australian broker magazine issue 10.06
DESCRIPTION
The no. 1 news magazine for Australian brokers.TRANSCRIPT
The MFAA CEO says brokers need some time to deal with NCCP before more regulations come through
FULL STORY PAGE 14
INSIDE+POST APPROVED PP255003/06906 APRIL 2013 ISSUE 10.06$4.95
+ ANALYSIS
BROKERS VERSUS PLANNERSThe debate rages over who’s best equipped to serve clientsP10
IN THE HOT SEATPhil Naylor and Peter White take on brokers’ questionsP12
For anyone watching the credit industry, it’s become fairly obvious that ASIC is becoming more active. The regulator has been handing out bans,
cancelling licences and generally ramping up its enforcement activity in 2013. MFAA chief executive Phil Naylor has said the move comes as no surprise.
“We always knew for the fi rst couple of years ASIC would be in help mode, but we’re now at the stage that they’re starting to enforce with more regularity,” he said.
+ MARKET TALK
SILVER LININGSRP Data says the future is looking better for housingP20
Time for a breather
+ NEWS
A look at what’s been making headlinesP4
+ WORKSHOP
STAR POWERCreating online marketing videos may be easier than you thinkP18
+ SPOTLIGHT
CALL FOR PRODUCTIVITYCBA’s Kathy Cummings on the need for effi ciencyP27
+POST APPROVED PP255003/06906 APRIL$4.95
Phil Naylor:
+ SPOTLIGHT
CALL FOR CALL FOR PRODUCTIVITY
01_Cover.indd 1 25/03/2013 3:11:42 PM
NEWS2 brokernews.com.au
NUMBER CRUNCHING
DID YOU KNOW?
1,100**The number of brokers booted from the MFAA for failing to meet the educational deadlinesSource: MFAA
DOUBLE OR NOTHINGAuction clearance rates improving
MAJORS MAKING HEADWAYThree of the big four have seen consumer satisfaction grow in February
Source: RP Data
Source: Roy Morgan
Source: 1300HomeLoan
UP 0.4%
80.4%
WHAT THEY SAID...
BERNIE KELLY “The idea of one man’s loss
being another man’s gain plays out every day in
the Australian market for distressed borrowers” P19
TIM LAWLESS“Buyers and sellers are starting to find that middle ground” P20
KATHY CUMMINGS“There’s nothing so
ineffective as doing something efficiently
that shouldn’t be done at all ” P27
TIM BROWN“I think brokers actually have a great opportunity to move into life and super, which is the traditional role of a financial planner” P10
“I think brokers actually have a great opportunity to move into life and super, which
KATHY CUMMINGS“There’s nothing so
ineffective as doing something efficiently
that shouldn’t be done at all ”
distressed borrowers” P19
TIM LAWLESS“Buyers and sellers are starting to find that middle ground”
13% of homes sold in the three months to December 2012 went for below their purchase price
31.8% of homes sold in the three months to December 2012 went for more than double their purchase price
Will banks adjust variable home loan rates independently of the RBA?
24% Not any time soon
They will make small cuts of up to 0.10 per cent
Expect some reasonable cuts of up to 0.25 per cent
51%
25%
DOWN 0.3%
79.2%
UP 0.4%
77.7%
DOWN 0.1%
76.2%
the MFAA for failing to meet the educational
“The idea of one man’s loss being another man’s gain
the Australian market for
planner” P10
distressed borrowers”
02-03_NumberCrunching+EGO.indd 2 25/03/2013 3:15:30 PM
02-03_NumberCrunching+EGO.indd 3 25/03/2013 3:15:32 PM
News4 brokernews.com.au
editor Adam Smith
PUBLiSHer Simon Kerslake
CoPY & FeAtUreS
journalist Mackenzie McCarty
production editors Carolin Wun, Moira daniels
Art & ProdUCtioN
senior designer rebecca downing
designer Ginni Leonard
SALeS & MArKetiNG
sales Manager Simon Kerslake
account Manager rajan Khatak
Marketing executive Anna Keane
traFFic Manager Abby Cayanan
CorPorAte
chieF executive oFFicer Mike Shipley
Managing director Claire Preen
chieF operating oFFicer George Walmsley
Managing director – Business Media Justin Kennedy
chieF inForMation oFFicer Colin Chan
huMan resources Manager Julia Bookallil
Editorial enquiriesAdam Smith tel: +61 2 8437 4792
[email protected] sales
Simon Kerslake tel: +61 2 8437 [email protected]
Rajan Khatak tel: +61 2 8437 [email protected]
Subscriptionstel: +61 2 8437 4731fax: +61 2 9439 4599
[email protected] Media
keymedia.com.auKey Media Pty Ltd, Regional head office, Level 10,
1–9 Chandos St, St Leonards, NSW 2065, Australiatel: +61 2 8437 4700 fax: +61 2 9439 4599
Offices in Singapore, Toronto, New Zealandbrokernews.com.au
Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility
for loss.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.
brokernews.com.au
Macquarie’s road to redemption■ Macquarie said it’s doing its level best to win friends in the broker circle, launching a TV ad campaign encouraging homebuyers to visit their mortgage adviser.
James Casey, division director at Macquarie, said the move was all about driving consumers to the broker channel, a crucial part of their business.
“When we knew we wanted to run with a TV program, it was second nature for us to make sure that the call to action was to ring our financial intermediaries. So, not a strategy as such, it was really part of what we do. They are the one channel that we operate with, so driving people to that channel is, as I say, second nature.”
Macquarie has been steadily making its mark since returning to the mortgage market in the recovery faze after the GFC and in an environment where banks continue to jostle for broker business. Casey said the road to redemption has been tougher than he anticipated.
“It’s been really difficult. I think, in ways, I certainly underestimated how long that journey would be and how tough that journey would be. Ninety-nine per cent of our mortgages go out through the mortgage broking third party channel and that is represented by 10,000–11,000 small businesses. So when we basically wound back on new originations, we definitely understood how that could hurt small businesses.”
In many ways, without being immodest, said Casey, Macquarie’s success prior to 2008 amplified their decision.
“We really let a lot of people down. There’s no magic cure, except time. We’ve been, I think, very successful so far but we’ve got a long way to go.”
Casey said Macquarie is listening to broker feedback and acting on it.
“One of the things we’ve done, apart from the advertising recently, is helping make our credit card bundled package loan a little bit more attractive. We heard the brokers basically saying people take the card because it’s part of the package, but they’re not using the card – and it’s difficult to sell the package because our card really didn’t have all the bells and whistles.”
White label products ‘critical’
■ Advantedge has seen a major uptick in its white label products as general manager of distribution Brett Halliwell says it’s becoming more critical for aggregators to own distribution.
“We think it’s absolutely critical, and we think we have the unique point of differentiation in being owned by a bank. The margins on lending are substantially higher than out of aggregation, and by making money out of lending, that enables us to invest some of the income and profits back into the aggregation platforms,” he said.
■ Major lenders have made significant inroads into the first homebuyer market and are now responsible for nearly four out of every five new home loans, according to the AFG Mortgage Index.
The proportion of loans processed for non-major lenders in the first homebuyer market fell to 21.8% in February, down from 24.8% the month before.
Non-major lenders have traditionally been stronger in the first homebuyer sector than among other types of borrowers.
Majors take bigger bite
Average age of a mortgage broker in Australia
did You KNoW?
49
Source: Freshwater Financial Services
04-09_News.indd 4 25/03/2013 3:22:03 PM
04-09_News.indd 5 25/03/2013 3:22:05 PM
6 brokernews.com.au
News
THe sTrAnger side of neWs
inTo THe depTHs■ Look, it’s a well-known fact that mortgage brokers in the United States don’t share the good reputation of their Australian peers. While Aussie brokers are known for offering value, competition and professionalism to their clients, US brokers are known for being so relentlessly money hungry they’d steal the coins off a dead man’s eyes. That, and fraud. Still, it seems the best way to deal with the industry is through the courts and some sensible regulation. Evidently, someone doesn’t agree. That’s why a 43-year-old mortgage broker in Illinois was enjoying an innocent game of golf when a perfectly man-sized sinkhole opened beneath him and sucked him into the netherworld. The broker escaped with nothing more than a dislocated shoulder, but it says something about the industry’s standing in the US that they’ve decided to skip over juries and trials and just drag brokers directly into hell.
■ The Green Party caused a stir following the release of its proposal for a 20 basis points levy on bank assets in excess of $100bn and in a scathing defence of major banks, the ABA dubbed it the ‘retirement savings tax’.
Earlier this month, Greens deputy leader and banking spokesperson, Adam Bandt, outlined his proposal for a ‘Public Support Levy’ on the big four banks in return for what it calls the implicit ‘too-big-to-fail’ policy of the government that underwrites their activities.
But ABA CEO, Steven Münchenberg, rejected the call, claiming it would effectively amount to a tax on Australians’ retirement savings and says bank profits are not excessive.
