australian broker magazine issue 6.15
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The news magazine for Australian brokers.TRANSCRIPT
Still a place for part-timers?
POST APPROVED PP255003/06906$4.95 ISSUE 6.15
August 2009
With less than three months to go until ASIC licence registrations kick in, the future of part-time mortgage brokers in the industry continues to divide opinion.
Since its inception, the mortgage broking industry has been a flexible option for working mothers. It has also included its fair share of ‘taxi driver by day, broker by night’ operators.
More recently accountants, lawyers and financial planners have also added mortgage broking to their tool boxes.
But with the aim of licensing and new regulation being to create a professional industry
mirroring financial planning, many have questioned where this leaves part-timer players.
It has become such a hot topic that Australian Broker understands that a number of aggregators are undertaking a study of part-time brokers to gauge their future role.
From an MFAA perspective, CEO Phil Naylor said there was definitely a place for part-time brokers, as long as they have a “professional mentality”.
He said the association did not consider whether members are full-time or part-time brokers: “We look at whether they are performing professionally.”
“If part-time brokers have a part-time mentality, yes it will be harder for them, but if they have a professional mentality, the fact that they are operating on a
part-time basis may not be an issue,” he added.
This view was backed by Citibank’s head of mortgage distribution, Peter Hayward, who said the question of being full-time or part-time was almost irrelevant. “It’s not about whether you are part time or full time, but whether you are professional or not. If you maintain professional standards, follow the CPD regime, attend training sessions and provide excellent service, then who cares if you are full time or part time,” he said.
And while new compliance, accreditation and licensing requirements along with fees would make it harder for part-timers, Hayward said this would not be “too onerous” to stop part-time brokers remaining part of the industry.
Not everyone agreed though.Dean Rushton, chief operating
officer at The Loan Market Group, said full time commitment was required to be able to “deliver the level of service that consumers should expect from an accredited mortgage broker.”
Future role of part-time mortgage brokers uncertain
ANZ’s call to brokers
Candidate checks
Duty of care
ANZ expects brokers to use its ‘Portfolio’ product to introduce new investor clients. ‘Portfolio’ will allow investors to bring all lending under one credit limit.
A summary of the pre-employment screening processes that should be carried out by employers. Broking businesses that skip this process do so at their own risk.
An industry expert talks about the ‘duty of care’ that financial advisors have. If a client suffers a misfortune, there may be consequences for their advisor.
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Genworth report gives industry thumbs upBrokers continue to be an important part of the mortgage landscape, with a growing number of Australians preferring to seek general advice and recommendations from brokers.
Delivering the 2009 Genworth Financial Mortgage Trends Report in Sydney, Alan Shields, Retail Finance Intelligence’s (RFI) director of research, said that more than half of Australian borrowers had used a broker in the past and that the “vast majority” were happy with the result they had received.
He added that for their most recent loan, as many as four out of 10 borrowers had retained the services of a broker – a figure that is up 33% from 2005.
The report also found that of those who had never used a
broker, nearly 20% said they would consider using one for a future loan.
South Australia was found to be the most broker friendly state, where 61% of borrowers had already used the services of a broker.
Tasmania and Victoria still has some room to grow, with 44% and 41% of borrowers there saying they were currently “unlikely” to seek out the help of a broker.
The survey also revealed that young Aussies were the most open to using a broker, with 58% of Gen Y borrowers having already done so – compared to 54% of Gen Xers and 46% of Baby Boomers.
Still, the most common reason borrowers look to retain the services of a broker is simply to get a better deal, the report found.
share relative to the major banks.According to Fujitsu
Consulting’s Martin North, regional banks are at a disadvantage due to their lower credit ratings. This means the government guarantee is costing them a lot more. In addition, North said regionals were up against the online banks like ING and Rabobank when it came to attracting deposits from end customers.
He said it was difficult to see what else the government could to right the funding disadvantage.
brokers still important part of the mortgage landscape
more borrowers retaining the services of brokers now than before
South Australia is the most broker friendly state.
Gen Y Aussies most open to using brokers.
‘to get a better deal’ is still the most common reason borrowers use brokers
falling interest rates offer borrowers hope in servicing home loans
Key points
Other reasons were to seek out specialist advice and to obtain guidance on the diverse range of mortgage products on offer.
The trends survey also revealed that most Australians are feeling cautiously confident in their ability to service debt as interest rates continue to bottom out.
Brokers key to regionals clawing back market share
And all this may be a moot point. According to North, the government is looking to remove the guarantee.
Rather, he said regional banks needed to carefully target which customers they write business for, since “some are more valuable than others.” He also highlighted working with brokers as another way to bridge the divide: “Regional banks should look to use brokers as part of their distribution strategy.”
Mortgage Choice spokesperson Kristy Sheppard said it was “absolutely critical that funding and credit be made available to regional and smaller lenders at the same level as it is to other lenders”.
Recent announcements suggest regional banks are continuing to struggle to maintain a foothold in the lending market, while RBA statistics point to a loss of market
Suncorp adds 0.2% margin to high LVR loans, announces job cuts
Bendigo & Adelaide Bank asks staff to take unpaid leave
Bank of Queensland in legal battle with some franchisees
Recent developments
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RMBS crossroads: more cash or guarantees?
