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The debate over the convergence of financial services has yet to subside, but ING Direct’s Mark Woolnough says much of the conversation has missed the point FULL STORY PAGE 14
INSIDE+
Mark Woolnough:
+ ANALYSIS
PROPERTY PUNCH-UPAre ‘spruikers’ sullying the industry?P10
As a mortgage broker these days, it’s near-impossible to escape the heated debate raging over the need for diversification and
the convergence of financial services. On one side, mono-line providers argue that brokers need to stick to the main game. On the other side, proponents of diversification argue that it’s the only way to ensure a steady income. But the focus of the entire debate thus far has been off, according to ING Direct’s Mark Woolnough.
+ OPINION
CHANGING AUSTRALIADemographic shifts brokers can’t afford to ignoreP20
+ PEOPLE
AMAZING JOURNEYOne broker’s unexpected path to parenthoodP28
Looking past the doubters
+ NEWS
A look at what’s been making headlinesP4
+ WORKSHOP
RISKY BUSINESSHow to develop a smart risk management strategyP22
POST APPROVED PP255003/06906 JUNE 2013 ISSUE 10.11$4.95
+ MARKET TALK
FOLLOW THE LEADERBig corporations may be tipping tomorrow’s hot spotsP18
NEWS2 brokernews.com.au
NUMBER CRUNCHING
*The nationwide median sale price of homes for the three months to April 2013
HOME BUILDING SEES A SLIPValue of work done: March Quarter
RENTS ON THE RISEA look at capital city rental growth over time
Source: ABS
Source: RP Data
Source: RP Data
WHAT THEY SAID...
MARIO BORG “If you specialise at what you’re good at, I find that clients do respect that” P8
GREG ASHE “What’s the one thing that small businesses hate the most? Surprises” P22
TONY HAYEK“I hate the word ‘spruikers’
because not all [property advisers] are spruikers;
– I’m certainly not a spruiker” P12
PHIL NAYLOR“We believe the total market
share of the mortgage broker channel is now
around 45%” P6
Combined capitals
12 months
5 years
10 years
15 years
Houses 3.5% 5.1% 4.4% 4.2%
Units 3.3% 5.0% 4.3% 3.7%
DID YOU KNOW?
$1.1m**The settlement reached with ASIC in the Storm Financial caseSource: ASIC
RESIDENTIAL
QUARTERLY CHANGE
-1.0%
YEAR-ON-YEAR CHANGE
+2.1%
BUILDING
QUARTERLY CHANGE
-1.1%
YEAR-ON-YEAR CHANGE
-0.6%
NON-RESIDENTIAL
QUARTERLY CHANGE
-1.2%
YEAR-ON-YEAR CHANGE
-4.3%
$405,000*
NEWS4 brokernews.com.au
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brokernews.com.au
ASIC issues ban to award-winning broker/property advisor
ASIC issues ban to award-winning broker/property advisor
■ ASIC has cancelled the credit licence of Money Choice Pty Ltd (Money Choice) and banned its award-winning director, Matthew George, after an investigation found failures to comply with credit laws, responsible lending shortfalls and instances of unlicensed SMSF advice.
Australian Broker contacted George, who declined to offer his side of the story due to legal reasons.
“At this stage we are reviewing our position and are not in the position to comment.”
However, George’s online property investment blog describes him as “an ambassador for property investment and a service provider … having made a small fortune … a $9m property portfolio”. He’s also listed as having won awards from various Australian aggregators and associations.
But ASIC says George, who is the sole director of the Melbourne-based property investment and finance business, has been banned from engaging in credit activities for eight years and from providing financial services for three years.
Deputy chairman, Peter Kell, says George demonstrated through his conduct that he’s “not a fit and proper person to engage in credit activities”.
“This included some instances where Mr George preferred his own interests to those of Money Choice’s clients. Mr George was found to have advised some clients to set up an SMSF for the purpose of purchasing property when he was not licensed to provide such advice.”
Money Choice and Matthew George have the right to lodge an application for review of ASIC’s decision with the Administrative Appeals Tribunal.
The incidence of using a broker to purchase a home loan has jumped from 25% in March, 2009 to 29% in March, 2013
DID YOU KNOW?
Source: Roy Morgan
BUDGET BLUES
CUSTOMER SENTIMENT
-7% MONTH-ON-MONTH
“IS NOW A GOOD TIME TO BUY A
HOUSE?” +11.1%
MONTH-ON-MONTHSource: Westpac
■ ING DIRECT, Macquarie, Adelaide Bank and BankWest home loan customers are more likely to have used a broker, compared to customers of other lenders, according to the latest findings from the Roy Morgan Research Finance Single Source Survey.
Roy Morgan also reports that, of all Australians with a home loan, the incidence of using a broker to purchase a mortgage or home loan has jumped from 25% in March 2009 to 29% for the latest 12 month period to March 2013.
MAIL FAIL: AUSTRALIA POST ACCIDENTLY AIDS AUSSIE MAIL-OUT
■ Australia Post has unwittingly given Aussie’s latest mail-out campaign a leg-up, creating credibility and impact that money just can’t buy .
The campaign to existing Aussie customers, which mailed earlier this week, was deliberately hand-ripped through the middle of the cover to suggest their mail had been damaged. The inside text reads: ‘Isn’t it frustrating when you only see half the picture?’
The marketing team at Aussie were therefore amused to see many of the brochures have been packaged and sent on to customers in clear envelopes – with an apology from Australia Post for accidentally destroying their mail.
25%
Consumer sentiment took a dive in the wake of the Budget, but housing optimism stayed strong
6 brokernews.com.au
NEWS
THE STRANGER SIDE OF NEWS
SILVER LINING ■ A store owner in the US is making the best of a bad situation. A security camera video of a bungling thief attempting to rob Kent’s Meats and Groceries in the Northern California town of Redding went viral. The video showed the would-be burglar break the store’s window, then run away, tripping twice during his escape. Store owner Kent Pfrimmer was able to spin the foiled burglary into some brilliant marketing. He’s used the video in a new television ad for the store’s pastrami, coupled with the tagline, “So good some people will do just about anything to get more”. That’s a real glass-half-full mentality, Kent.
ADVANCE AMERISTRALIA FAIR ■ It looks like a movement to merge Australia with its American allies is dead in the water. A petition on the White House website suggesting the two nations merge into a new super-nation, dubbed Ameristralia, garnered only 6,500 of the 100,000 signatures required for it to be reviewed by President Barack Obama. Proponents of the union had created a new flag containing the stars and stripes and Southern Cross, as well as a coat of arms featuring a koala with the head of an eagle. What we want to know is, why did America get first billing in the new country’s suggested name? Why not Australierica?
■ Mortgage brokers continued to hold their market share above 40% of the $24.1bn worth of home loans written during the March quarter – and are on track to break through the $100bn barrier of home loans written during the 2013 calendar year, according to research of the top 16 aggregators in the industry by research group comparator.
MFAA CEO Phil Naylor says brokers continue to lift their presence as a ‘highly effective’ distribution channel for both large and small lenders, well supported by borrowers.
Brokers maintain 40% market share
MAJOR UPS TRAINING HOURS IN EFFORT TO REDUCE BROKER DEPENDENCY
■ ANZ has doubled its training hours in the past year in a drive to boost proprietary sales and reduce reliance on brokers.
The major bank’s half year results reported 150,000 hours of training in the past 12 months, approximately two-thirds of which was specifically targeted at the retail sector.
Mark Hand, managing director of retail distribution, said the training’s core focus was in boosting the skills of their front-line staff, reducing dependence on broker channels.
“I felt our network needed to be having better quality conversations with our customers,” said Hand.
“Otherwise we’re effectively encouraging them to go to brokers, and that opens the option for them to bank with someone else.”
Hand said that, while the majority of mortgage sales in the last half came from proprietary channels, ANZ has still maintained a good relationship with brokers.
“The productivity has lifted in our branch network, so deals that we were missing out on before we’re capturing, but we’re still very active and big supporters of the broker network.”
“If we extrapolate the results of the 16 aggregators to the whole broker channel, we believe the total market share of the mortgage broker channel is now around 45%. The major lenders continue to invest in the broker model, with ANZ reporting last week that brokers held about 46% of the loans written by the major four banks.”
DID YOU KNOW?
of Gen Ys said they would not consult a financial planner Source: REST
50%
WE BELIEVE THE TOTAL MARKET SHARE OF THE MORTGAGE BROKER CHANNEL IS NOW AROUND 45% - PHIL NAYLOR
8 brokernews.com.au
NEWS
WORLD NEWS
■ A top broker has warned that diversifying for the wrong reasons can leave brokers as mistrusted as dodgy used car salesmen.
