Australian Broker magazine Issue 8.17

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Lenders are resorting to “acts of desperation” in a bid to capture business in a low credit growth environment, and borrowers and brokers may find themselves disadvantaged by the moves.

As lenders increasingly slash rates, offer discounts and increase LVRs to draw customers, broker Daniel O’Brien of PFS Financial

banks will then no doubt attempt to seek these losses from out of my pocket or the customer’s,” he said.

It was recently reported that prudential regulator APRA issued a warning to banks over their pricing wars, cautioning lenders to maintain responsible standards and expressing concern over rising LVRs. Following the reports, CBA subsidiary Bankwest released a WA-exclusive first homeowner loan of up to 97% LVR.

Bromley said such loans skirt the boundaries of suitability. “I think we really have yet to understand if we’ve recovered from the GFC or not, and there’s a whole issue around suitability and responsible lending. I’m probably a bit old school, but I think you have to prove you can afford a deposit,” he commented.

Bankwest defended its responsible lending practices following the release of the loan, saying it had put in place credit standards such as a minimum combined income of $80,000 and a maximum purchase price of $500,000.

“It is not in our interest to lend to people who cannot afford it. We have grown our share of new lending ahead of the market whilst remaining competitive and without compromising our credit quality standards,” Bankwest head of specialist lending Ian Rakhit said.

However, for a first homebuyer couple buying a $500,000 home at

ISSUE 8.17

September 2011

Rate cut marginsFixed cutting frenzy delivers fillip for banks

Page 2

Panel face-offAggregators and lenders clash over panel updates

Page 4

Opening LMIFact sheet to make mortgage insurance transparent

Page 8

Inside this issueAnalysis 20Business size vs revenueOpinion 22Being careful of footprintsForum 23Brokers on aggregator panelsMarket talk 24Melbourne and The BlockToolkit 26Making CRMs centralCaught on camera 28AFG awards top brokersInsider 30Clients, not garbage

Bank moves to raise LVRs and lower interest rates branded unsustainable

‘Desperation’ driving bank market share bids

Services has commented that banks are showing desperation in the face of shrinking credit demand. O’Brien echoed the sentiments of LJ Hooker general manager Peter Bromley, who recently accused banks of “desperate lending tactics” amid discounting moves, and criticised the banks for wooing customers with irresponsibly high LVRs. O’Brien called the discounts “ridiculous”. “The reason I say the discounts are ridiculous is because longer term it will mean skinnier profit margins for the banks. The Page 16 cont.>>

Daniel O’Brien

http://www.mangomedia.com.au

2

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Banks could have further to move on fixed rates before the current wave of cuts is over, it has been claimed.

With both major lenders and non-banks issuing a flurry of fixed rate reductions in the past weeks, National Finance Club manager of retail distribution Andrew Clouston said he believes many lenders still have room to move on fixed rates. Clouston said reductions in wholesale funding costs have been significant, and that some lenders have yet to pass on the full measure of these savings.

“Some people in the market are probably holding onto that reduction in funding costs,” Clouston said.

NFC recently reduced its three-year fixed rate by 30bps to 6.29%, a

move Clouston said represents the full impact of reductions to the lender’s funding costs. He said the move was made while still protecting profit margins.

“In reducing rates to the level we have now, we’ve managed to be able to maintain our profit margins where they were a few months ago. We’ve just seen a reduction in the cost of wholesale funding and passed on that reduction in wholesale costs in full,” he commented.

Clouston believes, however, that many lenders are building larger margins into their fixed rate reductions.

“I think there would be some lenders waiting to see where the bottom actually is. Some of them are testing the margins and building fatter margins into their funding range. We’ve just done a full pass-on of that,” he remarked.

While many lenders seem to have moved quickly to undercut each other’s fixed rate moves, Clouston believes the recent reductions merely represent changes to funding costs rather than competitive behaviour.

“Competitive behaviour will probably follow on after, but at the moment it’s predominantly a pass-on of the margin reductions,” he remarked.

This pass-on, Clouston said, has resulted in renewed customer interest. While he commented it may be too early to gauge borrower uptake of the products, he said NFC has seen a major spike in enquiries for fixed rates.

“The coming weeks will show what the result is as far as business that actually comes through, but customer enquiries have been really high,” he said.

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Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for

Marketing Science at the University of South Australia in December 2008.

The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA.

Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the

subject of telephone interviews.

Brokers are far more likely to join social networking site Twitter than they are LinkedIn, according to the MFAA.

Executive director of marketing and membership at the peak industry association, Kriti Colless, told Australian BrokerNews that broker preferences for social media start with Twitter, closely followed by Facebook, with LinkedIn struggling to find broker supporters.

“What we have found is that growing the MFAA’s likes on Facebook has been a lot more organic than trying to get brokers to actually use LinkedIn,” she said. Colless suggests this is due to the B2B nature of LinkedIn, in comparison with other more broker-friendly B2C platforms.

The MFAA suggests that it is the immediate nature and brevity of

Twitter, as well as its functionality, which is proving popular.

“Twitter is massive – absolutely massive. If you are a broker and you are not on Twitter, you are really missing out,” Colless said.

“With Twitter, you can get the information out quickly, and through that feed and through other tools you can update your other social media platforms quite easily, so it gives you efficiency.”

Colless said brokers can benefit by having regular information about the industry specifically, and more general information, delivered immediately via Twitter feeds.

Colless said the association is also running LinkedIn tutorials for people who are interested.

Melbourne-based Mortgage Fair finance consultant Emma

Lockwood said that she does use Twitter, and appreciates it particularly for its immediacy.

“Being able to interact in real time with other brokers, clients or referral partners allows me to see new initiatives as they develop,” Lockwood said. “By regularly using Twitter, I have developed my own online business identity with a range of dedicated followers. Twitter gives every business the ability to be their own PR agent.

However, Lockwood said that she uses Facebook more extensively than Twitter. “I use Facebook extensively, and LinkedIn occasionally,” Lockwood explained. “I find my core demographics use Facebook more regularly than LinkedIn, which is used mainly for developing my industry network.”

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Brokers prefer Twitter to LinkedIn

Banks building ‘fatter margins’ from fixed rate cuts

Andrew Clouston

http://www.liberty.com.au

For all the latest mortgage industry news, visit www.brokernews.com.au

4


Australian Mortgage Brokers CEO Paul Gollan has defended the market’s aggregators against accusations they are too slow to appoint new panel lenders.

Last edition, Australian Broker published an anonymous letter from a small non-conforming lender, which claimed that aggregators were too slow in updating their panels with good businesses, to the detriment of both brokers and their clients (‘Have aggregators forgotten their roots?’ Australian Broker edition 8.16, page 22)

However, Gollan has hit back by saying one of the main

responsibilities of an aggregator or broker firm is to complete adequate due diligence on potential panel lenders to ensure its members’ ongoing commission entitlements are not compromised.

Gollan said that this conservative approach to new panel appointments proved itself during the global financial crisis, when some mortgage managers without robust business models disappeared, leaving brokers out of pocket.

“Our members would be very pleased that other than the HLP Mortgage debacle – where we lost five trails in total – our members have continued to earn

trail on business settled through all approved panel lenders,” Gollan said.

Gollan said licensing – and the restriction of credit reps to panel lenders – made life difficult for “back door” BDMs and lenders who thrived pre-GFC era by “piggybacking off the hard work done by others”. He explained that pre-GFC, brokers were tempted via commission offers to submit deals to off-panel mortgage managers, which cut out the aggregator, reducing their return on investment in mentoring and training.

Gollan said that in a licensed environment, risks for aggregators

had also increased. “One hundred per cent of our members are authorised credit representatives under our licence and we do not charge for that,” Gollan said. “The additional risk, however, means we have to be very selective about which lenders we have on our panel and we complete an authorised product review every three months.”

Gollan added that it was also important for aggregators not to “clutter” brokers’ heads with too many competing panel members. “It’s not just about having every possible option available,” he said.

Aggregators accused of ‘restraint of trade’

Gollan defends aggregator lender panels

Aggregators who restrict credit representatives to dealing with only their panel lenders could be guilty of ‘restraint of trade’, one lender has claimed.

Premium Capital head of sales Andrew Rae said the case for aggregators restricting credit reps to panels is understandable, when it comes to risk mitigation and providing blanket professional indemnity cover for their member brokers.

However, he said that this restrictive approach is “unsubstantiated” as yet, and that ASIC could be quite happy for these brokers to become credit representatives of both their aggregator and a mortgage manager, in effect having more than one credit representation.

“At end of day their approach could potentially be perceived as restraint of trade,” Rae said.

A number of agreements already exist at some aggregators that allow select brokers to deal with off-panel lenders, usually due to long-standing broker relationships with those lenders.

Rae has also implored all brokers who have credit representative status to consider obtaining their own Australian Credit Licence, so they can “control their own destiny”.

“I’ve been speaking to a lot of brokers over the past couple of weeks, and in a lot of cases they didn’t get an ACL because they were told by their aggregator it was all going to be too hard,” he said.

Rae said that aggregators were understandably trying to protect their income streams, as well as their brokers’ income streams, by limiting lending to panel lenders. However, he said a “fair dinkum” aggregator would

open up a panel to provide more choice to their members.

Rae said brokers should do their own research, and also ask what value they are getting from their aggregators. “Brokers have got to start asking what they are getting out of their aggregators, as opposed to them being one large post office box,” he said.

Rae has also refuted claims from Australian Mortgage Brokers’ CEO Paul Gollan, which

suggested that smaller lenders locked out of lending to aggregator credit reps would begin to ‘push the envelope’ of NCCP as they were ‘starved’ of new business.

“As mortgage managers, we are bound by our funder’s credit policy, and in a lot of cases, we need to work with the mortgage insurers as well,” he said. “We are nearly working with two different credit policies on most occasions. It’s not happening at all.”

Flashback: Off-panel deals fraught with dangerCredit reps authorised by their aggregators to do off-panel deals could face extreme legal danger, according to Darren Loades of Insurance Advisernet. Speaking with Australian BrokerNews earlier this year, Loades said that if a credit rep writes business under another licensee’s banner, his group would not indemnify the other licensee. “Our position is clear that if you are a credit rep, and you’re placing loans via more than one licensee, you should have your own PI cover,” he said at the time. Were a deal to go badly and litigation to take place, Loades said both the lender and credit rep would find themselves as defendants.

http://www.bransgroves.com.au


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6


‘Volatility’ delays CUA’s broker return

CBA ‘rock solid’ amid global turmoil

First homebuyers most savvy

Economic volatility has delayed CUA’s re-entry to the broker market, the mutual has indicated.

In December, CUA general manager of strategy and marketing Andrew Hadley told Australian Broker the credit union was eyeing a return to the third-party channel, given the right market conditions. Hadley has now said recent economic instability has proven a setback in the company’s plans.

“If you had asked me a month ago, I would have said we were absolutely making progress, but we really do need this period of volatility to settle itself out and see where the dust settles,” Hadley said.

CUA had set about strategising its return to the broker channel, Hadley said, but difficult conditions mean such strategies will have to be re-evaluated. Hadley stated, however, that the mutual remains committed to seeing third-party origination become a reality.

