2006 miaa excellence awards jan 06

2006 MIAA Excellence Awards

Commercial Loan Writer of the Year

Name: Michael Charles Clarke (Business Owner)

Company: PCFS Finance (COMPASS Financial Management Group).

Address: 158 Gordon Street, Port Macquarie NSW 2444.

Phone: 02 65832211 or mob. 0400 030556

Fax: 02 65832303

Email: [email protected]

Website: www.compassfm.net.au (site under development)

MIAA Member no: 7692

Sponsoring Member: Australian Finance Group (AFG)

PCFS Finance – Commercial Loan Writer of the Year

http://www.compassfm.net.au/

mailto:[email protected]

1: BACKGROUND

1 (a)

When and why did you join the mortgage industry?

I entered the mortgage industry on the 25/8/2003 with the intention of developing & promoting a ‘niche’ market brokerage operation specializing in the delivery of financial lending facilities & supportive financial management consultancy to (SMEs) Small to medium size business Enterprises. Moving from 24 years of work in the direct retail banking sector allowed me to offer full relationship based loan facility support to clients, not restricted to a particular suite of products & services, & without conflict of interest. I have long held a particular passion for Small Business, realizing that because of cost inhibitors, they have very limited access to high quality technology & professional resource. SMEs play a very important role in contributing to employment & general economic wealth creation. I was able to establish a ‘partnership’ with the COMPASS group, a fully certified financial planning practice, which allowed access to a qualified database.

(refer to Appendix (A) enclosed . CV listing financial services sector experience)

1 (b)

What skills had you developed prior to your entry into the mortgage industry that became relevant to your current role?

Skills developed are listed as follows:-

Training skills used to deliver external presentations & conduct in-house training related to the banking sector. In the areas of operations, personnel management, marketing & selling , needs analysis & credit skills.

Attended in-house & external based training courses surrounding policy & procedures, OH&S, products & services, legislation impacting on the banking sector, eg UCCC, Credit Act, FSRA, Corp. Law, Trade Practices, Banking Code of Conduct, Privacy Act, etc. (between 1979 & 2003).

Through practical & theoretical training I developed Business Credit Analysis skills in fundamental areas of Financial, Management, Products, External Risk, & Security. Having spent time in both loan writing & loan approving roles with State Bank of NSW & Coastline Credit Union. This Credit Risk analysis, when expanded on, assists greatly in identifying weaknesses in SMEs, & therefore allows the opportunity to develop mitigating strategies to offset those weaknesses. It essentially coaches the SME clients, & creates a communication bridge between them & the banker or lending body.

1 (c)

Give a brief overview of your Full Member sponsor or employer.

Australian Finance Group (AFG), my Full Member Sponsor, is an independently owned, Australian company specialising in arranging loans for almost any purpose.

Ranked as Australia’s number one wholesaler of mortgage finance.

AFG is the largest third party wholesaler introducer of mortgages in Australia processing

PCFS Finance – Commercial Loan Writer of the Year 2

6000+ residential mortgages exceeding $1 billion per month with market share in excess of 20% of the Australian broker market.

Established in 1994, AFG recently announced that they manage more than $13 billion of mortgage finance.

2: PROFESSIONAL DEVELOPMENT

2 (a)

Describe how you extended your knowledge & skills during 2005.

I have enclosed the CPD points record sheet (Annexure C) from 1/11/04 to 31/10/05. During the last 2 year period MIAA have brought the measurement in line with calendar years. During that changeover period, I was awarded the Associate membership level of MIAA . This reflects a higher level of practical & theoretical experience within the industry. I have been advised by MIAA administration that there are only 34 current Associate members. I have expanded on the CPD record sheet as follows:-

24/1/05 Attended Colonial seminar & product launch.11/2/05 Attended Deutsche presentation on the domestic & international prevailing

economic conditions.11/4/05 Published an article in local Hastings Gazette discussing fixed v floating

interest rates.17/5/05 Attended Suncorp products launch.25/5/05 Attended presentation by ‘Financial Planning’ partners.27/5/05 Attended CBA / Colonial ‘connect’ launch – ‘allfinanz’ selling.2/6/05 Attended Commercial product training CBA / Bankwest & Citibank.10/8/05 Delivered ‘Finance & Banking’ presentation. Info. for clients of local

Chartered Accounting practice, Direction Accounting.21/9/05 Attended Macquarie Bank product training.17/10/05 Attended CBA product & policy presentation.19/10/05 Delivered ‘power point’ presentation on ‘Credit Risk’ analysis to a local

Hastings shire group of accountants & solicitors.25/10/05 Delivered ‘Credit Risk’ analysis presentation to local Business Network

group.

