Mortgage Professional Australia magazine Issue 11.8

www.brokernews.com.auISSUE 11.8

CELEBRATING 10 YEARS

AGE OLD QUESTIONMATURE BORROWERS OUT IN THE COLD?

Lenders defend their corner

on service,products and rates

BANKS ON BROKERS 2011 P24

CLAWING BACKSAFEGUARDING YOUR INCOME

COMMERCIAL FINANCEHOW TO DIVERSIFY

http://www.nabbroker.com.au/




2 | BROKERNEWS.COM.AU

CONTENTS / ISSUE 11.8

46

38Passing the clawback

Brokers are introducing provisions to safeguard their incomes.

Has the slippery slope to fee-for-service begun?

24 | Banks on BrokersThe nation’s top lenders come clean about their turnaround times, products, support and service

COVER STORY

WEEKLY INVESTIGATIONS

NOW ONLINE: Is credit growth set

to rebound?

Low-doc loans

Aggregators face-off over new recruits

» brokernews.com.au

Getting startedA guide to successfully diversifying into commercial finance

http://www.interimfinance.com.au/

http://brokers.adelaidebank.com.au/

CONTENTS / ISSUE 11.8


NEWS & VIEWS08 | Round-Up The latest market intelligence from the worlds of property, economics and mortgages

12 | Product newsA round-up of the latest rate changes and product launches to keep you up-to-date

14 | ViewpointWhat visitors to our website are saying about the possibility of a mortgage-broking degree

16 | AnalysisA review of the annual MFAA National Convention in Brisbane

20 | The Big StoryA compilation of the top quotes from our weekly multimedia broadcasts

COLUMN44 | Getting in the mediaPutting your face in the media and the advantages it can bring

46 | Getting startedFour of Australia’s leading brokers discuss diversification,

competition and fee-for-service

PROFILES36 | New LoanKit CEO Simon Dehne on going back to school and how he intends to increase the profile of the aggregator

42 | Mortgage Choice broker Wendy Higgins on her road to the top of the intermediary tree and how she manages to stay there

STATS54 | This month’s statistics roundup looks at the top end of the market and the best place for wealthy buyers to splash their cash58 | Your Mortgage indexStats our website show that buyer activity is on the rise

LIFESTYLE60 | A day in the life of…John Mohnacheff, Liberty Financial62 | My favourite things… Mark Hewitt, AFG64 | Words of wisdom – Andrew Horabin

22

42 Things I’ve Learned

Wendy Higgins is a force to be reckoned with. She

talks to us about her years in the industry and the

things she’s learnt

Out of time?Despite preventative measures from ASIC, brokers still feel that

lenders are being overly restrictive when it comes to older borrowers

http://www.mkmcapital.com.au/

NEWS / ROUND-UP

BROKERNEWS.COM.AU | 5

http://www.planaustralia.com.au/


The end of the financial year is often a time for companies to publish results, conduct appraisals of their staff’s performance, and hold internal reviews of how they have fared over the previous 12 months. MPA’s Brokers on Banks survey is timely, giving lenders an additional audit of how the third party channel rate their operations. As with any fair

assessment, we believe in giving the subject an opportunity to evaluate their own performance and the special report in this issue gives banks the chance to evaluate their ranking, admit where they went wrong, share how they succeeded and outline their plans for brokers in the future. Turn to page 24 to read the full Banks on Brokers feature.

Elsewhere in the issue, we look at the clawback provisions brokers are introducing to safeguard their income, investigate whether ASIC’s preventative measures around age discrimination are having the desired effect and ask some key players from the commercial finance arena how residential mortgage brokers can successfully diversify into their niche.

We also showcase the best bits of our recent round table discussion that saw some interesting views on competition and fee-for-service, and we ask Australia’s top broker Wendy Higgins how she made it to where she is today, review the MFAA’s recent convention in Brisbane and explain how you can harness the power of the press to the benefit of your business. Loankit’s new CEO Simon Dehne drops in to explain how he intends to raise the profile of the aggregator and we find out more about Liberty Financial’s John Mohnacheff and Mark Hewitt of AFG.

You may have noticed that last month’s MPA had a slick new look and we’re also working hard to bring you more tools that are useful for your business. In addition to the new statistics section towards the back of the magazine, we are also incorporating data and features from our sister titles Your Mortgage and Your Money, adding a product roundup to our news pages and adding some words of wisdom to help you through your working day. Your feedback is always appreciated, so drop me an email on the address below to let me know what you think of the new sections and what else you would like to see in your favourite mortgage mag.

Enjoy the magazine and all the best for a busy month. Barney McCarthy, Editor

CONTENTS / EDITOR’S LETTER

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CONNECT

NEWS / ROUND-UP


http://www.mortgagebroker.citibank.com.au/


NEWS / ROUND-UP

said if a credit file looks ‘busy’, this can cause lender declines by automated credit scoring systems. “Borrowers have the best chance of success if they have a savings record, are up-to-date with their bills, and have resisted signing up for any additional debt,” Acret said.

Acret said when lenders assess a borrower’s ability to repay, calculations assume credit cards are drawn to their full limit. He also made a case for borrowers to use the third party mortgage channel, arguing they will be able to reduce loan costs if they use a mortgage broker.

Australians are ready to opt for housing types outside the traditional detached home-on-a-large-block stereotype, according to the Grattan Institute, but the housing market is not supplying dwellings to meet their needs.

In a report entitled The housing we’d choose, the Grattan Institute found that once people took ‘real-world realities’ such as current housing costs and their income level into consideration, they would choose from a wider range of housing types than the traditional housing block.

However, Jane-Frances Kelly, cities program director at the Grattan Institute, said Australia is not building the variety of housing that the public wants. She pointed in particular to shortages of semi-detached homes and apartments in the middle and outer areas of both Melbourne and Sydney.

“We should not be afraid to shape our cities: otherwise we risk them shaping us,” Kelly said. “But we should shape them in accordance with what Australians say they want.”

The report argues there are barriers to delivering more of the housing required. These include the cost of materials and labour for buildings over four storeys, land assembly and preparation and the risk and uncertainty of Australian planning systems.

International house price growth slowed in the first quarter of 2011, pointing to potential ongoing underlying problems in global markets.

The Knight Frank Global House Price Index found that global house prices rose by 1.8% in the year to March, compared with 3.3% in the final quarter of 2010. It marked the lowest annual rate of growth since the fourth quarter of 2009.

Asia remained the top-performing region, recording 8.4% growth over the last 12 months. However, this represented a slowdown from 17.8% a year earlier. The weakest region was North America, which saw a fall of 0.4% in values over a 12-month period.

Liam Bailey, head of residential research at Knight Frank, said a cursory glance at the results would suggest business as normal, with Asian countries ahead and Europe and North America languishing behind.

However, Bailey said that while price growth had not stalled, it was faltering, which pointed to problems underlying the world’s housing markets.

INTERNATIONAL

FACT:

PROPERTY

SMARTLINE WARNS ‘CREDIT JUNKIES’

CREDIT SCORING

Mortgage broker Smartline has urged its potential customers to get their financial house in order or risk being seen as ‘credit junkies’.Smartline managing director Chris Acret

Housing stock falls short of desires

Global housing markets falter

1.8% – the increase in global house prices in the year to March 2011. Source: Knight Frank


NEWS / ROUND-UP

New housing starts are up for the March quarter, but have still fallen below last year’s figures.ABS data has shown a 3.1% seasonally adjusted increase for new home starts in the March quarter. While detached housing starts fell 1.9%, medium and high density residential dwelling construction was up 14.6% for the quarter.However, housing industry bodies say the numbers still betray softness in the home building sector. Urban Taskforce CEO Aaron

Gadiel said the result was down 11.5% compared to the March 2010 quarter, while HIA chief economist Harley Dale said detached housing starts are now running 9% below their long-term average.“An overall downward trend persists and has now extended into a second year, and that should be of considerable concern to policy makers in an environment of stalled progress on housing supply reforms and heightened uncertainty over future interest rate moves,” Dale said.

Queensland has seen the largest rise in arrears of any state in Australia, and the natural disasters that plagued the state at the beginning of the year are not the primary factor, according to Fitch Ratings.

In an update to the ratings agency’s Australian Mortgage Performance report, Fitch found Queensland arrears have risen to 2% from 1.54% six months prior.

James Zanesi, Fitch associate director of structured finance, said: “Arrears have been increasing sharply in the Gold Coast, Logan and Ipswich, in turn contributing to Queensland’s increase in delinquency rate as borrowers’ serviceability has been impacted by higher interest rates and increasing cost of living and changes in local socio-economic factors. On the Gold Coast, the stagnation in the housing market has also contributed to the increase in arrears during the six months to March 2011.”

The ratings agency pointed out that regions unaffected by the natural disasters like the Gold Coast and Logan City have contributed strongly to the state’s poor performance. Fitch has instead blamed regional unemployment and the rising cost of living for the result.

However, Queensland was not alone in its sharp higher-than-average arrears. South-western Sydney and the NSW Central Coast also saw higher delinquency rates, as did the south west region of WA.

New property listings have increased as auction clearance rates dwindle, according to figures from RP Data.

The four weeks to mid-June saw a 3.5% increase in new listings, with a modest 0.6% rise across capital cities. However, new listings nationwide are 32.8% higher than at the same time last year and 13.8% higher across capital cities.

The rise in new property listings has come with a decline in auction clearance rates. Though the number of properties taken to auction was affected by the Queen’s birthday long

weekend, the weighted average clearance rate fell to 44.3%. The result was down from 48.6% the previous week, and 60.6% during the same weekend last year. Melbourne saw its clearance rate fall to 51.3% from 53.1% the weekend prior, while Sydney’s clearance rate fell from 53.6% to 52.9%.

Qld worst for arrears – floods not to blame

ARREARS

CONSTRUCTION

AUCTIONS

HOME STARTS UPTURN UNDERWHELMS

LISTINGS RISE WHILE CLEARANCE RATES FALL


NEWS / ROUND-UP

Consumer sentiment has fallen to its lowest level in two years, and consumers are losing faith in real estate as a wise investment, according to a recent study.

June’s Westpac-Melbourne Institute Index of Consumer Sentiment has indicated a 2.6% fall from May’s result, and Westpac chief economist Bill Evans said the result is the lowest since June 2009. While households showed confidence in the near term outlook for the Australian economy, Evans said the result was offset by respondents’ concern for their personal financial positions. He added fears of rising interest rates could be behind the dampened consumer outlook.

“The explanation for why the index continues to print such soft results must lie in those factors which are so depressing respondents’ assessments of their own financial position,” Evans said. “The commentary from the media and our own research indicates that households still expect rates to be rising over the next 12 months.”

Evans also pointed out an increasing shift in consumer preference towards low-risk investments, with the proportion of respondents nominating bank deposits as the wisest form of savings increasing from 27.1% in March to 32% in June. Real estate, however, fared poorly in consumer sentiment. It was nominated as the wisest investment by 14.6% of respondents, down from 21.7% a year ago. Evans said it was the lowest proportion in the history of the series dating back to 1974, excluding the GFC.

SENTIMENT

Brokers have been warned about the increasing number of ‘industry rogues’ offering fake trail books for sale.The trail book market has been characterised by an increase in demand from buyers looking to build businesses in recent months over and above the number of sellers in the market.Gadens Lawyers partner Vicki Grey said the dynamics of this environment were

leaving brokers open to an “increasing number of industry rogues”. She added there were a number of operators in the market that were offering trail books to brokers and then not delivering on the agreement after taking payment.New entrants to the market are particularly at risk as they have not had the background and connections in the industry to prepare themselves for these approaches.

FRAUD

BROKERS WARNED AGAINST BOOKS

FACT:

Consumers dour on property prospects

2% – current level of arrears in Queensland. Source: Fitch Ratings

http://www.ncf1.com.au/


NEWS / ROUND-UP

Advantedge Financial Services has criticised bank clawbacks after revealing its own new clawback structure. The company has implemented a clawback structure of 50% for the first 18 months and no clawbacks thereafter. With the government’s ban on exit fees recently taking effect, Advantedge general manager of lending distribution Brett Halliwell said the structure should be a new industry benchmark.

Halliwell contrasted the Advantedge structure to that of the majority of major banks, which claw back 100% for the first 12 months. He criticised 100% clawbacks and said the Advantedge structure more fairly reflected the work done by brokers.“We recognise the hard work brokers put in to originate the loan and our clawback has been set at a level that we believe is fair, sharing the burden in recognition of their work.”