Mario Borg, director of Master Brokers Group, says despite the diversification hype, brokers need to approach the issue with caution.
“The whole thing about diversification is bandied around a fair bit – that it’s the best way to increase your revenue. It’s all about revenue, revenue, revenue,” says Borg.
“But at the end of the day, if you specialise at what you’re good at, I find that clients do respect that and do value the fact that you’re not trying to be all things to all people.”
More often than not, says Borg, referrals are a better option.
Brokers too quick to diversify
Major bank offers commission incentive ■ A major bank has launched an incentive program that could see brokers receiving an extra 10bps of upfront commission.
Westpac general manager of mortgage broker distribution Tony MacRae has told Australian Broker the bank will offer a volume incentive to aggregators in the wake of the lender’s push to grow its mortgage book at system. MacRae said the program, running from 1 June to the end of September, will reward aggregators who see their group’s overall volumes through Westpac increase.
While the volume targets will vary slightly from aggregator to aggregator, MacRae said they were realistic and achievable. Members of aggregators who hit the targets will receive an extra 10bps of upfront commission on Westpac deals, regardless of their individual volumes through the bank.
While the incentive program will rely on an aggregator’s overall numbers rather than those of individual brokers, MacRae said he hoped the promotion would see brokers who hadn’t previously used Westpac “give us a go”.
“I hope they give us the opportunity to prove we can deliver.”
UNITED STATES OF AMERICA
BORROWERS LOOK FOR TRUSTWORTHY BROKERS
Much-maligned mortgage brokers in the States are seeing a reversal of their reputations as more consumers look to the third party. Mortgage brokers are the 5th most inquired about and the 24th most complained about category of the approximately 800 Better Business Bureau (BBB) categories, according to BBB data.
In the first three months of 2013, BBB fielded nearly 6,000 inquiries into mortgage brokers just in northeast California, a 38% increase compared to the same period in 2012.
BBB reported an 18% increase nationally during the same time period, recording nearly 500,000 visits to BBB business reviews of mortgage brokers.
CANADA
CANADA HEADED FOR A CRASH?
Canada’s housing boom, often considered as bubble-proof as Australia’s – will not make a soft landing, predicts one market analyst, who expects that “significant collateral damage” is coming.
Ben Rabidoux, an analyst with Hanson Advisor, says that the differences between the Canadian and US housing markets have been “dramatically overstated”, stating that it will be “very difficult for this to unwind painlessly” for those pulling the policy levers in Ottawa.
“If you look at how levered our economy and our labour market is to this current housing boom,” Rabidoux said in a recent interview on BNN, “my position has been that it will be very difficult for policymakers to unwind this boom without significant collateral damage.
“If we look at housing-related industries as a percentage of GDP, we’re well above where the US peaked.”
RBA HINTS AT FURTHER RATE CUTS
■ The RBA says it was conscious of the “strengthening conditions in the housing market” when it decided to lower the official cash rate to 2.75% in May, but also noted that, thus far, credit growth had remained subdued – and haven’t backed away from the potential for even further reductions.
“Taking all the factors into consideration, the Board decided that some of the scope to ease policy should be used at this meeting. It judged that a further reduction in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target.”
Looking ahead, the RBA says it expects “moderate growth” in housing investment, along with growth of resources exports and a pick-up in consumption offsetting “the slowing in overall business investment”.
FAST FACT
Brokers’ share of the mortgage market for the March 2013 quarter Source: MFAA
THE WHOLE THING ABOUT DIVERSIFICATION IS BANDIED AROUND A BIT - MARIO BORG
45%
ANALYSIS10 brokernews.com.au
The Personal Property Securities Act (2009) is a national legislation that came into effect on 30 January 2013. Broadly, it impacts situations where one person or entity takes rights or a security in non-land
assets which belong to, or are in the possession of, another.
Hall & Wilcox lawyer and PPSA expert, Katherine Payne, says it’s crucial for brokers to understand the sometimes complex legislation, for a number of reasons.
“When approached for non-land asset finance, a financier will now search the PPS Register to determine which other entities claim rights in the borrower,” Payne explains. “For example, will the financier have a first-ranking charge or a second-ranking charge? Is the inventory intended to be financed already the subject of a retention of title arrangement with the supplier? These are important questions for financiers. It is therefore important for borrowers and brokers to be comfortable in answering these questions before they apply for finance.”
The PPSA also imposes additional obligations on particular types of financing. “For example, a debtor discounting facility will now require particular notices to be sent by the discounter, which often impact the timing of when funds will be advanced. It’s important that brokers be aware of these implications for their clients.”
Furthermore, lenders are now frequently questioning whether the borrower has PPS protocols in place to protect its business with respect to its customers. “For example, if a financier takes rights in assets held by an equipment-hire company, but that equipment-hire company does not protect its own assets as against the customers,
Covering your assets:
IT IS IMPORTANT FOR BORROWERS AND BROKERS TO BE COMFORTABLE IN ANSWERING THESE QUESTIONS BEFORE APPLYING FOR FINANCE- KATHERINE PAYNE
Hall & Wilcox commercial litigation specialist and PPSA expert, Katherine Payne, demystifies the complex legislation and identifies key points for brokers
Katherine Payne is a commercial
litigation specialist with a focus on insolvency, the
Personal Property Securities Act (PPSA)
and its practical implications and
general commercial litigation. She has
had numerous articles published,
provided expert commentary and
presented to clients and associations
from a range of sectors on the
impact of PPSA to their business.
ANALYSISbrokernews.com.au 11
DID YOU KNOW?
The PPSA harmonises six separate schemes formerly in place in different states
the value of the financier’s security may be jeopardised. Some financiers are now considering the existence and content of PPS protocols in assessing which products to offer a borrower.”
The final reason brokers need to be aware of the legislation, says Payne, is that it’s the borrower’s responsibility to ensure that interests incorrectly recorded against them are removed from the PPS Register. “In some instances, this can take time. Companies and people should seek professional advice swiftly if they consider that interests have been incorrectly recorded against them. This can impact their ability to obtain finance.”
The PPSA applies to most businesses, as well as individuals and trusts. Payne says it’s important that affected businesses and people seek advice as to the impact of the PPSA on their business. Brokers, she says, are ‘well placed’ to encourage clients to do so.
But what exactly is the PPS Register – and how do brokers access it?
“The PPSA has created a national register, called the Personal Property Securities Register (PPS Register), on which many of these arrangements must be registered. In doing so, it provides a public noticeboard of rights claimed by one party, called the ‘secured party’ (eg a lender), in assets held by another, called the ‘grantor’ (eg the borrower).” The register can be accessed online at: www.ppsr.gov.au
It’s vital that companies and individuals register their assets on the register, says Payne, because if they don’t, those rights may be lost. “It is important to note,” says Payne, “that the PPSA applies only to non-land assets. Land assets should be dealt with in the usual course.”
When registering a security arrangement on the PPS Register, she says it’s necessary to understand that rights are registered to one party (the ‘secured party’) over another party (the ‘grantor’) in respect to assets held by the borrower (the ‘collateral’).
“Registering can be deceptively simple. It is easy to inadvertently make a mistake which will invalidate the entire registration. While it is important for brokers to be aware of the PPSA and its ramifications, we recommend that the borrower and broker seek advice before undertaking specific registrations.”
Finally, says Payne, it’s recommended that businesses search the register periodically to check which interests have been registered against them.
“This will assist companies in understanding the rights claimed by their creditors. We frequently see rights being claimed against a party wrongly. It is preferable to be aware of such instances before questions are raised by the financier.”
EXAMPLES OF NON-LAND ASSETS INCLUDED UNDER THE PPSA
The PPSAA FIXED AND FLOATING CHARGE
(now called ‘general security interest’) taken by a lender over a company’s assets in order to secure the loan
INVENTORY FINANCING
PLANT AND EQUIPMENT FINANCING
MOTOR VEHICLE FINANCING
DEBT FACTORING/FINANCING
RETENTION OF TITLE ARRANGEMENTS WITH SUPPLIERS
SOME LEASE ARRANGEMENTS
SOME DIRECTORS GUARANTEES
ANALYSIS12 brokernews.com.au
Property investment seminars are nothing new. With Australians fixated on bricks and mortar as a safe asset class, there are plenty of self-appointed experts willing to share secrets on how to get the most
out of an investment. But, while many property investment seminars are advertised as free, the actual advice often comes at a hefty price.
The WA Government recently issued a warning to would-be investors following a spate of ‘free’ seminars, telling borrowers that many east coast spruikers were dishonest about the ‘free’ nature of their gatherings, as well as the risks involved in property investment.
