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The no. 1 news magazine for Australian brokers.
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Web of opportunity
POST APPROVED PP255003/06906$4.95 ISSUE 6.21
October 2009
A broker’s website should be a key weapon in their armoury and should have the potential to attract significant amounts of business, according to new consumer research.
Retail Finance Intelligence’s (RFI) Consumer Attitudes to Mortgage Brokers Report, which surveyed over 2,000 mortgage holders, found that one in five respondents (20%) who used the internet to make home loan enquiries then used a broker to obtain their home loan. (Only 22% actually went ahead and applied over the internet and
36% through a branch). When combined with RFI research that shows the broker proposition is most appealing to younger, tech-savvy borrowers (those aged between 25 and 44), the online opportunity looks even more attractive.
Alan Shields, research director at RFI, said the internet was something brokers could not ignore.
“This group (those aged between 25 and 44) is also the most likely to use the internet to apply for a home loan and it is therefore important for brokers to have high internet visibility and customer targeting to engage this group,” he said.
Shields said brokers needed to have a way of capturing people online. “More research for a home loan is being done online. Brokers need to ask consumers what they want in a website,” he said, adding that things like good calculators and tools appeared to work well.
According to the RFI research, more than one in ten (11%) borrowers find out about their broker via an internet search.
RAMS head of marketing, Lynne Wyatt, said it regarded a strong online presence as a “key pillar” of its business acquisition strategy. The non-bank lender and franchise group also sees the internet as a growing source of leads for brokers.
Internet is the key for brokers, new survey finds
US industry warns about regulation
Aiming at the top end of the market
Will growth begin to slow down?
A report from the US about the pain that mortgage brokers and bankers are feeling under the regulatory regime
Brokers should target Australia’s high net worth individuals who are looking to invest in real estate
A series of new economic forecasts have cast a shadow over the prospect of accelerated growth in the foreseeable future
Page 12>>
Page 16>>
Page 24>>
Page 32 cont.>>Turn to page 26 for a more in-depth look at the results of this survey.
Alan Shields
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“Lending equilibrium essential”The Australian Mortgage Industry report stated that the market share of the major banks was about 67% before the GFC and 82% presently – of which 12% has come from the acquisitions of Bankwest and St.George by the CBA and Westpac respectively.
Mortgage Choice also saw its settlements swing toward the Big Four, albeit less dramatically. In the June 2008 Quarter, the major banks’ market share of the franchise book was 54% (other banks 39%). One year later this was up to 60% (other banks down to 33%).
In between this time, dominance of the major banks at Mortgage Choice reached its zenith with a 75% market share in the December 2008 quarter. But Michael Russell said the “good news” was that since then “lender equilibrium has since been restored with the other banks reclaiming much of their rightful market share”.
“This competitive equilibrium is absolutely essential, not only for today’s property buyers but for the future generation of property buyers. For them, an extensive and competitive lender market will ensure they are given a ‘fair go’ when searching for a great mortgage for their particular circumstances,” he added.
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Broker business up, but appeal downThe latest instalment of the Australian Mortgage Industry Report, compiled by JP Morgan and Fujitsu Consulting, was a mixed bag of both good and bad news for brokers.
Volume 10 of the influential report found that while broker volumes had recovered, the broker proposition had suffered due to the reduction in competition.
On the positive side, following a dip in broker volumes in the second half of 2007, (attributed to wholesale funders being hobbled by funding constraints), brokers have been able to pick up market share by directing business to the major banks.
This, the report pointed out, was despite these banks trimming commissions in 2008.
As a result the proportion of outstanding mortgage originated by brokers has stabilised above 38%.
Fujitsu Consulting’s Martin North said the major banks and brokers were now more interconnected than before.
However, a separate Fujitsu Consulting survey of 26,000 banking customers found that while 40% are willing to use a broker, they are less inclined to use one than they were 12 months ago. Borrowers were being increasingly motivated by price, and saw little difference between products from various lenders (which meant borrowers had less need to call on brokers to help them navigate the range of options).
Commenting on the findings of the report about broker volumes and lender relationships, Mortgage Choice CEO Michael Russell said that while it cited broker channel usage above 38%, settlement figures at Mortgage Choice were above 40% for ANZ, Westpac, CBA and St.George.
“Similarly, the Genworth Mortgage Trends Report of July 2009 reported broker channel usage at 41%, with a further 19% claiming not to have used a broker for their last transaction but indicating they may use a broker for their next transaction,” Russell added.
Russell endorsed commentary in the report that discussed lenders currently focusing on “improving the efficiency of the
broker relationship to enhance the effectiveness of processing volumes, as opposed to re-visiting the commission structure”.
The report found that the difference between best practice and inefficient operators resulted in a $900 variance in loan origination costs. The bulk of these costs were attributed to staff and agency costs.
The report predicted more off-shoring of jobs to cut staff costs. It forecast potential areas of agency cost savings, including: optimising the valuation process by implementing AVM solutions; reducing re-work by assessing what is essential to approving a mortgage application; and optimising IT by developing unified communications and less expensive software as a service (SaaS) solutions.
Russell said aggregators and brokers were diligently working alongside lenders to bring down origination costs.
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The real estate industry and mortgage broking have moved closer together after Ray White added Loan Market Group to its real estate and property business.
Ray White took a 100% stake in the mortgage broking operation.
The remaining equity purchased by the real estate company was held by the founding X Inc Finance directors Dean Rushton, Jennifer Nielsen and John Kolenda.
Loan Market Group was formed two years ago when X Inc merged with Ray White’s broking arm eMOCA (which comprises of Ray White Financial Services, Loan Market and Realestate.com.au Home Loans).
The sale of X Inc (as part of Loan Market Group) to Ray White marks a personal triumph for Rushton and Kolenda. They formed the business (along with Nielsen) in November 2004, and were then caught up in a legal battle with Aussie (their former employer). Aussie sought an injunction preventing X Inc from hiring its employees and contractors, and also sued for alleged breach of contract. X Inc ultimately triumphed in both actions.
The new ownership structure of Loan Market Group will help leverage its planned investment across all businesses, according to its executive chairman Sam White.
“There are obvious synergies between mortgage broking and real estate practices. In addition,
[the acquisition] will enable the group to invest further in the development of its insurance operation,” he said.
Kolenda, the executive director of Loan Market Group, will phase out his involvement in the company to focus on other business interests. Nielsen quit the mortgage broking group at the start of the year to head up online and marketing at Ray
X Factor: Ray White buys up Loan Market Group
As new consumer research shows that customers expect a 48-hour turnaround in mortgage application approvals, a new online lender is hoping to attract brokers by offering them speed and convenience.
The new online lending platform, i.lending, developed by wholesale mortgage manager Loan Services Australia, allows brokers to generate conditional approvals and loan documents for their customers on the spot.
proposition possible. All loans from i.lending.com.au are funded by ING Direct, which Parkinson said meant interest rates would remain competitive throughout the long term.
Brokers who want to gain accreditation to offer i.lending products can do so online, by uploading their MFAA or FBAA member certifications through the site’s accreditation portal.
Online platform offers autonomy
White. Rushton will remain as CEO working alongside White, who will remain as Loan Market Group’s executive chairman
White paid tribute to the outgoing Kolenda, saying he had a “tremendous impact” on the company. “His contribution has been significant and I know he will take our thanks and well wishes into the next phase of his business life,” he added.
Sam White
Nov 2004• – Former Aussie executives John Kolenda and Dean Rushton join forces with Jennifer Nielsen (ex-Hallis COO) to form X IncDec 2004• – Aussie injunction preventing X Inc hiring ex-Aussie employees and contractors rejected by Supreme CourtApril 2005• – Aussie claim against X Inc for alleged breach of employment contract rejectedJuly 2007• – eMOCA acquires realestate.com.au Home LoansOct 2007• – X Inc merges with eMOCA (Ray White Financial Services, Loan Market and REA Home Loans) to form Loan Market Group with 500 brokers and $8bn loan bookApril 2008• – Restructure: Loan Market to focus on residential real estate, X Inc on SME lendingDec 2008• – Jennifer Nielsen quits X Inc for marketing role at Ray WhiteOct 2009 • – Ray White buys 100% of Loan Market Group
Loan Market Group timeline
National sales manager, Jo Parkinson, said allowing licensed brokers to perform a significant proportion of the loan application process themselves at one stroke would save both time and costs.
Parkinson told AB that he expected the product to be very well received by brokers. His initial target for the new venture – while not wanting to hamstring himself – is “about $30m a month [in settlements]”.