EXIT FEES

Advantedge takes aim at clawbacksCREDIT

NUMBER CRUNCHING

The number of borrowers who misrepresent their personal financial information when applying for credit is on the increase, according to Veda Advantage.

“We recognise the hard work brokers put in to originate

the loan”1.8m Number of Australians misrepresent their financial information when applying for credit (2010: 1.6 million)

1mNumber who understate total expenses

328,000 Number who overstate income

427,000 Number who understate credit card debt

21% Percentage who find it difficult to repay debt

28%Percentage of the above likely to apply for subsequent credit in next six months

See page 38 for more on the clawback debate

http://www.pepperonline.com.au/


PRODUCT NEWSPRODUCTS / ROUND-UP

Who: ING DirectWhat: Priority Commercial Mortgages

The spec: ING Direct has reduced the new business margins across a range of its Priority Commercial Mortgage products by up to 0.50% p.a. The interest rate on its Commercial Variable Rate product will reduce to 7.83% p.a.What they say: “A strong theme coming from our broker partners is the need to diversify their service and product proposition. We have a simple Priority Commercial Mortgage product suite available through the broker channel, which is already being supported by a segment of our brokers. We’d like this enhancement to really raise the awareness of ING Direct as a strong choice for brokers interested in commercial lending” – Mark Woolnough, head of broker distribution

Who: Adelaide BankWhat: Smart Saver – a new product aimed at investors and first homebuyers

The spec: 6.99%, with no ongoing fees. Available up to 95% LVR.What they say: “Although our premium SmartFit product is a great choice for borrowers looking for a flexible 100% offset loan, brokers have been telling us that there is demand for a good value, low-fee product for customers who don’t feel the need for an offset” – Damian Percy, general manager of third party lending

Who: AMPWhat: Three-year fixed rate

The spec: AMP has reduced its three-year fixed home loan interest rate by 0.25% to 7.19%. Combining this rate with the bank’s Professional Pack can save consumers up to $600 in upfront costs. What they say: “It’s great to be able to offer consumers certainty and peace of mind in this uncertain environment. This offer also positions AMP as an attractive alternative to the majors” – Robert Slocombe, chief operating officer

Who: Pepper What: Flexi Advantage and Self-Employed Advantage

The spec: Rates cut for all new applications and any existing applications not yet approved, as well as LVR tiering restructure on both products. Flexi Advantage product now starts at 8.25% for up to 65% LVR, down from 8.99% for loans up to 60% LVR. The Self-Employed Advantage loan now starts at 8.45% for up to 65% LVR, down from 9.24% for 60% LVR and below. In addition to its rate cuts, Pepper has also made changes to its credit policy. Under the new policy, the lender has increased its maximum loan amount to $1.5m for loans with an LVR up to 70%. The maximum LVR for its Flexi Advantage product will increase from 85% to 90%. Pepper will now allow defaults or judgements registered over 12 months prior to application date for its Flexi Advantage loan, and over 24 months prior to application date for its Self-Employed Advantage loan. It will also allow one month’s current mortgage arrears on its Flexi Advantage loan.

A bite-size guide tothe latest rate changes and product launches to keep youand your clients up-to-date

If you are launching or updating a product and want it to be considered for inclusion on this page, send the details to [email protected]

LAUNCHING A NEW PRODUCT?

PRODUCT NEWS



NEWS / COMMENT

THE ONLINE REACTION: Broker on 16 Jun 2011 12:53 PM

One has to wonder how many times we are expected to learn the same information about this industry; it’s a bit like listening to a scratched CD. After nine years in this industry, I reckon I ‘get it’ by now. The challenge for the MFAA will be to structure a degree that does not reinvent the wheel. It’s unlikely, but it’s a good money spinner for the MFAA and its carefully selected education mates.

Papery on 16 Jun 2011 12:54 PM We’ll be qualifying ourselves out of a job! Lenders certainly won’t up the commissions to recognise the qualification, and clients (apparently) won’t accept fee for service. Will your friendly lending enquiry staff at the local branch have to carry a degree to deal with a home loan client? Let’s get real!

Elle on 16 Jun 2011 01:15 PM I am all for professional development, but if the MFAA are going to insist on a university degree, then they also need to

do something about the remuneration on offer at the end

of it. With what the banks are paying us at present, mortgage broking is not exactly the most lucrative

Each issue weselect a storyfrom AustralianBrokerNews that hasgot intermediariestalking, and publishthe best responses.This month: Couldbrokers one day berequired to completea university degree?

VIEWPOINT

career and it would be hard to justify the expense of a degree in terms of reward for return. That’s not to say fee for service is the answer either – it’s not.

Leaving the industry on 16 Jun 2011 02:10 PM The MFAA has got to be kidding. How many people will do a degree to earn less than $50,000? I am already jumping ship, as are many of my fellow colleagues. The MFAA’s delusions of grandeur will force all brokers out of the industry.

Phil on 17 Jun 2011 10:28 AM How about the MFAA for once does something about banks contacting broker clients direct, the commissions paid to brokers and SLA agreements between brokers and banks? Education is something they have prattled on about for years.

Piquay on 17 Jun 2011 11:07 AM Unless the industry forces all loan writers to have this minimum standard, then this will alienate mortgage brokers from clients who won’t pay fee for service. Who has the courage to ban banks from writing this business direct and forcing all consumers to go through a broker for their knowledge, independence and ethics? Having sales people in banks who don’t offer this, is much more of a concern for consumers.

THE STORY:MFAA DETAILS UNIVERSITY DEGREE PLANThe MFAA is developing a certification process that will allow members to pursue higher education in addition to their Diploma, in a first move towards a university degree minimum level of qualification. President Joe Sirianni said: “I suspect that it may take many years before we reach this level of education, but as more and more brokers strive to achieve certification, one day in perhaps five or 10 years’ time it may be regarded as the minimum standard”

NEWS / ANALYSIS



NEWS / ANALYSIS


The mortgage industry descended on Brisbane at the beginning of June for the MFAA’s annual conference, with three days of plenary sessions, networking events and the famed ExpoMart. In his opening address, MFAA national president Joe Sirianni introduced the “Tomorrow’s Broker” theme and said there was never a question of the conference being moved after the floods that ravaged the area earlier this year and pledged $10 from each admission fee to the Disaster Relief Appeal fund. Sirianni was followed on to the stage by CEO Phil Naylor who spoke of his vision for the association and the importance of members continuing to promote the fact they are MFAA-approved. He also stressed that the association would continue to push the benefits of the Canadian bond model and hadn’t given up hope of convincing the Senate to overturn the exit fee ban.

The first panel discussion of note at the conference was a session with international representatives from Canada, New Zealand, the US and the UK discussing the economy and the mortgage market in their respective territories. Asked to describe the economic climate in their countries in one word, the responses ranged from “surviving” and “uncertain” in the UK and the US, to “resilient” in Canada and “diverse” across the Tasman

The MFAA NationalConvention tookplace in Brisbane recently with more than 700 delegates from across Australia in attendance. Barney McCarthy reports

“Lenders had failed to utilise social media, and customers are twice as likely to bank onlilne” BRETT KING

Sea. Jim Murphy from the Canadian Association of Accredited Mortgage Professionals (CAAMP) compared Canada’s “different-speed” economy with Australia’s and said its banks had emerged from the GFC similarly well. He also claimed that the bond model in operation in his home country could work well in Australia, as has been suggested by numerous pundits. The panel guests were also asked what tomorrow’s broker looked like (see box). The first day of the

convention was brought to a close by Brett King (photo page 18, bottom left), author of Banks 2.0, who said many lenders had failed to utilise social media and that the fundamentals of banking hadn’t changed in the past few hundred years. King added that customers are now twice as likely to bank online as they are at a branch.

Day two’s proceedings were kicked off by motivational speaker and voice-over artist Robyn Moore (pictured top left, page 18) who reminded brokers of the power of

TOMORROW’SBROKERS


NEWS / ANALYSIS


words and how simple things like smiling and using humour can make all the difference. Moore was followed by NAB Broker general manager of distribution John Flavell, who brought delegates up to speed with the machinations of Basel III and how higher capital requirements would slow credit growth and increase lending competition. He added that the Australian banking system was the envy of the world and predicted an increase in foreign-owned banks trying to obtain a slice of the pie.

Professor Trevor Waring (photo above, middle, second row) informed brokers how to ‘survive their profession’ (see box) before a panel of experts discussed opportunities in the commercial and business equipment markets and outlined the importance of diversification. The afternoon sessions were on how brokers could communicate with their clients and police detective Steve Van Aperen – the self-titled “human lie detector” – explained how to build rapport and identify deception, and Chris Helder outlining ways of mastering and understanding body language. Real estate guru John McGrath finished the second day by recounting to delegates how he recovered from scoring 95/500 in his HSC to found his own real estate company.

Forward thinkingPanellists from four countries were asked what would define tomorrow’s broker and their mindset. Here’s what they said:

Canada Jim Murphy,

CAAMP: ”Differentation”

New Zealand – Darren

Pratley, New Zealand Mortgage Brokers Association: “A mental shift from being a broker, to being an advisor”

UK – Michelle Colbran,

Solution4: “Moving away from thinking about a customer today towards a client for life”

US – Dennis Black,

Dennis Black & Associates: “They should move to Canada! In all seriousness, brokers need to focus on CRM and be proactive in keeping their clients”

Clinical psychologist Professor Trevor Waring warned delegates that one person in five is destined to have a mental disorder at some point in their life and shared the secrets to ensure you’re one of the other four:

Take time for yourself spend at least four hours per

week doing something you enjoy, and do it by yourself.

Have time for a mate – successful, happy people are in a positive, supportive relationship they nurture

Belong to a group of friends that positively reinforce you. Make sure the group is from outside of work, otherwise

you will end up talking shop.

Do something charitable or some community work on a regular basis. It makes you feel positive about yourself.

Conduct a life review. Are your relationships, work and life what you want? Have an idea of where you want to be in the future.

Waring’s wisdom

The final day of the convention featured event MC Andrew Horabin giving his own presentation on straight talk at work (see page 64), professional poker player Caspar Berry comparing risk-taking in the casino to decision-making in real life and futurists Bernard Salt (photo above, to the right of Robyn Moore) and Sohail Inayatullah discussing what tomorrow holds for brokers. Salt told delegates that the increasing number of Asian immigrants would influence changes. He also predicted that Gen-Y borrowers had been relatively unaffected by the GFC and would lead a property revival. Sirianni brought the convention to a close and revealed that 2012’s event would be held in Adelaide.

NEWS / ANALYSIS


Forward thinking

http://www.sintex.com.au/

NEWS ANALYSIS / MULTIMEDIA


Kym Rampal, Loankit: “There is a renewed ferocity. I’ve noticed the heads of other aggregator groups – specifically those who have lost members – have come out and said there is a new drive towards broker recruitment. We’ve always said that one model does not fit every broker and we are happy to tailor models to their requirements. Aggregators who went and sourced any kind of broker without any heed to their professionalism, they are the ones that are going to be suffering.”

Mark Haron, Connective: “It’s always been a bare-knuckled fight out there between aggregators for business, and that’s a good thing, particularly for brokers. It means that aggregator service levels and standards will continue to improve. A lot of brokers are looking for much better systems and software, particularly to help them manage their compliance systems. We work closely with our top brokers to get feedback on that and to understand what they require to help their business run better. Some aggregators seemed more interested in supporting their credit reps who were going to be paying them more money and be tied in a lot more. A lot of brokers with their own licences felt Connective was a better model for them.”

Tim Brown, Vow Financial: “There’s no doubt a number of aggregator groups have

lost a number of brokers through the whole licensing process. I’ve often

said that what we’ve lost is the tail – we haven’t lost what I would call the producers in the

THE BIG STORYEvery week, Australian Broker News roundsup influential figures to discuss the majorissues in the mortgage industry. You canwatch these bite-size videos online in themultimedia section of our website, but herewe bring you the highlights from the lastmonth’s clips

The subject: Aggregators face-off over new recruits

The lowdown: Brokers are witnessing renewed aggregation competition. What are aggregators up to and what are they offering? How will they fare amid a smaller broker pool following NCCP?

