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The NEW name for Mortgage Business
ISSUE 4.1
INSIDE:
Sales and marketing
Analysis
Business intelligence
Residential wrap
Top broker profiles
The magazine for Australia’s mortgage and finance brokers
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CONTENTS
FEATURES
ISSUE 4.1
18
Opinions are made
within the first four
minutes of meeting
someone and 90 per
cent of that opinion
is determined in the
opening 10 seconds
– so it is important
you make those first
few seconds work
for you
ALLAN PEASE
LEARNING THE SILENT LANGUAGE
Allan Pease has made a successful career out of his ability to read people – and share his
tricks of the trade with the world. But he has another hidden passion, as The Adviser’s Jessica
Darnbrough discovers
32 INSURING YOUR FINANCIAL
FUTURE
48
32
Brokers are diversifying into insurance in a bid to
boost their bottom lines
36 SPECIAL REPORT
While non-bank lenders have been on the ropes
for much of the last few years they are far from
out of the fight
48 POINT BLANK
Joe Sirianni talks to The Adviser about how the
MFAA is responding to change and its plans for
the future
2 www.theadviser.com.au
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CONTENTS
REGULARS
28
IN THE FIELD
A WINNING COMBINATION
12
ANALYSIS
KNOCKING ON BROKERS’ DOOR
51
BUSINESS OUTCOMES
PAYS TO PLAN AHEAD
FRONTLINE
SALES & MARKETING
INTELLIGENCE
06 SAME TRUSTED SOURCE
22 MAINTAINING DRIVE
45 ECONOMY
Mortgage Business is now The Adviser,
reflecting the changing face of broking
Making New Year’s resolutions is easy,
sticking to them is hard
Market fundamentals highlight an economy
that’s on the road to recovery
07 RAMS EXIT
24 ON A SHOESTRING
45 MONTH IN NUMBERS
A slowdown in broker activity has forced
RAMS out of the channel
Keep your profit wheels turning with bus
shelter advertising
Data highlighting key issues and activities for
the month past
08 THE WORD
26 TRADE SECRETS
46 RESIDENTIAL WRAP
Industry pundits have their say on
commissions in 2010
David Johnson discusses the necessity of
strong referral partnerships
Property market activity remains strong
heading into 2010
10 CONSOLIDATION
28 A WINNING COMBO
47 COMMERCIAL WRAP
With licensing imminent, the broking industry
is set to undergo further consolidation
Accountants can prove to be an attractive
referral partner
The commercial property sector is bouncing
back to life as office prices surge
12 RETURN OF THE MAC
30 READ THE FINE PRINT
51 BUSINESS OUTCOMES
Macquarie Bank is set to reengage the broker
market, but is it too little, too late?
Effective disclaimers can safeguard brokers
from liability
Sales-based business plans can help brokers
achieve their full potential
4 www.theadviser.com.au
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FRONTLINE
BANKS TO HOLD RATES UNTIL
FEBRUARY
New name, same trusted
publication
MORTGAGE BUSINESS has come a long
way since its launch over three years ago.
With more than 10,000 print subscribers
and an on-line audience of over 53,000
readers each month, Mortgage Business has
carved out a reputation in the industry as the
respected source of quality news, analysis,
and commentary on the major issues
affecting the mortgage broking profession.
And as the profession enters a new era,
so too will Mortgage Business .
From this month Mortgage Business
will become The Adviser – reflecting the
changing face of mortgage broking and the
growth of the third-party channel.
“Consumers have always valued quality
brokers for their professionalism, knowledge
and ultimately, their advice,” said Jim Hall,
publisher of The Adviser.
“With licensing coming into play this
year we wanted to reflect the elevated
news
wrap
status of the broking industry and the
way in which quality brokers are valued as
trusted advisers. The Adviser reflects this
evolution.”
The increasing value placed by borrowers
on a broker’s advice is underpinned by the
findings in Genworth Financial ’s 2009
Mortgage Tends Report .
According to the report, 51 per cent of
borrowers would consider using a mortgage
broker to obtain specialist advice – and 55
per cent would seek guidance from a broker
on mortgage products.
“The trend in consumers turning to
brokers for specialist advice will only
increase.
“It is an exciting time for the profession
– and The Adviser will be leading the way in
keeping the industry up to date on the latest
news and developments as they happen,”
said Mr Hall.
HOMELOANS GOES GREEN
In a direct appeal to environmentally conscious
consumers, Homeloans Ltd has announced it
will plant a tree for every new loan it settles. The
green initiative is part of the non-bank lender’s
new agreement with Australian company
Carbon Conscious. Homeloans’ national
marketing manager Will Keall said the initiative
was part of Homeloans Ltd’s commitment to
the environment. “Big brands have a decision
to make as to whether they act now
and forever be seen as being proactive in combating
climate change,
or wait until
the emissions
trading scheme
is introduced and
be seen as reactive
like everybody else.”
MOST BROKERS believe the 27 basis point spread
between the majors’ standard variable rates will
remain unchanged until the Reserve Bank meets
again in February.
According to a recent online poll by The Adviser,
76 per cent of brokers believe the big banks will take
a ‘wait and see’ approach to rate changes, holding off
until the Reserve Bank meets in February.
Of the 358 respondents, only 19 per cent said
they thought the majors would narrow the spread
between the standard variable rates before February,
while 5 per cent were unsure.
Citibank head of distribution and marketing
Peter Hayward said it was difficult to predict how the
majors would react to the RBA’s decision, with the
way they set rates dependent on funding constraints.
“Every bank has its own methodology for
funding. As a result, funding costs are quite
disparate… That has a direct impact on standard
variable interest rates,” Mr Hayward said.
Intelligent Finance managing director Justin
Doobov said he expected to see the majors fall back
into line on rates over the next three to four months
and said consumers should take heed.
“We warn our clients not to select a loan solely
based on current interest rates, as they are likely to
change. Instead, we recommend they consider a
number of factors and then decide on the loan that is
most appropriate for them.”
STRAW POLL
FUTURE FINANCIAL
BOOSTS PRODUCT SUITE
ING DIRECT TO COMPETE ON
FIXED RATES
Future Financial has added two
extra home loans to its product
suite in a direct challenge to the
majors. The new Future Mortgage
Minimiser home loan comes with
a standard variable rate of 5.89 per
cent p.a. and a 100 per cent offset
account, with unlimited redraws
and a Visa debit card. The Future
Assurance product has a standard
variable rate of 6.29 per cent p.a.,
capped at 7.49 per cent p.a. for
two years. A spokesperson
for Future Financial said
competition was returning
to the market “providing an
attractive alternative for brokers
and borrowers to consider”.
ING DIRECT has lowered the rates on its
two, three, four and five year fixed rate
residential mortgage products
as it gears up for increased
competition in the fixed
rate product market.
ING DIRECT’s executive
director of mortgages
Lisa Claes said the lender
anticipated a rise in fixed
rate applications in the
current rising variable rate
environment. On expiry of
the fixed rate term, the loan
will revert to ING DIRECT’s
mortgage simplifier loan
rather than the standard
variable rate.
new dwellings annually are needed to meet the demands of Australia’s inevitable
growth, says Property Council of Australia’s NSW acting executive director Glenn Byres
6 www.theadviser.com.au
Number of Voters: 358
WILL THE GAP BETWEEN THE BANKS’ RATES
NARROW BEFORE THE RBA MEETS IN FEB?
76%
NO
271
YES YES
69
19%
5%
DON’T KNOW
18
EUROFINANCE
RAMS to exit
broker channel
RAMS HOME Loans will exit the broker channel effective 26
February 2010.
According to R AMS chief executive Melos Sulicich, the
recent slump in broker activity was the main driver behind the
lender’s departure.
“Following a review of the options available to manage lending
growth it has become clear that pursuing a dual distribution model
in the current environment is not the best use of our resources. As
a result, RAMS Home Loans has taken the difficult decision to
close its broker distribution channel,” Mr Sulicich said.
“The decision to withdraw from the broker channel was
not taken lightly but it is important that we align our time and
resources to the activities that add the most value to our customers.
We’re convinced that focusing on the franchise network is the
right structure for RAMS and we are committed to growing and
developing the franchise business.”
RAMS spokesperson Paul Smith told The Adviser
that the lender sent letters to aggregation heads
informing them of the change.
“Nothing will change for pre-existing
customers. However, any customer that
wants to refinance with RAMS will
not be able to do so through their
broker.”
RAMS has also changed the pricing on its full
doc loan, reducing its loan-to-value ratio from 95
per cent to 85 per cent in the broker channel.
NAB EYES OVERSEAS
TARGETS
CLUB FINANCIAL SERVICES
LAUNCHES TV PROGRAM
National Australia Bank has
reportedly expressed interest in
one of the 300 plus branches the
Royal Bank of Scotland (RBS)
has put on the market – having
already signaled its intention
to buy Northern Rock. But it
faces competition from Richard
Branson’s Virgin Money, which
also has its sights set on overseas
expansion. NAB has already
ventured into the UK
market with its
acquisition of the
Clydesdale
and
Yorkshire
banks.
Club Financial Services will launch
a new on-line TV service in February
called Your Net Prophet, which will offer
financial and economic information.
Club’s director of operations David
Garner said the program would
give the company a new channel
for communicating with a wide
audience. “Because
we control the
program we can
get our message
across smoothly,
without it being lost
in translation,” he said.
“People can tune in and
watch the program live, or
tap in at a time that suits them.”
FAST FIGURES
IN 2009, THE SIZE
OF THE AVERAGE
HOME LOAN IN
AUSTRALIA HAS
GROWN BY
8%
ACCORDING TO THE
LOAN MARKET GROUP
35
YEARS
IS THE PREDOMINANT
AGE OF FIRST
HOME BUYERS,
REPRESENTING
TWO THIRDS
OF THE MARKET, THE
ABS HAS REVEALED
CHINA HAS HIKED
THE YIELD ON ITS
THREE MONTH BILLS BY
1.3684%
THE FIRST INCREASE IN
ALMOST FIVE MONTHS
BANKWEST BEEFS
UP BROKER
SUPPORT
Bankwest has appointed
Aaron Milburn as its new
head of broker sales as it
prepares to ramp up its
third-party distribution
business ahead of industry
regulation. Bankwest head
of retail sales Mark Reid
said the new role was
created “to ensure
Bankwest capitalises
on opportunities
within the broker
channel as a direct
result of the upcoming
industry regulation
changes”.
the rise of new home sales in November 2009, according to
the latest Housing Industry Association survey
NEW EURO
PRODUCT
REFINANCE
LOAN
This product has
been specifically
created to:
✔ Assist borrowers to
REFINANCE so as to enable
them to rearrange their
financial affairs.
✔ Enable borrowers to
overcome existing lenders
demands that the loan be
repaid immediately.
FOR MORE DETAILS
CONTACT Colin Sherry
[email protected]
02 9252 8311
FRONTLINE
the
word
Debate about commissions has raged since they were cut in 2007 but what do
industry pundits have to say on the topic as we enter the new year...
ARE COMMISSIONS LEVELS SUSTAINABLE AND WILL THEY
CHANGE IN 2010?
BRENDAN O’DONNELL
ALISON WHITTLE
RAY HAIR
PETER HAYWARD
MICHAEL COOMBES
POSSIBLE
FUTURE
INCREASES
COMMISSION
CUTS WOULD BE
DETRIMENTAL
IT’S TOO
EARLY TO
MAKE A CALL
HIGHER FOR
QUALITY
BROKERS
NO CHANGES
ON THE
HORIZON
Choice Aggregation Services
“TODAY WE have
brokers working harder
to make the same
return and many have
not, and probably will
never recover, the lost
revenue as a result of the
commission reductions.
In the short term – that
is the next 12 months – I
don’t believe we will
see any major change
to commissions. As
competition comes back
into the market and we
start seeing non-banks
and regional banks play
a more significant role,
then I believe we may
actually see an increase
in commissions – but…
this will be targeted and
depend on the nature
and professionalism of a
broker/brokerage.”
8 www.theadviser.com.au
Tiffen & Co / The Mortgage Detective
“I HOPE commission
levels are sustainable this
year. There is certainly
plenty of industry talk
about commissions
by brokers, as any
commission cuts would
be detrimental to the
third-party channel.
It is a hard one to call
because it essentially
depends on the lender’s
perspective, that is,
how much value they
place on the third-party
channel. While brokers
want to be paid fairly for
their services, a broker’s
product offering is not
centred on commissions,
rather, it’s all about
trying to source the right
product, price and value
for their clients.”