Numbers point to investor returnThe first homebuyer bubble may have burst, but property investors are lining up as the potential next ‘big thing’ in mortgages.
The release of the May housing finance figures by the Australian Bureau of Statistics (ABS) lent support to this view, with the value of dwelling commitments for investor-fixed loans rising by 2.4%. This was after a rise of 8.9% in April, the third consecutive month of increases for this category.
Data released by AFG in its June mortgage index suggested momentum would continue with the proportion of loans to
investors rising to 29%, up from a low of 24.5% in March and heading back towards AFG’s long-term norm for this sector: a range of 30–35% of all mortgages sold.
These numbers support the findings of the Mortgage Choice 2009 Property Investors Survey where three quarters of the 1,000+ respondents said they were waiting for the First Home Owner Grant boost to expire before purchasing within the next two years.
Commenting on the AFG figures, Mark Hewitt, GM of sales & operations said: “We’re seeing a
number of encouraging signs that the mortgage market is normalising. First home buying, investor activity and LVRs are all reverting towards the long-term trend after a period of turmoil.”
The investor data was also picked up the Housing Industry Association with senior economist, Ben Phillips saying the most pleasing aspect was the return of investors for the construction of new rental dwellings which grew by 83.7% over May.
“Conditions for rental investment have improved significantly recently, with strong rent growth, low interest rates and renewed confidence in house prices buoying the sector,” he added.
The HIA is forecasting a 15% increase in housing starts by the
logical path to follow. The simple fact of the matter is that RMBS is important not just to non-banks as a funding source, but also for banks. It’s also critical to ensuring competition,” he said.
to transactions sponsored by non-ADIs,” it said.
While lenders wait to hear what the government might do next, two possible of courses of action have emerged.
The first of these would be to provide additional funding for the AOFM, and the second would be to provide government guarantees on mortgage securities – as it has done with the major banks.
In June it emerged (via an AFR article) that Treasury officials were preparing options that would make it easier for regional banks and non-bank lenders to access funds, while there was also talk of the AOFM scheme being increased to $30bn.
Tony Carn, general manager for sales at Home Loans Ltd, backed the concept of a government guarantee. “From the market perspective, it would be a pretty
December quarter with new dwelling investment forecast to make a positive contribution to economic growth in the 2009/10 financial year,”
2.4% increase in the value of dwelling commitments for investor-fixed loans (ABS May data)
third successive rise in investor fixed loans (ABS data)
proportion of loans to investors up to 29% in June (AFG)
three quarters of investors plan to return to market in next two year after FHB boost expires (Mortgage Choice survey)
The key ‘investor’ indicators
Challenger’s general manager for distribution, Steve Weston, said lenders appreciated the $8bn investment provided by the government, but said it was not enough to provide the level of competition needed.
Weston said that if the government guaranteed RMBS it would result in increased appetite from investors – a good thing for Australia in the long term.
As the Australian Office of Financial Management’s (AOFM) $8bn RMBS scheme draws to a close, non-bank lenders and second-tier banks reliant on securitisation to fund their lending are still waiting to hear if the government will take any further steps to stimulate competition.
Recent AOFM investments in Wide Bay Building Society and Australian Central Credit Union brought the total investment so far to $6.7bn with $3.24bn going to ADIs and $3.5bn invested in non-ADIs.
And having selecting two further proposals from Newcastle’s Greater Building Society and from Suncorp, the AOFM noted it would be close to its limit for ADI securities.
“The next selection round will therefore most likely be restricted
Lender AOFM investment
Challenger Mortgage Management $1bn (two investments)Members Equity Bank $1bn (two investments)FirstMac $994.6m (two investments)Resimac $808.8m (two investments)Liberty Financial $500mBank of Queensland $500mAMP Bank $475mBendigo and Adelaide Bank $425mCredit Union Australia $350mWide Bay Australia $299.5mAustralian Central Credit Union Ltd $190mGreater Building Society Unknown at time of publicationSuncorp Unknown at time of publication
Where has the AOFM money gone?
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Volume quotas not on Citibank radar
Brokers part of NAB’s new customer focus
of volume targets being used to weed out incompetent brokers.
“Volume targets tug at the essence of what a broker does,” Hayward said. “A good broker has a wide range of lenders, and has no incentive to write one loan over the other. From Citibank’s perspective we don’t support that. Our job is to maintain a competitive product range, add value to brokers, take an interest in their businesses, share ideas and best practice.”
“Our job is to compete [with other lenders] and offer the best products. It’s up to brokers to survey banks and their products and make a recommendation.”
Hayward said the bank was in partnership with brokers and wanted to help them as much as it wanted their help: “It’s about
focus on its high growth customers consisting of: “premier/mass affluent, MyBusiness/Micro Business, aspirational mass market, [and] DIY”
She told The Australian that the overriding objective would be to improve “distribution channels through third-party brokers, financial planners, the retail or branch business and the direct channel”. But the bank was unable to provide any specific details about how it would be making improvements to the broker channel.
“NAB is focused on providing customers with choice of how they interact with us. Our customers want to deal with us at a time and in a manner of their own choosing –whether that be talking with someone face-to-face, managing their requirements online or
giving it to someone else to manage on their behalf,” a spokesperson said.