“I believe we are breaking the mould here. With a well-priced product and good service, the sky is the limit,” he said.
Parkinson said LSA’s bespoke technology platform, as well as the recent moves the industry had made toward broker regulation and licensing, made such a
Loan Services Australia launches online offering
products funded by ING Directtarget of $30m a month setbrokers able to generate
documents themselves
Key points
Jo Parkinson
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Sherman Ma, the founder and managing director of speciality lender Liberty Financial, has placed 14th on the 2009 BRW Young Rich List with a personal fortune of $103m.
Ma, who is 36, retained much of his wealth despite a turbulent year for the mortgage industry in general and non-bank lenders in particular. Last year he was worth $106m.
With Ma at the helm, Liberty has diversified in the last few years by expanding into commercial lending, asset finance and debtor finance.
The recently published financial results for 2008 showed a net profit after-tax of $36.3m – up from $26m in the previous year. Commenting on these numbers at the time, Ma paid to tribute to Liberty’s “differentiated business model”.
The only other noticeable industry representation on the list was Refund Home Loans founder Wayne Ormond, who placed 74th on the list with a personal fortune of $25m.
In an interview with BRW, Ormond said he planned to target the real estate market, where real estate commissions have doubled over the last four to five years.
Are property prices going to rise or fall? It depends on which influential market report you decide to read.
According to the Housing Outlook Report released by QBE LMI, property prices are set to surge in the next three years with double-digit house price growth forecast across all capital cities from June 2009 to June 2012.
Sydney is forecast to grow by 21%, Adelaide by 23%, Melbourne by 19%, Brisbane by 15% and both Perth and Canberra by 12%.
QBE LMI forecasted this growth on the back of ongoing positive incentives for property investors and homeowners looking to upgrade to enter the market
“Low interest rates, solid growth in rents and housing shortages will create favourable conditions for a strong recovery in residential property prices in the second half of 2010 through to
2012,” said QBE LMI CEO Ian Graham.
However this forecast is at odds with the latest JP Morgan/Fujitsu Australian Mortgage Industry Report (Volume 10) which mentions “dormant house prices”, an “extremely challenging” outlook for housing volume growth through to 2011 and fewer owner occupiers “trading up” the property ladder.
In a telling statement, the report stated that slowing housing growth rates were a “fundamental reflection of the exhaustion of meaningful house price appreciation”.
And it said a return to more ‘normal’ LVR levels, requirements for genuine savings and stricter underwriting standards at the major banks meant the “re-gearing phenomenon” which drove “significant house price appreciation over the course of 2002 to 2006” was unlikely to be repeated.
Furthermore, during the launch of the report, Fujitsu Consulting co-author Martin North highlighted a global house price comparison tool
Liberty founder retains wealth
released by the Economist, which shows that Australian house prices have continued on their upward trend while markets like the US and UK have suffered big corrections. The question that remains as yet unanswered is: how much further can they grow?
To try out the Economist tool for yourself go to: www.economist.com/businessfinance/displaystory.cfm?story_id=14438245
Property prices: Up or down?
Martin North
Ian Graham
Scenarios likely to push up house pricesinterest rates remain relatively low•investors/upgraders flood into the market•vacancies rates remain low pushing up rental yields•housing shortages remain•
Scenarios likely to drive down house priceshousing prices in Australian reach their peak•a higher interest rate environment•fewer owner occupiers refinancing or trading up•supply of housing credit remains relatively tight•relative improvement in construction of new dwellings•
Where to next for house prices?
For more on the future direction of the economy, housing and house prices turn to the article on page 24
Who made it onto the 2009 BRW Young Rich List?
1st place: Ross Makris ($350m)•14th place: Sherman Ma •($103m)74th place: Wayne Ormond •($25m)
World’s richest under 40…Sergey Brin, Google founder •worth $14.6bnLarry Page, Google founder, •worth $14.6bn
Rich kids
8
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Mortgage managers should be looking to partner with wholesale funders with strong deposit bases, according to the authors of the Australian Mortgage Industry Report.
Speaking at the launch of Volume 10 of the report, they pointed to the NAB acquisition of Challenger as an example.
Report co-author, Martin North, said mortgage managers
Steve Weston
would find the going tough unless they could “attach themselves to funders with a big deposit book”.
According to the report, despite some recovery in securitisation activity due to the AOFM initiative, wholesale providers that relied on RMBS markets to provide funding to mortgage managers were now largely ineffective.
But partnering with a funder with a deep pockets, the authors argued, would not only would give mortgage managers access to funding – it would do so at rates in line with the major banks.
On the other hand, mortgage managers that cannot secure such partnerships are likely to remain in the bottom of the “trough of disillusionment” – as they currently sit in the Fujitsu Mortgage Innovation Cycle.
Weight to this argument was given by Steve Weston, general manager for distribution at Challenger, who said in an
Mortgage managers need partners with deep pockets
interview contained in the report that before the NAB deal, it was reliant on the securitisation markets for funding.
“The markets dried up when the GFC began to bite just over two years ago – and in reality they remain in hibernation.
“So we were effectively starved of oxygen and were unable to provide the volume of funding anywhere near the levels we had before the GFC. That meant our network of mortgage managers were unable to play the key role in the mortgage sector that they had way back in the early 1990s,” he said.
Weston described the impact that the NAB acquisition would have as “pumping oxygen” in the form of funding back into the business, which would be good news for mortgage managers and for brokers.
Similarly, Tony Carn, national sales manager at Homeloans Ltd, spoke of the benefits for the listed mortgage manager of having NAB as an investment partner (NAB’s purchase of Challenger includes an interest of approximately 17.5% in Homeloans Ltd, with the potential to increase this to
approximately 41%) as a “vote of confidence”.
Earlier in the Fujitsu interview, Weston said that while he though the RMBS market would recover in the long term, conditions would remain difficult in the short to medium term because many of the traditional RMBS investors such as hedge funds had been badly affected by the GFC and their ability to invest had been “materially diminished”.
As a result of this, Challenger had searched for new sources of funding, including accessing $1bn of the AOFM’s $8bn investment scheme, but the NAB deal had been the “alternative solution”.
wholesale funders with big deposits bases needed by mortgage managers
conditions to remain tough in securitisation markets in medium term
funders dependent on securitisation will struggle due to lack of investor appetite
Challenger deal with NAB provides alternative funding source
Key points
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The AOFM’s RMBS program has kept funding flowing to a number of the second tier lenders and as such has extended a vital life line to the entire non-bank industry, according to James Austin, FirstMac’s chief financial officer.
His comments follow the Federal Government’s decision to extend the AOFM’s RMBS scheme – offering mid-tier lenders and non-banks another $8bn in mortgage bonds.
The $8bn boost to the program will be used to help smaller lenders compete against the major banks. The Big Four banks have increased their market share from 67% pre-crisis to 85%, according to the most recent Australian Mortgage Industry Report.
“It will increase the funding that goes to the smaller lenders, and we need the smaller lenders in the game to keep the market competitive,” said the Federal Treasurer Wayne Swan, adding that competition puts downward pressure on rates.
For months, mid-tier lenders and non-banks have been lobbying the government to implement a range of solutions. One such proposal was a complete guarantee of mortgage bonds, while another called on the
government to make it cheaper for smaller banks and credit unions and building societies (CUBS) to access the wholesale funding guarantee.
“We think it has been and will continue to be very beneficial for the second tier lenders. It will allow us to get to the other side of the GFC with more than just the Big Four banks – and in that regard it has been very successful,” Austin said.
Smartline’s executive director Joe Sirianni described the development as being “very important” for the industry. “It’s not a lot of money but it does enable some of the smaller players to stay in the game and lend at a pretty good rate,” he said.
Brokers make natural financial plannersThe mortgage broking industry is where financial planners considering succession plans should look to for new blood, according to B2P Mentoring managing director Mike Donaldson. He added that it makes good business sense for brokers too.
Donaldson piloted a two-year training and licensing model with a number of AFG brokers.
He told AB it provided these brokers with more than simply an additional income stream.
“With face of broking moving into the new advisory space, adding financial planning capabilities allows the broker to properly deliver a holistic solution to their clients,” he said.
Donaldson estimates there is an opportunity “for up to 15%” of current active brokers to break into the financial planning world.
It’s the ready-made contacts and database that the mortgage broker already has that stands them in such good stead, he said. He added that brokers are more entrepreneurial than financial planners, as the latter typically come from an insurance or funds management background.
“Therefore they’ve typically had resources and things provided for them. On the other hand, while mortgage brokers might not have financial planning experience they have had plenty of business experience,” he said.