PLAN Australia
“IT’S HARD to make
a call at this stage as
to whether broker
commission levels will
be sustainable in 2010. In
the past, and particularly
when we look at the
global financial crisis,
banks were hit by
funding costs and this
led to a reduction in
broker commissions.
The situation is different
now because there is
more competition in
the market. This has
effectively alleviated
the downward pressure
on commissions by
the banks. Having new
competition in the
market can only be a
good thing.“
Citibank
“THERE WILL definitely
be movement in broker
commissions this year.
For some brokers it
will be an upwards
movement, for others, it
will be downwards. The
key driver for increased
broker commissions
in 2010 will be a focus
on the quality of home
loans written rather than
volume. Commissions are
important, for both broker
and lenders. Brokers
have the ability to defray
some costs that lenders
otherwise have to bear
when dealing with poor
quality loans. I believe that
brokers who have good
quality loan applications
with strong borrowers will
grow their relationship
with lending institutions
and this in turn can only
lead to profitability.”
Southshore Finance
“I DON’T think
commissions will be
moving upwards, nor
will banks try to drop
them. Banks are in
control at the moment.
Commissions are
important to a broker’s
offering, but not so
important that a broker
would choose a lender
based on which lender
offered the highest
commission. We aim
to provide the best
service and product
for our clients, and
that takes priority over
commissions.”
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FUNDING BUSINESS SUCCESS FOR OVER 20 YEARS
FRONTLINE
ANALYSIS
Consolidation inevitable, but a good
thing – brokers
With a new regulatory regime imminent, the broking industry is set to undergo
further consolidation. But brokers remain optimistic about the future
BROKERS ARE preparing for a further
shake-out when new laws regulating the
industry come into effect later this year.
Athough they will be operating in a
new environment, many brokers view likely
consolidation among groups – and the new
regime – as positive.
According to the results of a recent
straw poll conducted by The Adviser, an
overwhelming majority of brokers – 92 per
cent – believe the industry will face further
consolidation in 2010.
Lake Macquarie Home Loan Centre’s
lending manager Jamie Payne is one such
broker, pointing to the impact the new
licensing regime will have on smaller
brokers in particular.
“Individual brokers and part-time
brokers will be hit the hardest by the
changes in 2010 and may need to
consolidate,” Mr Payne says.
Similarly, ongoing lending constraints
may force smaller brokerages to consolidate
for their very survival.
OneSite Finance Solutions director
Elizabeth Setiawan says small brokerages
will struggle to survive if the lending
environment worsens.
“The market will find it difficult to
sustain smaller brokerages, so I think we will
see more of them merge together in 2010,”
she says.
But despite the likelihood of further
consolidation, Ms Setiawan is confident
the broker channel will remain relevant to
consumers.
“While legislation will undoubtedly force
some of the smaller players to consolidate or
be removed from the market entirely, I think
this will ultimately be a good thing for the
industry as a whole,” says Ms Setiawan.
STRAW POLL
Number of Voters: 517
DOES THE BROKING INDUSTRY FACE FURTHER
CONSOLIDATION NEXT YEAR?
YES
NO
477
27
92%
5%
DON’T KNOW
13
3%
“I believe the outlook for brokers is
positive. I have confidence in the future
of broking. The broker channel can only
improve, grow and prosper from here on.”
Mr Payne agrees that the industry faces
a bright future.
“The business for brokers is growing, not
declining,” he says.
“Brokers are increasingly popular among
borrowers who see them as a valuable tool
to help find the right loan. Also, real estate
agents are increasingly aligning themselves
with brokers for the purpose of client
referrals.”
In fact, new laws and lending constraints
aside, many brokers are predicting that 2010
will be a year of growth rather than decline.
The Adviser ’s Q3 09 Sentiment Survey
revealed that most brokers expected
business to either grow (49.8 per cent, up
6.2 per cent from Q2 09) or remain the same
(39.3 per cent).
Only 10.9 per cent anticipated that
business would fall away.
FRONTLINE
ANALYSIS
Knocking on brokers’ doors
Almost two years after its sudden departure from the mortgage lending
market, Macquarie Bank is poised to make a return. But is it a case of too little
too late for the second tier lender?
MACQUARIE BANK’S exit from mortgage lending in March 2008
took the market by surprise – and left a sour taste in the mouths of
many brokers and consumers.
In a statement released at the time, Macquarie’s decision was
said to have been prompted by the “conditions in the cost of funding
mortgages”.
Throughout 2009, rumours persisted that the lender was set
to stage a comeback. In September, the bank’s head of mortgages
refused to be drawn on the issue except to say that Macquarie was
keen to re-enter the market at some future time.
That time appears to have come. Macquarie is cautiously testing
the waters, teaming up with its aggregation partner AFG, in which
it is a cornerstone investor, to conduct a small-scale trial of a new
product offering.
But will brokers – burnt by the lender’s sudden exit – come to the
party this time around?
“Macquarie has been monitoring the market for some time and
looking at a variety of opportunities. Our focus has been very much on
building our diversified funding strategy and building a sustainable
business for the long term,” says a Macquarie spokesperson.
The spokesperson said the Macquarie/AFG trial was aimed at
gauging broker appetite for the product and would hopefully result
12 www.theadviser.com.au
in a broader distribution of the lender’s products. But they would not
be drawn on the timing.
“We are in the very early stages of our trial and as such, we don’t
have any update on when an offering may be available to the market
more widely,” the spokesperson says.
AFG general manager sales and operations Mark Hewitt is
confident the trial will prove successful and encourage Macquarie to
stage a full-scale return to mortgage lending.
“As the trial was launched just before Christmas, it is too early to
understand the impact it has had on our brokers,” Mr Hewitt says.
“However, I think it [the trial] is a good sign for both Macquarie and
the industry as a whole.”
Taylored Financial Solutions director Richard Taylor agrees.
“The timing is good, very good,” says Mr Taylor.
“Access to wholesale funds is improving, which is ultimately
helping boost competition in the sector and Macquarie’s decision to
re-enter the market will only serve to boost competition further.”
But while Mr Taylor says Macquarie’s re-entry will benefit both
brokers and consumers, he is wary of using the lender’s services.
“They pulled out once, which infuriated a lot of people, and there
is nothing to say that they won’t do it again,” he says.
“In order for them to make any impact on the market or the broker
channel, they would want to be offering a suite of products that is
competitively priced and not like anything else currently available.”
Auspak Financial Services co-founder Mark Mellick says
Macquarie would be wise to take the time to sit down with brokers
and discuss with them how the lender can differentiate its offering.
Macquarie has been monitoring the
market for some time and looking at a
variety of opportunities
MACQUARIE SPOKESPERSON
“A lot of brokers and consumers were left feeling burned when
Macquarie left the market so suddenly in 2008,” Mr Mellick says.
“Brokers have a long memory, so I think it will be a while before they
can trust the bank again.”
He suggests Macquarie “hold a launch party for their product
when they are ready to expand their distribution channel beyond
AFG and let brokers know exactly what they can expect”.
“They should give their broker channel an overview of their new
and improved services as well as a holistic overview of the company,”
he says.
e s
his tie
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Fra rt ila
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Do you have the drive
to go further?
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or call 1800 616 082
RAMS Financial Group Pty Limited ABN 30 105 207 538. WA Finance Broker Licence No. 4602.
Credit Provider: Westpac Banking Corporation ABN 33 007 457 141.
0078/MB/1312
FRONTLINE
ANALYSIS
Rate gap creates non-bank opportunity
The RBA’s December rate hike has created the largest standard variable
rate spread between the majors in more than a decade – laying down a fresh
challenge to the non-bank sector
STEVE WESTON
WHEN THE RBA lifted the official cash rate in December by 25 basis
points, few could have predicted the events that were to follow.
Westpac was the first big bank to respond, raising its standard
variable home loan rate 45 basis points – 0.2 per cent higher than the
RBA cash rate hike.
Seeing an opportunity to capture market share, NAB opted to
follow the RBA’s lead with a 25 basis point rise. Meanwhile CBA and ANZ
sought the middle ground, lifting their standard variable rates (SVR) by
39 and 37 basis points respectively.
Advantedge’s general manager of distribution Steve Weston says
the 27 basis point spread that now separates the majors is the largest in
over a decade. And he says this is good news for the non-bank sector.
“The last time there was a spread like this was last century when
CBA moved to match the rates of RAMS and Wizard, leaving the other
majors behind,” Mr Weston says.
At 6.76 per cent p.a, Westpac’s SVR is priced the highest, while ANZ
and CBA are not far behind with SVRs of 6.66 per cent and 6.61 per
cent respectively.
NAB now offers the most competitive variable mortgage rate of
the majors at 6.49 per cent.
Mr Weston says traditionally the majors have kept their rates fairly
closely aligned.
“Rates move in cycles. So while we will see all of the majors eventually
STANDARD VARIABLE HOME LOAN RATES
NAB
CBA
ANZ
WESTPAC
25 bp
37 bp
35 bp
45 bp
6.49% p.a.
6.61% p.a.
6.66% p.a.
6.76% p.a.
14 www.theadviser.com.au
fall back in line with one another, I think we are going to have a period of
difference, which is great news for the non-bank sector,” he says.
Indeed, many second tier and non-banks lenders responded to
the RBA’s move with only nominal increases to their variable rates,
presumably seizing the opportunity to tackle the majors head on.
Australian First Mortgage for example lifted its variable rate by
25 basis points to just 5.99 per cent, 77 basis points below Westpac’s
offered rate.
Mr Weston says Westpac’s decision to raise rates significantly above
the RBA cash rate effectively opens the door for non-bank lenders
looking to re-enter the market.
“A wonderful opportunity currently exists for both non-banks and
mortgage managers. They just have to make sure they make the most of
this opportunity,” he says.
WHO Finance’s co-principal Michelle Coleman agrees that the
variable rate spread between the majors is good news for the non-banks
and second tier lenders.
“Westpac’s decision to raise its rates by 45 basis points will
encourage non-bank lenders to believe that they can compete in the
industry again,” says Ms Coleman.
But it seems the broking community is yet to be convinced. According
to The Adviser ’s most recent straw poll, only 17.4 per cent of the 390
brokers surveyed believed competition among lenders had improved,
with an overwhelming majority – 80.3 per cent – saying it had not.
Ms Coleman says she is surprised by the result.
The last time there was a spread like
this between the majors and non-bank
lenders was last century when the
Commonwealth Bank moved to match the
rates of RAMS and Wizard
STEVE WESTON
Advantedge
“While we haven’t seen a great deal of non-banks and second tier
lenders make their mark on the industry of late, I believe it is starting to
happen and we should see increased competition heading into 2010,”
she says.
Although Ms Coleman’s sentiment is not widely supported by other
brokers, the fact of the matter is, access to wholesale funds is starting
to improve, which suggests it might be easier than first predicted for
non-bank lenders to really penetrate the market and have an impact on
competition throughout 2010.
We’re committed to supporting high-quality
professional brokers as well as our key
industry partners.
As the industry enters a new phase of its
evolution we commend Sterling Publishing
on its timely rebranding of Mortgage
Business to The Adviser – a move which
reflects the changing face of the broking
industry.
We wish the team at The Adviser and all
our business partners across the industry
the best for this year.
©2010 Westpac Banking Corporation ABN 33 007 457 141
178683 (01/10)
FRONTLINE
EVERYONE HAS AN OPINION, AND SOME
PEOPLE FEEL COMPELLED TO SPEAK
OUT. HERE ARE JUST A FEW COMMENTS
PROMPTED BY DAILY NEWS BROKEN ON
WWW.THEADVISER.COM.AU OVER THE
LAST MONTH.
ON NAB’S LOWEST RATE OF THE MAJORS
e they source their fund s for lendi ng from . Obvio
‣ Maybe West pac and CBA shou ld ask NAB wher
go.
are much cheaper than wher e West pac and CBA
ns
Optio
Geoff Valle nder, Home Loan
usly their fund s
‣ Meanwhile, back at the ranch, the banks are reporting bigger profits than before due to the
gouging of home loan customers – and both the [Reserve] Bank and the government do not give
two hoots!
Jerry Gibb, Coast Line Mortgage Services
ON WESTPAC DEFENDING ITS DECISION TO HIKE RATES
‣ If the reason for the 45 basis point increase is funding costs, then it must be more expensive to fund Westpac
loans than St George loans or even RAMs loans.