“The majority of bank profits are paid through dividends to mum and dad shareholders and superannuation funds. Taxing banks’ profits reduces those returns for working Australians saving for their retirement.”
ABA slams Greens big bank tax
positive geariNg:
Source: RP Data
goverNmeNt’s visa drive could hurt broKers
■ nsW broking franchise principal, Tony schelling, says tightening restrictions on the 457 Visa could have a major impact on the financial services industry in towns like darwin, as the sector struggles to compete with higher wages offered by the likes of mining and gas.
“We will struggle to get good, qualified and competent people here when we’ve got a labour force working on $100,000 per year average.”
VIS-à-VIS VISAS
25,070Number of 457 Visas granted in 2011-2012. Almost 70% of visa holders are highly paid managers or professionals. Almost all (94.7%) work in the private sector and more than a third (34.1%) are in NSW, especially Sydney.Source: Department of Immigration and Citizenship
No new regs until 2016, says MFAA■ In a submission to Treasury this month, the MFAA stated that it opposed any further regulation of the finance industry until at least 2016, when the impact of the NCCP could be fully assessed.
MFAA CEO Phil Naylor said there simply hasn’t been enough consideration by the government as to the effects of the proposed regulation.
11.5%
sYdN
eY: b
ella vista
8.2%
bris
baNe
: goodNa
8.2%
ad
elaide: elizabeth east
7.0%
perth: KWiNaNa6.5%caNb
erra: fraNKliN
7.6%grea
ter hobart: chigWell
16.9%
7.8%
da
rWiN: ballamacK
mel
bourNe: carltoN
Top rental Yields per Capital City suburb
04-09_News.indd 6 25/03/2013 3:22:08 PM
04-09_News.indd 7 25/03/2013 3:22:10 PM
8 brokernews.com.au
NEWS
WorLd neWs
■ Vow Financial CEO, Tim Brown, said brokers are starting to have higher expectations of their aggregators thanks to, among other things, heightened licensing-related stress levels.
Brown said a subtle change has begun to occur and that brokers are now requiring a higher level of support.
“All participants in fi nancial services are looking at the value for money proposition and brokers are no different. High levels of aggregation services are no longer enough; our brokers want business solutions to improve revenues, strategy and client interaction.
“Small businesses generally struggle to commit the resources needed to independently develop those solutions.”
Additionally, said Brown, licensing has put enormous pressure on brokers.
“Their admin has increased substantially to a point where they need scale for effi ciency. This means brokers’ businesses will need to consolidate and this is where the aggregator can facilitate and help structure mergers and acquisitions. Most small businesses will not have the expertise to do this properly. … Brokers’ businesses will need to consolidate,” he said.
Set and forget aggregators no longer good enough, says CEO
Bridging finance popularity on the rise■ Housing affordability has been improving over the past year-and-a-half, according to the REIA-Adelaide Bank Housing Affordability Report.
The rise in affordability has led to a stirring of interest for first homebuyers in South Australia, Western Australia, Tasmania and the Northern Territory, and Adelaide Bank general manager Damian Percy said his conversations with the bank’s broker network also revealed that inquiries are on the increase nationally for people wanting to upgrade their home. This in turn, he said, is generating interest in some of the less restrictive ‘bridging style’ finance options.
“The somewhat limited availability of these types of financing solutions has seen mortgage brokers looking for tight turnaround times, particularly in the more active property markets and for higher end property which is again starting to generate interest from buyers.”
CAnAdAtoroNto broKers see flaggiNg marKetBrokers in Canada’s largest market now have tangible proof of what they’ve long suspected, with the local real estate association reporting a 15% year-on-year decline in home sales for february, even as the average sales price rose 2% over the same year-ago period.
Adjusting for the 2012 leap year, and one less day for dealing this year, the Toronto real estate Board (TreB) said recently that the year-on-year sales drop was slightly slimmer at 10.5%.
still, the market slump is real and likely a refl ection of slumping demand and fence-sitting buyers waiting for the kind of 10% price correction fitch ratings is now predicting.
“The share of sales and dollar volume accounted for by luxury detached homes in the City of Toronto was lower this february compared to last,” said TreB president Ann Hannah. “This contributed to a more modest pace of overall average price growth for the gTA as a whole.”
That change meant an average sold price came in at $510,580 for february.
UKuK tough for reNtersA study in the UK by homeless charity shelter has found that nearly two-thirds of renters are struggling or falling behind with their rent. Twenty-six per cent of those surveyed said they’d been hit by rising rents over the past year. one in three said they had to cut back on birthday or Christmas presents in order to handle rent, while 25% said they had been forced to visit family and friends less often. one in seven had resorted to using their credit card to pay rent.
shelter Ceo Campbell robb said rent rises were “pushing many ordinary families to the edge”.
“This is proof that the growing cost of renting is hitting families where it hurts, forcing them to make impossible choices about what they can cut back on next,” he said.
Usprosecutors WaNt life for broKerBrokers in the Us don’t have the best reputation post-gfC, and it seems like one is constantly in the news for fraud. Well, prosecutors in pennsylvania must have had enough. in the trial of pittsburgh area mortgage broker Vasilia Berger, the Us prosecutor asked the court to hand down what was close to a life sentence.
Taking into account the amount of loss Berger’s fraudulent activity caused (around Us$6.7m), prosecutors asked a judge for a 24–30 year
sentence. The judge took a more lenient course,
handing down a six-and-a-half year jail term.
commercial aNd eQuipmeNt boom oN the horizoN
Source: Veda Quarterly Credit Demand Index
Resources projects should deliver a boom in commercial and equipment finance to brokers, according to the MFAA, who predicts brokers in resource-rich states are set to see a surge in related business.
The recent Veda Quarterly Credit Demand Index showed NT and WA experienced strong growth in personal loan demand – up 14.3% and 13%, respectively – as well as leading the country in mortgage enquiries growth, with NT up 12.6% and WA up 11.1%.
Taking into account the amount of loss Berger’s fraudulent activity caused
fast fact Australia is lagging behind many other countries in the acceptance of teleworking – though mortgage brokers may be leading the way. In the US, 11 million people work remotely at least one day a week, while in Australia, less than 10% of employers say they make telecommuting available to all employees.Source: Hays Recruiting
successioN plaNs a must for savvY broKers
■ As more and more brokers hit retirement age, many are neglecting to arrange ongoing support for their clients, said Choice Ceo, stephen Moore, but being proactive on succession planning can reap big rewards.
“it’s crucial for brokers to develop and actively implement a succession plan. given the ageing broker population, this is not something businesses can afford to shy away from.”
research showed clients tend to opt for brokers who are roughly the same age or slightly older than themselves, which can mean that brokers end up retiring around the same time as many of their clients.
While Moore said that it’s encouraging to see so many people retire as experienced brokers, he was also worried the industry wasn’t attracting a younger demographic in order to take over.
personAL LoAn deMAnd
Nt14.3%
Wa13%
MorTgAge enQUiries groWTH
Nt12.6%
Wa11.1%
Taking into account the amount of loss Berger’s fraudulent activity caused (around Us$6.7m), prosecutors asked a judge for a 24–30 year
sentence. The judge took a more lenient course,
handing down a six-and-a-half year jail term.
04-09_News.indd 8 25/03/2013 3:22:16 PM
brokernews.com.au 9
A new short-term solution being touted to brokers is reportedly filling the gap between private lenders and
the corner pawn shop, offering borrowers large loans secured against their valuables.
Assetline offers loans up to three months which clients secure with high-end valuables. Co-founder Nick Raphaely says the lender will accept a range of items to lend against.
“The essence of the business is that we make short-term loans using high-end valuables as security. The sort of things we accept are luxury watches, jewellery, diamonds or other precious stones on the small end, to antiques and paintings on the medium end. On the large end, we’ll accept wine collections and motor cars,” he says.
Raphaely says a client in need of quick cash flow can upload a photo of a high-end item, fill out an online application and have the item professionally valued within a short period of time. With the loan secured against the valuable, Raphaely says there’s no need for income verification or credit checks, allowing a transaction to move quickly for borrowers needing a fast turnaround. He says the company varies from other short-term lenders because it doesn’t have the potential to ensnare clients in debt.
“There’s no spiralling debt, because you can’t dig yourself into a hole using something you already own,” Raphaely says.
“There’s no penalty for early payout, and there’s no impact on the client’s credit rating,” he adds.
The whole concept may sound a bit like what a pawn broker
Getting value from valuablesA new lender says it’s filling a gap for borrowers in need of short-term solutions
offers, but Raphaely’s co-founder, Steven Beinart, says the lender has some significant differences.
“In terms of the way we see ourselves as being different to a high street pawn broker is that our services are discreet and can be done online. We can do private office visits or home visits. Because our platform is online we’re able to drive down costs,” he says.