And since the average age of financial planners is in the mid-to-late 50s, Donaldson made the point that it was time for new blood to come into the financial planning industry.
“In particular, younger blood with some resources,” he added.
Donaldson, a 25-year veteran of the finance industry, also refuted the often-cited ‘cowboy’ label that financial planners tend to attach to mortgage brokers.
RMBS extension “a vital life line”
original RMBS a life line for non-bank industry
AOFM extends it by another $8bnTreasurer Wayne Swan says it
will regulate competition Firstmac says we will exit GFC
with more than the Big FourSmartline calls it very important
for the whole industryit will allow smaller players to
stay in the game
Key points
James Austin Joe Sirianni
mortgage brokers more entrepreneurial than financial planners
diversification offers holistic client solution
ready-made contacts, databases
average age of financial planners, 50+
industry needs new bloodtransition often a natural
progressionmortgage brokers not cowboys
Key points
Correction: Australian Broker 6.19, page 12Australian Broker would like to apologise for unintentionally attributing the wrong company names to a number of brokers mentioned in the story “Licence benefits: professional industry free of rogues”. The brokers mentioned in the article and their correct company affiliations are: Evgenia Pessios: Wise Star Finance, Christine Tyler: Consolidated Credit Services, Tony Fimeri: Credit Logic, Alan Johnston: Cutcher Neale Finance Brokerage, Tim Gaspar: Hatch Financial Services
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The 96th annual MBA conference opened with senior executives harping on the need to “restore the faith” in the beleaguered sector.
John Courson, president and chief executive officer of the MBA, said the industry had to maintain a high standard. “We have the responsibility to do it [finance] the best because that’s what we do”.
In true American style, he compared the travails of the mortgage industry to Bugs Bunny, with its opponents being the pot-shot happy Elmer Fudd. Despite the pot shots, the industry would achieve its goal of becoming a better place, just like Bugs Bunny always got his carrot, he said.
But times were tough, he admitted. “Not since the 1930s have there been as many changes proposed to real estate financing.”
While outgoing MBA chairman David Kittle cited his 12 appearances testifying to US Congress as evidence of the hard work that was being put in to ensuring the industry not only improved, but did so without an excessive amount of new regulatory burden, incoming chairmen Robert Story urged attendees to get anyone they know to attend meetings and industry events.
He attempted to rally brokers by quoting Winston Churchill – “If you’re going through hell, keep going” – to best sum up what US mortgage bankers and brokers are experiencing.
The challenge: restoring confidence
In what should be a warning bell for Australian regulators hastily drafting new credit rules, mortgage brokers and bankers in the US are groaning under the weight of a raft of new and amended regulations put in place in the wake of the GFC.
The burden of regulation was raised during a panel discussion at the 96th annual Mortgage Bankers Association (MBA) convention and expo in San Diego.
“Just trying to read it all is keeping me up at night,” said Jack Konyk, senior vice president, public and government affairs, National City Mortgage, one of three industry experts on the panel.
Attendees to the panel session on the legislative and regulatory
outlook for mortgage banking focused on the difficulties inherent in understanding what is now required of them in the new regulatory environment.
“We’re getting crushed,” said attendee Marianne McCarty Collins, senior vice president, mortgage lending at Insight Bank, a community bank based in Columbus, Ohio. “What the regulators don’t understand is the bad guys are gone – and they’re now driving the good guys out of business because our margins are so squeezed.”
Areas of key concern raised included commission payments, underwriting rules, new appraisal standards and the cost of implementing these changes at the ground level – echoing similar
concerns raised by brokers and lenders in Australia. The Australian Broker regulation survey released in September revealed that the administrative burden of coping with new rules (41%) and the cost of complying (30%) were by far the biggest concerns ahead of implementation
US issues warning about over regulation
of federal licensing and new lending conduct requirements.
Reports from the San Diego MBA conference held in October were compiled by Simon Parker, editor of sister publication Canadian Mortgage Professional, who attended the event.
14
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According to Provident Capital’s national manager for lending, Steve Sampson, if ratings agencies didn’t rate RMBS deals competitively there would be no purchases and the market would remain non-competitive – which would play even more directly into the hands of the major banks.
Ratings agencies have warned the government that they will be reluctant to give an AAA credit rating to securitisation deals with a large proportion of low-doc loans.
The Australian Financial Review reported that the Federal Government’s recently extended $8bn RMBS scheme includes a change to the original program which capped the amount of low doc loans at 10% of the total securitisation package. This prevented many smaller lenders from tendering for government investment. The government hopes to change the cap to allow for a greater number of low-doc loans, but it only intends to fund deals with a AAA rating.
But ratings agencies have stated the risk involved with low-doc loans makes it difficult for them to award such a rating.
Sampson told AB the key to maintaining the integrity of RMBS was to disclose their make-up to potential investors.
“When this all blew up in the US it was because people thought they were buying a quality product until they took the wrapping off,” he said.
Brokers not upselling reverse mortgages: SEQUALClaims that brokers are upselling reverse mortgages to desperate seniors are false, according to SEQUAL, the industry body which governs reverse mortgage providers. The body recently conducted its seventh study of the sector and found that the average settlement size of loans taken out through the broker/planner channel was $57,400 – just slightly higher than the average loan size of $48,000 lent through the direct channel.
Kevin Conlon, chief executive SEQUAL, said “sometimes people accuse the broker/planner channel of trying to upsell, but the facts don’t bear that out.”
The Deloitte SEQUAL Reverse Mortgage Study also found that while the direct channel remains the most popular for new
settlements at 53%, the broker/planner channel has almost reached parity at 47%.
The reverse mortgage sector had slow growth over the first six months of 2009. The study found there were 2,350 new borrowers over the January to June 2009 period compared to 2,600 new reverse mortgages written in the second half of 2008.
As of the 30 June 2009, the sector consisted of 38,000 facilities, with $2.6bn in total outstanding funding.
About 1,500 brokers are accredited in Australia to write reverse mortgages. SEQUAL adopted a Code of Proper Process earlier this year that covers the sale of equity release products.
Ratings agencies resist govt’s low-doc plans
Steve Sampson
average broker-originated loan only slightly larger than direct channel
indicates brokers not trying to unnecessarily increase loan size
broker/planner channel almost at parity with direct channel
2,350 new borrowers added in first six months of 2009
Key points
16
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Real estate is ‘richly’ appealingBrokers looking to target a niche market might wish to consider Australia’s 129,000 high net worth individuals (HNWIs) – those with financial assets exceeding US$1m – who have an affinity for investing in real estate.
According to the 2009 Asia-Pacific Wealth Report, published
by Merrill Lynch Global Wealth Management and Capgemini, HNWIs are forecast to hold almost a third (31%) of their financial assets in real estate in 2010.
Furthermore, the majority of the investments will be made at home.
Australian HNWIs are forecast to invest 75% of their money in the Asia Pacific region in 2010 with the remainder invested in North America (13%) and Europe (9%).
The real estate figure includes commercial and residential real
estate, REITs and undeveloped property.
Chris Selby, managing director of Merrill Lynch Global Wealth Management Advisory Australia, said about a third of this real estate investment would be in residential real estate.
Selby said there had been a “flight to safety” in terms of where HNWIs were investing and a focus on home markets. At the same time he noted a “continued love affair with real estate” among Australia’s HNWIs.
This considerable appetite for property among HNWIs comes as industry reports all point to a return of property investors to the market.
And while the real estate figure is down on the 41% held by HNWIs in real estate in 2008, it is higher than the 28% reported
31% of HNWI assets to be in real estate
75% of investments to be made in Asia Pacific region
Australia has 129,000 HNWIscollectively they hold financial
assets worth US$380bn
Key points
High net worth individual: has investable assets of US$1m ($1.08m) •or more, excluding primary residence, collectibles, consumables and consumer durables.Ultra high net worth individual: has investable assets of US$30m •($32.5m) or more, excluding primary residence, collectibles, consumables and consumer durables.
Definitions
in 2007 report – before the GFC took hold.
The next biggest asset class for HNWIs in 2010 is expected to be equities (29%) followed by cash/deposits (22%) and fixed income securities (13%). Collectively, HNWIs hold financial assets worth US$380bn – 5% of the region’s wealth. Australia has the third highest number of HNWIs in the Asia Pacific region behind Japan (1.4 million HNWIs) and China (364,000 HNWIs).
The combined wealth of Asia’s HNWIs is expected to grow by 8.8% from 2008 to 2019 above the global average of 7.1%.
By 2013 the Asia-Pacific is forecast to overtake North America as the largest region by wealth measurement.