NAB currently ranks third in home lending, with a market share of 14.4% – compared to 16.4% in May 2007.
It has struggled to gain traction with brokers via its HomeSide product range.
The June 2009 loan book of Connective, which has over 1,000 brokers, showed HomeSide’s share of the aggregator’s loan book was just 3% (compared to 5% in April 2009) and significantly less than any of its Big Four competitors. May sales figures for National Mortgage Brokers (nMB) did not include HomeSide among its top five.
Gray admitted the bank had been “very deliberately” uncompetitive on price before
Christmas, but since February it “had been keenly priced”.
She said the bank’s star rating system was designed to bring it closer to the larger, more professional brokers.
NAB targeting specific personal banking customer segments
overriding objective to improve all its distribution channels
Lisa Gray says NAB loans now much more keenly priced
star rating system to bring bank closer to larger, professional brokers
Key points
meeting halfway. We have work to do and brokers have work to do. It’s not a blame game.”
He said the bank viewed the partnership as a symbiotic way of achieving common goals.
And he agreed with the major banks that quality “is most important thing,” but said there were ways lenders can assist brokers to achieve this – other than through the accreditation process. “I understand that all banks have quality problems, but it’s not just a broker’s problem to resolve, it’s a partnership.
“We have 10 to 14 products. If a broker has 30 lenders on their panel (and each has a similar number of products), that’s a lot of information to maintain.”
Hayward said there were checklists that brokers needed to double check before submitting their applications, “but we are kidding ourselves if we expect brokers to know the intricate details of every lender. “We understand that mistakes are
made on both sides. We don’t want to go into a debate about percentages. It’s important that both parties have the opportunity to resolve mistakes and get the loan back on track.”
Citibank has no plans to impose volume-based requirements on its brokers. Its head of mortgage distribution, Peter Hayward, said the bank was opposed to the idea
Peter Hayward
Lisa Gray
The decision by Westpac and CBA to impose volume targets on mortgage brokers in order for them to keep their accreditation moved from an industry issue to a national one following coverage in The Australian and on news.com.au (where over 80 bloggers aired their views).
To view the stories go to:http://www.news.com.
au/business/money/story/0,25197,25784971-14327,00.html
http://www.theaustralian.news.com.au/business/story/0,28124,25777802-20501,00.html
National interest in volume targets
As part of its strategy to strengthen its personal banking position, NAB says it is focused on improving its distribution via third parties – including mortgage brokers.
The new strategic plan was outlined by the bank’s group executive for personal banking, Lisa Gray, who said NAB would
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Read informative profiles of broker industry leaders at www.brokernews.com.au
Round-up: banks steer clear of volume targetsA survey of Australian banks by Australian Broker has found an unwillingness to impose volume requirements on brokers in order for them to maintain their accreditation.
Of all the banks contacted, only BankWest said it would go down the quota route enforced by the CBA and Westpac.
BankWest’s head of retail sales, Mark Reid, said brokers were required to lodge six applications with the bank per year.
Reid said the bank would be writing to those brokers mid-year that had not met the target, telling them how many more deals they needed to submit.
He said this had always been the policy at the bank, but was only now being enforced after being reviewed about three months ago.
If brokers do not complete six deals, they will need to redo their accreditation – though there will
be no cost for doing the BankWest course. Reid backed volume targets: “It’s important, purely from a customer perspective, to ensure that we are getting the right information. Brokers need to understand our policies.”
A spokesperson for NAB Broker said the bank was currently reviewing its accreditation policy in line with its “quality advice initiatives” but has no plans to introduce an accreditation or re-accreditation fee.
Asked for its view on volume targets, the spokesperson said the ‘litmus test’ was whether “the initiative has an actual or implied ‘sales’ target or financial penalty attached to it, or whether the legitimate objective is to raise the bar on quality through education and training”.
Glenn Haslam, GM for specialist businesses at ANZ, said the bank had no current plans to modify its accreditation policy in
the next few months, but was working through the effects of the national consumer credit protection legislation on its accreditation policy.
“We do not have volume targets for brokers to maintain their accreditation,” Haslam re-affirmed.
ING Direct’s head of partnerships, Mark Woolnough, said following a recent evaluation of the broker channel, it had removed the accreditation of inactive and poorly performing brokers (those accounting for less than 1% of volumes). “No further significant changes are planned at this stage,” he added.
Woolnough said there was a significant cost to both lenders and the broker channel in sustaining poor and inactive brokers, but said the bank believes “volume targets shouldn’t be the sole factor considered regarding brokers remaining
accredited with their lenders”.A spokesperson for Suncorp
said its accreditation policy was constantly under review but there were no plans for any modifications at this time.
“Our accreditation process is not affected by volumes. We provide aggregators with a differentiated service level dependent on how much volume is generated. Ultimately, it is passed on to brokers affiliated with those aggregators.”
Bendigo and Adelaide Bank has no plans to modify its accreditation policy in the next few months, with a spokesperson saying volume targets may create “anti-competitive and biased behaviour”.
only BankWest enforcing volume requirement
says it is important for brokers to understands policies
other banks have no current plans to introduce quotas
Bendigo and Adelaide Bank says volume targets create anti-competitive and biased behaviour
Key points
Read informative profiles of broker industry leaders at www.brokernews.com.au
Read informative profiles of broker industry leaders at www.brokernews.com.au
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MFAA wants separate conduct guide for brokers
LIXI wants positive credit reporting on the agenda
guide for both professions, “even though ASIC have put in separate provisions. We think the temptation will be too great for someone further down the track to push the two together. We think it just makes it look too complex,” he said.