And with professional valuers giving an estimate on the item offered for security, Beinart says borrowers are offered fair value rather than being gauged. Another point of difference, Beinart claims, is in the size of the finance on offer. The company’s loans range from $1,000 up to $1m. He says this allows Assetline to sit between pawn brokers and private lenders.
“For a pawn broker, these loans are too large. For a private bank, they’re too small and fiddly. We’re filling that gap,” he says.
The company says it’s keen to work with brokers, and while Raphaely concedes that this type of short-term finance wasn’t for everyone, he says it offers brokers “another tool in the armoury” to meet borrowers’ needs.
“There are thousands of finance brokers around the country, and each one has probably had a client who would have benefited from this type of finance if it had been an option.”
there are thousaNds of fiNaNce broKers arouNd the couNtrY, aNd each oNe has probablY had a clieNt Who Would have beNefited from this tYpe of fiNaNce – NicK raphaelY, assetliNe
04-09_News.indd 9 25/03/2013 3:22:19 PM
ANALYSIS10 brokernews.com.au
For two industries that often work in close concert, brokers and planners often fi nd themselves at odds philosophically. With the continuing convergence of fi nancial services, mortgage broking and fi nancial
planning are becoming more closely aligned. But far from declaring a truce, the debate still rages in the industry as to who is better positioned to serve which aspects of clients’ fi nancial needs.
MGF Consulting Group analyst Max Franchitto is no stranger to the debate. He’s instigated it himself more than a few times. And Franchitto has stepped back into the fray, saying that planners are set to make more aggressive moves into the broker realm.
“We are advising many fi nancial planning fi rms to seriously consider buying a mortgage book of business and integrating it as a service, as FPs may be better equipped to advise on debt management.”
Franchitto said it’s an “obvious fi t” for a fi nancial planner or independent fi nancial adviser to be overseeing the debt management on the client’s balance sheet, particularly with the advent of SMSF and other investment vehicles.
“The fi nancial planner is somewhat better informed on how to optimise that debt management.”
spread too thinAFG general manager, sales and operations, Mark Hewitt, agrees in principle that brokers and planners should be closely aligned. He said it makes sense for a business to be able to offer its clients access to a mortgage specialist and a fi nancial planner under the one roof.
However, he’s concerned individuals who try to diversify their offerings too much risk spreading themselves thin.
“Our view is that it takes an exceptional operator to maximise the opportunities available across multiple disciplines, eg planning and mortgages, and that professionals who attempt this risk becoming a jack of all trades and a master of none.”
Franchitto agrees that having brokers and advisers under the same roof can be a viable alternative.
“Either strategy is OK – it all depends on the best possible position for the fi rm. Owning the mortgage business is always a good advice quality-control strategy.”
But Franchitto goes a step further, implying that planners may be best suited to take on the role of broker part and parcel.
“Let’s just say that the entry point for mortgage broking is still considerably lower than fi nancial planning even though I am seeing some encouraging improvement in professional development.”
The great debate between brokers and financial planners has been ignited again
FACE-OFFFinancial services
i think [Brokers] are Better suited and Better Qualified to take up that role that [financial planners] haVe Been ignoring for the last decade - tim Brown
10-11_Analysis1.indd 10 25/03/2013 3:29:14 PM
analysisbrokernews.com.au 11
Broker superiorityMost in the mortgage broking industry would disagree vehemently, and Vow Financial CEO Tim Brown is no exception. The aggregator runs its own wealth management arm, but rather than seeing advisers move into a mortgage broking role, Brown said he sees the flow moving the opposite direction.
“I think brokers actually have a great opportunity to move into, in particular, life and super, which is the traditional role of a financial planner. I think financial planners over the last decade really ruled that space and they haven’t done a very good job of servicing their clients in that space.”
Brown says many financial planners have gotten tied up in equities and investments and argues that there have been ‘issues’ throughout the network where financial planning groups are now being sued for giving poor investment advice.
He says countries where brokers have already started to take over certain areas of the financial planning industry, including New Zealand and the UK, have proven successful and says getting Australian brokers to move into offering financial planning advice shouldn’t be difficult.
“When you look at financial planning, there are two levels of financial planning education: there’s RG146, which allows you to sell life, risk and comment on super and then you’ve got the full financial planning diploma which allows you to do estate planning, equities investments,
derivatives – I don’t think brokers want to get into that space anyway.”
For a broker to get educated to the correct level, he says, would mean getting their RG146, “and that’s only a year’s education. That’s not much more than what they have to do to get their diploma for mortgage lending.”
Brown says ‘smarter’ brokers are already doing 75-80% of a statement of advice once they’ve completed a loan application anyway.
“The other 25% for a statement of advice is about the client’s risk appetite and also understanding what their current coverages are in terms of life, risk and super and I think most brokers are doing that,” Brown said.
“I actually think it’s the other way. I think it really should come from brokers into financial planning, because I think [brokers] are better suited and better qualified to take up that role that [financial planners] have been ignoring for the last decade, which is just making sure customers have the right coverage on their assets and liabilities.”
the entry point for mortgage Broking is still consideraBly lower than financial planning - max franchitto
10-11_Analysis1.indd 11 25/03/2013 3:29:15 PM
ANALYSIS12 brokernews.com.au
There’s been a lot of discussion in the industry about the value of associations in a post-NCCP environment. If ASIC is regulating the industry, the argument goes, what need is there for associations? And why should the industry have two competing organisations?
The Independent Finance Brokers Forum, a Sydney-based group of brokers, recently invited MFAA CEO Phil Naylor and FBAA president Peter White to discuss the role their organisations continue to play in the industry, their value to brokers and why two heads are better than one. Here’s a look at some of their responses.
In the hot seatAssociation heads Peter White and Phil Naylor discuss how their organisations are working for brokers
DESCRIBE YOUR ORGANISATION’S MISSION STATEMENT
Phil Naylor, MFAATo support, promote and represent professional credit advisers. We use the word professional because we’re trying to create a profession, and we think that’s where our members want to take it. They want to see [mortgage broking] recognised by consumers and the media as a profession.
Peter White, FBAATo continue to support fi nance industry professionals to ensure high standards of education, compliance and professionalism.
WHAT WOULD THE NCCP HAVE LOOKED LIKE FOR BROKERS HAD THE ASSOCIATIONS NOT PLAYED A ROLE IN LOBBYING THE GOVERNMENT AND ASIC?
Peter White, FBAAAs far as I’m concerned, if not for the intervention of both of us and the discussions we had, the industry would have had a very stringent AFSL regime and that would not be good for the industry. We were also very involved with the way the KFS was put together, and we’ve been very active in LMI disclosure.
Phil Naylor, MFAAWhen the regulatory regime was being discussed, one of the key things we said is it had to be national. We didn’t want anything state-based. It also has to be one and all, because initially the discussion was all about brokers. There was no discussion about lenders being regulated or credit providers being regulated. We said that if it was going to regulate the whole industry, it had to be all-in. The other point we made is that it has to recognise the different role played by brokers. I’m not saying the MFAA had total credit for how it turned out, but it’s pleasing to know some of those informal discussions eventually translated to reality.
WOULD THERE BE BENEFIT IN THE TWO ASSOCIATIONS MERGING?
Phil Naylor, MFAAI don’t think that’s an issue for people in the industry. Associations only exist because people want them to exist. I think you guys out there will make that determination. We as an organisation make decisions and do things because that’s what our members want.
Peter White, FBAAWhat happens if there’s Woolworth’s but no Coles, or Telstra but no Optus? I like to have choice. I like to be master of what my future is going to be. I think it’s very important that we have choice, and especially as a business person you want to make the decision that’s best for you.
NOW THAT ASIC IS REGULATING THE INDUSTRY, WHAT ARE YOU DOING FOR YOUR MEMBERS TO REMAIN RELEVANT?
WE CONTINUE TO DO WHAT WE’VE ALWAYS DONE, AND THAT’S TO CONTINUE TO DEAL WITH MEMBERS IN REGARDS TO GIVING THEM GUIDANCE. WE CONSTANTLY ENGAGE WITH THEM IN REGARDS TO WHATEVER NEEDS THEIR BUSINESS MAY HAVE AT THE TIME. WE’RE VERY FORTUNATE THAT WITHIN OUR STAFF WE HAVE DECADES OF EXPERIENCE, AND WE USE THAT EXPERIENCE TO PROVIDE VALUE BACK TO OUR MEMBERS. WE ALSO CONTINUE LOBBYING GOVERNMENT AND TO HAVE DEALINGS WITH REGULATORY BODIES.
