 months ago) the branch has gone from strength to strength, and is now a Top 2 branch nationally ... His contribution to this business can not only be measured by his financial impact (although his results speak volumes); he also brings a unique zest for life which has had a positive impact on the business culture, and he continues to challenge himself and colleagues with new initiatives. Hung’s value has not been unnoticed as he was recently made a business partner in the Randwick branch. He is a sensational nominee for this Young Gun award.” Will Taweel, national manager branch development, YBR
“The Financiers are a new group to Choice, having joined in March of 2015. The two principals, Chris Huynh and Joe Zhou, run a dynamic business and have been joined by Amy Song in June [2015]. They have settled $29m in the first five months since coming on board and are fast building what is a reputable brand both here in Australia and in Southeast Asia. They have a structured end-to-end sales process and have been bold enough to try outsourcing of the loan processing very early in the piece … They will most definitely qualify for the Choice Aggregation National Conference to be held in Beijing in October 2016. An excellent addition to my portfolio of brokers.” Chris Vellios, partnership manager, Choice Aggregation
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PARIS GALOMBIK, 26 SHORE FINANCIAL, SYDNEY, NSW $50,000,000 If you want a glimpse of tomorrow’s super-broker, Paris Galombik may be it. Galombik works for leading independent brokerage Shore Financial and was warmly recommended to us by Adrienne Smith, CBA’s state manager for NSW and ACT, who praised her “enthusiasm and passion for her customers”. Galombik’s background is in accounting; she previously worked at elite accounting firm Grant Thornton, which she found “just not satisfying whatsoever”. Following dinner with one of Shore Financial’s directors, a friend of hers, Galombik decided to take what was in her own words a “massive risk” and leave her high-powered graduate role for broking. Having that accounting background is “a really big point of difference”, Galombik believes. She says “a lot of brokers are ex-bankers, or doing it as a side role, but really understanding financial information has helped me excel, particularly on the higher end”. Despite being a new broker, Galombik is already dealing with high-end clients, who she’s accessed through her referral network, she explains. “My referral network isn’t actually so big … but my relationships are quite strong with my referral network, and I think that’s what’s helped me the most.” Going to open homes and even working out of real estate agents’ offices has helped with “getting in front of their faces” and building stronger relationships. With a referral network and already-great numbers, Galombik is well on her way to being a top broker, but she advises other new brokers to ‘mould their own path’: “I think what I’ve done is take a little bit of everyone around you, and find your own way to excel in the industry”.
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SPECIAL REPORT
MPA YOUNG GUNS 2016 WHAT WE LOOK FOR IN A NEW BROKER: AUSTRALIAN CREDIT AND FINANCE MARK KALAJZICH, DIRECTOR: Of our 90 brokers nationally, greater than 50% were either ‘new to industry’ or ‘recent to industry’. Generally these are high-quality people from both an attitude and intent perspective but just haven’t been able to generate a sustaining lead source and customer base. I hear a lot of people talk about bringing new talent to the industry, and by default they start talking about bringing in youth. But generalising in recruitment is a dangerous trait. Some of the most energetic people in our business are in their ‘50s and ‘60s. Quite often we will receive a CV from an individual who has been in the industry about 18 months. They set out to build their own business but found it harder than they expected … this opportunity has brought us brokers who have gone on to settle in excess of $40m in their first year with us. And yes, they all had something in common: great ethical humans; excellent attitude; and genuine desire for success in the broking industry.
Australian Credit and Finance is one of the fastest-growing brokerages in Australia, and winner of several Connective awards.
OLIVER LI, 29
NELSON BEDOYA, 29
OPTION FINANCE AUSTRALIA, SYDNEY, NSW $45,692,780
LOAN MARKET, BOTANY, NSW $15,500,000
“I am supporting this application based on many facts of Oliver. Settlements numbers speak for themselves, but as his up-line manager, what is more fundamentally important is where the sales are generated, the quality of his clients and also the manner of where his leads are sourced. Don’t let his age fool you. Oliver displays maturity in his work beyond his current age and experience. Almost all his leads are self-generated through word of mouth and, more importantly, repeated business … Time and time he has displayed these [qualities] and, as mentioned, his settlement figures speak for themselves.” Raymond Yap, head of business development and sales, Option Finance
“Nelson brings a really fresh approach to business and he always puts his clients first. I’ve worked with Nelson ever since he joined Loan Market, and very early on he identified that the client experience was his number one priority … The proof can be seen in his referral business – 90% of Nelson’s business is now repeat or client-referred business. His view on growth and business is very organic – he strives to be the best he can be every day. He’s always willing to go the extra mile for every stakeholder he comes into contact with, which is a massive contributor to his success. I only see Nelson getting better and better as time goes on.” Onur Kocabay, associate director, Loan Market, NSW
MATTHEW POSSELT, 33 ICONIC HOME LOANS, OSBORNE PARK, WA $15,987,236 “Since being accredited with the Commonwealth Bank Matt has shown himself to be a broker of the highest standard ... Matt’s applications prove he has a ‘get it right first time’ approach to everything he does. A trait essential in being a successful mortgage broker.” Adrian Rebeira, broker direct sales consultant, third party banking, Commonwealth Bank “Matthew has had an excellent start to his career as a broker since commencing in January 2015. Matthew has gained an understanding, over a very short period, of the importance of obtaining trust with referrers and their associated clients.” Steve Ayris, national business manager, Specialist Finance
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CHRISTOPHER BATES, 28 CANOPY PRIVATE, SYDNEY, NSW $16,000,000 “Chris takes an in-depth educational and financial planning approach to mortgage broking. He is extremely passionate about helping his clients understand the property market and the importance of making the right decisions. He therefore works closely with buyers’ agents and avoids developers. He knows the importance of structuring loans correctly and submits quality deals to St.George. He always has his clients’ best interest at heart, as shown on numerous occasions with his clients at St.George. He is always very kind and personable to deal with.” Jarred Spur, Flame BDM, St.George
WHAT WE LOOK FOR IN A NEW BROKER: n1 FINANCE & LEASE
SUDESH SAPLA, 34
YVONNE WANG, 32
LOAN GALLERY, THOMASTOWN, VIC $42,681,151
ABACUS HOME LOANS $42,400,000
“Sudesh Sapla has demonstrated what exceptional focus, determination and outstanding customer service can help you achieve in the mortgage broking industry ... Sudesh has achieved Elite Broker status with Loan Gallery in 2014/2015 and settled over $57,000,000 since lodging his first loan in September 2014. Sudesh prides himself on being a construction finance specialist, and finds off-the-plan and established homes clients to be very easy to service as well ... We highly recommend Sudesh for MPA Young Guns 2016.” Steve Matsoukas, director, Loan Gallery
“I have had the pleasure of knowing and working with Yvonne Wang at Abacus Home Loans over the past two years in my capacity as the area manager for ANZ Broker. Over this period Yvonne and the broader Abacus team have demonstrated a passion for their customers and invested in their business, ensuring their team are of the very highest level of skill/knowledge to ensure positive outcomes for their clients. The nomination of this award is fantastic recognition for Yvonne personally and for the broader team.” Joanne Hu, specialist distribution area manager NSW/ ACT, ANZ
REN WONG, MANAGING DIRECTOR: 1 Commitment: Without commitment a broker couldn’t sustain the initial dip and would lose confidence or patience to continue in their career. We all know most people wouldn’t have their first loan in the first month; even if they do, it will take at least six weeks to settle if lucky, then you only see the commission the following month. Hence we run by the salary PAYG model at n1. 2 No prior experience in broking: At n1 we definitely welcome experienced brokers joining us, but we do find fresh candidates without prior experience don’t carry over bad habits. 3 Technology-literate: When I recruit I stress very much the receptiveness to technology, from having the good habit of using CRM to log everything, to doing research via the internet … I can’t imagine a person working in our office not having a tech mindset; we always strive to be a tech-based or fintech-based brokerage firm.
n1 Finance & Lease is one of MPA’s Top 10 Independent Brokerages 2015 and launched the first Chineselanguage comparison site for Australian finance.
