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The no. 1 news magazine for Australian brokers.
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Broker battle lines drawn
POST APPROVED PP255003/06906$4.95 ISSUE 6.18
September 2009
A new battle for the hearts and minds of brokers is underway, after AFG declared its independence from the major banks and took a swipe at its three biggest rivals.
By putting to bed any questions about the sale of the business and suggesting that its rivals – PLAN, Choice and FAST – had compromised their customer proposition by selling out to a
major bank, AFG managing director Brett McKeon set the stage for what could be a titanic struggle at the top of the food chain. “We are in full swing with our five-year strategic plan, we’re in great financial shape and we’re set to grow our market share even further. The fact is, we’re not for sale,” McKeon said.
Pushing home the point about its independence, McKeon added: “The role of a broker is to become their customer’s advocate. To source the right finance, you need inherently independent advice.”
But directors at PLAN, Choice and FAST – as well the NAB
Broker management team – are unlikely to agree, having already argued that ownership by NAB brings with it security, certainty, a hefty balance sheet, and the potential to support mortgage managers with new products.
Choice founder, Ross Begley now heading up moneyQuest, said the AFG stance was a means for it to differentiate itself from its competitors while also playing on some of the concerns that some people have in relation to the NAB purchase of Choice, PLAN and FAST.
AFG takes aim at the big banks and rival aggregators
Independent aggregators
Generating a good connection
The joker in the pack
With a new licensing regime looming in a competitive environment, will the independent aggregators still have a role to play?
Author Iggy Pintado explains how people and businesses are using social networking websites to connect with each other
Insider was surprised to discover that Bankwest’s Ian Corfield may well be planning a future career in stand-up comedy
Page 22>>
Page 24>>
Page 30>>Page 28 cont.>>
Brett McKeon
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Error-free brokers deserve their trailBrokers continue to provide a far more satisfying experience for customers than lenders – and they do a better job post-settlement too, according to the latest MFAA/BankWest Home Finance Index.
Carried out in June, at a time when brokers were still struggling with delays in turnaround times, it revealed that the industry’s service proposition remains stronger than ever.
The nearly 1,000 consumers who took part in the survey gave brokers an overall satisfaction rating of 73%, up from 69% in November last year.
In comparison, banks rated at 66% (up from 65%) while non-banks managed just 62% (down from 65%). Even more uplifting was the finding that brokers are rarely to blame for problems experienced with borrowers’ loan accounts, adding strong support to the argument that trail payments should remain in place.
Only 16.7% of respondents attributed problems with their accounts to brokers – down from 21.4% in November 2008.
In comparison, more than a third of respondents (38.2%) who had a loan with a non-bank experienced problems, up from 23.5% in April last year. Banks also showed an increase in account problems, up from 16% in November last year to 22.5% in the latest survey.
John Kolenda, executive director at the Loan Market Group, was not surprised by the results: “Everyone knows that a broker offers a very compelling proposition to their customers. Not only do they have access to a wide variety of lenders and home loans, they are there through the whole loan process to support their customers.”
On the subject of managing customers, Kolenda said it was the Loan Market’s experience that “the vast majority of mortgage brokers manage their clients in the way they’d expect to be managed themselves…through the provision of a very personal, supportive and ongoing service”.
Mortgage Choice senior corporate affairs manager, Kristy Sheppard, was also unsurprised by the results since “many mortgage brokers are the owners of their businesses”.
“It’s their livelihood as well as their career – so in that respect they are more connected to their customers,” she said. The fact that fewer problems arise with accounts managed by brokers was also “terrific”, Sheppard said.
“Almost all brokers will tell you they earn above and well
beyond the trailing commission received for each loan,” she said.
Kolenda said good brokers earned their trail payments through the provision of both pre-settlement service and ongoing service after settlement of a loan. “A good broker will devote a lot of their time and energy into developing an ongoing relationship with each client over a period of many years.
“Additionally, many customers feel more comfortable with the continuity of service the get with a familiar face. This is what they get from their mortgage broker. The reality is that at a bank, the person you deal with for your original loan is likely to move on or up, breaking that continuity of service,” he said.
Overall, the survey found that 48.2% of customers prefer to go directly to banks when taking out a mortgage, compared to 31.3% who would use brokers.
The preference for using brokers was up on the last survey in November 2008, when only 26.9% said they would prefer to use brokers.
Worryingly for non-banks, the trend to use them continues to fall, with only 5% naming them as their first choice.
Source: MFAA/BankWest Home Finance
Index (Sept 09)
Overall satisfaction rating with home loan source
73% mortgage brokers
66% banks
62% non-banks
Source: MFAA/BankWest Home Finance
Index (Sept 09)
Problems with their loan account attributed to16.7% mortgage brokers
22.5% banks
38.2% non-banks
22.6% other providers
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The decision by Macquarie Bank to re-enter the broker market via a new co-operative aggregator has been described as a positive one for the industry, by both Smartline and finconnect.
Details of the deal, first reported on Brokernews in March, emerged in an article in BusinessDaily, which said the bank planned to re-enter the mortgage space by merging aggregators National Brokers Group, The Mortgage Professionals, The Brokerage and Specialist Mortgages to form a new entity.
The newly-formed aggregator would rival the largest players in this space and is expected to originate $1bn of home loans a month through 1,000 brokers nationwide.
Smartline director, Joe Sirianni, described it as basically
In presenting its annual results to the media in Sydney recently, Suncorp’s acting CEO Chris Skilton described FY09 as being “the most difficult ever.”
At the end of a horrible year, the Suncorp Group recorded a 40% fall in net profit after tax and minority interests – down from $583m in FY08 to $348m.
And in its banking division extraordinary impairment losses on loans and advances of $710m (compared to $71m last year) resulted in the division producing an 81.5% drop in profit before tax in FY09 to just $117m – off from $633m last year.
Acknowledging obvious shareholder disappointment in the results, Skilton said that lending growth slowed over the course of the year, consistent with the slowing domestic economy and the banks stated objective of running off non-core portfolios.
But he said the company had significantly adapted its business model over the course of the financial year “in response to market challenges and to ensure the group’s long-term viability”.
Brad Steele Suncorp Bank’s executive general manager for brokers said the bank had remained committed to the broker channel during FY09 but that lending volumes through all channels had “clearly moderated” with the economy and funding environment. Steele added that intermediaries were an important part of the Suncorp’s distribution mix, “particularly as we seek to build our main financial institution status with customers in new geographies”.
On the bank’s balance sheet total housing loans stood at $28.3bn for the year, marginally up from $28.1bn in June 2008.
a “positive move by Macquarie, which has clearly demonstrated a commitment to re-enter the mortgage market”.
“Obviously distribution is a key factor in the overall strategy to re-enter this space, and it’s a good move for the four aggregators who will collectively benefit by pooling their resources together, he said.
Sirianni said the economies of scale resulting from the consolidation, along with the input and guidance of Macquarie, would result in a new entity that will deliver “a better proposition for the broker and a more sustainable and viable business.”
Tanya Sale, general manager at finconnect, described the move as “just part and parcel of consolidation”. She also agreed that it came down to distribution: “The providers are looking towards the larger aggregation
groups as an alternate source of provision…simply as a source to cross-sell their products”.
Sale said it was “probably a very good investment” since all the groups are regarded well in the industry, and predicted similar activity in the future.
“I can see all the remaining large groups (the ‘Top 10’) being targeted by the banks. Soon there won’t be many totally independent groups left, which provides an opportunity in the market for the ones remaining,” she said.
The BusinessDaily report named South African Jeffrey Zulman, who has a background in information technology, as the new chief executive to oversee the merger. According to the report, the new business would also serve as an outlet for a suite of Macquarie financial products such as life insurance and cash management accounts.
Macquarie was one of the first to exit the mortgage origination space at the beginning of the GFC, sparking criticism from many in the broker community.
News of the deal comes soon after NAB’s proposal to purchase Challenger’s mortgage business and its three aggregators – Choice, PLAN and FAST.
Australian Broker contacted Macquarie Bank and each of the four aggregators for comment, but had not received any responses by the time of going to press.
Suncorp’s annus horribilis
Macquarie aggregation move “a good investment”
National Brokers Group •The Mortgage Professionals •The Brokerage •Specialist Mortgages•
Aggregators set to merge:
Source: BusinessDaily
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The Challenger/ NAB ownership issue aside, Homeloans Ltd remains an independent company which is a positive for brokers going forward.
This is the view of Homeloans Ltd’s executive chairman, Tim Holmes, following the non-bank lender both announcing its impressive profitability results, and reacting to the news that its Challenger minority shareholding is set to transfer to NAB.
“NAB coming in means more conventional funding is now available, and because our relationship with brokers will remain the same it might provide them with better options for their clients,” he said.
Despite a drop in lending volumes, Homeloans Ltd posted a net profit after tax (NPAT) of $7.2m for the last financial year.
On a normalised basis, and excluding non-cash adjustments, the company’s NPAT was $8.3m - which is up 78% on the previous financial year’s result of $4.7m.
Holmes described the 2008/09
financial year as “challenging” for the non-bank sector, particularly in the first half. Net fee and commission income was down 15% to $10.7m and total revenue was down 17% to $101m.
The company maintained its margins by reducing operating expenses to $17.1m, with a 42% increase in net interest
Homeloans Ltd profits up 78% despite challenges
Senior bankers at the Retail Financial Services Forum suggest they may be looking to replicate some of the broker experience in their branches.