“Conditions had improved and we were doing some fairly advanced modelling. The market volatility doesn’t help, but we’re still absolutely committed when we know we can make the model work

to return to the broker channel,” he remarked.

Hadley conceded that CUA has lost out by not being open to brokers, and indicated that mortgage growth was more challenging without utilising the channel.

“With 40% of the market dominated by brokers, the fact that we’re not in it means we’re playing in a much smaller pond. We’re pleased that we’ve been able to grow 50% above the market, but it’s been a fairly significant challenge,” he said.

While market conditions have remained volatile, Hadley said, this volatility has led to a better funding position. In light of this, CUA has joined the rush of lenders making cuts to fixed rate products. The lender recently lowered its three-year fixed rate to 6.39%.

“There’s absolutely been some significant changes in wholesale prices as a result of the market volatility. The market is not pricing in a number of rate decreases, and it provides us the opportunity to secure funds at a relatively cheap rate,” Hadley said.

First homebuyers – though typically more leveraged than other market segments – show the best arrears performance, Westpac has indicated.

In its third quarter results, Westpac CEO Gail Kelly indicated that among the range of borrower demographics in its portfolio, the bank’s first homeowner customers had the best performance and lowest level of delinquencies.

The bank’s general manager of mortgage broker distribution Huw Bough said this could be due to first homebuyers becoming savvier about the terms and details of home loans.

“We know that first homebuyers have more access to financial education, seminars, internet online tools, and social media specifically targeted at them. This could mean they are most likely to understand the details of their home loan under the current economic environment where there is a focus on paying down debt and saving more,” Bough commented.

The bank posted a $1.55bn cash profit for the third quarter. The result is down 2% from the bank’s second quarter result, but up 11% on the same quarter last year. Westpac has claimed subdued

demand for credit saw it grow its mortgage portfolio in line with weakened system growth. The group’s flagship brand grew 1.2 times system, while it claimed subsidiary St.George saw “improved momentum”.

While growth was subdued, Bough said the bank currently saw more than 40% of its home loan portfolio growth through the broker channel, and would continue to drive this channel through building relationships between brokers and local branch staff.

“We are doing this by introducing brokers to our bank managers and their teams locally to build strengthened partnerships that will benefit the customer,” he said.

Kelly indicated slow credit growth is likely to continue for some time, with credit demand unlikely to recover to pre-GFC levels. She said consumer wariness had seen increased deleveraging by both households and businesses, and that market volatility and weak demand for credit were expected to continue for the near future.

Andrew Hadley

Huw Bough

The Commonwealth Bank is in a strong position to weather any further shocks to the global financial system, according to CBA executive general manager of third party and mobile banking Kathy Cummings.

Following the bank’s announcement of a $6.8bn profit for the year to 30 June, Cummings said that the bank was in a “rock solid” position to meet any further problems with the global economy, which she described as “extremely volatile” at present.

Cummings said the bank was currently “very well funded”, with 61% of its funding sourced from deposits with its local branch networks. The bank is also purchasing additional wholesale funding three to six months in advance, to avoid short-term variances and shocks to wholesale pricing caused by any developments in Europe and the United States.

Commenting on the bank’s mortgage lending book,

Cummings said the bank was seeing the most competitive environment in 30 years, and the concern was that its loan book would churn out amid tough price competition from other banking institutions, some of whom she said were currently pursuing unprofitable strategies.

However, Cummings said the bank was committed to maintaining a system growth rate, and as a result was focused on taking a strong partnership approach to mortgage broking distribution, to ensure brokers supported the bank despite home loan price differences.

Cummings said the bank continued to source approximately 40% of its home loans from mortgage brokers.

While acknowledging the record $6.8bn profit result represented “a lot of money”, she said CBA was a “major engine” of the economy, and its return on assets was low compared with some other companies and industries.

At the bank’s results announcement, CBA warned of growing funding pressures due to economic “headwinds”. Outgoing CEO Ralph Norris said the 2011 financial year had been challenging for the group and many of its customers. He identified fragile consumer and

corporate confidence, political uncertainty, a strong currency and natural disasters.

Cummings said that the current minority Australian Government was a key contributor to poor consumer sentiment, including policies such as the proposed carbon tax.

Kathy Cummings

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



8


Swan champions bank ‘tick and flick’

LMI education to become mandatory

The Federal Government has released a plan that will give consumers the ability to switch banking institutions “with the stroke of a pen”, according to Treasurer Wayne Swan.

Following an inquiry into the viability of full account portability, the Treasurer announced a package in August that opted for an approach that will instead focus on removing the burden of having to change the details of automatic debit and credit transactions.

“Customers will sign just one form that authorises their new institution to do all the heavy lifting for them,” the Treasurer said at the policy announcement. “The new institution will arrange the transfer of all automatic transactions linked to the customer’s account and inform

associated creditors and debtors about the new details,” he said.

The statement came with the release of a report authored by Reserve Bank governor Bernie Fraser, which investigated options available for increasing account transferability. As a result of the report’s recommendations, the government stopped short of adopting full account number portability, which Swan said “would not deliver enough benefits to justify the huge costs it would impose on business and consumers”.

However, Swan said the initiative would give consumers the power to easily switch to another bank, building society or credit union to seek out better value and service. The plan is to be finalised after industry consultation by 1 July 2012.

The Australian Bankers’ Association reacted by claiming there are already high levels of switching, though it committed to working with the government.

ABA chief executive Steven Munchenberg said the Fraser inquiry found 8–10% of customers already switch transaction accounts, which was comparable with other countries.

Likewise, when it came to home loan customers, the ABA said data on mortgage refinancing suggests customers have little difficulty in switching their home loan provider.

“ABS housing finance statistics have consistently shown that around 30% of new housing loan applications are applications for refinancing,” Munchenberg said.

“While there’s already a lot of switching going on and

independent polling shows three out of four customers are satisfied with their current bank, the industry will work to bring in a simpler, easier system for customers,” he added.

Mortgage insurer Genworth said a new mandatory one- page mortgage fact sheet for homebuyers, which will contain key details on lenders mortgage insurance, will enable them to better compare “apples with apples”.

Announced by Federal Treasurer Wayne Swan as part of the Federal Government’s banking competition reform package, the new LMI fact sheet will allow consumers to compare quotes side-by-side, including the difference in premiums and rebate schedules.

Treasury has advised against the introduction of a scheme to allow the transfer of LMI between lenders, citing the expense, the extreme complexity of administration, and the conclusion it would benefit only 1% of all borrowers.

Genworth said in a statement following the government’s announcement that the mandatory fact sheet should be similar to the Key Fact Sheet for home loans, and could be handed out by lenders just prior to borrowers signing their home loan contract.

The insurer said it would benefit borrowers to be aware of the reason for lenders requiring LMI, how LMI reduces the interest rate that borrowers with a smaller deposit have to pay, the frequent capitalisation of LMI into the loan, and the availability and structure of refunds. This would include understanding that some lenders choose to provide a discounted mortgage insurance cost to borrowers at the outset of the loan in lieu of refunds, the company said.

“Genworth believes it is important that homebuyers know

how lenders mortgage insurance works and the benefits it offers, plus their potential rights in relation to existing refund schedules if they switch home loans,” Genworth CEO Ellie Comerford said.

According to Genworth, recently conducted consumer research shows that overall, most consumers consider LMI important due to the help it gives Australians getting onto the property ladder sooner. Genworth said homebuyers also like the fact that LMI was introduced as a government policy and was run as a government-owned business for many years.

“Consumers also valued that LMI is a community priced product, as opposed to a risk

based priced one (which could negatively impact those in less affluent areas),” Comerford explained. “Community pricing means that borrowers who take out loans (in the same loan to value category) pay the same for lenders mortgage insurance whether they live in – for example – western Sydney, Brisbane or regional Australia,” she said.

Wayne Swan

http://www.ncf1.com.au



http://www.mezy.com.au



10


Brokers should look to outsource as operating costs become more difficult, Vow Financial has said.

As NCCP compliance brings greater operating costs to bear on mortgage brokers, Vow Financial CEO Tim Brown has said brokers must look to cut their overheads.

“Look to outsource as many non-revenue activities as possible,” Brown said. “This way they become variable rather than fixed, which helps when volumes are mixed.”

Aggregators and lenders are also facing increasing costs in the compliance environment. Brown said aggregators should look to reduce overheads while trying to maintain service levels to brokers. The main costs faced by aggregators relate to compliance and software.

“They are inter-related as the first is driving the cost of the other. Add to this the natural increases the rest of the market is suffering such as wages, travel and cost of living etc,” he said.

These costs, Brown predicted, will lead to further consolidation of aggregators. “As margins contract and expenses increase, so will the need for scale and efficiency, so no doubt there will be further consolidation and rationalisation.”

Lenders and aggregators must be proactive in finding cost efficiencies in order to maintain their proposition to the market in an environment of low credit growth, Brown said.

“From an aggregator’s perspective having software that

enables compliance, commissions processing and reporting would reduce costs to the business. From a lender’s perspective, giving aggregators information on brokers who have poor conversion assists with improving loan numbers which again improves productivity and revenue for all concerned,” he said.

As aggregators increasingly consolidate to achieve scale, brokers should also look to consolidate costs with other businesses, according to Brown. “I believe from a broker’s perspective sharing the cost of an office and sales support can reduce their overheads while improving productivity. Brokers don’t get paid from being good at administration.”

Business credit has seen an upswing, and one lender has claimed it represents an opportunity for brokers.

Veda Advantage’s latest Business Credit Demand Index shows business appetite for credit has shown strong gains over the quarter. Credit enquiries for the June quarter were up 17.4% over the previous quarter, and 3.6% year-on-year.

Bankwest head of business broker sales Aaron Milburn has said there has been a corresponding rise in brokers wanting to enter the commercial lending market.

“We are seeing increased demand from brokers both with a commercial background and brokers new to commercial dealings. I think to say there is a substantial shift from residential to commercial may be premature; however, that said, the enquiry level we are seeing is definitely on the rise, as are the requests for education in the commercial field from brokers looking to diversify,” Milburn commented.

As the residential market sees increasingly waning demand, Milburn said commercial finance could present a revenue opportunity for brokers. Milburn commented

that aggregators are now helping brokers unfamiliar with commercial lending transition into the sector.

“Those brokers who are looking to start to transact within the commercial space are well positioned to get clear advice and education as to how to start writing commercial deals. Aggregators are focusing more on having bespoke commercial managers to assist in the transition and banks such as Bankwest are offering free tailored training sessions to encourage diversification,” he said.

Milburn said the best point of entry for brokers was to examine their existing client base for self-employed clients that hold smaller SME businesses with one to four employees.

While Veda said the demand for business credit was strengthening significantly, the company’s head of commercial risk, Moses Samaha, said it had yet to reach pre-GFC levels. However, he commented that the upswing could signal a renewed trend, giving momentum to demand. “Assuming we can move beyond the current market volatility, we should see growth in credit demand gather pace in the second half,” he said.

Outsource to reduce overheads: Brown

Business demand a broker opportunity

Stop using our logo: ASICASIC has warned licensees to stop using the regulator’s name and logo in their advertising.