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SPECIAL REPORT
MPA YOUNG GUNS 2016
JOSH RAWNSLEY, 28
REDOM SYED, 25
YELLOW BRICK ROAD KIRWAN, CRANBROOK, QLD $16,500,000 “Josh Rawnsley is an experienced bank loan writer-cum-mortgage broker and I have worked with him in his transition from banking to mortgage broking over the last two years. Josh’s experience and knowledge has helped him achieve consistent results for his customers, assisting them in all levels of financial enquiries, home lending, commercial lending and equipment financing. Josh is professional and is a well-respected member of the business community. I highly commend Josh for his achievements thus far.” Fernando Lemos, branch principal and lending support manager, YBR
CHANTELLE MEDENILLA, 30 MORTGAGE CHOICE IN RICHMOND, VIC $26,670,675 “Chantelle joined Mortgage Choice in November 2013 with a background in accounting. She had a love of numbers but no prior experience as a mortgage broker. Chantelle is enthusiastic and passionate about customer service, and considers every customer interaction as an opportunity to amaze and delight. In the two years that Chantelle has been with Mortgage Choice she has settled close to $45m.” Max Billi, Vic state manager, Mortgage Choice
“Redom Syed is an intelligent young broker with a big future in the industry. He has very quickly positioned himself as an industry expert with his knowledge of the marketplace. His background as a lending market regulator in the past has made him a ‘go to’ person in the industry to help explain some of the changes that have happened through 2015. His rapid response time and personable style make him a standout broker in terms of customer service. Knowledgeable, efficient and great service – he’s the complete package for what I look for in a great broker.” Lawrence Lim, partner, D&L Partners, Burwood, NSW
ALEX VELJANCEVSKI, 25
CHRISTOPHER FRANKLIN, 32
EVENTUS FINANCIAL, SYDNEY, NSW $17,200,000
AUSSIE SUNBURY, VIC $36,822,000
“Aleksandar also embraces learning from other brokers and has set up a network of brokers for peer-to-peer learning. In the short time of eight months that Aleksandar has been in business he has settled $17.2m with a large pipeline. An outstanding result for a new broker in his first eight months … Aleksandar has been keen to establish a highly professional and process-driven business which optimises the value of a client relationship and maximises new business opportunities through client referrals. I have no hesitation in recommending Aleksandar Veljancevski for the Young Gun award nomination.” Glenn Williams, partnership manager NSW/ACT, Choice Aggregation
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CONFIDENCE FINANCE, PRESTONS, NSW $36,000,000
“Chris has done an exceptional job in changing industries and embracing all that the broking industry has to offer. With a solid background in hospitality management, Chris has been able to leverage off his excellent people skills and positive attitude to hit the ground running and be a standout amongst his peers … Not only does Chris have impressive results in home loan results but his cross-selling of insurance to protect his customers has also been of a great standard. I have no hesitation in nominating Chris in the MPA Young Guns 2016 and look forward to seeing his progression in the Aussie business.” Glenn Edwards, state manager Vic/Tas, Aussie
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AARON CHRISTIE-DAVID, 32 MORTGAGE CHOICE SOUTH SYDNEY, NSW $19,858,795 Technically speaking, Aaron ChristieDavid is new to the industry – he’s been a broker for less than two years – but he’s worked with the third-party channel for a lot longer. After starting work at Wizard Home Loans in marketing, Christie-David then moved to Commonwealth Bank, working with brokers and increasingly thinking of becoming a broker himself. “When you’re in corporate you get complacent a little bit,” Christie-David recalls. “I always envisioned myself having my own brokerage, and I acted on it.” He bought his franchise from a departing broker, and according to Mortgage Choice’s CEO, who personally recommended Christie-David to MPA, “he hit the ground running”. Christie-David used his marketing expertise to rapidly accumulate leads, but he also delivered to existing customers, with a 98% customer satisfaction rating. Christie-David treats broking like professional sport; as well as working hard, he’s constantly monitoring what the top brokers are doing, and advises other brokers to do the same. “Reach out to the top-performing guys,” he says. “It’ll surprise you how open they are with the mistakes they made early on. [Take] any tips they can give you; the top-performing guys are top-performing for a reason. They have such an open-door policy and they want to help new-to-industry professionals.” All this needs to be backed up by a healthy mindset and lifestyle, ChristieDavid concludes. “For myself it’s really just enjoying what I do; clients see that you’re good at what you do, and that gives them confidence, and that comes from having it yourself. You’ve got to back yourself; don’t look back, and don’t have a plan B.”
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SPECIAL REPORT
MPA YOUNG GUNS 2016 WHAT WE LOOK FOR IN A NEW BROKER: AUSSIE HOME LOANS LYNDA HARRIS, GENERAL MANAGER PEOPLE AND CULTURE: 1 Customer focus: We can train our new brokers in the technical skills of finance, but you can’t teach the innate desire to help others and provide an unbeatable service. 2 Emotional intelligence: We’re not just looking for people with the highest IQs (though of course we look for business intelligence); we’re really looking for people with the highest EQs – emotional intelligence … tertiary qualifications are an advantage, but more so because they demonstrate a successful track record of starting and finishing something, and having to plan and organising their time while doing so. 3 Self-discipline and willingness to learn: We look for people who have a genuine drive, passion and desire to come on board wanting to build their own business; people who want direct reward for the efforts they put in and who have a commitment to make it happen for themselves. Part of this is having a willingness to listen and learn, and take advantage of Aussie’s training and support.
Aussie Home Loans is one of Australia’s biggest franchises and trainer of new brokers.
HARDIK SHAH, 29
SEAN MURPHY, 27
LOAN GALLERY, THOMASTOWN, VIC $22,936,517
MY MORTGAGE FREEDOM, MELBOURNE, VIC $26,499,000
“Hardik Shah started with Loan Gallery in June 2014. Many of his customers will compliment him on his customer service, in particular his attention to detail and mannerisms when dealing with them. Hardik wants to be the best within this industry and will often attend training sessions and personal development days presented not only via internal in-house training but from his aggregator AFG and lenders he is accredited with. Hardik encompasses all that Loan Gallery stands for in regard to customer service, presentation and delivering on promises. He embraces our motto, ‘Here to help’.” Steve Matsoukas, director, Loan Gallery
“Sean immediately made inroads, quickly building a pipeline by leveraging off his relationships with mortgage brokers built up during his time as a BDM for a non-bank lender. Using his experience in nonconforming lending gave him a competitive edge against other brokers, which quickly produced results and a solid foundation to start learning the prime market … Sean’s attitude and work ethic are a testament to the quick growth he has experienced and a driving force behind the great work that has been produced in such a short period of time.” Anthony Alabakov, CEO, My Mortgage Freedom
BRENDAN TURNBULL, 29 FRONT ROW FINANCIAL MANAGEMENT, NUNDAH, QLD $33,335,754 “Since starting his mortgage broking business in July 2014 Brendan has delivered some exceptional outcomes for his clients, particularly for his core clients who are high net worth and self-employed. Of note have been several deals where he has been able to deliver bespoke lending (mainly debt consolidation) solutions, outside normal bank lending criteria … We are continually impressed with Brendan’s knowledge and understanding of complex business structures and lending options. Brendan is an incredible asset to the Home Loan Connexion stable of brokers, and we could not be prouder of having him on board and in making this recommendation for him to be recognised and awarded as Young Gun 2016.” Tracy Kearey, director, Home Loan Connexion
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ARON CARDONA, 24 PROFESSIONALS FINANCE, PROSPECT, NSW $34,339,000 “Too often we measure a broker’s success by how much they’ve settled in loans. Aron has a very strong ethical foundation, so he is focused solely on client outcomes and building a long-term relationship. In short, how will the loan help them today, tomorrow and into the future? Clients have been very generous in their praise of Aron, saying they never felt rushed to make a decision and the entire process was much easier than they expected. For other new brokers joining our company, Aron is a fantastic example of what makes a successful ‘Young Gun’. We have no doubt he’ll become a Top 10 Australian Broker in the years to come.” Scott McTeare, general manager, Professionals Finance
BHARAT DERIYA, 31
ALEX POLITIS, 30
MAREE WOODCOCK, 25
LOAN GALLERY, THOMASTOWN, VIC $24,146,315
RAMS HOME LOANS ADELAIDE CENTRAL, SA $34,992,424
MORTGAGE CHOICE, ASHGROVE, QLD $25,632,169
“Alex commenced with our business in August last year and has had an incredible first year as a lending manager. He has an amazing work ethic and gets fantastic feedback from all his clients. Importantly, his success has been driven by his ability to self-generate new opportunities. He has been instrumental in helping our franchise win national awards, with us being best in the top three in the country (out of 90 franchises). He is a very quick learner, a great team player and has a great sense of humour which makes it a pleasure to work with him.” Stephen Villios, principal, RAMS Adelaide Central
“Having Maree Woodcock join the Mortgage Choice team has been fantastic. Maree brought with her extensive experience in home loan lending from Westpac, as well as her fantastic rapport with customers and a determination to find a solution for even the most difficult scenarios. Maree has been a valuable asset to the Mortgage Choice Ashgrove business and her numbers show her success, as they keep growing steadily each month.” Toni Slater, franchise business manager, Mortgage Choice Queensland
“We would like our mentees to settle at least $20m in two years. Bharat since October has settled just over $29,000,000 and lodged over $67,000,000. Bharat’s mild-mannered temperament combined with his attention to detail and high customer service levels makes him a broker that many of our referrers enjoy working with and would like to handle their customers. We believe we shall be seeing Bharat obtain more accolades within the industry in the years to come if his first year as a mortgage broker is his benchmark. We highly recommend Bharat for the MPA Young Guns 2016 award.” Steve Matsoukas, director, Loan Gallery
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SPECIAL REPORT
MPA YOUNG GUNS 2016 JUNHAO SUN, 34 SUN WEALTH MANAGEMENT, HAWTHORN, VIC $114,990,150 “Junhao started his broking business in November 2014 and to date has thrived and grown to outperform existing businesses in the market. Jun’s commitment to his growth and his clients is real, as has been his drive to provide his clients with a streamlined experience. His focus has been on compliance, process improvement and efficiency. Junhao has an intricate understanding of how people create success. When recruiting for new team members he looks for attributes including passion and enthusiasm. Junhao will continue to remain engaged and invest in his brand, which will keep separating him from the competition – this is a defining characteristic of a successful business owner.” Maree Maditianos, partnership manager, FAST
JACQUELINE WANG, 29 N1 FINANCE, SYDNEY, NSW $60,623,675 “Jackie started off as a person who didn’t know much about home loans three years ago as a loan admin, and is now herself one of the top-performing accredited mortgage brokers in the office. I can only credit this to her persistence and commitment. She took a step further by diversifying her knowledge and service into car loans and commercial lending, and also cross-selling protection/insurance to our in-house financial planners, making herself a valuable team player across different aspects of n1 business.” Ren Wong, director, n1 Finance
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PETER MORGANTE, 30
GAVIN TANDON, 32
LKFS FINANCIAL, ST PETERS, SA $30,017,123
SMARTLINE, BOWEN HILLS, QLD $27,150,246
“I have seen Peter grow as a broker over a period of nearly 18 months now, fresh out of retail banking to join the LKFS team. His core skills were there … but now comes the steep learning curve of getting his head around the pricing, policy, processes and niches of the plethora of lenders out there in the market, which he has adapted to perfectly from my view. Peter is now forging ahead to write some incredible volumes, with which I’m sure he will agree; he has one goal in mind when he sits down with any potential applicant(s) – give them the best customer service for what is probably the biggest decision in their lives. Congratulations, Peter.” Matthew Parsons, BDM, Home Loans