“The advertising of these seminars gives the impression that those who attend simply receive free information about how to secure their financial future but, in fact, they are subjected to high pressure sales tactics that promote coaching and mentoring programs costing between three and ten thousand dollars,” the commissioner for consumer protection in WA, Anne Driscoll, said.
Driscoll warned investors that the seminars often painted an unrealistic picture of property investment.
“They also appear to exaggerate the potential gains from property and other investments by following the promoter’s programs. The seminars appear to be just a clever sales tactic to get people into a room for many hours with the hope that they will sign up to expensive training courses, but very little information is offered for free. The question to ask is what would be the benefit to a promoter of holding a ‘free’ seminar if they didn’t sell something at the event?
“We believe some of the courses and programs on offer are just the next stage to get investors to make large financial investments that will be of benefit to the promoter, or simply a way to sell their coaching and mentoring packages,” Driscoll said.
A FEW BAD APPLES…The warning followed a similar admonition from ASIC that it would crack down on property spruikers through self-managed super funds (SMSFs). These caveats may be enough to scare some consumers off the idea of property investment seminars entirely. But Blue Wealth Property founder Dr. Tony Hayek claimed the idea that all investment advisers were ‘spruikers’ was unfair.
“For us, it’s an absolute world of difference. Number one, our seminars are never advertised; they’re not actually open to the public. You can only attend one after being invited by a business, because our clients are businesses – they’re financial planners, accountants and mortgage brokers.”
Furthermore, Hayek said, attendants weren’t able to commit to anything on the night.
“You can’t buy a property [at the seminar]; we don’t sell courses – we don’t do courses. Our seminars are more education and research-based.”
And Hayek has also pushed for regulation of the property investment industry.
“I live for the day when it happens, because what happens in markets like the one we’re in now is every charlatan and every person who thinks they can get out there and get their hands on some property will build some sort of rubbish story and sell it to a naive Australian. Fortunately for us,
Warnings are mounting about property ‘spruikers’, but should consumers steer clear of property advice altogether?
DID YOU KNOW?
Property Investment Professionals of Australia has supported calls to crack down on SMSF spruikers
WARNING SIGNSConsumer Protection officers in WA attended three separate property investment seminars and reported that all followed a similar formula:
The seminars were free to attend but were mainly a forum to sell expensive
mentoring and coaching programs
Presenters offered hints or teasers at the seminars, but participants had to pay for
programs to get any further information
‘Special’ rates for the programs were offered if attendees signed up on the day
They claimed to offer the secrets to financial success
They downplayed the risks and costs involved in property investment
Safe as houses?
ANALYSISbrokernews.com.au 13
we’ve been able to push past that… I hate the word ‘spruikers’ because not all of them are spruikers – I’m certainly not a spruiker.”
WHERE’S THE TRANSPARENCY?However, valid concerns remain when it comes to property investment adviser commission structures. Brian Clarke of East Coast Accountancy Management Services claimed that advisers like Hayek collect, on average, 6% commission on the sale price from vendors of off-the-plan properties and pass up to 3% to referrers – an obvious conflict of interest. Hayek wouldn’t confirm commission rates, saying the figures were commercially sensitive, but said the relationship between property investment advisers and vendors mirrored that of a broker and a lender.
“The client ultimately buys the property from us and we get paid money by the vendor – and we’ll share some of that money with the referrer.”
When asked how he managed the possibility of advisers at his firm building up ‘relationships’ with particular real estate agents and developers, potentially pitching their properties to investors above other, better options, Hayek said that
he fell back on “research methodology”.“We’ve built a very significant research
methodology that essentially adds a scientific approach to the approval of property. We are in the unique position that we don’t have to take on properties in order to be commercially viable … Our statistics show that, over the past five years, 77% of everything we’ve assessed has been rejected. That’s why publicly owned organisations like [one of the big banks] and Mortgage Choice have put us on their panels,” Hayek explained.
“You can imagine the due diligence they would have gone through. They did everything but turn us upside down and shake us.”
I HATE THE WORD ‘SPRUIKERS’ BECAUSE NOT ALL OF THEM ARE SPRUIKERS – I’M CERTAINLY NOT A SPRUIKER– TONY HAYEK
NEWS14 brokernews.com.au
Looking past the doubters
CONTINUED FROM PAGE 1
Woolnough, the bank’s head of third party distribution, said the debate over the inevitability of convergence in financial
services has focused more on the headaches it could cause for brokers than the benefits it would deliver to consumers.
“In this whole convergence discussion, there’s never any discussion around how it benefits the consumers. There’s often discussion around how it won’t work,” he said.
Because much of the debate has centred on the difficulty of implementing the model rather than the end result it yields for clients, Woolnough said many brokers are in a quandary over the idea of convergence.
“We’ve got a lot of brokers at the moment who are unsure of what convergence really means to them and their business. They’re receiving conflicting feedback and advice from within their peer community and often even from their aggregator. That’s because there’s rarely any focus or attention on what the benefits are to the consumer.” Woolnough said.
With this in mind, Woolnough believes it’s time to re-cast the narrative in terms of what convergence means for the consumer.
“Convergence of financial services should allow customer interaction and engagement to be far more holistic and add deeper layers of value and engagement between the trusted advisor and the customer,” he said.
That’s not to say convergence won’t deliver benefits to brokers as well. Especially in a tough environment beset by weak demand and increased regulation, Woolnough said the integration of a holistic financial services model can help brokers hedge their bets.
“We’ve still got flat credit growth despite the low cash rate, and consumer confidence and consumer
WE SHOULD NOT NECESSARILY LET OURSELVES BE GUIDED BY THE PART OF THE BROKER COMMUNITY THAT WISHES TO IGNORE THE EMERGING TREND– MARK WOOLNOUGH
Mark Woolnough:
brokernews.com.au 15
ING Direct recently restructured its BDM team to service planners as well as brokers
FAST FACT
sentiment remain low. Mortgage brokers need to look beyond just mortgages in terms of maintaining a sustainable and profitable advice model for the customer. That’s what we’ve found in financial planning. They’ve moved away from product focus and more into strategising around the client’s needs.”
And apart from just providing additional revenue, Woolnough said the model deepens the client relationship. He pointed to ING Direct’s recent trial distributing its Orange Everyday transaction account, saying that a transaction account in addition to a mortgage vastly increased the probability of gaining primary bank status with a customer, leading to a longer loan life and – ultimately – better remuneration for a broker. And a variety of offerings can lead to this deepened relationship, he said.
“If I’m a mortgage broker and I’ve just given a customer a mortgage, that’s great, but 80% of Australians don’t receive any form of financial advice from a trusted adviser. It’s the perfect time to ask, is the customer taken care of and represented with superannuation, with insurance? If the customer needs to look elsewhere for those needs, does that make them question the relationship with their broker?” Woolnough said.
The focus on the end result for customers is all well and good, but what about the practicality of incorporating a converged model in a broking business that has traditionally concentrated on mortgages? Woolnough offered advice for brokers looking to implement a more holistic model.
“Probably the easiest way and the best way is to look at surrounding themselves with quality representatives from that side of the industry. Maybe they go into a co-branded model or a co-office arrangement. But there should be a relationship beyond a simple referral relationship,” he said.
In going beyond a traditional referral relationship, Woolnough said brokers could consider hiring a financial planner, sharing an office or even a co-branding arrangement.
“That’s what you can achieve through a deeper and more rigorous agreement. I may have Mark’s Mortgage Broking and someone may have Caroline’s Financial Planning, but for the purposes of when I refer a customer to Caroline, it’s under my brand, and when she refers one to me it’s under her brand.”
And when it comes to branding in general, Woolnough said brokers should consider what their brand is saying to consumers.
“For a brand that solely refers to loans or mortgages, it may be the best time to take a look at how best to position that brand to communicate to the customer that you can provide holistic financial services and meet holistic needs,” he said.
The most important aspect in the convergence conversation, though, comes back to client outcomes, Woolnough said. Along with this comes a changing set of client expectations.
“We’re seeing the attitude and expectations of clients changing. They’ve moved away from wanting a trusted adviser to do it for them, and they’re now more educated and want an adviser to do the process with them.”
And Woolnough argued that, as financial services inevitably converge, mortgage brokers will have to put aside the commentary of the naysayers in the industry.
“We should not necessarily let ourselves be guided by the part of the broker community that wishes to ignore the emerging trend,” he said.
“The nature of the broker industry where you have a lot of islands in a big ocean, if it didn’t work in one business, it’s often deemed not to be worthy for the whole industry. That’s not a sensible message.”
Mark Woolnough:
16 brokernews.com.au
TOOLBOX
Business agility, the ability to rapidly and efficiently adapt to changes in the economic environment,
is the only way organisations can survive amid the current volatility – but is your practice nimble enough to shift with the market?