17www.brokernews.com.au
Julianne Bell is the managing director of Financial Writers Australia (www.financialwriters.com.au), a national writing service focused on delivering professional communication options to the Australian financial services industry since 2000
top five tips
… foR moRe effective business wRiting
tip 1: WhAT ARE you TALKiNG ABouT?This is one of those obvious points that is regularly overlooked – what are you writing?
Refrain from using the same text for completely different uses. it doesn’t work. you wouldn’t use the same language and voice to talk to one client face-to-face as you would when you speak to a roomful of clients, so don’t try to do it in your written communication.
For example, when you are writing a personalised marketing letter, your language, delivery and communication techniques need to be totally different to those you would use in a marketing brochure. The former addresses a single person; the latter is intended to be read by many.
tip 2: uSE ThE ‘BARSTooL TEST’The mortgage industry relies so much on the personal touch, so make sure it flows over into your written communication. When you write a letter to someone, even if you don’t know them that well, write as if you are on friendly terms. Just as none of us like to be ‘talked at’, nobody likes to be ‘written at’.
Try the ‘barstool test’: imagine your reader is sitting beside you sharing a coldie. Then write as if you were having a conversation. it really works, and it’s much more enjoyable for both parties.
tip 3: WRiTE FoR ThEm, NoT youDon’t forget the golden question in everything you do: “What’s in it for me?” That’s what your reader will be asking every time they read something from you. Keep that question ‘top of mind’ when you start writing about the features of a loan product or your service and refocus on the benefits. if your readers ask “so what?” when they’ve finished reading your ‘masterpiece’, you’ve wasted your time and money.
tip 4: A SEcoND SET oF EyESit is absolutely impossible to proofread your own writing. Always ask someone else to proof your work. The mind is very clever. it will tell your eyes what to see, so even though you think you are reading what you’ve written, your mind is actually remembering what you thought you wrote and your eyes can miss the most glaring errors.
if you don’t have someone close by to proof it for you, my secret is to print it off, walk away from your desk and read it aloud. you will hear your mistakes before you will see them. i recommend that you do this twice.
Then if you have the time, sleep on it. Read your writing the next day and polish it up – and then and proof it again as outlined above.
tip 5: ThE imPoRTANcE oF coRREcT PuNcTuATioNit might sounds boring, but correct punctuation is essential. A badly-punctuated piece of writing can convey the wrong message. This is not an English lesson, so i won’t spend time on commas, apostrophes and semi-colons. But if there is one punctuation mark that is abused – particularly in promotional writing – it’s the exclamation mark!
Please use it sparingly. Why not throw in some juicy adjectives or adverbs to make your message more exciting? overuse tends to hype things up which could cause your readers to receive the totally wrong message, giving them the impression that ‘it’s too good to be true’.
When your clients hear the word ‘mortgage’ you want them to always think of you – and refer you to their friends and family. Design your written communication to support those word-of-mouth referrals and you will soon see how the written word will help you write more business.
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moveRs & shakeRs
NAme: Tony macRaeFROm: RAmS TO: RAmSTiTle: Head of brokermacRae comes to the position with a strong background in retail financial services in general, and the mortgage industry in particular. he held senior roles with Pmi mortgage insurance, Virgin money and AXA/ipac and has also conducted his own consultancy business. his new responsibilities will be to lead the RAmS broker distribution channel and manage the relationship with its aggregator partners. his previous role was head of operations & iT at RAmS. The cEo of RAmS, melos Sulicich, said macRae was instrumental in “successfully leading significant changes across the operations business – in particular the move to paperless loan application processing and the introduction of electronic lodgement processing.”
NAme: martin BarterCuRReNT ROle: Genworth Financial (Australia)PROmOTiON: Genworth Financial (uS)TiTle: Officer of parent companyBarter, who heads the Australian subsidiary of mortgage insurer Genworth Financial, has been named an officer of the uS parent company. Barter has led Genworth’s Australian business since 2007. Barter joined Genworth from citibank, where he held leadership positions in the mortgage, commercial lending, credit and risk, and commercial mortgage segments. Before that, he held a number of leadership positions within banking in the uK as part of a career in banking and financial services that exceeds 30 years.
NAme: Selina StefanowiczFROm: Pioneer mortgage ServicesTO: AFGTiTle: member relationship manager (Victoria)Stefanowicz joins the AFG Victorian Sales Team where she will focus on managing the operational requirements and improving the support offered to members. She brings with her more than 10 years of experience in the financial services sector, in particular the wholesale mortgage sector where she previously occupied the roles of aggregator manager and BDm for Pioneer mortgage Services.
The drying up of specialist lending is hampering brokers seeking to assist non-conforming borrowers, according to Peter McGuinness, CEO of Bluestone.
Speaking to Australian Broker after Bluestone reported a net profit tax of $6.1m for the last financial year ending 30 June – a 56% increase over 2008 – he said there is no doubt that the brokers it deals with “are missing a vital tool in their business in assisting traditional non-conforming borrowers”.
Bluestone, along with the likes of Pepper Home Loans and GE Money, was one of a number of prominent non-conforming specialist lenders that either stopped lending or scaled back originations when securitisation markets froze up last year.
“The vast majority of our customers are self employed business entrepreneurs looking to grow their business or branch on their own. I think it’s fair to say that many brokers who built strong business plans based on servicing these types of customers are somewhat hindered through lack of product supply,” McGuinness said.
He reported though that Bluestone consistently hears that brokers are “very happy with the way existing loans have been managed and that customers are also happy, so hopefully it’s a
Brokers missing “vital non-conforming tool”
temporary pause while the financial markets realign.”
On the issue of market activity, McGuinness said there were “definite signs that the domestic capital markets are thawing”.
But he said it would probably be 12 to 18 months before funding costs came down enough for Bluestone to make a return to lending. McGuinness commented that while earnings from the company's mortgage portfolio remained consistent with expectations, the servicing and capital management operations provided growth.
“We were particularly pleased to deliver an increasing contribution to earnings from these younger businesses, both of which represent exciting opportunities for future growth,” he said.
Sou
rce: Peter M
cGu
inn
ess
to continue to diversify revenue so that Bluestone Capital •Management and Third Party Servicing increase their contribution to group revenueto protect the performance of each of its mortgage portfolios (and •therefore its balance sheet)to support the roll out of its European business through the provision •of technology, systems and raising external capital to fund the expansion of the European platform.
Bluestone key priorities for next financial year:
Peter McGuinness
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The economic storm be may technically over, but the rebuilding efforts that have begun in earnest will be long-term and challenging, the US-based Mortgage Bankers Association (MBA) chief economist Jay Brinkman told reporters at its annual conference in San Diego.
“This recession is like a hurricane,” he said. “The work of rebuilding is a lot harder than getting through the storm itself.”
Clouding the picture is how interest rates will respond once the Federal Reserve stops purchasing mortgage-backed securities (MBS), which is due to happen in March 2010.
“The elimination of these purchases will put upward pressure on all long-term rates, as well as the spread between mortgage rates and Treasuries [government bonds].”
The Federal Reserve purchased 90% of the available MBS in August.
Brinkman predicted the unemployment rate will peak at 10.2% in the second quarter of 2010, up from 9.8% currently. Real GDP growth is forecast to hit 3.0% in the fourth quarter of 2009, declining to 2.2% for each of the following two quarters. The US economy will start an incremental rise through the latter part of 2010
US brokers warned of slow recoveryand into 2011, when it will top 4.5% in the final quarter of the year, he said.
He said key areas in the US economy that must be rebuilt include the secondary finance market, credit modelling methodology and, generally, faith in the regulatory environment. Consumer confidence, a key driver of the US economy, must also be restored. But with around US$14trn in consumer wealth lost as a result of the collapse of the finance markets and only $4trn put back this year, any rebound in spending was unlikely to happen anytime soon, Brinkman said.
Many other key economic
indicators all pointed to a slow economic recovery in the US. National average home sales should bottom out in 2010, although any recovery was expected to be patchy across the country. New home sales will decline by 18% in 2009 on a year-on-year basis, and will rise by around 21% in 2010. But the recovery will be off one of the lowest bases since the 1940s.
Fixed mortgage rates, currently at around 5%, are forecast to rise to 5.6% by the end of next year. This in turn will stifle refinancing activity in the same year, Brinkman said.
The shape ofrecovery: W,V or U?
In a question that might be best answered by a character on Sesame Street, Mortgage Banker Association (MBA) chief economist Jay Brinkman attempted to articulate what the current recession might end up looking like.