“Gavin Tandon has had a fantastic first year with Smartline, where he was recently named New Franchisee of the Year Nationally. He is also an all-rounder, as while $25m in settlements from a standing start is significant, he is continually on the National Insurance leader board and is currently leading nationally (YTD four months) with 63 policy sales from 77 quotes. Client satisfaction results are consistently on or above the Smartline average of 9.8 out of 10 and Gavin continues to receive numerous client referrals and recommendations … and is seen as a young leader within the Smartline franchisees and his local community.” Brad Inwood, state manager Qld, Smartline
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SHARON BAL, 33 LOAN MARKET, CANNINGTON, WA $51,000,000 Perhaps it’s Sharon Bal’s philosophy that you should “treat clients the way you want to be treated” which has earmarked her for success in the mortgage broking industry. Commending Bal for her dedication to her job at Loan Market, WA state director Ken Maclennan praised her for her “outstanding customer feedback” and the instrumental role she played in running the business after the death of her boss, Damien Mills. Describing Mills as both her “competitor” and “big brother”, Bal was deeply shaken by his passing, but honours his legacy by upholding first-rate client services. With a background in project administration, Bal began her broking career over two years ago, impelled by the birth of her daughter. She found a work-life balance that allowed her to commit to both her jobs, as a broker and a mother. Claiming to owe her success to her husband, Bal believes that “if he hadn’t supported me in the early months … I would have left by now”. This work-family balance has paid off, as Bal’s success in the industry is clearly evident in her excellent monthly averages and net promoter score of 79. Still, her notable customer service and personable qualities have contributed to this rapid success. She believes this to be the “backbone to our business”, as attending efficiently to customers’ needs leads to referrals and further business. Bal attributes much of her success to her love for learning and her belief that “if you stop improving you’ll stop succeeding”. She advises upcoming brokers to “welcome new ideas” and learn from all people, including clients and those in other industries. As she believes “there is no age to stop learning”, Sharon Bal is certainly proven as a ‘Young Gun’ and has a promising future. Story by Olivia Baume
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FEATURES
BROKERS AND REAL ESTATE AGENTS
A PERFECT PARTNERSHIP Having a formalised referral relationship with a real estate agent can deliver far more than leads. MPA editor Sam Richardson examines the strategic advantages of a partnership, and what it means for brokers on the ground
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AUSTRALIA’S BROKERREAL ESTATE PARTNERSHIPS In addition to the countless referral relationships between brokers and real estate agents, there are a number of more formalised links: McGrath Ray White Century 21
PROFESSIONAL referral partnerships are the new lead generation ideal for most brokers. That’s for good reason: working with other professionals who understand the challenges of running a small business beats advertising, awkward birthday phone calls and database marketing, and has been utilised to tremendous effect by almost all of MPA’s top brokers and brokerages in 2015. Times are about to get tougher, however. As Aussie Home Loans CEO James Symond told MPA, “the likely competitor to one mortgage broker is now another mortgage broker”, and you’ll be competing not only for clients but for referral partners. It’s very possible that by this time next year we’ll not be talking about real estate agents, accountants and solicitors as an ‘untapped opportunity’ but as a rapidly drying oasis in a parched referral landscape. Having relied on professional referrals, a large number of brokers will find themselves in dire straits. This article is about a group with a particular advantage: brokers in partnership with real estate agents. MPA has brought together Loan Market, the mortgage broking division of real estate group Ray White, and Oxygen Home Loans, an MPA Top 10 Independent Brokerage 2014, which is owned by McGrath. The advantages for Oxygen’s brokers are obvious, explains general manager Alan Hemmings. “McGrath talks to hundreds of thousands of people a year, and we need to
Richardson & Wrench LJ Hooker
Raine & Horne
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FEATURES
BROKERS AND REAL ESTATE AGENTS
SATISFYING REGULATORY REQUIREMENTS The NCCP Act makes a number of provisions related to referral arrangements, which you can read more about on the website of law firm Gadens. Gadens also provides an example of a referral agreement between a broker and referral partner: If you refer potential borrowers to [name of lender/broker] (us/we), you will be deemed to have agreed to the terms set out in this document. You must: only engage in credit activities as a referrer incidentally to another business you are carrying on not charge a fee to the consumer for the referral only inform the consumer that we are able to arrange loans and leases but not any particular product, and not provide any recommendations or advice concerning loans or leases inform the consumer of any commissions or other benefits you may receive obtain the consent of the consumer to pass their name, contact details and a short description of the purpose for which the consumer may want the credit or lease pass on the consumer’s contact details to us within five business days of informing the consumer that we are able to arrange loans and leases but not any particular product Source: Gadens, Regulation and Compliance Update, July 2010
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maximise that opportunity and find brokers who are prepared to do the work and follow up the lead,” he says. For Loan Market chairman Sam White it’s the quality of clients that counts. “People who are buying property every day, people at open homes: that’s the database that everyone is spending a lot of money advertising to get,” White says.
A shared history The link with real estate agents goes back to broking’s roots. In 1993 the White family
think they’ll come in and get leads from day one; it’s about building that personal relationship, the same as they were doing with any external referrer”. Now both groups are intent on building closer links with their real estate arms, using technology and sophisticated marketing, and strengthening the links between the broker and real estate arms. Regulation has also played a role, White notes: “In a marketplace where there’s more pressure on new deals, given the APRA
“I see myself as real estate agent– mortgage broker. My skill is in helping the client buy a property, helping negotiate, but in the background I’ve got the finance knowledge” Josh Bartlett, mortgage broker, Loan Market were faced with a major decision, recalls Sam White. One of their competitors had been bought out by a bank, and “we were concerned they would be able to offer better products. We didn’t want to sell out to a bank, so we decided to get into mortgage broking, which was just beginning”. In McGrath’s case, they quickly realised that their in-house lender, who represented one of the major banks, simply couldn’t help all their customers, and founded Oxygen in 2002. While Loan Market and Oxygen were founded by real estate groups, over the years they moved further away from their parent companies. The name Loan Market resulted from a request by brokers who were concerned that the previous label, ‘Ray White Financial Services’, was “too limiting as a brand”, White explains; and Oxygen brokers are independent, as they hold their own credit licences. Both White and Hemmings insist their brokers don’t get handed leads on a plate. Loan Market brokers often pay referral fees. And as Hemmings puts it, “brokers can’t just
restrictions, it’s a good opportunity to get customers buying new homes rather than refinancing old investor books, and we think that’ll be a really important part of the future.” The objective is to deliver more leads for brokers, more reassurance for agents, and ultimately a smoother transition for customers, starting from the ground up.
Partnerships at the broker level Donna Beazley has been at Oxygen for four years, following time spent at Westpac and as a broker. Like other Oxygen brokers she’s based in McGrath offices – four offices to be exact – across NSW’s Sutherland Shire region. Placing brokers in McGrath offices is meant to help them build a rapport with the agents. Nevertheless, Beazley recalls that the process was “very challenging. You’ve got to be very in-their-face; you’ve got to work with them and get them to know you and trust you and see what you can do, because their clients are extremely important to them of course, so building a bit of a rapport up.” Loan Market has a more mixed approach.
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FEATURES
BROKERS AND REAL ESTATE AGENTS
THE eBROKER APP Developed by AppCloud and Loan Market broker Josh Bartlett, the eBroker app became available to Loan Market brokers nationally in May 2015 and has seen 225 brokers sign up and more than 3,400 leads captured. As well as saving time by automatically updating referrers on the progress of a loan, the app allows brokers, referrers and head office to track the number of conversions of leads. It’s in that final use that Bartlett sees the most potential. “A lot of aggregators want to grow people businesses and write more volume, and eBroker is allowing Loan Market to know exactly how many leads each broker is getting every month and how many they’re converting. Aggregators want to help their brokers grow, but if they don’t have the right information they can’t grow,” he says.
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MPA talked to Josh Bartlett, double-AMA Franchise Broker of the Year winner and No. 16 in the 2015 Top 100 Brokers. He is based in his own office in the Bayside region of Victoria. This gives him independence, he says, particularly in the eyes of clients. That’s fine, Loan Market boss White comments, but “it’s better for [new brokers] to be part of a team … we recommend when people start they look at [being in the office], and then once they develop their business they often go out on their own”, a transition that usually occurs after one to two years, he adds. In terms of the clients they get, Beazley notes that her clients vary across the four
Beazley explains. “They need to know who you are.” She helps build that trust by being physically present, both in the office and at open homes. “I go around to the offices and I train their staff, so you’ve got the trust in each other. The thing with real estate agents in McGrath is they’ve got so much going on and compliance to do that referrals don’t come naturally; I have to be in their face to remind them I’m here.” The focused training of real estate agents by brokers is one of the things that distinguish the most successful partnerships. This is partially necessitated by regulation, observes White. “We do a lot of training with agents
“They’ve got so much going on and compliance to do that referrals don’t come naturally; I have to be in their face to remind them I’m here” Donna Beazley, mortgage broker, Oxygen Home Loans offices, although they are predominantly upgraders or downgraders like in most of the Shire. Loan Market’s Bartlett has found that his client base has changed as he’s gained experience and the trust of agents. Originally he dealt with first home buyers, but “I’m getting a lot more traction now around the $1.5–$2m mark; there’s a lot more people there because of my skill set, and they refer a bit better as well”. Both brokers put enormous emphasis on building and maintaining relationships with their local real estate agents. Indeed, Bartlett has over 80 real estate partnerships and says he “loves” the transaction. “I say out loud that I see myself as real estate agent–mortgage broker. My skill is in helping the client buy a property, helping negotiate, but in the background I’ve got the finance knowledge to be able to handle the transaction at the same time,” he says. “It’s a trust thing in the Shire,” Oxygen’s
about descriptive dialogues, when and how to refer and why to refer – is it in the interests of their customer?” An agent’s dialogue is important for improving the quality of leads, according to Bartlett. “If they just say, ‘Someone from our finance team will be giving you a call’, that isn’t very warm, but [they could] say, ‘You’ll be getting a phone call from Josh Bartlett, the AMA Broker of the Year two years running; he’ll be a good person to talk to’.” Technology is helping Beazley and Bartlett take the uncertainty out of partnerships. After meeting a client at an auction or open home, Beazley checks with the agent and sends the client an email explaining what she does and her experience. She has a staff member specialising in lead generation who will then call and ask if the client needs any help from Beazley. Similarly, Bartlett uses video messaging to ensure clients bring the right documents to his appointments.
