Mortgage Professional Australia issue 17.04

MPAMAGAZINE.COM.AU ISSUE 17.4

BATTLE OF THE BANKS SPECIAL ISSUE: Brokers on Banks 2017 + Major Bank Roundtable COMPREHENSIVE CREDIT REPORTING Still waiting for the revolution

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FEE-FOR-SERVICE BUSINESS MODELS Lessons from a financial planner

MARIO REHAYEM AND AARON MILBURN Pepper’s moving up in the world

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APRIL 2017

CONNECT WITH US

CONTENTS

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

UPFRONT 04 Statistics

Mortgage delinquencies are on the up – where’s the most risk?

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08 FEATURES

NEWS ANALYSIS

How comprehensive credit reporting could change the game, and why we’re still waiting for it

BROKERS ON BANKS

You rated the banks – now we unveil Australia’s Bank of the Year for 2017, with new insights on ASIC and branch networks

12 Opinion

What can brokers learn from financial planners’ move to a fee-for-service system?

MORTGAGE INSIDERS Pepper’s Mario Rehayem and Aaron Milburn on their new roles

48 My Mortgage Freedom

MAJOR BANK ROUNDTABLE

SPECIAL REPORT

Three brokers on whether volumebased commissions should be banned

14 The big interview

COVER STORY

Commissions, investor interest rates, foreign clients – major bank heads take on the toughest issues at MPA’s latest roundtable

06 Head to head

The three evolutions of Anthony Alabakov’s brokerage

44 FEATURES

CAR FINANCE

Regulatory changes this year are giving brokers the chance to beat dodgy dealership financiers

52 Anja Pannek

The new boss of PLAN talks Challenger, NAB and more

54 Mhairi MacLeod

Working with children to make them financially savvy

BUSINESS STRATEGY 50 Sales

Anneli Blundell on how not to lose a deal in under a second

46 FEATURES

LOAN PROTECTION

It’s not just peace of mind – loan protection can also add a brand-new revenue stream to your business

MPAMAGAZINE.COM.AU NOW ONLINE: Highlights from our live-streamed Major Bank Roundtable Advice and expertise from MPA’s High Performance Business Summits

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UPFRONT

EDITOR’S LETTER www.mpamagazine.com.au APRIL 2O17

IGNORANCE IS NO EXCUSE

S

uppose you need to borrow $100. Which is the lower amount to pay back: $105, or $100 plus 3%?

This shouldn’t just be an easy question for brokers; your customers should know the answer, too. In fact, it’s so basic that it was one of four questions used to determine financial literacy worldwide by Standard & Poor’s Global Financial Literacy Survey. The other questions (all of which had multiple-choice answers) covered basic risk diversification, inflation and compound interest. In Australia, 64% of adults could answer three or more questions correctly.

That 64% puts Australia ninth in the world for financial literacy. But the flip side is that 36% of adults are ignorant of two of these four basic financial concepts – they are financially illiterate. S&P’s survey took place in 2015; in February this year, UBank found that 41% of Australians they surveyed had no idea what their home loan rate is, while another 44% managed only an approximate guess. Respondents were equally ignorant about their credit card debt. It’s not that these people didn’t care; in fact, 54% said their financial situation was causing them worry and stress.

“In February, UBank found that 41% of Australians they surveyed had no idea what their home loan rate is” Those who work outside finance usually have two chances to acquire financial literacy: at school and when they buy a home. S&P’s survey found homeowners’ financial literacy was substantially above average. As bank branches disappear, brokers are stepping up and providing that education to prospective home buyers on what they can afford and how to build their wealth. Yet a substantial minority of Australians continue to leave school financially illiterate, and may never accumulate the savings necessary to become your customer.

You can make a difference to those people, too. The MFAA’s Global Money Week Initiative, which starts on 27 March, will see brokers go into schools to educate kids about finance. ASIC has an ongoing National Financial Literacy Strategy, which has begun to engage brokers from other industries, such as insurance. With the average city home costing $605,000 as of January, Australians can no longer afford to be financially illiterate.

Sam Richardson, editor, MPA

EDITORIAL

SALES & MARKETING

Editor Sam Richardson

Publisher Rajan Khatak

Journalists Maya Breen Libby MacDonald Madelin Tomelty

Account Manager Simon Kerslake

Contributors Anneli Blundell Dante De Gori Production Editor Clare Alexander

ART & PRODUCTION Design Manager Daniel Williams Designer Loiza Caguiat Traffic Coordinator Freya Demegilio

Marketing and Communications Manager Lisa Narroway

CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

EDITORIAL ENQUIRIES

tel: +61 2 8437 4720 sam.richardson@keymedia.com.au

SUBSCRIPTION ENQUIRIES

tel: +61 2 8011 4992 • fax: +61 2 8437 4753 subscriptions@keymedia.com.au

ADVERTISING ENQUIRIES

rajan.khatak@keymedia.com.au simon.kerslake@keymedia.com.au

Key Media Regional head office Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 • fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, London, Toronto, Manila, Singapore, Bengaluru

Mortgage Professional Australia is part of an international family of B2B publications and websites for the mortgage industry CANADIAN MORTGAGE PROFESSIONAL justin.darosa@kmimedia.ca T +1 416 644 8740

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

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UPFRONT

STATISTICS

MAKING ENDS MEET

PRIME LOAN ARREARS ARE RISING The number of prime loans more than 30 days in arrears is on the rise, as is the proportion of household debt to income. Meanwhile, wage growth continues to slow, contributing further to the number of Australians who are having trouble making their mortgage payments.

A 25% rise in prime mortgage delinquencies is the tip of the iceberg in a worrying report from ratings agency Standard & Poor’s

Prime mortgages more than 30 days in arrears Wage growth

MORTGAGE DELINQUENCIES in Australia have been at historic lows in recent years, but a new report from global ratings agency Standard & Poor’s suggests it’s time to start taking arrears rates seriously again.

Looking at the rates of 30-day-plus arrears in residential mortgage-backed securities, S&P found the number of prime loans in arrears rose by 25% between November 2015 and November 2016.

Other findings from S&P’s report and its Ratings Direct Outlook for 2017 weren’t too surprising, such as mortgage arrears

increasing in mining-dependent areas of Western Australia and Queensland. Others may run contrary to expectations – namely, the relatively low level of mortgage arrears associated with non-bank lenders.

Most of all, S&P’s report puts into context the recent efforts by the banks to tighten up their lending policies. After years of historically low interest rates while Sydney and Melbourne prices continue to rise, Aussie mortgage holders are increasingly finding themselves stuck between a rock and a hard place.

Household debt to income

ARREARS BY STATE

WHICH BANKS ARE MOST AT RISK?

Western Australia’s economy has suffered since the end of the mining boom, so the state stands out for its high rate of arrears. The booming economies of New South Wales and Victoria have arrears rates below average.

Standard & Poor’s data suggests that regional banks have arrears rates considerably above the average. Despite handling potentially riskier loans, non-banks have relatively low arrears rates.

PRIME MORTGAGES MORE THAN 30 DAYS IN ARREARS, NOVEMBER 2016

2.5% 2.0%

1.88%

2.1%

1.5%

1.5%

1.14%

1.5%

1.0%

Average 1.15%

0.96%

Average 1.15% 1.1%

0.95% 0.63%

0.9% 0.5% 0%

Major banks WA

SA

QLD

VIC

NSW

Note: Statistics for Tasmania and the Northern Territory were not included in S&P’s report Source: Standard & Poor’s/RBA

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Regional banks

Other banks

Non-bank Non-bank financial originators institutions Source: Standard & Poor’s

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PRIME MORTGAGES MORE THAN 30 DAYS IN ARREARS WAGE GROWTH

2.5%

2.0%

1.5%

132.2%

HOUSEHOLD DEBT TO INCOME

131.4% 129.9%

129.3%

1.0%

0.5%

Dec 2015

Jan 2016

Feb 2016

Mar 2016

Apr 2016

May 2016

Jun 2016

Jul 2016

Aug 2016

Sep 2016

Oct 2016

Nov 2016 Source: Standard & Poor’s / RBA

WHICH LOANS ARE MOST AT RISK?

WHAT’S IN STORE FOR 2017?

Arrears rates are, unsurprisingly, higher for low-doc and non-conforming loans. However, arrears rates rose over the course of 2016 for both full-doc and low-doc lending.

5% 4% Non-conforming arrears

3%

Low-doc arrears Full-doc arrears

2% 1% 0%

Dec 2015

Mar 2016

Jun 2016

Sep 2016

Nov 2016 Source: Standard & Poor’s

Even more mortgage delinquencies: “Mortgage delinquencies are likely to rise in 2017 as underemployment and lower wage growth continue to affect debt serviceability,” S&P said in its outlook.

Interest rates could rise: S&P noted that high household debt has been moderated by low interest rates in recent years, but that historically low interest rates may now rise.

The agency even suggested that “concerns over debt serviceability have surpassed those of a decline in property prices”.

Institutions will prevail: Mortgage delinquencies may not pose a risk to institutions, S&P said, because arrears are at very low levels, and banks have recently tightened their lending criteria.

Source: Standard & Poor’s

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UPFRONT

HEAD TO HEAD

Should volume-based commissions by lenders be banned?

Fabio De Castro Mortgage broker Oxygen

Sean Murphy

Associate director MyMortgageFreedom

Aaron Christie-David

“Yes. Many see the benefit of a broker as impartiality. Volume-based commissions give the impression that brokers are not impartial. Consequently, they have become quite controversial. Anything that brings into question the integrity of the industry should be reviewed.

As an alternative, volume-based commissions could be replaced by quality-based incentives. A commission scheme that rewards quality is efficient for the lenders because it incentivises the broker to complete a quality application that progresses to approval quickly and smoothly. It’s better for clients because it is more transparent and removes any doubt that brokers are offering products based on remuneration.”

“There’s no doubt our interests should always be aligned with our customers’ objectives, and our advice should not be biased in any way.

However, if we build an organic relationship with a lender that is willing to provide a premium service to our clients, competitive pricing and broad product options that suit our customers, then I don’t think it is a bad thing to be rewarded for your support.

It is still a business relationship, so long as that lender is not recommended to clients that are not suitable in order to build volume. Organic reward would be the key for me.”

“The short answer is yes. Our role is to always act in the best interests of our clients, giving them choice and recommendations without bias. Volumebased commissions can introduce bias, and banning them changes the focus from quantity to quality metrics.

Loan sizes vary from a new entrant broker compared to an experienced broker, and from regional to metropolitan markets, which makes it inequitable to benchmark a broker’s performance based purely on volume. Quality metrics keep us accountable to get our applications to a high standard and to ensure our recommendations are based on merit, not on maintaining our volumes.”

Managing director Atelier Wealth

A YEAR OF REMUNERATION REVIEWS Whilst many brokers’ attention is focused on ASIC’s Review into Mortgage Broker Remuneration, the Australian Bankers Association also has its own (albeit independent) Sedgwick Review, which published its interim report in January. It flagged up volume-related payments, saying that “bonus payments for high-volume third-party channels are an additional payment, which further incentivises the third-party channels and increases the risk of poor customer outcomes. These additional payments appear to be unrelated to the effort required to make the additional sale.”

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UPFRONT

NEWS ANALYSIS

WHY ARE WE WAITING? Comprehensive credit reporting has been around for three years and could transform the mortgage process for brokers – but only if banks sign up, writes MPA editor Sam Richardson

REMEMBER COMPREHENSIVE credit reporting? It’s now been three years since the government set up a voluntary scheme for lenders to share information about clients beyond defaults and other ‘negative’ credit events that were previously reported.

The Financial Systems Inquiry [FSI] in 2014 envisaged that soon banks would be exchanging data about clients, enabling smarter pricing based on an individual’s risk.

It’s now 2017, and just a single major bank, NAB, has publicly stated it will participate.

Comprehensive credit reporting [CCR] was the main topic at this year’s RFi Group Australian Mortgage Innovation Summit, and MPA was there to learn more about this long overdue revolution.

CCR and innovation go hand-in-hand, because access to data allows lenders to make better decisions. As Will Ranken, general manager of home loans and retail lending practices at ANZ, put it: “Anyone who thinks more intelligently about how to use data, more intelligently about how to solve those customer pain points, I think they’ll get the advantage because the customer will think, ‘They understand – or help me understand – my situation a lot better; I can make betterinformed decisions.’”

Whilst the broker proposition is about understanding a client, brokers currently need to negotiate pricing with banks. In theory, with CCR, lenders would know enough about the individual client’s risk

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profile to offer them the best rate the bank’s commercial situation allowed.

CoreLogic’s managing director, Lisa Claes, characterises CCR as “pulling the blanket off risk assessment”.

Yet as Claes pointed out to the Summit, “We need to stop dipping our toes in the pond and drop in. Unfortunately, the way comprehensive credit reporting works, unless the majority of participants are participating, you can have adverse impacts.”