“It comes down to what you think about consumers,” he said at the annual MBA convention and expo in San Diego. He added that he didn’t see any sort of rebound in consumer activity in the near future at least. “They’re just not in the mood to spend.”
The ‘W’ argument has the economy dipping back (again) into recession next year, meaning the recent return of GDP growth is just a ‘false dawn’.
The ‘U’ and ‘V’ arguments are similar to each other, in
that once growth returns, it will continue – just at varying speeds. As implied by its shape, the V-type recession has the sharpest upswing in GDP growth.
Brinkman said while the recession likely ended in July this year, recovery would be slow. Using GDP growth statistics from previous US recessions, he said economic recoveries have taken up to nine quarters (where GDP growth returned to pre-recession levels). This was the case following the 2001 recession, which in turn was three quarters longer than it took following the 1990/91 recession.
Brinkman said that because the housing market was on its knees before the economy deteriorated, this recession
could be worse than previous experiences. In previous recessions the housing market sunk as a result of the weaker economy. Additionally, the Federal Reserve is nearly out of ways to bolster economic growth, having already dropped interest rates to 0.25%. Florida’s mass of housing foreclosures was another unknown, he said, with overall foreclosures expected to peak in late 2010.
On a brighter note, Brinkman said with just US$161bn of the US$780bn federal government stimulus package spent so far, additional economic growth should occur in early 2010 when more of this money is expected to be spent.
He also didn’t subscribe to the popular view there was a mass of unemployed people not accounted for in official statistics. He forecasted that unemployment would peak at 10.2% by the middle of next year.
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NAB’s purchase of Challenger Mortgage Management will allow Elders Home Loans to offer a better branded product to borrowers, according to its managing director, Ty Wiggins.
“We are excited about the NAB deal,” Wiggins told Australian Broker.
Elders offers a branded product to borrowers packaged by mortgage manager Australian First Mortgage (AFM), which in turn receives its wholesale funding from Challenger.
Wiggins was hopeful that the acquisition of Challenger would allow NAB to offer a less restrictive product. “The product has proved very popular, but things like post code restrictions have been an issue in some cases,” he said.
Similar expectation were expressed by Club Financial Services’s director of sales and marketing, Simon Norris, when the NAB/Challenger deal was announced
Norris said at the time he was hopeful of better pricing and product availability. “A higher LVR product funded off the balance sheet would be on the wish list,” he said
A more expansive NAB- funded product will be timely for Elders. It is embarking on a franchise expansion drive to double its 41 nationwide franchisee network and loan book of $850m.
“By Christmas we will have an additional 11 franchises up and running, and we hope to
add another 15 by the end of June next year,” Wiggins said.
“In the next 12 months we will see out numbers double nationally as we actively recruit both franchisees and loan writers to work within the franchisees,” he added.
Since the drop in residential lending brought on by the GFC, Elders has diversified its business model to reduce its reliance on residential lending commissions.
“The benefit of not having all our eggs in the real estate basket was reinforced over the last 12 months. We saw the pressures on the real estate industry reduce our leads from that area. Fortunately, we also saw the leads coming from the 130 Elders insurance agents almost double which more than covered the shortfall on the real estate side,” Wiggins said.
The next move will be into equipment leasing, particularly ‘big ticket items’ where it will look to meet things like the machinery needs of farmers.
Wiggins said the point of difference for an Elders Home Loan franchisee was direct ties to real estate, insurance, banking, financial planning and retail (merchandise) under the Elders brand.
“The greater Elders business feeds our franchise with leads from a variety of client-loyal areas – quite unlike any of the other groups,” he said.
An Elders Home Loans franchise costs $10,000, and franchisees aggregate through PLAN Australia.
NAB deal to improve Elders product offering
NAB/Challenger deal flows through to Elders franchise
broader product offering expected under NAB
Elders looking to double franchise network
eleven franchisees signed up by Christmas
diversification into “big ticket items” leasing planned
Key points
Ty Wiggins
Brokers have once again been at the forefront of citibank’s thoughts. The bank has moved its Adelaide mortgage office to make it more accessible to brokers. The office had been in the cBD, but has since moved to Norwood (2km northeast of the city) to make it more accessible to brokers. Due to a lack of parking, brokers had found the city office so inconvenient that they were no longer willing to come into town. Norwood, the new location, is a small business hub. it has a car park outside, and is an area of town where brokers predominantly work. The new office is bigger and has better facilities, including meeting rooms and conference rooms “designed to act as a hub away from home for brokers,” a spokesperson for citibank explained. The bank said the response from brokers had been “overwhelming” with a 90% increase in brokers coming to the office.
mortgage broker Samer hraiki has been charged with new offences related to obtaining over $1m by deception, following his appearance in Sydney’s central Local court on 13 october. hraiki was last charged in July for allegedly defrauding up to $5m from clients and threatening those who wanted to take the matter to police.
The new charges were for offences allegedly committed between September 2006 and April 2009, and involved obtaining tens of thousands of dollars from various clients as well as allegedly fraudulently securing two mortgages to the value of $1.02m.
hraiki allegedly used false documents to entice his victims into thinking they were engaging in a legitimate investment, AAP reported today. A spokesperson for the mFAA told AB that hraiki’s membership of the organisation “ceased some years ago”. Bail was refused and the case adjourned until 8 December.
Twenty years after acquiring real estate and financial services group LJ hooker, Suncorp has sold the business back to the hooker family. The sale of the business includes its approximately 140 loan writers and its 50-franchise-strong mortgage broking arm LJ hooker Financial services. in a statement, LJ hooker said Financial Services division would remain a core part of the business. The broking arm has been on a recruitment drive to add 100 brokers to its team since mid-last year. in may it announced that 22 brokers had joined up since February. heading the new ownership team will be Janusz hooker, grandson of the company’s founder, Sir Leslie hooker.
The median value of an Australian house has breached the $400,000 mark for the first time, property information specialists Residex has revealed. Residex data showed that the median value of a house in Australia reached $408,500 in August, an increase of 2.51% on the figure recorded at the same time last year. unit values followed a similar trend, with the nationwide median value increasing by 4.34% to $364,000 in the 12 months from August 2008. unit values in the Northern Territory recorded a massive 19.4% increase over the same period, while Darwin registered a similarly impressive 15.05%. Perth and Western Australia country struggled, recording house value falls of 6.21% and 8.33% respectively. unit prices in Perth dropped by 2.30% and 3.79% in WA country. Residex cEo John Edwards said the data suggested confidence was returning to the Australian property market.
citibank office move benefits brokers
broker charged with further offences, refused bail
suncorp returns LJ hooker to family fold
australian house values breach $400,000
industRy news in bRief
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23www.brokernews.com.au
The Australian market is ready to shed the government’s guarantee of bank deposits and wholesale funding – but the rest of the world is not, according to Citibank’s head
of mortgages Steven Ramage. His comments come after the treasury’s announcement that the guarantees are to remain in place until other countries start withdrawing theirs.
Speaking on ABC radio, Treasury Financial Services Minister Chris Bowen said in response to suggestions that the government might withdraw the guarantees now – given the Australian economy’s strong recent performance – that they still remained “very important”.
“The wholesale guarantee is still very important in assisting particularly smaller institutions in raising funds offshore.
“The retail guarantee is important in terms of confidence. There are many countries in the world with guarantees in place at the moment, and we would withdraw them in consultation with our
colleagues in the G20 and it should be done in an internationally coordinated fashion,” he said.
Ramage told AB he felt dropping the guarantee on a worldwide basis could put the recovering global economy at risk – in spite of how well the Australian economy was travelling.
However, Steve Sampson, national manager for lending at Provident Capital, said that it was indeed time for (especially the major) banks to be “weened off” the government guarantee – to allow the markets to return to normality.
Calling it “ridiculous” that the Rudd government was waiting for other countries to withdraw their guarantees before it did, he said it was time for the treasury to act.
Sampson said that the guarantee should be removed now because the Australian economy
Guarantee withdrawal: World must recover first
was pulling out of the global recession faster than other countries.
The guarantee has been praised for preventing a major banking collapse, but it has been criticised for making it impossible for second tier and smaller lenders to compete with the major banks due to having to pay more than double for government guaranteed funding.
Ramage defended this position – in spite of Citibank falling somewhat foul of it – by saying that pricing for risk was the fundamental principle of risk management.
government to keep deposit guarantee in place
Australian recovery ahead of the rest of the world
withdrawing it globally now could jeopardise world recovery: Ramage
time for the major banks to be weened off guarantee: Sampson
different fee structure continues to draw criticism
Key points
Steven Ramage
24 www.brokernews.com.au
Market outlook
“Limited acceleration going forward”
been in-step and steep, Australian home values have bucked the trend and continued on an upward trend over the same period (se article on page 6).