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Furthermore, Loan Market is trialling sending video messages explaining a broker’s role to attendees at open homes, with joint Loan Market–Ray White branding, White explains. “We’re trying to integrate open-for-inspection marketing to those clients.” Bartlett has actually built an app – eBroker – to track the flow of leads; it is being rolled out across the entire Loan Market group. Agents wanted feedback on how their clients were doing, Bartlett recalls, and manually delivering this information to all his referral partners was taking up a huge amount of time. The new system automatically informs all parties, but its main role is as an ‘accountability tool’. “It makes the broker accountable to the name and number and builds the relationship.” Oxygen is planning to develop its own lead management system, Hemmings says. “There may be a way to build a linkage between our software and McGrath software so we can provide updates around what’s happening. The agent creates a lead and we could have an application to automatically send a message to the agent to say, ‘Your lead has gone to lodgement’, or what have you.” Dealing with multiple referral partners nevertheless requires a lot of work, and Beazley has a team of three support staff covering processing, lead generation and appointments, to help her concentrate on the interviews. At Loan Market they’re promoting the use of ‘broker teams’, where a group of brokers will share and allocate leads from referral sources to ensure at least one broker is still available. White explains: “We’re seeing that teams can have a bigger impact than an individual.”
The strategic dimension At management level, both Oxygen and Loan Market are also trying to build a rapport between their broking and real estate arms. “We get [the team] in front of John McGrath,” explains Oxygen’s Hemmings. “Some mentoring and coaching from John always helps! He holds a couple of big sessions twice
a year and they get invited to that. They get speakers in; they get to interact with all the agents and senior management.” They also run lead generation competitions for agents, with holiday vouchers as rewards.
“People who are buying property every day, people at open homes: that’s the database that everyone is spending a lot of money advertising to get” Sam White, chairman, Loan Market There’s an increasing amount of crossmarketing at both groups. Oxygen gets mentioned in McGrath’s marketing material, as does Loan Market in Ray White’s advertising, White observes. “Sometimes in brochures we’ll illustrate how much an extra bid will cost you, so if you bid an extra $5,000 what’s the cost in terms of interest rate. We’ll have a chart that’ll be co-branded Ray White and Loan Market.” Ray White is expanding into Indonesia and Loan Market is following them, he adds, although he concedes, “It’s a long-term play.” While most brokers will mention crossmarketing, there’s a common concern about brokers and estate agents being seen as too close by clients. “We do get asked the question quite often,” notes Hemmings. “I think it’s just putting the customer at ease, letting them know what we do discuss with the agents, what we don’t discuss, and being quite upfront about it. It’s when you try and hide it that you get in trouble. Yes, we’re owned by McGrath but we don’t disclose any personal information about the clients at all,
THE FOXTONS CASE In 2006, major UK real estate agent Foxtons was accused by the BBC’s Whistleblower program of sharing information with its in-house mortgage broker, Alexander Hall. The BBC claimed that Foxtons’ agents knew exactly how much borrowers could afford, having access to confidential income information held by Alexander Hall. Although Alexander Hall denied these accusations – and no prosecution ever took place – the ramifications of inappropriate sharing of information is huge. While Oxygen and Loan Market seek client information from real estate agents in order to smooth the transition, they have taken steps to prevent any backflow of confidential information. In Oxygen’s case the brokerage stores details on a totally different IT system to that operated by McGrath, and although they can reveal to an agent that a client has been pre-approved, they won’t disclose for how much. Loan Market educates both brokers and agents and has a privacy policy that prohibits such sharing of information.
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FEATURES
BROKERS AND REAL ESTATE AGENTS
BROKERS BECOMING REAL ESTATE AGENTS If a partnership’s not enough for you, then you could join a growing band of brokers who have their very own real estate offices. Loan Market has seen a number of its brokers do this, with six Ray White offices now owned by brokers. “We think there’s a really good opportunity,” Sam White explains, “because the customer base is the same, the processes are very similar; the concept of finding and looking after the customers is the same.” Loan Market brokers who would be interested in this course of action would be supported by head office, White confirmed.
and the brokers are well versed in having that conversation.” Bartlett is similarly straightforward in his client dealings: “I just say ‘I work from my own independent office, and if I was to share your information I’d lose my job’. Saying that straight away gives the client confidence.” In fact, brokers at Loan Market are far less locked in than you’d imagine. According to White, they’re allowed to partner with whichever real estate agents they choose (and vice versa). “We’re not just about Ray White; we think we have some good DNA about working with agents, and we’re very happy to support any broker around the country to establish a partnership, regardless of whether they’re Ray White or not,” he says. Oxygen brokers are required to refer to McGrath, although there are no restrictions on their dealings with other partners such as accountants and solicitors. All broker-real estate agent partnerships do struggle with a fundamental question over conflicts of interest; that a broker represents the buyer and the real estate agent represents the seller, and therefore they shouldn’t cooperate. Oxygen boss Hemmings is eager to set the record straight: “Ultimately the broker is working for the client. Although we’re employed by McGrath, I’m quite upfront with John [McGrath] that we work for the client.” That includes advising clients against a course of action recommended by an agent, if the client’s finances wouldn’t support it. “We do work for the client and we’re governed by the rules around that, so under responsible lending we do everything in our power to make sure the client can afford that property.”
Beyond lead generation Broker-real estate partnerships began as a lead generation strategy, but after two decades of evolution they’re fundamentally reimagining the role of the broker. Brokers like Bartlett are coming to see themselves as experts in both spheres; an increasing number of brokers are setting up their own real estate offices,
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supported by head offices of national real estate networks. Hemmings believes that support is a huge advantage. “For a broker looking to incrementally grow their business, McGrath can give them that opportunity, through the leads, through the support we give them,” he says. For White, partnerships are part of a wider diversification play: “The mortgage broker is the old branch manager of the ’70s; they were the trusted adviser of the community. If you’re trusted, and you have the right services to
“I think it’s about putting the customer at ease, letting them know what we do discuss with the agents, what we don’t discuss, and being quite upfront about it” Alan Hemmings, general manager, Oxygen Home Loans offer the customer at the right time … it enhances the customer relationship. If brokers keep doing that, they can keep growing market share.” Finally, for Beazley the partnership is a gateway to a whole range of possibilities. “I believe they’re leads that you never would have seen. You’ll meet and greet people that you never would have met, ever, so I think the opportunity’s huge,” she says. “You’ve got dozens of people attending open homes at any time, which you can get in front of, and even if you impress just one or two of them, they’re people you wouldn’t have met … most people need finance and assistance with getting a home.”
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FEATURES
COMMERCIAL FINANCE
BUILDING A BUSINESS TOGETHER Commercial finance is moving from a transactional to a long-term relationship between brokers and businesses. MPA has brought together lenders to explain how brokers can provide finance and advice at every stage of a business’s life cycle
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MANY BROKERS still regard commercial lending as a sideshow: a way to assist existing clients with the odd deal, and make a buck. That was a great business model – but today’s top commercial broker looks for a long-term relationship with a client. In fact, a broker now has the tools and the lenders to help a business at almost every stage in its life cycle, and in this feature we explain how. There’s nothing new about brokers helping businesses expand, FAST CEO Brendan Wright explains. Brokers have been doing it for 30 years, and equipment finance is even older. However, he concedes that the landscape is “changing at one million miles an hour … brokers are doing more and more for the holistic commercial needs of business owners”. As Wright puts it, “what’s played out in the residential mortgage space is playing out in the business lending space”. Brokers are doing several deals with the same client, adapting their services as the client’s business changes rather than offering one type of finance to multiple clients. They’re also offering residential mortgages to business owners and their employees, generating even more leads. Services such as debtor finance and asset and equipment leasing may seem unfamiliar to many brokers, but being able to offer them is part of the traditional broker proposition. “What a broker brings, whether it’s in the commercial or residential space, is consistency for the client,” Wright explains. While business bankers come and go, a broker can assist a business in achieving its long-term development goals. Brokers need to stop thinking of these extra services as a cross-sell; they’re an integral part of being a trusted adviser to clients, for all things finance. When it comes to commercial finance, it’s fine for brokers to ‘give it a go’, and indeed lenders are pushing commercial finance harder than ever, but brokers can be far more ambitious. As Wright concludes, “there’s an opportunity for brokers to be a genuine first point of call for business owners who want to have a finance and debt expert to help them with their needs”.
CONTENTS 42| Starting up 44 | Acquiring equipment 46 | Owning premises 50 | Expansion 52 | Day-to-day operation
NEVER WRITTEN A COMMERCIAL LOAN? Even if you’ve never written a commercial loan, this article may still be useful to you. We asked FAST CEO Brendan Wright how a broker who’d never been involved in commercial lending should get started. “Have a look at your existing customer base and see how many of them are self-employed and already own businesses,” he said. “If it’s only a small percentage – less than 5% – well maybe you don’t want to step into it, but if it’s any more than 10% of your client base, I’d encourage a broker to consider what their next steps are.” This article is all about setting out those steps, with the first part devoted to start-up and self-employed borrowers who may already be in your client base. It also contains information on available training and resources, and brokers are advised to speak to their aggregators.
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FEATURES
COMMERCIAL FINANCE
STARTING UP You can’t avoid reading about start-ups, but you don’t have to be a millionaire venture capitalist to get involved. It’s taken a few years, but Australia now has its own Silicon Valley, the Stone & Chalk fintech start-up hub, which launched in Sydney in late 2015. In a sign of the times, even ASIC has created a dedicated division to make life easier for Australian start-ups. In short, Australian entrepreneurs are about to be unleashed, and brokers will play an important role. It might appear obvious, but small businesses need small finance. Beau Bertoli, CEO of Prospa, a small business lender that recently partnered with AFG, told Australian Broker magazine: “If you talk to a bank and you ask what a small business loan is, quite often they will tell you it is a $200,000 or $500,000 loan. Our average loan is $25,000.” Many banks and business bankers don’t have the structures – or the motivation – to provide such small loans, meaning brokers can become a critical resource for such borrowers. It’s not only glamorous tech start-ups that need a broker’s help; many of your clients may be self-employed individuals with ambitions to build a business around them. With lenders often requiring the borrower’s residential property as security, it’s important for a broker to consider borrowers’ residential mortgages. Finally, as Bluestone’s national manager, sales marketing and distribution, Rodyen D’Vaz, notes in his Q & A, new businesses may also struggle with cash flow, due to overly optimistic predictions of their initial income, and delayed payments (see ‘Cash flow support’, p52, for more information about debtor finance). It’s because of these cash flow issues that accountants can be a particularly valuable referral source for start-up business leads. It’s never too early for a broker to help a start-up business. With a variety of options available for securing the loan – whether against residential property or assets – the challenge is for the broker to understand their client’s business from top to bottom.