Russell Jenkins, chief general manager for retail at Bendigo & Adelaide Bank, said its branches had changed to be “fully open plan,” moving away from counter service to community service.
HSBC Australia’s head of personal financial services, Graham Heunis, recounted how some international customers use its branches simply to “have a coffee or read the newspaper”. Ian Corfield, BankWest’s chief executive for retail, said when it comes to getting a mortgage, “people want to be in an environment that is friendly”.For broker reactions, go to: www.brokernews.com.au/news/breaking-news/are-bank-branches-trying-to-replicate-brokers/36792
Offering the broker experience
While Australian banks have survived the financial crisis relatively unscathed, work remains to be done to win back customer favour. This was the message emerging from senior banking executives participating at the 2009 Retail Financial Services Forum.
Ian Corfield, BankWest’s retail chief executive, said banks needed to get people more interested in financial services and seeking advice. “If we are going to rebuild, we need to get more people to take advice and to do this we need to make banking more accessible,” he added.
“Seventy percent of people don’t seek any financial advice. It’s seen as something for the elite.”
NAB Broker’s head of sales, John Flavell agreed, and while he said complex transactions should receive a higher level of support, it should not be necessary to “manhandle each transaction.”
“Regardless of distribution, the question is the same: how do you provide value to the end customer? Flavell said the answer was in providing timely, accurate information so there is a level of confidence from consumers, regardless of the bank’s distribution channel.
“We need to look at [the] needs long term, and offer advice on an ongoing basis,” he said.
Russell Jenkins, chief general manager for retail at Bendigo & Adelaide Bank, said in the bank’s experience, when it comes to
being a trusted advisor, contact is paramount.
“All our actions are based around making personal contact possible … all relevant parties need to build on the customer relationship, he said.
Banks need to work on their appeal
Homeloans Ltd financial results:net profit after tax of $7.2mexcluding non-cash
adjustments, NPAT up 78%net fee and commission income
down 15% total revenue down 17%operating expenses held
to $17.1m net interest income up 42%
Key points
Tim Holmes
income contributed to an improved performance.
“There was some resurgence in home loan activity in the second half, largely as a result of the First Home Owners’ Grant, however the continuation of tight credit markets and a tightening of lending criteria across the home loan market impacted on the sector,” Holmes said.
“During this period Homeloans focused on improving its product offering and expanding its distribution capabilities. Together with our continued access to a diversified funding base, this places Homeloans in a very sound position as economic conditions improve,” he added.
He is optimistic about the year ahead, and said Homeloans was “in great shape to be a good funding partner to brokers Australia wide”.
NAB’s recent proposal to acquire mortgage management business Challenger includes taking 17.5% of Homeloans Ltd, with the potential to increase this stake to 41%, subject to shareholder approval.
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Read informative profiles of broker industry leaders at www.brokernews.com.au
Read informative profiles of broker industry leaders at www.brokernews.com.au
Brokers keeping ING customers happyING Direct’s executive director of mortgages, Lisa Claes, has praised brokers for their role in helping the bank reach the top of customer satisfaction ratings.
Nielsen Financial Services Monitor’s June quarter results found that more than 75% of ING Direct’s 1.4 million customers are satisfied, while over 70% would recommend the bank to others.
Asked if brokers had been a factor in its high rating, Claes’s response was emphatic: “Yes absolutely,” she said.
“For the vast majority of ING Direct mortgage customers, the customer journey begins with their broker ... we believe these great results represent the strength in our focus on being a true broker partner.”
Claes said internal customer research showed customer satisfaction with the application and settlement processes was higher for those using the broker channel. Customers managed by brokers experience less problems during the application process.
In addition, brokers also play their part in spreading positive word of mouth: “A customer’s interaction with their broker is an integral part in the customer promoting ING Direct to their family and friends,” Claes said.
Besides ING Direct, banks that use brokers performed well in the customer satisfaction stakes.Second on the Nielsen list was community-orientated Bendigo Bank (75% of satisfied customers) followed by BankWest (66%).
The top-rated major bank was ANZ with a customer satisfaction rating of 62%, followed by Westpac (57%), NAB (54%) and CBA (53%). Few brokers would be surprised to learn that the lender with the least satisfied customers was GE, where less than one in three customers (32%) were satisfied with service.
The latest Nielsen ratings correlate well with MPA’s
‘Brokers on Banks’ survey carried out in May, which ranked ING Direct second on overall service, behind AMP. ING was rated the top bank by brokers for the support it provided, second for BDM support and third on interest rates. ANZ also performed strongly.
Lisa Claes
Most satisfied: the top five
Lender% of satisfied customers
% who recommend
Market share
Player in broker space
1. ING Direct 76% 73% 12% Yes
2. Bendigo 75% 72% 7% Yes
3. BankWest 66% 59% 6% Yes
4. BankSA 66% 53% 2% Yes
5. ANZ 62% 52% 23% Yes
Source: Nielsen Financial Services Monitor
Least satisfied
Lender% of satisfied customers
% who recommend
Market share
Player in broker space
GE 32% 26% 5% No
Source: Nielsen Financial Services Monitor
Read informative profiles of broker industry leaders at www.brokernews.com.au
Read informative profiles of broker industry leaders at www.brokernews.com.au
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AMB hunting for own-branded brokers
brokers. “There is an opportunity here to grow our volumes – to bolster existing relationships and add more lenders to our panel,” he told AB.
At the time of going to press, all but one franchisee had agreed to AMB’s plans.
“If any situation arises where one of our master franchisees chooses not to endorse this process, then we won’t be recruiting any independent brokers in their region,” Gollan said.
Of concern to Gollan is that the lender quality reputation that AMB already has is not impacted by the expansion initiative.
“It might come as a shock to a number of our competitors that we might be saying ‘no’ to a large number of applicants – which is not something that happens very often in the mortgage aggregation area,” he said.
New recruits can expect to be provided with tools, but each will remain responsible for marketing their own brand.
Gollan said the recent decision by RAMS to cancel AMB’s accreditation will have no effect on the business.
Aggregators that run a franchise model tend to have a more intimate knowledge of what it takes to run a successful brokerage – which is why branded aggregators tend to outperform non-branded ones in terms of average productivity per broker.
This is the view of Paul Gollan, founder and CEO of franchise operator Australian Mortgage Brokers (AMB), which has just announced it will expand its aggregation service to include brokers who operate businesses under their own brand names.
The new services will be offered under a new trading name of AMB Origination.
Gollan said the new service to non-branded brokers would be in addition to continuing to support its franchise brokers to grow their businesses.
Commenting on the new model he said: “It is going to be a flat based monthly aggregation fee, with 100% upfront and 100% trail – with other services included such as coaching, sales management and IDR.”
Saying that the expansion allowed AMB to meet lenders’ new volume requirements, Gollan said the model would not be the cheapest in the market and would be “attractive” to high and mid-level performing
movers & shakers
Name: Grant LloydFrom: Stargate GroupTo: FBaaTiTLe: operations managerLloyd will assist the FBAA board in guiding the strategic direction of the association. He joins the FBAA with over 20 years experience in the banking and finance industry, having commenced his career with Westpac in the late 1980s and most recently holding managerial positions with Challenger and Stargate Group. Lloyd said: “I’m looking forward to the challenge of the position and am eager to be part of the FBAA’s future growth.
Name: michael rowlandFrom: aNZTo: aNZTiTLe: Ceo Pacific (based in melbourne)As CEO Pacific, Rowland will be part of the leadership team for ANZ’s Asia-Pacific, Europe and America Division following its acquisition of selected RBS businesses in Asia. He is currently CFO and General Manager Strategy & Marketing in ANZ’s Institutional Division, and was previously MD, mortgages for ANZ. He will report to the CEO of Asia Pacific, Europe and America, Alex Thursby.
Name: Tony CrossleyFrom: mortgage Choice To: brandmanagement/CoreDataTony Crossley joined the financial consultancy firm on the 31 August 2009. Prior to this role he held a number of senior positions with Mortgage Choice, most recently that of Chief Financial Officer. Andrew Inwood, brandmanagement/CoreData principal, welcomed Crossley, saying “…the addition of Mr Crossley will bring further expertise into what is already a very successful market operation.”
Paul Gollan
AMB to launch AMB Originationtargeting high to mid own-
branded brokers100% upfront and trailfull range of support servicesexisting franchisee buy-in quality reputation ‘not-
negotiable’RAMS decision no impediment
Key pointsName: Stewart mcmillanFrom: St.George BankTo: St.George Bank TiTLe: Head of Property for West australiaMcMillan’s role involves overall responsibility for St.George Bank’s WA property finance team in the delivery of full service financial solutions for investors, developers and builders of commercial, industrial and residential properties. He has held a number of senior management and property finance roles across corporate banking in both Australia and the UK. His previous role was Senior Manager, Property Finance, St.George Bank.
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nMB hungry for smaller firms
Foley was pleased with the result, in what he called a “pretty heavy” year. “We are planning [on] 10% sales growth in the next year. It’s quite achievable with the mix of brokers we have on board who are going well and continuing to grow their businesses,” he said.
“There will be opportunities to pick up a few smaller broker businesses that still have lender agreements but are feeling pressure to keep direct arrangements,” he added.
Foley said nMB had received a great benefit from completing the Mosaic transaction. “It’s gone very smoothly. It was a really good strategic move for us and complemented what we do.”