The fact that only one of the major banks has said it will share data is a huge problem,

“The way comprehensive credit reporting works, unless the majority of participants are participating, you can have adverse impacts” Lisa Claes, Corelogic given the majors hold the largest amount of customer data in Australia. ANZ has estimated the cost to the industry at up to $500m to implement CCR, and the Australian Bankers Association has told the government that banks need more time to adapt.

Now, the pressure for CCR is growing, including from within the industry. The FSI recommended the government consider making CCR mandatory by the end of 2017, should banks not sign up. Mandated involvement was supported by RAMS head

of product and digital Nathan McMullen, who declared that “it defies logic why it hasn’t been mandated for authorised deposit-taking institutions to sign up for it”.

McMullen, who previously was Westpac’s head of home ownership, explained that “the best thing I could see happening is the regulator saying, ‘We want everyone to sign into this; we’re going to build a bureau in the next two years, then we’re going to turn the switch on, and we’ve got a very rich source of data we can all access.’”

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COMPREHENSIVE CREDIT REPORTING: A TIMELINE

1970 In the US, the Fair Credit Reporting Act of 1970 is passed, which does not limit the content of credit information files, setting the scene for comprehensive credit reporting

1998 The UK Data Protection Act effectively allows CCR, setting the guidelines for what can be included in credit information files, although some rules had been in place since 1974

2014 March: Laws for CCR come into effect in Australia; sign-up is voluntary for lenders December: The Financial Systems Inquiry suggests the government should make CCR compulsory in late 2017 if banks don’t sign up Australia is one of the last developed nations not to have comprehensive credit reporting, so its benefits are far from unknown. Claes, who worked extensively with European banks during her previous role at ING, said that these lenders were at the next stage of “actually looking more broadly to assess someone’s reliability and serviceability through how they behave in matters seemingly not connected to finance”. ING’s Belgian banks are already using behavioural data for personal loans; in Romania, an alliance of banks can access their customers’ tax returns and couple those with credit checks. “They are giving secured and unsecured lending decisions within seven minutes,” Claes said.

Even Australian bankers admit that more data is a vital ingredient in quick turnaround times. NAB’s general manager of home lending, Meg Bonighton, argued that banks

need to start learning about their customers much earlier, as “this makes the one-minute mortgage more realisable because we already know so much”.

ANZ is already doing this with its ‘Buy Ready’ initiative, Ranken explained. “We found customers spent three months looking for a house in completely the wrong area,” he said.

“They look at places they’re never going to be able to afford, and they build all these tools and all these spreadsheets … all of the information we can use in the application anyway: everything about the underlying asset, the servicing, their statement of position.”

Other industry players are also pointing out the advantages of more data. ASIC senior executive leader Michael Saadat told the summit that CCR, combined with tools that would allow lenders to see bank account data, “could potentially make the assessment

2015 NAB begins sending extra data such as repayment history to credit bureaus, becoming the only bank to publicly do so

2016 April: Labor makes mandatory CCR one of its policies if elected October: Asked about CCR, the government says it will not legislate compulsory involvement “at this stage”, claiming banks are still working on how to participate

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FEATURE / BROKER EDUCATION UPFRONT

NEWS ANALYSIS of serviceability much simpler and much more efficient”, as well as less intrusive.

Bank investors – on whom banks rely for a significant degree of funding – need “more detailed, granular data on borrowers, not just mortgages”, according to Alex Sell, CEO at consultancy exSell.

One thing CCR wouldn’t solve is turnaround-time blowouts. While Veda’s executive general manager of credit risk and advisory, Mike Cutter, suggested that most lenders would eventually offer one-day turnaround, and a specialised minority could offer one-hour turnaround, he added that

DON’T FORCE YOUNGER CUSTOMERS ONLINE RFi Group has been doing some research into the preferences of younger consumers. Counter to expectations, RFi managing director of consulting Alan Shields told the Australian Mortgage Innovation Summit, banks shouldn’t assume younger customers prefer online channels. “You can speak to the needs of a younger generation without forcing them down a digital channel,” he said.

Consumers under 35 are less happy with the mortgage application process than any other generations (across all channels, although mobile lenders were the worst off)

42%

42% of those aged 18 to 34 say they’d be willing to do the whole process online

Of the remainder, half said they could not be persuaded to do the application online. A third could be persuaded; the biggest attractions were: being able to go from online application to a branch (25%) guaranteed fraud protection (21%) ability save/stop/restart the application (18%) improved security (18%)

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“you resource to be productive, and when you’re being productive, nobody resources to be able to deal with the absolute peak of demand thrown at them in a year. So you find when you do get surges, everyone will have a challenge meeting that peak demand.”

In the US, some lenders can offer an ‘eight-minute yes’, Sarvesh Mahesh, CEO of Tavant Technologies, told the summit, but this is helped by processes that allow easier loans to go through much faster, rather than being “designed for the worst-case scenario”.

Similar practical adaptations could make a huge difference in the broker channel, according to several speakers.

Connective director Mark Haron criticised the various pain points and duplications in the mortgage application process, such as repeated credit checks, differing rules on estimated market value, and differing index systems in software used by CRMs, Apply Online and at lenders. The CEOs of broking platforms HashChing and LoanDolphin also criticised the lack of transparency by banks when it came to policies and when information was required.

It’s possible that, by the end of this year, government will make CCR mandatory, and we will finally see Australia’s banks open up

aggregate all of that information, or even a broker; they actually don’t need a lender to willingly share that information,” he said.

“The tools exist for the customer today to enable a broker to have access to that information.” Indeed, services such as BankStatements.com.au allow customers to easily share information with brokers, although no single ‘dashboard’-type system has yet emerged.

According to Connective’s Haron, technology is already dividing brokers into two types. Larger groups, such as Australian Credit & Finance and Home Loan Experts, are using data themselves and constructing their own systems that are linked to aggregators’ CRMs. Single-operator brokers, in contrast, will become more dependent on aggregators to provide software and support.

Lenders are also seeing a similar division between cautious lenders and the more innovative; Haron identified Macquarie Bank as a driving force.

Sitting on a broker-focused panel towards the end of the summit, ING’s head of thirdparty distribution, Mark Woolnough, argued that the channel will experience “evolution, rather than all-out revolution”. If the banks already have all the data they need to offer

“This will make the broker less of an arranger and more of an educator and validator of decision-making” Mark Woolnough, ING Direct their treasure troves of data. Further down the line, it’s possible the Australian Tax Office could give lenders access to their data, giving them even more risk information on which to make a decision. So in a world of smart lenders, what role would a broker have?

Brokers can already make ‘smart’ decisions, explained speakers at the summit.

When asked by MPA whether banks would willingly share information with brokers to enable better customer experiences, RAMS’ McMullen argued that brokers don’t need banks’ help. “We’re already seeing the technology come out for a customer to

their best possible rate, he said, this will “make the broker less of an arranger and more of an educator and validator of decision-making”.

According to Haron, “The broker of the future will be one who brings together relationships and technology in a meaningful way … to use the digital process to make things happen fast and also create more transparency.

The key thing is doing this where, when and how a customer wants.”

MPA would like to thank RFi Group for enabling us to attend the 2017 Australian Mortgage Innovation Summit.

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UPFRONT

OPINION

GOING FEE-FORSERVICE Financial Planning Association CEO Dante De Gori explains why financial planners are switching to a fee-for-service model and how it can apply to brokers THE FINANCIAL Planning Association of Australia [FPA] has provided support for financial planners making the transition to a fee-for-service model as far back as 2012, and many of our members have successfully adapted. The lessons we have learnt along the journey to a FFS model for financial planners can also apply to mortgage brokers.

With the passing of the Life Insurance Remuneration Bill on 9 February 2017, the amount of commission that financial planners can receive from recommending life insurance products will decrease starting next year. This will put revenue pressures on financial planning practices, and in a lot of instances, financial planners will have to start thinking about whether they will need to supplement the commission with a fee for service, or fully abandon the commission model and move to a FFS model.

While many financial planners feel that moving to FFS is a very difficult proposition, the ones who have successfully completed the transition are finding that their businesses are much more profitable. This is because clients are much happier and more engaged with the financial advice process – they have certainty around what they are paying, so they value the services and advice a lot more.

Similarly, for mortgage brokers who adopt the FFS model, their clients can be certain that the broker is working for them because they are paying for the service, rather than the broker working for the lender via a commission. Under the FFS model, once the commission is received by the mortgage broker, it will be refunded back to the client.

Our advice to mortgage brokers making

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the switch to the FFS model is outlined in our six principles for remuneration below: 1 Clients must be able to understand the fees they are paying. Simple and

consistent fee disclosure should extend to all documents given to a client. The value of the advice, and the associated cost of that advice,

including the difference between upfront and ongoing commissions and associated services.

4 Clients must be presented with fees that are separated between advice and product. Fee disclosure must separate

the costs of the product from the costs of advice. Product costs are the costs charged by the product manufacturer – in this case, the lender – for the creation and management of the loan. Costs of advice include the initial client consultation (often free); initial client investigations; identification of client objectives, needs and circumstances; analysis of client objectives; and development of strategy.

5 Clients must agree on the fee with their broker and can request that the fee be switched off if no ongoing advice is required. Charges for broking

services should be determined between the

Clients are much happier and more engaged with the financial advice process– they have certainty around what they are paying, so they value the services and advice a lot more should be clearly conveyed to ensure the client understands the value and the cost.

2 Clients must be able to compare the fees they are paying. Improving the

consumer’s understanding of the fees they are paying means improving comparability in fee disclosure across business models. Disclosure should enable the client to compare the value they receive from one professional with that offered by another.

3 Clients must be presented with a fee structure that is true to label.

Brokers utilising commission-based models should be required to provide additional information directly to consumers on the impacts of commission-based remuneration.

These might include comparative information on charging models and questions to ask your broker about how they charge for services,

broker and the consumer. If a client wishes to terminate their agreement with their broker, or the broker wishes to withdraw their services, the fee should be switched off.

6 Clients, not product providers, should pay for broker services so as to remove potential for bias. Payment for broking

services should come from the client, not the product provider. In the case of payment for ongoing charges, these should be matched to regular deductions from the client’s account, and ‘factoring’ an upfront payment to the advisor or advice licensee would not be permitted.

Dante De Gori has been CEO of the Financial Planning Association since March 2016. He is a Certified Financial Planner and works to advance the financial planning profession and build widespread consumer trust.

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PEOPLE

THE BIG INTERVIEW

MARIO REHAYEM AND AARON MILBURN: GOING GLOBAL

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Pepper is undergoing a major change as Mario Rehayem takes a strategic managing director role and Aaron Milburn steps into his place. MPA asks whether brokers will still have a place as the non-bank becomes an international force

IN A CLIMATE of regulatory uncertainty, many brokers and lenders have avoided the limelight, putting off plans and curbing their ambitions. That’s not the case at Pepper.

MPA visited Pepper’s brand-new office in North Sydney the day after they posted after-tax profit of $61m, an increase of 26% that includes a 36% jump in Australian originations. Now in Australia, New Zealand, the UK, Ireland, Spain and Korea, Pepper is a non-bank with a reach beyond the wildest dreams of most Australian banks.

The reason you may not have noticed Pepper’s emerging global brand is that, unlike many Australian lenders, Pepper has enjoyed a degree of stability in the broker channel. Mario Rehayem has headed sales and distribution since 2011, before being appointed in October to the new role of managing director of Australian mortgages and personal loans. In January, Aaron Milburn, previously of Westpac, St. George and Citi, stepped into Rehayem’s old role, directing sales and distribution.

Rehayem sees his new position as a natural consequence of Pepper’s growth. “I’m not saying we weren’t aligned previously,” he says, “but having a managing director who is physically in the business 24/7 allows us to be a little more focused in our growth and strategy for the Australian business.”

Previously, Patrick Tuttle managed the Australian business whilst being co-CEO of Pepper, and the whole executive team pitched in to help; as Rehayem quips: “It’s hard to envisage from outside how a business could function without a managing director – well, there was; there were about 10 of them.”

Dividing up these management roles was necessary for Pepper to grow further, Rehayem says, but he’s determined that Pepper won't

degenerate into the feuding departments seen at large banks. Rehayem’s role, for instance, demands a ‘cradle to grave’ understanding of all facets of lending, including treasury and credit.

“That’s the beauty of our business,” Rehayem says. “We don’t have siloing; we don’t have turf wars like many other finance and corporate businesses. With us, we know we have one team, and we’re aiming for one result together.”

Unfinished business For the last six years, the result Pepper has been working to achieve is raising awareness of non-conforming lending through roadshows, online education courses and constant media commentary. Under Milburn, whose background is in prime lending, that’s not going to change.

“I’ve spent 18 years in major banking organisations,” he says. “There’s one thing that unites them all, and that’s trying to help people achieve their dream of home ownership. Pepper puts another lens on that.

It takes people whose dream couldn’t be realised by a major institution and gives them a second chance.”

There is a strong economic argument for Pepper’s awareness strategy. From 2011 to 2016, the number of brokers using Pepper’s products grew from around 700 to almost 3,000, excluding Pepper’s white label products. Many of those brokers are first-time users, Rehayem says.