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Q&A START-UP BUSINESSES
Royden D’Vaz National manager, sales, marketing and distribution BLUESTONE
Fast fact Australia was ranked the 11th best country in the world for starting a business, and the 13th for overall ease of doing business, by the World Bank Group’s Doing Business report for 2016
Why would a start-up business go to a broker, rather than the bank? This really comes back to the reason why brokers have become successful in the first instance! They have access to a range of products from a range of lenders and therefore are more likely to have a solution suited to the business owner and the particular scenario. From our experience, the ability to provide the best solution for a borrower is being able to fully understand the detail of the deal and then being able to match this to the product that suits whatever lender it is. What are the main challenges facing start-up businesses in 2016? It can be challenging enough starting a small business and running it, without the worry of managing finances or sourcing additional working capital. The feedback we have received has highlighted cash flow as the biggest challenge. This is often because when starting a new business most are fairly optimistic about their expected performance, but it is always wise to budget for the worst-case scenario just in case, and if things don’t go your way initially, it would be a shame to close up shop on what will in most cases be successful given time. How can brokers reach start-up businesses? Referrals from accountants and solicitors are especially effective for generating leads in this area. If you can build and maintain even 23 good relationships you will be surprised by the number of leads that are generated. Every business new or old is part of a specific industry, and each of these has governing bodies, regular events and numerous publications in print and online. By simply brainstorming different customer segments one by one and investing a few minutes on Google you will find plenty of opportunities for sourcing business. Given the high degree of failure among new businesses, why should brokers care about this sector at all? There may be failures, but there are also a lot of successes; new businesses are being started at a faster rate than ever before, and if you don’t cater for them your neighbour will! Don’t let them benefit from what is potentially a long-term loyal customer who will come back for more time and time again. You find a solution in their time of need and they will never forget it. What features of your products make them particularly suitable for start-up businesses? At Bluestone we have built a suite of products for self-employed and small business customers. Using the equity in their home, clients with a business as young as three months (ABN registered) can access cash-out up to $200,000, which can be used for additional working capital.
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FEATURES
COMMERCIAL FINANCE
ACQUIRING EQUIPMENT NEW TRAINING PROGRAM FOR EQUIPMENT AND COMMERCIAL FINANCE In late 2015 the MFAA launched a new training program dedicated to equipment and commercial finance, in conjunction with ANZ and FAST, which they claim will help brokers ‘future-proof’ their businesses. The program has two modules: beginner-intermediate and advanced. The beginner-intermediate module is taught through four online courses, covering market, products and services, and business practices. The advanced module has online modules and also includes a one-day workshop for peer-to-peer sharing of experience and advice. It focuses on financial analysis, business entities and practical case studies. Furthermore, a third ‘masterclass’ event will be launched in 2016 and will enable brokers to learn from top performers in the commercial lending space. All courses include CPD hours (at least four per module) and the cost is $400 for the beginner and intermediate modules and $600 for the advanced module.
Equipment and asset finance and leasing is one of the most useful areas of broking, for the simple reason that both residential and commercial customers purchase cars and are increasingly looking for more competitive finance than the banks are willing to offer direct. We focus here on the commercial side and the relatively easy opportunities it offers brokers. Asset finance has always been on brokers’ agenda, but 2015 saw it grow markedly in importance in response to the government’s federal budget. Among the main promises in the budget was the promise of immediate tax deductibility on every asset worth under $20,000 purchased before 2017. Equipment and asset finance plays an important role in the development of long-term broker-business relationships, according to Frank Crombie, director of aggregation services at NLG Leasing. “This advisory approach deepens relationships and supports the growing expectation that brokers provide a fullservice offering. Clients are ring-fenced, and brokers benefit from increased revenue and a competitive advantage in a highly aggressive market.” In a basic sense, the reason businesses may wish to fund rather than buy outright is in order to conserve working capital, which helps protect
their ROI. Businesses use asset finance in different ways as they develop, Crombie explains: “For newer businesses, asset finance can assist with set-up costs. More established enterprises can use asset financing to support growth, with the most common motivation being to fund expansion either by purchasing additional equipment or upgrading outdated and less efficient goods.” In practical terms, equipment finance has several advantages when it comes to maintaining relationships. Businesses may need funding for equipment several times a year, and as the turnaround times are relatively quick – from one to three days, according to Crombie – it provides an easy way for brokers to stay relevant to their clients. Equipment and asset finance is an easy entry point for less experienced commercial brokers looking to provide this service, or for more experienced brokers to add to their service proposition. Lenders often offer spotand-refer models in which a broker simply hands on the client, but they also offer support for brokers who want to do more of the work (and get more of the commission) themselves. Experienced brokers can integrate equipment finance and leasing into a business’s long-term strategy. Crombie notes that “equipment acquisition through a leasing structure is a smart alternative that allows the reallocation of funds to other areas of the business that can have a positive effect on efficiencies, productivity, sales, and ultimately growth”.
“The advisory approach deepens relationships and supports the growing expectation that brokers provide a full-service offering”
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Q&A ASSET AND EQUIPMENT FINANCE
Frank Crombie Director of aggregation services NLG LEASING
How can a broker start a conversation with clients about asset finance? We encourage brokers to simply ask private and commercial clients about their current assets and financial goals to determine if they’ll benefit from asset financing. If a broker is gathering information for the purposes of securing the customer a residential mortgage, then a significant amount of information has already been collected. Asking some additional questions pertaining to the objectives and requirements of the customer will uncover equipment finance opportunities. We recommend using social media and electronic direct marketing to increase customer awareness that the broker has an asset and equipment finance capability. This should help counteract the common perception of customers not realising that the broker could provide car loans, for example, as well as mortgages. What types of assets are Australian small businesses most commonly looking to finance? The commercial market (in particular SMEs) continues to demonstrate strong demand for motor vehicles (including cars, light commercial, trucks and trailers), tractors, excavators and other earth-moving equipment. There is also solid demand for IT infrastructure and restaurant/hospitality goods. The commercial market is increasingly receptive to alternative financing solutions that enable the immediate use of the goods, while freeing up funds to be reallocated to other areas of the business that support efficiencies, productivity, sales and growth. What are the key differences between asset finance and commercial property finance? Asset finance and commercial property finance are completely
different in their structure, processing and outcomes. Generally, asset finance is secured against the asset itself and requires no further cross-collateralisation. Many asset finance transactions can be completed under lenders’ low-doc policies, assuming the applicants meet the criteria for qualification, therefore providing a streamlined application process. This usually enables asset finance transactions to be completed quickly (often in one to three days). By comparison, commercial property finance is larger in value, takes longer to materialise, and tends to consist of more complex structures and security options. This complexity naturally involves a more intensive transaction process, which correlates to longer turnarounds (weeks to months or years). How can you help brokers who’ve never dealt with asset finance before? Brokers are offered two engagement models: 1. Spot and refer: Whereby the broker obtains permission from their customer to supply their name and phone number to NLG Leasing to process/manage directly. A ‘spot fee’ is paid to the broker for the referral, which is paid upon settlement. This model has traditionally been favoured by brokers who are hesitant to diversify into asset finance. 2. Online lodgement: The NLG Connect platform is a customised, intuitive system that provides an easy-to-use overview of all wholesale rates and products and has an adjustable fee/commission function. The broker remains the customer point of contact and is supported throughout the process by a team of experienced specialists who provide the vetting, lodgement, document generation and settlement functions.
CASE STUDY: UTE MASTER NLG Leasing was contacted by a broker who had a client seeking to purchase a new ute for his expanding landscaping business in Sydney’s inner west. He was looking to take on an apprentice (who would need access to a vehicle) and therefore wanted to
purchase a new ute for himself, though he was struggling to prioritise between the two points of expenditure due to cash flow. The deal was approved and settled in three business days, with repayments structured over five years to reduce the impact on cash flow, allowing the hiring of the apprentice and
further growth. The loan was approved under the lender’s low-doc policy based on the asset’s age; the client’s clear credit history and ownership of real estate; the loan amount (less than $55k), and the business being in operation for more than two years.
Kindly supplied by NLG Leasing
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FEATURES
COMMERCIAL FINANCE
BUYING BUSINESS PREMISES DANIEL GREEN, GREEN FINANCE GROUP Placing fifth on MPA’s Top 10 Commercial Brokers list for 2015, Daniel Green specialises in pub and hotel finance and has an in-depth understanding of the industry gained from first-hand experience. “It’s a dynamic industry with elements of tradition and transition … add in the intricacies around liquor licensing and gaming and it makes for an interesting workplace,” he says. “I see my role as more of a business partner’s,” Green told MPA. “There’s more to the client relationships than the initial finance approval, and I’m legitimately invested in the success of my clients’ business long-term.” As part of this long-term approach, he offers: • regular reviews • monitoring of adherence to banking covenants • reviewing of interest coverage • debt servicing and profitability • management strategies This approach is working well, he notes, with eight out of 10 deals referred by existing clients.
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Helping businesses acquire commercial property is commonly seen as a gateway for residential brokers expanding into commercial. The security is still property; the goal is still finance. However, unlike the family home, the purchase of commercial property is not an end in itself but just part of a business’s long-term strategy, which you, the broker, should understand. Peter Vala, head of sales and distribution at specialist commercial lender Thinktank, has identified four basic reasons why a business would want to acquire its own premises. The first is the simplest: to have control over their premises, especially if they’d like to make targeted improvements as part of a long-term development strategy. For businesses that rely on their local presence, having complete control over their property may be of added importance, Vala notes, as having to relocate at the end of a third-party lease could be detrimental to their brand. Businesses may also be “pursuing a broader personal and business investment strategy”, Vala explains, “which includes the acquisition of the property in their selfmanaged super fund”. Another reason – also shared by homebuyers – is to take advantage of the low interest rate environment and spend money on repayments rather than rapidly rising rent payments. Once a business has made the decision to acquire a property, its initial concerns may “not be greatly dissimilar to a residential investment or owner-occupier property buyer”, Vala explains, with typical questions including ‘Will the loan be approved? Will the independent valuation come in at the purchase price? What happens if the loan repayments become too much?’ There are some more specific issues that may need to be addressed: GST payable on purchase; zoning; ability to improve the property; impact on neighbouring businesses;
the prospects for the local area; and any covenants or existing leases affecting the property. “This is where good advice comes into play from the client’s solicitor and other professional advisers,” Vala observes. The broker can help with issues surrounding financial structure. As with residential properties, it’s vital to maintain good relationships with BDMs and relationship managers. Given the extended timeframe for many commercial property transactions, all parties need to be kept updated about the loan process. Having a real understanding of the security property and how this relates to the client’s business and industry is particularly important.