Kurt Armbruster, Carnegie Morgan Hill Finance.
‣ Enjoy your Xmas bonus, you bank executives have worked hard during the financial crisis to
protect yourselves. Don’t worry about the punter on the street.
Ian Fraser, Fraser Financial Services
ON HOW THE MFAA PUSHED LENDERS ON MINIMUM REQUIREMENTS
‣ In what has unfortunately become a typical ham-fisted announcement, the MFAA suggests lenders discontinue [their]
focus on volumes by suggesting the MFAA focus on alternate volumes. If conversions isn’t a volume metric what is? And
what about [having a] minimum number of lenders on a panel, minimum number of loans per quarter; [aren’t] these all
volume-based metrics? The MFAA is once again being played like a puppet or playing the fool at the expense of its broker
membership. I had hoped the recent elections would result in brokers’ interests being represented above that of the lenders,
consumers and the regulators – it appears my hopes are dashed and we see more of the same.
Andrew Hunter
‣ Why would I need to have a minimum of 11 lenders? If I prefer less [sic], why would that deem me an
unprofessional adviser?
Pat Guarnaccia, R-Finance Australia
‣ You guys are absolutely on the correct path with this approach. I have been a reluctant member of a number of
“trade associations” over many years – reluctant because they used my subscriptions to support the interests of
members from the big end of town rather than the smaller independent businesses. Volume criteria fly in the face of
the very concept of the independent broker; if a lender’s offering is not competitive at the moment then that lender
should get nil support until they become competitive. Please keep up the good work – I can’t see any aggregator
group prepared to take on the fight.
Stuart Litchfield, Active Finance
16 www.theadviser.com.au
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CBACM1471_A
PROFILE
LEADER
Learning
the
silent
language
18 www.theadviser.com.au
Allan Pease has made a successful career out of his
ability to read people – and share his tricks of the trade
with the world. But he has another hidden passion, as
The Adviser ’s Jessica Darnbrough discovers
SELLING POTS and pans door-to-door is a far cry
from the jet-setting life of a best-selling author and
public speaker.
But not only was that Allan Pease’s first job, it
was how he discovered his talent for sales – and for
reading people, thanks to days spent going door-todoor with his father selling financial services.
“My dad taught me how to read simple body
language. He taught me how to get in the door and
how to sell effectively,” says Pease.
“I learnt to recognise when people were being
apprehensive, when they were likely to say no, and
more importantly, when they were likely to say yes –
which is how I got my first job.”
Pease no longer has to rely on door-to-door sales
to get by. A resident of the Gold Coast where he lives
with his second wife and their two children (he has
six in total), Pease has written 15 bestsellers that have
been published in 51 languages across more than
100 countries and sold more than 25 million copies.
His latest book, Why Men Want Sex and Women
Need Love, is currently a bestseller in Australia, New
Zealand, Spain, Italy and France.
But it was his first best-selling book, The
Definitive Book of Body Language, that had people
sit up and take notice, and which became the
communication bible for organisations worldwide.
It all began with selling pots and pans. At the age
of 17, Pease became the company’s best salesman,
and was asked to present to other employees on the
art of selling. He went on to sell insurance door-todoor and became the youngest person in Australia to
achieve sales of over one million dollars.
Realising he had a hidden talent for reading body
language, Pease embarked on a career as an author
and public speaker.
He has since lectured in more than 55 countries
and is known the world over for his simple
techniques that achieve big results.
Pease says the way people move their bodies and
physically interact with others can have a significant
impact on their success in business and life. And he
says people should never underestimate the power
of first impressions.
“Opinions are made within the first four minutes
of meeting someone and 90 per cent of that opinion
is determined in the opening 10 seconds – so it is
important you make those first few seconds work for
you,” he says.
“You do not get a second chance to make a first
impression. In a face-to-face sales presentation, the
way you look will account for 80 per cent of the other
person’s opinion. What you say only accounts for 10
per cent and the rest is made up by the tone of your
voice.”
According to Pease, men who want to be
regarded as professional and trustworthy should
always wear a tie and polish the backs of their shoes.
“When a man stands up after a business meeting
and walks out the door, the person they are leaving
behind will be looking at their heels. If you have
scuff marks on the back of your shoes, people will
subconsciously perceive you as being lazy and
unprofessional,” he says.
Pease also says folding your arms or crossing
your legs can be seen as an intimidating gesture, and
clients would be unlikely to trust your advice. “Always
look presentable, never cross your arms or legs in a
meeting and always shake hands with an open, flat
palm,” he says.
By observing body language, Pease says it’s also
easy to spot a liar. “When someone is lying, hand to
face contact increases in frequency as do predictable
phrases such as ‘believe me’ and ‘to tell you the
truth’,” he says. “When people are lying, they like
to increase their ‘believability phrases’. If they are
touching their face while giving you a ‘believability
phrase’, warning bells should sound.” >>
www.theadviser.com.au 19
PROFILE
LEADER
>>
CLIMB EVERY MOUNTAIN
Pease has achieved unimaginable career success by
possessing a special talent. But his success has not
been accidental.
He is a firm believer in setting goals and writing
them down, and sets himself a list of goals each year.
Over the years, his goals have ranged from climbing
Mount Kilimanjaro (which he will do this year) and
learning how to tap dance, to giving advice to Boris
Yeltsin on how to look presentable on television. The
list may have 28 or 128 goals, says Pease, but to him it
is only important that he achieve just three each year.
“On my list originally was presenting a seminar
in Russia. However at the time, the Cold War was
preventing me from reaching that goal,” he says.
You do not get a second chance to make a first
impression. In a face-to-face sales presentation,
the way you look will account for 80 per cent of
the other person’s opinion. What you say only
accounts for 10 per cent and the rest is made up
by the tone of your voice
ALLAN PEASE
Pease says people would ask him ‘how’ he could
make it happen.
“I told them the ‘how’ was irrelevant because as
soon as I had worked out the ‘what’, the ‘how’ would
present itself.”
And it did. After striking up a friendship with a
Russian expat during a seminar he was attending,
Pease soon found himself lecturing Russian
politicians at the Moscow Kremlin on their body
language and presentation skills.
“The common mistake everyone makes is
deciding on how they can achieve something,”
Pease says. “Never do that, because if the how is not
clearly obvious you will never try. It is important to
ask yourself ‘what’ you want to do not ‘how’ you can
achieve it.”
SCALING NEW HEIGHTS
Pease’s next big goal is to fulfil a dream he has had
since he was 16 years old – becoming a rock star.
It’s a dream he once came close to realising,
many years ago. Pease’s heavy metal blues band won
the Battle of the Sounds competition in 1968, but
was knocked out in the Australasian final by a group
that would later be known as The Little River Band.
“The following year, I was all set to go to
Woodstock,” he says. “I had even bought my ticket
when my girlfriend told me she was pregnant. So
I did what any self respecting young man does – I
married her and sold my base guitar to pay for the
baby’s cot.”
But while his passion may have been sidelined
for a while, it never left.
Pease has built a music studio in Brisbane and
has taught himself to play “almost every instrument
imaginable”. The self-confessed “music nerd” has
been playing the guitar and piano for as long as he
can remember and has always wanted to write and
record music.
“And this year I plan to do just that,” he says. It’s
one goal Pease is certain to tick off his list.
SALES & MARKETING
EFFECTIVE HABITS
Maintaining the
momentum
Making a list of New
Year’s resolutions is
easy – it’s sticking to
them that’s the real
challenge. It’s the same
with business planning.
But through staying on
track you can achieve
your goals, writes Alex
Whitlock
THE CHRISTMAS break is the perfect
opportunity for brokers to reflect on the
year that was, and start planning for the
year ahead.
Planning can be an exciting and
inspiring process. But good intentions can
quickly fade into missed opportunities
without a structure in place to help put
them into action.
Whether you’re looking to break into a
new market, diversify your product offering,
ramp up your referral relationships, or
simply operate more efficiently, having a
structured action plan is the best way to
see your business dreams become a reality.
MAKE A PLAN OF ATTACK
Putting ideas down on paper is a good way
to give some structure to your thinking
and identify what priorities and aspirations
you have for your business. Start with
a simple outline of some key goals, a
timeframe within which you’d like to
achieve them and what steps you’ll need
to take to get there. It’s also important
to think about the costs that may be
associated with achieving your grand
vision – and setting a budget accordingly.
SET GOALS
Having a clear vision and goals will not
only keep you motivated but will greatly
improve your chances of success –
especially if you’re planning to head in a
new direction or into unfamiliar territory.
Goals should be broken down into
short, medium and long term. The golden
rule in goal-setting is to make sure the
goals are realistic and achievable –
otherwise you’ll be setting yourself up to
fail. For example, if your goal is to grow
your client base by 20 per cent each year,
break down your strategy for achieving
this goal into bite-size chunks, setting
22 www.theadviser.com.au
weekly, monthly and quarterly targets. Then
set about achieving those goals one step at
a time. Take your time and be thorough, it is
more important to achieve your goals than
reach them quickly.
SEEK FEEDBACK
Seeking and getting feedback on the effect
of the changes you are making or actions you
are taking in support of your business goals
is an important part of helping you achieve
them. If you have introduced a new client
service program, for example, survey your
customers to find out what their experience
was. There is nothing better than customer
feedback endorsing that you have improved
your service – or ide ntifying where you
could do better.
STAY THE COURSE
You need to be patient in achieving your goals
– don’t expect success to happen overnight.
Most new initiatives take time to bear fruit,
so don’t be too quick to can a new initiative
if it doesn’t deliver instant results. But if it
becomes clear that something simply isn’t
working, consider how you might change tack.
It is prudent to look closely at your goals
and tactics if results are not forthcoming and
perhaps change your approach if required.
REVIEW
When implementing new initiatives it is
essential to monitor their success on a regular
basis. Ask yourself whether your objectives
are realistic and achievable, your methods
effective and the results what you expected.
Even the best strategies need to be revised
and tweaked as they take shape because
theory is often very different to practice.
Reviewing your actions will ultimately help
your stay on the right path as you’ll be able
to correct mistakes and make improvements
as you go along.
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9706/1009
SALES & MARKETING
ON A SHOESTRING
Get on the bus
shelter, that is
Bus shelter advertising is an effective way to get your business noticed – and
your profit wheels turning round and round
WAITING FOR a bus can be very tedious and boring. But it’s
also the perfect opportunity to market your business to a
captive audience.
With the right message as well as look and feel, an
advertisement on the side of a bus shelter can be a very
effective way to market to both waiting passengers as well as
passing commuters.
Marketing director Elvira Lodewick of Adshel, one
of Sydney’s largest signage companies, says bus shelter
advertising can help a business reach a mass audience in a
way that is both high impact and effective, as well as creative.
And the best part – it’s more accessible than you might think.
“Some people are under the assumption that in order
to have a bus shelter sign, you need to first cut through
local government red tape,” says Ms Lodewick. “We want to
raise awareness that this is not necessarily the case. Adshel
holds numerous bus shelter contracts nationally and as a
consequence, no government approvals are required for the
majority of campaigns.”
Adshel sells a range of advertising packages tailored
to meet the needs of a particular business, including
environmental (roadside, rail, airport and retail),
demographic and proximity targeting. In recent months,
it has also been working on a new audience measurement
system, to be launched in February 2010.
Tracie Palmer of LJ Hooker Financial Services in
Queensland describes as “phenomenal” the benefits of bus
shelter advertising for her business, “particularly in terms of
brand marketing”.
My bus shelter advertisement has my picture on
it, and it’s fantastic for local recognition
TRACIE PALMER
LJ Hooker Financial Services
Her business advertises on a bus shelter in the district
of Albany Creek in Brisbane’s north and says bus shelter
advertising is great for brokers who are looking to raise their
profile locally.
“My sign has my picture on it, and that’s fantastic for local
recognition,” Ms Palmer says.
“It’s a fantastic way to get your name out there. People I
deal with often say to me ‘I recognise you from your picture
on the bus shelter’. That shows it’s really working.”
But for businesses to get the most out of this form of
advertising, Ms Palmer says location is essential. “My sign
is situated at a bus shelter by a main road, near a set of
traffic lights. I find that this has maximum impact for both
pedestrians and motorists, especially during peak hour,”
she says.
And for Ms Palmer, the return is definitely worth the
investment, although she has no way of knowing just how
many people pass by the sign each day.