“We’re seeing a direct correlation with a growth in our volumes, again by double digits,” he says. “That shows the course of business we’ve taken in the third-party channel is working, but it’s a slow burn, and dare I say it’s a very expensive way to go out

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PEOPLE

THE BIG INTERVIEW MARIO REHAYEM’S CAREER TIMELINE

2000

2001 Establishes Mortgage One brokerage in Paramatta, NSW

2007 2005

Moves across town to manage a Westpac branch in Manly

2008

2010

Becomes Westpac’s state manager of broker distribution in SA and WA

2011 Joins Pepper as director of sales and distribution

2015

2020

2016 Is appointed to the newly created position of managing director, Australian mortgages and personal loans, freeing up co-group CEO Patrick Tuttle to look at expansion beyond Australia

and build business.” Despite the increase in numbers, Rehayem adds, “it’d be wrong for us to take the foot off the pedal in lifting that awareness, and the reason for that is that would spell a business that is complacent”.

In fact, Pepper is expanding its awareness strategy. Milburn, who brings to the organisation deep experience in direct-toconsumer marketing, believes consumer awareness has a long way to go.

“The stats show that six out of 10 families who get turned down by a broker go without

“The course of business we’ve taken in the third-party channel is working, but it’s a slow burn, and dare I say it’s a very expensive way to go out and build business” Mario Rehayem any form of lending,” he says. Those six applicants wait three years on average before applying for another loan – a ruinously expensive delay, given the current state of Melbourne and Sydney’s housing markets.

On the consumer side, Pepper already runs radio adverts and sponsors AFL’s St Kilda, the A-League’s Western Sydney Wanderers and NRL’s Penrith Panthers; in February, the company also started doing TV commercials. Consumers are beginning to respond, Rehayem says.

“Brokers say when they recommend a Pepper product, people have some sort of affiliation to the brand, as opposed to the ‘Pepper who?’ statements they used to get five or six years ago.”

Rehayem admits that this strategy comes at a cost, though. “Unfortunately for the bean counters in the business, that’s going to ratchet up; it’s not going to go down,” he says. “It has to come from the two channels. I can only see us spending more money.”

Overcoming the barriers to entry It’s one thing to know that non-conforming options are out there; it's another to actually offer them to clients. Pepper has made a number of efforts to make its applications simpler over the years – introducing a single

16

application form for all products, for instance – but non-conforming continues to be viewed as a niche area, which doesn’t always work well in a traditional brokerage and may be too difficult for early-career brokers. To deal with those difficulties, Pepper has long had a scenario and support team in place for brokers, and it’s something Rehayem would like to make more efficient.

“We service thousands of calls and emails on a monthly basis, with brokers contacting us to help them with a scenario they may have,

and we help them construct deals,” he says.

“That’s becoming more and more of a demand from the brokers. The reason for that is we’re getting more and more brokers who are firsttime users … and there’s no other lender that has that kind of support mechanism for them.”

One major pain point is screening, Rehayem adds. “The first barrier of entry is when a broker sits in front of a customer and pre-screens them through predominantly the lens of a bank or non-bank. They quickly prescreen the customer and say, ‘Sorry, I can’t help you’ … 90% of those brokers don’t tend to run the lens of a non-conforming lender as part of their process.”

This year will see Pepper attempt to solve that problem through the introduction of a digital product selector tool. The tool will ensure that “any interview that is done in that broker’s office will give a solution, where possible, to that family in front of them”, Milburn says, by suggesting a suitable Pepper product for the customer in real time during the interview.

Rehayem sees Pepper’s tool potentially levelling the field between more and less experienced brokers. “It takes two minutes, less than eight questions, and you’re done,” he says. “Whether you’re inexperienced or don’t understand non-conforming products doesn’t

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PEOPLE

THE BIG INTERVIEW AARON MILBURN’S CAREER TIMELINE

2000

1999 Enters finance with UK bank Halifax Bank of Scotland

2008 2005

Joins Bankwest as regional manager of retail stores; eventually becomes head of commercial sales

2011 Heads up the broker distribution arm of Citi in Australia 2010

2015 Moves to St. George Bank to become the NSW/ACT state manager for brokers

2015

2016 Has a brief stint as Westpac’s NSW/ACT state manager for brokers

2017 2020

18

Joins Pepper as director of sales and distribution – Mario Rehayem’s old position

matter, because a tool does the work for you.”

Rehayem and Milburn believe that by providing automated advice, the digital selector tool will also help take pressure off Pepper’s support team. At the time of this interview in February, the tool was not yet launched, although Milburn indicated that brokers would be able to use it this year.

“We’re in the pilot phase now,” he says. “We’ll take the learnings from the pilot and roll out through 2017.”

Pepper's digital selector tool will also be accompanied by a new personal loan product with no establishment or ongoing fees, which is currently being marketed to consumers but will be rolled out to brokers and eventually in a white label format, Rehayem says.

Although there are no plans for other new products, one area that may see more focus under Milburn’s leadership is lending to the self-employed.

“Non-conforming is about non-conforming income as well,” he says. “It’s interesting – mortgage brokers have non-conforming income as well. Sports stars, celebrities, seasonal workers have non-conforming income … some brokers view it like commercial

“We’re inviting users and non-users of Pepper to come and help our business construct new policies and products we’re seeing a need for in the marketplace,” Milburn says.

And, he adds, any changes Pepper does make in the broker space will be based on broker feedback. “The market moves, and any lender who thinks they can roll out last year’s strategy into this year is fundamentally incorrect, in my opinion. It’d be remiss of me to come up with a strategy without consulting my business partners. So any decision that we make here under my leadership will be in consultation with our brokers, because that’s the only way we’re going to deliver product into the market that’ll best suit their clients.”

With Rehayem's new role as managing director providing vastly extended authority, he's looking at Pepper’s processes; he picks out the support team and turnaround times as particular targets for improvement.

One area where Rehayem is comfortable is Pepper’s reputation in the broker space.

The non-bank has experienced exponential growth in recent years, to what Rehayem believes is now 40% of the non-conforming

“Some brokers view non-conforming like commercial lending or SMSF. My goal, Mario’s goal and Pepper’s goal is to dispel the myths and make it more the norm” Aaron Milburn lending or SMSF – they sort of understand it, but it's too hard. My goal, Mario’s goal and Pepper’s goal is to dispel the myths and make it more the norm.”

An ear to the ground Pepper’s biggest change in 2017 won’t be about products, however, but about listening. Even as the non-bank courts consumers in Australia and beyond, Milburn wants to get closer to brokers with a series of roundtables. Starting in March, events in every state will enable brokers to sit across from Pepper’s heads of product, credit, treasury and marketing, with cooperation throughout the year.

market. “You don’t hold that type of market share by fluke,” he says, “and we are not the cheapest and don’t want to be the cheapest.

We want to be the best at what we do.”

The focus now is on maintaining that reputation and avoiding any slippage in the quality of customer service. “It’s not about volume; it’s about how much effort the customer has to put in to deal with our brand,” Rehayem says. “We take that responsibility very seriously because our brand is the broker’s brand as well, because they’ve recommended our brand. We don’t want to change brokers’ perception of us, but we want to take our really good reputation to another level.”

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SPECIAL REPORT

BROKERS ON BANKS

BROKERS ON BANKS After a year of rate hikes, regulatory uncertainty and turnaroundtime blowouts, the dust has finally settled and the results are in.

What emerges is a lending landscape experiencing major upheaval

PEOPLE DON’T want a mortgage – they want a home. You could argue that’s always been the case, but it’s certainly something the third-party channel has taken more seriously in recent years as brokers distinguish themselves from online alternatives by highlighting the advice and service they provide. The same is true for lenders: Given a mortgage is the biggest debt a customer will ever take on, the application process for such a product should be the best they’ll ever experience.

If only that were the case. Whilst Domino’s can famously give you a dynamic estimate turnaround time on a $5.99 pizza, brokers and their customers continue to have vastly different experiences applying for a mortgage

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at different lenders – or in many cases, with the same lender. That’s what MPA’s Brokers on Banks survey is all about: comparing Australia’s banks from the perspective of brokers, whilst analysing each individual bank’s strengths and weaknesses. Now in its 14th year, this survey has accumulated a vast amount of comparative data on the fraught relationship between banks and brokers.

To stay relevant, this survey needs to change, and this year was no exception. We included a new question on brokers’ perceptions of branch networks, the results of which may surprise you. And ASIC’s Remuneration Review could hardly be avoided, so we asked brokers whether they

believed the banks had adequately defended brokers’ role when asked by ASIC. The results suggest brokers are suspicious of the banks’ motives, particularly the majors. This year also saw a number of performance measures hit a roadblock – turnaround times and pricing, for instance, posted the first declines we’ve seen in several years.

Brokers may be just one of many channels in Australia’s mortgage industry, but they represent more than 50% of the market, meaning a similar number of customers are at risk of a bad experience when banks fail brokers. We hope the results of this survey help the banks give brokers – and therefore consumers – a better experience.

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OUR TYPICAL RESPONDENT

Writes $20m–40m worth of mortgages a year

Is aged between 46 and 55

Has been a broker for more than six years

Is most likely to work in VIC (34%) or NSW (31%)

WHAT DO BROKERS WANT? 1 = not important; 5 = very important BDM support

4.78

Turnaround times

4.75

Credit policy

4.63

Interest rates

4.41

Online platform and services

4.05

Product range

4.00

Communications, training and development

3.97

Commission structure Product diversification opportunities

3.84 3.71

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SPECIAL REPORT

BROKERS ON BANKS

PRODUCTS AND PRICING Rate hikes, particularly for investor clients, have not gone unnoticed by brokers, resulting in some gains for the non-majors

PRODUCT OF THE YEAR: WESTPAC FLEXI FIRST OPTION HOME LOAN Westpac’s Flexi First Option Home Loan is the bank’s low-rate basic product, with no maintenance fees and redraw and repayment holidays available. Extra features can be added to the loan at extra cost. Many brokers referred to attractive limited-time introductory offers on the loan, which at the time of writing included a 0.65% p.a. discount for the first three years and no establishment fee, saving $600.

PRICING IN 2017 bears little relation to what’s happening with the cash rate. The cause? Take your pick between regulation, risk appetite, funding markets and more.

There’s been a wave of price hikes, followed by competitive discounting, followed by more hikes. Many rate increases have targeted property investors, leading some clients to pull out of this area entirely.

It’s this instability that has contributed to 2017’s headline result: an almost even split (51% to 49%) between brokers who believe product ranges and pricing improved, and those who thought they’d got worse. As the

comparison with 2016 shows, results in previous years were substantially more positive, despite the cash rate now being at a historic low. Yet with rates only likely to go up, it’s difficult to see how pricing can get substantially better in the near future.

Undoubtedly the big winners this year were the non-major banks. ING Direct topped this year’s interest rate ranking by quite a margin, and it’s noticeable that seven of the top 10 for interest rates this year were nonmajors. In fact, not a single major bank made it into the top five. We also asked respondents which bank offers the most favourable policies

HIGHLIGHTS: PRODUCTS AND PRICING

What respondents said about Flexi First Option Home Loan: “Interest-rate-comparative product that suits a large niche of our clients with the high lending ratio of 97%.”

22

Interest rates

Product range

Credit policy

Product diversification opportunities

“Fantastic initial rate – revert rate is reasonably high, but we cross that bridge when the time comes. No upfront fee, no ongoing fee. Basic, simple home loan.”

1st

ING Direct

Westpac

ANZ

CBA

2nd

Suncorp

CBA

CBA

Westpac

“It’s a great product for clients seeking a lower loan amount while still having good options such as redraw available.”

3rd

Bankwest

ANZ

Westpac

ANZ

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and interest rates for their investor clients, and they picked out AMP, thanks to the ability to cross-collateralise investor and owneroccupied properties.

Non-majors have long dominated the interest rate category, but the majors continue to prevail in all other product categories. The top three banks for credit policy were entirely unchanged from last year, while Westpac won again for product range but lost the top spot to CBA when it came to product diversification opportunities. The scores in these categories were very similar, and margins of victory were slim. This could suggest that the banks are competing hard in these areas, but also that no one bank has really ‘wowed’ the market with a different approach.

It’s notable that 2017’s Product of the Year, Westpac’s Flexi First Option Home Loan, was not a packaged product as it has been in previous years, but instead a relatively basic product that many brokers are using for first home buyers, given the low rates, low fees and high LVRs permitted. As in 2016, highly competitive limited-time offers seem to have

propelled this year’s top product to the forefront of brokers’ minds. In Westpac’s case, a low introductory rate and waived fees were particularly popular.

Brokers continue to tell us that customers want a sharp rate, but it’s no longer clear whether brokers do. The top three banks for interest rates this year – ING Direct, Suncorp

and Bankwest – were not the top three banks overall (ING Direct was in 10th place).

However, the banks that excelled on credit policy, product diversification opportunities and product range were the same three banks – Westpac, ANZ and CBA – that claimed the top three spots overall. Coincidence? We think not.