“This is where good advice comes into play from the client’s solicitor and other professional advisers”
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FEATURES
COMMERCIAL FINANCE
Q&A COMMERCIAL PROPERTY FINANCE
Peter Vala Head of sales and distribution THINKTANK COMMERCIAL FINANCE
How can you spot a business within your database that might be considering purchasing commercial property? • A self-employed customer with increasing sales and profitability that may prompt a need to expand to larger premises. Option: Rather than rent, they may want to consider purchasing a property using a tax-effective wealth management plan. • Escalating rental costs in a profit and loss statement may now equal or exceed the cost of loan repayments on a commercial loan. Option: Run the numbers on buying versus renting, with the client ending up owning the property. • Simply staying close to your customer and listening to their medium- and longer-term business and premises occupancy plans. Option: Ask the question whether larger, smaller or just different premises would make a positive impact on the business, and if so, suggest that the client’s accountant and/or financial adviser should get involved to coordinate some options. What should brokers look out for in the application process to prevent problems? It is always good to positively address or at least highlight any client or transaction concerns up front and always workshop the deal with a trusted relationship manager of the lender of your recommendation before submitting the application. This will help establish a solid foundation, which in turn allows the lender to respond early and clearly
communicate how the deal is best placed to proceed. This style of proactive approach will always help to speed up the credit approval and, just as importantly, avoid any unnecessary delays or frustrations. Which products do you typically recommend for businesses in this situation? The purchase of a business premises is typically a long-term buy-and-hold investment decision and tends to form a central part of a wider wealth management and creation plan. This generally means that a longer-term loan with flexible features is the most suitable, with the least amount of recurring lender maintenance and fees. We recommend a longer-term, 25- to 30-year loan with a three- to five-year interest-only period up front, with no annual reviews or obligations to revalue the property every few years. Similar to a home loan but just adapted for commercial premises, if the scheduled payments are being maintained the loan will continue to tick quietly over yet still with the ability to pay down faster or redraw from the available balance. A competitive interest rate is important, but the cheapest rate is not always the best option, particularly if there is a series of extra costs that will come along each year or two. Cash flow control and confidence is a vitally important consideration for business, and a life-of-property or life-of-loan perspective is the key here, with a longer loan term reducing the monthly outgoings while still offering the ability to pay down faster or vary the loan as circumstances change in the future.
CASE STUDY: 8-DAY COUNTDOWN The applicants were self-employed, had been operating their business for eight years, and had signed a contract of sale to purchase the business premises. They were looking to raise 70% LVR via a commercial SMSF loan. Their application to a major bank encountered two key difficulties: one of the applicants had three ‘paid’ trade-related defaults totalling $48,000 on their credit report, and the SMSF
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would only have net assets of $250,000 following the completion of the purchase – $50,000 below the minimum threshold imposed by the bank. The application was declined after six weeks in the system, leaving eight days for the client to find a solution. La Trobe Financial’s credit analyst spoke to the introducing broker about the trade-related defaults and found that the defaults had been incurred five years ago due to a major client failing to pay them
for a six-month period. All defaults were subsequently paid. La Trobe treated this as a single ‘credit event’ (which is acceptable under our Commercial SMSF product). La Trobe were able to complete the transaction for the applicants at 70% LVR and within the eight-day timeframe to ensure penalties were not incurred.
Kindly supplied by La Trobe Financial
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FEATURES
COMMERCIAL FINANCE
EXPANDING TO NEW MARKETS In a way, all the types of finance discussed in this feature relate to expansion, because expansion can take many forms, almost all of which are relevant to brokers. In the most obvious sense, expansion could be geographical, ING Direct’s national partnership manager commercial, John Kolyvas, explains. “Some look to increase market share in their existing geographical patch by expanding their sales team,” he says. “Others might look to expand into other states, establishing interstate offices and often keeping production out of the existing location.” Moving into new premises or acquiring premises for additional offices requires commercial property finance, but it might also necessitate new equipment, which the broker can help fund. Furthermore, new staff could themselves be potential customers for your residential business. “A business may also be looking to expand through new distribution channels,” Kolyvas adds. “For example, moving from retail to wholesale or vice versa, or potentially moving online.” Again, equipment finance may come into play, as might debtor finance. Kolyvas also notes that buying out competitors or – “if a business has a great model but limited capital for expansion” – franchising could be another route to expansion. Given the complexity of any expansion strategy, it’s vital that a broker works closely with both lenders and all of a client’s advisers, accountants, solicitors et al. With limited differentiation in the pricing of business term loans, the willingness of a lender to understand a client’s business – and your ability to facilitate that understanding – becomes of paramount importance.
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Q&A EXPANSION FINANCE
John Kolyvas National partnership manager commercial ING DIRECT
What types of funding might an expanding business require? The most common funding for an expanding business is a business term loan, often secured by residential property. If the expansion plans require new premises, they will often look at commercial property loans as an option to own their building, and for growing equipment needs there is asset finance. Cash flow/debtor finance is another option if a business is experiencing rapid growth – effectively the funding can grow with
“It’s about knowing your strengths and knowing your client and their business” the business. There are lots of different funding options for different expansion plans, but most businesses, however, use a combination of the different types of funding available. How involved should a broker be in guiding a business’s expansion? It’s about knowing your strengths and knowing your client and their business. Ideally you should consult with your client and their accountant to establish a funding solution that is suitable and meets the client’s business objectives. An accountant’s input is invaluable when looking at cash flow projections and establishing future funding needs, so it pays for a broker to establish these relationships through or alongside their clients. There is also an onus on the client to engage their broker as early as possible. Transparency about current and future funding needs and forward planning can make a significant difference to all parties. How can you help brokers and businesses through this process? Unlike residential property loans, there tends to be little differentiation between commercial loans, so while of course we’re competitively priced, we see our real value-add as our people. We have an experienced team of commercial bankers to assist you with structuring commercial loans for your clients and guide you and your clients through the process. Our state commercial managers have a wealth of experience and can tailor our service to your needs, whether you are primarily a residential broker who may need a higher level of support and guidance through the commercial landscape, or whether you are a more experienced commercial broker with more complex transactions. We also have a credit assist team dedicated to helping our residential brokers every step of the way when looking at a commercial transaction.
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FEATURES
COMMERCIAL FINANCE
CASH FLOW SUPPORT MAKING SENSE OF ECONOMIC STATISTICS Take this for a headline: in the September quarter of 2015, Australia suffered one of its sharpest falls in business investment ever recorded. New spending on buildings and equipment fell 9.2%, according to CommSec, the fifth consecutive decline. However, when you take a closer look, much of this decline was in the mining sector; investment in manufacturing actually increased. 2015 was a year of rebalancing, with national statistics covering vast differences between mining and non-mining industries and miningbased states. For a WA broker dealing with construction firms, stats on mining investment are of huge importance, but a Vic broker working with retailers should look elsewhere. There are several sources of in-depth statistics that brokers may want to consider (all of which we use at MPA): • NAB produces several reports, including the monthly and quarterly business survey and a dedicated SME survey • Thinktank has a monthly commercial property update freely available on their website • CommSec Research provides insight and commentary several times a week • The ABS is the source of much research, although it can be difficult to analyse
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Establishing and expanding a business is just half the challenge; small and medium-sized businesses can be particularly prone to local and seasonal economic fluctuations, with consequences for their cash flow. However, managing a client’s cash flow isn’t just a defensive measure; with the right use of debtor finance the broker can help a business continue to expand. Debtor finance involves both factoring and discounting; discounting involves a business exchanging its unpaid invoices in return for cash. Factoring does that but also involves accounting functions being taken on by the lender. Both are designed to address a perennial problem in small businesses: late payments by customers delaying or even damaging relationships with suppliers (known as the working capital gap). Lenders in this sector increasingly see brokers as the perfect intermediary for debtor finance transactions. Having a long-term relationship with the client – whether on the commercial or residential side – means the broker is well placed to identify when debtor finance would be appropriate, and has an awareness of the client’s overall financial situation. In fact, debtor finance lender Scottish Pacific told MPA that close to 50% of its business comes from finance brokers. An increasing number of industries have businesses that utilise debtor finance, according to Peter Langham, CEO of Scottish Pacific. “We find we are supporting a growing number of industries, beyond the sectors of temporary labour hire, wholesale/distribution, road haulage, manufacturing and import/ export, where debtor finance has traditionally been very popular,” Langham says. Moreover, they work not only with established businesses but a number of start-ups, which suffer from the working capital gap particularly badly. Despite the name, debtor finance is also used by businesses that are perfectly healthy and indeed looking to expand. In some industries – such as
construction – a working capital gap is inevitable, and so debtor finance becomes a long-term method of providing upfront cash for acquiring equipment or taking advantage of unexpected opportunities for expansion. Furthermore, as debtor finance is secured against the invoices themselves, the client’s home can be freed up for further investment. For the broker, there’s the incentive of upfront and trail commission, with the amount depending on the value of the receivables and the lifespan of the loan. No extra qualifications are required, and lenders are happy to provide varying levels of support depending on the broker’s familiarity with the industry. Most importantly, however, debtor finance can be a common occurrence, providing regular opportunities for the broker to demonstrate their long-term value and develop the client’s trust. While the amounts involved in debtor finance may be small relative to financing property, the touchpoints and goodwill it can build up can lead to much bigger deals elsewhere. Ultimately, it’s that combination of a long-term relationship and the knowledge used to identify opportunities for the client that will define top commercial brokers in 2016.