Kym RampalLoankit

Mark Haron Connective

Tim BrownVow Financial

Belen Lopez DenisCitibank

Cameron WilesSmart Move

Mark ForsythFirstfolio

This month’s guests...

business, but every number you lose affects your overall volumes. Some aggregators are out there aggressively recruiting at this stage and offering deals that I would almost describe as charity as you just can’t make money at that level. We’re going to start offering equity to our top 100 brokers and I think that will be unique in the industry, allowing them to have ownership in the business. We’re looking to recruit brokers that are new into the industry and we’ve currently got a project going where we’re talking to some of our top brokers and asking them to get involved in helping us recruit 10 new brokers into the industry and they will go through a specialised training program over 12 months.”

The subject: Are low-doc loans back in business?

The lowdown: Following the GFC and NCCP, is there still an appetite for writing low-doc loans, from both lenders, and brokers? What opportunities – and risks – exist on the fringes of the prime mortgage market? Do lenders have a genuine appetite for non-prime loans? Should brokers be looking at low-doc as an opportunity to grow their business?

Belen Lopez Denis, Citibank: “The portfolio opportunities are opening beyond the four majors. We have seen that already with the recent APRA market share results, how it is actually shifting or recalibrating back towards pre-GFC conditions where we can see second-tier lenders having a higher or growing market share while the majors

start to reduce. It will be a matter of watching the appetite for risk from an investor’s perspective, which is the main source of funding for the second-tier lenders. It might be coming back, but at a significant premium.”

Cameron Wiles, Smart Move: “I think with the introduction of NCCP, it’s definitely made it harder through the major banks to achieve a successful outcome when we’re talking low docs and non-prime. The documentation required now to satisfy a low-doc case means you would almost have a good chance of trying to full-doc it. Providing the last 12 months’ business activity statements and maybe a previous year’s tax return, there might be an opportunity to construct an income and find a lender willing to listen, rather than going through a low-doc declaration. If brokers are willing to run the gauntlet of the new NCCP regulations, then there is an opportunity for them there, I guess. With the major banks moving away from those types of deals, you are going to be dealing more with second-tier lenders and non-banks. If you become a specialist in that field there is an opportunity, but I certainly wouldn’t be jumping into that field the way the regulations are at the moment.

Mark Forsyth, Firstfolio: “There’s an appetite from customers to get low doc, so it’s interesting that they’ve gone back into that space. Despite the fact the government doesn’t want people to have low docs and the funders don’t want it to be there, the fact is there is appetite from some segments of the public to have a low-doc loan. Having it around makes the broker’s discussion with the client a lot easier. If they have a broader range of products and a broader range of suppliers – either major banks or non-bank lenders – it makes things a lot easier. I think it’s good for brokers and shows there is commitment to the market from people other than the big banks.”

visit our website:www.brokernews.com.au

WATCH IT NOW!


FEATURE / AGE DISCRIMINATION

Prior to the introduction of NCCP act regulations, veteran broker Allan Faint says he had only experienced one issue with lenders because of a client’s age. “And I’ve been in this game for 10 years,” recounts the director of Home Finance Centre of Australia. Recently, however, he’s noticed that it’s getting harder and harder to get loans across for borrowers ticking down to retirement. “I’ve had a couple of the assessors say that once you get a client over 50 they’re going to start looking at it more,” he says.

According to Faint, lenders are playing it safe in light of new responsible lending regulations, and applications from older borrowers are being unfairly rejected as a result. He argues that older borrowers are a better risk than many younger clients. “If they’re going to look into their crystal ball and say ‘thou shalt not have a loan’ because you’ve reached a certain age, then how can they – if they’re adhering to responsible lending guidelines – give a loan to a double income couple that could eventually have kids and become a single income family? Surely, they’ll have far more unexpected changes to their lifestyle than a couple facing retirement?”

Faint is one of many professionals who have raised concerns for clients in their mid-30s and upwards who are being rejected because lenders are uncertain they

Are older borrowers out of time and out of luck?

With brokers complaining that lenders have taken an

overly restrictive approach, Andrea Cornish

investigates

OUT OF


will be able to pay off a 25-year loan before they retire. Geoff Baldwin, chief executive of real estate group ReMax, states that under the guidelines any mortgage applicant over 35 with little superannuation and no other significant investments could be rejected for a 30-year residential mortgage. “The NCCP (credit protection bill) is effectively discriminating against some borrowers on the basis of age,” Baldwin says. “Lenders are running scared about this.”

In response to concerns that the new legislation was leading to age discrimination, ASIC provided new guidance to lenders in April. “We are concerned by reports of older borrowers whose employment will reduce, or cease, before the end of the loan term, being refused loans because some lenders are adopting an unnecessarily restrictive approach to meeting the responsible lending requirements,” warns Peter Boxall, ASIC commissioner.

Boxall indicates lenders should take into account assets other than those from employment, which could be used to service a mortgage. He adds: “The new responsible lending requirements in the National Credit Act are an important protection for consumers, but they should not be an inflexible barrier to credit for any segment of the population, and should not prevent consumers obtaining credit that they can reasonably afford.”

IN A NUTSHELLThe issue: Age discrimination from lendersExperts say: Issue will be short-lived as cases come before courtsIn the meantime: Brokers need to investigate what other assets borrowers have that could help them service the loan beyond retirement

Resi CEO Lisa Montgomery says ASIC’s guidance has helped clarify where lenders stand on these cases. “They’re very keen for us to take the legislation in the vein it is intended, but I don’t think they’re looking for a rigid approach,” she reasons. “I think what ASIC has really been looking for is for us to apply the guidelines broadly, but not to be inflexible. I don’t think it makes it harder for lenders to assess older borrowers, I think it just requires a little bit deeper investigation as to what the exit strategy is going to be for that borrower and establishing that there is one.”

The guidelines in the main are practical, Montgomery says, but nothing has been tested as yet. “There’s no precedent and I think it will be some time before we do actually see that happen,” she predicts. “As long as lenders and brokers and those at the coal face who are actually arranging the finance are carrying out the prudent and appropriate questioning, and establishing the exit strategy for that borrower, and ensuring that the borrower understands all of the requirements in terms of the longevity of the loan long-term, then I think that our responsibility is fulfilled.”

Peter White, president of the FBAA, says the recent troubles brokers have experienced placing loans for older borrowers are just hiccups and “until lenders get more comfortable with what goes and doesn’t go under the NCCP, we’re going to see a bit more of this going on”.

TIME?n The average Australian aged between 55 and 64 years of age has about $142,000 in super, according to the Australian Bureau of Statistics data compiled by the Australian Super

Funds Association.

n ABS statistics reveal that the median age of Australia’s population (the age at which half the population is older and half is younger) was 36.9

years in 2008, up from 36.1 years in June 2003.

n Projections of people aged 65 years and over indicate that the proportion of this age group will increase from

13.6% to 16.4% between 2010 and 2015.

n Australia’s first homebuyers are now six years older than four decades ago – as the majority are waiting until 31 to

make a property purchase.

n Genworth indicates that the average age of first homebuyers could be 38 or 39 by 2040 unless affordability issues are addressed.

Facts of life

SPECIAL REPORT / BANKS ON BROKERS


RIGHTOF REPLY

Last month’s issue saw brokers give their verdict on how the nation’s top 12 banks have fared over

the past year. In this issue, the banks appraise their performances and tell Barney McCarthy

what they got right and what went wrong


From humble beginnings in 2003, our Brokers on Banks survey has grown in stature to the point where it is now used by a handful of lenders as a key performance indicator for their third party channels. This year was no different and Australia’s top 12 banks eagerly awaited the feedback you gave them about their products and service.

We received 663 respondents this year, all of whom ranked the 12 lenders between one and five across nine categories: BDM support, broker support, interest rates, internet platform, overall service, product range, satisfaction with credit policy, transparency of commission structure and turnaround times. The 12 banks featured were Adelaide Bank, AMP, ANZ, Bankwest, CBA, Citibank, ING, Macquarie, NAB/Homeside, St George, Suncorp and Westpac.

To recap for those of you who missed last month’s report, CBA was this year’s big winner, topping six of the nine sections to land the overall title. It also dominated in the eyes of the country’s elite advisors, with finalists from our top 100 brokers survey also naming them the nation’s best lender. ANZ finished in second spot and Bankwest came third. Special mention must also go to NAB/Homeside, which was the only bank to improve in every category and also leaped up the rankings to fourth after a below-par showing last year.

Read on to see just what the banks made of their showing, why they excelled in the areas they did and what was to blame for taking their eye off the ball in other categories …

CBA Kathy Cummings, executive general manager – third party banking

Q: Did you expect to win so many categories [CBA won six out of the nine sections]? A: This [winning Brokers on Banks] is one we’ve been after for some time, so victory is sweet. One of the only categories we didn’t win was interest rates, but no-one expects to win that! We’ve been responsible with our pricing – competitive, but responsible. With regard to commissions, we’re sitting in the middle of the pack on that sort of thing, and again we’re taking a consistent approach rather than being here today and gone tomorrow.

Q: You came third in terms of products, is that fair?A: The market is still trying to get its head around our new, no-fee home loan. I don’t think people fully understand how much it will appeal to consumers. We’ve just dropped the interest rate on it too and I think if you did the survey again now, you would find us even stronger in the product category. Our approach is competitive pricing, but leading on service and I think that comes out in the results.

Q: Can you attribute CBA’s success in this year’s survey to any specific thing? A: I think the fact we’re very strong in reinvesting in the business is crucial. We invest more than any of the other

Categories (in order of importance) SCORE 2011

SCORE 2010

CHANGE+/-

Turnaround times 3.6 2.67 0.93

Overall service 3.38 2.71 0.67

BDM support 3.52 3.02 0.5

Broker support 3.57 2.97 0.6

Satisfaction with credit policy 3.51 2.86 0.65

Interest rates 3.27 3.75 -0.48

Product range 3.48 3.41 0.07

Internet platform 3.51 3.39 0.12

Transparency of commission structure 3.1 3.21 -0.11

OVERALL 3.43 3.05 0.38

CBA



banks in our mortgage processing, in delivering to the broker tools that help them, like having their name on home loan statements so they have constant contact with the client. We invest in tools to help them grow their own business as well as making it a smoother interaction so they look better with the customer. Our credit people are there for broker queries and to help them with their loans. That reinvestment comes out very much in terms of the turnaround times result. The BDM and broker support category wins are a result of all the things we do to help brokers be more effective and professional. Our solution for regulation was simple and easy, we take that approach and want to make it efficient. It was a better experience for brokers than with the other banks who made it complicated and difficult to deal with them.

Q: Do you have anything up your sleeve to help CBA maintain its position next year?A: We have a very strong platform around partnerships and that’s probably one of the key differentiators for us – we will invest in anything that will improve those partnerships. We’re very consultative – if we are going to do anything we talk to brokers and continue to invest in their business development where other banks seem to have pulled back. We invest in their conferences and education and have ongoing PD days we put on for mass market and our Diamond brokers that are tailored to their needs. We’re doing a lot of credit workshops to help them understand what the changes are and what they need to do to get their customer’s deal across the line.

ANZMeg Bonighton, head of broker distribution

Q: Are you satisfied with this year’s performance?A: We were pleased with the result and the survey gives us a strong insight into our strengths and where we need to focus so that brokers are getting exactly what they need from ANZ. Being second best is a unique position, in that we have a strong base from which we can shoot for number one. In terms of the results, we’ve worked hard in providing the right products for our customers, and it’s pleasing to see that’s been recognised again.

Q: Is there any room for improvement?A: We have spent a great deal of time working on ensuring that we are consistent and transparent with our broker partners. While this work has come through in some elements of the survey, there are other areas such as credit policy [ANZ came third] where we can do more to provide clarity and consistency. Our broker partners will be pleased to hear that we’ve already been doing some work in this area, so they’ll be seeing more on this in the coming months.

Q: What are your plans for the next 12 months?A: In addition to the feedback provided in these surveys, we also spend a lot of time talking with brokers listening to their feedback about what is working well and in what areas they feel they need more support. This helps us continue to refine our focus within our BDM team, our training and education programs, our communications and our technology solutions. We’ve been strong supporters of the broker channel from the very beginning and we remain committed to building collaborative relationships and striving to truly understand what brokers need to run a successful business. With this result, we believe we’re ticking a lot of boxes, and we have some great opportunities to improve even further.