2 (b)

Explain how you met any work/life balance challenges during this year.

Entering the mortgage broking industry in August 2003 & establishing my own business, was partially driven by the need to improve ‘flexibility’ & balance between work & home. I have (3) boys, 19, 18 & 11. The ‘flexibility’ allowed me to coach my youngest son’s soccer team each Thursday afternoon through 2005 & attend various Hastings BEC functions in my role as a director. Unfortunately my wife has experienced ill health virtually from the beginning of our 20 year marriage, having suffered Hodgkins Lymphatic cancer in 1988, the removal of a lung due to Bronchiestatis in 1993 & having a ‘Bone Marrow’ transplant in 1999, after having been diagnosed with Leukemia. She is on anti-rejection drugs for the


rest of her life, & at 41, can experience physical struggles from time to time. I finally, in 2005, registered as a Bone Marrow donor & commenced giving blood donations Once again the ‘flexibility’ of self employment, assists me in better managing our family life, whilst at the same time allows me to focus on growing the business.

2 (c)

Where do you plan to be in the next 5 years?

My short to medium term business goals are as follows:-

1. The employment of an additional appropriately skilled loan writer / sub contractor to assist in business expansion.

2. Undertake additional study (via TAFE) in Accounting with emphasis on Taxation & in Human Resource Management, in preparation for business expansion.

3. Further develop the COMPASS Financial Management alliance, currently a partnership of financial planning & loan broking. Looking to add accountancy as part of the group’s services provided.

3: CUSTOMER SERVICE

3 (a)

What is your customer service philosophy & how do you deliver on your customer promise?

To treat everyone equally, honestly & with integrity; in the delivery of a timely, accurate, & high quality service.

In order to achieve this promise I ensure that;-

I respond to a client query within a 24 hour period to ensure action is continuous. I make myself available via mobile phone, land line or email, 7 days a week &

within reasonable waking hours. I complete a proper ‘needs analysis’ (preferably face to face) with the client, to

identify priority requirements which enables me to arrive at suitable solutions. I research enquiries thoroughly, double checking on information allowing for

legislative requirements etc, prior to providing that information to the client. I log a continuous worksheet via the ‘tasks’ option of Microsoft Outlook, diarizing

required follow up action & the date required for completion. As a ‘single’ loan writer, sitting in the position of implementer, I can still maintain

control over the processes & procedures, allowing prompt response without delays, as required. I delegate only in respect to such admin. functions as faxing documents.

Lastly I always offer some piece of information which represents ‘value adding’ to clients but at no cost. Eg. The perusal & tracking of 2, 5 & 10 year bond yields via the Reserve Banks website (open to the public). Value adding at no cost further strengthens the client / COMPASS relationship.


3 (b)

In which ways have you been successful in building a reputation with (i) borrowers, (ii) funders / lenders, & (iii) colleagues?

Management of these relationships from initial contact through to settlement is as follows:-

The Process –

- Appointment is booked for face to face meeting.- At commencement of initial interview, clients are shown my ‘Introduction’ folder which

includes CV, qualifications, awards, testimonials, schedule of commission payments received, practice profile, advice of service fees charged etc. This helps them to understand what we provide, & how COMPASS can meet their financial service needs. This also assists in establishing the beginnings of a ‘trusting relationship’.

- A full needs analysis is then completed, through the use of a proper questioning technique to determine priority financial needs. Once these are determined, an action plan is adopted outlining the provision of required data / information to complete a concise commercial loan proposal. Confirmation of this is faxed or emailed to the client with a ‘letter of introduction’. Accompanying the Letter of Intro. are the appropriate finance broking contracts, consent forms etc. as per legislative requirements. I have attempted to maintain uniformity as per ‘regulated’ lending legislative requirements.

- On receipt of all necessary information from the client, a formal ‘letter of engagement’ is issued in duplicate, requiring execution & return.

- The appropriate commercial loan submission is completed inclusive of required cash flow projections, financial analysis spreadsheets etc. Risk analysis is critical at this point & can determine whether we should proceed to the actual loan submission stage. At this stage ‘business risk’ issues are discussed with the client, with notes taken as to how mitigants can address these risks. A timeline for steps in the process is also advised to the clients, ie. Approval, issue of appropriate offer document, valuation if applicable etc.