“It costs about $125 a month, which is negligible when
you think of all the benefits generated by this kind of
marketing,” she says.
BUS SHELTER BENEFITS
tREACH A MASS AUDIENCE
tHIGH IMPACT
tCAN BE CREATIVE
tCONTEXT RELEVANT
tCLUTTER FREE
tNON-INTRUSIVE
24 www.theadviser.com.au
SALES & MARKETING
TRADE SECRETS
E SECRETS
FILE: TRAD
JOHNSON
NAME: DAVID
IGWIG
UMLEY & P
H
C
:
Y
N
A
P
COM
BROKER
IDENTITY:
Building relationships
Strong referral partnerships – and understanding the importance of
relationships – have been the building blocks of broker David Johnson’s
success, The Adviser’s Belinda Luc reports
WITH JUST three years’ broking experience under his
belt, David Johnson has already cemented his place as
one of Australia’s top mortgage brokers.
The manager of Chumley & Pigwig, which opened
its doors in Bondi Junction in May 2008, joined the
mortgage broking industry in late 2006. Within a year
he was writing just under $5 million in loans each month.
“My first job was with Scope Lending which had
Will Davies and Will Foster as principals,” Mr Johnson
says. “I learnt a lot from both of them.”
Importantly, he learnt the value of good referral
relationships – particularly with financial planners, who
have proven to be a reliable and lucrative source of
business. “They [Davies and Foster] had a very structured
approach, with lots of focus around planning and
individual and group goals,” says Mr Johnson.
“We used to analyse where our leads had come
26 www.theadviser.com.au
from every quarter as a part of the goal setting for
the next part of the year. It soon became obvious
that financial planners were one of the most valuable
sources of referrals.”
Mr Johnson says the relationships he cemented
with various financial planners during his time at
Scope Lending paved the way for his initial business
success with his own venture, Chumley & Pigwig.
“My conversion rates on the leads I received from
my financial planners were extremely high,” he says,
“Even though it was 2008 and the heart of the
global financial crisis, my referral partner was still able
to refer around $20 million over the year, nearly half
my volume.”
Encouraged by his early success, Mr Johnson
initiated a strategic business plan to support his target
of writing more than $60 million in loans each year –
with a bigger target of $90 million next financial year.
“I decided to form at least one solid referral
partnership every three months during the financial
year,” he says, a target he is well on track to achieving.
“I have already formed two new agreements and a
third is currently in discussion.”
Mr Johnson also knows the value good support
staff can play to meet his goals, saying brokers should
consider hiring support staff “as soon as they can
afford it”.
He says his current service manager helps provide
a level of customer service he could not singlehandedly provide.
“My service manager has been in the industry for
seven years and knows a lot more than I do when it
comes to building relationships, which is the way I
like it,” he says. “Having an experienced client service
manager allows me to get on with other aspects of the
business, like writing loans.”
INVESTING IN THE FUTURE
Business is currently booming for Chumley & Pigwig –
so much so that Mr Johnson recently appointed a new
loan writer to help meet capacity. By the end of the
year he is hoping to add another two loan writers and
a second client manager to his staff.
Already 2010 is shaping up to be a busy year,
with Mr Johnson targeting the real estate market in
particular for opportunities.
“I think 2010 will be the most exciting year I
have seen in the industry, with massive business
opportunities for higher volume writers and some
new entries in the market,” he says.
“There is a growing confidence in the broking
Even though it was 2008 and the
heart of the global financial crisis, my
referral partner was still able to refer
around $20 million over the year –
nearly half my volume
DAVID JOHNSON
Chumley & Pigwig
industry and I believe it will continue to grow in 2010.”
But diversification is not currently on his agenda.
Mr Johnson says while many brokers are moving into
financial planning, he has no plans to join them.
“Although many brokers seem to be going down
the path of providing financial planning [services]
I would say that is a path best taken by a very
established broker with very strong client referrals,”
he says.
“My business is still new and I know most financial
planners are not keen to refer their clients to a broker
who does what they do.”
Ultimately, Mr Johnson says client referrals are a
broker’s best form of advertising – and can make or
break a business.
“Brokers should invest a substantial amount of
time in maintaining their existing client base as they
hold the answer to repeat business and referrals.”
And he says brokers should never under-estimate
the importance of relationships.
“Clients, referrers, business development
managers, assessors... Treat them all like top clients.”
KEYS TO SUCCESS
tINVEST IN SUPPORT STAFF
tDIVERSIFY
tVALUE YOUR BUSINESS RELATIONSHIPS
tREGULARLY REVIEW YOUR BUSINESS MODEL
tSET PERSONAL TARGETS
www.theadviser.com.au 27
SALES & MARKETING
IN THE FIELD
A winning
combination
Accountants are usually overlooked by brokers, but these number crunchers can
often prove to be the winning referral partnership
IN WHAT is still an uncertain economic environment,
it’s important for brokers to have strong referral
relationships with partners who can provide them with a
steady pipeline of leads.
But while many brokers enjoy strong ties with real
estate agents, for example, fewer have accountants in
their sights as prospective referral partners – meaning
they are missing out on potentially lucrative business,
according to Tiffen & Co and The Mortgage Detective
director David Friend.
Accountant-referred customers tend to be in
strong financial positions, are often self-employed,
and can become good, repeat customers
David Friend
Tiffen & Co and The Mortgage Detective
Mr Friend says there are several reasons why
accountants make good referral partners.
“Accountant-referred customers tend to be in strong
financial positions, are often self-employed, and can
become good repeat customers,” says Mr Friend, who
derives more than 20 per cent of his business – and his
top five clients – from his referral relationship.
But he is quick to point out that a successful referral
relationship involves give and take.
“My referral partner refers clients on to me and I
refer clients on to them. It is not a competition,” says Mr
Friend, who has enjoyed a strong referral relationship
with an accounting firm for the past two and a half years.
He says the firm has a national presence and a client base
that ranges from mum and dad residential upgraders to
businesses with an interest in commercial property.
“If they give me three leads in one month, they do
not expect the same number in return.
“Rather, we have a very friendly and mutual
agreement with each other.”
Mr Friend met the directors of his accountancy firm
referral partner at a Christmas function three years
ago, and they arranged to catch up in the New Year. A
28 www.theadviser.com.au
strong rapport was built and as a result, “[we] decided it
would be beneficial to both parties if we entered into a
business agreement”.
“I have been in this business nine and a half years and
never had such a good relationship in place,” he says.
Fundamental to the relationship is trust. “Trust has
always been really important to me,” says Mr Friend. “I
won’t enter into a business relationship with [just] anyone
and often the right referral partner is hard to find.”
Mr Friend says before striking up a referral
partnership brokers should satisfy themselves that their
prospective business partner is the right fit and that
“their morals and mindset echoes your own”.
“In my career as a broker, I have entered into some
unrewarding relationships and been forced to cut them
later. My advice is to take your time, do your research
and make sure you build up a friendly relationship with
the business before jumping in feet first.”
GIVING BACK TO THE BIZ
Referrals from accountants can be highly lucrative for
brokers. And the good news is – there is no shortage of
accountants in Australia.
In fact, there are more than 157,000 fully qualified
accountants operating throughout the country.
But for brokers to build a relationship with a
well-respected and highly qualified accountant, Mr
Friend says they need to offer good, quality business
in return.
“Quality and accuracy are two traits accountants
highly value. I advise any broker looking for a long-term
relationship with an accountant to deliver both,” he says.
“A referral partnership is just like any other... no
money switches hands between my referral partner and
I, however, I do like to provide them with quality leads
that have the potential to become quality business.”
Mr Friend says accountants are also looking for
well-structured loans “that are correct both legally and
in terms of tax. Brokers need to know their way around
these issues,” he says.
!
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SALES & MARKETING
BEST PRACTICE
Read the fine print!
An effective disclaimer can help safeguard a broker from liability in the
unfortunate event of a business dispute
IT IS common business practice for brokers to use disclaimers in their
standard documentation.
But brokers often fail to appreciate the true value of a properly
worded disclaimer – or when a disclaimer may not be effective.
If a client is unhappy with a broker’s services for example, a
disclaimer can help protect the broker from subsequent legal action
where the broker can demonstrate that the client made his or her own
decision on a properly informed basis.
But there’s a downside – not all disclaimers are enforceable. In fact,
many aren’t – which is why it’s important to get them right.
“A carefully drafted disclaimer can significantly reduce the risk of
a claim and/or litigation,” says Rod Cameron, a mortgage enforcement
and commercial litigation partner at Sydney law firm Hicksons.
And while disclaimers may look simple on paper, they’re much
more complex than brokers may realise. For this reason Mr Cameron
says brokers need to invest time and care in preparing a disclaimer to
suit their individual needs.
“The mere copying of a disclaimer wording [from another source]
is a dangerous practice that may not limit liability to the level hoped
for,” Mr Cameron warns.
A disclaimer will also not protect a broker who has engaged in
misleading and deceptive conduct in breach of consumer protection
laws, for example. That’s why a broker providing information to a
client regarding a product should ensure their disclaimer clarifies the
terms on which that information is provided.
DISCLAIMER CHECKLIST
t SET OUT THE DISCLAIMER IN A CLEAR AND READABLE
SIZE PRINT
t BRING IT TO YOUR CLIENT’S ATTENTION
t MAKE IT CLEAR IF YOU ARE SIMPLY PASSING ON
INFORMATION THIRD-HAND
t ALWAYS ADVISE THE CLIENT TO SEEK THEIR OWN LEGAL/
FINANCIAL ADVICE
30 www.mortgagebusiness.com.au
If the information is from another source, such as a lender, then
the broker’s disclaimer needs to make this clear – with words to the
effect that the broker disclaims any belief in the truth or falsity of
the information provided, including any personal knowledge and /or
responsibility for that information.
In other words, the disclaimer should spell out that the broker is
merely passing on the information, for what it’s worth.
Where possible, the disclaimer should also disassociate the
broker’s name and identity from the information provided, where that
information originates from another source.
Given the complexity involved in drafting a proper disclaimer, Mr
Cameron says it’s worth spending money on getting a lawyer to do it –
for a number of reasons.
“Legal advice on the particular circumstances and wording of
the disclaimer and the way it is communicated to the client is a good
investment to secure the best possible protection,” says Mr Cameron.
DISCLAIMERS – THE FACTS
A disclaimer will not always provide a broker with a safety net,
according to Hicksons’ Rod Cameron. Examples of where a disclaimer
will not be effective include:
tWhere the broker’s client refuses to accept the terms of the
disclaimer before entering into the contract. “By refusing to accept the
terms of the disclaimer, the client is effectively refusing to be bound
by it,” says Mr Cameron.
tWhere a broker tries to rely on a disclaimer that is unclear or
confusing in its meaning. If the disclaimer is tested in court, the judge
will generally interpret it against the broker, so as to favour the client.
Mr Cameron says this is especially the case if the broker was the
author of the disclaimer. “In legal terms, this is known as the contra
preferentum rule.”
tWhere the broker has engaged in misleading or deceptive conduct.
“A disclaimer cannot exclude liability under [consumer protection
laws] or certain other legislation,” Mr Cameron says.
SALES & MARKETING
INSURANCE
Brokers are diversifying into insurance in
a bid to boost their bottom lines
LOYAL, STICKY clients are a broker’s best friend –
providing them with regular business and ultimately
adding to their bottom line.
But how do brokers make clients stickier?
Diversifying into areas outside of mortgage
broking – such as insurance – is one way.
Australian Life Insurance (ALI) chief executive
officer Tasso Papachatgis says there is a range of
insurance products on the market, but mortgage
protection and life insurance are the products most
commonly sold by brokers.
“There is a chronic under-insurance problem
in Australia and offering insurance solutions that
32 www.theadviser.com.au
complement a broker’s mortgage offering is great
[for brokers] not only [to] meet the legal and moral
obligations they have to their clients, but also build
deeper, stickier relationships,” says Mr Papachatgis.
And in many cases, such as the ALI distribution model,
brokers do not require a financial services licence to
sell insurance products to customers.
Mr Papachatgis says offering mortgage protection
insurance is a particularly good way for brokers to
strengthen their customer relationships, with the
added benefit of building a strong supplementary
income stream.
“In most cases if the broker doesn’t offer to
protect the loan, the lender or other providers
probably will,” he says.
“I encourage all brokers to consider what
insurance products would best suit their business
size, resources and objectives.”