“I mean the whole idea of this is making it easy to understand. By all means have a paper, but make it a separate one.”
Naylor said because there was different legislation governing AFS licence holders and credit licensing holders it seemed “artificial” to put the two together. “If you pull it out and make it focused on credit licensees it’s not anywhere near as complex.”
In both consultation papers ASIC takes a ‘principles-based’ approach and says allowances will be made for the “nature, scale and complexity of the licensee’s business”.
This was welcomed by Naylor who said “scalability” was the basis of the MFAA’s earlier submissions.
“It has been our objective from day one that this be simple enough, without losing its integrity, for the thousands of one-man businesses out there to comply,” he said.
The second paper covering compensation and financial resources arrangements proposals (Consultation Paper
ASIC releases first package of policy proposals on the implementation of the proposed National Consumer Credit regime
first two papers cover general conduct and compensation arrangements
MFAA opposed to single conduct guide covering planners and brokers
wants separate guide for credit licensees
overall, MFAA pleased with proposals
Key points
111) provides licence holders with the scope to self-assess whether they have adequate funds and arrangements in place for compensating consumers.
“I think self-assessment is the best way to go. Initially they [ASIC] were talking about being much more rigid on that, but our view was that you are not dealing with financial planners or people handling customers’ money. We questioned all the record keeping… it’s not all that relevant to a mortgage broker,” he said.
The paper also includes a lot of detail about professional indemnity cover and Naylor said the MFAA was pretty happy with what is being proposed.
“We’ve checked it out with out advisors and they are pretty comfortable that that is consistent with what we already require of our members.
The industry body will also put together a guide for brokers once ASIC has finalised its policies.
An ASIC proposal that an updated version of the conduct guide for financial planners be used jointly for credit licensees has been rejected by the MFAA.
An updated version of the AFS guide – Regulatory Guide 104 – is included in Consultation Paper 110, the first of two consultation papers releasedby the regulator setting outhow it will administer the new credit laws. In the consultation paper, one of the questions asked is: “Do you think we should provide this guidance for credit licensees in an update to RG 104 or should we provide the guidance in a separate guide?”
CEO Phil Naylor said the MFAA was opposed to a single
12 August 09 – Comments due on consultation papers
Aug to Oct 09 – Drafting of regulatory guides
November 09 – Regulatory guides released
Timeline: what happens next?
Erik Fenna
Positive credit report could be a major talking point among lenders and brokers at the LIXI Annual Forum.
LIXI CEO Erik Fenna told AB he was trying to get positive credit reporting onto the agenda for the forum, which takes place in Sydney on 9 September.
“We are in favour of better credit reporting, while mindful of privacy and confidentiality constraints,” he said.
Under current Australian law positive credit reporting is not permitted, although in its review of Privacy Law released last year, the Australian Law Reform Commission (ALRC) recommended a move to a more comprehensive credit reporting
Fenna said the LIXI annual forum attracted over 200 delegates last year.
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ANZ expects brokers to add to their ‘portfolio’
Regulation to drive franchise consolidationAs it set its sights on ambitious expansion plans, Club Financial Services managing director Andrew Clouston says upcoming regulation will drive further consolidation in the franchise space. His comments came as the South Australian-based franchise group set itself the target of growing its current base of 25 franchisees to 150 over the next five years.
Club’s own entry into the franchise space followed the
Brad Nolan from Eastern Financial Solutions said the product was “fantastic” and a sign that the bank was “gearing up for investors to get back into the market in the next quarter”.
The launch of the product comes as the property investment sector shows signs of recovery with most indicators showing a renewed appetite from investors.
The new product enables property investors to bring together all of their home and residential investment lending under a single credit limit and is being sold across all the bank’s distribution channels.
It has been developed on the back of research commissioned by ANZ which found that more than 50% of investors go on to
communications to accredited brokers. He added that ANZ BDMs have been fully trained on the new product and will be working with brokers to identify sales opportunities.
He told Australian Broker the product would appeal to customers who have equity in their home, have a strong available cash flow, are seeking a gearing strategy to build wealth and have good financial discipline. “The product suits investors who are familiar with the market, and while it does not suit all customers, we anticipate that brokers who have exposure to a significant proportion of the target investor customer segment will recommend ANZ Portfolio to their clients,” he said.
Due to their exposure to ‘target investor customers,’ ANZ expects brokers to be a significant distribution channel for its new ‘Portfolio’ investment product.
Michael Bock, ANZ general manager for mortgages, said the bank has provided sales tools and
new investment product launched by ANZ
enables property investor to bring all lending under one credit limit
bank expects significant take-up through brokers
head of mortgages says brokers have access to right investor clients
Key points
purchase more than one investment property, and 60% of investors secure an investment loan over existing property.
Bock said turmoil in global financial markets in the past year had highlighted the relative security of investing in the residential property market.