The watchdog has issued a caution to the industry after a licensee was found displaying the ASIC name and logo on its website to advertise the company’s ACL. ASIC said the action breached intellectual property laws, and could have the potential to mislead consumers.

The regulator further called on consumers to report individuals or companies “suspected of misusing ASIC’s name or logo”.

“ASIC is concerned that use of the ASIC name and logo in conjunction with these identification requirements could

cause consumers to believe the business or company is in some way endorsed or approved by ASIC,” commissioner Peter Boxall said.

An ASIC spokesperson told Australian Broker the company in question displayed the ASIC name and logo on its home page “alongside a number of other organisations’ logos”. She said it was the only case of misuse the regulator had found to date.

Though the incident may have been isolated, Boxall warned that licensees had to follow protocol for advertising their ACL. He commented that it was important to make consumers aware of industry licensing standards.

“This is an important part of

informing consumers that they are dealing with a licensed and regulated entity,” he said.

Boxall reminded licensees that ACL numbers would have to be included in a number of documents, and in all advertising, with the onset of NCCP regulations.

“ASIC reminds licensees that the correct way to inform the public that they hold a credit licence is to display the Australian credit licence number. Credit licensees must include their credit licence number in certain prescribed documents, including advertisements, from 1 April 2012. Licensees should have started the process of updating documentation

which identifies them as holders of an Australian credit licence to avoid breaching the National Credit Act,” he said.

Tim Brown

Peter Boxall

Business credit demand: the key statsCredit cards Up 53.8% on July 2010, and up 21.7% on March 2011

Business loans Up 9% on July 2010, and up 27.6% on March 2011

Asset finance Up 6% on July 2010, and 10.3% on March 2011

Trade credit Remained flat at 0.1% year-on-year, but was up 15.7% on March 2011

Source: Veda Advantage


11www.brokernews.com.au


Falling house prices have led to only marginal improvements in affordability, it has been claimed.

Comparison site RateCity has claimed a falling housing market combined with rising incomes means housing is now more affordable than five years ago. However, RP Data has stated that housing has some way to go to combat affordability concerns.

“As property values ease and the cost of goods and services continue to increase, property becomes relatively more affordable. Therefore, it’s unlikely that a couple of quarters of falling values will result in a substantial improvement in affordability; however, if property values continue to grow at a rate below the growth in inflation (as we anticipate) affordability will continue to improve,” RP Data researcher Cameron Kusher said.

Kusher said inflation-adjusted data shows property values have fallen 2.4% in real terms for the quarter. The data has also indicated capital city property values have declined

5.8% from their peak during the March 2010 quarter.

Despite these recent declines, Kusher said property growth has outpaced inflation for much of the last 15 years, resulting in property becoming more expensive in relative terms. If growth remains subdued, though, Kusher said the property market could make headway on affordability.

“Given the expectation of limited value growth as a result of consumer conservatism and limited availability of finance, by inflation-adjusted terms and real terms homes are likely to continue to become relatively more affordable. This is great news for potential homeowners as it will make home ownership a more realistic prospect over time,” he remarked.

In further contrast to RateCity’s claim is new data that has shown the time needed for a first-time buyer couple to save a deposit has significantly increased in the last five years. The Bankwest First Time Buyer Deposit Report has shown the time needed to save a

deposit increased from 3.8 years in 2006 to 4.1 years in 2011.

Bankwest senior analyst Tim Crawford said first homebuyer participation has fallen 35% since last year, and has hit a seven-year low.

“The fact that first-time buyers are taking longer to save a deposit, especially in capital cities, directly contributes to this drop in new buyers entering the property market,” Crawford said.

Little headway for affordability

Source: RP Data

CPI-adjusted capital home value changeCapital city Peak quarter Change to home

values, June 2011

Sydney Sept 2003 -7.9%

Melbourne Sept 2010 -6.2%

Brisbane March 2008 -12.3%

Adelaide June 2010 -6.8%

Perth Sept 2007 -11.3%

Hobart March 2010 -6.3%

Darwin March 2010 -7.2%

Canberra June 2010 -3.9%

Combined capitals March 2010 -5.8%

Cameron Kusher

http://www.pepperonline.com.au

12


Connective posts three months above $1bn

ING Direct has offered ATM fee rebates to its home loan customers as lenders increasingly make moves to attract new mortgage business.

The second tier bank has advised it will refund ATM fees to home loan customers who use their ING Direct transaction account at any ATM in Australia. The rebate will apply to the bank’s Orange Everyday transaction accounts, which will not charge for withdrawals or balance checks.

ING Direct executive director of delivery Lisa Claes said she expected the offer to provide further incentive to potential home loan customers.

“We know Australians loathe paying ATM fees to conduct a simple, everyday transaction so

we’re providing further value to our home loan customers by rebating these completely,” she commented.

Claes said the changes to the bank’s transaction account were not merely a promotional move, but would instead be permanent for home loan customers.

“This is not a promotion, but an enhancement to our transaction account. We’re hoping this feature will be very popular amongst our home loan customers and as a result we aim to embed this into our product suite long term,” she commented.

Amid a wave of recent fixed rate cuts and dramatic discounts to draw new home loan business, Claes indicated that lenders will have to be creative in their

offering to potential borrowers. “As competition heats up in the

market, lenders are looking at other ways to add value to their offers in order to attract new or refinancing borrowers. We believe this will be a real drawcard when customers are looking for a point of difference between lenders and have customers further consider ING Direct for more of their everyday banking,” she said.

The second tier bank also announced in August that it would waive fees on its SmartPack and fixed rate home loans for borrowers with LVRs up to 80%. The offers apply to any new loans unconditionally approved from 15 August until further notice.

ING Direct’s head of broker sales Mark Woolnough said the

offer reflected the current aggressive competition within the home loan market.

“We’re conscious that it’s a very competitive environment at the moment and these offers prove that we’re very keen to maintain our position as a true alternative to the major banks,” Woolnough commented.

ING Direct waives ATM, setup fees

Connective has reached three consecutive months of more than $1bn in settlements.

The company surpassed the $1bn mark in May, June and July, and principal Mark Haron said the milestone is one the aggregator had been edging in on for some time.

“Our average monthly settlements had been sitting just shy of the $1bn mark and we’ve previously come very close to reaching the milestone. To actually surpass the target, and to do so across three consecutive months, is very satisfying,” he remarked.

Connective previously reached $966m in December, and more

than $800m in June 2010. Haron previously told Australian Broker he believed the company was well-positioned to surpass $1bn in settlements during 2011, adding after December’s result that brokers had been distracted by licensing concerns. He said the result was pleasing in the midst of a difficult market.

“This achievement is testament to the dedication of our member brokers and is a reminder of the opportunities which still remain despite challenging market conditions,” Haron said.

While Connective initially set a goal of reaching the $1bn mark by March, Haron indicated he was

buoyed by the consistency of the results in May, June and July.

“Aggregators often experience spikes in lending volumes due to the seasonal nature of home lending. We’ve now achieved three record months of settlements and set a benchmark that we’re confident we’ll be able to consistently reach moving forward,” he commented.

In spite of recent slowdowns in credit demand, Haron expressed optimism that brokers could continue to see good returns, and added that revenue diversification had become increasingly important.

“Expanding one’s offering and diversifying revenue has become

increasingly important for brokers in the current market. We believe there are still many opportunities in traditional residential mortgages for the proactive broker but it makes a lot of sense for brokers to add complementary products to their suite. Connective has been very focused on assisting brokers to diversify their offering and our member brokers have responded especially well, particularly with insurance products,” he said.

Mark Haron

Lisa Claes

http://www.SWSi.tafensw.edu.au


Smartline’s new WA state manager has stated that brokers must assist clients in wealth creation by filling the role of debt and risk advisers.

The company has announced the appointment of David Devenish. Devenish previously worked as the director of Profound Property and an associate director of Macquarie Bank.

Devenish commented that the operating environment in the mortgage broking industry has seen significant change, and that brokers now fill the role of debt advisers.

“Consumers are now more conservative and less inclined to make quick, emotive purchase decisions – and they’re looking for trusted advisers to help them do that,” Devenish said.

Devenish said brokers must fill the role of helping clients create wealth by aiding in the management of debt and risk.

“For many people debt is the thing that keeps them awake at night. Our role is to advise our clients on the most appropriate strategies and solutions to reduce risk, assist in wealth creation and, consequently, allow them to rest easy,” he commented.

Smartline said Devenish would be mandated with raising the company’s

profile in the WA marketplace, and boost support to franchisees. Devenish said he would look to further develop support structures available to the state’s 31 existing franchisees, as well as ramp up recruitment of new franchisees. He commented that the WA market presented unique challenges to brokers, with many potential borrowers working in the resources sector.

“Many people are managing fly-in- fly-out roles, they tend to purchase and share rental accommodation and have a lifestyle that demands solutions tailored to those specific needs,” Devenish remarked.

Devenish encouraged brokers to embrace changes in the industry that have come about through the onset of licensing and regulation. He predicted further industry change was “around the corner”.

“In the last few years, we’ve seen the industry change dramatically with much tighter lending, more regulation and consolidation, so professional development is critical,” he commented.

Consumers have jumped on board the Choice mortgage switching campaign, but its feasibility is still being questioned.

The Choice-led One Big Switch campaign has drawn 40,000 consumers, who have registered their interest in the campaign’s drive to obtain group discounts from mortgage lenders. The scheme has drawn controversy, with both Choice and One Big Switch set to collect commissions, but Intouch CEO Paul Ryan believes the campaign is unrealistic.

Ryan called One Big Switch “optimistic and romantic”, but said it was unlikely to yield results. The idea of securing a lender discount based on collective bargaining is not feasible, Ryan remarked.

“The notion of trying to help a collective group of thousands of people achieve a better home loan deal is great but the challenge is in the execution. When you are talking home loans there are so many variables. Every loan is different and deserves individual attention as per the responsible lending guidelines outlined by ASIC,” he said.

The campaign has also drawn regulatory scrutiny, with ASIC reportedly examining whether Choice’s involvement necessitates the group holding an ACL. The regulator is also reportedly examining whether One Big Switch is following responsible lending guidelines under the NCCP. Ryan said it is doubtful

the campaign’s structure can abide by these guidelines.

“For example, if Mr and Mrs Smith at Campbelltown have registered their interest, then who will be the qualified person to help them with their home loan application and assessment under the collective bargaining? Will they qualify for what’s available, will the loan suit them, who approves their loan and at what cost?”Ryan asked.

And should the campaign fail, Ryan believes it is borrowers who will be hurt most.

“I’ve been in the industry for 20 years now and just get incredibly frustrated when I hear about another quick fix idea. Inevitably it’s the consumer who loses out and is left disenchanted,” he said.

Smartline appointment sees wealth creation role for brokers

Choice campaign will leave consumers ‘disenchanted’

David Devenish

Paul Ryan

http://www.homeloans.com.au/broker


14


Australia booming compared to US: RP DataNot for profit property developer

group Urban Taskforce has blasted the Council of Australian Governments (COAG), saying it has failed to take any action on housing affordability.

Urban Taskforce CEO Aaron Gadiel said that COAG has failed to act on a Productivity Commission report into zoning and development assessments. A COAG communication on the report claimed states and territories were “continuing to improve significantly” in planning and development. Gadiel called this assertion “nonsense”.