According to Mr Papachatgis there are various
insurance distribution models. “Even within a model
there are a number of variables,” he says, adding that
the types of advice offered may differ depending on
the broker’s diversification model.
“There are different types of advice that can be
offered in relation to financial services products.
These include the provision of personal advice
tailored to a client’s needs, or general, non-specific
advice relating to insurance products.”
Mr Papachatgis says ALI strives to remove the
complexity and compliance obligations associated with
brokers offering and dealing in financial product services.
“Our aim is to minimise the compliance obligations
on our brokers so they can concentrate on what they
do best, which is arranging loans,” he said.
LIVING THE DREAM
Mortgage Choice’s national manager of non-core
products Simon Dehne says its decision to diversify into
insurance goes right to the heart of its business strategy.
“We have a business model acronym called
‘DREAM’ – the ‘D’ stands for diversification,” Mr
Dehne says.
In June 2009 Mortgage Choice announced a
strategic partnership with Lifebroker, an Australian
life insurance broker.
“We wanted to give franchisees and customers
a diversity of choice and expand our portfolio to
include life insurance,” Mr Dehne says.
While the new product stream took several
months to implement, Mr Dehne says it is performing
exceptionally well.
“There has been a 25 per cent penetration of life
insurance to customers, according to our October
2009 results,” he says. “We expect it to rise to 50 per
cent next year.”
CHECK YOUR LICENSING REQUIREMENTS
But brokers who want to provide advice on insurance
products or services may need to hold an Australian
Financial Services (AFS) licence or are an authorised
representative of an existing licence holder. It
depends on the product, the role the broker plays
and the product provider.
An authorised representative – which can be an
individual or a business – can only offer insurance
products permitted under the principal’s AFS licence,
but can be authorised by more than one principal.
NAB insurance and licensee specialist Gordon
Wallace says becoming an authorised representative is
a popular option for sole trader brokers who are keen
to increase their revenue streams.
There’s a chronic under-insurance problem in
Australia. Offering insurance solutions that
complement a broker’s mortgage offering is great
[for building] deeper, stickier relationships
TASSO PAPACHATGIS
ALI
“Sole traders are often keen to diversify into
insurance themselves rather than referring the client to
someone else because of the greater revenue prospects
for them,” he says. “By advising a client directly on
insurance rather than referring them elsewhere, a
broker’s business can improve threefold.”
NAB offers MLC-backed insurance products
through the program Vivid. Brokers who become
authorised representatives of Vivid can set up an
insurance trading arm that leverages off the NAB and
MLC brand.
Mr Wallace says the process for brokers to
become a Vivid advice authorised representative is
straightforward. >>
AFS LICENSING REQUIREMENTS
BROKERS WHO ARE LOOKING TO BREAK THROUGH INTO THE
INSURANCE SECTOR MAY CONSIDER APPLYING FOR THEIR OWN AFS
LICENCE, BUT SHOULD BE AWARE OF THE COST
Where brokers are not authorised representatives of an AFS license holder
and want to sell some insurance products or services, they will need to obtain
their own ASF licence – or risk breaching the law.
Applying for an AFS licence requires time and effort and the process
generally takes around three to six months. Brokers are encouraged to seek
independent legal advice before applying for a licence – which can involve
fees ranging from $15,000 to $30,000 depending on how involved the
application is.
AFS licence applicants need to demonstrate that their business is
financially stable and complies with financial services laws and the licence
conditions. Annual audits are one of these requirements.
The licence application process requires an assessment by ASIC of the
suitability of the entire business structure, including business management,
organisational competence, training, financial, technological, human
resources, risk management and dispute resolution systems.
To save time and money, applicants should ensure all these systems are in
place before applying for an AFS licence.
www.theadviser.com.au 33
SALES & MARKETING
INSURANCE
“To ensure that [brokers] meet the
obligations that apply to them, we have
robust initial and ongoing training,
monitoring and supervision programs.”
NEED MORE INFO?
>>
The first step is for the broker to obtain
the relevant ASIC accreditation – the RG146
standard.
“Some brokers may already have it, and
others can obtain it by undergoing an inhouse training course NAB provides,” he says.
Brokers then need to successfully
complete a two-day training course, which
is run by Adviser Campus 360 in many
locations across Australia. The course
aims to equip brokers with the software,
resources, compliance and sales knowledge
required to provide a quality standard of
insurance advice to clients.
Sole traders are often keen to
diversify into insurance themselves
rather than referring the client to
someone else because of the greater
revenue prospects for them
GORDON WALLACE
NAB
“NAB’s broker partners have the
support of a NAB relationship manager and
insurance and licensee specialist, as well as
the support of MLC which provides brokers
with product and service guides, as well as
training seminars and conferences in each
state,” explains Mr Wallace.
While ALI’s product does not require an
AFS licence to sell it, Mr Papachatgis says
ALI has trained and accredited over 7,000
mortgage brokers who have provided
in excess of $20 billion in insurance
cover to more than 80,000 Australians –
highlighting the importance of training
and broker support.
34 www.theadviser.com.au
NOT SURE IF YOU
NEED AN AFS LICENCE
OR WANT MORE
INFORMATION ON
INSURANCE? CONTACT
ASIC’S INFOLINE
ON 1300 300 630
OR ANY OF THE
FOLLOWING INDUSTRY
ASSOCIATIONS:
National Insurance Brokers
Association
www.niba.com.au
Level 18, 111 Pacific Highway
North Sydney, NSW 2060
Ph 02 9964 9400
Fax 02 9964 9332
Email [email protected]
Insurance Advisors
Association of Australia
www.iaaa.com.au
PO Box 597,
St Albans, VIC 3021
Ph 03 9390 9355
Fax 03 8390 7877
Email [email protected]
Australian Insurance Law
Association
www.aila.com.au
38 Ellingworth Parade
Box Hill, VIC 3128
Ph 03 9898 9221
Fax 03 9890 6310
Email [email protected]
Insurance Council of
Australia
www.insurancecouncil.com.au
Level 3, 56 Pitt Street
Sydney, NSW 2000
Ph 02 9253 5100
Fax 02 9253 5111
CREATING STRONG REFERRAL
PARTNERSHIPS
Brokers looking for a simple alternative to
diversification can embrace the benefits
of having strong referral relationships with
insurers.
While referrals do not directly impact on
a mortgage broker’s bottom line, a strong
referral partnership can enhance a broker’s
client base and, incidentally, the broker’s
revenue stream.
According to Mr Wallace, NAB’s broker
partners often develop referral partnerships
with insurers as a means to boost their
business. Mr Wallace attributes the popularity
of referral partnerships among brokers and
insurers to the fact that referrals are the
simplest, cheapest and easiest way to be
introduced to more clients and improve
business turnover as a result.
“Mortgage brokers are not allowed to give
advice on financial services products without
a licence. It doesn’t matter if the advice is
client-specific or not. However, nothing stops
a broker from identifying a client’s needs
and referring them to a person who is legally
authorised to give the client insurance advice.
“If brokers intend to give any level of
‘advice’ then they need an AFS licence or they
need to be an authorised representative of an
existing licence holder.
“However, while some of our broker
partners cannot give insurance advice, they
may discuss with the client the risks of the
client remaining uninsured, before referring
the client to a NAB advisor who is authorised
to advise the client on the most suitable
insurance product for them,” he says.
Mr Wallace says referral relationships are
great for brokers who are looking to build on
their existing client base and boost turnover,
with the least change to their existing business
structure and with the least implication of
further compliance obligations.
“This is because any compliance obligations
that are associated with giving financial services
product advice are effectively ‘passed on’ by the
referral broker to an appropriately licensed NAB
advisor,” he says.
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NON-BANK LENDERS
BROKERS HAVE a long-standing affinity with the
non-bank sector.
Since the industry’s early days, originators and
mortgage managers have represented a lending
segment with little or no channel conflict with
brokers. The non-banks have also driven much of the
product innovation in the market and have shown a
willingness to be flexible in their credit assessment
where possible.
But since the financial crisis hit in the middle of
2007, the non-banks have had a torrid time.
Funding quickly dried up and the little capital
that was available was horrendously expensive –
particularly damaging for a non-bank sector largely
dependent on funding via the capital markets.
The non-banks saw their market share dramatically
plummet – from 12 per cent to 2.5 per cent – as a
result of the rapid rise of the big four, which captured
more than 90 per cent of new lending business
according to data from the Australian Prudential
Regulation Authority.
In September 2008 the federal government
stepped in, injecting $4 billion into the residential
mortgage backed securities (RMBS) market in a bid to
reinvigorate competition.
Since that first injection of funds, the government
has contributed a further $12 billion to keep
competition alive.
That decision helped sustain the non-bank sector
through the global financial crisis and has given many
non-bank lenders the confidence to re-enter the RMBS
market without government backing.
Late last year, for example, ME Bank became one
of the first lenders to issue RMBS without government
support, in a sign the securitisation markets might be
starting to thaw. The Australian Securitisation Forum
deputy chairman Patrick Tuttle says the deal was what
the industry had been waiting for – a sign of life.
But despite brighter prospects for the sector, Mr
Tuttle says the government’s work is not yet done.
“If the AOFM (Australian Office of Financial
Management) can provide a liquidity facility it will
provide further encouragement for investors to come
back to the market,” he says.
RESIMAC chief operating officer Allan Savins
says the government’s decision to extend the AOFM
RMBS purchase program provided further surety
for non-bank funding models that were reliant on
securitisation.
More importantly, Mr Savins says it enabled
RESIMAC to continue to lend at near competitive
prices to that of the banks throughout the crisis.
SPECIAL REPORT
“RESIMAC has sold over $1.2 billion in three
separate RMBS trades under the AOFM program,
allowing us to demonstrate medium-term refinance
capabilities to our banks,” Mr Savins says.
BANK VERSES NON-BANK
It is not only the government that has come to the nonbank sector’s aid. On 18 August last year, NAB announced
that it had agreed to buy Challenger’s mortgage
management business for $385 million – a move widely
viewed as a watershed moment for the non-bank sector.
The move saw NAB acquire a significant stake
in the third-party distribution channel through the
purchase of the PLAN, Choice and FAST mortgage
aggregator businesses as well as Challenger’s multibrand ‘white label’ product capability.
The rebranded business, Advantedge, gives
its mortgage managers unrestricted access to
competitively priced funds. Advantedge general
manager of distribution Steve Weston says NAB’s
move should give borrowers confidence and predicts
the non-bank sector will reclaim some of the market
share it has lost over the past two years.
I like to recommend non-bank products
as much as bank products, but ultimately
it depends on my client’s needs
JAMIE CHRISTIE
Mortgage Choice
“During the downturn, borrowers turned to the
majors for an assurance of safety, afraid that mortgage
managers would not be able to protect their
investment. However with NAB’s backing, the tables
have now turned and borrowers will start to return to
the non-bank sector,” he says.
Homeloans’ general manager third-party
distribution Tony Carn also predicts that the nonbanks will return to favour with consumers who are
disenchanted with how the banks responded to the
financial crisis.
“In the last 12 months, major banks took full
advantage of interest rate rises and the dramatic
reduction of competitors – with GE and Macquarie
Bank pulling out of the game,” says Mr Carn.
“Banks cut their low doc loan offerings and pushed
LVRs higher making it harder for self- employed
borrowers and companies. As a consequence, consumers
were left feeling bitter towards the banks, and are now
seeking lending alternatives.” >>
www.theadviser.com.au 37
SPECIAL REPORT
NON-BANK LENDERS
>>
Michelle Coleman of brokerage WHO Finance
agrees, saying borrower sentiment has changed
towards the banks over the last 12 months with more
borrowers seeking non-bank alternatives.
“I recently had a borrower say to me ‘I don’t want
to go anywhere near the banks’,” says Ms Coleman.
“The number of borrowers taking up non-bank loans
is continually increasing. It was harder to promote
non-bank products to clients 12 months ago but these
days, borrowers are much more open to what nonbanks have to offer.”
During the downturn, borrowers turned
to the majors for an assurance of safety,
afraid that mortgage managers would not
be able to protect their investment
STEVE WESTON
Advantegde
Broker sentiment towards the non-bank sector
is also positive. According to the results of a recent
The Adviser straw poll, 92.3 per cent of brokers would
recommend non-bank products to their clients.
Mortgage Choice broker Jamie Christie is one of them.
“I like to recommend non-bank products as much
as bank products, but ultimately it depends on my
client’s needs,” Mr Christie says.