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FEATURES
COMMERCIAL FINANCE
Q&A DEBTOR FINANCE
Peter Langham CEO SCOTTISH PACIFIC
At what stage in a business’s life cycle might it require debtor finance? Peter Langham, CEO of Scottish Pacific: Debtor finance can assist at all stages. It’s a very dynamic and versatile form of business finance, and is particularly helpful in growth stages. The beauty is it’s not tied to the value of personal assets such as the family home. The amount of funding available is linked directly to the sales of the business, so as the business grows the size of the facility grows with it. It is also invaluable for succession planning, such as when a retiring owner wants to pass the business to a family member and extract maximum value from the business while ensuring it has sustainable funds.
How can a broker identify clients in their database who may have cash flow problems? Greg Charlwood: Many SMEs and start-ups don’t look beyond an overdraft or family loans to fund their business, because they don’t know what else is available … Brokers can start a conversation with clients, about how to meet increasing wage bills, whether they have ATO obligations to meet, constant creditor issues or slow payers, or if their overdraft limit is often being breached.
Greg Charlwood, FactorONE spokesman: At FactorONE many of the businesses we fund are just starting out, or have cash flow pressures that might prevent the banks from financing them. At this end of the market, brokers can look out for clients who are start-ups or who have orders that are outstripping cash flow. It can also be used to inject cash if a business needs to buy some time to resolve a cash flow issue that might be the result of suffering a bad debt, loss of a big customer or a suspension of production.
“Debtor finance is a very dynamic and versatile form of business finance, and is particularly helpful in growth stages”
Are struggling businesses the only clients who require debtor finance? Peter Langham: Absolutely not. Historically this was a common misconception, but the commercial finance industry has moved on from that notion. At Scottish Pacific we work regularly with brokers, bankers and accountants who refer their clients because they see the benefits of debtor finance in a whole range of situations – but particularly when they are involved with a business that is
How much understanding of a business does a broker need to offer debtor finance? Peter Langham: Debtor finance is an easy new revenue stream for brokers to introduce into their business … Scottish Pacific works closely to support our referring brokers and provide information and marketing materials. Greg Charlwood: Once a broker introduces FactorONE to their client, we can take care of the detail, and we are happy for the broker to be as involved in the process as they want to be.
Greg Charlwood General manager FACTORONE
growing more quickly than its asset base would otherwise allow. Most of our clients are long-term. Some clients have been with us for decades, and continue to grow.
CASE STUDY: FIRM FOUNDATIONS Factoring – where debtor finance is combined with accounting assistance – can enable business growth, as in the case of Queensland construction supplier Concrete Options. Concrete Options services construction projects, and everything is done on account. This creates cash flow
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issues if customers take their time to pay, or if there are seasonal issues such as a few weeks of rain bringing construction to a halt. The Sunshine Coast was the base for Concrete Options for many years; however, in recent years they expanded into Mackay in Central Queensland. With Mackay experiencing local
economic troubles in 2014 and constant rain, the company struggled to pay for new steel. Using FactorONE to pay suppliers, rather than waiting for slow payers, allowed the owner to both focus on new customers and expand into another business entirely. Kindly supplied by FactorONE
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PROFILE
RUAN BURGER
RUAN BURGER: BOUNCING BACK Double-AMA winner Ruan Burger has built first-rate brokerages not once but twice. He gives MPA his tips for starting from scratch
THOSE TAKING the stage at this year’s Australian Mortgage Awards were mostly familiar faces. Indeed, we at MPA make it our job to know who’s likely to be gracing The Sydney Star every year, and who’s in the running for the fabled crystal trophies. However, in the case of Time Home Loans, 2015 winner of both New Brokerage of the Year and Independent Brokerage of the Year (≤5 Staff ), we were blindsided. Where had this brokerage come from, and how, after just two years in operation, had it clinched two trophies? For those who have been in the industry a little longer, the name Ruan Burger will be more familiar. As head of Gladstone-based brokerage Home Loans Etc, he won MFAA Broker of the Year in 2013 and 2012, as well as numerous awards from his aggregators AFG. Yet at the start of 2013, after eight years building up the business in Gladstone, Burger and his family “walked away from it all”. They left both their brokerage and their home, relocating to Brisbane 600km away. “Our little boy has quite a few medical issues with special needs,” explains Burger. “We had to come to a city, and Brisbane was it.” Broking certainly didn’t factor into the equation, as for Burger family comes first: “If it’s purposeful then it’s not really a choice so to speak; it was done for the purpose of our family, so whatever challenges may have come from it, I was willing to face.” Having upped sticks, sold Home Loans Etc, and also sold his trail book, it was about
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as close to a clean break as it’s possible to get in broking. Burger had no immediate plans to get back into the industry. “Knowing the challenges we were facing starting over, as a family not just a business, I thought first and foremost I wanted to get this family set up, and from there, focus on the next venture,” he says. Nevertheless, “one thing led to another and before I knew it I was running a broking firm again”. In January 2013, Time Home Loans was born.
Time Home Loans Given the awards achieved by both brokerages, the urge to compare Time Home Loans and its predecessor Home Loans Etc is irresistible. However, Burger insists there are significant differences: “I think it’s a different market, because it’s so much bigger. In Gladstone you had touchpoints on people more often, maybe through touch footy, or other events.” In Brisbane, on the other hand, “you’d be lucky to see people once a year, because people come from all different walks of life. So it was more concentrated in Gladstone, so at the end of the day, with marketing, you get more bang for your buck”. Many of the approaches that worked for Burger in Gladstone didn’t work so well in Brisbane, Burger recalls. “I took some bold moves; I invested – and I’ll never forget this – $30,000 on being on the front page of the ‘Property Week’ section of the Gladstone Observer. I didn’t yet have the numbers to
TWO AWARDWINNING BROKERAGES Home Loans Etc (2007–12) • MFAA Broker of the Year 2012 and 2013 • AFG Champion Loan Writer 2009, 2010, 2011, 2012 Time Home Loans (2013–present) • AMA New Brokerage of the Year 2015 • AMA Brokerage of the Year (≤5 Staff) – Independent 2015 What Burger puts Time Home Loans’ win down to: “I think for me personally, knowing there’d be a lot of challenges and facing them head-on, and perseverance”
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“Knowing the challenges we were facing starting over, as a family not just a business, I thought first and foremost I wanted to get this family set up”
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PROFILE
RUAN BURGER AFG’S SMART SYSTEM Now six years old, AFG’s SMART system is a CRM and marketing tool used by Time Home Loans. AFG says it: segments customer database based on risk of losing them sends out automated brokerbranded communication to clients on loan anniversaries, etc runs a brokerage’s website and updates it provides business analytics offers residential and commercial variants
THE KAIZEN PROGRAM Commonwealth Bank’s Kaizen Program is a five-day complete review of a brokerage’s processes, with the aim of increasing efficiency. It looks at service flow and information flow, and develops a standardised process for new and existing staff to follow. AMA Broker of the Year 2014 Raymond Xue credits feedback from Kaizen reviewers for the restructuring of the way his staff handled loans, which contributed to his win. The workshops are far from cheap, but general manager of broker sales Sam Boer told MPA they “are so transformational for a business that any costs incurred and the perceived lost time of the participants is paid back many times over”.
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justify making that investment, but I also knew that if I wanted this to work I really had to give it a go.” In Brisbane, Burger originally had Time Home Loans sponsor local basketball and rugby union clubs, but this approach simply didn’t work as well as it had in Gladstone. Not
coming here with no contacts, to do it any other way.” Having real estate agents properly understand the broking business doesn’t just improve the quality of their leads, Burger explains, but also increases the number of clients being referred on for refinancing. His
“An advocate is willing to refer you because it’s personal, because they truly believe in what you do” only did Burger lack contacts in the local community but he was up against a number of successful brokerages, many of whom had long-term relationships with clients. It quickly became clear that Time Home Loans needed a different approach if it was to grow quickly.
Developing advocates Something that certainly connects the two brokerages – and is indeed key to Burger’s approach – is a focus on referral partners. “I’ve always been one to like dealing with real estate agents, because of my Gladstone days. Most of our business in Gladstone came from real estate agents, and I’ve always felt I’ve had a connection with how they do things.” In fact, Burger aims not just for referral partners but also for advocates, and takes the difference seriously. “To put it in simple terms, you get someone who refers you for business, and someone who refers you because it’s personal. An advocate is willing to refer you because it’s personal, because they truly believe in what you do,” he notes. Furthermore, an advocate isn’t just fixated on getting their client across the line. “They truly understand your business, and if it’s a deal that’s better to walk away from, they understand.” Starting from scratch again has required him to adapt his approach to referral partners. Time Home Loans pays real estate agents referral fees, something Burger never did in Gladstone. Given that other brokers in the city pay fees, there was no way around the issue, Burger says. “I think it was difficult for me,
brokerage’s upstart status and reliance on referral partners has influenced its client base, he adds. “An investor tends to buy and sell twice a year, so they’ll have a more active relationship [with a broker], whereas a mum and dad don’t sell once or twice a year, instead perhaps every four years, so any relationship they may have had could fall by the wayside, and those are the ones we knew we could influence, and they’re a good client to have.” Although Burger ultimately aims to develop quality advocates, he recognises that Time Home Loans’ requirement for leads early on necessitated building a range of referral relationships. “I’ve always taken the approach that beggars can’t be choosers at the start, and you’ve got to talk to an awful lot of referrers, and some are going to shut you down and others are going to give you a look.” Some relationships won’t work in the long term but should be taken on for immediate benefits, he advises brokers.