“There is no sign that state governments have taken any note of the Productivity Commission’s report, and clearly the Commonwealth hasn’t insisted that they should,” Gadiel said.

The Productivity Report, Gadiel said, identified practices pertaining to property zoning and development which could “dramatically improve the efficiency and responsiveness of state planning systems”.

“They advocated broad and simplified development rules, more rational and transparent rules for infrastructure levies and

eliminating impacts on the viability of existing businesses as a town planning consideration,” he commented.

Gadiel claimed Australia was currently experiencing a housing shortfall of 200,000 homes, and forecast that this would grow to 308,000 by 2014. He slammed COAG’s claim that “work [is] already under way [on] ... housing supply and affordability reform”, saying that COAG has accomplished “almost nothing” it previously promised.

“The requirement to start producing solid reform proposals by mid-June 2010 was intended to spur on officials to get on with this urgent work,” Gadiel said.

The report, commissioned by COAG in April, asked the Productivity Commission’s Housing Supply and Affordability Reform Working Party to investigate potential reform to zoning and planning processes, the development of consistent principles for development charges, the role of local governments in planning approval processes and extending land audit work to examine underutilised land.

The Australian housing market is a “boomtown” compared to the United States, RP Data has claimed.

The company’s Property Pulse publication has pointed to continued declines in US home values, where nearly one-quarter of loans are in negative equity. The company has claimed its data indicates relatively few Australian homes are in negative equity.

Arrears in Australia are also extremely low compared to the US, RP Data contended. The percentage of US homes delinquent by 90 days or more is more than 8%, while comparable arrears for Australian homes are below 1%.

However, both Australia and the US are experiencing lagging demand, with transaction volumes in the US 33% below five-year averages and Australian transaction volumes 16% below five-year averages.

RP Data research director Tim Lawless said the US housing market may see a boost from the recent Federal Reserve announcement that rates will remain on hold for at least the next two years. Lawless commented that the Australian market has no such guarantee of stability.

“The certainty around US interest rates is in direct contrast to the Australian mortgage market where the direction of interest rates over the short to medium term still seems to be up in the air,” Lawless remarked.

Australian mortgage holders are also more sensitive to interest rate movements, Lawless said.

“The vast majority of Australian mortgages are on a variable rate. This means that any change in the interest rate environment has an immediate impact on most mortgage holders and consumer behaviours,” he commented.

Though there are significant differences between the two markets, Lawless said the Australian housing market would be well served to learn from the US market. Lawless warned that the relative health of Australian housing compared to the US should not make the market “complacent”.

Property developers take COAG to task

Australia is struggling in a low growth, high inflation environment, the Reserve Bank has claimed.

RBA deputy governor Ric Battellino has commented that the Reserve’s board has had to balance higher-than-anticipated inflation with slowed economic growth. Battellino said upward revisions of mining investment mean that inflation for 2011 is likely to trend higher than was forecast last year, while growth estimates have had to be revised downward amid global economic uncertainty and this year’s natural disasters.

“As the year has progressed, the resources boom has strengthened, but the divergence between the mining and non-mining sectors of the economy has increased and the mix of growth and inflation has turned out to be less favourable than expected a year ago – ie there has been less growth but more inflation,” he told a gathering in Sydney.

Battellino indicated that inflation forecasts have risen, with longer term outlooks predicting inflation above the RBA’s target range. However, he commented that growth had been hampered both by production

slowdowns due to natural disasters and falling consumer sentiment. Battellino said global economic growth had slowed noticeably by the RBA’s July board meeting. In addition to global forecasts trending downward, Battellino said the July meeting revealed domestic growth would be lower than expected, and that employment growth was expected to slow.

“In Australia, households remained cautious and the housing market was soft. Also, it now appeared that the slow recovery in coal production would mean that earlier GDP forecasts

for 2011 would not be met,” Battellino said.

This dwindling growth had stayed the RBA’s hand in 2011, Battellino said. However, he said the Bank still remained concerned about inflation, and indicated that devising monetary policy taking into account waning growth and growing inflation would prove a challenge.

“With the recent volatility in financial markets adding to the uncertainty about the economic outlook, it does not look like the challenge will become any easier over the months ahead,” he commented.

Low growth, high inflation challenges RBA

Missing in action: Affordability reports yet to be releasedIn April last year, COAG asked the Housing Supply and Affordability Reform Working Party to prepare a report on:• The potential to reform land aggregation, zoning and planning processes• Nationally consistent principles for housing development

infrastructure charges• The merits of measures to ensure greater consistency across

jurisdictions, including local governments’ planning approval processes, in the application of building regulations

• Extending the land audit work to examine underutilised land and to examine private holdings of large parcels of land

Moody’s not so sunny on Aussie housingMoody’s senior credit officer Ilya Serov said in July the agency expects arrears and defaults to rise in Australia over the coming decade.

“Default and delinquency rates in the mortgage market are likely to be both variable and, in our view, on average higher over the coming decade than in the past,” Serov commented.

Moody’s said the sustainability of Australian house prices was in question, and stated that massive increases in value over the past decade were “only partially explained by fundamentals”.

“We consider the possibility of major regional house price drops to be a material risk for the Australian market,” Serov said.



Bank ranks have little impact on behaviour

Brokers missing e-lodgement benefits

Top brokers have claimed that customer satisfaction rankings do not necessarily reflect actual client behaviour when it comes to banks.

Outgoing CBA chief executive Ralph Norris and 11 other CBA executives reportedly lost out on more than $15m in pay due to the company’s slide in the Roy Morgan customer satisfaction rankings. However, The Selector Group’s Brett Abikhair believes the rankings reflect little more than a philosophical stance on the part of consumers.

Abikhair said he has noticed no hesitance on the part of consumers to use the bank, even amid negative publicity following CBA’s out-of-cycle rate rise. For consumers, Abikhair said, price is more important than public perception.

“Most people have zero loyalty to the bank they happen to be with at

the time,” he said. “Zero loyalty means they always chase the better deal, or at the very least go with the lender who can do what the client is wanting.”

Abikhair indicated that the lack of customer loyalty has been driven by lenders who increasingly outsource customer service.

“The banks are the very reason this has occurred, as they have made a loan purely a commodity. This is the very reason mortgage brokers actually exist, as the banks have passed the relationship aspect of their banking to brokers,” he said.

MPA Top 100 Broker Justin Doobov of Intelligent Finance agrees, and said price and product drive customer behaviour, while customer service is largely the role of the broker.

“When Intelligent Finance arranges brokers a loan for a

client we act as the conduit between the client and the lender. So long as we as a broker are providing fantastic service to our client, this is all our client cares about, as they generally have more contact with us than the lender,” he commented.

Doobov, however, defended service levels for CBA, saying the fact that so much of Norris’ pay

packet was tied to satisfaction results showed a commitment to customer service.

“I am sure that this poor survey result is mainly due to the out-of-cycle rate rise by CBA. We survey our clients regularly and the clients whose loans we have put with CBA are generally the most satisfied with their lender,” he said.

Mortgage brokers are rendering a large part of their CRM functionality “defunct” by not using their system as an e-lodgement gateway, according to Stargate.

Speaking with Australian Broker, Stargate CEO Brett Spencer said many brokers are choosing to use free online bank e-lodgement systems, rather than the electronic gateway provided by CRM systems such as Stargate’s Symmetry CRM.

During the last 12 months, Spencer said that 164,000 loans went through the Symmetry system, but there were only

30,000 e-lodgements that went through the platform.

“That means that the CRM system for many is becoming defunct,” Spencer said. “You are not getting all the back-channel messaging, you are not getting the status updates, and it is not going into their CRM system – they are getting that information on their mobile phone.

“So they can’t then utilise the marketing and reporting – all the things that appear in CRM systems – to manage their customer loans. That is the biggest issue we see – there are alternatives out there, and they

would rather take the free approach to doing that,” he said.

Spencer said the cost of e-lodgement – which is facilitated by the likes of NextGen.Net and Pisces – can vary depending on whether brokers pay a fee per transaction, or choose to pay a monthly user fee. However, he said a single transaction may cost brokers $10.

“If you’re a big broker and you are lodging over 20 transactions a month, you are spending over $200 on your e-lodgement, and some of them just won’t spend that,” he said.

While acknowledging the cost, Spencer said brokers miss out on

the functionality, which would enable them to monitor through regular reports the entire loan process – eliminating problems such as ‘forgetting’ or tardy lender responses – allowing them to stay on top of their customers.

Spencer said the cost and time efficiencies that could be achieved are in the vicinity of two to three hours per loan file, when taking into account 30 minutes to enter two sets of data, and manually updating back-channel messaging that is not automatically coming into the system.

For more on CRMs, see Toolkit on page 26

Bouncing back: CBA’s satisfaction rankings since the November 2010 rate hikes

7070.5

7171.5

7272.5

7373.5

7474.5

75

Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11

Source: Roy Morgan

http://www.loankit.com.au

16


Fixed rate cutting frenzy continues

Franchise profits after ‘demanding’ year

97% LVR, the minimum monthly mortgage repayment on a 7% variable rate would be more than $3,200, or in excess of 50% of the couple’s before-tax income. Bromley said such numbers are troubling.

“Sometimes with high LVRs, there are lower standards used around the income to qualify,” he remarked.

O’Brien has also called into question Bankwest’s assertion that the loan will combat housing affordability issues. The bank claimed its high LVR product would address housing affordability in WA, with Rakhit saying that it could stimulate first homebuyer demand.

“If first-time buyers need to save for a shorter period, this is a clear sign that affordability has improved for them. It doesn’t reduce the amount of debt that they acquire but it means that they can build equity in the property market sooner. In order for the property market to prosper there needs to be a consistent number of first-time buyers as historically this has been the catalyst for growth in the sector,” he commented.

However, O’Brien said he doubted the product would “impact the market at all”. Bromley agreed, saying he too was sceptical that a higher LVR would have any

material impact on affordability.“I don’t know if it’s going to

stimulate extra growth in housing. There are more fundamentals that need to be addressed before we see any real change in housing,” he commented.

Ultimately, Bromley said he believed the Bankwest move, along with similar moves by other banks to raise LVRs and slash rates, represented the pressure banks are under to grow market share. Though high LVRs could pose a risk to lending standards, Bromley suggested that banks may see more risk in shrinking credit demand.

“With a high LVR I would assume they’re all being mortgage insured anyway, so there’s not the sort of risk in terms of defaults. There’s more risk for banks in not getting credit growth,” he said.

The mortgage market saw a fixed rate cutting frenzy in August, as lenders increasingly bet on the probability of the RBA slashing rates.

At time of going to press, St.George Bank had issued a third round of fixed rate cuts, dropping the rates on its two-year product a further 10bps to 6.59%, and discounting its three-year fixed rate 20bps to 6.59%.

The lender also made cuts to its four and five-year rates, cutting both by 55bps. The move brought the bank’s four-year rate to 6.99%, and its five-year rate to 7.04%. St.George CEO Rob Chapman said demand for fixed rate products has been high.

St.George’s parent bank, Westpac, also made further fixed rate moves, cutting its three-year rate 20bps to 6.59%. The bank also announced discounts to variable rates on its Premier Advantage Package on loans of $500,000 or more.