Analysis of the book revealed that more than three quarters of business was written through the major banks, with three of Australia’s biggest banks growing their share of the nMB loan book.
These were CBA, which upped its share from 21.6% to 29.7%; Westpac which took 21.4% of business (up from 19.6%); and ANZ with 16% (up from 11.9%).
St.George dropped slightly from 7.8% to 7.1%, while NAB was the only major bank to lose ground, with its HomeSide brand dropping to 5.7% (from 7.1%).
While he was concerned at the dominance of the major banks, Foley said it was just a “part of the market we are in at the moment. I don’t think it’s unusual to experience that concentration. We are not doing anything different to the rest,” he said. “If it stays the same for the next few years it would worry me though.”
Foley said it was imperative for brokers to use a range of lenders, particularly when it came to the different bank brands. “If all else is equal, I’d rather have a broker use BankWest over CBA, or RAMS over Westpac.”
Otherwise, Foley warned these brands might disappear. “Lenders will only keep their multiple brands so long as they continue to be sold. That aspect does worry me,” he said.
RHG promises certainty on trail payments
The non-bank lender has closed its mortgage book and warned of declining revenue over time, with the rundown of its book. RHG also revealed the negative effect that ratings downgrades of mortgage insurers it uses has taken on its financial position.
While the downgrades did not affect the insurers’ ability to pay claims, RHG said it created “nervousness and uncertainty
with some warehouse providers”.“In some cases the downgrade
of insurers triggered obligations to support minimum warehouse rating requirements. This has led to the need to offer further credit support on all warehouse facilities. On review of these enhancements it is believed that a reduction of fair value on these assets of $22m is appropriate,” an appendix to the report said.
RHG, the listed entity and mortgage book formerly known as RAMS, says it has enough cash to meet its liabilities, including paying trail commissions to brokers. In its annual results for the year ending 30 June, RHG said liabilities included trail commission to brokers of $21.8m and tax of $38.5m.
“The directors are satisfied the group will have sufficient cash resources to settle ... as and when they fall due,” the annual report said. While RHG recorded a profit of $120m, the business warned of a default risk if a warehouse funding facility could not be renewed and the mortgages could not sold. The lender declared no dividends for the financial year.
The annual results revealed that the RHG mortgage book is made up of $5.22bn funded through warehouse facilities, with the remaining $2.22bn funded through residential mortgage-backed securities (RMBS).
Woolworths has not ruled out a play in the mortgage space, after UK supermarket giant Tesco announced its intentions to apply for a banking licence – in addition to plans it has to offer its own lending products.
A spokesperson for Woolworths Australia told Australian Broker it was “constantly looking at areas to expand” but it has made no statements about expanding its financial services offering beyond its Everyday Money Rewards credit card. “We are always looking around for new things. Through our credit card, we already have a foothold in financial services,” the spokesperson added.
The comments from Woolworths come as unhappy UK bank customers turn to Tesco and Sainsbury for their banking needs. Last year, Tesco announced its intention to offer mortgages in addition to personal loans, savings accounts and credit cards. However, rather than offer white-label products, Tesco now has plans to offer products under its own banking licence.
The news come as major bank continue to dominate mortgage lending in Australia, a factor which could lead to competition from unlikely sources, particurlarly as the GFC eases. Australia Post’s recent expansion into general insurance has fuelled speculation that the federal government-owned postal network is eyeing up the financial services sector.
Should Australia Post apply for a banking license, consumer interest in finding a trustworthy alternative to the major banks would make it a plausible source of home loan products. This move is not unheard of in the market: closely emulating Kiwibank, owned by New Zealand Post.
Australian Broker contacted Coles for a comment, but had not received one at press time.
Woolworths not ruling out mortgage play
National Mortgage Brokers (nMB) will be looking for opportunities to pick up a “few smaller brokerages” this financial year, as it set its sights on growth of 10%.
Loans submitted by nMB brokers in the 2009 financial year reached $2.6bn, compared to $1.4bn in the previous financial year. Managing director Gerald
Gerald Foley
Mosaic acquisition helps drive strong performance
loan book up 86%sales growth of 10% aimed for
in 2010hunting for smaller brokers
Key points
RAMS Home Loans was seeking a correction from The Australian after the newspaper ran an article on 1 September, wrongly attributing a default warning issued by RHG (the listed mortgage entity formerly known as RAMS) to the franchise group and non-bank lender, now owned by Westpac.
A statement circulated to all RAMS staff and franchisees read: “The Australian today ran an article alleging RAMS Home Loans could default on its current funding commitments. The article was in fact about RHG Ltd, which previously sold mortgages under the RAMS brand, rather than the RAMS Home Loans business acquired by Westpac in January 2008. We are currently seeking a correction.”
RAMS seeks default correction by newspaper
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Lender service issues driving up stressInconsistent and poor service from lenders appears to be a key factor driving up stress among brokers.
This follows a new independent study by recruitment firm Hudson, which found that accounting and finance professionals in Australia and New Zealand are actually suffering from greater levels of stress than other professionals.
Called Talent Tightrope: Managing the Workplace through the Downturn, Hudson’s report found that almost 74% of accounting and finance professionals say their stress has risen as a result of the GFC, 20% higher than the average.
Broker coach, Doug Mathlin, from the FrontRunner Mortgage Group, said stress levels were indeed up and attributed this
increase to service issues. “Brokers are very concerned with the inconsistency in service offered by lenders. In Brisbane this week, I have one brokerage on the north side saying how great a bank is (they have a good BDM) and a broker on the south side saying the opposite about the same bank,” Mathlin said.
He said brokers were telling him about lenders who were encouraging them to submit a deal after hearing the scenario only to then decline the deal.
“Brokers know that the successful operation of their business depends on the lender being at least interested in making the borrower happy. Unfortunately, we are seeing a revisit to the bad old days where lenders don’t seem to care about the customer anymore,” he said.
Mark Duggan, from Affordable Home Loans and Conveyancing in Geelong, agreed that stress level experienced in recent times have increased and listed dealing with lenders as a factor in increased stress.
“Our level of stress has increased due to dealing with lenders processing issues and keeping up with the numerous changes to credit policy and loan products, while managing client expectations during the process,” he said.
He said bank processing issues had now been fixed and the only real stress was in dealing with the mistakes and ineffectiveness of the banks’ general processes, and the inexperience of staff – “something that has dramatically worsened in the past 20 years of being in this business”.
acknowledge that this is happening and start to manage the •expectations of clients well beyond advertised turn-around timesdevelop scripts in order to help explain the current situation to •potential borrowerswhere possible, vote with your feet. Take clients to lenders who look •after both the broker and the client ensure the loan application is complete and double check to •avoid delaysif the person you are dealing with at the bank is not being helpful stop •and ring someone else – get the BDM or the aggregator involvedmanage staff stress levels by remaining positive and being very clear •about expectations
Tips for dealing with lender-related stress
Tips provided by Doug Mathlin and Mark Duggan
Ross Begley is chairman of moneyQuest and former founder and director of Choice Aggregation Services
15www.brokernews.com.au
opinion
The fuTure of aggregaTionin an exclusive column for Australian Broker, ross Begley, one of the founders of Choice aggregation services, considers what the future may hold for the aggregation model after more than a decade of solid growth
As a previous director of an aggregation company, I know many aggregators have invested millions of dollars into sophisticated IT platforms, compliance, education, training and recruitment. These investments led to the growth of the home loan market and the natural evolution of around 4 in 10 Australians choosing to use brokers to arrange their home loan… and this rising trend should continue.
So you would think that, with more consumers seeking broker services, the future would look rosy for aggregators? Nothing could be further from the truth.
main problems facing aggregatorsThe introduction of minimum case volumes and the prospect of ongoing ‘re-education’ will hit brokers, and ultimately aggregators, hard.
In order for brokers to make the same level of income they have enjoyed in the past, they will need to service a lot more consumers than they did previously.
Revenue will decrease for brokers who do not do the volumes necessary to maintain accreditation with a competitive panel of lenders (particularly CBA, as they have 22% of the market). Reduced conversions, based on rate and product choice, combined with fewer loans getting ‘over the line’ due to restricted criteria from a smaller lender panel, will impact heavily on commissions.
Couple this with the introduction of regulation and you will see why this will no longer be an industry for part-time or low volume brokers! Unfortunately, however, many aggregators currently make a large percentage of their margin from that broker profile.
Does this mean that an aggregator then only becomes a place for the top performing brokers? If so, under current models, aggregators will continually be squeezed to give away more commission to the better performing broker. These top performers will be in a strong position to offer their business to the highest bidder, further eroding margins for aggregators.
And who is going to be there to keep the banks honest in terms of commission, now that the aggregators are losing influence with the lenders with NAB’s recent acquisition of Choice, PLAN and FAST; CBA’s play into Aussie and even Macquarie’s long-term shareholding in AFG?
profit in the brave new world?Aggregators have competed on price to the point of self destruction. It’s looking very much like becoming an even lower margin business as a point of difference, within the current model, something difficult to achieve. Therefore commission becomes the major consideration for brokers.
Moreover, further infrastructure investment will also be required to provide brokers with training and support that lenders and regulation will require. Aggregators will be expected to play a critical role in the transition to a ‘professional broker’ environment… but will it make them any more money?
For aggregators to maintain or improve their margins, they will need to be able to add a different kind of value which allows them to increase their share of the commission. Centralised services that brokers can tap into to help them administer, market and grow their businesses could be part of a solution.