BANKWESTCategories (in order of importance) SCORE

2011SCORE 2010

CHANGE +/-


Overall service 3 2.63 0.37

BDM support 3.43 3.16 0.27



Interest rates 3.38 2.76 0.62




OVERALL 3.1 2.79 0.31


SCORE 2010

CHANGE +/-



BDM support 3.25 3.26 -0.01

Broker support 2.63 2.69 -0.09

Satisfaction with credit policy 3 3.1 -0.1


Product range 3.72 3.86 -0.14

Internet platform 3.15 3.28 -0.13


OVERALL 3.23 3.23 SAME

ANZ


BankwestIan Rakhit, head of specialist banking

Q: Bankwest was one of this year’s most improved banks jumping from eight to third overall, which must be pleasing?A: Bankwest is delighted to have moved up to third position overall and we thank our broker partners for their feedback. To have risen so significantly is vindication of a year where we have shown we are clearly the alternative to the big four. It was a great set of results for us and Bankwest remains totally committed to the broker industry.

Q: What was behind the renaissance?A: We continued to be innovative on the product front, with the launch of the Rate Cutter Home Loan in 2010; a product that ‘gets better with age’ and rewards loyalty with an increasing discount. In February this year, we delivered the Super Start Home Loan offering a three-year intro discount of 0.8%p.a. Both products complement our life of loan discounts, offering both short and long-term attractiveness. The remainder of 2011 will see continued product innovation, offering more choice to our broker partners and customers. Commissions continue to be a source of debate and Bankwest was proud to move against some of our competitors and actually increase commissions twice in the past six months. We also plan further initiatives where the savings we make on processing better quality applications can be passed onto brokers by way of higher commissions.

Q: What elements of the business were you most pleased with?A: Most pleasing was the feedback on our BDMs as we are in a people business, whether broker-to-customer or lender-to-broker. The Top 100 voted our BDMs best

in class and we came a close second overall. This is very satisfying and a superb accolade for the team who never shirk and never hide from tough conditions and who give their brokers their full commitment and support.

Q: What’s next on the agenda?A: We always listen to brokers on where we can further improve and I’m committed in the next 12 months to reducing our turnaround times. Our service offer has improved gradually over the past 18 months, and we can now safely predict a three- to four-day unconditional approval when all required documents are submitted at the time of application. We’ve acted on broker feedback and improved a number of our processes, to remove hours and even days out of our turnaround time. In the near future, we will automate two processes with external suppliers, which will take a further day out of our loan submission to approval timescale.

NAB/HomesideJohn Flavell, general manager of distribution

Q: Is fourth out of the 12 banks about what you expected? A: It’s a significant improvement from where we were at last year. It’s good to see positive movement from the bottom third to the top third.

Q: NAB/Homeside topped the interest rate category and were second in terms of products, but then finished towards the bottom of the turnaround time section. Is it natural that the bank with the best rates would be inundated and therefore struggle with service issues? A: It’s about balance. Part of it is the products and pricing proposition and the other part is the service proposition and what you want to do is have a strong

http://www.homesecbrokersupport.com.au/



performance across all fronts. Your clients – the customers and brokers – need a consistent level of service they can rely on and set their expectations by. From a product and pricing perspective we’ve operated at the top of the continuum, which is good and we’ll maintain our focus on that. The area for us to improve on, and we know we need to improve on, is from the service perspective, and we’ve made significant gains in that area. Most of our focus has been around origination, getting applications in, communicating with brokers over that process, giving them a timely turnaround and maintaining the dialogue during the process. We’ve made some good ground, but there’s still some ground to go, specifically around the area of documentation and funding.

Q: NAB has been busy on the marketing front in the past year what with the break-up campaign and the like. Has that drawn any reaction from brokers?A: The approach from the whole group to fair value is a program we commenced almost two years ago. Fair value is about the service experience, the product and the price and giving people a fair return on what they’ve spent. That same principle and approach applies equally to broker customers as it does to branch customers. We’ve done a large number of things from a pricing perspective whereby we’ve removed a large number of fees and charges across our product ranges, specifically looking at fees on transactional banking products and credit cards, and Homeside customers get all the benefits of those. In addition to that, we’ve looked at the fees associated with our mortgages and removed 80% of the fees associated with them. At the same time, we’ve had the lowest SVR mortgage of any of the majors for 19 months and we also commenced in October 2009 with our price for risk initiative – differential pricing based on risk and we’ve been delivering market-leading products and pricing for two years in line with fair value proposition. A lot of the advertising that started in February this year around the break-up campaign was just the latest round in marketing supporting the fair value proposition. Most relevantly, in our last round of TV adverts, we included a specific call for action for consumers to call their broker. To my knowledge, we’re the only major lender doing this – really supporting the broker channel and spending our advertising dollars on mainstream TV in supporting them.

Q: What plans does NAB have for the broker channel going forward?A: The broker channel is a key part of the group’s growth strategy. We will continue to invest in trying to deliver a superior service proposition.

NAB/HOMESIDE


SCORE 2010

CHANGE +/-



BDM support 2.97 2.52 0.45






Transparency of commission structure 3.27 3.04 0.23

OVERALL 3.07 2.64 0.43

“Fair value applies to brokers and branch customers” – JOHN FLAVELL


We’ve just expanded the ability for brokers to go online and order valuations themselves at no expense prior to lodging an application, and [we] have completed a round of technical workshops around the country to 1400 brokers. We’ve also made some additional enhancements around our mortgage insurance processes, moving to deliver a more competitive premium.

ING DirectMark Woolnough, head of broker distribution

Q: How valuable are the results from MPA’s Brokers on Banks poll?A: The survey is a great temperature gauge for ING DIRECT and one of several measures we rely on to track our progress in the market – across people, products and service. Interestingly, the results are in line with the feedback we’ve sourced directly from brokers as part of a series of national events, via our BDMs and ING Direct-commissioned research. It’s comforting to hear a consistent response from those we truly value.

Q: What are your thoughts on finishing fifth overall and achieving podium finishes in a number of categories?A: We’re very proud to be the only non-major (or non-major owned) bank to be featured in the top five, a testament to our broker offering through products service and industry support. Proving timely and in areas where we received mid-range scores, we’re in the process of implementing a number of changes which will improve our position in the market. BDM support [ING Direct came seventh] is just as vital to a broker’s business as consistent service and competitive products. To that end, improvements to our sales team are front and centre of our current internal initiatives.


SCORE 2010

CHANGE +/-

Turnaround times 2.9 3.07 -0.17

Overall service 3.1 3.12 -0.02

BDM support 3.04 2.67 0.37


Satisfaction with credit policy 2.73 2.73 SAME





OVERALL 3.06 3.05 -0.01

ING DIRECT

http://www.bbbsa.com.au/



simple beats complex in this area and the results show we’ve managed to achieve simplicity.

Q: What’s next?A: AMP has a range of initiatives under development at the moment – all of which will be delivered in the latter part of the year. These initiatives are aimed at delivering on our service promise of consistency and timeliness and they have been developed from broker feedback. Our goal is to be the real alternative to the majors. We’re part of the way there, so watch this space in 2011 and beyond.

WestpacHuw Bough, general manager of mortgage distribution

Q: Westpac again performed strongly in the internet platform category. Why do you think that is?A: We’ve led in that space for some time. This year we introduced Broker Base, a new web portal for mortgage brokers full of expertise and advice, economic updates, video links and raw data that they can visit at their leisure. We also launched the Davidson Institute, a comprehensive library of financial education resources that consumers and brokers can access.

Q: Another of Westpac’s better showings came in the product category, what was behind that?A: It comes back to the fact we target the higher-performing brokers who, in turn, tend to deal with more affluent customers. They find our products good for property investment and easy to use.

Q: Where can Westpac improve?A: Turnaround times are an area for improvement. For customers, it is all about the experience and they want a

Q: What does the future hold?A: Given the complexity and competitive nature of the current home loan market, we’re very aware that there’ll be peaks and troughs and that’s what keeps us on top of our game and eager to compete in a market still dominated by the majors.

AMPStephen Craig, head of sales and marketing

Q: Are you happy with this year’s performance?A: AMP Bank has improved its overall score for the 2011 survey, which shows our focus on products and relationships are starting to show results. We’ve worked hard over the year to deliver a consistent service to brokers while creating competitive offers for both brokers and borrowers – positioning AMP as a real alternative to the majors. However, growth doesn’t come without its challenges – particularly with regard to maintaining consistent service levels during periods of rapid growth. Our own results show we’ve been able to do both, but more importantly the brokers are confirming this through the survey results – so we’re encouraged by this but also know we’ve got more work to do.

Q: What about specific categories? AMP improved greatly in terms of interest rates and was also voted joint best in terms of transparency of commission structure. A: We’re particularly pleased that our product and pricing initiatives have delivered much improved scores this year – proof that brokers value what we’re doing. Being rated number one for transparency of commission structure is important to us. Brokers have told us that

WESTPAC


SCORE 2010

CHANGE +/-



BDM support 2.95 2.68 0.27






Transparency of commission structure 3.24 3.23 0.01

OVERALL 2.94 2.76 0.18

AMPCategories (in order of importance) SCORE

2011SCORE 2010

CHANGE +/-



BDM support 3.04 3.34 -0.3







OVERALL 2.97 2.89 0.08



quick answer that takes them out of the market. We want to increase the percentage of cases that go unconditional within 24 hours from around 35% to more than 50%.

SuncorpTony Meredith, executive manager – personal lending

Q: How important are brokers to Suncorp?A: We’re actively growing our lending portfolio across our core business areas of personal banking, SME and agribusiness and the broker channel is a vital part of this. We aim to genuinely connect with our broker partners and deliver greater trust, credibility and confidence, which is why it’s important to us that we look for ways to improve our proposition to our broker partners and continue to invest heavily in this market.

Q: What developments in the past 12 months have helped Suncorp’s performance?A: We have worked on our back-office capability, which has improved our service proposition and ultimately our turnaround times delivered to the broker market. We have also continued to simplify our process and policies to meet world class service standards. Brokers have their own dedicated business development manager and access to tracking specialists and we’ve expanded these teams in recent months to meet demand and adequately support our regions. On the overall service level to brokers, we’re pleased that the work we’ve done to improve our loan assessment and processing is starting to reflect in feedback from brokers. Suncorp appreciates the support and business received through the broker channel, particularly in what is a competitive market with economic and business environment challenges.”

Q: What are your plans for the coming year?A: As Australia’s fifth largest listed bank and only A+ rated regional bank, Suncorp is well positioned to take advantage of the opportunities being presented to grow our share of the market. Australia wants and needs a strong second-tier banking system and as the largest of the second-tier banks, Suncorp is certainly a genuine alternative to the majors.

CitibankBelen Lopez Denis, head of mortgages – strategy, marketing and product

Q: How do you rate Citibank’s performance in the survey this year?A: It has been pleasing to see an increase in the overall satisfaction from the top 100 brokers, with Citibank

SUNCORP


SCORE 2010

CHANGE +/-



BDM support 3.28 2.88 0.4







OVERALL 2.91 2.79 0.12

http://www.cashflowfinance.com.au/




SCORE 2010

CHANGE +/-



BDM support 3.26 3.56 -0.3


Satisfaction with credit policy 2.84 2.89 -0.05





OVERALL 2.85 2.87 -0.02

means our broker partners can make promises that they know can be kept and their clients have one less thing to worry about. We were ranked in a similar position for our credit policy [fifth], which we know from experience has a lot to do with the fact that we encourage brokers to speak directly to our credit team. The fact that they’re accessible and deal exclusively with intermediaries means we see a lot of sensible conversations between professionals, which is always a good thing. I suspect our fourth placing around overall service levels is very much a function of our rather relentless focus on turnaround time and accessibility of our people, which in turn is a result of the fact that we only deal with intermediaries. Our priorities are pretty well aligned with theirs as it’s all we do.

Q: What about the areas Adelaide Bank didn’t perform so well in?A: In terms of the less-positive results, we’ve been aware for some time that we’ve got some work to do on the technology side and other components of the proposition. Over the last nine months we’ve been working on a series of initiatives to refresh our offering and brokers will see the fruits of that labour over the next few months including a new basic product, a refreshed internet presence that promotes our proposition and the value of brokers directly to consumers and a range of other improvements.

St. GeorgeSteven Heavey, GM – intermediary distribution

Q: How useful are surveys such as this?A: We acknowledge the results of the survey which, along with our own insights, we always find to

moving from 12th to 10th. As we are focusing on growing our overall business, it’s important to fulfil the expectations from the top brokers in the market.

Q: Were there any categories you were particularly pleased with?A: Our overall BDM support continues to be top quality, with brokers ranking our team as the fourth best. Under the current competitive environment and increased focus on market share growth, this ratifies that our personnel and support to this channel continues to fulfil the needs from our brokers.