HAVE PRODUCT RANGES AND PRICING IMPROVED OR WORSENED OVER THE LAST YEAR?

65%

Improved Worsened

2016

51%

2017

35%

49%

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SPECIAL REPORT

BROKERS ON BANKS

INCENTIVISING BROKERS Commission and segmentation strategies matter, but it only takes one bad experience for a bank to lose a broker’s business

DOES COMMISSION matter? That’s the question ASIC has been pondering for more than 12 months, and the outcome of that investigation will shape brokers’ businesses for years to come. So, in a sense, commission does matter. Yet all the regulatory and media attention on commissions means brokers have seen little in bonus commission offers over the past year. Our results show very little consistency in which banks are rated best by brokers for commission structure – just one of last year’s top three made it to this year.

What undoubtedly does matter is communications, training and development.

The top three banks for this category were also the top three banks overall. Our results

“Having premium broker helps a lot.

But with most lenders, if you don’t have a premium broker status, you are basically stuffed”

HIGHLIGHTS: INCENTIVISING BROKERS

24

suggest, moreover, that ‘communications’ is the most important part of this category.

When we asked brokers why they’d put more business through a bank, or had stopped using

Commission structure

Communications, training and development

1st

Westpac

Westpac

2nd

NAB

CBA

3rd

Macquarie

ANZ

a bank, communication often factored into their answer.

The problem for banks is that communications is an area in which it’s very easy to slip up. Take NAB. One broker applauded NAB because “they keep you informed at every stage of the approval process. I do not call or send them emails; they call/send me emails with updates”. But another broker, explaining why they left NAB, criticised “BDMs going missing in action when you need them most”.

Last year we asked brokers whether they were part of broker segmentation schemes, such as CBA’s Diamond Brokers and Westpac’s Platinum Brokers. Although we didn’t repeat this question, many brokers mentioned their membership in comments, and many complained that banks didn’t always fulfil their promises. Perhaps more worrying was the comment of one broker on

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the subject of turnaround times: “Having premium broker helps a lot. But with most lenders, if you don’t have a premium broker status, you are basically stuffed.”

Brokers’ perception of channel conflict remains largely unchanged this year, although those overall statistics hide some regional variations. Brokers from Western Australia and Queensland were more likely to see channel conflict as a problem for their business, no doubt as a result of brokers in WA being much less satisfied with the bank branches they deal with (see the following section on Technology, Turnaround and Service).

The fact that one in five brokers sees channel conflict as a major problem should be an uncomfortable finding for the banks.

Whilst bank leaders have continually warned that some level of channel conflict is inevitable, we received countless comments from brokers who had lost clients or needed to rapidly rebuild trust after branch staff attempted to take their clients. With the Sedgwick Review into bank remuneration running concurrently to ASIC’s review into broker compensation, it’s possible that bank staff incentive schemes promoting such unethical behaviour will be named and shamed. Evidently, commission does matter – not so much in its value, but because of what it’s for.

HOW BANKS WIN AND LOSE BROKERS Why I’ve given more business to this bank

Bank

Why I’ve stopped using this bank

“Due to their investment lending policy framework when owneroccupied residences form part of the security suite.”

AMP

“They change their BDMs two to three times a year; it is hard for us to communicate with them.”

CBA

“Arrogant, provide little support and can’t ever speak to the doc prep team. Have lost deals because of them – even with Diamond status.”

“They have great documents and good processes. Credit are willing to talk through a deal and try to make it work.”

“Their rates have been sharp, products are easy to understand, their customer service is amazing, and they have minimal to no fees.”

“Turnaround time is excellent.

They keep you informed at every stage of the approval process. I do not call or send them emails; they call me/send emails with updates.”

ING Direct

NAB

“Dreadful implementation of their loan system, and assessors seem to be extremely inexperienced.”

“The banking experience is terrible. Broker clients are openly snubbed by branch staff and told to ‘go back to your broker’ for account openings, etc.”

DO YOU BELIEVE CHANNEL CONFLICT EXISTS?

Not a problem (18%)

Minor problem (60%)

Major problem (22%) www.mpamagazine.com.au

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SPECIAL REPORT

BROKERS ON BANKS

TECHNOLOGY, TURNAROUND AND SERVICE Improving technology isn’t doing enough to arrest a slide in turnaround times caused by insufficient staffing and special-offer blowouts FOR THE first time in several years, turnaround times have got worse, according to brokers. This year, 29% of brokers say turnaround times had worsened, while 11% said they’d worsened significantly. In 2016, those figures were 14% and 2%, respectively.

Of course, 37% of brokers this year said turnaround times were improved or much improved, but that number was far lower

than 2016’s figures. Evidently, lenders have a problem.

Technology was meant to improve turnaround times, and brokers gave us many examples where that was indeed the case.

Many celebrated being able to email rather than fax documents, even if this seems a small victory in 2017. Bank’s online portals for submitting documents are also growing in

HIGHLIGHTS: TECHNOLOGY, TURNAROUND AND SERVICE

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Turnaround times

BDM support

Online platform and services

1st

Westpac

Westpac

Westpac

2nd

Macquarie

ANZ

CBA

3rd

Bankwest

Bankwest

ANZ

popularity, especially those with live chat functions and dynamic estimates of time to completion. Bankwest’s Broker Chat was again celebrated by brokers, and it should come as no surprise that this non-major made the top three for both turnaround times and BDM support this year. Broker platforms for preparing documents registered a huge increase in mentions this year, although as one broker pointed out: “Ability to manage via online portals is becoming even more important to our business, and the banks haven’t caught up with this yet.”

Many comments blamed misuse of technology for poor turnaround times.

“ApplyOnline has too many ‘workarounds’ one must know for respective lenders,” complained one broker. “This does not provide efficiency but instead impedes progress and submission.”

Sloppy introductions of new IT systems had stopped many brokers using certain banks, and some systems just took far too long to use.

Most of all, however, there was a suspicion that banks had reduced the number of staff working in the application process, which brokers felt was apparent every time the bank experienced surges in demand.

Although almost all banks received criticism on this front, ING Direct, Suncorp Bank and CBA suffered particularly badly – one broker reported experiencing turnaround

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times of more than 25 days when dealing with the former bank. Even brokers in elite segmentation schemes complained that turnaround times had dropped off, often accompanied by declines in BDM service and communication.

Technology was meant to have particular advantages for branchless banks by liberating them from the need for a physical presence.

Many brokers mentioned this was occurring when asked whether customers were willing to look beyond the Big Four. Yet 63% of brokers said an extensive branch network is a ‘help’ to their business – accordingly, the top

“The ability to manage via online portals is becoming even more important to our business, and the banks haven’t caught up with this yet” five banks this year, although not all majors, do have extensive branch networks.

Turnaround times and BDM support are consistently voted the most important areas of service by brokers, and these results have relevance to the overall survey. Non-majors offer impressive rates, yet the turnaroundtime blowouts have put brokers off using them, with the exception of Suncorp and Bankwest. Whatever brokers’ problems with Westpac, the fact that this bank won all three of these service categories goes some way to explaining their overall success this year.

HAVE TURNAROUND TIMES IMPROVED OR WORSENED OVER THE LAST YEAR?

56%

2016

Improved

No difference

2017

28%

Worsened

37%

23%

16% 40%

ARE BANKS WITH EXTENSIVE BRANCH NETWORKS A HELP OR HINDRANCE TO YOUR BUSINESS?

Hindrance Help

37%

63%

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SPECIAL REPORT

BROKERS ON BANKS

WHAT YOU’RE SAYING Brokers and banks have been working together for three decades, but the suspicion between the channels remains intense

STAR COMMENT One Perth broker will actually enjoy the five-hour flight east after winning a pair a Bose noise-cancelling headphones by providing this year’s Star Comment. This comment was one of dozens that noted how the internet is allowing clients to look beyond their local bank branch. We thought this particular comment really nailed the argument: Are customers more receptive to looking beyond the Big Four, and why would you advise them to do so/why not?

Definitely. With an increased online presence and confidence in online products, customer receptiveness is much higher. Access to branch items through Australia Post also helps.

importance. Many have welcomed scrutiny of the channel as a chance to show the value of brokers, and some brokers agree. But the fact that the Australian Bankers Association has organised their own concurrent Sedgwick Review, which has also looked into the role of brokers, has not helped to build trust.

Beyond ASIC’s review, we asked brokers to comment on a number of issues, from branch networks to how banks might improve turnaround times, and whether they thought customers were willing to look beyond the Big Four.

BANKS AND ASIC’S REVIEW “The majors are trying to avoid paying trail commissions to make more money for themselves. In my opinion, the banks don’t really care about the role of brokers and the value proposition they give to customers.”

“From what I’ve heard from state managers, BDMs, etc., I do believe [the banks defended brokers], but would love to see evidence in ASIC’s report.”

BANKS AND ASIC Do you believe the banks effectively defended the role of brokers when consulted for ASIC’s ongoing Remuneration Review?

Yes

No 40% 60%

THERE’S NO denying the industry is under pressure: ASIC’s Review into Broker Remuneration could potentially disrupt the underlying revenue model of brokers’ businesses. With the entire industry under threat, it’s understandable that brokers would want the industry’s major stakeholders – i.e. the banks – to make their position clear. Yet according to our survey, 60% of brokers don’t think this has been the case.

Banks have certainly talked about the value of brokers; non-majors in particular have made strident comments asserting brokers’

“I highly doubt [the banks defended brokers]. The major lenders were very quiet on the topic, and it seemed that only the smaller players voiced any real support to the media.

MFAA have been very inept in their handling of everything as well. They appear to be more focused on internal politics rather than actively defending brokers.”

“It is difficult for the banks to defend an ‘offshoot’ of their main business (aggregation groups owned by banks) or defend an outside organisation/business introducer.” “[The banks] are the ones who lobbied the politicians behind the scenes to do the review.”

“Whilst the banks may have stated the positive outcome brokers bring, I don’t believe they actively defended our position.”

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SPECIAL REPORT

BROKERS ON BANKS

HOW BANKS COULD REDUCE TURNAROUND TIMES “The issue is on two fronts. Firstly, we as brokers need to accept responsibility for not providing all required supporting documents – that’s a common problem for the banks. Secondly, when a bank offers a very competitive campaign, they need to ensure they have both the staff and processes in place to deal with increased volume. ”

“It’s important that we work with branches to add value to our mutual clients. In general, this has improved significantly over the past year, but I recently had a poor experience via a Bank of Melbourne relief teller denigrating brokers and not offering assistance to the client unless they dealt with the branch lender.”

“Better communications with file progression. Stop the silo/gates for an application. There seems to be a cast of thousands looking at each application, but only a small step in the overall process before passing on to another team.”

“Regional branches don’t always seem to be providing a full service. I have obtained feedback from clients who don’t want to use the branch – for example, one client had to have a loan interview at the branch via Skype. The client disliked this format. This was with one of the major four.”

“An online applications progress view, incorporating a live comment field to the person who has the file, and also actual SLA time for your file to be completed/ move to the next area.”

“Going from the assessor to credit then back to assessor blows out the deals due to turnaround times. If credit say yes, then it should be signed off straight away.”

“Good tracking system to allow for self-tracking instead of contacting the service centres, which do not offer quality assistance.”

“SMS messages all the time, not sometimes. Do not call me at 8pm to let me know of outstandings.”

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WORKING WITH BRANCH NETWORKS

“We educate, enlighten and empower our clients to feel positive and strengthened by their lending decisions.

So if a client were to go into a branch, they would not be influenced, nor would any comments the branch staff made cause them concern.”

“It adds to the overall experience.

Most clients move their banking to the bank that has their home loan. Often, as brokers, we can’t set the client up for internet banking, bank accounts, etc., so it’s important to have a contact at the branch to onboard the client.”

WHETHER CLIENTS ARE LOOKING BEYOND THE BIG FOUR “Clients are now seeing that there is more choice, and with few visiting branches and doing the majority of tasks online, it makes it easier and more cost-effective to switch to a non-major.”

“I stick to Big Four. Banks are more protective than non-bank lenders when there are changes to the financial industry.”

“Very much so. If customers are serviced well by the broker, the product or lender they are with becomes secondary in the relationship.”

“Customers are, but this broker is not, as the non-banks are small entities and may not weather higher costs of funds and a GFC-type event.”

“It really depends on the client and their situation. Very generally, the Big Four perhaps have a greater product offering with more specialised policy – you pay a premium for this, though.

Smaller banks are more pricecompetitive but can lack ‘bells and whistles’ at times, as well as risk appetite.”

“There’s 1,450 banking products available out there, so if I can get a better deal from another lender, why not?”

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2:50:59 PM 15/03/2017 2:55:48

SPECIAL REPORT

BROKERS ON BANKS

FINAL RESULTS Meet 2017’s Bank of the Year, and find out who were the big winners and losers in this year’s overall results

WESTPAC

32

ANZ

4th

SUNCORP

Position in 2016: 1st

Position in 2016: 3rd

Position in 2016: 4th

Westpac made it three in a row, comfortably securing the title of 2017’s Bank of the Year. Westpac won the same number of categories as last year, falling to second in product diversification opportunities but winning the category for commission structure. The bank’s performance was consistently excellent: There was just a single category (interest rates) in which it was not in the top three banks.