Meanwhile, Citibank lowered fixed rates for a second time, moving its one-year and two-year fixed rate home loan from 6.79% to 6.34%, and its three-year fixed rate home loan from 6.79% to 6.45%.

Mortgage managers began

passing on the discounts as well, with Mortgage Ezy, Australian First Mortgage, Iden Group and Future Financial all announcing fixed rate cuts.

Mortgage Ezy announced a 30bps cut, which will give customers fixed rate options from 6.39% with no ongoing annual fees.

Mortgage Ezy said the fixed rate loan repricing also included upfront and trail commission.

Iden Group cut fixed rates on its Fair Go range of products. It is offering 6.74% on its one-year fixed rate loans, and 6.54% for two-year and three-year products.

Australian First Mortgage also reduced its two and three-year fixed rates, cutting its Flexible Option Full Doc products twice in the space of a week, bringing both two and three-year rates to 6.54%. Future Financial cut its two-year rate to 6.79% and its three-year rate to 6.89%.

Both AFM and Future Financial have opened the products to residential construction loans for owner-occupiers and investors, and both include the option of a 100% offset account. Future Financial has also touted a rollover rate of 7.19% at the end of its fixed rate period.

Profits rose for Mortgage Choice in spite of a slight slowdown in approvals, according to the listed group’s recent profit announcement for the 2010/11 financial year.

The company’s full-year results showed a 7.4% increase in net profits to $15.9m. Likewise, the group has grown its loan book to $42.4bn, up from $40bn in 2010.

Housing loan approvals, however, saw a slowdown in 2011, falling to $9.9bn from $10.1bn in 2010. The company attributed the decline in approvals to the general market slowdown in credit demand. CEO Michael Russell said the financial year was “one of the most demanding” in the history of the company, and praised the profit results.

Russell said the group saw stable productivity from its brokers, who average 58 loans each per year, and witnessed a doubling of brokers in its aggregation arm, LoanKit.

“It is satisfying to present a healthy financial performance, loan book and recruitment growth,

broker efficiency and customer satisfaction during a year of great change for the market and for Mortgage Choice, which has been steadily evolving to ensure we make the most of a new lending landscape,” Russell said. “Our sound result shows the company’s DREAM strategy – an acronym for diversification, recruitment, existing broker support, acquisitions and managing costs – is producing rewards.”

During the period, Mortgage Choice managed an overhaul of learning and development programs, the introduction of a target-driven lead conversion project, streamlining of commissions reporting and improvements to franchisee benchmarking. The group saw the addition of 19 greenfield franchises and the sale of 19 existing franchises during the period.

Commenting on the state of the market, Russell said the group executed a strategy to strengthen its presence amongst the “more experienced” borrower groups, focusing heavily on investors and

refinancers. “We understand the need to go where the business is rather than sit back and wait for conditions to return to ‘normal’, which may never happen,” he said.

“If conditions remain subdued for a number of years, our brokers

are well equipped to continue to run successful operations that concentrate on areas of growth located within both the home loan market and other realms of personal and commercial finance,” he said.

Peter Bromley

http://www.resimac.com.au

Newswww.brokernews.com.au19

INDUSTRY NEWS IN BRIEF

Keen support for non-banksFindings from MPA’s latest Brokers on Non-Banks Report suggest that brokers who regularly support non-banks are keen to increase the volume of business they do with these lenders. More than 350 brokers took part in this year’s survey, with the average non-bank supporter saying they placed 41% of their business with non-banks, but in an ideal world this figure would account for 63%. However, participants said just one-fifth of customers requested a home loan from a non-bank. Despite non-bank market share plummeting to record lows recently, 72% of those surveyed expect this trend to reverse in the coming months. Brokers taking part in the survey were also asked whether licensing and the removal of DEFs would impact their dealings with non-banks, but just 21% thought regulation would be an issue and 26% expected the exit fee ban to affect their relationship with non-banks.

Pisces snapped up by investment groupMortgage software company Pisces Group has announced it has been acquired by Santapau Limited for an undisclosed sum. Pisces, which provides a suite of mortgage software services for mortgage brokers, including CRM and electronic lodgement capabilities, was acquired by Santapau, which is backed by clients of Gleneagle Securities, a registered Australian financial services company. A statement from Pisces said the acquisition would allow the launch of a range of new financial services products in Australia. In the coming weeks, Pisces and messaging solution provider Newsnet – also acquired by Santapau – will be combined under a unified brand in the market. CEO of Pisces, Jega Rajan, said the transition would be “smooth and transparent” for customers, partners and suppliers.

ANZ focuses on fundingRetail deposit growth has driven a stronger funding position for ANZ, the bank has stated.In a market update, ANZ reported an unaudited underlying profit after tax of $4.2bn for the nine months to June, 16.1% above the previous corresponding period. The bank said it had also strengthened its funding position, with customer deposits increasingly driving its funding. “Customer funding now represents 61% of ANZ’s funding base, up from 50% in 2008,” the bank said. “This structural improvement has reduced ANZ’s reliance on both short-term and term wholesale funding.” ANZ said it saw retail deposits grow at 1.8 times, and a 10.1% increase in overall deposits year-to-date. While deposit growth outstripped lending, the bank said its commercial loan book grew by 2.4% in the third quarter, and that mortgage lending volumes were improving on the second quarter.

Divide opening up in buildingAustralia’s two-speed economy is evident in the building sector, industry advocates have claimed. Following ABS figures that showed a decline in every sector of construction except engineering, Master Builders of Australia claimed a divide is evident in the building sector. With residential building declining a seasonally-adjusted 7.6% in the June quarter, Master Builders chief economist Peter Jones said outlook for the sector is grim. “For the building and construction industry overall, a sectoral divide is opening up, with strong engineering construction fed by the mining boom contrasting with a weak building sector caught in the slow lane of a post GFC economy struggling to transition to a private sector led recovery,” he commented. Jones said the figures confirm evidence from a Master Builder’s survey, indicating falling builder sentiment in the commercial and residential sectors.

Australian Unity doubles broker bookFinancial services company Australian Unity has seen its broker-originated loan book grow significantly over the past year. The financial services provider announced it has seen its network of 20 mortgage brokers more than double its loan book over the past 12 months. In addition, general manager of personal financial services Steve Davis commented the company has seen a 27% increase in risk insurance revenues over the same period. “We now have a very strong business, especially when you consider that it was just a few years ago that we restructured and moved from a retail, sales driven shop approach to a modern advice driven financial services business,” he said. While primarily a financial planning business, Davis indicated the business has brokers working across every mainland state, and the ACT.

Little difference between majorsBanks are failing to differentiate on customer service, a survey has indicated. A recent Roy Morgan bank customer satisfaction survey has shown the gap between the major banks continues to narrow, with less than 2.5% separating the front-runner, ANZ, from the bottom-ranking bank, CBA. ANZ has ceded much of its lead in customer satisfaction, now only eclipsing Westpac by 10bps. ANZ posted only a 0.1% rise in satisfaction during July, increasing to 76.6%, while Westpac surged 50bps to 76.5%. NAB has also given up some of the ground it gained on Commonwealth Bank after moving ahead of CBA in March. NAB’s satisfaction ranking fell 30bps in July to 74.7%, while CBA’s rose 50bps to 74.2%. Roy Morgan said the banks were doing a poor job of differentiating their propositions.

http://www.planaustralia.com.au

20 www.brokernews.com.au

Analysis

Small fish in a big pond

Consolidation and scale may drive income benefits for some, but smaller independent brokerages question whether the numbers really add up

A recent research report has indicated that the scale provided by large broking franchises may lead to healthier revenue prospects for brokers.

A poll conducted by Macquarie Practice Consulting has shown that brokers in large firms earn more per broker than their solo-operator counterparts. As much of the industry argues for the benefits of scale and continued consolidation, Macquarie Practice Consulting’s Fiona Mackenzie has said brokers in larger firms may have more earning potential.

“The results are saying that with the smaller firms, which are one broker firms, they’re earning around $142,000 per broker, whereas larger firms are earning about $175,000 per broker. The main reasons we’re seeing in the results is the diversification of revenue, so they’ve got other revenue streams which are supporting the mortgage revenue,” Mackenzie said.

However, one top broker remains unconvinced. MPA Top 100 Broker Justin Doobov of Intelligent Finance has questioned the results, saying while the numbers may indicate more money overall for larger firms, not all of this is being passed on to brokers.

“When you actually read the survey it says that larger businesses have more formal referral arrangements than smaller businesses, so smaller businesses have more informal arrangements. What that actually shows me is that while larger businesses might have more income, more gross revenue per broker, I’d actually argue that the net revenue – the profit that each broker takes home – in a smaller business is probably more,” he said.

Doobov argues smaller businesses may be better positioned due to smaller overheads. He commented that large national franchises have operating costs that could end up eating into the amount of revenue their brokers actually see.

“Chances are if they’re a larger business they’ve probably got formal referral arrangements, so they’re probably paying a referral fee. Yes they may turn over more per broker, but actually the net amount that stays with the business is probably a lot less for some larger businesses,” he said.

Mortgage Choice broker Andrew Hawking agrees that bigger is not always better. He indicated that scale does not automatically equate to increased revenue, and said situations vary from franchise to franchise and broker to broker.

“I know some smaller franchises actually have a very

large income stream, whereas some large franchises have a small-to-medium income stream. It just depends where you are, what you do and how you actually have to try to generate income,” Hawking remarked.

Small business, big portfolioBigger businesses don’t necessarily equate to bigger loan books, either, according to Mackenzie.

“The smaller firms have about $51m per broker, and the larger firms around $40m, which is an interesting result,” she said.

However, Mackenzie has contended that the smaller portfolio size is reflective of income diversification rather than a difference in broker productivity.

“We’re seeing the drivers for that are that the larger firms are being more diversified, so they’re actually earning income from other products, not just mortgages,” she said.

Experience can also play a role, Mackenzie indicated.“The larger firms have more junior, less experienced

brokers coming through who are still building their book,” she remarked.

Even with the larger portfolio sizes of some small businesses, Doobov believes brokers across the board could be doing more.

“I would have expected any broker to be able to maintain $100m–$200m of portfolio, so the 50-odd million they’re talking about is actually quite low. It doesn’t matter whether you’re a big or small business,” he remarked.

Shrink to growDoobov still contends that brokers who can generate their own referrals are better off as small operators as opposed to aligning themselves with large franchise networks. While being part of a franchise may have its benefits, Doobov contends that there are greater revenue opportunities for smaller brokers.

“Being part of a large franchise will definitely assist you with a bigger stream of leads as franchises spend a large amount of money on advertising, though the conversion of leads will be nowhere as good compared to the conversion of a quality referral that you generate yourself from happy clients. From my calculations, for every $5m you settle a month as a small operator, you would have to settle between $6m-$7m per month as a franchisee broker. It is worth running the numbers before deciding to ensure you make the right decision,” he said.

http://www.semper.com.au


Macquarie Practice Consulting recently released a series of benchmarks on the industry’s mortgage broking businesses. Here’s what our pundits had to say about the results.VIEWPOINT

Comment

OPINION

Brokers need to be careful not to add to credit file footprints – and educating them about credit files may just be good for business, writes Joseph Trimarchi.