Adelaide BankDamian Percy, general manager of third party mortgages

Q: What does the Brokers on Banks survey mean to Adelaide Bank?A: First of all, I just wanted to say how much we value the MPA survey. It’s a really useful addition to our own feedback loops and though we might disagree with the results from time to time, it’s a great opportunity for brokers to have their opinions up in lights.

Q: Adelaide Bank performed well in terms of turnaround times, satisfaction with credit policy and overall service. What were behind those successes?A: Turnaround times have always been job number one for us, so we’re pleased to once again rank in the top three in delivering a result to brokers and their clients in a timely manner. It’s not the most glamorous or exciting element of what banks do, but remaining focused on it


SCORE 2010

CHANGE +/-


Overall service 3 3.03 -0.03

BDM support 3 2.93 0.07







OVERALL 2.84 2.88 -0.04

ADELAIDE BANK

CITIBANK



Categories (in order of importance) SCORE 2011 SCORE 2010 CHANGE +/-



BDM support 2.45 2.76 -0.31

Broker support 2.47 2.55 -0.08






OVERALL 2.75 2.87 -0.12

ST. GEORGE


SCORE 2010

CHANGE +/-


Overall service 3 3.03 -0.03

BDM support 3 2.93 0.07







OVERALL 2.84 2.88 -0.04

be a great source of information. St.George is committed to making it easier for brokers to do business with us and we have recently been making some significant changes to our business, in fact some of the changes we have already made get to the heart of these survey results, which is a very positive indicator for us.

Q: What has St.George done over the past 12 months to help brokers?A: This year you would have seen a raft of changes designed to supercharge St.George, including considerable changes to product, policy and back office process, as well as having some great offers in the market. We have also increased our BDM team nationally, so you can expect to see an increased level of broker support including more sponsorship events and broker road shows catering to all of our broker segments.

Q: What are St. George’s third party channel plans?A: Over the next 12 months, you will continue to see process improvement initiatives, product innovation and service enhancements. We pride ourselves as being a bank that offers brokers strength, security and a full range of products and services along with the genuine support and friendly service of a small bank. Gaining broker confidence and demonstrating our commitment to the industry is of the utmost importance to us. We look forward to next year’s survey results, as we believe that we’ll see a true reflection of where we are.

MacquarieDoug Lee, national head of sales

Q: How has Macquarie’s return to the third party channel been?A: It’s still relatively early days for us but we’re

http://www.nationalfinanceclub.com.au/



pleased with how we are progressing. We’re a very different business today compared to what we were three years ago, and we believe we have the foundations of a great offering.

Our focus during the past year has been working with those brokers who really understand our offering and recognise that it suits their clients. We’re very much relationship-driven. We have a really strong and positive relationship with a number of brokers and have been working closely with them to develop our product offering and also to make sure we’re offering something extra in terms of service, making sure we can add real value to our brokers’ businesses.

For us, it’s about understanding what brokers want in terms of product and in particular service, and it’s about what we can do to make their lives easier and to help build their business for the long term. The past 12 months have been about keeping things simple. We have an uncomplicated product suite, a consistent and transparent commission structure that pays trail from day one, and a straightforward approach to accreditations and re-accreditations, which saw the launch of online re-accreditations earlier this year.

Q: Will Macquarie be looking to rise up the rankings next year?A: Ultimately, Macquarie isn’t about being all things to all people, but focusing on core relationships with a great BDM team that has the time and commitment to assist their brokers. We’re always learning and looking for what we can do better for our brokers. It’s a continuous process of learning and development. We’re proud of what we’ve achieved during the past year and of those brokers who have been working closely with us, and are looking forward to the continued growth of the industry.

Categories (in order of importance) SCORE 2011 SCORE 2010 CHANGE +/-

Turnaround times 2.8 N/A N/A

Overall service 2.57 N/A N/A

BDM support 2.95 N/A N/A

Broker support 2.5 N/A N/A

Satisfaction with credit policy 2.6 N/A N/A

Interest rates 2.6 N/A N/A

Product range 2.54 N/A N/A

Internet platform 2.98 N/A N/A

Transparency of commission structure 3 N/A N/A

OVERALL 2.68 N/A N/A

MACQUARIE

“We are a very different business today compared to what we were three years ago” – DOUG LEE

http://www.australianfm.com.au/


&A

Q: Are you working alongside Kym with immediate effect?A: We’ve been doing a handover over the past few weeks, meeting key brokers, and I’m really fortunate that Kym is sticking around until February 2012, so the transition will be pretty seamless. He’ll be doing other functions around IT within the Mortgage Choice group, but it will be good for the LoanKit business that he’s around if we have any questions.

Q: What are your initial plans for LoanKit? Is the plan to eventually rival some of the larger aggregators such as AFG and PLAN or will LoanKit remain more of a boutique operation?A: The legacy I would like to have when I eventually leave LoanKit one day would be the same as many small companies and aggregators – I want to have grown the business. LoanKit is not always on the radar for people considering moving aggregators and I want to change that. There could be a lot of consolidation, and brokers should be looking at their costs and seeing where they can reduce overheads, so I think they should be looking around at other aggregation models. LoanKit hasn’t been too successful in getting its name well-known enough in the past, so I want to increase that and let brokers know about our value proposition. To me, it’s about delivering what we say. We’ve got a really good software platform developed by Kym from the ground up from when he was a broker.

Q: Do you set membership recruitment targets or do you just take each month as it comes?

Simon Dehne was recently appointed asthe new CEO of LoanKit to replace KymRampal who is taking a break from themortgage industry. Barney McCarthycaught up with Dehne to discuss hisplans for taking the aggregator forwardand the issues facing mortgage brokers

CEO

CEOCV

+ Qualifications: Diploma in Financial Planning, Diploma in Human Resource Management, MEI (pending)

+ First job: Started at Westpac in 1982 – worked in branch, became bank manager, then national sales manager for the broker channel

+ Next step: Joins GE in 2004 as national sales manager for GE Mortgages, helps establish broker channel

HEAD TO HEAD / SIMON DEHNE


&A

is returned if the loan proceeds or held if the customer chooses not to proceed, so you are charging for the professional service you’ve offered the customer during that introductory stage. That’s something I think should be adopted. If you’re seeing lots of people and they don’t proceed through no fault of your own, you should be able to recoup some of those costs. I haven’t seen a pressing need for a brokerage fee and I would feel really uncomfortable charging a fee and taking a bank commission as it’s double-dipping. If brokers aren’t earning enough money, I would ask them how much they are leaving on the table when their customer leaves. They may have a loan, but have they been asked about their insurance needs, their health insurance, their car finance, their leasing needs?

Q: Will mortgage brokers start becoming more like financial planners in terms of looking after their clients’ financial service needs across the board?A: Brokers need to be careful and decide what their core business is. If you’re a one-person operation and you’re trying to be a mortgage broker and a financial planner, it’s not so much a conflict as not being able to do both well. If you are a larger business, you may specifically employ a financial planner within your business to focus on that and I think that’s a good model. If you’re smaller and you’re trying to write loans and look after your customers, then it’s worth building a relationship with a local financial planner where you’ve got a referral agreement and you can have a face-to-face interaction.

A: Ideally, we would like to be bringing 20/30 brokers on board every month, but whether that’s feasible or too low I don’t know yet. If I can at least increase the number of enquiries we have from prospective members, then our business model will speak for itself.

Q: In our recent Brokers on Aggregators survey, just 12% of respondents said they were looking to switch, but reading their responses, many brokers said they were locked into draconian agreements or that the choice wasn’t theirs. A: Even if it is just 12% looking to move, that’s still a fair number of brokers. Some aggregators use scare tactics when brokers try to leave whereas we adopt an approach that you’re free to come and go as you please, so we have to deliver on our promises. We’ve got the full force of Mortgage Choice behind us as a parent company. We’ve got one broker at the moment who is trying to get his bond back from another aggregator and they are dragging their feet, so I’ve got the full services of our legal team to assist in helping that broker. When tested, some aggregators aren’t as tough as they make out. At the end of the day, there has to be a real reason why a broker wants to move, but if they think they can get a better deal not just in terms of price, but with service, then we’ll do all we can to help them move, and do so quickly.

Q: How successful has LoanKit’s “compliance in a box” offering been? And what percentage of your members became credit reps, and what percentage sought their own ACL? A: Around 53% of our brokers have their own licence, 24% are credit representatives and 23% are licensed but use LoanKit for compliance. From talking to brokers in the field, many are using us for their auditing needs.

Q: Do you see fee for service becoming more common as brokers struggle to survive on current commission levels?A: I haven’t seen much evidence of it so far. The only thing I can see that might take off is the ‘no-go fee’ where brokers take a fee upfront that

“The broker market share can increase … dependent on brokers acting on the value they bring”I’m currently in

the final stages of my Masters in

Entrepreneurship and Innovation (MEI), which is

keeping me pretty busy. It’s focused

around start-up businesses, the

growth stage and strategies around business, making

it useful for dealing with

brokers. When I’m not studying, I enjoy spending

time with my children (two and

four) and the occasional jog to

keep fit.

Out of office

+ A Choice move: Michael Russell invites Dehne to join him at Choice Home Loans in 2007

+ Back to school: Having left school after year 12 to go straight out to work, Dehne belatedly adds to his resume by heading to university fulltime in 2008 to obtain his diplomas and an undergraduate degree

+ Reunited: Dehne again teams up with Russell at Mortgage Choice as head of diversified products

+ Now: Appointed CEO of Loankit in June 2011


TThe ban on exit fees threatens to have a devastating effect on brokers’ bottom lines. A number of lenders indicated in the months leading up to the ban that they would be forced to introduce clawback provisions in response to the legislation. Homeloans Ltd’s Tony Carn says clawbacks would be a “sad reality” under the DEF ban, while MFAA CEO Phil Naylor calls the extension of clawbacks a “paradox”. “We have, on the one hand, a Government-enforced incentive for consumers to switch lenders, and on the other, a lender-enforced disincentive for brokers to encourage, or even allow innocently, consumers to switch lenders,” he states. “What message is being sent here for brokers? ‘It’s OK to encourage another lender’s borrower to come to us, but you will be punished if one of our borrowers switches to another lender, whether or not you were involved’?”

BROKERS FIGHT BACK Home Loan Experts director Otto Dargan has had a clawback provision in place for

18 months. While he’s not worried about the fee ban affecting his client base, he does question its impact on other business models.“I am concerned that the removal of DEFs will create a culture of refinancing for minor rate differences, which in reality gives the customer very little benefit and reduces the profit margins of our industry,” he warns. “I think that brokers who have sold their services on rate may suffer as a result of this change

Brokers are introducing clawback provisions to safeguardtheir incomes. Has the slippery slope to a fee for begun? Andrea Cornish investigates

PASSING THE


as their customers will always chase a minor saving. Most of our customers who have left, have done so as a result of selling their property, so I do not believe this will affect our business.”

Dargan’s brokerage agreement includes a clause that states if the customer repays the loan in 24 months and his business incurs a clawback fee from the lender, then he will seek reimbursement from the customer. The provision is also published on his website and discussed with customers during the interview and most customers are happy to sign off. “We explain why we have this in place, and the majority of customers understand,” he says. “We mention to customers that it is important that the transaction is a win for the customer, the broker and the bank. If a customer may exit the loan early, then we offer them loans that do not have significant exit fees or clawback. In most cases this isn’t a concern and customers are happy to proceed. This should be an industry standard. If you offer a good service then you should never work for free.”

For some brokers, the introduction of clawbacks is like pouring salt in the wound that was created two years ago when the industry underwent commission cuts. “Why should the broker pay for it?” asks Sarah

Eifermann, mortgage planner at SFE Loans. “We already had a 35% commission cut as a result of the GFC. The average broker earns $70,000 and then has to deduct the cost of running their business, which is about $40,000. So the average broker earns a net income of about $30,000 per year – it’s not a lot of money.”

The amount a broker stands to lose on clawbacks depends on the loan size and their aggregator, but clawbacks of $3,000–4,000 are not unheard of. For brokers running a business, the sudden withdrawal of that income is a severe blow. Eifermann introduced a clawback provision five years ago.

“If they pay out their loan within 18 months, I’m entitled to charge them up to a 1% fee for administration if the bank takes back what it pays me, which I explain and they initial in the contract,” she explains. “What it does is it lets them know upfront that the service a mortgage broker provides is not for nothing. And as a society we think everything should be free. It gives an automatic value proposition on the brand right from the get-go – they know that it’s not for free.”