It’s that consistency that allows Westpac to stay ahead of its major bank competitors. In areas like commission structure, Westpac clinched the number-one spot, whilst ANZ, CBA and NAB didn’t even make the top three. From this survey, it appears that Westpac may have avoided the worst of the turnaround-time blowouts and unpopular rate hikes that have plagued the other majors.

Furthermore, Westpac continues its good records with individual products, again clinching the Product of the Year after losing the title in 2016.

The challenge for Westpac now is to persuade all brokers, not just their regulars, that they’re the best lender out there, and to offer quality services to back it up.

It’s taken several years for ANZ to break through to the silver-medal spot, making the achievement all the sweeter. The bank received excellent results for its credit policy, a category it won, as well as good scores in other areas. ANZ will be disappointed about its results for turnaround times – a category it used to dominate – where it didn’t even make the top three, whilst commission structure and interest rates remain areas of weakness, which could keep the bank off the number-one spot if not addressed.

When Suncorp burst into the top five last year, it was easy to see it as a one-off. Evidently, that’s not the case. Whilst the bank doesn’t shine in particular categories outside of interest rates, brokers consistently score it highly, which is why its average result is so high. Suncorp has experienced blowouts this year, and respondents to our survey certainly criticised these, yet it appears Suncorp’s products and service continue to place it above much larger competitors.

CBA

5th

BANKWEST

Position in 2016: 2nd

Position in 2016: 8th

CBA didn’t lose out on second place by much, yet the bank still slipped to third, which should come as worrying news.

The numbers show brokers still rate CBA’s products and technology highly, yet its results for BDM support and turnaround times were far below those of its immediate competitors. Furthermore, some of the harshest comments by brokers were reserved for CBA. Clearly the bank has some holes – but if they can be plugged, that could return it to second place, if not higher.

This year’s big shock result has to be Bankwest, which jumped from eighth place to fifth, pushing out a major bank in the process. They’ve done it through excellent top-three results in the key areas of BDM support, turnaround times and interest rates. It’s not uncommon for a non-major to win the latter, but BDMs and turnaround times are important categories that are traditionally dominated by the majors, making Bankwest’s arrival in the top five a special achievement.

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OVERALL RESULTS 6th

NAB

8th

MACQUARIE

Position in 2016: 6th

Position in 2016: 5th

Although NAB retained its sixth-place position this year, the result must come as a disappointment, given the other major banks all sit in the top five. With a well publicised rebrand from NAB Broker to NAB, the bank cannot be accused of failing to respond to brokers’ concerns.

Well intentioned management decisions are not always reflected on the ground, however. Many brokers complained about channel conflict with NAB, despite the recent introduction of ‘bankerbroker’ staff meant to prevent this.

What happened to Macquarie? The bank that consistently featured in the top five is now relegated to a middling position. Although Macquarie achieved top-three results in turnaround times and commission structure, overall brokers rated it much lower than before.

7th

ST. GEORGE GROUP

Position in 2016: 7th + 9th (see below) We took the decision this year to amalgamate St. George, Bank of Melbourne and Bank SA into a single entity this year, given the organisations already operate this way, and as a group, they have a national reach. This year’s result, which places St. George Group among the better non-majors, is therefore similar to 2016’s results for its individual banks. Future Brokers on Banks surveys will continue to treat St. George Group as a single entity to make comparison easier.

9th

To come up with the overall results, we took an average of the results for every category of service. This means every category had an equal impact on the final result. Certain categories may matter more to your business, so we advise you to look at the individual ‘Highlights’ boxes throughout this report.

Bank

Overall score

Westpac

3.72

ANZ

3.58

CBA

3.52

4th

Suncorp

3.46

5th

Bankwest

3.44

6th

NAB

3.39

AMP

Position in 2016: 11th AMP has entered the top 10 this year, and the reason may have a lot to do with investors. We asked brokers which bank offered the most favourable policies and rates to its property investor clients, and they picked AMP above all other institutions.

10th

ING DIRECT 7th

Position in 2016: 10th A win for ING DIRECT on interest rates stands in contrast to disappointing results in many other categories. Many brokers complained about the bank’s turnaround times this year, suggesting ING Direct is struggling to handle the volume of business coming its way.

St. George Group (Bank of Melbourne, BankSA and St. George)

3.38

8th

Macquarie

3.36

9th

AMP

3.31

10th

ING Direct

3.16

Note: Scores go from 1 (very bad) to 5 (very good)

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SPECIAL REPORT

MAJOR BANK ROUNDTABLE 2017

2017

MAJOR BANK ROUNDTABLE In a first for the mortgage industry, brokers got the chance to quiz the heads of Australia’s biggest banks from the comfort of their desks as part of MPA’s second Major Bank Roundtable, broadcast live

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IF YOU THINK herding cats is difficult, try herding bankers. Australia’s major banks are amongst this country’s biggest businesses, and getting their busy decision-makers together in one room to discuss the most contentious issues was a huge challenge. Yet it’s a coming together the broker industry has badly needed, at a time when broking is experiencing a level of change and disruption not seen since the GFC. The last roundtable MPA ran was in December 2014. At that time, rampant investor-driven price growth in Sydney and Melbourne had yet to force APRA’s hand, so lenders pushed ever harder into this space.

Foreign borrowers and the brokers who served them were celebrated, not reviled; most lenders were more than happy to accept

their custom. Most importantly, ASIC’s Remuneration Review was then just a glint in chairman Greg Medcraft’s eye. At lavish conferences in Asia and Europe, brokers assumed things could only get better.

Fast-forward to February 2017, and both the industry landscape and the participants of our roundtable were quite different.

Moderated by Australian Broker editor Madelin Tomelty, our roundtable included Steve Kane, general manager of NAB’s broker distribution; Simone Tilley, head of retail distribution at ANZ; and Warren Shaw, national head of Westpac Broker Distribution.

The latter two broker channel chiefs entered their roles in 2016, bringing fresh ideas, whilst Kane has overseen the evolution from Homeside to NAB Broker to NAB in just

three years. As non-majors continue to gain market share, these bankers, like the thirdparty channel as a whole, have no room for complacency, and thus our second Major Banks Roundtable was just as volatile as the industry it discussed.

Our roundtable differed in one final respect from 2014: It was broadcast live online, and viewers were invited to send in questions. Outside the arena of elite broker lunches and aggregator boardrooms, never have normal brokers had such access to the decision-makers at the biggest banks. You’ll find the banks’ answers to those questions throughout this piece, and you can watch the entire roundtable for free on our website.

We’ll keep on live-streaming our roundtables and encourage you to join us next time.

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SPECIAL REPORT

MAJOR BANK ROUNDTABLE 2017 THE PANELLISTS

Simone Tilley, head of retail broker distribution, ANZ

Steve Kane, general manager of broker distribution, NAB

Warren Shaw, national head of broker distribution, Westpac

Should ASIC’s Remuneration Review recommend severe restrictions on upfront and trail commission, how could you help brokers maintain sustainable businesses?

For the last 12 months, ASIC’s Review into Mortgage Broker Remuneration has set the tone for the entire industry, and has been the natural starting point for many conversations.

At the extreme end, fears have grown that ASIC could follow developments in the UK and ban commissions; the concurrent but separate Sedgwick Review has looked at banning volume-related bonuses for intermediaries. The only group who has remained almost entirely silent has been the major banks. With large distribution networks of their own, the major banks are one of the few groups that could profit from a rapid decline in the broker channel. We wanted to know exactly where the banks stood, and whether they’d stick with brokers if ASIC’s recommendations end up causing major disruption in the channel.

NAB’s Steve Kane was up first, given that he had worked with both sides of the brokerbank divide during his time as president of

“We really support the upfront and trail system. What is really apparent, though, is that we need to ensure any remuneration is absolutely visible” Steve Kane, NAB the MFAA. He suggested that regulatory oversight is inevitable. “With the success of the broker channel with customers, taking it to above 50% of the market share, we were bound to have regulatory oversight,” he said, “and we welcome that regulatory oversight, as it legitimises further the role that brokers play in the market.”

Kane reiterated previous comments by NAB that upfront and trail commission was a “fair way for brokers to be remunerated”, and that the purpose of ASIC’s review was “to

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improve the view that customers have when they interact with any intermediary”.

With this increased regulatory focus, the broker channel can’t afford even a suspicion of malpractice, so transparency is essential, Kane concluded. “We really support the upfront and trail system,” he said. “What is really apparent, though, is that we need to ensure any remuneration is absolutely visible as to who’s paying, what they’re receiving the money for and how that is going to be accounted for.

It’s really important that any remuneration structure is completely transparent.”

Moving on to ANZ’s Simone Tilley, the conversation turned to alternative revenue streams brokers could pursue, should upfront and/or trail commissions for residential lending be curtailed. ANZ has been among a number of banks pushing commercial lending and asset finance as an opportunity for diversification. For Tilley, the objective is simple: “It’s really about making sure brokers have access to all of our bank.”

ANZ has been working closely with aggregators to help brokers already looking to move into other areas of lending, she added. “We’re seeing brokers wanting to diversify their income streams, and we see an

opportunity to really partner with them in the market to help them achieve their goals.”

Finally, Warren Shaw of Westpac was asked whether broker businesses could survive a change to commission structures.

“Absolutely,” he replied. “I don’t think the review being undertaken is about making broker businesses unsustainable; it’s about ensuring customer outcomes are at the centre of everything we do.”

Agreeing with Kane on the need for transparency, Shaw added that he saw

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AUDIENCE QUESTION What are you doing to make it easier for brokers and customers to check the progress of their loan applications?

Simone Tilley: “I think it’s something, to be honest, we need to do a better job on.

When we think about other models out there, like the Domino’s Pizza model, you have absolute transparency from inception right through to fruition. We actually have a process underway to assess that. In the coming 12 to 18 months, there is a project.”

Warren Shaw: “I’d reiterate that. I think as an industry, we need to get much better at keeping people informed of where their loan is at in an origination sense. It’s a bit of a black box approach, which has to change.

It’s about prioritising that against a myriad of other priorities.”

speculation about the review as “really unhelpful” because it’s distracting the channel from serving customers at the same time as they are being monitored by ASIC. Once ASIC’s recommendations are actually published, debate can begin, Shaw noted. “I think there’s been lots of commentary and lots of industry players trying to position themselves very close to decision-makers on this, and I don’t know if that’s the case; I haven’t been doing much of that. I think the continual talking about it is destabilising; I think as an industry, we’re much better off focusing on the customer and allowing ASIC to do its review and table its recommendations.”

Will higher interest rates be applied to investors in coming years, and does that mean owneroccupiers will get better rates?

The banks underwent their own regulatory disruption back in 2015 with the introduction of APRA’s 10% investor lending cap. Although this initially led to a cooling, and even a fall, in the value of some lenders’ investor books –

such as ANZ – the issue was reignited at the end of 2016 as banks began to raise interest rates for investors; some even stopped lending to investors. This has led to no shortage of inter-bank rivalry: NAB responded to another major’s freeze by taunting that NAB remained “open for business”. Although none of the banks on our panel had frozen investor lending at the time of filming, we felt sure this would be a divisive issue.

Tilley argued ANZ was taking a ‘measured’ view of investor lending. “From an interest rate perspective, those decisions aren’t made lightly,” she said. “We have to think about the returns we get for our deposit holders, the cost of funds, the competitive environment, the economic environment for our customers at that particular point in time and the regulatory environment, because we want to make the best decisions.”

Taking into account both APRA’s 10% growth cap and a highly competitive market with 100 participants, the bank still remains “open for business” to investors, Tilley insisted.

A week prior to the roundtable, ANZ had told

brokers they were extending a $1,200 rebate for some loans refinanced to ANZ, including investor loans.

Although interest rates are rising for investors, these rates should be put into perspective, argued Westpac’s Shaw. “In real macro terms, the cost of borrowing is extremely low, whether it’s investor lending, interest-only lending or traditional P&I lending,” he said. “The access to money is free and available and relatively cheap. There are going to be some differences between our borrower profiles. We saw that start to emerge last year, and I think that will be the trend going forward.”

Westpac’s primary goal is home ownership, Shaw explained – specifically “owner-occupied, principal-and-interest lending so they can pay off their loans faster”.

Nevertheless, the bank recognises the continuing attraction of property investors and the need to ‘play strong’ in that market going forward.

Differing interest rates across different types of borrowers is one of many variations

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SPECIAL REPORT

MAJOR BANK ROUNDTABLE 2017 AUDIENCE QUESTION Do you see the majors re-entering the low-doc market in the future?

Steve Kane: “My view is, we need to enhance what we do in terms of credit investigation to make sure we get all of the information that is available. On the fringe where low-doc is playing, I think that is incumbent that a customer only gets what they absolutely require and need and that we are certain they are in the right product.”