The point North was trying to reinforce was that Australian house prices may well have reached their peak. But any concerns of a US or UK-style house price collapse may be unwarranted. According to BIS Shrapnel’s Building Industry Prospects report (Sept 2009) the phasing out of the FHB boost scheme is not expected to undermine a recovery in the resurgent upgraders and investor markets. So an “outright decline in property prices” is not on the cards.
Growth dependent on constructionOverall, the outlook for a mortgage lending is steady.
JP Morgan/Fujitsu projects volume growth – due to government incentives being wound back – to result in a more subdued final quarter of 2009 and overall growth for the year of 7%. For the next two years (2010 and 2011), the forecast is for growth of between 6% and 7%.
This damp forecast – the report said – will put negative pressure on housing recovery. And with house prices not expected to appreciate significantly, construction activity has been earmarked as a key driver of housing credit growth.
Despite overall construction activity expected to be “particularly weak”, BIS Shrapnel is forecasting a healthy 20% growth in total dwelling commencements for 2009/2010. This is pleasing when compared to the estimated drop of 18% in 2008/2009 and paltry 4% growth in the previous year.
Total building commencements are predicted to be strongest in NSW (13%), Victoria (12%), WA (12%) and Tasmania (15%) and weakest in Queensland (4%), South Australia (-2%) and the ACT (-38%). These are indicators of which markets may perform better over the coming 12 to 24 months.
Key recovery factorsAccording to the BIS Shrapnel report, the key determining factor in the scale of the rebound in housing in 2010 will be interest rates, as well as the “trends in economy-wide business investment”.
When it comes to construction activity, the key thing to watch for will be the flow of credit. BIS Shrapnel comments that “tight restrictions on funding will continue to make it harder for projects and investments to proceed”.
So, just how long can Australia’s property market run counter-cyclically to its first world counterparts – and how will this affect building activity?
No one, as yet, has a definite answer.
When the RBA raised the cash rate by 0.25% on 6 October – the first time it had lifted rates since March 2008 – the outcry from naysayers was that the central bank had acted too soon.
The argument put forward by those who said Glenn Stevens and his monetary policy team got it wrong was that the increase came at a time when the economic recovery had only just begun – and any tightening could hamper a lasting comeback.
“Healthy housing market in jeopardy by lifting official rates,” cried the Loan Market in its press release while the HIA chief economist Harley Dale warned of the “big risk” that increasing rates would “blunt consumer and business confidence that is crucial to the prospects for an economic recovery”.
Tough times aheadSo where exactly are we headed? In the press release accompanying the publication of Volume Ten of the J.P. Morgan/Fujitsu Consulting Australian Mortgage Industry Report, banking analyst Scott Manning stated, in no uncertain terms, that Australia is not yet out of the woods. “The outlook for Australian housing volume growth,” he said, “remains extremely challenging.”
He added: “At the same time, despite the positive impact from the First Home Owner Grant, volume growth remains below the long run trend – and we see limited acceleration potential going forward.”
Driving this “limited acceleration potential” is the threat that Australia’s long run of ‘meaningful’ house price appreciation may be exhausted.
In his presentation to mark the launch of the report, Fujitsu Consulting director Martin North made mention of a recent Economist interactive graph which compared house price growth in 20 major economies since 1996.
What the graph shows most clearly is that while US and UK house price decline over the last 12 months has
The economy is on the mend, the global situation is improving, confidence is up… or is it? The release of new forecasts provide some insight into where property and lending markets are heading over the next few years, writes Larry Schlesinger
How long can
Australia’s property market run counter-cyclically to the first world?
Total dwelling commencements
07/08 08/09 (estimate)
09/10 (forecast)
NSW 31,452 23,100 30,100
Victoria 41,778 41,400 47,600
Queensland 44,810 28,600 34,700
SA 11,828 12,200 13,300
WA 22,449 18,750 22,950
Source: BIS Shrapnel Building Industry Prospects 2009
26 www.brokernews.com.au
Feature
What do borrowers really want?Research carried out by Retail Finance intelligence (RFi) examined the buying habits of 2,000 borrowers when obtaining a mortgage in order to answer two vital questions: what do customers value in a service provider, and what are the characteristics of potential customers? Australian Broker highlights the key findings
loan. This is higher than the conversion rate via branches (80%).
And while it’s concerning that more than one in ten (13%) of borrowers who initially enquire about a mortgage via a broker will then obtain it from a different channel, the good news is that there are opportunities to pick up business from other channels.
According to RFI research, one in five respondents who used the internet to make home loan enquiries then used a broker to obtain their home loan; while only 22% actually went ahead and applied over the internet and 36% through a branch.
These results indicate there is a significant opportunity to capture these customers through high internet visibility and customer targeting.
Research first, broker secondThe RFI research found that among the group of borrowers most likely to use a broker (those aged between 25 and 44 years of age) there is a high proportion who do their own research before they start looking for a property or see a broker: 28% of 25–34 year olds and 29% of 35–44 year olds. This is a higher percentage than in the other age groups.
In other words, one out of every four ‘young’ borrowers coming into a broker’s office is likely to be fairly knowledge about lenders and products.
On the other hand, older borrowers (those in the 55–64 year age group) are most likely to visit a broker initially, with 15% not conducting any other research in regards to their mortgage.
All this suggests that brokers need to adapt their sales approach depending on the age of the borrower. Younger borrowers are more likely
According to RFI, brokers are facing growing competition from the internet channel.
While only 6% of the respondents who took part in the June 2009 survey sourced their mortgage online, this channel is
expected to grow and cut into a traditional broker’s business as the variety and complexity of available loans decreases.
Therefore, an understanding of what customer’s value in their service provider and what makes customers tick is vital information if brokers wish to remain an attractive channel in such a competitive market place.
Time poor and seeking specialist knowledgeAccording to RFI research, the broker proposition is most appealing to borrowers aged between 25 and 44 – particularly those aged between 25 and 34, among whom 47% turn to a broker when making loan enquires.
The vast majority of people in this age category would be taking out their first home loan. They would turn to a broker for specialised help and assistance in an area that they may not be familiar or comfortable with.
Younger age group borrowers, the RFI report says, are also likely to be associated with heavy workloads and young families, and see using a broker to conduct enquiries as a quick and easy way to carry out research and find a loan.
The good news is that, regardless of age, once someone makes an enquiry through a broker, 87% of them will use the same channel to apply for their
1. A simplified way of seeing a range of loans from a range of lenders.
2. To ease the stress of the application process.3. To save time.4. The convenience of being able to see a broker after work
or on the weekend.5. To receive independent advice regarding
mortgage options.6. To get a better deal.
Top six reasons to choose a broker over a direct channel
Source: RFI
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to expect specialist knowledge at the initial consultation, while older borrowers may have a preference for receiving basic information about products and lenders.
Good reputation is vitalSo, if a borrower decides to use a broker to get a mortgage, how do they come to a decision about which broker to use?
According to RFI research, 56% of respondents found their broker through a recommendation from a friend or family member, indicating that providing a satisfying customer experience should be top of every broker’s list of priorities.
Advertisement is also important, with nearly a quarter of customers (22%) saying they found their broker this way.
Internet searches accounted for 12% of respondents, while 8% had been contacted proactively by their broker, with RFI highlighting this statistic as significant, and “indicating an opportunity for brokers willing to make cold-calls”.
Interestingly, sponsoring a local event or team appears to be of little value in bringing in business, attracting just 1% of the respondents who had used a mortgage broker.
Advertise where property investors lookBrokers looking to attract the attention of property investors seeking a loan should consider advertising on personal finance websites popular with these borrowers.
While investors have a preference for financial institutions when doing research (65% stated that they would conduct research using a financial institution’s website, 31% would call a financial institutions and 30% would visit the financial branches) a high proportion conducted research using popular websites and magazines like Your Mortgage.
Strategically-placed advertisements about a broker’s service offering in these publications would have a high chance of attracting the attention of those property investors that do their research via these platforms.
Turn on and turn offsJust as important as knowing what draws a borrower to a broker is knowing what turns them away from the third party channel.
RFI asked respondents who they would contact to refinance their loans in a variety of different circumstances, with the available choices being their existing lender, their existing broker, another lender, another broker, or ‘unsure’.