Eifermann has rarely had to enforce the clawback provision and only two of her clients in the last year have refinanced. But she admits there is a difficulty in

REFINANCE FIGURES

According to AFG, the number of borrowers looking to refinance on a monthly basis has averaged between 29-34% over the last five years

FEATURE / CLAWBACKS

AVERAGE LIFEAccording to NAB, the average life of a mortgage in Australia is 20 months

PASSING THE


Clawback provisions: Step-By-Step

STEP 1: Talk to other brokers in your area

STEP 2: Have a solicitor revise your finance broking contract (cost $1,500–2,000)

STEP 3: While it’s not strictly necessary, you may want to inform potential customers of your policy by explaining the provision on your website, as well as during the initial loan interview

enforcing it and has had to take one client to the Victorian Civil and Administrative Tribunal. “You need to have a lawyer chase it for you or take them to small claims court to have them pay.”

Despite that, she thinks more brokers will be introducing fees – both for clawbacks and for the advice they provide. “There are two issues – one is fee for advice and the other is clawbacks. Banks pay mortgage brokers solely for the purpose of placing a loan with them. They don’t pay you for the advice you give the client about the right loan for the client. So fee for advice will be coming in and I think you’ll find brokers bringing in a fee for clawbacks. Why should a broker have to foot the bill when they’ve done the work? We think we should get everything for free. What it boils down to is they don’t think we should get paid if they take their business elsewhere. And because there’s been no cost to the client in the past they’ve been able to use and abuse the system of commissions.”

Eifermann charges a fee for advice, which she specifies is different than a fee for service. “Fee for service refers to the actual placement of the loan,” she clarifies. “Fee for advice refers to the advice given regarding the product suite, the lender, the rate, the structure that suits their needs and goals. There’s an argument that with the new ASIC legislation you have to do that

FEATURE / CLAWBACKS

LENDER UP TO 6 MONTHS 7-12 MONTHS

13-18 MONTHS

19-24 MONTHS

LIBERTY FINANCIAL

100% 75% 50% 25%

MORTGAGE EZY 10% 0% 0% 0%

AFM 0% AT PRESENT. 100% WHEN CLAWBACK INSTITUTED BY ADELAIDE BANK

0% AT PRESENT. 100% WHEN CLAWBACK INSTITUTED BY ADELAIDE BANK

0% 0%

HOMELOANS LTD. 100% 100% 50% 50%

RESIMAC 100% 100% 50% 50%

ADVANTEDGE 50% 50% 50% 0%

LJ HOOKER*OFFERS EXEMPTIONS FOR SITUATIONS BEYOND BROKERS’ CONTROL

100% 100% 50% 50%

PEPPER*ONLY IN CASES OF CHURN

50% 50% 0% 0%

NATIONAL FINANCE CLUB

100% 100% 50% 50%

Non-banks and clawback structuresThe ban on deferred establishment fees has resulted in changes to clawback structures for many non-banks. Here’s a quick summary:

anyway – that’s true, but I’ve spent eight years in this industry building up my knowledge base, I’m currently doing my diploma and I give you advice – as an accountant or a financial planner would give you advice and charge you for it – so the same thing applies.”

“They think that the banks pay us, but when I explain that the banks pay me for placing the loan on their behalf, not for the advice component, they don’t have a problem with it.”

The answer depends on how many you receive in a two-year period, which lender the loan was placed with and how much the loan is worth. According to the most recent data from ABS, the average loan size taken out by first-time buyers is $285,400. Brokers placing new loans with Liberty Financial can earn up to 1% or $2,709. For loans discharged in the first six months, the broker would lose the entire commission. Between 7-12 months, the broker would lose $1,928. After 12 months, the broker loses $1,354 and between 19-24, the broker loses $677

How much will clawbacks cost your business?


http://www.fastgroup.com.au/

BROKER PROFILE WENDY HIGGINS


Q: What do you attribute your success to?A: Hard work, long hours, more hard work and more long hours. Doing what I say I will do and having the tenacity to keep going when things get tough or don’t go my way. There is always another deal to do. I get paid to write home loans, so I don’t get distracted from that. I can’t do it on my own and I have employed a fantastic hand-picked team of professionals who work together with me to achieve the business’ goals.

Q: What keeps you motivated?A: I am by nature a passionate and positive person. Being needed by clients is what keeps me going through thick and thin. I am spurred on by the phone continuing to ring, by writing the next deal, by ringing a client whose loan has been approved and getting very excited and emotional just before I tell them the great news. I love to be busy and when it goes quiet from time to time, I have to concentrate hard to keep the momentum going. Knowing it will

AMA Broker of the Year and perennial chart topper on MPA’s Top 100 list, Wendy Higgins is a broking force to be reckoned with.Higgins also recently celebrated reaching the $1bn mark. Here’s aninside look at her business and her top tips for other brokers

THINGSLEARNED

get busy again quickly means that I still stay up-to-date and ready at all times for new business.

Q: What has been the biggest turning point in your career?A: The biggest turning point was leaving ANZ and buying a Mortgage Choice franchise. I have never looked back. I have found my true calling in life; to be able to assist clients buy their dream property and increase their wealth through investment. It is not what I would consider a job, as I love what I do.

Q: Have you faced any professional hurdles, and how did you overcome them?A: Being a female in a male-dominated industry was difficult at first. In the early years, it was even difficult to get clients to see a broker as they were little known and were seen as a threat to bank branch staff. There were often adverse comments made about our industry, but with perseverance and general word-of-mouth referrals the broking

I’VE

BROKER PROFILE WENDY HIGGINS


Q: What form of marketing works best for your business?A: Marketing ourselves is the best and cheapest way – every interaction we have with anybody is marketing ourselves. Even when we are discussing a loan application with a lender we are marketing ourselves via professionalism, the manner in which we speak and how we handle ourselves.

Q: Is there anything you would have done differently in your career?A: No, I don’t think so. Sure I have made mistakes from time to time, but anyone who doesn’t learn from them is not taking their business seriously. Life (and work) is all about new experiences and practising to be better, and unless we trip up now and again we can’t improve. I am always looking at ways to develop both my own and my business’s performance.

Q: Do you feel fee-for-service is the way forward in the industry?A: No, not until the general public realise the true value of a mortgage broker. If they visit a lender and get the same product for free, why would they use our services? We need to increase awareness of mortgage brokers as professionals working in a customer’s best interests to help them source a deal suited to their individual lifestyle and needs, saving them time when shopping around and by doing most of the legwork for them. In saying all of this, I feel there should be a fee for advice-giving as I know clients would pay for this.

business has grown and grown. In addition, the gender balance is becoming more level.

Q: What kind of advice would you give a new broker?A: Have a mentor and stick close to them. Ask questions until you understand. Meet with all leads as they may have someone to refer you to if they aren’t ready to use your services. Practice on them to hone your skills. Keep at it and never get anyone offside.

Q: What are you doing differently from other mortgage professionals?A: We have always stuck with our clients through the whole process. To minimise errors and rework just prior to settlement, we always sign up the loan documents for clients. We make the process stress-free and do anything we can to help them to avoid having to redo it. We communicate at all times throughout the process, the more times we have contact, the better.

Q: Are there any areas of your business you are looking to improve?A: Spreading out the workload so that the five loan consultants including myself all write 20 loans per month, each is a priority and we are working on this right now. This means letting clients know they may need to see someone else but assuring them I have hand-picked all my staff and have taught them everything I know.

Q: What do you do to reduce clawbacks?A: Clawbacks are inevitable and are solely due to customer behaviour. I accept them as part of doing business, but they always hurt the bottom line.

Q: Do you diversify? and if so, in what areas?A: We have diversified into insurances, and in our office some of us write ALI, and others refer clients to Lifebroker. We also do leasing, personal loans and commercial loans. However, the residential loan side of the business is our priority.

“To minimise errors and rework, we always sign up the loan documents for clients”

+ Company: Mortgage Choice

+ Location: Glenelg, SAYears as a broker: 13 Client database: 8,000Loan book: Approx $1bn

+ Awards: AMA Broker of the Year 2010Mortgage Choice National Franchisee of the Year (three times)Franchise Council of Australia Award Winner (four times)Personal Australian Mortgage Salesperson of the year (two times)Mortgage Choice Hall of Fame, inaugural inductee 2005

Fact file Wendy Higgins


COLUMN / THE POWER OF PR

RRunning in alignment with an advertising campaign or in isolation, a PR program should be integrated into every brokerage’s marketing plan in order to generate interest among the firm’s target audiences. Importantly, an effective campaign doesn’t always necessitate the need for big budgets, with the key ingredients required being time, effort and know-how.

Like the mortgage broking industry, the media is evolving at a rapid pace. The internet is playing an increasingly important role in the delivery of news and you would have undoubtedly heard terms such as 24-hour news cycle, digital media, social media and the like bandied around. While it’s true the media is quite different to days gone by, the fundamentals involved when approaching the media remain largely the same. So don’t be deterred by the jargon.

The following are some general tips to guide you in getting your face in the media. In addition to these, the best piece of advice is to read and understand the media that you want to target. Read it with a more quizzical eye to better understand what makes news and what information will be of interest to the journalist. While the best approach to getting your face in the media will vary depending on the type of media you are targeting, the following are some general tips that will assist in your efforts for exposure in both industry and mainstream media, regardless of the medium (press, radio or TV):

Be proactive It can be a lonely exercise waiting for a journalist to cold call to speak about your business or ask for a comment on an industry issue. You need to be proactive and engaged in the process. Generally speaking, it’s only dubious operators or the proactive who make headlines.

Be available and responsive The media is a deadline-driven industry, so if a journalist makes a request for comment or information then you need to act promptly. Ask the journalist the timeframe for the response and make sure you meet it. If you can’t assist them, let them know immediately so they can try elsewhere.

Deliver what you promise You don’t want a journalist to form the view that you’re unreliable. There are plenty of people vying for media exposure and journalists favour those who assist them to do their job. They have long memories.

Figures, statistics and research The media loves them as they qualify views and opinions. Pick-up today’s newspaper and count how many stories are based on research findings, figures or stats. Poll your customers or quantify your statements where you can.

Leveraging the media can be an effective wayto raise the profile of a firm and generate newbusiness leads for free. Matt Paterson explains

GETTING IN THE


Matt Paterson is a partner at Six Degrees, a PR firm specialising in the mortgage broking industry

Understand deadlines Deadlines, deadlines, deadlines – make sure you understand them. Don’t call a daily newspaper journalist at five o’clock to pitch a story or for a discussion about a development in your business. They will be busy putting their stories to bed and you could, quite possibly, be met by the sound of a dial tone. Similarly, if it’s a weekly column or monthly magazine, make an effort to understand the editorial cycle and make your approach a timely one.

Target your approachTarget the media outlet(s) where your news or story concept will best sit. Is it an industry-focused issue, or does it have broader appeal? Also, target the right journalist. Do some research and find out which journalists have covered a related angle in the past, or simply call the publication or media outlet and ask them who the most appropriate person is to contact.

Images and visionIf you plan to be active in the media, then it’s worth having professional shots taken. Mainstream media generally don’t accept supplied images. If you are

targeting TV, then think about how a story will translate visually – ‘no visual, no story’ is the saying.

Mode of approachDoes your news angle warrant a press release? Sometimes a targeted email highlighting the key points is the best way forward – it subtly implies exclusivity. Once you have determined a topic or issue that warrants media coverage, consider how best to communicate with the media you have identified.

It’s editorial – not advertisingJust because something is of interest to you or your company doesn’t necessarily mean it will be to those outside it. Try to expand the media appeal of your development by linking it in with broader industry trends or issues. Remember, it’s the role of advertising, not editorial, to flog your wares, so you need to be subtle.

Cultivate relationshipsThis doesn’t mean you have to embark on a circuit of boozy lunches with journalists. Relationships are largely formed on trust and this comes through supplying them with accurate, trustworthy and timely information.

http://www.imb.com.au/


BUILDING

NEWBrokers are constantly reminded of theneed to diversify, but it’s not always aseasy as deciding to offer otherproducts. Barney McCarthy spoke tofive key players in the commercialfinance sector and asked them wherebrokers are looking to

OPPORTUNITIES


GETTING STARTED / COMMERCIAL FINANCE

Q: What are your top three tips for residential mortgage brokers who are looking to get into commercial finance?