Since the global financial crisis, lenders have become fearful of the cost of bad credit, and as such have adopted a stringent regime in pricing the credit they extend.

Excessive enquiry on a client’s credit file - irrespective of whether it is for domestic or commercial purposes - may see your client embark upon a perilous journey, where they may be rejected outright for a loan or become subject to an interest rate significantly higher than the most competitive rate offered in the marketplace.

As finance professionals, it’s part of a mortgage broker’s job to assist their clients in maintaining credit worthiness, not only by advising clients on the best form of credit available, but also by making significant efforts to present their clients in the best possible light - as depicted by their credit file - to potential credit providers.

Finance professionals need to assess their client’s credit file at the beginning of the retainer, and not treat it as an afterthought. As

professionals, you must be in tune with how credit providers view your client’s application for finance and what impact the same has on their ability to be approved. This includes the number of footprints that appear on a credit file.

A footprint is defined as activity recorded on a credit file. Given a credit file records a large amount of information, the content of such activity could be wide and varied. Once recorded the information is a permanent fixture on the credit file and remains there for five years.

At the beginning of the retainer, it is preferable that a request be made by the broker for the client to supply a copy of a credit report obtained from Veda Advantage or Dunn & Bradstreet. By the client ordering their own report, the broker has not left a footprint on the credit file and is not alerting future potential lenders the client is shopping around for finance.

Prior to lodging any application for finance on behalf of a client, the broker must be confident the loan will be approved. In most cases, prior to lodging an application contact should be made with the prospective lender in order to establish prima facie (on the face of it or at first glance) if the application stands a good chance of being approved, whilst making it abundantly clear the request is only a preliminary attempt in order to ascertain the client’s prospects of approval and

not an application for finance. As such, this will mean that no enquiry will be noted on the client’s credit file.

Finance professionals will be served well by educating their clients about the importance of protecting their credit file’s integrity. This may be done by adopting this message as part of your monthly newsletter sent to clients, which may have the added benefit of keeping the marketing message you wish to send useful, thereby preventing your client’s from falling victim to the carnage left in the aftermath of excessive footprints. Typically, your clients should be educated about the inherent danger of browsing online websites and inadvertently lodging an application for finance.

The story you wish to tell potential lenders about your client is one of stability and a calculated borrowing capacity, not one of instability as depicted in your client’s credit file. Numerous footprints - in particular applications for finance - raise a level of suspicion as to your client’s credit worthiness and invariable lead to an application being rejected.

The above information servers only as a guide and should not be relied upon as legal advice. Joseph Trimarchi is the principal of Joseph Trimarchi & Associates solicitors.

Credit file footprints and the story they tell

Justin DoobovIntelligent Finance

On growing mortgage broking revenue: I think the results are positive because most of the poor performing brokers have already left the industry, due to regulation. If you do a statistical analysis you are left with higher

performing brokers and higher results.On mortgage broking book sizes: I expect

that any broker should be able to manage a $100m to $200m portfolio, so the $50m [cited in the Macquarie Practice Consulting survey] is actually quite low – it doesn’t matter if that’s a large or a small business.

On mortgage broker revenues: If the gross income per broker is $146,000, once you take into account rent and all the fees and service costs of running a business, the average broker probably earns $70,000 to $80,000. If you are an average broker you probably have to relook at your career because to earn that sort of income for the amount of hours you are expected to work is probably not viable. Top broker firms are probably earning double, triple, quadruple that amount, and it makes it worthwhile, but if you are earning that sort of income before you take out all your expenses, I think you need to get some more referrals to ramp up income.

Andrew HawkingMortgage Choice

On mortgage broker income growth: I think there’s probably two main reasons why there’s a bit of growth happening in incomes for mortgage brokers. The first one is because a lot of people are actually moving out of the mortgage

broking industry, there has been time to actually acquire business, so they could be growing income from new loan books they have acquired, or they are diversifying their income to different income streams.

On differences in revenue: I know with some smaller franchises they actually have a very large income stream. Larger franchises have a small to medium income. So it just depends where you are, what you do, and how you actually try and generate income.

On streamlining businesses: If you had an older, more established franchise, then what you have seen is if they have surplus staff, then those staff are no longer there, so what you will see is that because they have grown their loan book over a period of time, it’s going to be high in value, but the number of people operating it is going to be smaller.

Fiona MacKenzieMacquarie Practice Consulting

On mortgage broking incomes: Well it has been a tough environment, but we have found that on average returns have increased by 13%. So what we are seeing is brokers have been really confident in their business, and are

looking to drive efficiencies in their business. They also seem to be quite confident about adapting to change – brokers are quite an optimistic bunch.

On differences in revenue: Our results show that with the smaller firms – which are one broker firms – they are earning around $142,000 per broker, whereas the larger firms are at about $175,000 per broker. The main reason we are seeing these results is diversification of revenue – they have got other income streams that are supplementing the mortgage revenue.

On mortgage broking loan book size: The smaller firms have about $51m per broker, and the larger firms around $40m per broker, which is an interesting result, but again we are seeing the key driver for that, being that the larger firms are actually more diversified, so they are actually earning revenue from other products, not just the mortgages.

To view the full story, go to www.brokernews.com.au/tv

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Australian Mortgage Brokers’ Paul Gollan attacked an anonymous letter from a smaller niche lender, which had criticised aggregators for not making more additions to their panels (Aggregator defends panel appointments, 17/08/11). He got these responses online.

Looking for the “like” button. Well said Paul, and poor form to the lender who chose to remain anonymous. If you are

worthy for panel inclusion, put your name to your claims so that we may consider why you are not already on there. Chances are we know the answer to that, otherwise there would be no cause for your complaint.Panel Lender Manager on 15 Aug 2011 12:10 PM

I have a pretty good idea of who the BDM was that wrote the article. They are a representative of a very well-structured,

well-established and liked non-bank lending institution. As an aggregator, if you do not provide the options to your brokers that other brokers have access to then over time your brokers will either deal off-panel or leave your firm – this is a reality. The lender at the point of this discussion has never missed a payment of commission and did not even increase their rates during the GFC as they rightfully could have. They provide products that suit a whole array of clients that your brokers will be saying ‘no’ to when they could be picking up another deal and helping more customers. Maybe if aggregators took the time to speak with these lenders or even simply return their calls you would actual find some good reasons on why to include them onto your panel.Service on 15 Aug 2011 01:21 PM

I deal with a successful medium-sized aggregator and would be concerned if they closed consideration to all new

opportunities, especially non-conforming funders that have real benefit and perspective. I thought with the new legislative changes, brokers needed to be armed with the appropriate tools and best

FORUM

To vote in our latest online poll or get involved in our forum, visit our home page at www.brokernews.com.au

products to service our clients? Aggregators walk hand-in-hand with the large financiers –the banks – and are just conduits/servants of the banks. Why would the aggregators want to work with other finance options and benefit their brokers and members when they are being paid handsomely acting as a “teller”, distributing funds and getting bonuses from the big end of town? Did we see these aggregators fight for the benefits of brokers when the elite brokers were being courted by the big banks for volume and anyone not turning over millions per month we relegated? Paul, get 10 non-super-sized brokers in for half an hour and get their feel on what the banks and aggregators don’t do for our industry. Hopefully then aggregators might just pay respect to all levels of participants.Adam on 15 Aug 2011 03:08 PM

The biggest risk to broker commission is the aggregators themselves. Despite all the rhetoric, you do not have to scratch

very hard to dig out stories of trailer forfeiture. Only when brokers can freely transfer their clients and trailer books between aggregators – as do financial planners between dealer groups – will the true “restraint of trade” in the industry be cleaned up. The ACCC and ASIC are asleep at the wheel as usual.Patrick on 17 Aug 2011 02:00 PM

Should brokers be able to use the ASIC logo? The watchdog doesn’t think so. (Don’t use our logo warns ASIC, 18/08/11) Here’s how readers responded to the regulator.

“ASIC is concerned that use of the ASIC name and logo in conjunction with these identification requirements could cause

consumers to believe the business or company is in some way endorsed or approved by ASIC,” commissioner Peter Boxall said.Is this just me, but I thought if ASIC furnished you with an ACL then you were “approved” by ASIC to be an ACL holder. Is this dry cleaning legislation “all care but no responsibility”?

Granted the use of their logo etc is pushing it, but at the end of the day they have “approved” the license holder – it’s time to take ownership.Ozboy on 18 Aug 2011 10:02 AM

ASIC might give you a licence to provide Credit Assistance, but putting their name on your website could easily appear that

they are approving all your activities. The two don’t go together. I know of one of the “preferred trainers” that was also asked to remove the ASIC logo. It really is trying to use someone else’s credibility and claim it as your own. Would you display the Road Transport Authority’s logo because you have a driver’s licence?Sally on 18 Aug 2011 10:43 AM

I don’t see the big issue. I am proud of my own achievements in my own business. I don’t need to hang off ASIC’s credibility. I

will stand proud on my own thanks.Johnathon on 18 Aug 2011 02:32 PM

Poll: Would you ever ‘like’ a bank online?

St. George recently made its first foray into social media, and other banks are already there – so we asked our online readers if they would connect with a bank via social media.

Source: Australian BrokerNewsPoll date: 11–23/08/2011

http://www.brokernews.com.au

http://www.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] Talk


If anyone needed proof of the unique Australian obsession with property as a method of quick capital gain, they need look no further than hit TV show The Block. As most people know, the reality show pits contestants against each other to

renovate – and subsequently flip – properties, hopefully for a decent return. This year, the show has chosen Melbourne as a location, with host Scott Cam claiming in one episode that Melbourne was rated one of the world’s hottest property markets. However, three of the four houses featured failed to sell at auction, with the lowest-priced property the only one to get above reserve.

SQM Research managing director Louis Christopher hotly contests the positioning of Melbourne as one of the world’s hottest markets.

“Rated by who? By them, of course. That’s rubbish. Melbourne’s one of the coolest markets right now. It’s on all the official data. APM, ABS and RP Data all say the same thing: that house prices are falling in Melbourne,” Christopher said.

Christopher believes the Melbourne market faces some serious challenges. With auction clearance rates consistently below 60% and around 43,000 houses sitting on the market, Christopher said demand in Melbourne has disappeared. The overhang of stock in Melbourne, Christopher commented, is larger than during the GFC. Vendors, though, have yet to adjust to the environment.

“It’s a great mistake to try to sell above the market right now. A lot of vendors are being frustrated at this point in time,” he said. “A lot of stock on market is not selling. It’s just piling up,” Christopher said.

A stagnant marketMPA Top 100 Broker Mario Borg of Mortgage Achievers in Melbourne has witnessed this oversupply firsthand.

“It’s all about supply and demand. At the moment the market is in equilibrium, and to that end capital growth has stagnated,” Borg commented.

Borg is optimistic that the stagnation will pass as buyers regain confidence and re-enter the market.