Unlike broking business, such as Aussie and Mortgage Choice (and our own, moneyQuest), aggregators have not invested heavily in lead generation. Although this could add significant value, it is much more difficult for an aggregator than a branded option as there is a disconnect when marketing one brand and then having hundreds of different ‘brands’ handling the customer enquiry.
Whilst aggregators will play an integral part in the future, by providing a professional platform for brokers, they will predominantly act (or their real value will be) as a distribution network for lenders.
18
Newswww.brokernews.com.au
Ian Graham
LMI providers: we are not the bottleneck
Firstfolio moves back into the black
the finger at LMI providers over delays in mortgage applications going through to settlement.
Steve Lambert, CEO of National Brokers Group (NBG) said the feedback from brokers is that both LMI providers and lenders have been tightening their acceptance policy, which means closer scrutiny of applications in all cases.
He described LMI as “another bottleneck at the moment which is causing some issues, as the brokers all start to understand, comply and structure the loan submissions in accordance with the lending policy changes”.
Club Financial’s director Simon Norris was also critical of LMI providers, claiming they were “dragging their heels” and “impacting on turnaround times. They are scrutinising common-sense straight forward deals,” he said. Connective’s Mark Haron also weighed into the debate, saying a desire had been put forward by aggregators at the MFAA Forum earlier this year for the policy of lenders to reflect that of the LMI providers.
However, he added the bigger lenders had a “delegated lending authority” from insurers, on amounts they could sign off. “It’s given some of the major banks a lot more flexibility around credit
policy, but the smaller regional players less so,” Haron said.
QBE’s Graham confirmed that a significant number of its LMI customers were “exclusive” and in the case of the very large lenders had delegated underwriting authority. “We have given them authority to approve loans within their credit policies, with few exceptions. The bank makes the ultimate decision,” he said.
Both PMI and Genworth confirmed policy changes have been made in recent times. Graham said these were not surprising given the GFC.
“The world has changed from two to three years ago. We have tried to keep changes to a minimum,” he said.
The group said the turnaround in profitability was driven by its double-digit growth in revenue to $47.4m, realising economies of scale, improving yield management and cost reductions.
Firstfolio’s mortgage book grew by 50% in the 2009 financial year, from $8bn to $12bn. Forsyth put this performance down to a “mixture of acquisitions and organic growth”.
On 1 November, Firstfolio acquired online mortgage platform eChoice and wholesale lender Domain Financial Services, which contributed to profitability as well as adding $3.6bn to the loan book.
Forsyth told AB that he was pleased with how Firstfolio had kicked off the 2010 fiscal year. “The results speak for themselves;
business is really good and growing. Also, the economy is looking pretty good. I predicted it to improve in the second half of the year – and it has,” he said.
Forsyth pointed to clarity on the issues of what the Reserve Bank intended to do with interest rates, as well as dealing with the practicalities of the impending regulation, as the main challenges for Firstfolio in the year ahead.
Other challenges will be dealing with “market noise from the Big Four – or more accurately the Big Two plus Two – and reacting to whether the government is going to address the lack of competition”.
Forsyth took the opportunity to reaffirm his view that the broker space remained a “highly attractive” place.
“It’s a great distribution channel, and brokers who professionalise their businesses, find niche markets and maintain great relationships with their customers have a great opportunity to prosper,” he said.
In FY09 Firstfolio paid total commissions of $29.48m.
While their policies have adjusted in response to market conditions, the mortgage insurance providers of Australia’s two biggest lenders have told Australian Broker they are not the cause of any delays in processing applications.
QBE LMI CEO Ian Graham said the insurer retained an “absolute commitment” (where it had all the information it required) to provide “at best, four hour turnarounds and at worse, the same day turnaround”.
“The only delays occur when information is incomplete – that restarts the clock,” he said.
A spokesperson for Genworth said applications for LMI continue to be reviewed closely, “as they always have been.” Genworth worked closely with lenders to provide consistent turnaround times, “which have not changed in recent months”.
These responses follow a number of aggregators pointing
turnaround times defended by Genworth and QBE LMI
aggregators claim LMI can create bottleneck in system
big banks have authority to approve most LMI applications
policy changes have been kept to a minimum
Key points
As small business battles tightening credit restrictions, attractive funding alternatives remain for Australia’s SMEs, according to Peter Langham, CEO at debtor finance provider Scottish Pacific Benchmark.
The latest quarterly analysis of the debtor finance market, eleased by the Institute for Factors and Discounters, showed the provision of cash flow finance, through invoice discounting and factoring, grew by 5% compared to the same period last year.
Langham told AB that while debtor finance might be relatively new for brokers, it provided a good additional source of income in an already tightened market. “Most people pay an upfront fee, and sometimes a trail as well.”
Perth broker Bruce Williamson said that debtor finance solutions offered “a range of opportunities” – both for his clients and for his own business. “There’s still bit of a stigma attached to debtor finance ... it’s a brilliant product and once you get your head around it you quickly realise that it’s terrific for many SMEs.”
Income in debtor finance
Don’t believe any CEO who tells you the biggest challenge in the business is RMBS or securitisation – the hardest thing of all is getting great people. This is the view of Mark Forsyth, ASX-listed Firstfolio’s chief executive.
The mortgage and financial services company posted a net profit before tax of $3.27m for the full year ended 30 June, compared to a $1.1m loss recorded in the prior corresponding period.
Mark Forsyth
Firstfolio results:mortgage book grew by 50%acquisitions contribute $3.6bnrevenue increase to $47.4m NPBT of $3.27mtotal commissions of $29.48m
Key points
19www.brokernews.com.au
Bibby Financial Services provides cash flow and working capital finance solutions to small and medium sized businesses. For more information go to www.bibby.com.au
Top Ten TipsBeTTer Cashflow managemenTDebtor finance provider Bibby financial services offers ten resolutions that brokers can pass on to their small business clients (or pply to their own businesses) to speed up the payment process and safeguard cash flow
Tip 1: ALWAyS CREDIT-CHECK CUSTOMERS In an ideal world all customers would pay promptly, however this is not the case. The first step to avoiding late payment and bad debts is to always credit-check potential customers before handing over goods or delivering a service. This is a standard business practice and one which shows due diligence on your part. Tip 2: GET yOUR TERMS AND CONDITIONS RIGHT A clear set of terms and conditions can protect you from late or non-payment, limiting your liabilities and providing some security. Make sure customers are aware of your ‘Ts and Cs’ upfront before doing business with them so that every party knows where they stand from the outset. Tip 3: GET TOUGH ON REPEAT OFFENDERS It may be worthwhile considering tightening credit terms for serial late payers. However, before biting the bullet and reducing terms and conditions, try to find out why the customer is consistently paying late. you may be able to come to a mutual agreement with them. Tip 4: STAy ON TOP OF PAyMENTS Do not delay when sending statements and invoices – if you delay you can’t expect to be paid on time. If a client has not paid within the agreed terms, always follow it up. If your customers know you are quick to deal with late payment, they will be less likely to delay. Consider a small discount for reliable customers who regularly pay on time. Tip 5: INvOICE OFTEN Consider changing some of your processes to ensure invoices are sent as quickly as possible after delivery or completion. This might mean moving to weekly invoice processing – or sending the invoice with the delivery. Tip 6: INvEST TIME TO SAFEGUARD CASH FLOW Maintaining good, consistent cash flow is all about knowing exactly what is coming in and going out. No matter how busy, you look at your cash position every day. This will give you an accurate picture of where the business is going, help identify late payers, control costs and manage the peaks and troughs in your cash balance. Tip 7: KEEP CLOSE TO yOUR CUSTOMERS Get to know your customers better, as understanding the way they work and their specific requirements may help to reduce late payments. It is also a good idea to keep an eye on customers’ payment trends, to spot any potential problems before they become major issues. Tip 8: HAvE THE RIGHT ATTITUDE When faced with a late payer, politely but firmly ask for payment to be made. Never be embarrassed about discussing money with customers. If you have supplied goods or services, you have the right to be paid. Tip 9: UNDERSTAND yOUR RIGHTS If all else fails, Australian business owners and managers can consider various means of legal debt recovery. Bad debts can hit profits and cause significant disruption to business operations. Business owners should be aware of the services available to undertake effective recovery. Tip 10: CONSIDER MORE FLExIBLE FUNDING Work smarter, not harder in 2009/10, by reviewing your funding to ensure that it continues to meet the needs of your business, resolving issues brought by late payment.
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Newswww.brokernews.com.au
Phil Naylor
MFAA aiming for CPA-level awareness
Shared equity product makes good first impression
the 900-plus respondents. Asked for his thoughts on awareness of the MFAA name and logo, CEO Phil Naylor said it should be remembered that these had only been in the market since 2007.
“The rating is not too bad considering the FPA has been promoted a lot longer,” he added.
Naylor said the long-term goal was to reach the CPA recognition, but he said it had taken the CPA a long time to achieve its current standing.
“Our immediate task is to increase MFAA standards well above that required by regulation and to ensure the professional conduct of MFAA members,” he said.
“We will then promote that continuously to the community lenders and regulators,” he added.
The MFAA appears to be doing a good job in this regard, with the survey revealing that 83.9% of consumers agree that it is important to discover whether a mortgage broker is a member of an industry body before using them to arrange a loan – up from 72.3% in April 2008.