Honing processes Burger is the first to admit that developing personal relationships requires a substantial investment of time. That’s why Time Home Loans’ other focus is on efficiency across all areas of the business. And that starts with client selection: “We concentrate on our own backyard, and the reason is that if I see a client we have a much better chance of getting that business. We want to meet up with clients; we want to build up relationships, because they become tomorrow’s referral partners.” For follow-up services, Burger uses AFG’s
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SMART CRM system extensively to send out automated updates on current news, such as RBA rate changes, which he finds effective in pushing clients to get back in contact. However, he doesn’t offer gifts for clients who refer on. “As a business you have to stand for something, and we believe we give good service, and we expect them to refer to us, because this is what we do for them. We give them service, and in return we’d like them to give us business.” As with estate agents, Burger has invested the time to develop relationships with lenders. “We made very sure very early that we knew which banks we’d need to take us to the next step,” he explains. “We invested in those relationships, travelled to see credit teams, because we needed to understand precisely how they’d deal with us … We’ve always taken the time to understand who our business
partners are going to be and that they can put a face to the name and know who they’re dealing with.” Again, the reward is efficiency. Time Home Loans has fewer unsuccessful applications, and those they do put in match lenders’ requirements, making good relationships easier to maintain.
The year ahead This year’s AMAs are nine months away, and Burger is looking to make Time Home Loans even more efficient by that point. It’s taking part in Commonwealth Bank’s Kaizen Program, in which business experts assess a brokerage’s processes and suggest how they might be improved. Burger welcomes the feedback: “I think you need to be open to criticism during that process; just because you’re passionate about
what you do doesn’t mean you do it right.” He’s more circumspect when it comes to expanding the brokerage, however. “You want to take your time bringing people in, making sure they’re not just good for the business but good for the people that have made the business,” he says. “In 2016 I am hoping to add another two brokers, but when you talk to other companies they’re talking about 15 or 20 new brokers; we’ve got no such aspirations.” Having the right people is central to having the right referral relationships, Burger concludes. “As a small business the one thing that’s going for you is good staff morale and a great team spirit. You have to be very cautious that you’re not giving that up. Your clients can see it, your referral partners can see it; they want to deal with you because there’s that emotional attachment to your business.”
Mortgage Professional Australia (MPA) is the leading business magazine for the mortgage and finance industry.
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THE DATA
CONSUMER IGNORANCE
IGNORANCE ISN’T BLISS New research from NAB Broker indicates that only one in four aspiring homebuyers plans to use a broker, and they’re more likely to be selective in who they go for
AFTER TWO decades of steadily increasing broker market share, you’d think Australians would at least know what a broker is, even if they don’t all use one. However, a new report from NAB Broker, in partnership with Genworth and RFi Group, suggests that Australian consumers remain remarkably ignorant about the broking proposition. The report surveyed 1,000 Australians, 500 of whom were considering buying a
THE FEE-FOR-SERVICE QUESTION Bizarrely, the NAB Broker survey found that 47% of those aspiring homebuyers who said they were likely to use a broker expected to pay a fee. Clearly, this reflects the degree of ignorance among consumers of how brokers are paid, an issue that should see more coverage in the mainstream press as ASIC reviews broker remuneration in 2016. However, brokers might also see the 47% statistic as an opportunity: the fact that these applicants were considering a broker – and weren’t put off by the fee – suggests fee-for-service remains a viable business strategy. NAB Broker’s Steve Kane said consumer attitudes to broker fees were curiously reminiscent of the early days of credit cards, when cards with fees were more likely to be used as consumers assumed they were getting a better deal.
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property within the next 24 months (aspiring homebuyers) and 500 who had done so in the last 24 months using a broker’s services (broker applicants). Only a small number of aspiring homebuyers planned to use a broker, with many simply forgetting that brokers even existed; or being convinced they’d get a better deal from the bank; or misunderstanding how most brokers get paid. However, just as significant a finding was
that those clients who do use brokers are becoming increasingly selective. Almost half are talking to more than one broker, and branding doesn’t seem to sway the balance; they’re picking through personal recommendations and individual impressions. What this report tells us is that brokers need to fight on two fronts: to demonstrate that they’re better than the bank, as well as better than the broker down the road.
IGNORANT AND SAVVY BUYERS While the survey reveals a great deal of ignorance among consumers about brokers, it also suggests that those who do use a broker are becoming increasingly picky.
47% of those likely to use a broker expected to pay a fee
27% of aspiring homebuyers thought they could get a better deal by going direct to a lender
Of those who did use a broker
43% spoke to more than one broker
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If brokers write 52.6% of loans in the market ...
...why do only 27% of aspiring first home buyers plan to apply for their mortgage through a broker? ... and 35% of aspiring first home buyers not even consider a broker?
BRANDS BEWARE
49% of broker
62% of broker
applicants sourced their broker through a personal referral
applicants had a satisfaction score of 8/10 or higher
THE VIRTUOUS REFERRAL CIRCLE
65% of broker applicants would use a broker again
89% of satisfied customers were contacted by their broker after settlement
It’s also notable that 29% of broker applicants wanted to hear about relevant new products and 28% wanted to hear about refinancing.
NAB Broker’s survey spelled bad news for broking brands: just 17% of those who used a broker picked them based on the brokerage brand. With John Symond’s face beamed into Australian living rooms nightly, not to mention Mortgage Choice’s ‘Happy As’ campaign and countless local radio adverts by brokers, this statistic will come as a surprise to the industry. The sad reality is that brokerage brands remain small fry compared to the bank brands out there. Brokers’ retreat from paid advertising into low-cost digital marketing and referral strategies certainly could be to blame, but it also suggests that the industry as a whole is far less corporatised than many brokers fear. With thousands of individual brands consistently impressing their clients, the promise of a guaranteed level of service – ie a brand – seems to count for less. Source: NAB/Genwoth/RFi, Engaging Consumers and Empowering Brokers, November 2015
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LIFESTYLE
A DAY IN THE LIFE OF…
Paul Cameron, lending operations manager, Better Mortgage Management
4:35am: My alarm goes off; I look at it with contempt as I pull myself out of bed. I work through my daily routine quickly, thanks to my prior evening’s preparation. I get to breakfast and take six small but enjoyable minutes to eat whilst admiring my beachfront view of Maroochydore. After this little moment, I finish getting ready for work and head off on a 15-minute drive to Woombye train station.
5:30am: I’m on my two-hour train ride to Brisbane; to pass the time I vet lodged loan proposals. I make notes on what items are outstanding, what checks need to be conducted, etc. This preparation allows me to hit the ground running once I hit the office.
7:25am: First in the office, I arrive at my desk where I scan the Financial Review, local papers and industry publications for updates. I enjoy getting in early as it gives me the opportunity to work through the new emails in my inbox. Once completed, I can then work through the task list prepared earlier on the train.
9.45am: Time for morning coffee over the road at The Nest, who make great coffee. When time permits I enjoy the outlook from my office looking out over Brisbane’s north, including glimpses of Victoria Park Golf Course, at times contemplating my weekend golf plans.
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12:00pm: Lunch, and when I finish reading the papers and industry publications. Regularly, because of our direct relationship with our funders and brokers, we often see our best-laid plans go up in smoke. As their priorities and circumstances change, we adjust to support and accommodate their needs. Our team maintains a flexible approach to business, knowing that things can always change at the drop of a hat. The old adage rings true for us: ‘the impossible will take an extra 15 minutes’; the challenge is finding the 15 minutes.
something goes wrong it can be ugly – thank goodness it does not happen often.
6:15pm: I arrive home at last, put my feet up, have a beer. My wife, who is also in the finance industry, talks about her day and I tell her about mine, like most regular married couples. After the hard day at work, I relax and tune out for a little. I think it’s healthy to have a little bit of ‘me’ time in the day. It helps keeps you sane … well, a little sane; most people are pretty crazy anyway. 10:00pm: I turn in for the night.
3:50pm:
It’s knock-off time, and I’m ready to kick back on the train for the trip home. The time is passed with work-related reading and file reviewing when available. Otherwise, some light personal reading with
Footnote: People often question my current commute, but having worked in Sydney for over 20 years in several roles with St.George, at a number of locations, a timeconsuming commute was part of the package. The important thing isn’t the time it takes to get from point A to B; it’s what
“The old adage rings true for us: ‘the impossible will take an extra 15 minutes’ ” the assistance of my Kindle, a necessity for distance travellers. This is, of course, if there isn’t an issue with the rail network, which is part of the ‘fun’ of living in Queensland, with its wild, unpredictable weather. To date in my commuting, the latest I have arrived home because of the weather was 2am; that was a 10-hour commute. When
you do with that time. I am more than comfortable as most days I use this time quite well. When Murray Cowan interviewed me for the role seven years ago, his biggest concern was the commute. He asked the question “Will you stick it out?” on numerous occasions prior to giving me the role. As mentioned, that was seven years ago.
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LIFESTYLE
FAVOURITES
FAVOURITE THINGS Sam Boer, general manager broker sales, Commonwealth Bank
Drink: d’Arenberg The Dead Arm Shiraz. Holiday destination: Places where we can have fun as a family are my favourite destinations. I took the family to Queenstown, New Zealand, last July for the first time and had a blast skiing and taking in the sights. Queenstown is a favourite destination – it's so picturesque. I also love the Whitsundays and the solitude of King Island, Tasmania, when we go on extended family visits. Sunday afternoon: The best Sunday afternoons are out on Port Hacking with my wife, kids and our dog wakeboarding/skiing or just cruising, swimming and relaxing.
Food: The best meals are at home with my family. Simple food is best. I love cooking fresh seafood on the BBQ that we caught earlier that day. Chilli-blue swimmer crab and beerbattered flathead tails are my signature dishes!
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Sport: I'm not a great spectator – I prefer to participate. I currently surf three to four times a week, play golf (badly) and indoor cricket once a week. I love going on family trips to Hartley Valley Farm for motorcross riding with my two sons, and horse riding with my wife and daughter. I don't watch a lot of sport; I prefer to stay active and have fun as a family.
Book: I like reading both fiction and non-fiction. I'm a Lee Child/Jack Reacher fan; currently reading the Make Me e-book. I also like to read and research online. Learning is so easy with the internet, and when I'm home I often help my kids with homework and their school assignments. I’m really enjoying re-learning the things I should have paid attention to at high school the first time around!
Music: I have a wide range of taste in music; it really depends on my mood. I like modern pop and ’80s rock and everything in between. Some days I listen to Bach, which drives my kids and dog mad when I turn up the volume. My sons play the drums and bass guitar, and I jam with them on occasion as I dabble with the guitar myself. Not sure if the neighbours are too happy about that, though.
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