ANZ Portfolio features the ability to create up to 12 sub-accounts from a variety of loan types including a line of credit, fixed or variable rate mortgage under a single limit.
acquisition of The Mortgage Bureau in 2007, and Clouston said it would reach its target by a combination of organic growth and further acquisitions. “We are constantly on the look-out for smaller independent brokers who are looking for a bigger entity to take them through the upcoming regulation, and who are not comfortable of taking on the burden themselves,” he said.
Club is also open to acquisition opportunities, particularly small
to mid-size groups struggling with the “burden of being fully compliant”. One of Club’s priorities has been to get compliance standards in place before legislation kicks in.
Were it to achieve its “national footprint” of 150 franchise offices, Club would create a network comparable in size to RAMS (which plans to double its network of 80 stores in the next few years) and Aussie, which currently has 140 stores. Clouston said it was successful because it was a mortgage manager as well as broker: “We always had our own product so we have stayed a lot closer to customers than stand alone brokers. The philosophy of
the company is to build strong relationships with customers.
Andrew Clouston
News14 www.brokernews.com.au
Struggling borrowers ‘afraid’ to contact lender
AMAs: Westpac puts weight behind industry’s top event
The latest Genworth Mortgage Trends Report revealed an overall reduction in mortgage stress, but it appears that the vast majority of borrowers will not contact their lender if things get really bad.
Among the questions asked of the 2,000 Australians surveyed by Genworth in late April was
what they would do if they had a mortgage and lost their job.
Sixty-nine percent of respondents said they would proactively contact their lender, while 39% said they would proactively contact their broker.
But just one in five borrowers (21%) said they would contact their lender “as a measure of last resort”. The findings added impetus to Genworth’s call for the establishment of a mortgage stress helpline.
Genworth CEO Martin Barter said the mortgage insurer would be proposing this to solution to the government.
In addition, Genworth will continue to assist struggling borrowers having short-term difficulty meeting their mortgage repayments via its Hardship Solutions Team, which was set up in 2006.
Alan Shields, research director of Retail Finance Intelligence (RFI) which compiled the report, said the unwillingness to contact lenders when the situation was
dire was a sign of a “heads in the sand” mentality.
“People are not facing up to their problems. There are a proportion of people who just let things get worse and worse,” he said. On the other hand, Shield said there were also those people who would move heaven and earth – even sell their possessions – before asking for help.
Accompanying the publication of the mortgage trends report, Genworth’s first Spotlight Express Report, revealed that unemployment was now the biggest driver of hardship, with 50% of applications made to its hardship team relating to job loss or reduced hours compared to 40% in 2008 and 33% in 2007.
Before the onset of the GFC, illness or injury were the main reasons for seeking hardship assistance. The biggest factor in borrowers facing hardship and mortgage stress was the high cost of living (51%) following by their debt obligations (26%).
It is essential that borrowers are able service their loan over different economic cycles, not just when rates are at historic lows.
Consider changing personal circumstances, such as going down to one income, in a borrowers ability to service their mortgage.
Be proactive with borrowers struggling to meet their repayments – the earlier they contact their lender the better.
Tips for preventing or dealing with hardshipRaise awareness with all
borrowers, not just those in arrears, about hardship assistance programs.
Understand the historical performance of your own and your customer’s loan portfolios, and think about who is likely to be most vulnerable in the current environment.
Ensure all staff are trained to recognise hardship and offer potential solutions where appropriate.
mortgage world – Westpac – has signed up to be the official partner of the event.
The Australian Mortgage Awards 2009, as the culmination of a months-long, in-depth research process, will celebrate and recognise the key players who have triumphed in the face of global economic adversity and continued to strengthen their business and customer relationships. And in 2009, in line with its heightened profile, the
event moves up a notch to the swish confines of the main ballroom at the five-star Westin in Sydney’s CBD.
Finalists will have been hand-picked from hundreds of nominations by members of the general public and industry insiders and will be announced in the September issue (9.9) of MPA magazine. Winners will be chosen by a panel of judges composed of some of Australia’s most respected mortgage and finance players and will be announced on the night.
“Westpac is proud to be the official event partner of the 2009 Australian Mortgage Awards,” said Huw Bough, general
manager, Westpac mortgage broker distribution. “This is an exciting key annual event that recognises the best individiual and business performances in the Australian mortgage industry.”Over the eight years since
its inception, the Australian Mortgage Awards has well and truly established itself as the mortgage industry’s leading annual event.
Usually sold out and packed with up to 600 of the industry’s most successful and pre-eminent personalities, the Awards always proves to be much anticipated, much talked about and much enjoyed. No wonder then that one of the biggest names in the
Martin Barter
Official Event Partner: Westpac 25th September 2009 The Westin Sydney
Visit the official website and secure your table at this sell-out event www.australianmortgageawards.com.au
The Australian Mortgage Awards 2009
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NAB and wholesale financial services provider Cuscal have entered into an agreement to create an ATM network of more than 3,100 ATMs. In a statement, NAB said the deal would save customers more than $10m in direct ATM charges annually.
Under the agreement, NAB’s 1,700 ATM fleet will combine with the Cuscal-managed 1,400 rediATM sub-network. All NAB-owned ATMs will carry the NAB logo and all ATMs within the combined network will display the rediATM logo. The rediATM sub-network is used 100 participating retail financial institutions that form part of the Cuscal group – the majority of which are credit unions.