Asked if the current strategic review was looking at consumer awareness, Naylor said that although he had no knowledge of what the strategic review would recommend, he expected that “professionalism and the promotion [of the MFAA] will be part of it”.
gyrations that the stock market has had,” he said. Describing it as a tremendous product for people who wanted additional cash flow, Skilbeck said Rismark’s shared equity instrument is targeted at the “aspirational middle”.
“The classic use of the product would be by a previously dual income family looking to avoid the stress of servicing a full mortgage when the wife, after having a baby, wants to step out of the workforce for a period,” he said.
All indications suggest the future of the product is secure.
Skilbeck pointed to a series of surveys that show as many as 50% of current mortgagees want a mix of debt and equity finance.
“So there is latent demand for the product, and we see a very strong future for it,” he said.
The product is structured so that borrowers who take out a 20% interest-free equity finance instrument, Rismark receives 40% of the capital appreciation.
The product is offered through Bendigo and Adelaide Bank and was launched in March 2007.
The MFAA has set it long-term sights on matching the high level of consumer awareness achieved by the professional accounting body, the CPA.
The results of the latest MFAA/BankWest Home Finance Index found that just over one in ten (12.8%) consumers had seen the MFAA logo in the last six months, compared to a slightly higher proportion (14.3%) in April 2008.
The MFAA was almost on a par with the Financial Planning Association (FPA), which achieved a score of 15.8%. But it has a long way to go to catch up with CPA, whose logo was seen by 72.9% of
The big budget advertising campaigns of Aussie, RAMS and Mortgage Choice appear to be paying off, with research carried out by brand management on behalf of the MFAA and BankWest revealing that the three brands rank highest in the minds of consumers.
Aussie, which launched its multimillion dollar “Put yourself in a better place” campaign in June, is the most recognised industry brand, according to the Sept 2009 MFAA/BankWest Home Finance Index survey. It is recognised by 84.7% of consumers.
Besides this campaign, Aussie runs consumer ads in conjunction with TV show ‘Packed to the Rafters’, and sponsors the NSW State of Origin rugby league side and the AFL team Collingwood.
RAMS and Mortgage Choice, which have also both embarked on high-profile consumer campaigns driven by their respective mascots Raymond the ram and the Mortgage Choice beagle, ranked third and fourth with scores of 69.5% and 66.1%.
But they were both pipped by Wizard Home Loans, which was known by 70.5% of consumers (despite being bought by Aussie and being gradually phased out).
Despite not acting as brokers, the next nine places were taken by lenders, including all the major banks plus ING and GE Money.
Franchise group Australian Mortgage Brokers performed strongly – recognised by a quarter of the more than 900 respondents – followed by The Mortgage Gallery, AFG and Smartline.
Big spending brands top of mind
Australia’s first national shared equity investor, Rismark International, made the performance of its shared equity product public for the first time last month, as reported by The Australian Financial Review.
Rismark has invested in about 500 home loans and, based on the cash flows realised by the repayment of more than 60 shared equity assets, its portfolio has generated an internal rate of return (IRR) of about 7% a year.
This is despite 2008 being the worst year on record for residential property returns, and a period of enormous wealth destruction in most asset classes.
Rismark executive director Ben Skilbeck told AB the reason the portfolio had performed well was
product invested in about 500 home loans
portfolio generated an IRR of 7%
incorrelated nature of residential property credited for results
targeted at ‘aspirational middle’future demand appears strongoffered through Adelaide and
Bendigo Bank
Key points
Rank* Name1st Aussie2nd Wizard3rd RAMS4th Mortgage Choice
14th Australian Mortgage Brokers
22nd The Mortgage Gallery23rd AFG25th Smartline26th X Inc29th eMOCA31st PLAN32nd FAST
Most well known mortgage broking brands
Source: MFAA/BankWest Home Finance Index, Sept 09* Remaining places taken by lenders
because of the “uncorrelated nature of a diversified Australian residential property portfolio”.
“While individual postcodes may have fallen or risen in value, the national index historically hasn’t had anywhere near the
Have you seen this logo in the last six months?(% of respondents answering “yes”)
Source: MFAA/Bank-West Home Finance Index, Sept 09
MFAA
FPA
CPA
14.3
12.7
12.8
14.3
20.2
15.8
78.0
80.8
72.9
APR 08NOV 08MAY 09
For all the latest mortgage industry news visit www.brokernews.com.au
21www.brokernews.com.au
ASIC has set out to define what it means by making “reasonable inquiries of the consumer about their financial situation” in its latest policy proposal covering responsible lending.
The proposal is particularly relevant to brokers, given that responsible lending will kick in for the industry on 1 January next year – a year earlier than it will be in place for banks and most other lenders.
According to ASIC, reasonable inquires should be followed by reasonable attempts to verify information – followed by an assessment of whether a contract is unsuitable. Next, a written
assessment must be presented to the customer upon request.
The regulator will take into account all feedback received before providing its guidance, but it said the obligation to undertake reasonable inquiries would be scalable and would “vary depending on the circumstances”.
“In administering the law on the reasonable inquiries obligation, we will take into account all the circumstances when determining whether the licensee has satisfied the obligation to make reasonable inquiries,” ASIC noted.
Less detailed inquires would be required for “more basic” credit contracts, where loan size is small relative to the person’s capacity to repay compared to those required for a “significant” mortgage – one approaching the limit of a person's capacity to repay.
“We would expect credit licensees to have specific processes in place for making reasonable inquiries that are appropriate for each of these situations,” the regulator said.
Reasonable inquiries could, according to ASIC, include those about a consumer’s current amount and source of income or benefits, including whether they work full or part-time, their fixed and variable expenses, the consumer’s credit history, circumstances, assets and geographical factors.
These then need to be followed up by “positive steps” to verify the consumer’s financial situation. This could include inquiries through the borrower’s employer or accountant (with permission) and with other lenders.
Gerald Foley, managing director of National Mortgage Brokers (nMB), said the proposal looked as though it might be doubling up on what lenders are already doing.
He also wondered how brokers verifying information by ringing other lenders (outside of the lender providing the mortgage) would play out. “The last thing you want to do is ring another lender. A credit report would be sufficient,” he said.
Financial services minister, Chris Bowen, said bringing forward the requirements for brokers would “set a national standard for responsible lending and prohibit poor credit practices at an earlier stage.
“It will also allow consumers to access remedies for irresponsible lending sooner. Under this new timetable for reform, there will be no gap in consumer protection between the ‘turning off ’; of the State and Territory credit regimes and the 'turning on'; of the new Commonwealth regime with these crucial responsible lending requirements,” he added.
Responsible lending: Inquiries must fit circumstances
30 September• Deadline for comments on consultation paper.Oct/Nov• ASIC drafts regulatory guide.December• Regulatory guide released.1 January 2010 • Responsible lending requirements begin.
Timeline to responsible lending
“…credit licensees must not enter into a credit contract with a consumer, suggest a credit contract to a consumer or assist a consumer to apply for a credit contract if the credit contract is unsuitable for the consumer.”
The basic tenant of responsible lending
22 www.brokernews.com.au
News analysis
Independent aggregators still have role to play
Well positioned Frank Paratore, general manager at independent aggregator Ballast, said that rather than being at risk, boutique aggregators are positioned “quite well” in the market right now.
This, he said, is as a result of “some lenders having changed their metrics focus from straight gross volume requirements to a more individual broker contribution”.
Paratore said that independent aggregators are a necessity for the industry, since they provide a service that ensures consumer choice, “something history has shown that Australian consumers value.”
But he also acknowledged the ongoing risk for smaller aggregators of being dumped by a lender.
“Unless you have sufficient scalability, or enough appropriate strategic groups under you to insulate yourself against any of the volume requirements imposed by the lenders, you are at risk,” he said.
Paratore noted that deal quality is as important as transaction volume, and that is where the independent aggregators should keep their efforts focused.
NicheBoutique aggregators will always have a niche in the market, said Challenger’s general manager for distribution on broker platforms and lending mortgage management, Steve Weston.
“But these smaller aggregators will become more conscious of their business economics as current trading conditions evolve,” he added.
Weston’s said that the less scale you have, the more challenging the economics will be.
“For each of the small guys, to have big investments in technology or the compliance part of their business simply won’t make economic sense,” he said.
He also said that the commissions reduction of recent times, and the fact that boutique aggregators will need to find additional dollars to put towards compliance and licensing, will drive consolidation at the smaller end.
“Groups might set up a loose consolidation of aggregators – something we are hearing from Macquarie,” he said. He added that it might take the form of smaller aggregators coming together under one brand – or they might just look to have a common technology system or compliance area to use in a cooperative manner across several businesses.
InundatedLynne Wyatt, head of brand and marketing at RAMS, said the decision to cancel the accreditation of up to 18 aggregators was taken to rationalise its broker panel because it was inundated with business this year, and was battling to operate within its SLAs.
“To service the majority, we are looking at brokers that don’t put a lot of business with RAMS,” she said.
Along with NAB’s purchase of Challenger’s mortgage management business, the announcement by RAMS to cut 18 aggregator groups from its lending panel has brought the future of smaller, boutique
styled aggregators into the spotlight. Do they have a role to play in their current form, or
will volume demands in this period of competition scarcity and high compliance costs sound the death knell for those not attached to large, more established groups?
ConfidentPaul Gollan, chief executive at Australian Mortgage Brokers (AMB) – one of the groups that lost their RAMS accreditation – said that although the decision is disappointing, he is confident that it will not derail AMB’s business.