For borrowers who took their loan out through a broker, the main distinction was not between contacting their broker and another broker, but rather between
contacting their lender and contacting their broker.The results indicated that respondents show a certain
level of loyalty towards their broker and were more likely to contact their broker (as opposed to their lender) for issues regarding changes in circumstances, such as starting a family or difficulties with repayments and needing additional finance.
Receiving poor customer service from their existing provider was also another strong reason for contacting their broker.
However, 47% of broker customers said they were unsure who they would contact if they were unhappy with their existing loan with only 11% saying they would contact their existing broker. In comparison, 62% of non-broker customers would contact their existing lender in this situation. These results indicate that brokers who provide some reassurance about what they should if they are unhappy with their mortgage might generate greater repeat business and more loyal customers and would be less at risk of losing their client to a direct channel.
Conclusions A key concern emerging from the research was the potential for brokers to lose out to direct channels for business from those seeking investment loans. This is due to these customers being more experienced and less likely to need the expert assistance of brokers.
“As a result, it is important for brokers to be able to distinguish and provide services which are valued by customers,” RFI said in its conclusion.
Overall, RFI identified the two main groups of customers who use brokers as those who want a ‘quick and easy’ method of carrying out research into a variety of lenders and loans, and those who want the broker to ‘take care of the process’ almost entirely on their behalf.
In general, borrowers aged between 25 and 44 are more likely take out their loan or conduct research through a broker.
The survey results showed that more than one half of broker customers found their broker through a recommendation. This means that providing a positive experience is important for individual brokers, and the channel as a whole, if it wishes to remain a popular alternative to direct channels.
The success of the channel, RFI found, rests on providing the services which are valued by customers, as well as appropriately managing expectations.
As for opportunities, brokers should look to plug the leakage of 13% of all borrowers that made enquiries via a broker but actually apply via an alternate channel. Brokers should also look to capitalise on the one fifth of customers who conduct research via the internet but take out their loans using a broker.
This second part, RFI found, can be achieved by “appropriate internet visibility”.
One in five respondents who used
the internet to make home loan enquiries then used a broker to obtain their home loan
Turnaround times: the faster the better
Acceptable time period
*Note: option specific to just one of two questions shown
look for another loan
45%
Within an hour*
Within 24 hours
Within 48 hours
Within five days
Within one week
Within two weeks
i would not withdraw
my application until i had a response*
40%
35%
30%
25%
20%
15%
10%
5%10%
0%
32%
39%
16%
5%3%4%
29%27%
15%
9%9%
Source: RFI
Fi websites
Call FlsFl branches
70%60%50%40%30%20%10%0%
Friends/FamilyRealestate.com.au
money magazineDomain.com.au
OtherHome.com.au
Smart Investor magazine
Cannex star ratings
Your Mortgage magazine
lender’s bidding
RateCity.com.au
infochoice website
Online marketing30 www.brokernews.com.au
Web guru Sam Benjamin answers questions from readers on how to get the most out of their online presence. If you have any questions on online marketing, please e-mail them to [email protected]
peRmission to coRRespond?web guru sam benjamin answers the following questions:
Q I am ready to start marketing to my clients and leads, but I don’t have many e-mail addresses on my database list. How do I go about increasing my e-mail contact list for e-marketing purposes and how do SPAM laws affect my marketing?
sam: once you have set up your e-newsletter and are ready to start your ongoing marketing e-mail campaigns, you may be tempted to simply add a list of contacts to your mailing list or to go through any business cards you may have lying around from a business networking function and add these contacts to your e-mail lists.
The problem with this strategy is that we have strict spamming laws in Australia that would make this a ‘no-no’! The Australian communications and media Authority (AcmA) are responsible for enforcing the Spam Act 2003 which became operative on 10 April 2004.
under the Spam Act 2003 it is illegal to send, or cause to be sent, unsolicited commercial electronic messages including e-mail, instant messaging, SmS and mmS (text and image-based mobile phone messaging) of a commercial nature. it does not cover faxes, internet pop-ups or voice telemarketing.
Do you have permission?Spam is a generic term used to describe electronic ‘junk mail’ – unwanted messages sent to a person’s e-mail account or mobile phone. To avoid spamming you need to engage in ‘permission-based marketing’.
To ensure any message you send out does not classify as spam, it must be sent with consent by the recipient, it must clearly identify the person or organisation who authorised the sending of the message (ie, you or your organisation). Finally it must contain a functioning facility to enable the recipient to unsubscribe from the message and the e-mailing list, so that they receive no further messages from the source.
in order to build your e-mailing list in accordance with Spam Laws, you need to have places on your website where prospects can ‘opt-in’ to your e-mailing list. This can be via a properly worded and constructed e-newsletter opt-in form, ‘contact us’ form, E-course opt-in and so on. Another way to build you list is to add a “join my e-mail list” link on the bottom of your e-mail signature, offer incentives for signing up (eg, free E-books etc).
Off-line contactsit is also a good idea to collect contacts off-line as well. Some people choose to leave a bowl on their reception desk with a sign on it asking people to leave their business cards, or to fill in a form in order to receive the latest e-newsletter from your organisation.
if you are sending your first e-mail to an existing list of your actual customers it may be a good idea to add a permission message in the unsubscribe link. For instance tell them that they are receiving the e-mail because they are a customer, while giving them the opportunity to unsubscribe from further e-mails.
if you want to add a list of contacts that have not actually consented to receive your marketing you need to carefully construct a personal message to them initially. For example, you may send them a message asking them for permission to add their name to your e-newsletter list advising them of the benefits to them in terms of the information you will be sending them.
in order to keep subscribers on your lists be sure to make the newsletters or information you send them useful, meaningful and compelling. Keep the content relevant to them and they will keep coming back for more.
Spam attackLastly, if we have legislation to curb spam mail, why do i keep receiving it in my inbox you ask?! Well the internet is just one of those things that is very difficult to police, and spammers are a pesky bunch that play a numbers game. if they send out 10,000 e-mails and get a handful of responses they are winning, because sending e-mails is such a low-cost marketing method. unfortunately, once they get a response it spurs them on to do it again and again.
techie coRneR
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Congratulations mick md on winning the $10,000 media package
Commented by: mick md The ACCC needs to understand if the NAB completes this deal to buy the Challenger suite of businesses, they [NAB] have no influence over where the 5700 brokers write loan business. If the NAB tried to alter the contracts or influence broker recommendations we would all take our business, clients and income streams and join or form another aggregator. The NAB is buying a distribution channel not the brokers, nor the clients. The NAB aren’t that stupid! The NAB advantage as the smallest and arguably worst service provider in the broker market (although they have serious competion for last place from the other majors) is to deliver cheap AA/A-1+ funds through the Challenger mortgage management platform and make money outside the bank. Smart move, and great for competition.
The ACCC should ensure the Challenger entity remains managed outside the bank like MLC and lets get on with business. The ACCC could do the industry a great service by investigating the many other anti-competitive practices in the sector like predatory pricing, channel conflicts in pricing and service, application of volume quotas and requirements to cross sell additional bank products.
The ACCC should realise that we, the brokers, are the only true competitive force in the mortgage marketplace. We help families make the best decision by assisting them to compare everyone’s offering right there on the kitchen table. The NAB purchase of the Challenger will provide new funds to the crippled mortgage manager sector and contribute enormously to provide increased competition to all the majors who have to this point been very happy to see the death of so many of their competitors.
visit www.brokernews.com.au The place where the industry comes to meet
ACCC may block NAB/Challenger deal Key parts of NAB's proposed $385m buyout of Challenger's mortgage management businesses may be blocked by the competition regulator on market dominance concerns.
BusinessDaily believes the Australian Competition and Consumer Commission (ACCC) may seek undertakings from NAB to divest one of the businesses to bring its share of the broker market to below 40%, heraldsun.com.au reported....
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What was the last book you read?
Influencer: The Power to Change anything by Kerry Patterson et al.
if you did not live in Australia, where would you like to live?my birth place,
Scotland. it’s cold but beautiful, and you can hop to the south of Europe for frequent holidays to catch up on sun.
if you could sit down to lunch with anyone you like, who would it be?Barack obama.
What was the first job you ever had?Working as a weekend cashier for a national retailer in a South African country town. it was there that i realised that the benefit of speed, focus and being friendly to customers!
What do you do to unwind? i love to cycle on weekends and i always enjoy a good movie. And nothing beats a good cuppa and the paper on a Saturday morning.
What’s the most extravagant gift you ever bought yourself?Travelling to a number of great destinations!