HomeStar Finance captured the Non-Bank Lender of the Year award from Your Mortgage magazine for the second year in a row. The industry’s leading consumer magazine on residential and investment property finance also awarded the lender silver in the categories of Best Loan for First Homebuyers and Best Loan for Investors. Additionally, HomeStar Finance was awarded a silver, bronze in the Best Standard Variable Loan category and a bronze for the Best Fixed Five-year Loan.
“For HomeStar, winning the Non-Bank Lender of the Year Award is public recognition for all the hard work that our team has put in to ensure that our customers always receive great value and the best service that the mortgage market has to offer,” said HomeStar General Manager, Andrew Donaldson.
IT provider Pisces Group was released from voluntary administration after five weeks and was cautiously optimistic about moving forward. However, the company acknowledged it would need to carry out a recapitalisation in the near future. The company, chaired by Liberal leader John Hewson, is trying to keep the lid on debts it inherited after it acquired three smaller companies. The acquisitions took place before Hewson joined the board. The GFC affected Pisces’ ability to access credit and the mortgage solutions provider took a $13.5m loss in the 2007/08 financial year. The company attributed most of the losses to write downs on assets absorbed with acquisitions. Pisces is expected to make a profit of close to $1m for the year to June 30, 2009.
In the future, Pisces is making structural changes to the business.
Corporate insolvencies have risen again, but not as much as expected, according to Restructuring Works’s third quarterly Business Stress Report. The new numbers raise the question of whether insolvencies have peaked, or if this is the calm before the storm. “I think the research is showing a pause in the rise in insolvencies and there is worse to come,” said Cliff Sanderson, director at Restructuring Works. He put this sombre prediction down to the significant increase in enquiries from companies in financial distress, and well as that a “reasonable proportion” of companies currently being offered latitude would eventually fail. “So it will take some time but ultimately we will see a further material rise in the number of insolvencies,” he said.
The Queensland Teachers’ Credit Union (QTCU) has being named Queensland’s best non-bank lender for first homebuyers by Canstar Cannex. It beat all Queensland credit unions, building societies and mortgage providers to take out the award for its Smart Starter Home Loan Package, designed specifically for first home buyers.
QTCU CEO Mike Murphy said the win was the result of careful research into creating a product suited to the first home buyer market.
Canstar Cannex head of research Steve Mickenbacker said although the major banks had the edge when it came to national coverage, state-based non-banks played an important role by providing healthy competition in the local lending market.
Murphy said QTCU continued to demonstrate the viability of using credit unions as an alternative to the major banks.
industry nEWs in BriEF
nAB and Cuscal create joint AtM network
non-bank award for Homestar Finance
Pisces back from administration
‘Pause’ in rise of insolvencies
Credit union wins Qld FHB award
16
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Price discrepancy promotes refinancing activity
being a one-off occurrence, he believed it would be an ongoing trend – fuelled by diverse funding structures and strategies as well as the continued overall lack of wholesale funding.
However, Porges said brokers should be aware that not all refinancing opportunities were created equally – and in some cases borrowers would be better off not refinancing their home loans at all.
“For example there may be tax implications for refinance or debt consolidation transactions, and these should be discussed with the customer,” he said.
His comments follow up an earlier Aussie announcement that low interest rates and market uncertainty has prompted an increasing number of borrowers to refinance.
“Almost 40% of all new loans written in June were for
Differing prices between lenders are allowing homeowners to refinance in order to save money or pay their home loans off earlier, according to Aussie chief executive officer Steven Porges. And rather than this
refinancing customers, up from 30.2% in March,” it said.
Meanwhile, Genworth Financial has warned that lenders, borrowers and brokers should approach refinancing with a degree of caution – especially in these uncertain times.
The ripple effect of the US sub-prime crisis and the global financial melt down has been well documented, but Genworth Financial said that little attention has been paid to the role that the culture of refinancing played in the debt binge of the last decade.
“One characteristic that helped accelerate the current crisis was the availability of the so called 2–28 and 3–27 loans in the US, which came with low introductory rates of around 1% that increased up to as much as 9% after two or three years.
“The key driver for getting into such loans was the ability to Steven Porges
refinance a new loan at another low introductory rate when the higher rate kicked in – and thus the cycle continued.
“A key lesson is understanding that the borrower’s ability to repay the mortgage over the long term is essential, regardless of any introductory or promotional rate,” it said.
1. be careful2. consider a borrowers full
debt history3. understand the stacked
risk factors4. act early 5. put fraud tools in place6. learn from global markets 7. trust your instincts
Seven rules of refinancing
Source: Genworth Financial
Source: The Australian Government – Department of the Environment, Water, Heritage and the Arts (www.environment.gov.au/index.html)
17www.brokernews.com.au
toP tEn tiPs
…FuEl EFFiCiEnt drivingFor most brokers, their vehicle is an essential business tool. Here are ten tips to help you save money on your fuel bill…
tiP 1: Minimise your vehicle use Vehicles are least fuel efficient and most polluting at the start of trips and on short trips. Do a number of errands in one trip rather than several trips and save both time and fuel.
tiP 2: Drive in the right gear Driving in a gear lower than you need wastes fuel, and letting the engine labour in top gear on hills and corners is also wasteful. In a manual vehicle, change up gears as soon as the car is comfortable with the higher gear but without accelerating harder than necessary.