In its annual Focus report, consultancy firm Hay Group says organisations have the opportunity to capitalise on the rapid shifts in the market and become known for expert responses.
“The ability to adapt to change stands as the single most important differentiator for organisations successfully dealing with the current volatile business environment. The task of becoming more agile is not easy; however, we are increasingly finding that the more agile organisations are better placed than their peers to make decisions, reinvent their business models and redeploy effort and resources to pre-empt and respond to the needs of the market,” says Hay Group Pacific MD Henriette Rothschild.
By studying the movements of agile organisations both globally and locally, Hay Group compiled eight differentiating characteristics that underpin ‘organisational agility’. Is your brokerage on top?
1. MARKET INTELLIGENCE There is overwhelming
information available to businesses on their market, customer preferences, competitors, new trends and ideas. The truly agile organisations are those that have identified ways of turning random information and analytics from various sources into insights by the leadership team, and taken decisive action on these.
2. ENTERPRISE-WIDE PERSPECTIVETo be agile, an
organisation needs to be led by
an aligned executive team. However, what lets down many broker teams is a lack of enterprise-wide perspective, sacrificed on the altar of structural silos and, at times, self-interest.
3. DECISION-MAKINGThe common killer of agility is slow decision-
making processes involving too many people, lack of clarity of outcomes, and decisions easily overridden or forgotten. Agile organisations channel decision-making to the right (usually lower) level, including key people who need to have input and those who feel accountable for the outcomes of the decision.
4. LEADERSHIPLeaders are often no longer able to create
the level of clarity of end results that may once have been possible in more traditional, hierarchical environments. However, employees are more likely to be engaged and retained in organisations that provide clarity of purpose and direction. The most successful leaders manage this balance by providing confidence and clarity of the values and overall goals of the organisation while openly acknowledging the ambiguity of charting the right course.
5. PERFORMANCE FOCUSLocally we often
struggle to hold people to account, feeling that in volatile times we may be ‘changing the goalposts’ if we reinforce performance expectations. As a result, many leaders shy away from setting and holding people to account for performance expectations. In contrast, leaders in agile organisations remain focused on organisational and individual performance goals and maintain these, even though the milestones may shift to respond to changes caused by market volatility and changes in customer expectations.
In order to stay agile in a changing environment, your business needs these vital characteristics
6. FLEXIBLE REWARDOften cited as a reason organisations struggle
to change, reward – in particular executive reward – is often seen as a millstone around the neck of boards and organisations. A well- designed incentive plan should be able to respond to the change in game plan. Flexible incentive schemes are a key underpinning of success in quickly adapting to market changes and will continue to give boards the flexibility required to meet increasing shareholder demands.
7. SIMPLICITYAs leaders we deal with complex issues and
have to be realistic that there are not always quick fixes for complex issues. However, the most effective executive teams are those who make strategic decisions on what not to do. Similarly, the most agile organisations recognise the critical role of middle managers in stripping out unnecessary complexity and activity from the organisation.
8. CULTUREOften an outcome of getting the other
seven building blocks right is a resulting ‘culture of agility’. This is a challenge as organisations continue to struggle with outdated cultural elements relevant to a traditional ‘command and control’ environment. While not easily tackled in isolation, by addressing other building blocks a more agile and responsive organisational culture can emerge.
EIGHT VITAL BEST BUSINESS PRACTICES
THE ABILITY TO ADAPT TO CHANGE STANDS AS THE SINGLE MOST IMPORTANT DIFFERENTIATOR FOR ORGANISATIONS – HENRIETTE ROTHSCHILD
MARKET TALK18 brokernews.com.au
Followthe leader
Investors looking for future hotspots may want to take the lead of retailers and airlines
For some insight into the potential property hotspots of the future, your clients may need to look no further than what major corporations are doing. Corporations are responding both to present demand and
what they see as future opportunities in their decisions to invest in new areas. So if borrowers are looking for a good buy, they may want to follow the money.
DID YOU KNOW?
Woolies recently built a $15m store in the Brookwater suburb of Ipswich, Qld
Source: RP Data
$15m
MENTONE, VIC: Mentone houses the biggest Bunnings store in Victoria. The giant $75m Bunnings store opened in June 2012, creating more than 100 new jobs for residents.
WARRAGUL, VIC: The rural town of Warragul is located around 103km southeast of Melbourne. The town’s economy is largely supported by agriculture and is one of the biggest milk suppliers to Melbourne. With Bunnings opening its doors there, the area’s economic credentials are further enhanced.
GOULBURN, NSW: Goulburn has a large and growing population base and boasts a broad range of employment opportunities, thanks to the local hospital, a maximum security jail and the NSW Police Academy.
SINGLETON, NSW: Singleton is attracting a large number of new residents lured by the job opportunities in the resources sector. The town is surrounded by pastures, vineyards and national parks, making it desirable for families as well.
ARMADALE, WA: With excellent transport links and amenities, this suburb’s growing appeal to homebuyers is evidenced by its rising population.
Woolies and/or Coles are about to open or have recently opened shops in the following suburbs, which means these areas have already passed the population and future ongoing demand test.
MINTO, NSW: Located 48km southwest of the Sydney CBD, Minto is one of the larger suburbs of the Campbelltown local government area (LGA), with a population of 10,307. Woolies announced it will open a store here in December 2013.
NORTH ST MARYS, NSW: A working-class suburb of the Penrith LGA, North St Marys is seeing a flurry of developments that are set to transform the suburb and boost its appeal to both homebuyers and renters. The construction of the Masters Home Improvement Centre has already started. This highly anticipated multimillion-dollar development will house a Woolies store.
MARIBYRNONG, VIC: A Woolies supermarket opened at the Highpoint City Shopping Centre in October 2012, which indicates the retailer is confident about the suburb’s fundamentals. Located 8km from the Melbourne CBD, Maribyrnong City is one of the fastest-growing areas in the state, with its population rising by an average of 1.91% per annum over the past 10 years.
LYNDHURST, VIC: Woolies opened a store in Marriott Waters Shopping Centre in February 2013. Located 38km from the Melbourne CBD and just 5km from the economic hub of Frankston, Lyndhurst is certainly a suburb to watch.
MAYFIELD EAST, NSW: Coles submitted development approval for a $13m shopping complex in October 2012, cementing the suburb’s desirability for both residents and businesses. Five kilometres from the Newcastle CBD, Mayfield East boasts a number of shops and schools, a park and a TAFE campus.
BUSSELTON, WA: Located just a short distance from Margaret River, Busselton is one of Western Australia’s most popular tourist destinations. Woolies opened a new store there at the end of last year, signalling its confidence in the area’s economic viability.
BUNNINGS STORE OPENINGS
WHERE AIRLINES ARE OPENING NEW ROUTES
WOOLIES, COLES STORE OPENINGS
Sydney Dubbo
Qantas will add eight more flights to a total of 58 services per week.
Sydney Gladstone
Qantas will start eight return flights a week.
Perth facilities: Qantas is expanding its Perth facilities.
Singapore Perth
Jetstar has announced an additional six flights a week between Singapore and Perth.
Sydney Tamworth
Qantas will add eight flights a week between Sydney and Tamworth, including a $400,000 expansion to its terminal facilities.
Melbourne Hobart
Qantas will add an extra seven flights per week.
Melbourne Launceston
Qantas plans to add an extra 11 flights per week to service tourism.
Sydney Gold Coast
Qantas will reintroduce its full-service flights between Sydney and Gold Coast in support for the joint Qantas and GC Tourism initiative.
Melbourne Perth
Qantas announced it has expanded the number of its return flights to 68 from 44 airbuses.
MARKET TALK19brokernews.com.au
Homebuyers in Western Australia are on the move, and a new survey shows what they’re looking for
An estimated 491,000 adults living in Western Australia plan to move in the next three years, according
to figures released by the ABS.ABS director of WA State and
Territory Statistical Services David Waymouth says the 2012 WA Housing Motivations and Intentions Survey collected information about current and future housing intentions of Western Australian adults.
“Most Western Australians would like to live in a separate house, with 73% of those planning to move within WA in the next three years preferring a separate home to a townhouse, flat, unit, or apartment,” Waymouth says.
“Home ownership is also important, with 65% of Western Australians who plan to move within WA over the next three years showing a preference to own their home rather than rent.”
PRE-JULY SURGE EXPECTED FOR VICTORIAN FHB’S
Aspiring first home buyers are expected to rush to ‘sign on the dotted line’ ahead of the removal of thousands of dollars in government incentives at the end of next month, according to Melbourne property law specialist Adam Zuchowski.