Peter Kearns, Think Tank:

Ask your existing network of clients through your newsletter or just when catching up to find out how many have commercial property interests already

and whether they might have a need for commercial property finance in the future.

Take the time to understand what your client’s needs are and what outcome they are looking for. For example, a client with an existing commercial loan might be looking to release equity for further investment, others might be after larger business premises, while increasingly, many people are now looking to borrow through their self-managed super fund. If you note where the banks are falling down when servicing small business it is that the small business is focused on outcomes, while the bank is focused on revenue and cross selling.

Develop relationships with commercial specialists such as those within your aggregator group, specialist commercial broker groups or direct with dedicated commercial lenders. Some lenders provide more help on deals than others and we are always available to provide assistance.

George Sotiros, IMBSpend time with your self-employed clients you may have done some residential lending for. They are clients

likely to need commercial finance as well. Utilise your referral base such as accountants, solicitors and your local chamber of commerce. We all get work done by a small business operator, simply ask if they are happy with their current lender and see if you can save them some money.

Align yourself with a lender that can assist you in putting the transaction together. We get our business development managers to spend time with the broker putting their first few deals together. Once you get one or two under your belt then your confidence in doing commercial grows. You will also know who is best for what segment. You need to be seen as the expert by your client.

Cathy Dimarchos, SintexStart by letting people know that you can offer more than home loans. If people don’t know that you can offer solutions for commercial loans, then they won’t ask and

will simply go elsewhere.Don’t dive into the big ticket deals. Start

with the small business owners, like the retail shop owner, the hairdresser, the small office owner or Mum and Dad investors. These deals are simple and no different to a home loan.

Find a funder that gives you access to credit staff or decision makers so you can get the correct answer the first time. This helps build your confidence and gives the customer a simple and easy experience.

Ranjit Thambyrajah, AcuityClient satisfaction and retention are most important. Do not waste yours and the client’s time by shopping a transaction. If new to commercial, take the

transaction to a specialist. Don’t bite off more than you can chew. Get into the habit of bringing in specialists when required to best service your clients.

Seek expert advice and partner yourself with a reliable and experienced specialist who can show a successful track record in this business environment.

Iain Forbes, Australian First MortgageUnderstand your client requirements and bear in mind that most lenders will not accept specialised securities.

Remember that loan to value ratios are not as

high as that of residential lenders. The maximum available on a commercial full doc is an LVR of 75% of the valuation.

Obtain as much information as possible and submit the deal with all supporting information such as copies of tax returns, existing leases and loan repayment statements if an existing mortgage is to be discharged.

Q: What types of commercial finance would you recommend mortgage brokers start with?

Kearns: The best place to start is with finance for owner-occupied or investment properties whether it is for a purchase, refinance or equity release. These types of loans offer the greatest similarity to residential loans in terms of applicant, servicing, loan terms and either full doc or low doc. Other forms of commercial finance such as development finance are quite different and generally require some specialist knowledge and expertise to


GETTING STARTED / COMMERCIAL FINANCE

“Every broker must consider commercial lending” – IAIN FORBES

understand the merits of the transaction and how to source appropriate finance on the right terms.

Sotiros: Simple leases for motor vehicles or equipment and smaller mortgage transactions below $1m, including refinancing of current loans are probably the best type of deals to start with. Don’t chase the big stuff as there are experienced commercial brokers who will handle this. Small business owners who have survived the last few years post-GFC with some solid equity in their security, for loans of around $500,000 would be a great starting point. If the business is well run financially and you can give the lender a good understanding of who they are lending to, how long they have been in business and explain variances in their declared incomes year to year, then you have a better chance of getting the loan across the line.

Dimarchos: Look for small business owners; the panel beater workshop, or perhaps the commercial warehouse, just simple transactions. Don’t jump into construction or development or the multi-million dollar deals as these become complicated and drawn out.

Thambyrajah: Financing office blocks, as this is very similar to residential lending. Also, leasing, debtor/inventory finance and developments make a good starting point.

Forbes: Start small, with loans under $1m. Do not get into construction funding if you do not understand how it works, as it can be somewhat complex.

Q: How important is it for mortgage brokers to diversify?

Kearns: The changes within the industry over recent years suggest that diversifying the broker product and service proposition will be a positive move. With commissions being squeezed, payment terms tightened, increasing regulation and a softer property market, it has definitely become harder to build a business based on residential lending alone, particularly without the benefit of an existing trail book. The potential to diversify is there and arguably, there are much better training and professional development structures to

support brokers wanting to diversify into areas such as commercial finance, equipment finance and wealth management.

Sotiros: Diversification will ensure a consistent cash flow, insuring the broker against when the residential market is impacted by changes to interest rates or first homebuyer stimulus packages. By taking on commercial opportunities you are forming strong relationship skills with your clients rather than single lending opportunities. Commercial borrowers are also likely to come back to their originating broker for ongoing funding requirements.

Dimarchos: As the market changes, it is important to stay in touch with customer needs and demands. The consumer has become more astute as a result of the GFC and is keen to know all the options. Having different products to offer also ensures you have multiple income streams, it will ensure that income does not dry up.

Thambyrajah: In this market it is very important for brokers to diversify their range of services, and their biggest threat is if a client feels they have to look elsewhere to meet their commercial needs.

Forbes: It is important for every residential broker to consider commercial lending, as the income is very attractive.

http://www.owenlaw.com.au/


http://www.thinktank.net.au/


FOCUSIN

Four of the industry’s best brokers gathered together for the cameras of BrokerNews TV,

to discuss the hottest issues facingmortgage professionals today.

Proudly sponsored by


PANEL DISCUSSION / BROKERS

The panel on competition:What are your views on the market?Justin Doobov, Intelligent Finance The number of loans being written overall is declining, but from our side, the amount of loans we’re writing has increased. It looks like we’re taking a little bit of market share.

David Brell, SmartmoveI think generally speaking most consumers are underground and a little bit freaked out with the rate rise last year. I think they’re just waiting to see and assess where the market is going.

Brett Abikhair, The Selector GroupThe higher earning clients aren’t blinking, but the Mums and Dads are struggling a bit. The thought of a new rate rise, as we keep getting told, is really putting a slowdown on that area big time. And average loan size is going up too, which is interesting as it indicates a higher level of client.

This month’s guests

David Brell, Smartmove

Brett Abikhair, The Selector Group

Leeanne Scott, Mortgage Choice

Justin Doobov, Intelligent Finance

Leeanne Scott, Mortgage Choice I think there’s a unique opportunity for brokers at the moment. Because the market is down, the banks are becoming more aggressive with what they’re prepared to do, what they’re willing to offer. But the general public doesn’t know that. So we’re actually in the box seat to provide something unique to our clients.

The RBA has been flagging a potential rise in the next few months, how do you think that might affect the market?

JD: It will slow people down a little bit, but if one rate rise is going to kill you then you shouldn’t be buying a property.

LS: It depends on what market you work in as well … one more rate rise on the Gold Coast and we would go from non-existent to completely comatose.

PANEL DISCUSSION / BROKERS


What’s your view on the state of competition at the moment, do you think banks will remain dominant?DB: The competition is incredibly intense, I’ve never seen it better than this, but it’s really only within the major lenders and I think the major lenders are more concerned with themselves than opposed to the non-bank or the second tier.

BA: We’ve almost given up on our second-tier banks, which I hate to say, as we supported them all the way during the GFC, but we’ll get a deal approved with a CBA in three days and it will take up two weeks to get approved with one of the others – so it’s a business decision at the moment.

LS: I’m not finding that at all. And I would actually say that during the GFC, it was really the big four. You had your big four and then there was daylight between them and anyone else. Whereas what I’m seeing now is the next tier, if you sort of move away from your big four and look at Bankwest, Suncorp, ING, AMP – they are the ones that have really come back into the market with really competitive offers.

Will it help or hinder competition to remove DEFs?DB: It’s going to help the major lenders – there’s no doubt about it. Taking away a tool or a mechanism for a lender to protect themselves to be able to compete within a market is going to hamper competition. If you dwindle

JD: You can’t be a top broker and try and flog insurance and everything else at the same time and know all the ins and outs. Like with the floods, how many people were selling insurance that made sure their Queensland clients had proper flood insurance, probably 5%?

DB: I have a strong opinion of this. We’re in a business of providing mortgage solutions, not anything else, so we’ll stick with what we’re doing to be the best in the business. I don’t understand how anyone can be perfect at what they do. We have a whole office and all we do is mortgages, all we talk is mortgages, we just breathe mortgages, so we become – I like to think – the very best at doing that. We refer everything else on. I can’t see how I could be doing the best thing by my client, if I’m doing something else.

JD: We’ve got guys that will write the insurance but we won’t sell the insurance policy at the same time as signing up the loan. It needs to be a secondary process because there’s the loan and if we don’t win the insurance, that’s ok – but I don’t want to lose the loan.

BA: I’ve done it all on my own and it’s hard work. The business we’ve got now has pods and each of those pods are specialists… and each hub, the financial planning hub, or the mortgage planning hub, provides the technical advice. And that’s the only way I can see it working.

LS: At the moment, my clients come to me and they will ask me for the name of an accountant, they will ask me for the name of the financial planner, a solicitor – any of those avenues, and because they trust me they will trust who I send them to. Now if we were all working under the same roof it would be happy days – it would be awesome.

competition the major lenders are going to win, so it’s not a good thing for our industry and our consumers. So it’s probably the dumbest decision that’s ever been made.

On diversification:Do you think diversification is a viable option and are you using it in your own business?

BA: We started with a mortgage broker operation and built it into a multi-faceted financial services business. We look for different areas to drive lead generation into the business, but at the end of the day, we’ve got client revenue expectations, which we can’t get off a mortgage – full-stop. We run with the bank’s philosophy – if you’ve got a client with two or three products with you it’s highly unlikely that they’re going to leave… So we believe we’ve proven the fact that diversification works. The question is do you specialise as a broker inside a diversified financial services business or do you set up a diversified financial services business and put a broker in it?

LS: I’ve looked at the whole diversification piece, especially from Mortgage Choice’s perspective, and as far as we’re concerned, the mortgage broking is the main game. Do I really need the $23.76 I get for writing a general insurance policy or referring it for a life insurance policy at $3.72 trail? I’m a professional broker that knows everything about my game but I don’t pretend to know about financial planning or insurance or anything else and I refer all of that off.


“I know the banks would love a fee to come in, but I think it would be hard”

DAVID BRELL

On fee for serviceDB: I just don’t see a fee for service coming in. I know the banks would love for it to occur, but I don’t see it working. I think it would be hard for the consumer to comprehend.

LS: I think there are three levels of fee for service. There’s a genuine fee for service, which now the financial planning industry is being forced to look at – that’s a total fee for service. There’s also a no-go fee for service – where you can say, look we’re doing this amount of work, there’s an understanding that you will pay this amount of money. But I think the important one is the clawback fee for service.

JD: But why should we lose the commission? We’ve helped the client sav money. They might buy for half a million and a year later they get an offer for $600k to sell the property. The real estate agent’s made the commission on the in and on the out, the accountant has charged them fees, the solicitor has made money on both the purchase and the sale, and we’re the only schmucks that lose everything.

Comments have been edited. For a full account of the panel discussion, go to www.brokernews.com.au

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Best suburbsin NSW

One to avoid

5

Balmain East is New South Wales’ in-demand suburb for well-heeled buyers, with values in the area almost doubling in the last year. Average prices are over $2m though, so only serious earners need apply. The peninsula juts out into Sydney Harbour and sits just 5km west of the CBD, with many professionals commuting to work via the local ferry terminal. Less than 8km across Sydney, it’s a very different story. The average property in Breakfast Point will set you back the best part of $1.5m, but values have plummeted in the last year, with a decrease of 34%.

Thismonth’sround-uplooks atthe bestsuburbs forthose withcash tosplash

THED

ATA

Units in Deakin are the best option for those in Australian Capital Territory with money to spare. Apartments average around $780,000 in the suburb, but have risen in value by almost a third over the past 12 months. The affluent neighbourhood is home to a number of embassies and high commissions and is also the location of The Lodge, the official residence of the Prime Minister of Australia. At the other end of the scale, wealthy buyers may be better off steering clear of Forrest. Houses in the area command a heady $1.75m, but have dipped in value by 19% since May 2010.