So much so that Gollan is not holding back plans to expand AMB’s aggregation service to include brokers who operate businesses under their own brand names.
Gollan said the thing that has disappointed him most about the RAMS decision was that “there was no consideration given to the potential our group offers in terms of quality”.
Gollan added that he felt the decision was premature, and that simply chasing volume is “something anyone can do.”
On the future of smaller aggregators, he said we should expect to see some of them proactively trimming their panels.
Lenders are attaching volume requirements to individual brokers. Most notably, this is happening at CBA. Gollan expects to see brokers selecting the lenders they will focus on, and handing accreditation back to the others. “And with licensing coming in, brokers or aggregators won’t be able to maintain credibility if they claim to understand all of the products on offer across 20 or 30 lenders,” he added.
Australian Broker’s Tim Neary speaks to three industry experts about how increasing volume demands and competition scarcity – as well as the impeding licensing regime – will affect the future of independent aggregators
Frank Paratore
Steve Weston
Aggregators won’t be able to maintain credibility if
they claim to understand all of the products on offer across 20 or 30 lenders
23www.brokernews.com.au
An improvement in house and share prices combined with “encouraging signs from the global economy” may nudge the RBA to push up rates this year. This was the view of Bob Cunneen, senior economist at AMP Capital Investors, following news that the Australian economy had expanded by 0.6% in the second quarter of 2009. Like other economists, Cunneen called this a “remarkable result”.
“Compared to the deep recessions in America, Europe and Japan over the past year, Australia has sailed through the global financial storm given the benefit of assertive and timely policy stimulus in late 2008 – as well as the corporate & consumer resilience,” he said. Driving the growth was consumer spending (+0.5% quarter-on-quarter) and machinery investment (+5.6% qoq).
Latest ABS figures show approvals were granted for 824 private sector apartments and townhouses in NSW in July, nearly double the number approved in June (425). According to the Urban Taskforce, which represents the property developers industry, it shows that the stamp duty concession announced by the NSW Government in the State Budget “is beginning to bear fruit”. Under the NSW Government’s Housing Construction Acceleration Plan, from 1 July until 31 December 2009 purchasers of newly constructed homes, ()(other than first homebuyers) only pay half the normal stamp duty on purchases of up to $600,000 in value. “The stamp duty reduction for new homes, together with recent planning reforms, has helped restore some confidence in NSW,” said Urban Taskforce CEO Aaron Gadiel.
Phone lines are now open to offer support for small businesses. The free service was officially launched by Small Business Minister Craig Emerson, as part of the Rudd Government’s $10m budget commitment to provide advisory services to small business during the economic downturn. The support line is designed to help small business owners navigate the government departments and specialised services available to them. The lines are staffed by advisers with business experience and trained by beyondblue to help callers suffering from depression associated with running a small business. Phone lines are open between 8am and 6pm, and calls are toll free on 1 800 777 275. Small business owners can e-mail [email protected].
Fee-for-service upstart vanilla Loans has ceased to operate as a non-bank lender to focus entirely on its retail broking proposition. Business founder and managing director, Geoff Brieger, said vanilla had signed up 12 brokers to date as well as receiving a “truckload of enquiries from brokers around the country”. “We decided to stop being a non-bank lender because the opportunity to build a substantial ‘fee-for-service’ mortgage broking business is fabulous right now,” he said. Brieger said the reason for dropping its non-bank aspirations was due to an overly complex message being sent to consumers.
July data from APRA revealed that Westpac now holds $100bn in deposits from retail banking customers. The bank, along with subsidiary St.George and rival ANZ, was one of the fastest-growing deposit takers in July. ANZ came first with another $1.3bn added in July, taking its retail deposit base to $59.3bn. Westpac added just over $1bn, and another $587m flowed into St.George. Deposit bases at ANZ and Westpac are growing by more than 15% per annum, almost twice as fast as the CBA and NAB. NAB added $986m worth of fresh business, bringing its total deposit base to $55.8bn. CBA attracted only $816m, but remains far ahead of the pack with $139bn in retail deposits. Bankwest increased retail deposits by $266m.
inDusTry news in Brief
“green shoots” point to early rate rise - amp
stamp duty concession delivers boost for nsw
small businesses can call for help
vanilla loans to focus entirely on broking
westpac reaches $100bn deposits milestone
Feature24 www.brokernews.com.au
Generating a good connectionBrokers that use tweets, Facebook updates or Linkedin invitations to interact with colleagues and consumers are part of the ‘Connection Generation’. author Iggy Pintado looks at the five types of connector profiles and ways of getting the most out of them
BASIC connectors have a classical view of the word ‘connection’, seeing it in terms of nature, love and the universe. They are slow to take up new technologies and often need an agent, usually a friend or family member, to help them manage their technology such as e-mail and mobile phones. Basic connectors risk being out of work or out of business and may become social outcasts due to their lack of connectedness.PASSIVE connectors often have a good understanding of technology but choose not to use it to its full potential. They have a ‘conceptual’ view of connection, associating it with puzzles or building blocks. They prefer to watch, listen and absorb before engaging with a person or idea. They risk missing social and business opportunities.SELECTIVE connectors have a ‘relational’ view of connection, seeing it as a handshake, kiss or lightning bolt. Selectives might be members of two or three online business or social groups and prefer minimal but rich interactions. They are early technology adopters and picky about who they connect with, which could potentially hold them back.ACTIVE connectors have a deep understanding of the usefulness of technologies and tend to think of connection in physical terms: bridges and power points. They maintain contacts, participate in online conversations and seek input and feedback. They embrace most media and are early adopters. They know how to make the most of their contacts. SUPER connectors are the most savvy and best connected. They are technology experts, innovators and efficient managers of their connections. They have a structural view of connection, seeing it in terms of networks, processes and maps. They know how it can help them achieve goals and are aggressive and intrusive in trying to increase the number of their connections.
Challenges and opportunitiesThe Connection Generation is a collection of diverse connection profiles, groups and networks from various generations and perspectives. The question arises as to how best to manage and leverage the mix of individual profiles to extract the best value from them. To answer this question, it’s important to understand the threats and opportunities that underpin each connection profile.
Basics possess an overwhelming denial of their ability to learn and adopt connection technology. This limits their propensity to consider technologies which may enable them to become more connected to the rest of
According to online business networking site LinkedIn, the average age of its 40 million (almost 900,000 in Australia) senior professional member base is 41.
In the US, Facebook’s statistics state that in the last six months, the fastest growing age segments were 35-54 (up 190%) and 55+ (up 513%). In fact, analysis by iStrategyLabs state that at this point in time, there are more Facebook users 55 years and older than there are high school students. Regardless of age, we’re all getting connected – and fast.
Communication platforms such as YouTube, LinkedIn, Facebook, Twitter and smartphones have given users access to a wealth of information, experiences and ideas.
The world now has a generation of people who live in an era of great connectivity that are not defined by their year of birth. I call it the Connection Generation. A generation that’s defined by the way people and groups interact and how attitude, behaviour and capability affect their place in society and business. The challenge is how to engage and extract value from this generation of connected people. A good starting point is to understand connector profiles – profiling that relates to a user’s attitude, behaviour and capability to connect.
Connector profiles – who are you?My research revealed that there were five distinctive profiles that define an individual’s degree of connectedness. These groups comprised of Basic, Passive, Selective, Active and Super Connectors.
25www.brokernews.com.au
“Connection Generation”, Iggy Pintado’s recently released book, is a fascinating study of how connectedness affects our place in society and business and the challenges and opportunities this compelling development presents. For more information, visit www.connectiongeneration.com.
society and business. This limitation could lead to the real threat of this group not only being uninformed but of missing opportunities altogether that may benefit them.
On the opportunity side, Basics’ same dependence on the connected behaviour of others may bring out their willingness to consider the practical benefits of the more applicable connection technologies as it relates to their day-to-day activities and relationships. They may even get ‘dragged into’ the online world amongst their circles of influence. The pervasiveness of mobile device technology and its applications may be the vehicle for greater connectivity for Basics and they may potentially ‘upgrade’ themselves to more connected profiles.
Passives have a tendency to underestimate – and even deprioritise – connection activities. If Passives can’t see the value of connectivity, they may be left behind in business, may be even missing out on job opportunities. On the plus side, Passives have a propensity to test and trial new applications and they understand the importance of staying connected to close colleagues and friends. Like Basics, if more of their social and business circles used connection technologies as standard modes of connection operation, they would be more inclined to try them out and increase the rate of permanent adoption.
By definition, Selectives prefer to keep ‘closed’ networks of connections. They’re very specific about who’s in – and out – of their social circles, which limits their ability to obtain and understand other points-of-view on issues and challenges. The Selective business professional would have very deep relationships with their existing customers but would struggle with prospecting for new business. The opportunity for Selectives is that although their networks are closed, their minds are open to new technologies and ideas. They link the logic between application and technology quickly and have a tendency to be more productive due to their focus on specific connection activities.
In the case of Actives, management is required to ensure they become productive contributors. They tend to drive connection activity at alarming speeds without stopping to assess the quality of their efforts, leading to unproductive time and activity. It’s essential that a management system that incorporates specific controls is implemented by managers of this group to ensure focus is directed in the optimal areas of connection. The opportunity for Actives is that they make for great sales and marketing personnel. Their capability to initiate interactions and proactively connect for commercial benefit should be leveraged by any business.