Zuchowski, a lawyer for Slater & Gordon Conveyancing, believes the Napthine Government’s announcement earlier this month that incentives for FHBs purchasing existing houses would be scrapped from July 1 will result in increased activity at the entry level of the property market.
Zuchowski says anyone in the market for a first home that is already built will save 40% on the cost of stamp duty, as well as receiving a $7000 grant, if they sign the paperwork before July 1.
“The window is certainly closing for anyone considering getting a foot onto the property ladder who wants to take advantage of the grants and other incentives presently on offer. In recent years, there has been quite a lot of assistance available and that has helped thousands of Victorians get into their first property, but that will soon change.”
While those buying brand new houses, units or apartments will not be affected, Zuchowski says most FHBs are buying existing dwellings.
“Clearly, there is a benefit for those first home buyers who are able to negotiate a purchase prior to July 1, and I anticipate there will be a significant number of Victorians who will be wanting to take advantage of that.”
The survey also looked at ‘future movers’, that is, adults who indicated that they planned to move in the next three years.
Just under half of all future movers had lived in their current home for less than two years. A further 24% had lived in their current home for between two and five years.
While 87% of future movers planned to stay in WA, a small proportion (9%) planned to move interstate or overseas.
Waymouth says the survey also looked at what may influence people choosing a future house.
“When choosing their future home, just under half of future movers within WA said appearance and layout were factors influencing their decision. A better quality residence was important to 44%. Forty-two per cent of future movers within WA indicated familiarity with an area was a strong influence when choosing their future location.
Both being close to family or friends and access to facilities and services such as shops or schools mattered to 38%,” Waymouth says.
“People’s priorities when moving home reflected their different stages of life. People in senior households were more likely to choose a home that was smaller (34%) or on a smaller block (27%) than non-senior households. People in senior households were more likely than those in non-senior households to indicate being close to family or friends would be important (56% compared with 36%).”
PEOPLE’S PRIORITIES WHEN MOVING HOME REFLECTED THEIR DIFFERENT STAGES OF LIFE- DAVID WAYMOUTH
HIA bearish on home buildingThe Housing Industry Association (HIA) has released its National Outlook report, and HIA chief economist Harley Dale has said new home building faces headwinds in the year ahead.
“The dominant constraints to a sustained recovery in residential construction continue to be found on the supply side. A further tightening of credit conditions for residential development, together with disproportionately high and inefficient taxation as well as excessive regulation of new housing, stifle the potential of an inherently efficient component of the Australian economy,” Dale said.
While Dale said low interest rates were creating a more favourable environment for home building, he called on Federal Government action to stimulate “a sustainable recovery”.
“If the residential construction industry is to play its required role in rebalancing Australia’s economic growth, then Federal leadership is imperative in a range of areas, including a reduction in taxation and regulatory costs, increased banking competition, and greater workplace flexibility,” he said.
The HIA has predicted a flat year for housing starts across Australia, though NSW and WA are standout exceptions. The organisation forecast a 14% increase in construction in NSW and a 17% rise in WA.
State on the move
FAST FACTS
of future movers in WA plan to stay in the state
plan to move interstate or overseas
Source: ABS
87%
9%
20 brokernews.com.au
OPINION
Changing lifestyles combined with increasing life expectancy is creating a new lending dynamic
that all mortgage brokers need to consider.
INCREASED LIFE EXPECTANCYOver the last 50 years a person’s life expectancy has increased by around 12 years.
A child born today will live until they are in their early 90s.
In addition to everyone living longer, people are delaying significant life events.
Australians are getting married and starting families later and having fewer children. Higher property costs mean that children are staying at home longer and this is reflected in the increasing age of first homebuyers. Many of these decisions regarding lifestyle are made because of someone’s financial position.
ECONOMIC STRUCTURAL CHANGESThere have also been structural changes to the Australian economy that are impacting on an individual’s ability to save and invest for their future. Notably, Australia has increasingly become a high cost of production economy
and to compete internationally we must improve our skills and qualifications. Australians are therefore spending more time at school and in tertiary/vocational training at a financial cost to themselves. Even with government assistance to fund tertiary education, many young adults are starting their working years indebted.
Another major structural change occurring is the increasing trend to casual or part-time work. Until the early 1990s it was common to have a job with one organisation for life. Today, this is rare and it is expected that people will change not only jobs four or five times in their career, but also the industry. This trend to part time or casual work, particularly amongst older workers, means their pre-retirement incomes are lower, limiting their ability to save.
Wealthmaker Financial Services has analysed these trends and structural changes, producing some telling ratios that have implications not only for financial institutions, but every Australian.
INCOME EARNING/LIFE EXPECTANCYIn 1960 the average Australian spent 61.7% (44 years) of their life
Michael McAlary says brokers planning for the future must understand present demographic shifts
AUSTRALIANS ARE GETTING MARRIED AND STARTING THEIR FAMILIES LATER
Brokers must follow the big shift
working, whereas today it’s only 42.7% (35 years). This means that Australians have less time in the workforce, and therefore a reduced timeframe to save and invest for their retirement.
RETIREMENT/LIFE EXPECTANCYIn 1960 the average Australian was expected to live for eight years after they retired. Today it’s around 22 years.
INCOME EARNING/RETIREMENTIn 1960, an Australian had 5.5 income earning years to save or
invest for each retirement year. Today an individual must save enough during their income earning years to pay for 22 years of expected retirement.
As our income earning years are decreasing and our retirement years are increasing the current level of superannuation savings is insufficient. The Federal Government is taking some action to address this by proposing to increase the superannuation levy; however, this only goes part of the way. Australians will have to work longer and may have to accept a lower standard of living both before and in retirement.
WHAT DOES THIS MEAN FOR BROKERS?Recently, there has been considerable media coverage that there are not enough younger generations choosing mortgage broking as a career to step into the shoes of old brokers as they retire. This may not be the issue at first glance it appears to be because the above statistics indicate that brokers may not be able to retire as planned. Brokers should carefully consider whether they have saved and invested sufficiently for their retirement years, as it will be a lot longer than they realise.
SELLING A TRAIL BOOK MAY NOT BE SUCH A SMART IDEAFrom a customer business development perspective, being able to apply a holistic view of a customer’s likely financial life cycle needs means that brokers will be better able to provide solutions aimed at achieving the customer’s objectives.
LIFE EXPECTANCY ANALYSIS 1960 TODAY
Life expectancy 71 82
COMPRISED OF:
Childhood & education 19 years 25 years
Income earning 44 years 35 years
Retirement 8 years 22 years
RATIO ANALYSIS
Income Earning/Life Expectancy 61.7% 42.7%
Retirement/Life Expectancy 11.3% 26.8%
Income Earning/Retirement 5.5/1.0 1.6/1.0
Michael McAlary is the chief
executive officer of WealthMaker
Financial Services
brokernews.com.au 21
THE COALFACE
Melbourne-based Capital Advantage broker Chris Boler is a baby in the industry, having
only completed his diploma a few months ago, but he’s determined to get it right.
“My first job out of university was with a mortgage broker who convinced their clients to refinance their existing debt and get a line of credit. The customers were also charged thousands of dollars for a debt reduction program. My job was assessing the serviceability of the clients
and putting together the plan to show clients how quickly they could pay off their mortgage. It got me interested in mortgage broking, but once I realised how unethical the business was, I got out of there and ended up working for Macquarie Bank in margin lending.”
Before starting out at Capital Advantage, Boler worked for a real estate agent, prospecting for clients and providing sales support. He says this, coupled with his experience working for banks, is proving to be a major career advantage.
Chris Boler may be new to the industry, but his previous experiences have given him a running start
“I believe this helps me to be a better mortgage broker, as I can understand where everyone is coming from.”
The toughest thing about starting out in the industry, says Boler, is coming to terms with the fact that broking doesn’t fit into a typical nine-to-five work day.
“My work experience is mainly in project and administration roles in banking and finance, so the thing I have found hardest to get used to is the focus on finding new business. I am used to being able to forget about work outside of work hours, but I realise part of being a successful broker is to be constantly networking and identifying situations where I can help – even when I’m socialising.”
Creating a unique business proposition is also a challenge, he says.
“It seems to be getting more difficult for mortgage brokers to stand out, as everyone seems to be expanding their services. I am working with an experienced broker who is also a licensed real estate agent and he provides a low-cost buyers advocate service. This means we can help to make sure our clients are buying the right property, as well as getting the right home loan for their needs. We aren’t finding the properties for them, but guiding them to make decisions they will be happy with in the long term.”