- PETER WHITE, FBAA
12-13_Analysis2.indd 12 25/03/2013 3:33:01 PM
brokernews.com.au 13
SINCE NCCP CAME INTO OPERATION, ASIC HAS ALREADY IDENTIFIED THAT MANY OF OUR STANDARDS ARE HIGHER THAN THOSE PRESCRIBED BY THE NCCP. WE’RE VERY MUCH INVESTED IN FOCUSING ON EDUCATION. WE RUN WEBINARS TWICE A WEEK WHICH WE’RE FINDING TO BE VERY POPULAR. WE STILL HAVE PD DAYS AROUND AUSTRALIA, AND LAST YEAR WE LAUNCHED OUR MFAA PATHWAYS LEARNING WEBSITE WHERE MEMBERS CAN GO AND DO PROGRAMS THEY FEEL ARE APPROPRIATE TO THEM. IN ADDITION, A LOT OF MY TIME IS SPENT ON LOBBYING, NOT JUST POLITICIANS AND REGULATORS BUT THE MEDIA.
- PHIL NAYLOR, MFAA
12-13_Analysis2.indd 13 25/03/2013 3:33:10 PM
News14 brokernews.com.au
While the regulator may be taking greater aim at the industry, Naylor said brokers shouldn’t be overly alarmed.
“The discussions I’ve had with ASIC, they’re generally pretty happy with the way brokers are operating,” he said.
And brokers who are already operating within the boundaries of the law shouldn’t worry, he said. Naylor suggested that most of the industry has already been holding themselves to ASIC’s standard for some time.
“The things they’re focusing on are fraud, misleading advice and inadequate disclosure. Those three points are really the key planks of the MFAA’s disciplinary code, which has been in place for years. So no MFAA broker should be concerned,” he said.
Unintended conseqUencesThis doesn’t mean that none of the regulatory regime is cause for concern. Naylor said the NCCP ban on the use of the term “independent” has hit some brokers. While the MFAA lobbied for an extension for brokers to comply, ASIC decided to deal individually with the affected brokers.
“We went through our whole database, and there were five or six brokers who had ‘independent’ in the name of their business. Whilst ASIC weren’t prepared to give an extension, they said they were happy to talk on a one-on-one basis with any members who had concerns, because for those businesses it can be quite expensive, especially if they have a well known brand,” he said.
But while ASIC was happy to offer help to brokers who needed it, Naylor said the ban on the term was overboard. He indicated that it could have troubling implications for future regulation, an eventuality the MFAA is trying to guard against.
“It does raise a further issue. We just think the definition of the word ‘independent’ got a bit out of control. I can understand saying that brokers receiving commissions can’t claim they provide independent advice. I think it’s overdone, but I can understand why. But to extend that to say they can’t have ‘independent’ in their name or advertise that they’re independently owned? Maybe the horse has bolted on this one, but we think it’s an issue worth raising with politicians, because there could be other words in the NCCP that they extend to take on meanings they were never intended to have,” Naylor said.
A politicAl opportUnityIndependence is only one of the issues the association will be raising with politicians, Naylor indicated. With Australians headed to the polls in September, he said the time is ripe to put brokers’ interests front and centre with politicians.
“Now that we’ve got the federal election coming up in September, we think it gives us a golden opportunity to get out to all political parties – major and minor – with the key issues from the broker’s point of view,” Naylor said. One of the biggest issues he said the MFAA would be
PHIL NAYLORTime for a breather
CONTINUED FROM PAGE 1
PhIl NAylOR
tackling is that brokers need a breather. After coming to terms with licensing and the regulatory regime over the past few years, he said it’s time for the industry to have a chance to get on with business rather than worrying about the next tranche of regulation.
“One thing we’ve been saying is that the whole industry has been invested in absorbing regulation for the last three or four years, and we need to have a breather now so all the legislation has a chance to operate and be assessed.
“It may be that after five years it needs to be reviewed, and there may even be aspects that we feel aren’t working. But rather than bring out NCCP Phase III or IV in haste, it’s time to slow down so the industry can have a breather.”
Levelling the playing fieldA formal submission to Treasury made by the MFAA argues retailers, particularly vehicle dealers, who help arrange point-of-sale finance for consumers should not be exempt from the NCCP, which currently regulates credit providers who “engage in credit activities”, including mortgage brokers who assist consumers in applying for credit.
MFAA CEO Phil Naylor says continuing current NCCP exemptions to retailers will “weaken the integrity” of the legislation by enabling consumer protection and competitive fairness gaps to appear.
14-15_CoverRunOn.indd 14 25/03/2013 3:23:57 PM
15
NEWS
PhIl NAylOR
stAying vigilAntWhile the industry may need some time to rest and recoup, Naylor suggested this is a luxury not afforded to the MFAA. He said the association has had to remain vigilant to ensure further regulation doesn’t impact on brokers’ businesses. One such fight the association has had to take up was in regard to what potentially could have been damaging SMSF regulations.
“Draft regulations came out about nine months ago which – on their face – would have banned mortgage brokers from SMSF lending. Treasury agreed with us that that wasn’t the intention, and haven’t proceeded with the regulations. That’s the sort of thing that if no one had picked it up, it would have come into being, and been more difficult to roll back once it was in the legislation,” he said. On top of all this, Naylor said the
We jUst think the definition of the Word ‘independent’ got A bit oUt of control– phil nAylor
did yoU knoW?
The MFAA is putting together an accreditation program for brokers looking to tap into the growing SMSF market
MFAA has been busy sorting through the influx of broker qualifications following the Diploma deadline. While some industry figures were predicting significant attrition as a result of the heightened education requirements, Naylor said the vast majority of brokers came through the deadline for qualifications with flying colours.
“It’s gone really well. The deadline was 31 January, and as you can imagine, we’ve had a tsunami of emails from people providing evidence that they’ve obtained the qualifications. It will take some time to sort through that, but by the time we’ve finished I think 92–93% of our membership will have satisfied the requirements. We’re very happy with that.”
looking AheAdThe Diploma has been a sticky subject for brokers. Those opposed to the increased qualification requirements have been incredibly vocal. But Naylor said the silent majority of brokers had no problem with the additional requirements, and welcomed the growing professionalism of the industry.
“We knew all along that some people didn’t want to comply with the higher standards, but the overwhelming proportion of our membership want to see the MFAA with higher standards than the others, and they want to see the MFAA with higher standards that those required by legislation,” Naylor said.
With the Diploma kerfuffle behind it, Naylor said the association would be free to look to the year ahead, and grow its brand with consumers. Part of this, he said, would be changing the lexicon for the industry by better advertising to consumers with what brokers could offer. Along with this will come a new title for brokers, which Naylor said will do a better job at communicating the value the industry brings to borrowers.
“What we’ll be doing once we’ve sorted out the Diploma is that everyone who’s accredited will be entitled to use the title ‘MFAA accredited credit advisor’. We think that focuses more accurately on what brokers do. The term ‘broker’ tends to give the impression that they’re just focused on the sale. We’ll be going out with that campaign in the next half of the year.”
14-15_CoverRunOn.indd 15 25/03/2013 3:23:58 PM
16-17_FAST.indd 16 21/03/2013 2:13:36 PM
16-17_FAST.indd 17 21/03/2013 2:13:39 PM
workshop18 brokernews.com.au
With a greater demand for a more personalised approach, the finance industry – and especially brokers – are taking steps towards creating a more intimate and interactive
marketing strategy. Matt Mitchener, marketing and product manager
at Vow Financial, says there are many incentives for brokers to use online videos to promote themselves and their companies.
“It’s important in a crowded marketplace to stand out from what everyone else is doing. Most businesses have a website which serves as their online business card, but they rarely create unique and dynamic content for their clients and potential clients. By using videos, you can educate your clients whilst connecting with them on a personal level.”
Charbel Azar, managing director of Coloursock Productions in Woolloomooloo, Sydney, specialises in tailored videos. He says, video content is a growing resource for businesses in search of higher conversions – and one in three brands already use video to generate sale leads.
“Most consumers are self-identifying as visual learners, making video the perfectly suited multimedia for attracting clicks and driving conversions.”
Mitchener believes brokers should have videos that are short but punchy.
“Keep all information in bite-sized chunks. A broker should aim for three minutes at the most. We recommend using a professional service for some core videos. If you are just getting started, these can be quite inexpensive if you keep them generic.”
Azar adds that YouTube averages four billion hits each day and holds ‘high authority’ in Google search.
“People are getting used to watching high-quality, professional videos online. At Coloursock, we
Creating online video may seem out of reach for many brokers, but two experts say it’s easier than you think
Source: Nielsen
75%of Australians watch video online.
That’s a total of Two billion views!
This breaks down to 165 videos per user, per month
specialise in creating piece-to-camera productions ideal for sales, communication, training and education. Professional services can save businesses hours of amateur work and money from purchasing expensive equipment.”
Mitchener suggests creating engaging, topical content when it comes to online videos for brokers.
“You can produce weekly market updates, or product news, or just some information on rates and home buying. Keep up the energy but don’t oversell and if you do this regularly, you may like to keep it fun and light-hearted for your audience. This can be extremely engaging and have a greater chance of it being shared to potential clients.”
He says there are a variety of topics brokers can cover on their video and suggests including RBA bulletins, product news such as fixed rate changes and what the major banks are doing with their rate.