Supers’ addiction to connecting to anything and everything may seem intrusive and offensive to other profiles, which should be managed via their own disciplined system. They can be distracted by the thrill of hunting down multiple contacts without reviewing each connections’ specific value to their stated purpose. This could lead to a loss of productivity and commercial output if left unmanaged. The opportunity is that Supers can act as connection mentors to other profiles to boost effective and efficient connectivity for value. They
have an intuitive and instinctive sense of how to best leverage connections.
Managing to a PLAN and being OPENWith the mix of diverse profiles, there are a set of guidelines recommended for how to manage individual profiles for personal and commercial benefit. I summarise these four factors as Personalise, Listen, Activate and Nurture, or more easily remembered as PLAN.Personalise. Each of the individual profiles relishes the importance of a personalised connection to others. Listen. Listening to what individual profiles are doing, commenting and providing feedback on is essential. Activate. For some connection profiles, it is a challenge to establish a connection. To better manage these individuals, regardless of their capacity levels, it’s important to activate a connection or relationship. Nurture. Once you’ve understood the importance of personalisation, leveraged their connection preferences and activated connections with stakeholders successfully, nurturing established relationships is key to managing connectors longer term.
Connected individuals are part of connected groups and networks. A set of initiatives are recommended to best manage these, which comprises Opportunity, Participation, Engagement and Navigation, or OPEN.Opportunity. Understand and work with the precise goal of the group, team or network and take full advantage of its collective purpose. Participation. It’s often difficult in a time-poor, easily-distracted and information overloaded world to get people to be part of something unless they see the value. You can transcend these potential barriers by establishing compelling propositions and communicating the rationale of being part of a greater group. Engagement. Once people are willing to play and have bought in, the connected group, community or network needs to be engaged to realise the fullness of the opportunity at hand. Network. The power of connecting individual and groups together to form networks should never be underestimated. Networks need to be planned and regulated to deliver benefit.
A few words about being ‘inline’ There are some connectors like Basics and Passives who take a backseat when it comes to connection technology and have a preference for face-to-face or phone interaction. Selectives see online as a supplemental connection tool in their daily lives and use a mix of real and virtual interactions to stay connected while Actives and Supers live comfortably in both worlds. The key here is not about online replacing offline. The most effective connection methodology is the one that works and is preferred by the parties concerned relative to what needs to be achieved. I call this concept inline, which means to establish the most relevant and effective connection methodology, as the name suggests, ‘in line’ with what needs to get done.
Inline is critical for business, especially in the case of relationship management. While telephone and video conferencing is being widely used by organisations to save time and expense of travel, there is no replacement for establishing and maintaining individual relationships and group dynamics via regular face-to-face social and business interaction. In my corporate experience, most of the value from team meetings, workshops and conferences was done outside of the formal agenda sessions, usually during pre-event breakfast meetings, coffee breaks and post-event drinks.
In a connected world, understanding connector profiles, managing to a PLAN with individuals, having an OPEN mindset with groups and connecting INLINE with desired outcomes, provides the framework to more effective management of this generation of connected people called the Connection Generation.
The opportunity for Actives is
that they make for great sales and marketing personnel. Their capability to initiate interactions and proactively connect for commercial benefit should be leveraged by any business
Broking businesses, big and small, are using social networks to connect with customers and to spread news and information about their latest activities.
One recent initiative saw Aussie Home Loans use YouTube video posts and a dedicated Facebook page to tell the story of mortgage broker Duane Brown as he prepared to make his first parachute jump ever. The escapade was part of an Aussie Home Loans competition and tied in with a new television campaign where Aussie promised to give borrowers a $300 refund if one of its brokers could not secure them a better home loan deal.
Mortgage Choice have also jumped on to the social media bandwagon setting up a Facebook group and tweeting about latest media releases and announcements.
Tapping into social networks
Iggy Pintado
Aussiewww.youtube.com (search “Duane Brown”)
Mortgage Choicewww.facebook.com/MortgageChoice
http://twitter.com/MortgageChoice
Links to check out:
Feature26 www.brokernews.com.au
Michael Stone is director of Holistic Health Services. For more information email [email protected] or visit www.holisticservices.com.au
finger on The pulseinvesting in the health and wellness of your employees can certainly improve business success – although the benefits to be gained may differ according to the age of workers, writes michael stone
There is a growing body of research which shows that corporate wellness is essential for organisational performance. Clear links between workplace wellness and metrics such as organisational profitability, employee engagement and staff retention mean that workplace health and wellness is no longer a ‘soft’ issue, but one that is critical to ongoing business success.
The current economic downturn and the pressure for organisations to reduce headcount whilst maximising productivity means that cost-effective employee health and well-being is more relevant than ever.
The question that I am often asked by organisations these days is “What sort of program or benefits should we be offering?”
starting pointAs a starting point, I usually get organisations to think about what they are really trying to achieve, the demographic profile of employees, and the types of challenges and issues that staff are currently facing.
When it comes to what appeals to employees across different generations, there are no simple formulas. Massage, for example, is one of those things that appeals to people of all ages, although the same can be said for most of the programs we offer – after all, who doesn’t want to feel better at work?
Where employee age does have an impact, however, is from the benefits that stem from implementing a corporate wellness initiative. There is no doubt that workplace health and wellbeing programs help promote employee engagement, regardless of a person’s age.
However, as people get older, the risk of lifestyle-related chronic diseases goes up. With an increase in chronic disease comes heightened
potential for lost productivity, increased absenteeism, elevated staff turnover and associated recruitment and training costs, reduced team morale as individuals ‘cover’ for ill colleagues, and the list goes on. Amongst older employees, workplace health programs therefore start to play a particularly important role in maximising their business success.
The good news is that organisations can definitely play a critical role in the prevention, early detection and management of chronic disease. All major chronic diseases that we see in Australia today are amenable to interventions which target stress reduction, nutrition and weight management, blood pressure and cholesterol control, and other lifestyle modifications and behavioural interventions. If people are kept healthy, then organisations benefit and can flourish over the longer term.
CorporaTe healTh
Five hallmarks of an effective wellness initiativeENGAGING – workplace health and wellbeing programs should be fun and enjoyable for all concerned. They can help promote communication between employees and foster effective teamwork and camaraderie. PRACTICAL – nobody wants to go to a session to be ‘talked at’. Effective wellbeing programs always incorporate practical activities that give people a memorable experience.EDuCATIONAL – there needs to be some degree of skills transfer so that employees gain knowledge and/or skills that they can take away and apply.PREVENTATIVE – the true business benefits of a workplace health initiative become apparent when a preventative focus is taken – whether in ways to prevent stress, physical ill health, muscle fatigue/physical injury, or even a negative outlook at work.FLEXIBLE – there needs to be room to tailor things to meet the specific needs of your organisation. Consider your key objectives, your employee profile, worksite practicalities, current issues or challenges, time and cost constraints, and so on. ‘Off the shelf’ solutions ignore the fact that every organisation is different.
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off The Cuffcont. from cover>>
He said AFG being not up for sale was more about the current market not allowing them to maximise a return in the event of a sale. “I’m sure they will concentrate on building the business and wait until the market returns to a favourable environment for a sale – whether an IPO or a trade sale,” he said.
But he said he didn’t believe being autonomous made any difference. He pointed to the Macquarie investment in AFG: “I don’t believe they (AFG) would suggest this affected their independence,” he said.
Connective principal Mark Haron saw the debate a little differently: “Twenty five percent of brokers don’t want to be part of an institutionalised business, 25% will say yes and the other 50% really won’t care so long as they get good service and their commission on time,” he said. “Banks are not likely to be interested in an aggregator doing $100m to $150m a month.”
AFG broker David Brell, from Smartmove, said he was very happy to hear that the aggregator was not up for sale and would remain independent.
“The business of AFG is to assist its members in offering the best solution to clients – as opposed to a lender potentially looking to take advantage of the distribution network,” he said.
Brell said he was undecided about the effect on the industry of NAB buying Choice, FAST and PLAN, but said their commitment was a positive. “I’m not sure about the impact on the independence of the industry,” he added.
Queensland broker Stephen Beck, from LoanWay, questioned how other lenders would feel about paying commission to the NAB via Challenger. “As a business owner it defies belief that you would help contribute to income earnings of your major competitor, who is trying to gain as much market share a possible.”
What was the last book you read? The Gate House by Nelson Demille. if you did not live in australia, where would you like to live? Southern Europe, for many many reasons: long Mediterranean summers, great sailing destinations, and you can be anywhere in Europe in less than an hour! if you could sit down to lunch with anyone you like, who would it be? Barry Humphries – lunches should be fun and fascinating. What was the first job you ever had? Picking up golf balls on a driving range. I did it for one year, and I learned that I needed to be paid more. What do you do to unwind? A beer on Friday. Dining out, boating, long drives in the country and travel. What’s the most extravagant gift you ever bought yourself? My boat. What CD is currently playing in your car stereo? Amy Winehouse – Back to Black. if you could give anyone starting out in business one piece of advice, what would it be? Small steps and one step at a time. Big bangs rarely work. if i was not working in the mortgage industry, i would like to be…? A wildlife adventure tour operator. Where was the last place you went on holiday? Dalmatian coast and islands of Croatia. What is the one thing most people would not know about you? I was born in Kenya.
malcolm watkinsTitle: executive director, afg
James Veigli is a mortgage broker, marketing and business strategist and founder of the Australian Mortgage Broker Alliance. He can be contacted at: [email protected]
29www.brokernews.com.au
opinion
replaCing Trail: memBerships anD ConTinuiTyin his third and final article about how brokers can reduce their dependency on lender commissions, James veigli suggests setting up paid memberships for clients
In my first two columns I discussed a number of tips and strategies that allow you to: (1) charge fees by value-adding and (2) diversify income through strategic partnerships.