- If proceeding application is lodged with applicable lender. Industry experience allows me to consider best option for clients prior to lodgement. This limits the spread of personal & business information. A face to face meeting with the appropriate business banker is conducted where possible. However where lodgements are to lenders outside the local area , the concise submission format provides majority of information required to allow a credit decision to be made.

- Once an initial decision is advised to me by the lender, the client is immediately informed. The loan application may require ‘massaging’ in order to convert it to an approval, & it is at this point, that issues & obstacles are worked through & resolved with client & banker. It is important to mention that if the client was initially referred to myself, by an external accountant, centre of influence etc; then they too are kept informed of process.

- Apart from the actual approval, generally the use of email &/or fax is employed, to confirm positions with clients, referral sources & lenders alike. As mentioned in 3 (a) above Microsoft Outlook is utilized as a ‘tracking’ system, but doubles as an ‘audit’ trail in need. Of course each client has their own labeled ‘paper based’ suspension file.

Microsoft Outlook is also utilized to diarise quarterly contact with clients & monthly contact with referral sources, centres of influence etc. This forms part of my marketing plan.

In addition to the above & as a part of a ‘Disaster Recovery Plan’ for internal use, I have prepared an ‘Operating Procedure’, a paper on ‘Legislation Impacting on Mortgage &


Broker Industry’, & a ‘Home Loan Processing Procedure’. These will assist future staff & existing staff of COMPASS to maintain operations & continuity of client service in my absence.

Apart from ‘the process’ explaining how I build & maintain the relationship with the borrowers, the area of ‘relationship building’ with referral sources & lenders, can best be seen by referring directly to the relevant references enclosed. Main referral sources Accountants / Solicitors see me as an extension of their business. As they can be tax driven or caught with legal scenarios with their clients, the financial ratio analysis work & overall credit risk assessment, that I deliver, provides them with professional support & adds value to their business. In addition to this, I receive work from other brokers & have also managed their clients whilst they have been on leave. I have obtained permission from 3 of these associated brokers. A phone call to Tom Lockwood ‘The Mortgage Man’ 65 831599, Mark Grant of ‘Mortgages & More’ 65 837516, & Paul Trevillion of Newstate Finance P/L 65 837611 will confirm information discussed. They also utilize my technical skills in assisting their business clients.

3 (c)

List two examples where your customer service levels were considered to be outstanding & explain how your business reputation was enhanced.Example 1.

19/8/2005 Rec’d phone call from external accountants (referral source).They had a client working in a local curtain manufacturing business looking to purchase the business as a going concern. Total funding required was approx. $315,000. Management & industry experience were evident, but a significant shortfall in allowable security values existed. ($150,000). The current owner had lost business focus. Although profits were strong, & business was well established, the debtor days & erratic deposit taking policy on job commencement, meant that ‘cash flow’ requirements were hard to determine. Security & Cash Flow identified as two main areas of concern.

14/9/2005 Gathered all required info., issued appropriate engagement letter, & submitted the loan app. to the NAB business banker in Port Macquarie. They knew the business & under delegation limits, could carry security shortfalls such as this. Under ‘Financial Risk’ section of the paper we pointed out that by improving deposit taking from 20% to 50% of finished cost, the ‘funding gap’ in the operating cycle could be closed. This was demonstrated in the cash flow projection.

21/9/05 NAB refused loan on basis of security shortfall coupled with the non alignment of historical cash flow requirements & projected cash flow requirements. The client/purchaser had 2nd thoughts deciding not to proceed.

13/12/05 After some ‘cooling’ & initial decision by client not to proceed, I was requested to resubmit the loan with additional info. proving that the cash flow funding gap could, & would be closed. I also requested NAB business banker to call at the business address, again, & concentrate on the break up of WIP, & actual debtors. NAB banker then realized &


confirmed the business’ ability to close ‘funding gap’. Formal loan offer document issued 23/12/05.

As an intermediary, my persistence, technical knowledge / experience, & ability in communicating the issues to all parties, achieved what was initially thought to be, a deal that was too difficult to bed down. At all times, client, accountant, banker & in part vendor were kept informed as events progressed.

Example 2.