Homeloans’ Mr Carn says the non-banks will
always present as an attractive alternative to the
banks for brokers as they better complement the
broker business model.
“Brokers often cannot be seen to align heavily with
one bank, and the non-banks provide a more flexible
option for them,” he says.
FINDING A NEW NICHE
But although the non-bank sector may be
returning to favour with consumers – and
brokers – Mr Weston says it will have
to do more than offer competitively
priced products in order to compete
with the majors.
“Non-banks and mortgage managers
need to set themselves apart through niche
products or exceptional service,” he says.
Bendigo and Adelaide Bank’s general
manager of third party mortgages
Damian Percy agrees that
niche products and
services will be important
to the non-bank sector’s
ability to differentiate itself
from the majors. But he
38 www.theadviser.com.au
says the sector needs to be careful not to be viewed as
purely a “niche solution”.
“[I]f the non-majors are seen and treated
as purely niche solutions, the issue of market
dominance by a very small number of big players
won’t change,” he says.
But he says he “fully expects” it will be the nonmajors that will deliver to niche markets.
“Historically the second tier and non-bank
funders have driven product innovation in Australia,”
he says.
According to Mr Percy, non-bank lenders will
make a resurgence when the timing and funding
is right, bringing both competition and innovation
back into the industry.
A REFRESHING ALTERNATIVE
Homeloans’ Mr Carn says the lender has worked
hard to change its value proposition over the last 18
months to better position itself as an alternative to
the banks.
Among the changes Homeloans has introduced
are nil application or ongoing fees on selected
products, a no cash-out limit under 75 per cent and
no requirement for lender’s mortgage insurance
(LMI) under 80 per cent.
“Previously, non-banks were fixed on competitive
pricing. Then it was product. Now the focus of the >>
COMPETITION IS COMING
NON-BANK LENDERS ACROSS AUSTRALIA ARE HOPING
TO CLAW BACK MARKET SHARE IN 2010
Although the majors continue to dominate the market, Future
Financial’s general manager Troy McLachlan says broker and
borrower sentiment is starting to swing back the way of the nonbank lenders.
“We have seen enquiries increase dramatically over the past
few months and I think the majority of non-bank lenders are well
positioned in the broker channel for 2010,” Mr McLachlan says.
“Brokers and consumers will be the winners this year with
product development, service and pricing all being areas for some
strong competition among many organisations.”
Firstfolio’s general manager e-choice wholesale lending,
Brett Mansfield, agrees that 2010 should see the resurgence of
competition between bank and non-bank lenders.
“The non-banks that managed to come through the global
financial crisis relatively unscathed have proven themselves to be a
force to be reckoned with,” Mr Mansfield says.
“While some borrowers will always want to go to the big banks
for security, I think many borrowers will take solace in the fact that
the non-bank lenders who have emerged from the crisis are here to
stay and [will] make an impact on the market in the future.”
SPECIAL REPORT
NON-BANK LENDERS
>>
non-banks such as Homeloans is to be a refreshing and
viable alternative to the majors,” Mr Carn says.
But while Homeloans seeks to compete on both
product and pricing, Mr Carn says its main focus is
service quality.
“Customer service is always better among the
non-banks, which is a key selling point for borrowers,”
he says.
SEIZING THE DAY
Another non-bank selling point is product innovation.
Garry Driscoll, chief executive officer of
Mortgage EZY and recently appointed chair of
the MFAA’s national mortgage management
committee, says non-bank lenders are seizing
the opportunity to differentiate themselves from
the banks by the products they offer.
“We saw that even in
the mist of the crisis,
lenders like Firstmac
were able to come
out with innovative
products such as the
2.99 per cent fixed rate –
so I have no doubt there will be more to come in 2010
as funding improves,” he says.
Mr Driscoll says Mortgage EZY plans to introduce
a whole new line of products in early 2010 that will
have “people sitting up and taking notice”. The
products will be exclusively distributed through the
broker channel.
“Mortgage EZY is always introducing new and
innovative products to take on the banks – such as
our YZ3 range, which introduced one year fixed low
rates, and the option of no extra or ongoing costs,”
says Mr Driscoll.
But Mr Driscoll says Mortgage EZY has no plans to
take on the broker channel.
But despite Mortgage EZY’s drive to reengage the
broker channel through innovation and improved
servicing times, Mr Driscoll says the company has no
plans to take market share away from brokers. He says
the company’s goal is to work with the broker channel
and support them.
“We do not want to be like the banks who
encourage brokers to give them business on one hand
and then do everything they can to steal from them
with the other hand,” he says.
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A NON-BANK FUTURE
Mr Driscoll says for there to be true competition
between lenders, the non-bank sector needs to
achieve a market share of at least 15 per cent – a
target he thinks is realistic.
“While our market share has been clawed at by the
majors I think reaching 15 per cent is quite achievable
because I am already seeing some strong balance
sheet funders supporting the mortgage management
sector including ING DIRECT, NAB, and Bendigo and
SELLING NON-BANK PRODUCTS
BROKERS HAVE AN IMPORTANT ROLE TO PLAY IN
SELLING THE NON-BANK SECTOR TO BORROWERS
More than 93 per cent of brokers would recommend non-bank
products to their clients, according to the findings of a recent
The Adviser ’s straw poll – a resounding vote of confidence in the
non-bank sector.
But despite the strong support for non-banks among
brokers, many do not know how to effectively market non-bank
products and their benefits – some of which are set out below.
Personal approach: “Non-bank borrowers are not just a
number, they are a real person with real needs,” says Carrington
National’s chief executive officer Gino Marra. “We make sure we
treat all our customers with respect and understanding.”
Niche product offering: Mr Marra says the bulk of Carrington
National’s borrowers are investors or consumers looking for
a niche loan that will suit their individual needs. “Non-banks
definitely provide the most competitive loans for niche areas. We
specialise in construction loans and I can safely say there is not
another lender on the market that can rival us in this area,” he says.
Customer service: “Non-bank lenders want business and they
are prepared to do whatever it takes to make sure their customer
is happy,” Mr Marra says. “To a big bank, a customer is just
another number, but to a non-bank lender, a customer is their
bread and butter and they want to make sure they are constantly
delivering the best service possible.”
Broker commissions: “Generally speaking, non-bank lenders
offer more competitive broker commissions,” says Australian First
Mortgage’s associate director Michael Maiorano. “Most nonbanks do not have claw backs, which improves a lender’s general
commission structure.”
Safe as houses: Mr Maiorano says brokers need to let
borrowers know that non-banks are just as safe and reliable as
the majors thanks to the various government funding initiatives.
“Borrowers should take solace in the fact that the non-banks left
in the market survived the global downturn and so are in this
industry for the long haul.”
Competition: “Non-banks help keep the big boys honest,”
Mr Maiorano says. “If a broker was to offer a non-bank lender’s
products, they would effectively be encouraging competition,
which is ultimately beneficial to the broker and their client.”
Adelaide Bank, as well as securitisers returning
to the market,” Mr Driscoll says, adding
that superannuation funds are an obvious
source of future funds.
“We have billions sitting in
superannuation funds looking for
suitable investments and in the years
ahead, I am confident that a lot of
these funds will make their way into the
home loan market via the non-banks.”
While competitive funding has been
a real issue in the last 18 months, Mr
Driscoll says the mortgage management
sector is very much ready to re-launch as a force
in 2010.
In order for this to occur however, Mr Driscoll says
there will have to be greater government involvement in
the non-bank sector.
“They have now seen the effects of lack of
competition in the housing market and realised that they
have absolutely no control over the major banks who
thumb their nose at the government,” says Mr Driscoll.
“They must increase competition, and the best,
quickest and most efficient way to do this is via the
already established track of the non-banks.”
Historically the second tier and non-bank
funders have driven product innovation
in Australia
DAMIAN PERCY
Bendigo and Adelaide Bank
REPUTATION IS ESSENTIAL
Mr Carn is similarly upbeat about the prospects for
the non-bank sector in 2010. But he says new lenders
will find the going tough.
“The future of the non-bank industry will need
sustainable players. It’s going to be hard for new
players to survive,” says Mr Carn.
“We [Homeloans] have succeeded due to
having a solid infrastructure, liquidity, and having a
recognisable brand.”
Mortgage Choice broker Mr Christie agrees that,
for non-bank lenders to remain viable, having a
reputable name and brand is critical.
“Borrowers show no concern with products
offered by ASX-listed companies like Homeloans,
and names like ING DIRECT give borrowers comfort
because they’re used to seeing them,” he says.
“Reputation is everything.”
www.theadviser.com.au 41
SPECIAL REPORT
NON-BANK LENDERS
Anatomy of a
non-bank borrower
In the past, non-bank products have tended to appeal to a
certain type of borrower. But with competition returning
to the lending market, the non-bank borrower
profile is changing
WHEN THE Reserve Bank lifted the official
cash rate in December last year by 25 basis
points – the third consecutive hike in as many
months – all four majors followed suit.
The result was the narrowest rate spread
between them in many years – generating renewed
borrower interest in non-bank products, and from a
broader borrower base than in the past.
National Mortgage Company’s head of
broker origination Jeff Chapman says non-bank
borrowers tend to be younger and more IT savvy.
They are also people who want timely, efficient
and personalised service from their lender.
“If a borrower wants a loan quickly and without
hassle, they go to non-bank lenders because they
know the loan will be settled in less than a week in
most cases,” he says.
At the end of the day, the more competition
there is in the industry, the better it is for the
consumer. Non-bank lenders help keep the
majors honest
JANELLE RAYNER
Barnes Home Loans
42 www.theadviser.com.au
National Mortgage Company’s client base is
“a mix of all demographics and socio-economic
groups”, says Mr Chapman. Investors account for
a large proportion, and are generally looking for a
simple, effective loan that best suits their needs.
Barnes Home Loans managing director Janelle
Rayner says investors are more likely to seek out nonbank lenders. “Investors don’t want a lot of the bells
and whistles that come with other loans,” she says.
“They just want to pay the interest off on their
loan. And they want to know that if something
goes wrong, they will be able to get the problem
sorted quickly, efficiently and without fuss.
Non-bank lenders provide
them with that.”
Ms Rayner says most borrowers who use nonbank lenders do so because of their reputation
for quick turnaround times.
“At the end of the day, the more competition
there is in the industry, the better it is for the
consumer. Non-bank lenders help keep the
majors honest,” she says.
But more than keeping the banks honest, Ms
Rayner says some borrowers will look to nonbank lenders and second tier lenders to fulfil
their niche needs.
Many of the majors have stopped lending to
low doc borrowers and are making it increasingly
harder for self employed borrowers to apply at
all, forcing them to find another lender that can
cater to their needs.
Better Mortgage Management’s managing
director Murray Cowan says loc doc borrowers,
non-conforming borrowers and first home buyers
are more likely to look at non-bank products.
But the non-bank borrower profile is
broadening. “[I]n recent months, non-bank
lenders have improved the competitiveness of
their rates, and are in many cases, lower than
those offered by the big four banks, attracting
the full spectrum of borrowers back to the nonbank sector.”
ine
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Non-bank lenders play a key role in the third-party distribution channel however after a
tough year which originators are now at the forefront of the industry?
Australia’s leading originators will be ranked by The Adviser on their size, scale and
growth in its 2010 Top 10 Originators ranking.
Find out which originators have held firm over the last year and which groups have
made the biggest advances in the March issue of The Adviser.
ECONOMY
Confidence rises as
unemployment falls
THE MONTH IN
Rising consumer confidence and falling
unemployment will help drive economic growth
By Jessica Darnbrough
Editor
CONSUMERS CLEARLY view the
darkest days to be well behind us with the
latest Westpac-Melbourne Institute data
showing a 5.6 per cent surge in confidence
in January.
Westpac’s chief economist Bill Evans
attributes the jump in confidence to the
better than expected job data recorded
earlier this month.
Figures from the Australian Bureau
of Statistics show the unemployment rate
fell 0.1 per cent in December to 5.5 per
cent, the lowest level since April 2009.
Overall, the number of people
unemployed in Australia declined by
10,600 or 1.6 per cent to 639,400, while the
number of people in work grew by 35,200
– three times more than economists had
predicted.
The Aussie dollar is also tracking well
against other major currencies, last month
hitting a near decade high against a weak
euro and even weaker American dollar.
After eclipsing 94 US cents less than
one month ago and 57.65 British pence
earlier this month, it seems the Australian
dollar has finally come to rest at near record
highs of 92 US cents and 56 British pence.