What CD is currently playing in your car stereo? Brian mcFadden
if you could give anyone starting out in business one piece of advice, what would it be? it’s not only your aptitude but – more importantly – your attitude that will determine how well you do in life; both personally and at work. Back yourself, but be sure to use every opportunity to learn.
if i was not working in the mortgage industry, i would like to be?
Exploring historic sights around the world. Where was the last place you went on holiday? mt hotham for skiing.
What is the one thing most people would not know about you?i lived in Salt Lake city for a couple of years.
off the cuff
brendan o’donnellchoice aggregation services ceo
“Failing to harness the power of the internet may place severe constraints on future business growth, as homebuyers now entering the market are considerably more web savvy than previous generations,” Wyatt said.
“Younger first homebuyers see the internet as an effective and efficient shopping mall for financial products and sources of advice,” she added.
Wyatt said calculators of varying types were particularly useful tools. Utilisation of those, she said, provided RAMS with “insights into trends on what is foremost in consumers’ minds”.
Besides appealing to first time buyers, strong online presence may also be a way of attracting time-poor property investors. The RFI survey found that both branches and brokers are losing ground to the internet when it comes to applications for investment property loans.
cont. from cover>>
Consumer research by RFI found that borrowers are more loyal to brokers than to any other channel.
Eighty seven percent of respondents who made broker enquiries when starting out eventually applied for their loan through a broker. In comparison, only 80% of respondents who enquired using a branch ended up taking out their loan via a branch.
While there would be some concern at the 13% “leakage”, RFI research director Alan Shields, said the findings highlighted how strong the relationship is between brokers and their clients.
Furthermore, he said it showed that the bank “does not 100% own the relationship” with the borrower.
“Brokers can take a lot of heart from that,” he said.
A strong sense of loyalty
33www.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] Insider
Next on the menu: lemons
shape nationwide “and likely to stay buoyant”.
And instead of warning of the great peril facing the economy, chairman Sam White said he believed borrowers “can afford a couple of interest rate rises”.
Given the sequence of the press releases, Insider wondered if some kind of power play was going on behind the scenes…and then came the announcement a week later, Ray White had acquired Loan Market.
Flattering to deceive
They say imitation is the sincerest form of flattery, and Insider thinks that
must certainly be the case at banking journal Mortgage Business.
Following publication of Australian Broker’s front page story in its August 6.15 issue, which ran with the headline “Still a place for part-timers” MB managed the exact headline word for word on page 14 of issue 3.8, which, surprise, covered the very same topic and appeared a few weeks later.
The flattery continued with its most recent issue paying homage to AB’s “Top Ten Tips” column by…you guessed it…running its own Top Ten column.
Next on the agenda is MB’s euphemistically titled ‘Elite Business Writers’ cover story, which surprise, surprise appears just as MPA’s flagship Top 100 makes an appearance.
Flattery maybe…or perhaps they’re just bereft of any good ideas of their own.
According to the last independent readership survey, AB is ranked first by brokers (44%), MPA second (30%), and Mortgage and Finance Brief third (11%). MB comes a distant fourth with just 5%.
The publication of the JP Morgan/Fujitsu Australian Mortgage Report every six months is guaranteed
to cause a stir, but the undoubted highlight (for Insider at least) is the type of food the authors choose for the front cover and how it ties in to the theme of the report.
In past years we’ve had a half eaten apple core, blocks of cheese and a pie.
In the October 2009 (volume 10) issue the authors went with a pair of ripe juicy lemons along with the title: “Can more juice be squeezed from the cost lemon?”
Insider thinks it’s appropriate they’ve chosen a lemon as opposed to a more sweet-tasting orange, which lets face it, would
be a bit too optimistic, given the contents of the report.
A lemon on the other hand is perfect, particularly when it comes to that nasty little phrase ‘cost of funds’.
And why is that? Because just like lemons can deliver an unexpected stinging sensation to the eyes when squeezed, talk of ‘cost of funds’ has the potential to deliver just as much pain for unsuspecting borrowers.
For those feeling a bit peckish, a list of the most recent offerings on the JP Morgan/Fujitsu smorgasbord:
Oct 09: Lemons… Can more juice be squeezed from the cost lemon?
April 09: Cheese platter… Will Australians households end up with too much on their plate?
Nov 2008: Apple core…The global credit crunch – Episode II – The Empire Bites Back
March 2008: Apple pie…The global credit Crunch – a chance to re-cut the “Mortgage Profitability Pie”
Sept 2007: Pickles: Mortgage Stress – Are Australian households in a pickle?
Rate rise will hurt…no it won’t!
Still on the topic of rate rises, Insider was as per usual bombarded with
media releases when the RBA did the seemingly unthinkable and lifted rates on 6 October.
One of the first salvos to be fired came from The Loan Market Group, which ran with the headline “Rate rise could hurt housing market” and warned that the 25bps increase could “put a healthy housing market in jeopardy” by hurting consumer and business confidence and could possibly have an adverse impact on the national housing market.
Only a day later, another press release enters the Insider inbox, this time from Loan Market’s real estate partner Ray White.
But rather than take a stab at the RBA, Ray White thought Glenn Stevens got it just about right.
Running with the headline: “Ray White says rate rise shouldn’t hurt recovery” it said the housing market was in good
34
Caught on camerawww.brokernews.com.au
PHOTO 1: Daniel Zadnik (McLean Delmo), Bryce Deledio (AFG BDM) & Jarrod Hodges (McLean Delmo)
PHOTO 2: Walter Coslovich (AFG BDM) & Brian Kelly (WHK Horwath)
PHOTO 3: Des Horsington (AFG BDM) & Paul Mazzella – The Broker House
PHOTO 4: Bryce Deledio (AFG BDM) & Mike Pace & Team – Pace Financial Services
PHOTO 5: Evelyn Crawford – Crawford Mortgage Services – Hall of Fame Inductee
AFG held its member Awards night on 1st October at The Windsor Hotel, melbourne. “The night was a resounding success with 180 lenders and brokers joining us,” a spokesperson said. Besides the category winners, 10 long-term AFG brokers were inducted into its inaugural Hall of Fame. The audience was also captivated by a special guest, Tom “Perceptionist” Berger, who performed a mini X-Files “mind-reading” experience!
PHOTO 6: Gary & Di Smith - Aussiewide Financial Services
PHOTO 7: Mike Pace - Pace Financial Services – Hall of Fame Inductee
PHOTO 8: Pat Garth – PBN Management - Hall of Fame Inductee
PHOTO 9: Peter Mulligan – Heath Five – Hall of Fame Inductee
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Serviceswww.brokernews.com.au
aggRegatoR / whoLesaLe bRokeRAmB Origination1300 55 1118www.ambo.com.aupage 23
Choice Aggregation1300 135 389www.choiceaggregationservices.com.aupage 25
Firstfolio One1300 722 752www.firstfolio1.com.aupages 14 PlAN Australia1300 78 78 [email protected] pages 5 & 29
banksiNG Bank1300 656 226introducer.ingdirect.com.aupage 9
St. George Bank1300 137 532page 3
Suncorp Bank13 11 75www.suncorp.com.aupage 13
LendeRCitibank mortgages1300 651 059www.mortgagebroker.citibank.com.aupage 31
eurofinance02 9252 8311www.eurofinance.com.aupage 17
mKm Capital1300 762 151www.mkmcapital.com.aupage 8
moRtgage manageR / non-bankBetter mortgage management1300 662 [email protected] 36
mango media02 9555 7073www.mangomedia.com.aupage 1
non-confoRmingliberty Financial13 11 80www.liberty.com.aupage 7
Pepper Homeloans1800 737 737www.pepperhomeloans.com.aupage 20
otheR seRvicesCityweb Business Services0417 665 983www.cityweb.com.aupage 18 Financial Services Onlinewww.leads.financialservicesonline.com.au
page 21
North Shore mortgages(02) 8060 1825www.northshoremortgages.com.aupage 10
Residex1300 139 775www.residex.com.aupage 34
RP Datawww.rpdata.com.aupage 33
Trailerhomes0417 392 132page 32
shoRt teRm LendeRCrown & Gleeson1800 735 626www.crownandgleeson.com.aupage 2
interim Finance02 9971 6650www.interimfinance.com.au page 6
NCF Financial Services Pty ltd 1300 550 707www.ncf1.com.aupage 12
softwaRe/itFinware1300 762 444 [email protected] www.finware.com.au page 35
whoLesaLeAdvantedge Financial Services Pty ltd03 8616 1600www.advantedge.com.au pages 11,15 & 19
Resimac1300 764 447www.resimac.com.au page 16
To advertise in Australian BrokerCall Simon Kerslake on +61 2 8437 4786
www.residex.com.au
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