1/6/05 Met with 3 proposed partners looking to purchase the freehold & business of a local Port Macquarie nightclub. Purchase Price $1.050 Mill. They required to ‘gear’ up as much as possible, 80% was a loan security ratio discussed at the time. Management experience very strong, but in such a ‘specialized’ industry a 50% ‘geared’ position is a more acceptable risk position for a lender. Licensing requirements, public liability issues etc. reflect a very heavily regulated industry.

28/7/05 Collated all info. & issued appropriate letter of engagement. Proposal completed & lodged with NAB. After researching the local business bankers, once again NAB was selected due to delegations & knowledge of business. As ‘gearing’ was high & repayment reliant on cash flow from the business, a going concern valuation was required. Main ‘risk’ area, apart from high ‘gearing’ was the margin volatility in historical financial performance.

4/10/05 Loan approval received from NAB at a level of $770,000 (just on 74% gearing), after some additional work was done on Business Planning & projections. Matter settled 22/11/05.

These borrowers were relatively young & required some ‘coaching’ & education in the presentation of their business loan proposal. To achieve this & obtain a 74% geared position against a business in such a ‘specialized industry’, reflects the value of myself as an intermediary in being able to articulate their needs to the banker.

In both the above examples my business reputation was enhanced by the fact that we achieved favourable results. The bankers realized the value of my knowledge & presentation skills, in making a significant reduction in work for them. My reputation was enhanced with the clients in that they realized using a highly skilled intermediary offered them the best chance of a positive result. The reference from Jennifer Priest (enclosed) refers to Example (1) used above.

3 (d)

Describe how you have forged or strengthened business to business alliances in 2005 & associated results.

Referral sources:I have 3 associated accounting practices acting as main referral sources (see reference from Direction Accounting). The relationship with one of these referral sources (Direction Accounting), has been strengthened through my delivery of Finance & Banking module presentations for clients of their Business Success Program. That accounting practice also has an associated ‘business broking’ arm. My technical skills have been used to


prepare & submit loan proposals for clients intending to purchase some of those business’ advertised for sale.

Other referral sources includes the well established local finance company known as Newstate Finance, who generally broker Leasing, Chattel & HP facilities. Our relationship strengthened with joint work completed on several Chattel facilities through 2005 (eg. 95k saw sharpening machine & 124k granite benchtop saw). I provided financial analysis in support of the related finance applications. I also completed work for ‘The Mortgage Man’ & ‘Mortgages & More’ referred to in 3 (b) above.

Internally our COMPASS group continues to grow & strengthen, with referrals flowing freely between my Financial Planning (CFPs) (partners Rob & Warrick) & myself. The 2 business examples used in 3 © above have both been referred to one of my partners for a full financial planning & ‘risk’ insurance analysis. (see reference from COMPASS). From inception in 2003, this partnership provided a ready made database for the broker lending operation. It was successful from the outset as 50% ownership, meant part responsibility for its success also rested with the Financial Planners (partners).

Networks:

Throughout 2005, I have continued to participate in the BEC networking functions, monthly meetings & Small business expo during September 2005. In addition I joined the local ‘Mariner’ chapter of the Business Network International (BNI) in September 2005, which is a formal networking group. It meets weekly Wednesday morning. The network members refer business by a direct card referral system. The principal philosophy being, ‘Givers Gain’. I am the Secretary / Treasurer of the group.

Lender Alliances:

Strengthened through 2005 with full ‘risk’ analysis proposals forwarded to business banking units for Westpac, Macquarie Leasing, & ANZ. In addition ‘new’ business banking relationships were developed through loan submissions to IMB, NAB, Colonial Small Business, & Suncorp. (details of applications & approvals available on request)

My sponsor member AFG has benefited greatly from my continued growth in commercial loan broking (see total dollars written Commercial facilities under 4 (a) below). My professional expertise also assists the expansion by AFG into the ‘Commercial’ loans market.4: ACHIEVEMENTS

4. (a)

List the goals and targets you set for 2005 and associated results.

In respect to ‘sales’ targets, the business commencement date was 25/8/03 Sales results from commencement need to be considered in line with ‘start up’ & rapid growth phase. Results were:-

10 months to 30/6/04 $2537112 months to 30/6/05 $52521 (107% up on 04)6 months to 31/12/05 (banked $28638 + $17693 to settle) $46331 (76% up on 05))


I had targeted to reach ‘breakeven’ position of $57000 in year 3 of operation which will have been easily achieved by 30/6/06, when figures are extrapolated. Apart from agreed partners salary increase, there has been no other uncontrolled expense increases. Cash flow remains positive.