It’s now time to reveal the final and most powerful trail replacement strategy: how to use memberships and continuity to increase your leveraged income, reduce your dependence on the big lenders and boost the saleable value of your business.
Trail income (or as I’ll often refer to it in this article as ‘continuity’) is a beautiful thing. It defines the saleable value of your business, and it provides vital ongoing cash flow for your business future.
When you think outside the box, you can learn to harness the power of trailing income and become the successful mortgage broker of 2010, while others struggle as the market gets tougher and tougher in every way – and we’re already seeing it happening now!
As brokers, we constantly search for new clients, help them select the best loan and manage the whole process from application to settlement and beyond. In return, we collect an upfront commission, and in most cases, a smaller trail income for the life of the loan.
At this point, virtually all brokers make the huge mistake of stopping. They focus 100% of their efforts on the ‘front end’ of their business, when in actual fact the real income explosion only starts on the ‘back end’.
Now let’s be clear. When I say back end, I’m not talking about referrals and I’m not talking about client retention or client servicing – because those are basic strategies and I’m assuming you are already doing them.
What I am referring to with back end is the idea of offering paid memberships to your clients and prospects.
Memberships are a great way of providing massive value and exclusive service to your clients – while leveraging your time and expertise in exchange for continuing income (just like trail).
Three big reasons why you should set up memberships:Receive more trailing income that’s in your control.•Offer a higher standard of service to clients long-term while getting paid for it.•Build loyal clients, who give referrals – so you can give rate-shoppers and time-wasters •the flick.
Now that you understand why you should do this, here are my “Five fast-start power tips” to setting up your own membership program:
Use ‘members only’ exclusivity. People love belonging to groups and clubs. The key is 1. to clearly communicate the added value of becoming a member and what benefit it will give your client. A powerful motivator for many people to join memberships is the “fear of loss” principle. For example – a client feels compelled to join because they might miss out on something special, and they don’t want to be left behind.Offer regular value-add information. Use media such as newsletters, manuals, books, 2. CDs, DvDs, seminars, tele-seminars, phone consultations, internet resources, and the list goes on. The most powerful topic, by far, is information on “how to make money”. Set up ‘access levels’. If you provide valuable information to your members on a topic 3. they can’t get enough of, then you owe it to them to keep offering more and more. Set up three membership levels ranging from “everyone can afford it” (with basic services and information) through to “top 5% of clients only” (with higher-level, more specialised information and a more personalised, premium service).Use ‘forced continuity’. This concept is worth millions if you learn how to harness it. 4. Good examples of this are Readers Digest, Gym Memberships, and ProActiv (the acne skin treatment from Tv). The idea is when a product or service is sold, it automatically comes with a bonus continuity based product or service. This bonus will often come at no cost for a period of time, before the purchaser is charged a monthly fee to continue (unless they cancel within the ‘no cost’ period). Million-dollar tip: yes, this means potentially giving away products and services for nothing or even negative profit – but the statistics prove that only a small percentage of people cancel and the majority will stay on as paying customers.Model success! Don’t reinvent the wheel. Successful entrepreneurs and marketers in 5. every industry already use membership-based services to better serve their clients over the long term, while setting up a leveraged income stream for their business. I encourage all my members to not only study their materials each month, but to also model exactly how I market and build relationships, because the fastest way to success (and more money) is learning, modelling and adapting from others.If you want more “outside the box” tips, including how to set up trail replacement
strategies in your own business, stay tuned for future columns in Australian Broker, or visit our website at www.PowerBrokerSecrets.com.
To read James Veigli’s first column in the series go to: www.brokernews.com.au/news/industry-talk/forging-a-new-trail/36195. To read the second column in the series go to:http://www.brokernews.com.au/news/industry-talk/replacing-trail-strategic-partnerships/36861
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Insiderwww.brokernews.com.au
Got any juicy gossip, or a funny story that you’d like to share with Insider, drop us a line at [email protected]
The joker in the pack
the RAMS 2010 calendar. A nice idea, Insider feels, and one which may have some fringe business benefits. After all, it’s no secret that the resurrection of the RAMS brand is due – in no small part – to its success within the first homebuyers’ market.
So what better way to connect with budding first homeowners of the future!
FirstMac-gate… not quite!
Australian Broker entirely missed a story, which, at first glance, seemed
to reverberate with “Utegate- like” ripples.
According to a report, which appeared in The Australian on 6 August, FirstMac had some help from a former Kevin Rudd staffer in securing its $1bn in funding from the government’s RMBS scheme.
The paper reported that Neville Conway, who managed the PM’s electorate campaign in 2007 before becoming a lobbyist, had “some general e-mail correspondence” with Andrew
Thomas, departmental liaison officer in the Treasurer’s office about the RMBS scheme on behalf of the non-bank lender.
For those who don’t remember, Andrew Thomas was one of the Treasury bureaucrats caught up in the Utegate saga.
Not surprisingly then, Conway was eager to pour cold water on any comparisons, telling the paper he only asked Thomas “who to talk to about the scheme,” and was then directed to the AOFM “which was overseeing the scheme”.
Now at this point, you’ll forgive Insider for being just a tad bit cynical because if that’s all the information he got out of Thomas, Conway might as well have contacted Insider for some pointers.
He should have tried Google!
You don’t generally expect banking execs to be all that funny – generally they live up to their conservative
tag – but BankWest’s retail chief executive Ian Corfield appeared to be pushing for a sideline in stand-up comedy at a recent industry event.
Speaking as part of a bankers’ panel discussion at the Retail Financial Services Forum, Corfield generated plenty of laughs with some of his left-of-centre comments.
On the subject of the public’s relationship with bank branches, Corfield quipped that “people walk faster past a bank branch than any other store”; when the discussion turned to technology, he said he doubted there would ever come a day where someone
is “sitting on a bus filling in a mortgage application via mobile phone” and when the panel was asked to describe what the bank branch of the future looked like, he was first off the mark with “… it will look like a BankWest branch, of course”.
But he definitely saved the best for last. At the end of the discussion, each panellist was asked what their predictions were for the next financial year. While the others on the panel talked shop, Corfield – an Englishman – clearly had other things on his mind.
“England to win the Ashes and the [soccer] World Cup,” he said, on the eve of the final Ashes test match at the Oval.
Well… one out of two ain’t bad!
And while on the subject of cricket…
Some interesting findings came out of Retail Financial Intelligence’s
(RFI) report, The Lucky Country, which compared the Australian mortgage market with its counterpart in the UK.
We reported on some of the findings in Australian Broker (and online on Brokernews), but what we didn’t tell you was that the report was originally called a very different name.
According to reliable sources, we understand that RFI originally planned to call the report ‘The Financial Ashes’.
This would have had a nice ring to it, especially if the Australian cricket team had performed as well against the English as the Australian mortgage industry did against its UK opposition (according to the report).
Never mind, perhaps the stars will line up in 2011!
Tapping into the future FHB market
Arecent browse across the RAMS home page revealed that the non-bank
lender and franchise group has launched a drawing competition for kids.
To take part, children aged between 6 and 12 must submit a drawing of “their favourite house and describe in 50 words or less, why it’s their favourite” with the 12 winning entries featured in
31
Serviceswww.brokernews.com.au
Australian Mortgage Awards 2009, 25th September, The Westin Sydney. Secure your table at www.australianmortgageawards.com.au
aggregaTor/wholesale BrokeramB origination1300 55 11 18www.ambo.com.aupage 32
Choice aggregation1300 135 389www.choiceaggregationservices.com.aupage 15
mortgage House aggregation Services1300 664 [email protected] 16 & 17 PLaN australia1300 78 78 [email protected] 5
Bankadelaide Bank1300 791 679www.brokers.adelaidebank.com.aupage 3
CommerCialBanksia Financial Group1800 333 114www.banksiagroup.com.aupage 13
Think Tank1300 781 043 [email protected] 26
DeBTor finanCereal [email protected] 4
lenDerCitibank mortgages1300 651 059www.mortgagebroker.citibank.com.aupage 9
eurofinance02 9252 8311www.eurofinance.com.aupage 19
Homeloans Ltd1300 787 866www.homeloans.com.aupage 21
mKm Capital1300 762 151www.mkmcapital.com.aupage 8
morTgage managemenT/ non-Bankmango media02 9555 7073www.mangomedia.com.aupage 1
non ConformingLiberty Financial13 11 80www.liberty.com.aupage 7
Pepper Homeloans1800 737 737www.pepperhomeloans.com.aupage 10
oTher serviCesresidex1300 139 775www.residex.com.aupage 30
Symmetry1300 723 613page 23
The orange advantagewww.theorangeadvantage.com.aupage 29
Trailerhomes0417 392 132page 28
shorT Term lenDerCrown & Gleeson1800 735 626www.crownandgleeson.com.aupage 2
interim Finance02 9971 6650www.interimfinance.com.aupage 6
NCF Financial Services Pty Ltd1300 550 707www.ncf1.com.aupage 11
sofTware/iTFinware1300 762 444 [email protected] www.finware.com.au page 31
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