“I see slow growth for a little while with a pickup in demand and prices by this time next year. If interest rates are reduced, then this will happen sooner. Fear is holding back the market, but this will pass, just like

Reality TV show The Block may have attempted to make the Melbourne market look like a goldmine, but the true market is a different story

Melbourne property on The Block

every other time in the past,” he said.Christopher, however, does not believe recovery will

come so quickly.“It’s going to take a while to clear this overhang. We’ll

need a sudden increase in demand to absorb it all. We saw a little bit of this back in ’08 when Sydney had a bit of overhang. It went very quickly as buyers snapped up some properties and sellers took others off the market,” he said.

But clearing this overhang will require vendors to either readjust their expectations, or remove stock from the market.

“Vendors who really aren’t that keen to sell and have properties listed above the market are foolish, because they’re wasting everyone’s time and money. They’d be far better off either meeting the market or withdrawing their property,” Christopher commented.

Big money scarceDevelop and Invest director Andrew Brumby, also an MPA Top 100 Broker, said vendors at the upper end of the market are having the most difficulty attracting buyers.

“The top end – $2m-plus – has been affected the most. We hear stories of property sold at $5m two years ago, and [it] can’t get anywhere near that now,” Brumby said.

Christopher agreed, saying the $1m-plus segment of the market has been hit hardest. This is the market segment Nine was banking on for its houses on The Block, reportedly shelling out $3.6m for the four Richmond properties. While the network no doubt recouped its costs many times over in advertising dollars, everyday vendors expecting big prices may find themselves sorely disappointed. With increased buyer access to valuation and research tools, Christopher said Melbourne vendors can no longer get away with inflated asking prices.

“The days of finding some poor sucker to pay an inflated asking price are gone,” he said.

NUMBER CRUNCHING

Source: RateCity

Source: Bankwest

Fixed rate growth: July 2010 – June 2011 Number of years required for FHBs to save a deposit

25.3*years

* The amount of time it would take the average first home buyer couple to save a deposit for a house in Perth suburb Peppermint GroveSource: Bankwest

At a glance…

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Adelaide

Hobart

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Jun-11 0

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NSW Vic Qld SA WA

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WORLD

Brokers take aim at products, regulators

US mortgage brokers have accused regulators of causing a “profoundly negative impact on mortgage brokers and consumers” in their response to the mortgage market crisis.

In testimony delivered before the Committee on Financial Services in the United States House of Representatives, National Association of Mortgage Brokers chairman of government affairs, Mike Anderson, said that recent regulations “disproportionately target individuals, entities and the disclosure of information, rather than addressing specific issues related to faulty products or bad behaviour” on the part of banks.

“For example, in the pharmaceutical industry when a

faulty product is discovered to be causing harm to consumers using that product, the FDA steps in and requires the distribution and use of such product to be discontinued,” he said. “In such circumstances, the FDA does not attempt to impose further restrictions on the pharmacies, pharmacists or physicians.”

Anderson said the “epicentre” of the market’s problems were faulty loan products, including the pay-option ARM, stated income, no-doc loans and Alt-A and sub-prime mortgages, but the Federal Reserve Board and Congress had not focused on creators of these products.

British FTBs aim for age 35

Britons expect to take their first step into the property market

at the age of 35, according to research from Post Office Mortgages published by UK publication Mortgage Strategy.

According to the research, 53% of potential property buyers aged between 25 and 34 don’t think they will ever be able to afford to buy property.

In addition, Mortgage Strategy reports that 50% of prospective home owners between 25 and 34 have said they can’t afford a deposit for a home unless their circumstances significantly change.

Women were slightly more optimistic than men, according to the results, expecting to buy their first property when they are aged 34, compared with a 37-year-old expectation for men.

At present, the average FTB the Post Office lends to is aged 30.

Brokers urged to beat rate hikes

Canadian mortgage brokers have been urged to grow their value proposition outside of interest rates, if they are to be seen as mortgage professionals like financial advisers.

As reported by Key Media sister publication Canadian Mortgage Professional, Calgary-based broker and motivational speaker Greg Williamson outlined his Inflation Hedge Mortgage Strategy in a webinar entitled “Winning the Rate Wars”.

“This strategy helps to recast brokers in the mould of a financial adviser, extending that role beyond renewal time and refinances. It also helps clients prepare for the inevitable rate hike so that when they come up for renewal, they’re not going to get slammed,” he said.

What’s it called when after 10 years you re-connect with an old friend on Facebook and then start interrogating them on intimate financial details? Sociopathic networking?

Anyhow, we’ve all heard about the broad sweep of the property crash, the sub-prime crisis and the GFC. I thought that I’d get a personal perspective of what it’s been like as a property purchaser and mortgage holder in the US during this period.

My friend lives in sunny Southern California – clearly location is key – and is fortunate values haven’t tanked in his area. He also wasn’t a first home buyer and had decent equity

in his 2004 purchase. I was most interested in his state of mind at the time and how he sees things now.

Back then, his existing house had doubled in value in two years and the pressure was on to sell and get into the biggest house you could afford – even if it straps you – as “real estate always increases in value over time”. There was a massive feeling of excess demand and inadequate supply – the pressure was to “get into something quickly” before prices became out of reach. On his new estate the developers held a lottery to allocate new homes to buyers – except of course there was no

lottery; it was smoke and mirrors to create the illusion of demand.

My friend took himself to the limit of affordability on what we’d call a ‘low start’ variable rate to minimise the repayments. He’s now at the reset where it goes to the current market rate.

How does he feel now? He still believes in home ownership, but his dominant emotion is fear. Fear of the future. Affordability is such that vacations and eating out are rare. This has caused relationship stress, made him feel inadequate and dented his self-confidence.

Amongst his peer group, some are in negative equity but staying put, some are waiting to be evicted and some have tossed in the keys – but the dominant emotion amongst his friends is also fear – and guilt.

Regardless, the intrinsic belief in a ‘home of your own’ remains – “renting may be money saved; but not money made,” as he put it.

So, is there anything in my friend’s experience for us here?

While the consensus may be that our market is in for a period

of ’stability’, a search for articles as little as 12 months ago reveals that this ‘illusion of demand’ was front and centre. I have a mid-2009 forecast from a senior industry figure predicting strong growth in property prices through to 2012 due to inadequate supply. I don’t think so. Shelter is demanded, whereas house purchases must be afforded. Desire is not correlated to performance.

The future is uncertain – it’s a different country. Australians’ core values continue to include a belief in the merits of home ownership. It would be a pity if for many of us in the future the price of home ownership included dominant feelings of inadequacy, fear and guilt because the demand magicians once convinced us to ‘get it whilst it’s hot’.

There was clearly a real estate bubble in the US. Is there one here? A little too early to tell. I do know, however, that when you’re in a bubble-bath, everyone tends to get wet.Kym Dalton, www.futurology.com.au

Life in a bubble can get you wetWhat’s life like before – and after – a real estate bubble? Kym Dalton tells a US housing bubble tale


Toolkit

Brokers are underutilising their CRM systems, and there are some key areas where they are falling down. We asked Stargate’s Brett Spencer for some CRM tips

If you don’t use

the full data component, then how can you manage and market to a client after settlement?

Three reasons why a CRM often failsCRM – or customer relationship management – plays a vital role in obtaining and storing valuable data about customers. But where does it go wrong? Business analyst Joanne Church from leads management firm Value-Ad provides the answers.

1. Manual inputting of dataCRM is about data, and lots of it; however, it still relies heavily on the discipline of an individual to collect and capture the data correctly. If only portions of the data are collected and captured and passed on, the effectiveness of CRM is immediately jeopardised.

2. Sales people are not administratorsCRM systems are often viewed by sales people as another step in the ever-increasing admin process. They are creatures of habit; they talk to people face to face, over the telephone and via email. If they are required to log into another system their enthusiasm wanes fast!

3. Measuring the wrong thingMost CRM systems focus on customers after they are already deep in the sales pipeline instead of looking at prospects. What is happening to the leads and prospects that never get captured? What about the stuff that happens without anyone knowing?

Source: Value-Ad

Data captureAs data is the core of a CRM’s usefulness, it is the key to getting closer to clients through marketing. However, it is in capturing data that many brokers are in fact falling down.

“If you don’t use the full data component – if they only put in half the data, or not the correct information – then how can you manage and market to a client after settlement?”

It is this leveraging of available data for marketing where many argue mortgage brokers could improve. Spencer said brokers who use the files in a system to keep in contact with a customer benefit from repeat business. Such strategies can be as simple as a birthday letter, or a letter on the anniversary of buying a home. Alternatively, it could be specific offers.

“I know a broker in Melbourne who does nothing but market his existing database,” Spencer said. “He has 700 clients and manages 30 to 40 loans a month. His clients come 100% through existing client referrals,” he said.

Spencer said that it comes down to not having the time, and the small amount of work required. “I think in many cases it’s laziness; it’s more a case of ‘I’m not going to worry about that, I’m going to do something else’ – I think that’s the biggest reason.”

DiversificationBrokers should also view their CRM as a key tool in assisting the diversification process, in order to generate increased revenue and deliver exceptional service to clients.

According to Stargate’s Spencer, brokers need to see a CRM system as being for more than “just a loan”, as it can assist in providing a spectrum of related and peripheral services.

“You need to be able to sit with your customers, and say to them that you are able to provide a service for anything in relation to the mortgage application,” Spencer said.

Some CRMs have the capacity to include business partners specific to the mortgage application – like mortgage insurers and valuers – as well as providers who can assist with related credit products, including personal loans, credit cards, insurance and accounting.

Spencer said they can also incorporate ‘customer specific partners’ to create a ‘wow factor’ – including the likes of removalists, and assisting with arranging utilities arrangements. “There is a massive opportunity for brokers who can provide this sort of service,” he said.

CRMs and you“M

any brokers don’t do anything to utilise their existing customer database,” argues FAST managing director Steve Kane. (CRM data is greatest asset: Kane, Australian

Broker issue 8.16) But if CRMs are such an asset, how can their full potential be continually overlooked?

According to Brett Spencer, managing director of Stargate, brokers are too focused on loan processing via CRMs. “What brokers have to realise is that a CRM is more than just a glorified loan processing system,” Spencer said. “Brokers do have the ability to process loans from the point of a customer lead, right through to settlement, but they don’t understand how to use their client base after that. That’s where they fall down,” he argues. So are there some key areas where brokers could improve their CRM use – and subsequently, their business?

E-lodgmentAre you using your CRM for e-lodgment, or going direct through free bank platforms?

Stargate’s Spencer said many brokers choose a free online bank system, rather than lodging through the Symmetry system, which costs approximately $10 per loan. In fact, out of 164,000 loans processed over 12 months, only 30,000 went through the platform. “That means that the CRM system for many is becoming defunct,” Spencer said. “You are not getting all the back-channel messaging, and that is a big issue,” he said.

While acknowledging the cost, Spencer said brokers miss out on the functionality, which would enable them to monitor through regular reports the entire process – eliminating problems such as ‘forgetting’ or tardy lender responses – to stay on top of their customers.

Spencer said the cost and time efficiencies that could be achieved are in the vicinity of two to three hours per loan file, when taking into account 30 minutes to enter two sets of data, and manually updating back-channel messaging not coming into the system.