Warren Shaw: “The non-conforming market is not a true market for the Westpac brand, that’s absolutely the case. I don’t think it’s a massive opportunity for us as a major … we should only be comfortable with that in the industry on the basis that it’s driving good customer outcomes.”

brokers should expect to see in the future, Shaw said. “There will be some nuances in how we price, and I think that’s just a reasonable reaction by lenders to maintaining an even playing field, but at the same time being aware it is competitive,” he said. “We don’t operate in a vacuum here, and we’ll operate in a way that benefits our balance sheet and all of our stakeholders.”

Last up was Kane, who pointed to the “enormous number of inputs” going into any decision by NAB. In contrast to other members of our panel, who emphasised the challenge of lending to investors, Kane claimed that NAB operates “in all markets, whether it be investor or owner-occupied; we don’t have a preference, other than to operate within the guidelines that are set by the regulators”.

The decision-maker here is the customer, argued Kane, and it’s about what the customer wants rather than what NAB wants, “whether that be interest-only, whether that be owneroccupier or whether that be investors, it really is determined by the need of the customer”.

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“There are going to be some [pricing] differences between our borrower profiles.

We saw that start to emerge last year, and I think that will be the trend going forward” Warren Shaw, Westpac Is there any future for brokers who deal with foreign clients?

If you’re seeking examples of industry disruption, look no further then lending to foreign borrowers. Brokers in this previously lucrative area of lending have already experienced disastrous shifts in bank policy, precipitated by the banks sitting on MPA’s panel. In April 2016, Westpac stopped writing loans for non-residents with entirely foreign sources of income, and most of the majors and non-majors quickly followed. The bank was responding not only to concerns about widespread fraud, but also changing capital requirements. “In the future, the capital

weighting for foreign-sourced loans is going to go up materially under Basel IV,” Westpac CEO Phil Coffey explained at the time, “and unless there is a significant repricing of these loans, the returns won’t be anywhere near where they are today.”

As one of the first banks to move – and one most heavily involved in foreign lending – Westpac was a natural choice to the begin this conversation, and Shaw’s point was clear. “I think it’s a challenging proposition in the current environment,” he said. “If your business model is that you are supporting foreign residents into property purchase and funding in Australia, then you haven’t got

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SPECIAL REPORT

MAJOR BANK ROUNDTABLE 2017 many options.” He said the bank has “no intention to change our view” when it comes to refusing lending to borrowers with exclusively foreign income.

The reason behind that decision, Shaw explained, is Westpac’s commitment home ownership for Australians. “If there are foreign residents who are genuinely immigrating to Australia and looking to contribute to Australian society, invest in Australia and become Australian citizens, then clearly there are opportunities for us to deal with those types of clients; we want to help those people,” he said. “But in terms of speculative foreign investment, that’s not the sort of funding we’ll be doing any time soon.”

NAB’s Kane was asked if it’s time for such brokers to look elsewhere. He referred back to the previously discussed limits on investor lending. “We have the opportunity to put our products and resources into markets we think will serve the vast majority of clients in the best possible way,” he said. “There’s a great opportunity to grow the market internally in Australia, and we do keep mindful of the regulatory framework that we work in around investor lending.”

None of our panel so much as hinted at the possibility of a loosening of foreign borrower restrictions, and brokers in the area should be prepared for change. “Change is inevitable,” Tilley said. “We run a large portfolio; we want to balance that portfolio, and we actually need to consider all the different weightings and the dynamics that are playing out, and respond accordingly. The jewel is in how we deliver those changes and deliver them to the market in the best manner possible.”

How will you be driving education and professional development in the industry over the next 12 months?

Brokers need to justify taking time out of their business for professional development – as Kane put it: “It’s not education for education’s sake.” Given all the current and potential changes in the third-party channel, the relaxed, CPD-point-driven professional development

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“When you look at the third party-space right now, it’s really a pivotal moment. In years to come, I’d love to look back and say ANZ really led the change” Simone Tilley, ANZ days of yesterday have been replaced with a hard-nosed approach to education, much of it driven by the banks themselves as sponsors. We wanted to know how our panel’s banks were contributing to professional development, and what topics are most important right now.

ANZ’s Tilley pulled no punches with her response. “When you look at the third-party space right now, it’s really a pivotal moment,” she said. “There’s quite a lot of cultural change, and education is really at the forefront of that change agenda. For those who are informationseekers and open-minded about how they can evolve and be better … good things will come.”

Tilley argued that not only does ANZ have a role to play in this, it should be a leading role.

“We need to distribute more information and lead with insights, because brokers are busy,” she said. “They’re small business owners, and it’s really difficult … in years to come, I’d love to look back and say ANZ really led the change – and not just change, but the way we’ve partnered with the market.”

NAB’s Kane argued that education now needs to be about responding to regulatory change; NAB is running an annual roadshow on the topic. The bank’s roadshows and PD days don’t just talk about immediate responses for brokers, but rather educate them on the regulatory context to allow them to formulate their own responses, Kane explained. “[We] make sure you understand not just

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AUDIENCE QUESTION How would you react to lender requirements of minimum targets for brokers, considering responsible lending is all about product suitability for the customer’s individual circumstances?

Simone Tilley: “I’d welcome that. I don’t think so much minimum targets – I don’t like that – but with brokers, where we’re going is [that] every single conversation is dealt with properly. In order to achieve responsible lending, there need to be reasonable enquiries.”

what you need to do, but what was at the heart of changes in the regulatory environment. It’s incumbent on banks to do that, and NAB takes that very seriously. What we do is run these roadshows annually and give everyone the opportunity to understand the why as much as what you physically need to do.”

Following on from the other panel members, Shaw noted the “huge unmet demand” he’d seen for training: “Whenever we run roadshows ... we get knocked over by the rush from brokers.” Shaw sees this demand as a natural byproduct of the industry itself.

“The barriers to entry in this industry are relatively low, in my view,” he said, “and so there’s an obligation on all of us [to upskill].”

As brokers build increasingly large businesses, they must construct compliance and contact regimes, and bankers running large organisations can help them do that, Shaw suggested. Westpac is responding by building a broker training hub, which will be rolled out later this year, alongside more BDM support. “It is a key priority for us,” Shaw said.

“We see it as a point of difference.”

The panellists also discussed diversification, and Kane announced that NAB is currently piloting a tool, to be rolled out in the next few months, that will help brokers assess small business applications of up to $1m. “It’ll give them a very strong indication as to the likelihood of success in that application,” he said. “It gives them a formula and it gives them a methodology to actually put the deal together.”

Our panel did advise brokers to move slowly when it comes to diversification, however.

Tilley recalled one cautionary tale: “[There was] a successful residential broker who really got fixated on a $50m transaction,” she said.

“Now, the lead time for these deals can be very long, and the gestation period is enormous.

Stick to what you’re good at, and start to add other things as you get more confident, then step into the larger, more complicated stuff. It is, I think, a trap for new players.” Tilley did however encourage brokers to consider diversification, especially where it seeks to service the whole of their client’s needs.

Westpac’s Shaw suggested that brokers look at easier opportunities such as leasing or

Warren Shaw: “I’m not sure about the inferences of that question. If the target is a remuneration outcome that’s more attractive because they managed to achieve a volume target, that’s certainly not something that any of us would advocate … [but] anything we can do get the third party working with us on quality would be welcome.”

Steve Kane: “Setting a target in relation to getting any sort of bonus is non-transparent … I wouldn’t support that.”

partnerships. “Diversification is not for everyone,” he said. “There are mortgage brokers who are very good at what they do, and potentially the best path for them is to stick to what they do and partner if necessary as a way of potentially accessing other revenue streams.” Diversification, Shaw concluded, “generally requires investment – and not an insignificant investment”.

Which lending-related fintechs are you investing in, and do you – and should brokers – view this area as friend or foe?

Looking at the long-term, fintechs present a threat and an opportunity to both banks and brokers. Fintechs began to be taken seriously once banks started investing in them – Westpac’s $16.5m investment in Uno in

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SPECIAL REPORT

MAJOR BANK ROUNDTABLE 2017 AUDIENCE QUESTION How are you getting your branches to work more closely with brokers?

Steve Kane: “A customer coming to NAB is a customer coming to NAB … we need to ensure that customer experience is the best it can be, regardless of channel.

We need better connectivity with our branch network, and we’ve been piloting for six months banker-brokers – staff who are fully conversant with brokers – into select locations around Australia. There’s a focus on ensuring the relationship with the broker and customer is absolutely at the forefront.”

Simone Tilley: “Actually, last Friday I sat down with a broker and a branch manager in the Toorak branch to understand what they do. What this is about is trust and respecting one another, and being genuine about there being one customer. What Sonia does, if someone comes in, they communicate back to the broker and tell them what they’ve done, so they’re aware and not blindsided by anything, and there’s strong unity. Across ANZ, all our BDMs are aligned to a district, to a branch network.”

Warren Shaw: “We’re all on a similar path, but I’d like to make a point about variability. The variability is too wide, I’ve experienced, at the same location and at multiple locations. We fundamentally need to work on the hearts and minds of people in our branches and in our broker networks about how we come together to provide a coherent outcome for the customer. It’s tricky, but not something we’re going to step away from.”

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September 2016 was a well-publicised example.

It was also a divisive moment: Uno’s stated intention is to disrupt the broker space by enabling consumers to broker their own loans.

Most banks now have departments dedicated to anticipating developments in technology, so we wanted to know which fintechs brokers should take seriously, and whether these players were necessarily disruptive.

Given Westpac’s investment in Uno, Shaw was the first to respond. “The fintech space is another channel, and it should be regarded as one now, alongside the existing more traditional channels in the residential mortgage space,” he said. “It should be no surprise to anyone that we want to have a seat at the table when it comes to the fintech side of the business.”

This doesn’t mean Westpac is putting all of its eggs in one channel’s basket. “It’s about learning how developments in technology can be transferred into benefits for everyone, so I don’t view it as friend or foe,” Shaw said. “I see it as another channel, in its infancy.”

Online lending doesn’t appeal to everyone, Shaw cautioned, as the vast majority of customers want personal advice. “What I’d say to the third-party practitioners who are watching today is you need to have a very good digital presence. I’d strongly encourage you to spend any available capital on this space.”

Kane agreed, arguing that brokers can’t afford to ignore advancements in technology.

He pointed to NAB’s own response in developing NAB Labs. “[It] looks at these things to give us an idea of what we can develop ourselves, who can we partner with, what’s the best outcome for the customer.”

Brokers can expect technology to drive improvements in conveyancing, application processes and signage, Kane explained. He also revealed how close NAB is to becoming paperless. “We’ve settled seven or eight transactions where there’s no paper at all,” he said. “We’ve piloted with some brokers to go the whole way from application to settlement without the customer signing a piece of paper.

It’s possible, but you don’t just need technological improvement, you need legislative change.”

Our panel did not ultimately see the

broker’s core proposition at risk. “The reality is, all of our research points to the end customer still requiring someone to meet faceto-face, and the broker channel provides that absolute connection to the customer,” Kane said. “We don’t think that any time soon we’re going to see a totally digital situation.”

ANZ’s Tilley said new organisations with great ideas should not be feared, but instead partnered with, pointing to ANZ’s cooperation with Apple Pay. She said that while she has an open mind when it comes to technology – hence setting up the Broker Innovation Thinktank at the bank – “banks in the last few years have invested millions, if not billions, on technology, but brokers have prospered in that time because they’ve kept customer relationships at the centre of everything they do”.

Non-majors have been chipping away at your market share. How do you plan to respond?

Finally, our panel discussed the threat of nonmajors. This topic was also discussed in 2014, but in the intervening years, the proportion of

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“Banks in the last few years have invested millions, if not billions, on technology, but brokers have prospered in that time because they’ve kept customer relationships at the centre of everything they do” Simone Tilley, ANZ deals going to non-majors has increased sharply. In the first quarter of the 2013 financial year, majors wrote 77.1%, and nonmajors wrote 22.9%; by the second quarter of the 2017 financial year, those numbers had become 65.3% and 34.7%, respectively, according to AFG’s Mortgage Index. AFG COO David Bailey suggested this was due to increasing interest rates and tightened lending to investors, but we wanted to know how the banks on our panel would respond.

Westpac’s Shaw retorted that “65% market share by the majors is pretty significant. We’re very comfortable with our current marketshare position, and it’s our aspiration to

maintain our share, and you’ll see in the recent numbers that’s exactly what we’re doing.” He admitted that Westpac has “work to do” in making the application process more efficient, but then so does the whole industry.

Furthermore, Shaw added, unlike the non-majors, Westpac is “a multi-channel brand; some of our competitors drive all their acquisition from one channel. So we look not only at what’s being originated in the broker channel, [but] we’ve got a first-party channel that’s very significant in its right.”

Kane took a different perspective. “Isn’t it a great testament to the broker channel that we’re talking about competition from non-

major lenders?” he said. “The competition drives us harder to ensure we stay on our game, improve our services and look at what the customer requires – and in some instances improve that, whether it be through the broker or other channels.” As for competing with the non-majors, Kane said NAB would “look in [our] own backyard first”, particularly at the training and education of its own staff and the support given to the broker channel.