“You could also give a tour of your office and introduce all your staff, talk about why it’s important to use a mortgage broker, source market reports about the mortgage broker industry to talk about or use RP Data updates to talk about what’s happening in their suburb.”
Azar says professional production houses that specialise in property and finance research can also help brokers plan and create scripts.
“It’s best to find a production house who speaks your language. They can help identify your audience and design, plan and script accordingly. Coloursock currently works with over 50 mortgage brokers across Australia in getting their message out to their database and new prospects through the use of video. We are a full-service video production house which means we take brokers from scripting to delivery.”
Whether you’re making the video yourself or enlisting a professional, Mitchener says to have your contact details and logo on the video, but to keep it simple.
“One of the many great things about video is you never know who and how many will view it and share it. It’s almost like an interactive business card.”
102,896
100,000,000Australian Broker - 20 videos
1.50 / 8.00
ABOUT SHARE ADD TO
1
STARPOWER
chArbel AzArManaging directorColoursock Productions, Woolloomoolloo
mATT miTchenerMarketing and production managerVow Financial
One Of the many great things abOut videO is yOu never knOw whO and hOw many will view it - matt mitchener
18-19_Workshop+Opinion.indd 18 25/03/2013 3:48:10 PM
opinionbrokernews.com.au 19
Bernie Kelly points out that while many people think of home equity as real, it can turn out to be theoretical when mortgage distress hits home
By definition, home equity is the current market value of a property minus the outstanding mortgage.
It is a concept many Australians hold dear. They think of it as growing strongly every time they make a mortgage payment, with additional capital growth taken for granted as a sound long-term axiom.
Recent research has also found that Australians tend to think of their home equity as even greater than might be valued on the market. Published in the Australian Economic Review earlier this year, the research found that on average Australians over-estimate the value of their homes by 2.5%, which is worth about $100bn economy wide.
There is nothing wrong with any of these beliefs, except that in the minds of many, home equity is a well-defined and tangible concept that equates with real value. Unfortunately, recent market trends and growing awareness of the savage effects of mortgagee sales raises the question of whether home equity is real or theoretical.
Market value and real equity can only be determined when there is a willing buyer and a willing seller, which works well when the market is stable but not if you are a defaulting borrower and facing mortgagee or forced sale.
When this scenario occurs, the difference between real and theoretical equity is made too glaringly obvious because a critical part of the equation is missing. In a sense, the market still brings together a willing buyer and seller but their motivations have changed
radically. The seller is a mortgagee in possession prepared to accept any price that reduces a bad debt write off and the buyer is most likely a bargain hunter on the look-out for property selling below what might be thought of as market value.
Sadly, the original borrower is no longer in control of the transaction and could see what was thought of as concrete equity rapidly eroding, helped along by non-market forces such as legal fees, default interest and removal expenses, just to name a few.
The statistics which support this proposition are devastating – recent Australian data shows the average discount on mortgagee sales across the country is 20-50%, with the higher end reached in Queensland in recent times.
Additional costs, particularly if default interest is high, can see another 10-20% of value disappear.
The extended tragedy of this is that losing the family home and seeing equity vanish is traumatic for people’s lives and health, and recovery can take some years.
If there was wider understanding of vanishing equity in mortgagee sales, among brokers and their clients, then there could be a greater awareness that there are solutions in the market these days which can help avoid mortgagee sales and speed the recovery process.
A common cause of a slide towards a distressed sale has been using home equity as credit to finance tax enhanced investments in property, meaning people are using illiquid equity in the quest for wealth building. This would all work well when
the equity is quantifiable and the risk of gearing well understood. However, many investors do not appreciate the level of risk from gearing, which can suddenly increase if an investment property loses a tenant, with added danger when the whole transaction is based on what is only theoretical equity.
Even if borrowers are struggling with mortgage repayments, one may argue they would benefit from a gain in equity when the value of the property increases – but the question is, how long can you really tread water for?
Distressed asset sales are typically targeted by professional investors who understand very well the concept of theoretical equity and buying assets well below the intrinsic value.
It is an unfortunate saying in relation to home equity but the idea of one man’s loss being another man’s gain plays out every day in the Australian market for distressed borrowers.
It is important for all of us to be realistic about the value of home equity, whether it is
real or not, especially when using this ‘equity’ for a second investment and running the risk of seeing equity vanish as if it never existed.
Perhaps it might be time for brokers and borrowers alike to think about how the tragedy of vanishing equity can be avoided.
EQUITYHOW REAL IS THE
IN YOUR HOME?
bernie kelly is cO-fOunder and directOr Of araP which PrOvides sOlutiOns fOr mOrtgage distress
did yOu knOw?
On average Australians over-estimate the value of their homes by 2.5%, which is worth about $100bn economy wide.
$100bn
18-19_Workshop+Opinion.indd 19 25/03/2013 3:48:11 PM
market talk20 brokernews.com.au
Good news and bad newsRP Data’s Capital Markets report has revealed positive signs for the housing market, but obstacles to recovery remain
The last few years have been shocking ones for the housing market, and most analysts aren’t predicting a
breakthrough for 2013. But there are some positive signs on the horizon. According to RP Data, a recovery is underway. It hasn’t been fast, and it has had ups and downs, but the signs for the housing market are nevertheless positive.
The overall picture in 2012 showed a marked slowdown in transaction volumes. In fact, the year saw annual sales increasing at their lowest levels since 1996, with sales volumes 13.7% below the five-year average. But RP Data research director Tim Lawless said the second half of the year saw some positive stirrings.
“Buyer activity was up nearly 8% over the second half of 2012. The preliminary data we’re seeing indicates that we’re set to see a continuation of that trend,” Lawless said.
Furthermore, auction clearance rates rose steadily throughout 2012, while the levels of vendor discounting and average time on market have trended lower over the second half of the year. Since September 2012, the proportion of homes selling at a loss has
eased, while a rise in the proportion of homes selling for more than double their initial purchase price has been evident.
“That suggests to me that buyers and sellers are starting to find that middle ground,” Lawless said.
FHBs still MiASome troubling news, however, is the continuing unwillingness of first homebuyers to jump back into the market. RP Data has said first homebuyers have returned to the housing market in some capacity, although current numbers are well below the 10-year average – and half their historic peak. Some of this return, Lawless said, was represented by transactions brought forward due to state government incentive programs. With stamp duty concessions and first homebuyer grants being rolled back last year, first-time buyers rushed to get into the market before the incentives ended. This was particularly true in NSW, where first homebuyer incentives now only apply to new housing rather than existing housing.
“As those incentives are removed, the market clearly responds and demand falls away sharply. First homebuyers are not willing to take advantage of the [new] concession because
they don’t see the value in new housing,” Lawless said.
This is because new housing exists on city fringes where infrastructure is under-developed, Lawless said. He urged governments to look for more sustainable solutions to move first-time buyers back into the market. To do this, Lawless said policymakers should be looking to make greenfield developments more liveable.
“That’s probably a discussion we need to have from a policy perspective. We need to talk less about short-term stimulus and more about the long-term view of making sure the proper infrastructure is in place,” he said.
EArly indicAtors For 2013 rEMAin positivE:
• Higher clearance rates
• Less vendor discounting
• Fewer listings• Uplift in
investor activity
Decline in home values from their peak to February 2013
WHErE do you ExpEct HoME vAluEs to go ovEr tHE nExt six MontHs?
WHErE do you ExpEct HoME vAluEs to go ovEr tHE nExt 12 MontHs?
-10
-8
-6
-4
-2
0
HoBA
rt -1
0.9%
dArW
in -1
0.7%
Bris
BAnE
-10.
4%
MEl
Bour
nE -6
.9%
AdEl
AidE
-5
.5%
pErt
H -
5.0%
cApi
tAls
-4
.3%
sydn
Ey -1
.3%
cAnB
ErrA
-0.9
%
stABlE 54 %risE 37.9 %FAll 8.10 %
risE 51.20%
stABlE 40.30%
FAll 8.30%
20-21_MarketTalk.indd 20 25/03/2013 3:49:01 PM
MARKET TALK21brokernews.com.au
SKY-HIGHyield figures divide opinionRP Data’s revelation that it is possible to get 16% rental yields in one of Australia’s emerging housing markets has some commentators urging investors to get active, while others are not so sure
For years, property investing has been the enclave of those with plenty of cash to spare, but some observers
believe this is starting to change.After reviewing suburb
statistics commissioned from RP Data, Aussie Home Loans executive chairman John Symond said there are at least half a dozen suburbs in each capital city where rental yields are greater than the cost to repay the mortgage.
“It’s the perfect time for the average Australian to consider a move into property investment if they have some money saved. Both fi xed rates and variable rates are the lowest they have been in years, with interest rates below 5%.”
Housing prices in some areas are historically low, according to the research, but are starting to move back up and Symond claims investors can earn rental yields of between 5% and 10% in some areas and as high as a 16% in Bellamack, Darwin.