IT SEEMS TO BE GETTING MORE DIFFICULT FOR MORTGAGE BROKERS TO STAND OUT, AS EVERYONE SEEMS TO BE EXPANDING THEIR SERVICES - CHRIS BOLER
Ahead of the learning curve
WORKSHOP22 brokernews.com.au
QED Risk Services director, Greg Ashe, has spent more than 15 years applying the science of risk management to finance businesses. In 2009, with the imminent onset of NCCAP, Ashe set out to educate
mortgage brokers about how their obligations as credit licensees can be turned around into best practice for their businesses.
“What’s the one thing that small businesses hate the most?” asks Ashe. “Surprises. We hate surprises. We like to have some certainty about what’s going on, because we’re spending a lot of time doing what we do, trying to eke out a living for ourselves. Risk management is a way of trying to take those surprises away.”
Creating a risk management strategy is a crucial step in preparing your business for unexpected hurdles – and golden opportunities
Develop a smart risk management strategy
ONECREATE A DIALOGUEEither talk to your team or talk to your colleagues. Ask, ‘what are the things that we’re concerned about in how our business operates?’
TWODEFINE YOUR RISK ‘APPETITE’Remember that if you never take on any risk, you will never make any return
THREEOUTLINE THE KEY RISKS YOU CURRENTLY FACEA ‘risk’ is just an event that, if it eventuated, would have an impact on your business objectives. Again, what does your team think are the risks?
NEVER LET THE THINGS THAT MATTER MOST BE AT THE RISK OF THE THINGS THAT MATTER LEAST - GOETHE
RISK MANAGEMENT IS A WAY OF TRYING TO TAKE SURPRISES AWAY- GREG ASHE
SEVEN STEPS TOWARDS DEVELOPING A SUCCESSFUL RISK MANAGEMENT STRATEGY
FOURPRIORITISEAsk, how ‘risky’ are all those risks when I compare them to the backdrop of my risk appetite? Are they within acceptable boundaries?
FIVEIDENTIFY ANY GAPS IN CURRENT RISK MANAGEMENT STRATEGYWhat controls do you already have in place around those identified risks in your business? Are you comfortable with the level of control you have? When you look at those risks in terms of how risky they are – and controls that you have in place – are you now satisfied that the risks are well managed?
SIXMAKE ADJUSTMENTSDecide if you need to adjust the level of control you have. Do some risks need more control? Do some risks have too much control and you’re actually wasting money?
SEVENTESTOnce the risk set is understood and controlled, you need to test the controls on a regular basis and ensure they’re working. Ashe says brokers should check their entire risk management process once a year and ensure that all risks are still understood and prepared for.
brokernews.com.au 23
SUMMARYIf you are a credit licensee, you’re obliged to have a system like this already in place, notes Ashe. In fact, he says, if you have renewed your licence through the Annual Compliance Certification process, you’ve already certified to ASC that you have such a system in place.
“But, putting the legislative and compliance requirements aside, it just makes good business sense.”
RISK MANAGEMENTMYTHS...
ASIC IS THE BEST SOURCE WHEN IT COMES TO RISK MANAGEMENT INFORMATION
“ASIC continually gets things wrong… One of the obligations of being a licensee is sadly overlooked by the entire industry, including the regulator. Risk management is all about your business. It is all about making sure your business resources get spent in the most appropriate areas. ASIC is only concerned with harm minimisation to consumers.”
‘RISK’ IS ALWAYS BAD
“When we think ‘risk’, we so often think about the negative things. But wider risk management looks at your whole business. What are the things that can upset your apple cart in the future?” It’s not ‘bad’ to be suddenly swamped with client interest following a marketing campaign, says Ashe – unless you don’t have adequate resources in place to cope with the influx.
‘BIGGER’ RISKS ARE MORE IMPORTANT THAN ‘SMALLER’ RISKS
Obviously, having your office burn down is a catastrophic event and something you’ll want to prepare for by purchasing insurance and so on. But what about ‘smaller’ risks, like a negative Twitter comment going viral and damaging your reputation? It’s important to consider as many potential threats – and how you might respond to them – as possible.
FINANCIAL SERVICES24 brokernews.com.au
Former Bell Potter Securities adviser Glen Russell Evans has been prosecuted by ASIC less than one
month after fellow adviser Lawson Stuart Donald was given a fully suspended sentence of two years and six months.
Evans, who pleaded guilty to 10 counts of misappropriating funds, received a five-year jail term with a non-parole period of three years and nine months. Five further counts were also considered in sentencing.
ASIC said that Evans’ fraudulent conduct cost investors more than $1.6m. According to the regulator, Evans entered into contracts with individuals and self-managed superannuation funds to invest in listed Australian equities and derivatives. ASIC’s investigation found that he:
Former Bell Potter adviser gets jail time
ASIC’s concerns arose from Evans’ role as a director of Kismet Trading Pty Ltd (deregistered) during his employment at Bell Potter Securities, where he worked until his resignation in October 2008.
ASIC commissioner Greg Tanzer said, “This is the second prosecution in a month involving a financial adviser who has exploited client accounts in a deceptive fashion.”
THIS IS THE SECOND PROSECUTION IN A MONTH INVOLVING A FINANCIAL ADVISER WHO HAS EXPLOITED CLIENT ACCOUNTS – GREG TANZER
A $4m claim on an insurance policy – by an insured person diagnosed with incurable metastatic melanoma – has been denied due to the interpretation of one word.
The clause in dispute was: “will result in the death of the person insured within 12 months, regardless of any treatment that might be undertaken”. The Court held that “will” meant it had to be absolutely certain the insured person would die within 12 months. However, the person in question was still alive at the time of the appeal, more than 12 months later.
Queensland Law Society accredited specialist in succession law Christine Smyth says that insurance is a big part of the toolkit for financial planners, but contracts are drawn up by insurance companies whose objective is to make money.
Although insurance contracts may look good at first, a lot of their terms are pregnant with meaning, and clients will often put more importance on the cost of a policy than its terms, says Smyth.
Advisers recommending insurance policies are increasingly at risk as people look to shift blame and responsibility.
“If it comes to pass that the policy didn’t suit someone’s requirements, there is a risk – and I think it’s a growing risk – that the client will say the adviser should have known because they were the one recommending that particular policy,” says Smyth.
One word costs client $4m
failed to invest the money as agreed
provided false trading and performance reports
failed to repay the balance of the proceeds to the investors, and
in some instances used clients’ money as collateral for his personal trading account without their authorisation
DID YOU KNOW?
of Australians believe their economic situation is good. This makes Australians the third most optimistic about their finances, following Canadians and Malaysians at 82%
77%
Source: Pew Research
PLANNING MERGER OPENS DOOR FOR GLOBAL EXPANSION
Insurance Advisernet Australia's (IAA) largest corporate authorised representative, Gibbscorp, has merged to create a joint venture with financial planning group Total Capital Management (TCM) of Newcastle, NSW.The deal, completed in May, will see TCM supply financial planning services to the Gibbscorp
client base. TCM will also have access to Perth-based Gibbscorp’s general insurance products and services.
Adrian Kitchin, managing director of IAA, told Australian Broker: “Peter Gibbs is well known in the industry and has established a business and brand over many years. He saw there was room to expand that outside of WA. TCM offers Gibbscorp an opportunity to expand that brand and, at the same time, Gibbscorp has a GI business. TCM will have a fully operational insurance business and will utilise the expertise of Gibbscorp.”
The group will open a new general insurance operation in Newcastle and plans to expand into Singapore.
“There is potential in Singapore based on the profiles of some of our clients. We needed an opportunity and it seems like it is here,” Kitchin added.
FORUM26 brokernews.com.au
DIVERSIFICATION DANGERS
Master Brokers Group director Mario Borg warned brokers to approach diversification with caution. Brokers agreed.
Lorenzo on 24/5/13 2:32PM“A good article and sound advice for most brokers. I, for one, am sick and tired of being told to diversify by people sitting in their ivory towers who have never written a loan.”
Ray on 24/5/2013 11:13AM“This guy is absolutely spot on. If we keep focused and do what we do best, making the clients a best friend, then business keeps rolling in from their referrals. The moment you treat them as some form of multi-stream profit avenue they lose trust in you and stop referring.”
Kiss and make upReal estate head John Cunningham recently told brokers it was time to bury the hatchet with real estate agents and forge a mutually beneficial relationship. When brokers reacted negatively on the Australian Broker forums, real estate agents expressed shock. One commenter said the bad blood was understandable.
“These feelings brokers have are due to their personal experiences gathered over time. One person telling them it’s different isn’t going to change how they feel and you pushing back won’t help. I personally have had exactly the same experience most of the other brokers here have had but I did take solace from your ‘press release’ that there is still an opportunity for us to work together in a relationship that is beneficial for everyone. I even sent around my team hoping to encourage them. At this stage I would say this is the exception rather than the rule. Now if only I could find a [real estate agent] that thought and worked like Mr Cunningham! That’s the challenge.”