As the roundtable came to a close, Tilley pointed out how ANZ differs from other members of the Big Four. “We actually don’t own an aggregator, and I think it’s important calling that out; we’re agnostic in that sense,” she said. “The reason we’ve prospered is we’ve kept excelling in service – we love the need for speed; we’re trying to convey simplicity in the marketplace and support brokers in the marketplace.”

ANZ and the other major banks certainly aren’t complacent, she added. “It’s important to ask ourselves ‘How can we get better?’ and be quite genuine about that, so we’ll be working very hard.”

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FEATURES

ASSET FINANCE

Hit the road

believes. He’s urging mortgage brokers to expand their offerings to include car finance. Whilst training is required – as car finance is a tax-based product – ANZ runs multiple educational workshops for brokers.

Conveniently, unlike many other types of finance, car finance does not affect existing security structures, as the loan is secured against the vehicle itself.

Some practical changes are required, however, as Wilson found with her brokerage.

“Car finance is a different game,” she says.

“You need to be thinking on your feet, and be able to process the deal in under 24 to 48 hours because your client wants their car straight away.”

Wilson Financial now has a dedicated equipment finance processor, as Wilson finds it difficult to write both mortgage and vehicle finance simultaneously. “If you try and do mortgages in the same breath as a car loan, you can become derailed in one or the other, because they travel at completely different speeds,” she explains.

Traditionally, brokers who offered car finance would receive flex commission – which ASIC has vowed to ban – and ANZ also offers a volume-based bonus at the end of the month. Brokers also have the option to charge a ‘broker origination fee’, which must be clearly detailed and justified to the client.

Wilson charges it “only when extra work might be required, such as private inspection”.

Regulatory changes this year are giving brokers a unique opportunity to get into car finance. MPA and ANZ explain how mortgage brokers can get involved

IN A FULL-SPEED mortgage brokerage, diversification can be difficult: Brokers simply don’t have the time to sit down and brainstorm products that a homeowner might want. Instead, how about a product nearly all homeowners – and many non-homeowners – actually need? Enter the humble automobile.

I needed to actually learn it,” she says. “It’s better to service your own clients rather than turn them away.”

Not only was she looking to make stickier clients of her home loan customers – who all drive – but she was encountering a number of younger clients who weren’t homeowners

“Equipment finance is really important, given we’re at the low end of an interestrate cycle and it’s a fixed-rate product” Cosi De Angelis, ANZ Asset and equipment finance broking has been around longer than mortgage broking, and 40% of that market is cars. This year presents a once-in-a-generation chance for brokers to get into car finance, as ASIC has very publicly torn into the questionable practices of many car dealership financiers, vowing in March to ban flex commission. Now that the reputation of dealership financiers looks to be headed in the same direction as that of used car salesmen, brokers can use their trusted and highly regulated status to break into this market. As Cosi De Angelis, general manager of commercial origination at ANZ puts it, the regulatory and media scrutiny “gives brokers an enormous opportunity to talk to their customers about car finance”.

For Liz Wilson, who runs Wilson Financial in Bowral, NSW, car finance was a late addition to her brokerage. “The turning point was about five or six years ago when I decided

44

but who traded up their cars regularly.

Furthermore, her location in a regional area meant a number of her clients were selfemployed and needed commercial vehicles.

There’s a strong correlation between buying a house and buying a car, De Angelis

WHY YOU SHOULD CONSIDER IT

1,178,133 new

January 2017

vehicles were sold in 2016, an increase from 2015

saw the second highest car-buying levels on record

Australia’s top five best-selling vehicles in January

1

2

3

4

5

Mazda3

Toyota Corolla

Toyota Hilux

Ford Ranger

Hyundai i30 Source: Federal Chamber of Automotive Industries

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DISRUPTION IN CAR FINANCE

Because a car costs far less than a home, commissions are correspondingly lower, thus, “if you have one employee on car loans, you want them settling two to three car loans a week to make it viable,” Wilson says.

Wilson offers a car-buying service through Macquarie Vehicle Select, which avoids clients’ exposure to unscrupulous car financiers at the dealerships. She also provides finance for complicated commercial vehicles and ‘yellow goods’; in fact, she can write a loan for an existing commercial client in as little as two hours, as commercial lending is not NCCP-regulated. “Equipment finance is really important,” De Angelis says, “given we’re at the low end of an interest-rate cycle and it’s a fixed-rate product.”

Getting into commercial vehicle and asset finance has a lot to offer brokers, but it needs to be understood, warns David Gandolfo, president of the Commercial Asset Finance Brokers Association of Australia [CAFBA].

“You need some degree of experience and commercial knowledge in order to package loans appropriately in terms of their tax effectiveness,” he says. “Just writing a few car loans doesn’t make you an asset finance broker; it just adds another string to your bow.”

CAFBA, which has a reciprocal arrangement with the MFAA, runs PD days and educational workshops. “If you want to get serious about it, we can help you do that,” Gandolfo says, adding that it’s worth the effort because “asset finance brokers are very relational, not transactional”; commercial clients have an ongoing need for your services.

ANZ’s De Angelis agrees that offering car finance helps brokers ring-fence their clients.

Wilson has witnessed this firsthand: Clients are starting to see her as “their one finance person”, with immediate benefits. “We are seeing our clients become more loyal, bigger advocates and more trusting with their finances,” she says.

Now is an ideal time for brokers to enter car finance, as ASIC cracks down on unsuitable practices by the car dealership financiers who have traditionally controlled this market.

Last September, a three-year ASIC review concluded that the add-on insurance policies sold by car dealers were “failing consumers” and that the industry was “on notice”.

In December, BMW Finance was fined $77m by ASIC in Australia’s biggest-ever credit remediation program. BMW had failed in their responsible lending obligations.

In March, ASIC announced they will ban flex commissions in the car market, amending the NCCP Act. Dealers may still be allowed to offer lower rates and consequently bring in reduced commissions.

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FEATURES

INSURANCE

When the going gets tough Clients are taking on historic levels of debt, which means loan protection is becoming more important. MPA and ALI Group explore how to protect your clients whilst growing your own business

ONE PERK of being a broker is seeing your clients at their happiest, whether that’s through achieving home ownership or starting an investment portfolio. But what about clients at their worst? Of course brokers make ‘reasonable enquiries’ to ensure a customer can cope with debt, but when tragedy strikes, all those calculations can become meaningless.

To see just how bad things can become, pay a visit to ALI Group’s website. Their testimonials section includes tales of cancer diagnoses, heart attacks, accidents and other tragedies that have befallen the clients of many award-winning brokers you’d recognise from the pages of MPA. Fortunately, all of those clients had loan protection cover arranged by their brokers, which protected them and their relatives from the debt.

In his 20-year broking career, Angelo De Pasquale has provided loan protection to more than 1,000 clients, yet in that time, “not one person has ever asked me about personal insurance,” he says. De Pasquale’s Victoriabased brokerage, Waterstone Finance, is part of the Henley Construction Group, which means De Pasquale deals with clients of all shapes and sizes. Whether the client is a young first home buyer or an older upgrader, De Pasquale asks one simple question: “You’re taking on a lot of debt – do you have enough insurance to cover it if things go wrong?”

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With first home buyers, many simply don’t know. Older buyers are likely to point towards their superannuation, but De Pasquale says they rarely know its value. Many superannuation policies cover borrowers in the event of death, but rarely for the income lost due to trauma or serious

illness, explains ALI Group CEO Huy Truong. Super also takes time to accumulate, meaning most Australians are underinsured by it alone.

A financial planner could put protection policies in place, but younger and less wealthy clients are less likely to have access

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to a planner. That leaves a “gap in the middle” for general advice tied to a product, such as a mortgage, Truong says. “Whoever’s providing that loan transaction is well placed to provide that general advice: ‘If you’re taking out a $400,000 loan, I can provide $400,000 worth of loan protection to you.’”

The 10-minute mark Loan protection insurance works best for brokers when it’s seamlessly integrated into the loan application process. Getting accredited with ALI Group requires a 20-minute online training module and a sitdown with a BDM. “The BDM can help them understand how they can embed this within their business,” says national sales manager Gabrielle Moscati.

Loan protection is well integrated into Waterstone Finance’s process, and as such, “it takes longer for me to walk to my car than it does to apply for loan protection insurance,” De Pasquale says.

The five- to 10-minute loan protection application process has been designed with brokers in mind, Truong explains. “We need to be realistic about the time requirements of brokers; they can’t be sitting there asking 25 medical questions.”

Nor does ALI require clients to undergo medical checks – all the information brokers need, they can get on the spot by talking to

the client. Brokers should be aware, however, that ALI only offers insurance to clients aged 18 to 59 who have taken out a loan in the last 12 months.

If a broker makes the application before close of business, they should receive a confirmation by the next day, Truong says, and then the client’s cover will be active.

ALI will also call the client and explain the specifics of the policy within 30 days.

relevance for brokers is in commission.

Loan protection pays upfront and trail commission, as well as ‘reward points’ in ALI’s case. An average broker writing an average policy would earn around $350 to $500 per deal, according to Truong.

However, the impact on a broker’s business is better viewed on an annual basis.

For many brokers, loan protection accounts for 10% to 20% of revenue, but as it has no

“It takes longer for me to walk to my car than it does to apply for loan protection insurance” Angelo De Pasquale, Waterstone Finance In fact, the broker’s ongoing role is minimal. Clients generally get in contact to ask a question, to make a claim or to expand their cover, all of which are better served by going direct to ALI. If a client makes a claim, ALI does ask their permission to inform the broker of the client’s new situation.

Additional revenue stream Loan protection can also help make clients stickier and more likely to recommend the broker, Moscati says, because it demonstrates the care taken by brokers. Where loan protection does have concrete and lasting

extra costs, it accounts for 30% to 40% of income. That extra revenue stream can be used to build your business, Truong explains.

“Many brokers use the income they receive, say $40,000 to $50,000 [a year], to hire a personal assistant,” he says.

For De Pasquale, remuneration is less relevant, as he’s a salaried broker. For him, loan protection is part of a duty of care he has towards each and every client – he’s arranging the debt, so he needs to get them covered. “It feels good to protect people,” he says. “I see these people when I walk down the street.”

WHY LOAN PROTECTION MATTERS

$245,000

1 in 6

80%

56%

#1

is the average level of Australian household debt, four times what it was in 1988

male workers aged 35 to 65 will likely suffer a disability that leaves them unable to work for six months or more

of Australians don’t have life insurance outside of their superannuation

of Australians would have to rely on Centrelink if a family member suffered a terminal illness or passed away

instance when Australians sign up for extra insurance cover is when they take out a mortgage

Sources: CANSTAR, 2016; Institute of Actuaries; Rice Warner 2011; CommInsure

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PEOPLE

BROKERAGE PROFILE

MY MORTGAGE FREEDOM The brokerage of longtime Top 100 Broker Anthony Alabakov is now in its third stage of evolution as he moves towards a holistic finance offering EVEN WITH a great broker at the helm, great businesses don’t emerge overnight.

Melbourne broker Anthony Alabakov first entered MPA’s Top 100 in 2013, and has since been determinedly moving up the rankings to 13th place. His brokerage, My Mortgage Freedom, has undergone a number of changes since he set it up in 2011 in order to become the business it is today.

“Back in 2011, we went fairly hard on online marketing and having a branded product out there in the market,” Alabakov says. He’d previously worked for his father’s business, Sharp Finance, which also offered accounting and financial planning, but My Mortgage Freedom was a mortgagebroking-focused operation, at first with just Alabakov and brokers Sean Murphy and Stephanie Carello.

In the search for leads, Alabakov invested heavily in a website. “We did a lot of data analytics and looking out there to see what other companies are doing – not so much in the finance field, but in other industries,” he

says. “We find mortgage broking is a little bit behind the eight-ball when it comes to technology.”

Focusing on the online channels brought in 1,500 active clients and provided a learning experience for the young brokerage, but didn’t necessarily bring in the right clients.

“Not only are they very rate-conscious,” , Alabakov says, “but there are a few things that make them less viable than seeing clients face-to-face.”

The wealth accumulators My Mortgage Freedom still has an online brand, but now it’s coupled with a more holistic, advisory approach. Alabakov’s team now includes six other brokers and four ‘customer experience managers’ who provide

“We did a lot of data analytics and looking out there to see what other companies are doing – not so much in the finance field, but in other industries” Dealing with clients on the phone made the entire process longer, and Alabakov found it was sometimes difficult to acquire important documents. Even after the loan

MY MORTGAGE FREEDOM’S WEBSITE STRATEGY Given its initial focus on the internet for lead generation, My Mortgage Freedom has a website that’s quite unlike that of most brokerages. After clicking an option on the home screen, such as ‘Investment Loan’, visitors are presented with options – in this case, ‘refinance’ or ‘purchase’. Depending on their selection, they’ll then be offered further options – those who click ‘refinance’ can pick between ‘I want a lower interest rate’ and ‘Equity release’. Visitors are then directed to a short web page with only the most relevant information on it, along with a video featuring one of My Mortgage Freedom’s brokers. They can then fill in a form to be contacted by one of the team. Alabakov says he was inspired by looking at the websites of the biggest companies outside finance, including Telstra, to see how they guide visitors through their websites.