However, Northern Territories broker franchise principal Tony Schelling said he is concerned
the data may be slightly skewed.“Bellamack has had some
pretty new homes, so 16.9% – you’d have to have very, very low cost housing. The average house in the area is probably $600,000 and they’re getting about $1,000 per week for rent. I think the fi gure does seem a little high.”
Schelling said it’s possible for fi gures to occasionally become ‘adjusted’ by limited sales.
Otherwise, he agreed that local rental yields are high, especially for units.
“Darwin in particular has opportunities for those who have a focus on investment and unlike towns such as Gladstone in Queensland, which also have high rental yields... Darwin has a multi-stream economy.”
sydnEy’s nortH-WEst A ‘goldEn opportunity’
Sydney’s north-west could be emerging as a new hotbed of commercial activity, prompting predictions of a market primed for growth.
Presenting at a Frasers Property conference, Jason Anderson, senior economist at property advisory MacroPlan Dimasi, said the area is becoming increasingly popular with young professionals.
“Sydney’s north-west is experiencing a bit of a boom in offi ce development. Hubs at Macquarie Park, North Ryde and Sydney Olympic Park are becoming increasingly attractive for businesses as they relocate to more affordable sites away from ever increasing commercial rents in the city,” he said.
Anderson added that young professionals are favouring Putney in particular because of its location at the heart of this area and forecasted rental increases of over 6% for the next three years.
“Here [residents] can avoid the long commutes associated with working in the CBD. This is driving up rental prices, creating the perfect scenario for investors.”
Frasers Property group sales manager Adam Sparkes said Putney Hill, a collection of premium houses and apartments on the border of Putney and Ryde, remains a golden opportunity for investors.
“Despite Sydney’s north-west becoming [a] new hub for business, the area lacks premium housing to cater to this growing market of professionals and investors,” he said.
did you KnoW?
Housing affordability saw an 18.4% increase in the December quarter compared to the same period in 2011.Source: HIA
dArWin in pArticulAr HAs opportunitiEs For tHosE WHo HAvE A Focus on invEstMEnt - tony scHElling
20-21_MarketTalk.indd 21 25/03/2013 3:49:02 PM
22 brokernews.com.au22
toolboX22
The end of the financial year is looming, and businesses need to start looking at how to minimise their tax
liabilities, according to mid-tier accounting firm RSM Bird Cameron.
“While business owners should have strategies in place all year round to reduce tax liabilities, 30 June presents some additional opportunities and is a critical deadline for minimising tax for the financial year,” says Andrew Graham, national head of business solutions, RSM Bird Cameron.
The firm offers the following advice to businesses for reducing their tax liabilities:
1 SuperannuationThe minimum super that business owners must pay is
9% of each eligible employee’s ‘ordinary time earnings’. Payments must be made at least four times a year by 28 days after the end of each quarter, including the quarter ending 30 June 2013. Business owners can generally claim a tax deduction for super contributions that are paid on
time. However, super is one contribution that can’t be claimed until it is paid. This means business owners need to pay the contribution before 30 June to claim it in the 2013 year. Given this year 30 June falls on a Sunday, payment would need to be made a few days before.
2 perSonal SuperLike employee super, business owners also need
to pay their personal super contributions prior to 30 June to get a deduction.
3 Bad deBtSThese should be written off prior to 30 June to be eligible
for a deduction. Business owners should go through their debtors list and write off anything that is not collectible.
With tax time rapidly approaching, brokers can employ strategies to keep their business’ tax bill from spinning out of control
4 Bring forward expenSeSDo some forward planning and look at expenditure for
the next few months. There may be some expenses that will be incurred but would be better brought forward. Consider items like training, repairs and maintenance, or prepaying some interest. The $6,500 instant asset write-off commenced in the 2012/13 year, so businesses may consider bringing forward any capital expenditure of less than $6,500 to receive the automatic deduction.
5 truSt diStriButionSIf operating a trust, make sure the trustee decides how
the profit will be distributed prior to 30 June. This decision should be recorded and signed off before the end of the financial year.
Most businesses can benefit from following this advice – but businesses should be cautious in bringing forward expenses. “When looking at expenditure that can be brought forward into the 2013 year, remember to consider your cash flow,” says Graham. “A business owner doesn’t want to bring forward $50,000 of expenditure if they don’t have the money in the bank or funds available to pay for this.”
He also has advice for business operators as they head into the new financial year. “When preparing your BAS, don’t leave it until the last minute. Starting earlier gives you more time to complete the BAS and reduces the risk of lodging late and incurring fines or having to ask for a lodgment extension.”
You can generallY claim a tax deduction for Super contriButionS paid on time
5 Ways to limit your tax liability
A new survey has revealed that 90% of businesses are sharing files directly, giving the information little or no protection. The survey, conducted by Storage Made Easy, suggests that many companies using Microsoft Outlook are exposing themselves to unnecessary risk.
“The survey results demonstrates that whilst Outlook is a ubiquitous file-sharing tool, companies have no grasp of what files are being shared and with whom,” says Jim Liddle, CEO of Storage Made Easy.
The survey found that:
90% of those who share files are sharing them directly, without using password protection of time-sensitive links
51% of companies share file attachments by email
45% of companies are worried about the security of attachments sent by email
When files are shared directly, files being sent or forwarded cannot be tracked – which can lead to data leakage. Businesses can reduce the risk of data leakage by:
reducing the number of sensitive files they share by email
encouraging employees to be mindful of who they share files with
adopting software that can protect files and provide auditable information
protect Your data: who’S reading Your emailS?
audited file Sharing iS a Strong waY to protect a companY’S core aSSet, itS data, while enSuring full compliance with regulatorY requirementS - jim liddle
22-23_Toolkit+Coalface.indd 22 25/03/2013 2:57:04 PM
brokernews.com.au
the coalface23
A position recently advertised by Tourism Australia, famously-dubbed ‘the best job in the world’ was stationed
in the Whitsundays. That got us wondering: Are the Whitsundays the best place to be a mortgage broker, too?
In short, says resident broker Justin Butler, the answer is ‘no’.
“It’s a very small place. The population at Airlie Beach is only 5,000 – there’s one full-time broker in Airlie Beach and there’s us – and we do broking as well as life insurance and financial planning.”
That said, Butler, who started at Westpac straight out of school in 1987 before setting up his own brokerage, Eclipse Financial Services, 10 years ago, says the local flavour and relaxed living can’t be beaten.
“The lifestyle’s pretty good and laid-back – it’s all about the water. It is a small place, there’s no picture theatre, but Mackay is 100km away for all that stuff. I haven’t worn a tie to work since I left Westpac 10 years ago!”
But it’s not all sunshine and sailboats – finding quality employees can be just as much of a challenge as signing on new clients in such a remote part of the country.
“Up here the hardest thing is finding staff. We’ve got a great mix at the moment – we’re lucky, but it’s probably the first time that’s happened in 10 years. It used to be a big problem with professional development too, but that’s not such an issue anymore with webinars and the like.” Having been in the industry for
best job in the World?
more than 20 years, however, means Butler’s got more than just a bit of Whitsunday sand between his ears.
“The main value to the client is not in product selection, it’s more in advice on how to structure things… A lot of people in the industry are focused on who’s got the best interest rate right now. We’re not so much a mortgage broking firm as much as a debt advisory firm. If we believe someone’s going to benefit from using an offset account then we’d never go and recommend a lending package that didn’t have that just because it’s 10 basis points cheaper.”
Helping new clients get their head around their finances is another challenge which Butler, like most brokers, faces on a daily basis – but it’s something he finds incredibly rewarding.
“I love it when clients come in overwhelmed, and then walk out after they’ve decided to form a longer-term relationship, feeling relieved, realising there’s someone who can guide them on all their financial issues, in a way they understand. It comes naturally to me because I’ve been doing it since I was 21. You need to keep giving them more information as you go – some want to know very little, others want to know everything.”
Perhaps his lack of ‘stuffiness’ is actually the result of years spent in a place where board shorts constitute ‘smart casual’.
“There’s nothing much formal about Airlie Beach,” he laughs, “At ‘formal’ occasions in town, there’s always somebody wearing thongs.”
broking in the Whitsundays may sound like a day at the beach, but it has its challenges
JuSTin BuTLEr
22-23_Toolkit+Coalface.indd 23 25/03/2013 2:57:09 PM
FINANCIAL SERVICES24 brokernews.com.au
ASIC BOOTS FINANCIAL PLANNING FIRM
Brokers aren’t the only ones running afoul of ASIC. ASIC has cancelled the Australian fi nancial services licence of Addwealth
Financial Services in Western Australia, after the fi rm failed to comply with its licence conditions. Addwealth FS had additional licence conditions imposed by ASIC in September last year following concerns over the suitability of advice to certain clients. ASIC was also concerned that Addwealth FS may have failed to adequately manage confl icts of interest.
Addwealth FS was found to have breached the additional conditions, which included failing to lodge independent external compliance reports. The fi rm requested its licence be cancelled by ASIC.