Ozboy on 23/5/2013 9:29AM
What do you think? Leave your comments at brokernews.com.au
of your legislation!”C.G. had first-hand
experience with property advice seminars, and it wasn’t positive.
“I attended a few of these seminars conducted by different organisers and they all aim at naive members of the public. Along with misleading information and figures, they are selling their expensive services in a high pressure environment.”
AUSSIE POST MAIL FAIL
Australia Post unwittingly lent a helping hand to Aussie Home Loans when it packaged their mail-out, designed to appear torn, in an envelope apologising to recipients for damaging the flyer.
Kram on 24/5/2013 9:49AM“Great! (sarcasm) Now our postage costs will rise, thanks to a ‘marketing’ concept? How many mail items were sent out? How many Australia Post staff and how much time was wasted on this venture?”
Fez on 26/5/2013 2:46PM“It’s an amusing story, but it’s a shame that some of the commenters could not appreciate that and have had to try and divert the focus onto other unrelated matters. Come on guys, chill out!”
Property ‘spruikers’ are being called out, and brokers say it’s about time
Investors warned about dodgy seminars
The WA Government recently issued a warning about property investment seminars, telling consumers that
many ostensibly ‘free’ seminars often pressured attendees into paying for add-ons, and downplayed the risks of property investment. Brokers had plenty to say on property spruiking seminars.
Melbourne Broker said the phenomenon was nothing new, and buyers needed to use common sense.
“These seminars have been around for a long time. Anyone who goes along thinking they are not going to be ‘sold to’ is being naïve. Do your own research on the subject, check people out and get other opinions before making a decision.”
QEDRisk called on regulators to pay attention to the property advice industry, after having already turned their eye to mortgage brokers.
“ASIC, are you reading this yet? It’s high time this industry was put on a level playing field with mortgage brokers who were the low-hanging fruit
brokernews.com.au 27
ONE YEAR ON
What a difference a year makes … or not. Australian Broker reflects on the punditry, news and influential trends that made headlines 12 months ago Australian Broker Issue 9.11
ONE YEAR ON
MFAA explains diploma extensionAt its annual convention in Adelaide last year, the MFAA announced to much jubilation that it would be extending the mooted diploma deadline from 30 June 2012 to 31 January 2013. CEO Phil Naylor said the extension came after a “massive backlog” in processing enrolments. Naylor said the association had also been granted $2.4m in government funding to help its members complete the qualification.
What’s happened since? The MFAA stuck firm to its final 31 January deadline, with Naylor saying the association saw a “tsunami” of qualifications. After sorting through the requisite paperwork from brokers providing evidence of their diploma completion, the MFAA announced it had terminated the memberships of 1,100 brokers who had failed to meet the requirements.
Pepper plots diversification drive beyond low-docLooking to move beyond its traditional niche of specialist lending, Pepper Home Loans last year launched a new near-prime product line. The move was the latest in a series of strategies designed to expand the lender’s offering outside the low-doc range. Pepper had previously acquired a $150m auto and equipment finance portfolio from Suncorp.
What’s happened since? Pepper has continued making inroads into prime and near-prime lending, mainly through the acquisition of other books and an aggressive push into Europe. The non-bank signed a deal in January that would see it manage a $482m Irish loan portfolio, and followed on with a €290m Spanish loan book buy. Its most recent move saw it acquire a $250m small balance commercial portfolio from Citibank.
Alongside the future of financial advice reforms, the roles of brokers and planners are converging. Mark Woolnough of ING DIRECT commented at the 2013 MFAA conference that it was important
for brokers to stay abreast of changes within the financial services industry.
“I think one of the interesting things at the moment is to follow the developments of the FOFA [Future of Financial Advice] reforms in the financial services and planning side of the world and keeping in mind the potential changes that will lead for our own industry. It’s quite interesting to see the change in dynamics and changing customer expectations as driven by FOFA and the impacts that has on the advice model.”
Woolnough says it’s not a case of brokers and advisers becoming one role, but of sharing knowledge and developing more strategic partnerships.
“What you’re starting to see now are the professional networks actually starting to move closer together and are preparing to talk to one another and, potentially, still operate under the same brand, and for the consumer it’s just a holistic advice. But it’s more strategic partnerships and joint ventures behind the scenes.”
In the case of ING, the process has been a matter of fostering both the advice and broker sides of the business to ultimately create a better service offering for clients.
“Recently, with the integration of our adviser division and our broker division into a true third-party distribution model, we were actually able to learn a lot on both sides and to share wisdoms and ‘war stories’, for want of a better term, with respect to the respective partners.”
ING DIRECT’s Mark Woolnough says the roles of brokers and planners are coming together
Financial services converging
PEOPLE28 brokernews.com.au
When people think of mortgages they’ll often think of brokers and finance. For me, as a mortgage broker myself, I see homes and the opportunity to make someone’s dream a reality.
For the last 12 years I’ve worked in the mortgage industry, growing and nurturing my own successful business, 2nd Chance Mortgages. I’ve had the pleasure and the privilege of helping hundreds of people achieve their dream of being a homeowner.
A home is one of life’s great comforts but for me, my dream home lacked one important element: children.
In 1998 I lost twin boys, due to cancer of the uterus, leaving my then-fiancé and I unable to have a baby together.
In 2012, as I approached my 37th birthday, my fiancé and I made the controversial decision to try surrogacy. After exhaustive research, in June 2012 we travelled to New Delhi in India to meet the well-respected Dr Shivani Gour at SCI Healthcare and begin the journey into parenthood.
Little did we know the rocky road we would travel.
The weight of Dr Gour’s reputation and her history of delivering many babies to Australian couples were reassuring but I couldn’t help but be anxious. India was a different world, exotic and in
your face. As we entered the clinic I felt an increasing sense that we had made the
right decision. Our meeting with Dr Gour was remarkable. We were shown around the clinic personally and from top to bottom every door was open to us for inspection and
A Journey through
Surrogacy
ALL SURROGATES ARE THERE BY CHOICE AND IT AFFORDS THEM THE OPPORTUNITY TO
IMPROVE THEIR OWN FAMILIES’ LIVES
every step of the procedure, from the acceptance of surrogates to the baby’s birth, was explained. We were introduced to every staff member who would assist in the whole process of becoming parents; we even got to meet our surrogate mother, face-to-face.
It was a surreal moment, even in spite of the language barrier, I did not have the words to say sufficient thanks to this woman for the gift she was offering us.
From that point we had no doubts, and on our last day in India we formally began the process, with the egg collection and fertilisation and our first fresh transfer. It felt like we were holding our breath all the way back home.
Two weeks later we received an email. ‘We’ were pregnant!
But the joy was short-lived.
A ROUGH ROADAt eight weeks, our surrogate mother miscarried. Not only was this heart-breaking, the news came with devastating ramifications. People who had been excited for us now offered negative opinions and questioned our choices. On top of our loss, doubts began compounding.
I suppose it was around this time that the relationship between my fiancé and I began to break down. We had known that surrogacy was a difficult road but we were a couple in love who just wanted to bring a baby into the world.
Despite the growing stress we did not abandon the program. In September 2012 we attempted a frozen embryo transfer which wasn’t successful.
The following month we tried once again. Not long after that my fiancé and I separated. It had become too much.
A TIME OF REDEMPTIONIt was a few weeks later that the news came. Our surrogate was carrying twins!
On 10th May 2013 our two baby girls, Namaeya and Hati, were born by emergency caesarean, weighing only 2.2 pounds and 1.6 pound respectively.
The rollercoaster ride suddenly was worth it. I felt both emptied out by the journey and yet full of excitement. I was terrified that these fragile babies might yet be taken from me and that they might now grow up without a loving father. Yet two days
Adelaide broker Kylie Gower tells of her rocky path to parenthood, and
why it was all worthwhile
Namaeya
Hati
PEOPLEbrokernews.com.au 29
In April, National Mortgage Brokers held its annual conference on the Gold Coast. Brokers were treated
to speakers such as Olympian Alisa Camplin, real estate guru John McGrath and Aussie Home Loans founder John Symond, as well as views from the top of Q1, the Gold Coast’s iconic skyscraper.
IN FOCUS
View more photos from this event at brokernews.com.au/industry-events
later it was Mother’s Day and I couldn’t have asked for a better gift.
Under the care of the amazing Dr Gupta at the Delhi Newborn Centre, both Namaeya and Hati remain in the Neonatal Intensive Care Unit (NICU). Though they remain in the NICU, their prospects are looking wonderful.