Other financial goals set were to :-

Have ‘trail’ income exceed $1000 per month by 31/12/05. Currently running at $1500 per month, &

Increase Loan book to in excess of $15 mill. loans under management. That figure is now close to $20 mill.

(see enclosed Accountants’ Declaration – Annex. D prepared by Richard Bligh-Jones of GBJ. ph. 02 65847944).

During the 2005 calendar year I wrote & received approval for the following (16) commercial loan facilities:-

Bannerman $95k Chattel mtgeClegg $33.5k Chattel mtgeChristie $29.2k Chattel mtgeDavis Trust $300k Commercial property loanDe Lepervanche / Compass FM $27.2k Chattel mtgeGresham $140k Commercial term loanKing Creek IGA $600k Commercial business mortgageMarks (CBM Moto sports) $50k Chattel mtgeMascord $115.6k Chattel mtgeOldfield $250k Commercial term loanPearson $200k Commercial term loanTidapa P/L $137.5k Commercial term loanWaz@oz P/L $137.5k Commercial term loanDels Curtains $310k Comm. term loan & chattel mtgeRoxys Night Club $770k Commercial term loanSingh $124k Chattel mtge

3.319 Million

Non financial goals set related to the development of an additional referral network (BNI) , achieved; ensuring the Hastings BEC made the transition to its new life under the wing of Port Macquarie Community College, achieved; & steering my under 11’s soccer team to the semi finals , achieved.

4. (b)Nominate the (5) things that you do that make you an exceptional Commercial Loan Writer.

Utilisation of ‘training’ background to educate the clients in loan processes & procedures.

Max. loan application to approval success rate. Ie. Understanding when a ‘deal is really a deal’.

Strong ‘credit analysis’ skills demonstrated in submission with attention to detail. This is being proactive in identifying risks in loan applications, with suitable mitigants explained.

As an ‘intermediary’ the use of strong & constant communication between lender & client, clearly managing & driving the process forward.


Having an overriding view that the client’s ‘best interests’ must always be considered, regardless of whether an approval is, or can be, obtained.

The value in these 5 things to my clients, sponsor broker group, & business relationships are summed up in one sentence. The provision of a quality service, underpinned by a high level of practical skills, enacted with honesty, integrity, & a strong moral thread.

4. (c)Give three examples of how you contributed to the growth of your sponsor’s or employers’ business.

1. Participated in Small Business expo (Sept 2005) showcasing small business’ in the Hastings shire. Compass Financial Management had relevant display material & brochures relating to financial planning products & lending products. Suitable AFG brochures (sponsor broker group) were on display.

2. October 2005 ‘Credit Risk’ presentations delivered by myself to local accountants & lawyer’s, were in part sponsored by AFG.

3. AFG (sponsor broker group) is regularly marketed via my weekly Business Network International group meetings. These commenced in September 2005. Brochures have been provided to group members.

5: BONUS QUESTION

5. (a) In your opinion what are the three greatest challenges Commercial Loan Writers face in an ever changing mortgage industry? How do you intend to meet these challenges?

1. Having the essential credit risk analysis skills, which supports their understanding, of when a loan deal should or shouldn’t be written (from the clients perspective). To overcome this, practical credit risk experience is needed, together with suitable internal training & additional tertiary study where required. A high level of ethics also plays a part in this issue. I will continue with tertiary study in the future either via TAFE or the Securities Institute. My references refer to my ethical standing.

2. A slowing domestic economy with softening growth in retail consumption & construction sectors. This will push the Commercial Loan Writer into considering different income sources, centred around complimentary products & services. Eg. General Insurance, Financial Planning , etc. The ‘allfinanz’ concept is not new. At Compass we are applying this principle now. My income streams are sourced via commercial loan broking, consultancy fees, residential loan broking & leasing chattel finance. I will continue to look to increase income from the ‘Business Planning’ service side of the business which provides scope for expansion, plus expand opportunities for further alliances with residential mortgage brokers & external accountants.

3. Tightening legislative requirements, which has to date, mainly effected the ‘regulated’ loan market, but will gradually broaden it’s cover, bringing some uniformity into unregulated ‘Commercial Loan’ markets. I have prepared a ‘Paper’, on current legislation effecting brokers & the mortgage industry, which I use for internal business purposes. Wherever possible, I will continue to apply regulated legislative requirements to the Commercial loan facilities that I write.


2006 miaa excellence awards jan 06

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