tiP 3: Drive smoothly Stop/start driving is much less efficient and more polluting than driving at a constant speed. Avoid travelling during peak-hours and on congested roads whenever possible. Take it easy on the accelerator – more revs equals more petrol use.
tiP 4: Minimise fuel wasted in idling Most cars don’t need to be “warmed up” by idling before setting off. This simply wastes fuel. Start your car when you are ready to go. Once on the road, minimise fuel wasted in idling by stopping the engine whenever your car is stopped or held up for an extended period of time.
tiP 5: Don’t speed Fuel consumption increases significantly over about 90 km/h. At 110 km/h your car uses up to 25% more fuel than it would cruising at 90 km/h. If your car is fitted with cruise control, using it during highway driving will help to maintain a steadier speed, which will save fuel.
tiP 6: Minimise aerodynamic drag Additional parts on the exterior of a vehicle such as roof racks and spoilers, or having the window open, increases air resistance and fuel consumption, in some cases by over 20 per cent at higher speeds. Take off roof and bike racks when not in use.
tiP 7: Look after your vehicle’s tyres Inflate your vehicle’s tyres to the highest pressure recommended by the manufacture and make sure your wheels are properly aligned. Looking after your tyres will not only reduce your fuel consumption it will also extend tyre life and improve handling.
tiP 8: Use air-conditioning sparingly Air conditioners can use about 10% extra fuel when operating. However, at speeds of over 80 km/h, use of air-conditioning is better for fuel consumption than an open window as this creates aerodynamic drag.
tiP 9: Travel light The more weight a vehicle carries, the more fuel it uses Don’t use your car as a mobile store room. Leave heavy items like tools and sports equipment at home when you don’t need them on a trip.
tiP 10: Keep your vehicle in good condition Keep your vehicle well tuned and regularly maintained. Get your car serviced at the intervals specified in the manufacturer’s handbook.
18
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MovErs & sHAkErs
NaMe: Chris SzigetiFroM: FBaaTo: FBaaTiTLe: National treasurer and board memberChris Szegti is a founding member of the FBAA. Before his appointment as the national treasurer, he acted as state president for Queensland. He has over 30 years of experience in the finance industry. “The finance and mortgage broking industry is currently going through a tumultuous period and I’m looking forward to taking a role on the board of a peak advocacy body for brokers.”
NaMe: ahmed FahourFroM: NaBTo: Gulf Finance HouseTiTLe: Ceo (based in Bahrain)Ahmed Fahour joined the Middle Eastern Islamic investment bank on 19 July as CEO. He was formerly executive director and CEO for the Australian operations at NAB. Fahour joined NAB in 2004 to run its Australian and Asian business. At the beginning of 2009, he left NAB to establish the Australian Business Investment Partnership (ABIP), a joint venture institution between the government and Australia’s four largest banks.
NaMe: Paul FeganFroM: St.GeorgeTo: aMPTiTLe: Non-executive director and board memberPaul Fegan, who headed St.George before its merger with Westpac, joined AMP as a non-executive director on 1 August. He has 30 years of experience in the financial services industry, including roles in the US, UK, Ireland, Hong Kong and Australia. AMP chairman Peter Mason said Fegan’s wealth management experience will be a valuable addition to the AMP board.
NaMe: John BrogdenFroM: Manchester Unity, abacusTo: The investment & Financial Services associationTiTLe: CeoFormer NSW Liberal Party and opposition leader, John Brogden, will replace Richard Gilbert as CEO of the Investment & Financial Services Association on 28 August. From mid 2006 to December 2008, Brogden was the chief executive of health insurer Manchester Unity. Brogden was a member of the NSW Parliament from 1996 to 2005 and leader of the opposition for three-and-a-half years from 2002 to 2005.
“It is more than meeting the industry CPD requirements or meeting lender minimum volumes, it’s about investing the time to be able to stay current with a range of lender’s products, policy and procedures,” he said.
Furthermore Rushton said factors like licensing, accreditation requirements and compliance would make it harder for part-time brokers to operate. “There is no question that these factors will make it extremely hard for part-timers to remain compliant and with ASIC as the new regulator, the scrutiny will be significantly greater.”
Andrew Clouston, managing director of franchise group, Club Financial Services disagreed with Rushton on the service front: “From the service perspective, part-time brokers are definitely still viable and there are lots of good quality people.”
But he said it would become increasingly difficult for part-timers just to maintain accreditations due to volume requirements, besides keeping up to speed with compliance requirements
“It’s incumbent on aggregator to ensure part-time brokers are working within the new
compliance regime. There is definitely a place for them, but whether they can maintain their accreditation is yet to be seen,” Clouston said.
Paul Gollan, CEO of Australian Mortgage Brokers, said there was a role for part-time brokers in the industry. However, he qualified this statement by saying that for many years AMB has insisted that all new recruits make a full-time commitment to their business.
“In saying that we have a handful of brokers who choose to work part-time hours in their broking business. We have had experienced brokers choose to drop back to part-time hours due to events such as birth of child, sickness in family or purely for lifestyle reasons.
“However the important thing is they attend PD days, stay up-to-date with product changes and adhere to our strict compliance requirements,” he said.