A
significant
improvement
in
Quote
end
quote
INTELLIGENCE
commodity prices has been one of the
biggest contributing factors behind the
strong dollar.
Throughout the majority of 2009,
commodity prices were incredibly
volatile, swinging between record highs
and record lows.
But in the last few months of 2009,
resurgent Chinese, Indian and Singaporean
economies have boosted the demand for
Australia’s resources, kept commodity
prices high and helped put our nation on
the path to a U shaped recovery.
This overall improving outlook, and
with core inflation hitting an annual 3.8
percent rate in the third quarter, will
undoubtedly put pressure on the Reserve
Bank to raise rates when they meet again
on 2 February.
The Reserve Bank has already
raised rates three consecutive times
since October last year and the general
consensus among economists is that more
immediate rate hikes are likely.
NAB’S ECONOMIC OUTLOOK
Domestic GDP 2009: 1.25%
Domestic GDP 2010: 2.75%
Global GDP 2009: -1.5%
Unemployment end 2010: 6.2%
Cash rate end 2010: 4.75%
Cash rate mid 2011: 5.5%
NUMBERS
6.2%
11.3%
The percentage
representing
cumulative
housing price
growth in
Australia from
January to
November 2009
$1.2M
Sydney’s
expected median
house price in
2019
Issued 8 December 2009
I think at the beginning of [2009] I would not
have expected the economy looking as good
as it does. I mean, you know, I said we were in
recession in April, so I felt that things were
going to turn out rather worse than they have.
But who’s complaining? Not me.”
The drop in
the number of
new home loan
approvals in
December
16
The number
by which the
pool of credit
unions shrunk
in 2009 due to
consolidation
$18M
The total
value of AFG
mortgages for
NSW investment
properties in
December 2009
RBA governor Glenn Stevens at the ABE Annual Forecasting Dinner, Sydney
8 December 2009
Must
read
reports
The Adviser: Non-Bank Report , Sterling Publishing, January 2010, www.theadviser.com.au
Australian Mortgage Report: 2010, Deloitte Touche Tohmatsu, December 2009, www.deloitte.com.au
Mortgage Brokers in Australia: Australian Industry Report , IBISWorld, December 2009, www.ibisworld.com.au
www.theadviser.com.au 45
INTELLIGENCE
RESIDENTIAL PROPERTY
Investors set the scene for a
solid 2010
Property market activity remains strong heading into 2010
despite rising interest rates and the end of the FHOG boost
DARWIN
Median house price: $537,924
Quarterly growth: 5.11%
Annual growth: 17.35%
Average annual growth: 16.27%
Median weekly rent: $545
Gross rental yield: 5.27%
Souring predictions of a slowdown in activity
following the end of the first home owner’s grant
boost, APM economist Matthew Bell says interest
By Belinda Luc
Median unit price: $406,245
rates will have to rise by another 100 basis points
Journalist
Quarterly growth: 8.41%
before the market feels any impact.
Annual growth: 32.92%
Average annual growth: 16.97%
DESPITE THREE interest rate rises in as many
“I think people overestimated the effect
Median weekly rent: $457
months and the likelihood of more to come in
of the first home bonus slackening off and
Gross rental yield: 5.85%
the New Year, homebuyers are still out in force.
underestimated how many investors and
The latest figures from Australian Property
upgraders were quietly waiting in the wings,”
Monitors (APM) have revealed that auction
Mr Bell says.
clearance rates in both Sydney and Melbourne
PRDnationwide research predicts
NORTHERN
PERTH
TERRITORY
remain steady at above 70 per cent, while the
that investor finance commitments
ANALYSIS
ANALYSIS
ANALYSIS
COMPANIES
COMPANIES
COMPANIES
number of properties listed for sale is rising
will increase to around 30 per cent of
Median house price: $505,897
Quarterly growth: 0.51%
week on week.
total finance commitments in 2010.
Annual growth: 5.09%
Research director Aaron Maskrey
Average annual growth: 11.15%
MORTGAGE INDICATORS
WESTERN
says the market will continue to
Median weekly rent: $402
AUSTRALIA
Gross
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SOUTH
NEWS
NEWS
FRONTLINE
FRONTLINE
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ANALYSIS
ANALYSIS
ANALYSIS
COMPANIES
COMPANIES
COMPANIES
FRON
EDITORIAL
LENDING
FOR HOUSING
– SEASONALLY NEWS
AUSTRALIA
Median unit price: $479,102
continue to rise and the number of
ADJUSTED
Quarterly growth: -1.02%
first home buyers declines.
Publisher
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ANALYSIS
ANALYSIS
ANALYSIS
COMPANIES
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Average annual growth: 12.54%
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COMMERCIAL PROPERTY
PRICES AND INDICATORS
LATEST FIGURES
BRISBANE
Median house price: $472,811
Quarterly growth: 1.40%
Annual growth: 5.63%
Average annual growth: 9.58%
Median weekly rent: $381
Gross rental yield: 4.19%
Median unit price: $361,927
Quarterly growth: 3.52%
Annual growth: 9.65%
Average annual growth: 10.78%
Median weekly rent: $340
Gross rental yield: 4.88%
SYDNEY
QUEENSLAND
NEW SOUTH
WALES
ACT
Median house price: $621,248
Quarterly growth: 3.38%
Annual growth: 9.87%
Average annual growth: 2.39%
Median weekly rent: $496
Gross rental yield: 4.16%
Median unit price: $466,328
Quarterly growth: 2.75%
Annual growth: 9.81%
Average annual growth: 2.70%
Median weekly rent: $462
Gross rental yield: 5.15%
VICTORIA
CANBERRA
Median house price: $533,202
Quarterly growth: 4.75%
Annual growth: 10.58%
Average annual growth: 6.83%
Median weekly rent: $477
Gross rental yield: 4.65%
Median unit price: $413,209
Quarterly growth: 2.53%
Annual growth: 13.71%
Average annual growth: 7.44%
Median weekly rent: $461
Gross rental yield: 5.80%
INTELLIGENCE
Retail sector weathers
downturn
Australia’s retail sector has emerged from the global
economic slump relatively unscathed
THE GLOBAL economy may have taken
a battering but Australia’s retail sector has
proved its resilience, with Sydney, Melbourne
and Brisbane now ranked amongst the 20 most
expensive retail markets in the world.
CB Richard Ellis’ latest Global Market
View ranks Sydney at number seven on the list
– two spots ahead of Brisbane and five spots
ahead of Melbourne. Auckland – the only other
Pacific market included in the survey – ranked
forty-ninth.
New York remains the most expensive retail
market in the world, despite a 20 per cent decline
in rental values over the past 12 months.
CBRE global research and consulting
executive director Kevin Stanley said while
Australia’s strong showing could be attributed in
part to the strength of the Aussie dollar against
the Greenback, prime CBD retail rents around
the country had remained relatively stable – and
even risen in some markets – over the past 12
months, in stark contrast to other centres.
Mr Stanley said the result was particularly
significant given the “significant amount of
trauma” that had occurred in Melbourne and
Sydney as a result of redevelopment activity,
which had resulted in store closures and
temporary relocations.
“When these new centres in the Melbourne
and Sydney CBDs are completed, there’s
expected to be a boost to destination retailing
and probably an increase in rents as well,” Mr
Stanley said, adding that low interest rates and
the federal government’s cash hand-outs had
helped keep the tills ringing in Australia’s CBD
retail markets over the past 12 months.
The regional director of CBRE’s retail group,
Joshua Loudoun, attributed the strong Brisbane
result to a similar scenario, following the
displacement of retailers from the redevelopment
of the Wintergarden centre in Brisbane’s CBD.
Mr Loudoun said low vacancy rates and
strong retailer demand had helped most
Australian capital city retail markets maintain
or improve their position notwithstanding the
global financial crisis.
OWNER OCCUPIERS DRIVE COMMERCIAL SALES
Owner occupiers are fuelling land sales in Melbourne’s west as improving business sentiment
encourages a growing number of businesses to invest in new industrial facilities.
Competitive pricing has also helped propel sales activity in key markets such as Derrimut
and Laverton North.
CBRE senior negotiator, industrial and logistics services, Tom Hayes said recent sales had
further reduced the stock of serviced industrial land in Melbourne’s west.
“The emerging shortage of serviced industrial sites will help stabilise land values, which will
in turn provide businesses with the confidence to proceed with new projects,” said Mr Hayes.
Recent deals include the sale of a 6,329 square metre site at Australand’s West Park
Industrial Estate at Derrimut to Bob White Electrix which specialises in the repair of electrical
machines and generators for the Western Australia mining sector.
INTELLIGENCE
48 www.theadviser.com.au
POINT BLANK
A new dawn
Regulation is set to dramatically transform the mortgage and finance
broking industry – and as the peak industry body, the MFAA is at the
forefront of the revolution. Joe Sirianni talks to The Adviser about how the
MFAA is responding to change and its plans for the future
WHAT ROLE WILL THE MFAA PLAY IN THE INDUSTRY
ONCE REGULATION IS IN PLACE? HOW WILL IT
REMAIN RELEVANT?
The MFAA will [continue to] provide its members with
the opportunity to achieve a higher standard of training,
education and professionalism.
We are presently undergoing a major review – part of
[which] is to clearly define what constitutes a ‘professional’
broker. Once this is clear, we will be in a strong position to
communicate this to the consumer. Let’s get this straight –
licensing is only the minimum requirement. Just because a
broker has met the bare minimum requirements doesn’t make
them a professional.
Licensing is a major step forward for the industry and the
MFAA has played a significant role in helping ensure that the
structure of the new requirements is fair and beneficial to
brokers and their clients. As the industry progresses the MFAA
will continue to play a central role in helping to ensure the
industry is governed by the appropriate legislation.
The MFAA will also work with its members to ensure they
have access to the tools, training and support needed to
achieve the best results from their business.
THE MFAA HAS RECENTLY SOUGHT TO CHANGE ITS
CONSTITUTION. WHY?
Market forces have driven consolidation and so it was
important that the MFAA recognised those changes. As things
stood we faced the prospect of three, maybe even four, board
members coming from different parts of one overall group.
Given the new landscape it was decided that two seats
should be made available to each entire entity as this would
offer fair representation while not allowing any one group to
dominate. The amendments were passed at the December
AGM by a majority vote and we will move forward from there.
HOW CAN THE MFAA BETTER SUPPORT ITS BROKER
MEMBERS AT A CONSUMER LEVEL?
The MFAA plays a major role in advocating to consumers the
benefits of dealing with an accredited MFAA member. At this
stage, the MFAA needs to be able to articulate these benefits
to ensure there is some substance behind the proposition.
The MFAA will have a slightly different role to play with the
pending credit legislation and the strategic review has been
developed with broader industry changes in mind. We need
to be more of a professional body, advocating and promoting
awareness of the MFAA broker and the advantages of dealing
with an MFAA member, similar to the way the CPA promotes
their accountant members.
The new consumer credit legislation dictates
that any broker who provides assistance to
consumers around lending needs to be licensed
and provide responsible lending that needs to be
supported with the right advice
JOE SIRIANNI
MFAA
THE MFAA IS SEEKING TO REPOSITION QUALIFIED
BROKERS AS ADVISERS. WHAT IMPACT WILL THIS
HAVE ON THE INDUSTRY AND DO YOU THINK
BROKERS WILL ACCEPT THE CHANGE?
The MFAA is not driving this change. The reality is that the
new consumer credit legislation dictates that any broker who
provides assistance to consumers around lending needs to
be licensed and provide responsible lending that needs to be
supported with the right advice. Brokers need to ensure they
clearly understand the client’s financial position and objectives
and that the product solution they select is not unsuitable for
the client’s needs – all of which needs to be clearly transparent
to the client and documented. Interestingly, the vast majority of
brokers already adhere to this process so I suspect the industry
will easily embrace [the changes].
WHAT ARE THE MAIN CHALLENGES THE BROKING
INDUSTRY FACES OVER THE COMING YEAR?
The key challenge is not legislation and compliance. [It] is
lifting professionalism in the industry, providing a valued
service to our clients, maintaining high quality business
partnerships with lenders, and continuing to grow the broker
channel by delivering a valuable proposition to clients.
Moving to a compliance regime under the new consumer
credit legislation will [also] be an important factor but I
suspect they [brokers] will quickly handle this.
www.theadviser.com.au 49
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Mo r t
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BUSINESS OUTCOMES
INTELLIGENCE
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MORTGAGE BROKING is a competitive industry and
success comes down to a lot of factors – including the
ability to plan ahead.