People have asked me “Why India?” Despite the fact that 300+ babies are born to Australian couples every year, commercial surrogacy in Australia is illegal. In the US the average cost is around $150,000. In India those costs were reduced to between $25,000 and $40,000.
There is a lot of controversy surrounding surrogacy, often derided as ‘renting a womb’. Yet the Assisted Reproductive Technology (ART) clinics are accredited and they maintain strict restrictions on the surrogacy process.
All surrogates are there by choice and it affords them the opportunity to improve the lives of their own children and families while providing two little miracles to me. Surrogates are cared for through the length of the pregnancy, and the payment for providing this incredible service is worth several years’ wage to the surrogate. She can put her children through school and university, buy their home and hopefully fulfil some of her own dreams.
A LOOK TO THE FUTUREWords cannot describe the thanks I have for Parvati, our surrogate. I feel greatly indebted to the country as well and I’m looking forward to volunteering at a Delhi orphanage, helping children
with homework and English. It seems so little in return for the amazing gifts I’ve received.
To people considering the same path, I would say a strong marriage and rock-solid support group are a must; the road is long and unpredictable and one of the hardest ways to become a parent.
Since my separation my journey has been kept within my own inner circle. I know that others will judge me for my choices but I alone have the facts specific to my case; I refused to let ill fate stop me from having a child to complete me; I faced down the adversities and am proud to say I survived.
Am I frightened? Extremely. Will I manage? I need only think of little Namaeya and Hati, fighting for their lives, to know that I’ll find a way to give them all that they deserve, and more.
So what does the future hold for my other baby, 2nd Chance Mortgages? The Victor Harbour office will be closing for the moment with plans to re-open the branch when the children are a little older.
The Adelaide office will remain open and I will continue to work to give customers the service they expect. It is my promise to all of our loyal customers that 2nd Chance Mortgages will continue to provide the same high level of customer satisfaction in our services that have made the company a success. Our future focus remains on local growth and satisfied customers.
To follow the remaining leg of my journey or to find out more about 2nd Chance Mortgages please have a look at kyliebrettgoodwin.blogspot.com or www.facebook.com/2ndchancemortgages.
May life one day grant you all your dreams.
INSIDER30 brokernews.com.au
In a bizarre employment case, a woman on a business trip has successfully sued her employer after she was hit by a chandelier while having
sex. A summary of the legal issues was supplied by Fox Rothschild LLP to Mondaq.
The woman, who worked in the HR department of an Australian government agency, was travelling for her employer and met a ‘friend’ in the motel room that had been reserved for her. “The respondent was injured whilst engaging in sexual intercourse when a glass light fitting above the bed was pulled from its mount and fell on her, causing injuries to her nose and mouth. She also suffered a psychological injury as a result,” according to the decision published by the Australian Federal Court.
Under the relevant legislation, the Safety, Rehabilitation, and Compensation Act 1988, the employer must pay compensation when an employee suffers an injury that results in death, incapacity for work, or impairment. However, they do not have to pay up if the injury is intentionally self-inflicted or the result of serious and wilful misconduct (unless the injury results in death or serious and permanent impairment).
In the Employment Tribunal, the employer defeated the claim by arguing that the woman’s injuries were not suffered during the course of her duties. The woman’s sexual activity was
According to the internet, the Ancient Romans were the first to wear neckties – and they’ve been around more or less ever since. The sheer number of websites dedicated to psychoanalysing a man’s personality based on the colour and design of his tie is mind-boggling. (Search: “what does the colour of your tie mean?” and you get something like 72,000 hits on Google.)
But really, are they a necessary part of the broker uniform? Or are they an outdated sign of corporate oppression, as companies like IKEA (which has banned its staff from wearing ties) seem to think?
Management adviser and business analyst Max Franchitto says that, while he himself is not a broker, he believes there’s little point in loan writers wearing ties.
“I haven’t worn a tie to work in a long time. It’s like guys that drive four-wheel drives – they’re making up for something that’s missing! I think if you’re going to a breakfast or a luncheon where there are going to be a wide variety of business people, then it’s a good idea.”
The reality, however, is that many brokers very much enjoy wearing ties, and it probably says absolutely nothing about the size of their...cars. So, without further ado, here’s what your tie says about you (according to high-end American tailors Balani Custom Clothiers):
RED“It’s called the power tie for a reason, and by wearing a red tie you are implying that you mean business. Just like Tiger Woods
wears a red shirt to convey dominance, the red tie is a reaffirmation of strength, authority and dominance within the professional world. For a less aggressive approach, switch out your vibrant red for a softer shade of burgundy.”
YELLOW/GOLD“Yellow is the approachable cousin of the power tie. While still conveying authority, intelligence and positivity, yellow is the
subtle version of a red power tie. This is the perfect tie to wear for a first interview, because it shows you are confident and not afraid of a challenge.”
BLUE“Conveying trust, stability and confidence, a blue tie is perfect for client facing or public speaking. That being
said, it’s no coincidence that politicians and salesmen are frequently seen in blue ties. The lighter blue shade is softer and appears more approachable. A darker shade of blue represents seriousness and matter-of-factness.”
GREEN“This colour symbolizes practicality, reliability and implies being down-to-earth. Brighter shades of green
will imply that you are balanced, fresh and energetic. For a conventional look, darker shades of green are more appropriate and will imply that you are stable and serious.”
ORANGE“Orange is the wild card of tie colours. A bright orange tie will imply that you are enthusiastic, open-minded
and adventurous. It is the perfect tie for making a memorable first impression and creating a sense of excitement within the workplace.”
Woman sues employer after sexual ‘mishap’ on business trip
not encouraged by the employer, nor could it have been reasonably foreseen by the employer. The case would have been different, it seems, had she injured herself while showering, brushing her teeth, or sleeping in the motel room.
However, the Australian Federal Court reversed the decision of the lower court on the basis that there was a sufficient connection between her injuries and her employment. “The relevant connection or nexus to employment was present in this case by virtue of the fact that the [employee’s] injuries were suffered while she was in the motel room in which her employer had encouraged her to stay,” the court concluded.
THE RESPONDENT WAS INJURED WHILST ENGAGING IN SEXUAL INTERCOURSE WHEN A GLASS LIGHT FITTING ABOVE THE BED WAS PULLED FROM ITS MOUNT AND FELL ON HER
TO TIE OR NOT TO TIE?
TOP BIZARRE WORKPLACE LAWSUITS
■ A US woman who had multiple earrings, tattoos and an eyebrow piercing sued her employer after they changed their dress code, banning facial piercings. She filed a $2m lawsuit for ‘religious discrimination’, claiming she was a member of the Church of Body Modification and that she wore the piercings as ‘a sign of faith, which helps to unite her mind, body and soul’.
■ A Japanese man was fined $5,000 after his female employee complained of sexual harassment, saying that her boss forced her to pluck his beard.
■ Koko the Gorilla was involved in a sexual harassment case in 2005, when two former caretakers claimed they were forced to expose their breasts to the gorilla because of its ‘mammary-gland fetish’. They asked for “more than $1 million in damages in their sexual discrimination and wrongful termination suit”, according to Court TV, but ultimately reached a settlement with the foundation.
DIRECTORYbrokernews.com.au 31
Liberty Financial 13 11 33www.liberty.com.au Page 3
MKM Capital 1300 762 151 www.mkmcapital.com.au Page 4
Pepper Homeloans1800 737 737www.pepperonline.com.auPage 13
REAL ESTATELook Property Group - Residential Project Sales & Marketing03 9827 8288www.lookpropertygroup.com.auPage 31
SHORT TERM LENDER Interim Finance 02 9982 2222 www.interimfinance.com.au Page 2
Mango Credit02 9555 7073 www.mangocredit.com.au Page 1
Rapid Capital07 5562 2485www.rapidcapital.com.auPage 6
WHOLESALEResimac1300 764 447www.resimac.com.auPage 32
OTHER SERVICESRP Data1300 734 318Page 23
Trail Book Buyers1300 742 3060434 742 306 [email protected] 10
Trailerhomes0417 392 132Page 27
FINANCEARAPNSW & VIC 0415 210 434QLD, WA & SA 0434 254 798Page 8
Semper Capital Pty Ltd1800 SEMPER (1800 736 737)[email protected] 21
LEGAL SERVICESBransgroves Lawyers02 9221 [email protected] 15
LENDER AMP1300 300 400www.amp.com.au/distributorPage 9
ANZ1800 812 785www.anz-originator.com.auPage 7
ING DIRECT1300 656 226introducer.ingdirect.com.auPage 5 To advertise in Australian Broker, call
Simon Kerslake on 02 8437 4786