ACT

NSW

SUBURB PROPERTY TYPE

MEDIAN PRICE

12-MONTH GROWTH

BALMAIN EAST House $2,100,000 47%

WAVERTON House $1,850,000 45%

LITTLE BAY Unit $915,000 43%

TENNYSON POINT House $1,540,000 40%

CHURCH POINT House $1,447,000 38%


MEDIAN PRICE

12-MONTH GROWTH

DEAKIN Unit $780,000 31%

ISAACS House $890,000 23%

O’CONNOR House $790,000 21%

GARRAN House $867,500 20%

YARRALUMLA Unit $850,000 19%

Best suburbsin ACT

One to avoid FORREST House 1,755,000 -19%

5

BREAKFAST POINT $1,485,000 -34%


Best suburbsin Qld

One to avoid

5

STATISTICS / HIGH NET-WORTH PROPERTIES

Less than 5km from the centre of Darwin, Bayview is one of the Northern Territory’s most enviable addresses and this table is just one of the reasons why. Units in the area average just shy of $900,000, but have grown in value by almost a quarter since the same point in 2010. The sought-after development even has its own marina. On the other side of the Stuart Highway, things over in Fannie Bay aren’t quite so promising. Houses in the suburb average close to a million dollars, but have experienced a 9% reduction in values in the last 12 months.

Tinbeerwah is Queensland’s premier destination for wealthy buyers with an eye on growing their investment. Average property prices in the area sit around the $1m mark and have improved by a third in the last year alone. The suburb is located on the Sunshine Coast, around 10km or so inland from the fabled resort of Noosa. The picture isn’t quite so rosy on the other side of Noosa Heads though, with property values on Sunshine Beach falling by almost a quarter. Bargain hunters needn’t get their hopes up though – you’ll still need to write a cheque for more than $800,000 to call the area home.

NT

Qld


MEDIAN PRICE

12-MONTH GROWTH

TINBEERWAH House $1,000,000 33%

TENNYSON House $705,000 28%

ANSTEAD House $850,000 26%

PULLENVALE House $1,150,000 25%

YUNGABURRA House $700,000 24%

Best suburbsin NT

One to avoid FANNIE BAY House $910,000 -9.1%

5

SUNSHINE BEACH House $805,000 -23%


MEDIAN PRICE

12-MONTH GROWTH

BAYVIEW Unit $897,500 23%

PARAP House $805,000 21%

NIGHTCLIFF House $787,500 18%

WOOLNER House $720,000 15%

DESERT SPRINGS House $695,000 7%


Best suburbsin Tas

One to avoid

One to avoid

5

South Australia’s top suburb for well-off house hunters is Unley Park in Adelaide. Average property prices in the area are in excess of $1.5m and have soared by 32% in the last year. In the last Australian census, more than two-thirds of the area’s residents were classified as high-income earners. Not far north-east of Unley Park sits Rose Park, which has endured a contrasting picture to its illustrious neighbour. It has seen a 7% dip in prices since May 2010, although average prices still remain comfortably over a million dollars.

Dynnyrne to the south-west of Darwin is Tasmania’s property appreciation hotspot, with values growing by almost a third in the past 12 months. Average prices in the area are around $550,000, which may seem modest by national standards, but are towards the upper end of Tasmania’s scale. Much of the area overlooks the Derwent River and the majority of the suburb’s property is less than two decades old. Slightly closer into Hobart, Battery Point hasn’t shared Dynnyrne’s growth spurt. Houses in the area have lost 14% off their values in the past 12 months.

SA

Tas

Best suburbsin SA

5

BATTERY POINT House $750,000 -14%

ROSE PARK House $1,221,000 -7%

SUBURB PROPERTYTYPE

MEDIAN PRICE

12-MONTH GROWTH

UNLEY PARK House $155,000 32%

TUSMORE House $1,070,000 32%

HAZELWOOD PARK House $726,000 31%

KINGSWOOD House $815,000 27%

NORWOOD House $822,500 27%

SUBURB PROPERTYTYPE

MEDIAN PRICE

12-MONTH GROWTH

DYNNYRNE House $550,000 32%

TRANMERE House $577,500 22%

TOLMANS HILL House $647,500 12%

ACTON PARK House $590,000 10%

SANDY BAY House $667,250 3%


STATISTICS / HIGH NET-WORTH PROPERTIES

Highgate is the second-smallest suburb in Perth, but one of its most stellar. Houses in the area have appreciated by 36% in the

last year to give a median price of $830,000. It sits 2km north-east of the CBD. East Perth has seen property values fall by 18% over the last 12 months, but you’ll still need almost a million dollars to live there.

Methodology – using RP Data’s comprehensive mine of information, we looked at the most expensive suburbs in each state, then ranked them in terms of the price growth they have enjoyed over the past 12 months. The bar was set at $550,000 and above, to account for the relative dearth of $1m+ properties in Tasmania, Australian Capital Territory and the Northern Territory. The suburb to avoid was the high net-worth property with the poorest growth figure over the last year.

Kooyong is Victoria’s suburb du jour with property values in the suburb almost doubling to north of $2m in the past

year. It is 6km south-east of Melbourne’s CBD, just south of the Monash Freeway. The area has its own lawn tennis club. A mere lob away, Armadale hasn’t matched this astonishing growth, with 15% falling off property values in the area since May of last year.


MEDIAN PRICE

12-MONTH GROWTH

KOOYONG House $2,145,000 46%

MOUNT MACEDON House $730,000 40%

IVANHOE EAST House $1,347,500 37%

MONT ALBERT NORTH

Unit $715,O00 35%

CAULFIELD House $1,236,000 31%

ARMADALE House $1,450,000 -15%


MEDIAN PRICE

12-MONTH GROWTH

HIGHGATE House $830,000 36%

KARAWARA House $775,000 30%

TRIGG House $1,080,000 27%

CRAWLEY Unit $709,500 26%

SHENTON PARK House $1,165,000 24%

EAST PERTH House $975,000 -18%

Vic

WA

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STATISTICS / YOUR MORTGAGE INDEX

Buyer activity on the rise Attracting 150,000 visits per month, yourmortgagecom.au is one of the most popular resources for homebuyers and property investors seeking information. MPA is taking advantage of its sister publication’s user activity statistics to gain a unique insight into the sentiment among Australian borrowers

When is the mortgage needed?

Buyer activity by state

PPerhaps the main take-away from the inaugural Your Mortgage index is the fact that first homebuyer interest continues to account for more than half of all home loan enquiries on the website, despite claims that potential homeowners are struggling with affordability issues. The size of loan requested has dropped slightly from $354,464 in April to $342,888 in May, but the percentage of all enquiries has increased to 50.33%.

Fixed rates seem to be the flavour of the month too, increasing in popularity by 2.39%, although still some way short of the standard variable rate stranglehold. There are also indications homebuyer activity may be on the rise with 84% of enquiries specifying an intention to purchase property within the next few months, up 7% from April. Finally, on a state basis, NSW continues to account for just over a third of enquiries to the website, while Queensland and WA experienced decreases.

See the tables below for a full breakdown of this month’s statistics.

0.00%

0.00%

10.00%

5.00%

Right now

NSW Vic Qld WA SA NT Tas

Next few months Not immediatley

May

April

May

April

20.00%

10.00%

30.00%

15.00%

40.00%

20.00%

50.00%

25.00%

30.00%

35.00%

Purpose of loan

0.00%10.00%

May

April20.00%30.00%40.00%50.00%60.00%

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NEWS / ROUND-UP

http://www.mezy.com.au/


LIFESTYLE / A DAY IN THE LIFE OF

6.30am Wake up and get ready for work. Normally the rest of the house is sound asleep, including the watchdog.

7am I drive to work while listening to the ABC, to get my fill of overnight news and views. I’m always sorely tempted to start making phone calls, especially to those friends in Perth who rang me at 10pm the night before!

7.30amI pick up my favourite morning drink – a tall skinny latte from Hudsons – and head into the office. While I enjoy my coffee, I review my emails and my diary and briefly skim the Financial Review.

8.15am Attend to as many emails as I can before the phone calls start.

8:45am Speak to one of our four state sales managers and have a quick chat about their day, discuss some sales strategies and initiatives and staff matters. I try to ensure that I speak to each of our state sale managers at some point during the day.

9am Catch up with my assistant Alex to review the day ahead and discuss current tasks and topics that need attention.

9:30am Call one of our business development managers to discuss market information and to catch up on their activities. Because Liberty’s business is made up of many asset classes, it’s important that we remain on top of the latest developments and trends.

9:45am Call another state sales manager.

10am I try to speak to several of our business partners to discuss any matters that they may have, such as specific loan or staff issues, their initiatives and results. I like to arrange a meeting with them face-to-face, or arrange for a member of our sales team to do so.

11am I normally attend several internal meetings, as well as make calls to both business partners and colleagues. I also attend to more emails and prepare for the afternoon.

12.30pm I try to catch up with at least one business partner a day, and what better way than over a nice lunch? I’ve always found that this is the best way to acquire information, commitment, feedback and tips. Some would say that this is the best part of my job, and I have to admit that I agree.

2.30pm I call another state sales manager en route to visit another business partner. I also use the drive time to return other calls.

3pm I don’t like rushed appointments, as it always seems to leave matters unfinished, so I try to make my business partner meetings open-ended, to allow us time to resolve or achieve our objectives.

4.30pm I normally return to the office and review my day. However, if my meeting has run later than expected, then I use my trusty Blackberry to complete the day in the mobile office.

5:30pm On the way home, I catch up on a few more phone calls, and catch up with another state sales manager. I always try to be home before 7pm, and in my mind I usually am, although my darling partner would disagree. I’m fortunate that she also works in the industry, so she’s very understanding.

7:30pm We sit down to our evening meal, and enjoy a gentle conversation and some fine wine as we compare what transpired throughout the day.

8:30pm If we don’t settle in front of the TV we’ll work on emails.

10:30pm I love finishing my day tucked up in bed with a large cup of Lady Grey tea, reading the Financial Review.

A day in the life of…John Mohnacheff, national sales manager of Liberty Financial

“I make my business partner meetings open ended, to allow us time to achieve objectives”


NEWS / ROUND-UP

http://www.choiceaggregationservices.com.au/

LIFESTYLE / FAVOURITES

Favourite things…Mark Hewitt General manager, sales and operations AFG

❤

Music: Bon Jovi, Green Day, Good Charlotte. Yes I am a bogan when it comes to my taste in music

Movie: This will probably surprise a lot of people but it would have to be Titanic

Place to be: The Greek island of Mykonos. We are taking some of our top performing members there later this year

Book: I am a sports nut and the best sporting book I have read is A Good Walk Spoiled, which follows golfers of different levels over a year on the US PGA tour. Great insights

Hobby: I enjoy keeping fit and try to mix it up with a combination of running, weights, boxing, cycling and swimming


Drink: A glass of woody Chardonnay

Celebrity: Kevin Matthews

Food: Grilled fish and salad or veggies

Sport: AFL. Living in Perth, my family are Eagles members, but I support Richmond through thick and thin and there has been plenty of thin

Vacation spot: I love travelling overseas, but there is something special about Uluru and the red centre

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LIFESTYLE / MOTIVATION

01Don’t be defensive – be curious

02Don’t make excuses – say what happened and take responsibility

03Don’t waffle – use less words

04Don’t use corporate-speak – use less words

05Don’t have an opinion if you don’t need one – stay open

06Don’t express opinion as fact – express opinion as opinion

07Don’t get too emotionally invested – detach and reflect

Andrew Horabin shares his secrets of how to get more honesty and straight talk at work

Andrew Horabin is a professional speaker, trainer, facilitator, author, comedian and singer/songwriter. The above principles first appeared in the book Bullshift

According to Andrew Horabin, bullshit in the workplace costs time, money and energy and is stripping the soul from the workplace. To this end, he devised a 14-principle plan to help workers be more efficient and more highly motivated. Whether you work in a brokerage, for a lender or at an aggregator, you may recognise some of the following traits in yourself and your colleagues, so work to eliminate them from your professional life, and your office could be a much happier space.

THE FOURTEEN PRINCIPLES 08

Don’t spread gossip – be respectful

09Don’t pretend you do if you don’t – be authentic

10Don’t act without awareness – know your motivation

11Don’t mutter – speak up

12Don’t leave out the truth – say the important stuff

13Don’t hide your judgements in jest – say it straight or don’t say it

14 Don’t expect truth without safety – make it safe

Bullshift!


http://www.yourmoneymagazine.com.au/

http://www.rpdata.com

http://www.commbank.com.au/

Documents

Mortgage Professional Australia magazine Issue 11.8