Addwealth FS provides advice on products and services including retirement planning and strategies, superannuation and rollovers (including strategies), self-managed superannuation, share market investments and managed funds. In 2011, the fi rm was recognised as a rising star in the WA Business News Rising Star Awards. The fi rm was recognised for demonstrated leadership, and for contribution to the environment, people, education and the community.
For the next 12 months, Addwealth FS must extend professional indemnity insurance and maintain its membership of an external dispute resolution service.
A joint venture between Allianz and Citibank allowing mortgage brokers to refer clients to the insurer for
general insurance needs is unlikely to impact insurance intermediaries.
Allianz Australia has joined forces with Citibank to launch a general insurance referral service to better meet the needs of mortgage brokers and their clients.
As part of the joint venture, mortgage brokers will be able to refer clients to Allianz for personal lines of insurance products.
If a mortgage broker identifi es Citibank as the most appropriate home loan provider for their client, they will assist the client in obtaining a mortgage loan from them – and under this arrangement will also have access to Citibank insurance products, which are underwritten by Allianz.
A spokesman for Allianz
Mortgage broker insurance push won’t hit insurance brokers
DID YOU KNOW?
The estimated amount that Australians are under-insured by
$927bn
Days after a super funds body called for brokers, as well as financial planners, to be banned from receiving insurance commissions, the federal government has stressed its FoFA changes are to benefit the customer – not to disadvantage any particular sector.
When the Industry Super Network suggested insurance commissions fall under FoFA’s conflicting remunerations ban, it was met with uproar from insurance brokers, who criticised the body for paying too much attention to payment and not enough to client need.
In a bid to alleviate fears and explain the reasoning behind the regulation, a spokesperson for Minister Bill Shorten’s office said that the reforms – which allow accountants to receive referral fees as long as it does not conflict with their advice – aimed to improve customer trust in the finance sector and remove structural impediments to broaden provision of advice by accountants and financial planners.
“The new limited licence is an important part of these reforms and delivers on the government’s commitment to expand access to financial advice and to increase consumer protection,” the spokesperson explained. “The new limited licence will enable accountants and other finance professionals to provide broader and more strategic financial advice, including comparing the pros and cons of different classes of financial product.”
FoFA to help clients, not hurt advisers
Australia said that the new agreement would not disadvantage the insurance brokers it works with.
“This arrangement will have no impact on insurance brokers,” he said. “Brokers focus on business insurance and complex and/or tailored personal insurance needs.”
He added that most clients do not use brokers to buy general insurance products and therefore would not be impacted.
“All major insurers distribute personal insurance products directly as well as through various third party intermediaries such as fi nancial institutions,” he continued.
“This multi-distribution approach to the sale of personal general insurance products… does not materially impact on the business of insurance brokers because most of the people do not use insurance brokers for personal insurance products such as building and contents cover.”
THIS ARRANGEMENT WILL HAVE NO IMPACT ON INSURANCE BROKERS
24-25_FinServices.indd 24 25/03/2013 3:50:31 PM
24-25_FinServices.indd 25 25/03/2013 3:50:32 PM
FORUM26 brokernews.com.au
St.George denies channel conflict accusation
SMSF CONFUSIONPIPA chair, Ben Kingsley, recently said that despite
repeated public discussion, mortgage brokers and others in the fi nancial services industry remain confused as to who can recommend property for investment within an SMSF.
Greg R on 15/3/2013 11:15 AMA large part of the confusion could be said to be as a result of ASIC and its various regulations of trying to force separation of advice into fi nancial product advice and credit advice and then the industry bodies trying to protect their own turf by muddying the waters when we add in investment vehicles like superannuation.
Steve C on 15/3/2013 12:38PMThis is cut and dry. Unless you are correctly licensed you cannot advise on property held inside an SMSF.
BROKERS UNCOMFORTABLE WITH SUCCESSION PLANNING
Choice CEO Stephen Moore urged brokers to be more proactive in implementing succession plans. With an ageing pool of brokers, Moore said succession planning could help reinvigorate the industry with young blood.
Noel on 13/3/2013 8:51AMSuccession planning is part of your compliance and risk management plans required under the NCCP. If you have your own licence which does not include this plan, you may be in breach of the NCCP.
What do you think? Leave your comments at brokernews.com.au
Each issue, Australian Broker will publish the best online comment from the previous fortnight – along with your other feedback. So get online, and get participating! BROKERNEWS.COM.AU
St.George has poured cold water on the idea that a new customer contact policy could cause channel conflictMFAA a waste of money eh?
Personally, I prefer to have the MFAA representing me to government. Besides the banks, nobody speaks better Canberran in our industry than MFAA. Nobody.NoTimeLikeTheFuture on 18/03/2013 at 10:37AM
I THINK THAT A LOT OF THE NEGATIVE COMMENTS COME FROM A FEAR OF THE UNKNOWN
The MFAA has called on the government to give brokers a breather on new regulation, with CEO Phil Naylor saying the NCCP should not undergo any more changes until 2016. NoTimeLikeTheFuture
pointed to the development as proof of the association’s value.
Leave brokers alone
In an email to brokers, St. George general manager of mortgage broking Clive Kirkpatrick said third party introduced customers would
be contacted on approval by a local branch, rather than the customer call centre. Kirkpatrick said the contact would absolutely not result in clients being wooed away from brokers, and said the goal was to give broker customers a better service experience. Broker reaction was mixed.
City Broker said a good branch relationship was benefi cial, and urged brokers to be proactive in getting to know local banks.
“I have great relationships with two local branches for two different banks. It pays to be proactive and seek a good relationship to cut out any poaching. You have to realise people have to do their banking somewhere, so they are mutual clients. I think that a lot of the negative comments come from a fear of the unknown. Make yourself
known to a few local branches and to change this.”
Positive Broker trusted Kirkpatrick’s motives, but worried that channel confl ict could arise nonetheless.
“I have no doubt Clive’s intentions are honourable. Call me a sceptic but a branch staff member under intense pressure to meet their own sales targets is liable to poach other business such as insurance and at worst poach the customer. Very risky I feel.”
But MelbBroker claimed to have fi rst-hand experience with banks poaching clients.
“We have too many recent cases where our clients have been contacted directly by a branch, offering deals that we can’t match. My clients hadn’t signed a thing and yet received credit cards in the mail, which were clearly not applied for.
“Took it up with senior management and kept the client, but got no explanation or apology.”
26-27_Forum+Spotlight+OYO.indd 26 25/03/2013 3:42:30 PM
brokernews.com.au 27
ONE YEAR ON
KATHY CUMMINGSKATHY CUMMINGS
Productivity a business imperative
The mortgage industry needs to take a “good, hard look” at its productivity – but they’re not the only ones, says CBA’s Kathy Cummings, who tells Broker TV that improving work fl ow is a business
imperative, particularly in the current low credit growth environment.
“We all know with the rather fl at credit growth environment we’re in, it’s been tough. So therefore we need to look at how we can reduce overheads. And how can we work more effectively? How can we move waste, stop errors and re-work?”
She says there are simple things brokers can do to become more effi cient.
“I think good brokers and in fact all businesses should have a very clear business plan. So when they’re working through their goals and business objectives, they’ll know how they’re tracking.”
Cummings says it’s also crucial for brokers to maintain a tidy workspace in order to maximise productivity. “They need to have a clean workspace for themselves and for their staff. Things like a 5-S workshop in the Kaizen Lean program focuses on getting their workspace nice and clean so they can actually fi nd their fi les and see their monitor.”
However, it’s not just brokers who should be improving their productivity. Cummings says broker feedback that banks can do more has been taken on board.
“We have a saying inside CBA that ‘there’s nothing so ineffective as doing something effi ciently that shouldn’t be done at all’. So one of the things we’re doing is focusing on our productivity and on our processes. We’ll be starting an end-to-end review of our total home loan process later on this year.”
Cummings calls for partnership in effiency
What a difference a year makes … or not. Australian Broker reflects on the punditry, news and influential trends that made headlines 12 months ago Australian Broker Issue 9.06
ONE YEAR ON
NAB to rewrite loan doc ‘horror stories’NAB last year vowed it would simplify the process surrounding its loan documentation packs, with manager of sales performance, Adrian Cunningham saying the complex documents had caused “horror stories”. The bank said it would move to a single document pack, with the eventual goal of drastically reducing the complexity of its loan documents.
What’s happened since? NAB’s move to a single document pack late last year initially caused some negative stir. The bank saw its broker satisfaction levels dip from 79% to 55%. But distribution head John Flavell said that satisfaction levels have been on the mend as brokers get used to the change and the bank hones its processes, with satisfaction rising to 70% in January.
Brokers’ last stand: Aggregators to sell within 18 monthsAFG has long been dogged by unsubstantiated claims that the aggregator was for sale to the highest bidder, but managing director Brett McKeon last year turned the tables on the rumour mongers by suggesting that unprecedented consolidation was afoot in the aggregation sector. McKeon claimed that the next 18 months would see the death knell of independent aggregators – apart from AFG, of course.