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was completed, such clients “generally wouldn’t stick around; we find that the runoff is quite high on the book, and it’s harder to create a relationship”.

support. The clients have also changed; they’re predominantly what Alabakov describes as ‘wealth accumulators’: “couples, individuals in their 30s or 40s, accumulating wealth or starting in business. Yes, there is an investment side of things, and a lot of [property] investors there, but in general I’d say wealth accumulators.”

As clients, wealth accumulators tend to be time-poor, Alabakov explains – they want the broker to do the work for them and need to trust that broker to do it well. That trust is helped by many clients coming through referrals, often from within the brokerage.

“A lot of our team members are in their late 20s and early 30s, so there’s a lot of good connections and relationships with that clientele.”

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FAST FACTS Year founded 2011 Services Owner-occupiers, investors, commercial lending, SMSF, financial planning Staff Seven brokers, four staff Premises Office Owner Anthony Alabakov Income Upfront and trail commission; fees for some diversified services Major awards • Number 13, MPA Top 100 Brokers 2016 • 2015 Finsure Best Broker Group (5 or more brokers) Anthony Alabakov (in blue) with the My Mortgage Freedom team

Of the seven brokers at My Mortgage Freedom, all have different niches. Alabakov handles larger transactions, Sean Murphy deals with non-conforming and SMSF, and other brokers deal with home loans, investment loans, off-the-plan, nonresidents and annual reviews for existing clients. When it comes to client enquiries, “if they ask for me, I’ll definitely help them,” Alabakov says, “but if it’s a general enquiry, someone ringing through or online, we’d like to think we can spread the load with everyone”.

Three of My Mortgage Freedom’s brokers actually started as customer experience managers, and Alabakov is determined to develop his team further: “I don’t want it to be all about me with My Mortgage Freedom.

I maybe could have done better volume if I wanted to, but I would really rather have a better balance within the business.”

A comprehensive offering In 2016, My Mortgage Freedom began its third stage of transformation, taking on a full-time financial planner. Alabakov himself has qualified as a financial planner but doesn’t practise. “I know the fundamentals of it all,” he says, “so it helps me in discussions with clients, but I don’t practise that on a daily basis; I focus on mortgages.”

Financial planning is now fully integrated into the brokerage’s process. “Every client that comes through,” Alabakov says, “we sit down with and speak to them about their mortgage, then they sit down and talk our full-time financial planner and para-planner, going through insurance, wealth creation, superannuation – all of those other add-ons.

It’s worked really well, and it’s an exciting part of the business and something that creates a lot of value.”

With the brokerage’s wealth accumulator

clients, planning is a natural fit, and Alabakov is looking to expand his services even further.

“Understanding our client base and what they require,” he says, “we are this year looking to move into real estate as well, providing an advocacy service.”

A multifaceted business needs a management structure that reflects it, and whilst Alabakov isn’t looking to hire, he is hoping to create a corporate structure with certain people responsible for certain divisions. He doesn’t see himself moving into management full-time, however.

“I couldn’t,” he says. “I tick, writing loans, and that’s what I enjoy doing … I may slip down the rankings over time because I’m not doing as much, but I just want to have a sustainable business where everyone enjoys coming to work, and we’re helping as many clients as possible and building something special.”

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BUSINESS STRATEGY

SALES

HOW TO LOSE A DEAL IN .07 SECONDS We don’t like to think about it, but our body language can make or break a deal.

Communications expert and broker coach Anneli Blundell explains how to put one’s best foot forward WHEN DEALING with large financial decisions, clients are often nervous or anxious before they step through your door. Some brokers may be fortunate enough to receive ‘warmed-up’ clients through networks, recommendations or research, but many new clients are already on guard and may treat you with some trepidation.

Your ability to make a favourable first impression through a strong personal connection is paramount to getting the deal off to a good start. How a client experiences you in the first few moments of your connection will determine how quickly they will trust you, how hard it will be to fix any potential errors, how forgiving they will be should any occur, and how likely they’ll be to refer you.

Regardless of whether clients arrive ‘warm’ or ‘cold’, every new client is won or lost in the first few moments of contact.

Your brochures, referrals and social media presence can only get you so far; the real test is when your reputation collides with reality.

You are the enemy until you prove otherwise Within .07 seconds of meeting new people, we unconsciously decide if they are ‘friend’ or ‘foe’. A look, feeling or gesture can determine our decision. If there’s something about you – your behaviours or mannerisms – that aren’t like me or don’t make me feel comfortable, you become my foe, and my guard goes up.

My view of you narrows automatically, and I begin looking for evidence to justify my gut

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feeling that something’s not right. I become less responsive, more sceptical and harder to win over.

As a broker, your job is to steer your clients’ initial impressions and direct their unconscious decisions about you. You need to get into the friend category as quickly as possible before any instinctive impressions negatively (and perhaps unjustly) colour the way they view your expertise.

How do you make a favourable impression when impressions are formed so quickly?

Let’s explore three key components to getting a jump on the right first impression.

1

Project a sense of calm

If you arrive at a client interview stressed, frustrated, flustered or even mildly annoyed, it will leak out in subtle yet solid ways and affect your clients’ feelings toward you. As much as we have evolved to be rational, logical creatures, we are still very instinctive when it comes to reading people – we sense when there is something going on, and we respond without thinking. When people try to suppress negative emotions, it causes the blood pressure of the other person to rise. If you’ve ever walked into a room when two people have been arguing (but stopped before you entered), you’ll know what I mean. Your blood pressure goes up and your chest tightens as you sense something is going on.

Your emotions are contagious, and your emotional state creates the conditions for connection – for better or worse. If your client enters the room and you are holding onto frustrations or stress, they will feel it.

Before you can say ‘good morning’, you’re in the foe bucket.

Be in a positive emotional state – calm, relaxed, happy. (Funny cat video, anyone?)

2

Smile with your eyes

The question we ask ourselves (unconsciously) when deciding whether someone is a friend or foe is: Does this person like me? We judge this based on how warm and friendly they appear toward us.

Smiling is the obvious first step to showing this; however, not just any smile will do.

GET YOUR BODY LANGUAGE RIGHT Win deal

Calm, relaxed state

Stressed, anxious, frustrated state

Smile with your eyes

Smile with your mouth only

Steady eye contact

Diverted eye contact

Creates a friend classification = More trust, less resistance, easier to close the deal

The key here is to smile with your eyes, not just with your mouth. A genuine smile (or, as psychologists call it, a Duchenne smile) reaches the eyes and causes the orbicularis oculi muscle to contract. This raises the cheeks and forms crow’s feet around the eyes.

When we receive a tight-lipped smile or even just a ‘mouth’ smile (which doesn’t reach our eyes), we become steered toward foe. In fact, if we don’t smile at all or smile too late in the initial greeting, we cause people to shut down altogether. When people are faced with a blank or neutral facial expression, they interpret it to be a negative facial expression.

And of course, negative means you don’t like me, which means an automatic classification into the foe bucket.

Invite your whole face to the smile party.

3

Lose deal

Make eye contact

Looking at someone when you greet them is crucial to making a great first impression. However, the quality and quantity of your eye contact is key. Your gaze must be steady and soft, not shifting, darting or too intense. And there’s more – once your initial connection through the eyes has been made and the talking begins, it’s critical to keep up the same cadence of eye contact when your clients are speaking.

This might sound obvious, but not everyone has a natural preference for

Creates a foe classification = Less trust, more pushback, harder to close the deal

looking at another person when that person is talking to them. Several clients of mine prefer to listen with their ears by turning their head to the side (appearing to look out the window) as the other person talks. This causes the other person to immediately start shutting down, as they interpret that cue as a lack of interest.

Make eye contact early and keep it steady.

Although your client assesses your experience and tries to make a rational, logical decision about the value of your expertise, they are unconsciously steered by their emotional and instinctive interactions with you. Their first impressions, gut feelings and general sense of you will outweigh your history or ability to get the deal done – every time. When choosing between you and another broker, your prospective client’s decision is in your hands – or more specifically, your mood, your smile and your eyes.

Anneli Blundell is an author, speaker and communication expert who helps her clients improve their communication, influence and engagement for better business results. She is the co-facilitator of Broker Essentials, a one-day training to fast-track broker development. Her book, Developing Direct Reports: Taking the Guesswork out of Leading Leaders, is a practical guide for developing performance on the job. For more information, visit anneliblundell.com.

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PEOPLE

CAREER PATH

APPETITE FOR DISRUPTION Adaptation is second nature for new PLAN CEO Anja Pannek, who thrives in dynamic environments of constant change

1975

MAKES THE FIRST OF MANY MOVES

1995 With a Kiwi mother, a German father and a childhood spent in both New Zealand and Germany before migration to Australia, Pannek’s background is one of constant change and adaptation.

“Moving so often and being able to settle again and make connections – it formed part of who I am.”

JOINS BANKERS TRUST Shortly after university, Pannek joined Bankers Trust, at the time one of Australia’s most renowned investment banks. In 1999, Bankers Trust’s US arm collapsed, but the Australian entity, where Pannek had risen to VP, continued to perform well.

“It was always challenging and full of action.”

2004

SPOTS A FAMILIAR FACE

2008

A year taken off to travel had a fortuitous outcome: Pannek ran into an old colleague while boarding a plane in Dublin, and they traded business cards.

When Pannek returned to Australia, she entered the world of mortgages with Challenger’s white label mortgage manager, Interstar.

TRANSITIONS TO NAB

Despite developing a significant distribution footprint through the acquisition of PLAN Australia, FAST and Choice Aggregation Services – in each of which Pannek played an integral role – Challenger was devastated by the global downturn of 2008; it was purchased by NAB. “The shift from working for Challenger to NAB was cultural; the biggest change was going from a company of 1,000 people to 40,000 people. It was an emotional change. Being part of that journey was really exciting.”

2016

IS APPOINTED CEO OF PLAN AUSTRALIA

2015

ENTERS THE C-SUITE Moving from distribution to personal banking, Pannek was granted insights into the broader retail bank as her positions increased in seniority and breadth. By the time she left NAB, she had risen to the level of CFO of personal banking.

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Part of PLAN Australia’s board since its acquisition, Pannek seized the opportunity to join the aggregator on the heels of its merger with Advantedge Financial Solutions – and once again enter a dynamic sphere.

“I’ve seen this business morph and change; it’s something I’m passionate about. It’s a growth area – it’s not static in any way.

I’m not the kind to operate in a status-quo environment. I see significant significant opportunities for PLAN Australia to grow and offer differentiated differentiated services to members.”

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IS YOUR BROKERAGE WORTHY OF A PLACE ON THE LIST? MPA’s annual search for Australia’s best brokerages will soon come to an end.

Whether you operate a franchise or independent business, get involved for the chance to make this year’s list.

Being named a Top 10 Brokerage sets you apart from your competitors and gives clients confidence they are dealing with the best in the business.

Entries close Friday 7 April at mpamagazine.com.au

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PEOPLE

OTHER LIFE

400+

Students who have taken some iteration of MacLeod’s course

12,000

Number of MFAA brokers who have access to the program

23

Age of the oldest student to have taken MacLeod’s course

THE SMART MONEY

A lack of basic financial knowledge among young people inspired broker Mhairi MacLeod to head back to school A FATEFUL conversation two years ago with “a couple of school teachers [who] told me there was a hole in students’ financial knowledge” prompted Mhairi MacLeod, owner of Astute Ability Group, to start work on a community engagement program that has since offered financial literacy to hundreds of students.

It’s an issue that cuts close to home for MacLeod, who herself has two boys aged 14 and 11. Talking with her boys and their friends, it became clear that although her own children have a good grasp of the financial basics, their friends “had no real understanding of their own financial

54

capabilities or financial literacy skills.” In her working life, MacLeod says she often encounters twentysomethings who have “no idea what they spend their money on, or why they have bad credit from defaulting on their mobile bills”.

The program itself has been a hit – a pilot program at Tuggerah Lakes Secondary College’s Tumbi Umbi campus met with such a favourable reception that the course is now being rolled out to educational institutions across Australia.

There has also been considerable interest from the NRL, PCYC, YMCA and the NSW Justice Department.

The program can be scaled depending on such factors as the ages of the students, the length of time available and the preexisting level of understanding amongst the students. A class of Year 7 students might learn about budgeting, for instance, whilst a class of immigrant adults might tackle matters such as how to get a car loan.

As for the massive investment of time involved, MacLeod is modest: “I always had a drive and passion for [spreading financial education], and once I started doing it, I couldn’t get enough of it. If you’re passionate and enthusiastic, you will always make the time.”

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Friday 27 October • The Star Sydney www.australianmortgageawards.com.au

Event Partner

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Official publications

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