But if the results of The Adviser straw poll in late
2009 are anything to go by, business planning remains
a low priority for brokers, despite the increasingly
competitive environment in which they are operating.
The Adviser poll asked brokers whether they had
implemented a business plan for 2010.
At last count, 61.1 per cent of the 185 respondents
said they hadn’t, while only 23.8 per cent said they
had a plan ready to go.
Only 15.1 per cent said their business plan was
nearly complete.
The Loan Arranger’s Scott Marshall is among
those brokers that believe in planning. He says even
the most successful brokers can fail to meet their
full potential if they don’t take stock and map out an
achievable business plan for the year ahead.
“By having a business plan in place, we are able to
define our sales goals as well as outline who is doing
what and when,” Mr Marshall says, adding that it is
also useful to be able to compare and contrast actual
sales against targets, on a month by month and year
by year basis.
GOAL ORIENTATED
Mr Marshall says in creating a sales plan as part of
their business planning strategy, brokers should start
by thinking about what their objective is.
“An effective sales plan should be realistic and
ideally contain short term goals and more long term
ones,” he says.
“In most cases [the objective] will be getting a
return on their investment. In that respect, brokers
need to have a good knowledge of the market and
tailor the plan to their skills base. They also need to be
aware of what it is they are offering to the client in the
way of products and services.”
He says by having business objectives laid out >>
www.theadviser.com.au 51
INTELLIGENCE
BUSINESS OUTCOMES
>>
in black and white, achieving them becomes a whole
lot easier.
Often brokers can get weighed down in the dayto-day grind, they forget to look at the bigger picture.
They know what needs to be done, but unless it is
sitting in front of them, starting them in the face,
achieving those desired business goals becomes an
unachievable nightmare.
nMB’s director of sales and marketing Sal Cinque
says setting business targets is “a little like planning
a holiday”.
“Home is usually the starting point (situation
analysis), the destination is chosen (desired
objectives), and then a means of transport is selected
(strategy to achieve the objectives).”
Mr Cinque says it’s important for brokers to be
able to measure their past performance so they can
improve on it – which is where a sales plan comes in.
“The objective of measuring results is to provide
brokers with a clear understanding of their current
state of play before discussing future business goals,”
says Mr Cinque.
“Setting sales objectives provides direction, purpose
and motivation in the management of the business.”
As part of its plan, nMB has developed a software
business review system that converts sales data into
meaningful information. The aim is to help brokers
improve their sales performance by understanding
their historical performance, including any cyclical
and seasonal behaviour, as well as uncovering
underlying business trends that may inform their
future sales planning.
The software comes with budgeting tools to help
brokers identify the fixed and variable costs of the
business, a ‘breakeven’ calculator that analyses the
required sales to cover the fixed and variable costs,
and a business plan template that can be used to set
the macro direction of the business.
It is also useful in identifying any macro factors
that might be affecting the market in general and
that are outside the broker’s control, including which
months are traditionally quieter.
DATA CHECK
1st Street managing director Jeremy Fisher says
he likes to know what periods of the year are quiet
because “I know when I need to work harder and
when I need to start putting in the ground work”.
“I am also interested in comparing six monthly and
yearly periods to get an overall picture of my business
over a longer term. I will often look back over the past
three years to get a snapshot of how the business has
been faring,” he says.
52 www.theadviser.com.au
Mr Fisher has a general sales plan in place that
he uses to record his figures for the month and then
compare those results with previous months.
But while Mr Fisher says a plan is great for keeping
track of everything, “especially sales”, it is important
that it remains relatively informal and simple.
“The simpler the plan, the more likely I am to stick
to it,” he says.
“I think for brokers, the best business plan is one
that has realistic and achievable targets.”
Mr Fisher says brokers can get so caught up in
writing their business goals that they don’t stop to
think about how attainable said goals are.
Setting sales objectives provides direction,
purpose and motivation in the management of
the business
SAL CINQUE
nMB
In this respect he believes it is important for
brokers to keep the bigger picture in mind.
Mr Fisher says he lives by the Keep It Simple policy.
He says a simple goal is not only more likely to be
achieved but can also be changed easily to suit the
ever changing business conditions.
“Goals should be broad, general ideas about the
future, because they can be shaped at a later stage
and are more attainable,” says Mr Fisher.
Mr Fisher says it is important that brokers keep the
big picture in mind when writing their business plan
for the year ahead.
“A broker should decide where they want their
business to be in the future, then write down what
they are going to do and when in order to get there,”
says Mr Fisher.
“Having an effective sales plan in business is
like having GPS navigation in your car – it takes you
where you want to go, enables you to focus on your
main task and gives you a more comfortable ride
along the way.”
But while setting business goals is a great idea, Mr
Fisher says brokers should not be too disheartened if
they don’t meet their targets.
Incidents happen and obstacles arise that can
have a significant impact on the business, changing
the sought after final outcome.
“If that happens, don’t worry. Just pick yourself
up and shape your business goals to meet the new
conditions. Never see anything as a failure, but rather
an opportunity for change.”
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CEO OF EARTH: A GROUNDBREAKING GUIDE TO BUILDING THE
ULTIMATE BRAND
Why do global brands like Apple, Coke and Google have such a loyal following? Brand
expert Simon Hammond says it comes down to how they engage consumers. In a
narrative style that is part Hitchhiker’s Guide to the Galaxy and part Fish!, CEO of Earth
examines the power of consumer engagement in creating brand connection and
loyalty, through the simple question: How would you run Earth as a business and a
brand?
Author: Simon Hammond
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CLASSIC ITALIAN COOKBOOK: THE RIVER CAFÉ
There is a brief moment as summer overlaps with autumn when the beautiful Borlotti
beans are fully ripe in their pods, the huge, wonderfully-flavoured Porcini mushrooms
are beginning to appear in the markets, and the tomatoes are so ripe and sweet they
are almost bursting. The River Café Italian Cookbook is a celebration of the real, classic
food of Italy. In twelve chapters the authors sample an array of tastes that comprise the
traditional Italian menu – from antipasti to sweet dishes for special occasions – with
accompanying stories and anecdotes.
Author: Rose Gray & Ruth Rogers
Publisher: Penguin Australia
RRP: $59.95
Tool
Box
BIGHAND DIGITAL DICTATION
Drivers, look out: BigHand has launched a new voice to text software system that gives Blackberry users the ability to
send texts while on the move – and continuously improve the quality of their copy.
The dictation software 3.3 includes both a “speech recognition only” and “speech recognition with
proofing” option.
With the latter, the recipient of text sent via the transcription server can make
corrections, save the document and submit it. Once submitted, the server-based
speech file of the original author is upgraded to reflect the corrections. The author can
still correct his or her own speech file if so desired.
As well as the Server-side Speech Recognition module, other new features include
document attachments and links within the workflow, a new search engine and user
interface improvements as well as splitting of voice files and extended external sound
file support.
Cost: $1,000
NOKIA BLUETOOTH HEADSET
The Nokia Bluetooth Headset BH-902 is an attractive, lightweight and easy to use headset. It is
perfect for business operations, thanks to the stylish OLED display and caller ID function. The headset
comes with a convenient neck strap, so you won’t lose it when racing to a meeting.
The headset also has great battery life, with up to eight hours talk time. The only downside is that
it’s slightly larger than some other bluetooth headsets on the market. However, given its convenient
extra features, the headset is a high-tech little gem that is perfectly suited to brokers on the run.
Cost: $214
www.theadviser.com.au 55
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CONTACT
Colin Sherry
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[email protected]
02 9252 8311
6/2/2009 3:37:57 PM
“It’s so easy to regularly keep in touch with my clients, using
PLAN’s professionally written and designed newsletters,
and I can customise them using the smart CRM system.
Best of all, while other brokers pay hundreds of dollars a year
for such a service, its FREE. Part of the service.”
Mick McClure
Managing Director
Buyer’s Choice Home Loan Advisory Service
MKM Capital: 20
1st Street: 50
CB Richard Ellis: 47
MFAA: 2, 40, 49
Adelaide Bank: 38, 41
Challenger: 37
Mortgage Choice: 32, 33, 34, 37, 38, 41, 46
Adshel: 24
Choice Aggregation Services: 14
Mortgage EZY: 40, 41
Advantedge: 10, 37, 38
Chumley & Pigwig: 26
National Australia Bank: 7, 10, 34, 37, 41, 42
Adviser Campus: 34
Citibank: 6, 14
National Insurance Brokers Association: 34
Auspak Financial Services: 12
Club Financial Services: 7
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Australia and New Zealand Banking Group: 10
Commonweath Bank of Australia: 10
National Mortgage Company: 42
Firstfolio: 29
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CPA Australia: 49
Nicolas Feuillatte: 54
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Nokia: 55
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Australian First Mortgage: 41
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PLAN Australia: 14, 37
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Better Mortgage Management: 39
Australian Securities and Invstments Com-
Housing Industry Association : 7
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mission: 34
ING DIRECT: 6, 41
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Future Financial: 40
Australian Securitisation Forum: 37
Insurance Advisors Association of Australia: 34
Scope Lending: 26
Bankwest: 7
Insurance Council of Australia: 34
Southshore Finance: 14
Barnes Home Loans: 42
Intelligent Finance: 6
Taylor Financial Solutions: 12
Bendigo Bank: 38, 41
Lake Macquarie Home Loan Centre: 14
Tiffen & Co and The Mortgage Detective: 14, 28
Better Mortgage Management: 42
LJ Hooker Financial Services: 24
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Bighand: 55
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WHO Finance: 10, 38
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Loan Market Group: 7
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Macquarie Bank: 12
Wizard: 10
Carrington National: 41
ME Bank: 37
National Mortgage Company: 21
PLAN Australia: 25
23/10/09 8:13:46 AM
Professional Lenders Association Network of Australia Pty Ltd.
Suite 11, 828 High Street, East Kew VIC 3102
Phone: 1300 78 78 14 Fax: 1300 78 78 15
Email: [email protected]
Website: www.planaustralia.com.au
ACN 086 490 833 ABN 88 380 760 150
riable rate, free redraw, no annual fees
mention you get the service you deserve,
wback policy.
a simple and competitive commission
ter.
PLAN Australia is a member of MFAA and FBAA
PLAN6643 MBM
The aggregator for professional mortgage brokers
14/08/09 9:01 AM
24/2/09 1:44:57 PM
Paula Henderson: 8
Peter Hayward: 6, 8
Ray Hair: 8
Richard Taylor: 12
Rod Cameron: 22
Rose Gray & Ruth Rogers: 55
Sal Cinque: 50
Scott Marshall: 50
Simon Dehne: 32, 33, 34
Simon Hammond: 55
Steve Weston: 10, 37, 38
Tasso Papachatgis: 32
Tom Hayes: 47
Tony Carn: 37, 38, 40, 41
Tracie Palmer: 24
Troy McLachlan: 38
Will Davies: 26
Will Foster: 26
Will Keal: 6
COMPANIES
13/1/10 3:47:01 PM
Advantedge: 23
At PLAN Australia, we’re here to help build your business.
While others talk about it, we do it. So choose your
aggregator carefully.
Jeff Chapman: 42
Jeremy Fisher: 50
Jessica Anderson: 8
Joe Sirianni: 2, 48, 49
Joshua Loudoun: 47
Justin Doobov: 6
Kevin Stanley: 47
Lisa Claes: 6
Mark Hewitt: 12
Mark Mellick: 12
Mark Reid: 7
Matthew Bell: 46
Melos Sulicich: 7
Michael Coombes: 8
Michael Maiorano: 41
Michelle Coleman: 10, 38
Murray Cowan: 42
Patrick Tuttle: 37
Paul Smith: 7
Commonwealth Bank: 17
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Aaron Maskrey: 46
Aaron Milburn: 7
Alison Whittle: 8
Allan Pease: 2, 18, 19, 20
Allan Savins: 37
Brendan O’Donnell: 8
Brett Mansfield: 38
Damian Percy: 38, 41
David Friend: 28
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David Johnson: 26
Elvira Lodewick: 24
Garry Driscoll: 40, 41
Gino Marra: 41
Glenn Byres: 6
Gordon Wallace: 34
Jamie Christie: 37, 38, 41
Jamie Payne: 14
Janelle Rayner: 42
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RAMS: 13
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