What’s happened since? We’ve still six months to go until we see if McKeon’s prediction was right, but the rumblings of aggregator consolidation continue. After Aussie bought National Mortgage Brokers in April last year, Aussie itself saw CBA raise its stake to 80%, with an eventual option for complete ownership.
26-27_Forum+Spotlight+OYO.indd 27 25/03/2013 3:42:36 PM
PEOPLE28 brokernews.com.au
Remember Josh Foote? The intrepid Mortgage Choice team leader we wrote about in January, who vowed to
take on Africa’s highest peak in the name of charity? Well, he did.
Last year, Foote, an infrastructure team leader, boasted to work mates that he would happily climb a mountain for a good cause. His co-workers took him up on it, and six months later the urban Australian found himself in a group of 15 climbers, eight guides, four cooks and 37 porters at the base of Mt Kilimanjaro in northern Tanzania in a high-stakes effort to raise money for Ronald McDonald House.
“It was amazing – I’ve never done anything quite like it in my life,” says the 32-year-old.
“Food was pretty average though,” he laughs, “It’s a lot of high-energy, high-carb stuff like fried eggs, some not very nice
Bad food, freezing conditions, food poisoning – it was all worth it in the end for Mortgage Choice’s Josh Foote’s fundraising efforts
sausages and stale bread. It gave me a bit of food poisoning on the last few days!”
Foote describes how, on the fi nal day-and-a-half before reaching the summit, he recalls spending a harrowing night being ill, sore and shivering in a frozen tent – but says it was completely worth it in the end.
“You start at 3,600 metres on the summit night and you do an 8–10 hour hike to the fi nal camp. If you’re unlucky like me and get food poisoning, you get woken up at midnight and rush to the toilet by torchlight on the ice. Then you go from 4,600 metres to the top on the fi nal day.”
Foote describes the moment he reached the summit as an
IT WAs AMAZInG – I’VE nEVER DonE AnYTHInG QuITE LIKE IT In MY LIfE
intensely emotional one, the culmination of seven days’ worth of sweat, sore muscles and some of the most spectacular vistas to be found on the continent.
“You spend the night being cold, and annoyed that you’ve got food poisoning. Then sunrise hits and you go from being annoyed to seeing the most amazing thing you’ve ever seen in your life.
“They say you’re going to cry and you don’t believe them, but then you struggle to the top and you just fi nd a rock to sit down on and bawl.”
To date, Foote’s tremendous effort has raised $4,180 for Ronald McDonald House and he says he’s continued to be amazed by how generous the broker network has been – and continues to be.
“I went through hell for seven days to get to the top, but the people I did it for – well, they go through hell for a lot longer than that.”
� MoRTGAGE EXPERIEncE A MusT AT nEXTGEn.nET
NextGen.Net has appointed Greg Phillips to its sales team. Phillips previously served as state manager of sales and distribution at YBR and as a senior relationship manager for NAB. NextGen.Net sales director Tony Carn says Phillips’ appointment was recognition of the value the company placed on mortgage industry experience.
MoVERs & sHAKERs
TOP OF THE WORLD
28-29_People+COC.indd 28 25/03/2013 2:46:34 PM
brokernews.com.au 29
caught on camera
La Trobe Financial took home two gongs at the
International Alternative Investment Review Awards in Hong Kong in February. The non-bank was honoured for Excellence in Mortgage Fund Management – Independent – Australia, and Excellence and Innovation in Australian Management – Independent – Australia. The event was attended by over 500 people covering fund managers, international banks, law firms, family offices and institutional investors. Winners were chosen through a survey of over 15,000 investors worldwide.
In focus
View more photos from this event at brokernews.com.au/industry-events
28-29_People+COC.indd 29 25/03/2013 2:46:55 PM
INSIDER30 brokernews.com.au
MAYBE I WON’T MAKE IT, MAYBE MY KIDS WON’T MAKE IT, BUT MAYBE MY GRANDKIDS WILL BE ABLE TO GO UP THERE
An American man who’s been selling properties on the moon since 1980 claims lunar real estate is a great investment.
Oddly enough, 5.7 million people have agreed with him, purchasing up to 200 of his properties a day.
Dennis Hope said he saw the opportunity to sell property on the moon after considering the 1967 Outer Space Treaty.
The treaty, which is the basis for international space law, has no explicit restrictions on individuals owning satellite bodies beyond Earth.
Struggling for money after a divorce, Hope fi led a declaration of ownership with the United Nations. After failing to receive any ‘legal problems’ with his claim, he launched a brokerage to sell lunar real estate.
Since then he has sold roughly 600 million acres on the moon, charging US$24 a property. Buyers have hailed from 193 countries, numbering around 5.7 million people.
Many of the sales have become
gifts, others were purchased for novelty value, Hope said. “If you own land on the moon, there’s the opportunity to think, ‘maybe someday. Maybe I won’t make it, maybe my kids won’t make it, but maybe my grandkids will be able to go up there and utilise the property.’ ”
UNTIL CAPITAL GAINS TAX DO US PART
Offi cials at Shanghai’s Zhabei District marriage registration centre divorced a record 53 couples in a single day this month – that’s about one every fi ve minutes – as lovers rushed to untie the knot in an effort to avoid tougher tax laws on home sales.
According to Reuters, there were similar scenes in Wuhan, Nanjing and Ningbo as married couples opted for ‘quickie’, uncontested divorces – costing just a few Yuan – that would allow them to split ownership of their properties and sell without having to pay capital gains tax of as much as 20%.
The fl urry of divorces follows Beijing signalling that it wants local governments to be tougher in implementing rules to curb property speculation (the tax on gains from selling second homes has been in place for almost two decades but never strictly enforced).
After fi nding out that primary residences owned for more than fi ve years will remain tax exempt, some couples hope that divorcing and dividing up real estate assets will allow them to sell properties as individuals and not have to pay tax. Once the sale is complete, they can remarry each other.
Li Li, managing director of International Strategic Group, says it’s a practical attitude.
“It’s strange, but policy forces people to do it,” he says.
The phenomenon is not new. In 2010 and 2011, state media reported that couples resorted to forging divorce certifi cates so they could skirt restrictions and buy more property.
The Crooked House of Windsor, England Construction of this house dates back to 1592, but it didn’t acquire its trademark slant until 1718, when it was rebuilt using unseasoned green oak. What really makes the house unique though is that its basement had a secret passage to Windsor Castle. According to local legend, the passage was used for trysts between King Charles and a mistress, as well as for running supplies to the castle’s kitchen.
Everingham Rotating House, Taree, Australia This octagonal house can rotate a full 360 degrees with the touch of a few buttons. A rotating drive consisting of 32 outrigger wheels and powered by two 500-watt electric motors are used to spin the house on demand, taking between 30 minutes and two hours.
Subterra Castle, Kansas, USOriginally a missile silo, it took about a decade of renovations to make it a liveable home. Pumping out more than eight feet of rainwater was one of many makeover challenges. What was once the launch control station, the owner says, is now a cosy living space.
WORLD’S STRANGEST HOUSES
BRING A JUMPER
123°CTemperatures on the moon can fall to -123°C at night
This entrepreneur’s selling properties with views that
are ‘out of this world’
30-31-IBC_Insider+Directory.indd 30 25/03/2013 3:09:03 PM
DIRECTORYbrokernews.com.au 31
Homeloans Ltd13 38 39www.homeloans.com.auPage 9
Liberty Financial 13 11 33www.liberty.com.au Page 3
ME Bank03 9708 3994mebank.com.auPage 7
RAMS1800 616 082www.rams.com.au/about-rams/franchising-opportunities/rams-franchising/Page 11
Versara1300 CAVEAT (228 328)www.versara.com.auPage 4
SHORT TERM LENDER Interim Finance 02 9982 2222 www.interimfi nance.com.au Page 2
Mango Credit02 9555 7073 www.mangocredit.com.au Page 1
Quantum Credit1300 135 212www.quantumcredit.com.auPage 6
TECHNOLOGY PROVIDERNextGen.Net02 9929 [email protected] 13
OTHER SERVICESRP Data1300 734 318Page 23
Trailerhomes0417 392 132Page 27
AGGREGATOR / WHOLESALE BROKERAustralian Mortgage Brokers1300 [email protected] Page 21
FAST02 9233 8222www.fastgroup.com.auPage 16-17
BANKCommonwealth Bank13 20 15www.commbank.com.auPage 5
FINANCERhino Money1300 654355 www.rhinomoney.com.au Page 15
LENDER ANZ1800 812 785www.anz-originator.com.auPage 32
To advertise in Australian Broker call Simon Kerslake on 02 8437 4786
30-31-IBC_Insider+Directory.indd 31 25/03/2013 3:09:06 PM
30-31-IBC_Insider+Directory.indd 32 25/03/2013 3:09:07 PM