27www.brokernews.com.au 27www.brokernews.com.au

What a difference a year makes … or not. Australian Broker reflects on the punditry, breaking news and trends that made headlines in the magazine 12 months ago

Australian Broker issue 7.17Headline: Brokers not ready for compliance (page 4)

What we reported: Last year CreditWise director of legal Kate Keating claimed brokers were unprepared for NCCP compliance. Keating contended that brokers did not fully appreciate how difficult compliance would be, and had underestimated responsible lending provisions. Club Financial Services director David Garner agreed with Keating, saying compliance would prove particularly challenging for solo operators.

What’s happened since:While the disclosure regulations have finally been released, they are not due to be implemented until October. MFAA CEO Phil Naylor has claimed that brokers are ready to implement the disclosure requirements, and that no MFAA member would have difficulty complying with the regulations. SAKS Consulting principal Steve Paterson has been less optimistic, claiming that the full weight of compliance won’t be understood until cases are tested in the courts.

Headline: Aussie slashes fixed rates (page 12)

What we reported: Aussie last year cut its fixed rates below 7%, resulting in the first time a fixed rate had dropped below the industry’s cheapest variable rates since 2009. The move came mere months before the RBA hiked rates in November, with the banks responding by moving over and above the RBA. Aussie CEO Stephen Porges predicted such a move at the time, saying that the mortgage market was due for turbulent times.

What’s happened since: Cutting fixed rates has become a popular pastime for lenders these days. A flood of fixed rate cuts came through in August, with lenders such as CBA, Westpac, St. George, ING Direct and Citibank all pricing their fixed rates below 7%. In spite of the discounting, brokers warned borrowers against chasing cheap rates. MPA Top 100 Broker Justin Doobov said he advised clients to fix part of their loans for certainty of repayments, not on speculation of the RBA’s next move.

Headline: Bankwest a good buy: CBA (page 13)

What we reported: CBA last year was forced to defend its controversial purchase of regional brand Bankwest after it was revealed the lender carried $212m worth of poor quality loans. CBA chief Ralph Norris told media at the time that Bankwest would refocus on quality following the CBA takeover, and that those responsible for taking on poor quality loans would pay with their jobs.

What’s happened since:Bankwest is certainly looking like a better buy than it was a year ago. The bank posted a massive turnaround this year, reporting a $463m profit in contrast to last year’s $45m loss. A large part of the result was improvement in the bank’s loan book as it ran off poor quality business loans. Bankwest saw an 86% decrease in loan impairment costs over the year.

Headline: ASIC signals solid licensing start (page 16)

What we reported: As it kicked off licensing last year, the credit watchdog boasted a smooth start to the process. ASIC commissioner Peter Boxall said the online application system for ACLs and credit reps had been well received, and that the regulator had tried to “cut unnecessary red tape and the cost of compliance for credit participants”. By mid-August of last year, ASIC had received 411 credit licence applications, and had granted registration extensions to at least 19 parties.

What’s happened since:ASIC claimed success earlier this year as the initial wave of licensing drew to a close. The regulator licensed 6,081 businesses and registered 24,005 credit reps. The licensing process resulted in four formal application refusals, additional conditions imposed on 11 licensees and 400 applications being declined due to being incomplete or inadequate. Boxall stated that, with initial licensing behind it, the regulator would begin to take a “less forgiving approach” to unlicensed activity.


Caught on camera

AFG held a series of state-based awards events in August to recognise its top performing brokers and broking groups, treating them to a fine meal, and a star-studded line up of celebrities and motivational speakers

Image 1 AFG’s WA office: Liam O’Donnell, Sally-Anne Merrington, Michele West, Alan Walker, Wendy Goddard, Clara Sciarretta, Paul Baker, Jia Jia Wong and Jeremy Wealleans

Image 2 North West Finance’s Andy Bradshaw, Ian Poulter, Belinda Bradshaw, Bill Knighton (AFG Champion WA Loan Writer of the Year) and Deb Knighton

Image 3 Better Choice Mortgage Services, AFG Champion WA Business of the Year: Ashleigh Kenworthy, Matthew Kenworthy, Belinda Cosentino, Jarred Costantino, Vic Giannakis, Sophia Bennet, Derren Bessen, Cassandra Wayne, Leigh Burnside, Kirstine Leavers, Craig Leavers, Vinci Coventry, Jim Klifunis, Monica Klifunis, Keryn Allen, Helena Perriman and Barry Allen

Image 4 IFG Home Loans, Runner-up WA Business of the Year: Phillip Nguyen, Tarina Hendarto, Vic Tor Koon, Anna Huynh, Mark Nguyen, Katrina Phan and Joy Chen

Image 5 Better Choice Mortgage Services principal Vic Giannakis and AFG WA state manager Alan Walker

Image 6 Jodie Carle from Amity Mortgage Solutions, Diana McKenzie and

Catherine Borromei from Loanport and Kerri Buurman (Buurman Finance Solutions)

Image 7 The ACA Home Loans team with champion broker Raymond Xue

Image 8 AFG chairman Tony GillImage 9 Amelia Kahila (Evolution Home

Loans),with Maxine Gray (AFG Home Loans) and Chris Christofilos (AFG)

Image 10 MC and former Australian soccer player Amy Taylor

Image 11 The Apple Home Loans teamImage 12 Chris Slater (AFG) and David Lennon

(Mac Credit)Image 13 Former Socceroo Captain

Paul WadeImage 14 Hilal Adeyemir (Citibank) with

Serena & Nick HuynhImage 15 Kathy Cummings (CBA)Image 16 Raymond Xue holds the Champion’s

Cup, presented by Chris Slater (left) and Mark Hewitt (right)

Image 17 Tony Semrani and Selmina Aganovic (CBA) with Cathy Webb and Sharlen Hill (ISM)

Image 18 Vibha Coburn (Citibank)

Photography by David Charles

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http://www.australianmortgageawards.com.au


Insider Got any juicy gossip, or a funny story that you’d like to share with Insider? Drop us a line at [email protected]

Mark Bouris host the Australian version of Celebrity Apprentice. Well, Insider has learned Nine is furiously at work casting for the “celebrities” to be involved in the program. As with most celebrity reality programs, they’re scraping the very bottom of the C-list to find people whose 15 minutes expired sometime in the last millennium. Apparently, their major casting coup has been that effervescent bundle of love and inclusiveness, Pauline Hanson. Now, Insider thinks Mark is being very savvy and shrewd by positioning himself as the Australian answer to The Donald (minus the orangutan hair), but Pauline Hanson? Mark could be setting himself up for some major headaches, because if history has told us anything about Ms. Hanson, it’s that a simple “You’re fired” won’t make her go away.

Automated Time-waster MachineYou’ve probably experienced the following scenario more than a few times: You’re queued up at an ATM, already running late as you wait, card in hand. The person at the front of the queue has evidently never seen one of these curious devices before, because they’re moving with the speed of an arthritic sloth crawling up a greased pane of glass. As they incorrectly enter their PIN for the fifth time, actual steam begins to shoot from your ears and your bowtie spins around while making a comical whistling noise. Now, add into that scenario the ability for slow ATM users to chat with bored bank employees. That’s what one company is proposing. An ATM manufacturer plans to introduce machines to Australia that allow users to video chat

When it comes to privacy laws, mortgage brokers need to be pretty damn

careful with their repository of client data, if they don’t want the law to come knocking on the door.

Insider thinks that someone should have told that to an Alberta mortgage broker, who, having no doubt built the trust of clients over many years, ended up treating them like rubbish.

That’s right; said broker decided that the office was getting just that little bit too cluttered with pesky bits of paper, and that it was time to be rid of at least five boxes of files containing all of those clients’ personal information. And where better to put it, than in the garbage?

The data – which was discovered and reported by construction workers, who seemed to be much more aware of the potential privacy breach than the mortgage broker - contained social insurance numbers, credit card information, as well as mortgage values. Wayne Wood, spokesman for Alberta’s privacy commissioner, told the Edmonton Journal that “there are a lot of people’s information in those boxes” and that there may be others. Insider can only hope that local Australian brokers take this as a warning to protect their clients’ privacy, especially with enthusiastic spring cleaning already underway.

Get ready to cringe…Part of Yellow Brick Road’s much publicised deal with Nine Entertainment was an advertising and TV development package which will now see executive chair

Clients not garbage

with branch employees to deposit cheques, set up accounts or even initiate a loan application, utterly defeating the convenience of ATMs. Should these become widespread, anger management classes are going to fill up fast.

Property malinvestmentInsider was recently made aware of a couple from Western Australia’s south-west, who decided to sue a Queensland-based property investment company after they were convinced to purchase a unit that they later discovered was grossly over-priced. A legal action, begun by national law firm Slater & Gordon in the Federal Court in Perth against The Investors Club and two of its employees, alleges the company and the two staff members engaged in misleading and deceptive conduct when they advised the couple (who come from Denmark) to purchase the property on the Gold Coast in 2007. Slater & Gordon alleges the couple were told by TIC that the “Kirribilli Heights” unit in Highland Park was worth up to one million dollars, and they would make an instant profit of $300,000 on settlement. However, after the couple purchased the property an independent valuation revealed the unit was worth as little as $450,000 at the time the deal was made. Slater & Gordon said the couple, who are in their late 50’s and 60’s, trusted investment advice given by TIC and are now hundreds of thousands of dollars out of pocket. The couple is seeking damages for financial losses, interest and costs associated with the purchase. Can anyone else see the parallels? Insider only hopes that the case will not be mirrored by many Australian investors who may have been “sucked in” by the property spruikers, who can only ever see prices going up.

“If only there was a way to make this slower and less convenient!”

“Hmmm... where can I dump these old client files?”

31

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Homeloans Ltd(08) 9261 7000www.homeloans.com.auPage 13

Liberty Financial 13 23 88www.liberty.com.au Page 3

MKM Capital 1300 762 151 www.mkmcapital.com.au Page 2

NCF Financial Services Pty Ltd.1300 550 707www.ncf1.com.auPage 8

PLAN Lending Phone: 1300 78 78 74Web: www.planlending.com.auPage 5 & 7

Pepper Homeloans1800 737 737www.pepperonline.com.auPage 11

NON BANK LENDERMortgage Ezy1800 TOO EZY (866 399)[email protected] 9

SHORT TERM LENDER Mango Media 02 9555 7073 www.mangomedia.com.au Page 1

WHOLESALEResimac1300 764 447www.resimac.com.auPage 17

OTHER SERVICESRP Data1300 734 318Page 18

Residex1300 139 775www.residex.com.auPage 31

Trailerhomes0417 392 132Page 25

AGGREGATOR / WHOLESALE BROKERLoanKit1800 466 085www.loankit.com.auPage 15

PLAN Australia 1300 78 78 14 www.planaustralia.com.au Page 19

FINANCESemper Capital Pty Ltd1 800 SEMPER (1 800 736 737)[email protected] 21

LEGAL SERVICESBransgroves Lawyers(02) 9221 [email protected] 4

LENDER Citibank Mortgages1300 652 059www.mortgagebroker.citibank.com.aupage 32

www.residex.com.au

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http://www.homeloans.com.au

http://www.liberty.com.au

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http://www.ncf1.com.au

http://www.planlending.com.au

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http://www.mezy.com.au

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Documents

Australian Broker magazine Issue 8.17