Gollan also believed that a major hurdle for part-time brokers would be writing enough volume to satisfy the volume requirements from lenders who have introduced a minimum quota.
Still a place for part-timers?
cont. from cover>>
Mortgage Choice is definitely not in negotiations with Suncorp to buy LJ Hooker Real Estate.
“It has never been on the table for us,” said Kristy Sheppard, Mortgage Choice’s senior corporate affairs manager.
But she did confirm with AB that the mortgage broker is still “very much” actively seeking growth opportunities. Her comments were made in response
Mortgage Choice douses LJ Hooker rumoursto rumours that Mortgage Choice was on the verge of sealing a deal with the realtor.
The mortgage broking company was believed to be offering between $30m–$50m, lower than Suncorp’s asking price of between $90m–$110m, according to The Australian. Peter Bromley general manager at LJ Hooker also confirmed that there was no substance to the report.
19www.brokernews.com.au
Brokers may have a new niche market to tap into.According to new research, co-ownership of property
by friends, siblings, relatives and gay or straight couples is on the rise.
The Daily Telegraph reported that there has been a “300% boom” in the rate of buyers opting to take on a mortgage with a partner in the last six months.
Jeremy Levitt, director at PodProperty, which specialises in drawing up legal contracts for co-ownership, said most co-owners were buying either homes to live in or homes for investment purposes.
He said that when servicing this market brokers should recommend to customers that they put in place a co-ownership agreement.
“Unless there is an agreement in place, buying together with friends or family members can have some big pitfalls – particularly if one person defaults under their finance or one person needs to sell their share of the property,” he said.
Levitt made these comments on the back of reports that the major banks are launching mortgage products that allow co-owners to keep repayments separate in order to tap into the rapidly expanding market.
Among those to already do so is the CBA. It launched ‘Property Share’, which allows people buying a property together to keep their loans entirely separate.
According to PodProperty: “Both parties act as cross guarantor for each other, but such a loan structure allows for each party to pay back their loan at their own pace and to take out differently sized mortgages.”
Co-ownership: legal agreement vital
It regularises the relationship between the co-owners by including the following provisions: an indemnity in respect of each co-owner against liability caused by any other a way of dividing up any profits or losses an approval mechanism for appointing substitute occupiers obligations on each co-owner to provide their proportion of the instalment requirements in connection with each co-owner splitting the costs the establishment of a committee for making decisions a default regime protecting co-owners against the default of another ways of selling out, either collectively or individually a provision relating to determining fair market value a dispute resolution clause
Key elements of a co-ownership agreement
Source: PodProperty
Jeremy Levitt
The broker market needs to segment itself so that it separates the professional operators from the rest, according to Kathy Cummings, executive general manager, for third party banking at the CBA.
Cummings said that over the last 12 months, the broker market had – bar a few exceptions – failed to segment itself.
“But you will find that other organisations, like ourselves, will segment brokers into those that are professional and those who are not putting in the effort to build sustainable businesses,” she said at a media lunch in Sydney yesterday.
Her comments come following the CBA implementing its new accreditation policy which requires a minimum volume of four lodgements in a six-month period to encourage brokers to maintain their knowledge of the bank's products, policies and processes.
Other banks have also started to segment brokers. In May NAB altered its star rating system to give its 4-star brokers access to higher LVRs and new services including access to real-time online NAB and Homeside customer information.
“Brokers need to understand what is needed in terms of quality and they need to ensure they have a level of confidence and competency,” Cummings said.
“Poor quality deals are blocking up the system for other professional brokers,” she added.
CBA: Broker market needs to segment itself
20
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Heritage pulls top products from brokers
Upper crust of market crumbling
A broker has alerted AB about possible channel conflict at Heritage Building Society, after the company withdrew its best two products from the broker channel but continued to offer them through its branch network.
In response, Heritage confirmed that effective Tuesday 2 June it had temporarily withdrawn the Basic Variable and Professional Package home loan lending products from its broker channel.
The building society had done so because it was committed to maintaining processing time standards, said Paul Francis Heritage’s general manager of retail services.
“Because of our market-leading interest rate on both our Basic Variable and Professional Package home loan products, we have experienced an unprecedented level of demand,” he said.
But he was quick to add that the building society would continue to accept applications from existing Heritage members in the broker channel for either of these products.
Saying that its commitment to the broker channel had allowed Heritage to grow its geographic diversification, Francis denied
other in the country, with nine properties in the suburb featured on the Top 100 list.
Included on the list was Glenn Willis, who previously headed the Australian arm of Lehman Brothers. He sold his Mosman property on Sydney’s North Shore for $8m less than it was worth before the crisis.
The house was valued at $18m last October around the time the house was listed for sale, but was recently sold for $10.2m.
“I was hoping to get a larger amount, but the top end of the
intentionally trying to cause channel conflict.
“We value our broker relationships and are committed to putting people first. So the efficiency of our settlement process is critical to ensure that our broker partners and our members receive a level of service that is consistent with our service standards,” he said.
He added that those standards were currently being re-evaluated, and that a decision would be made “in the short term” about the future availability of the two products.
Francis reiterated that Heritage was committed to maintaining relationships with its broker partners.
residential property market has come off dramatically,” Willis told the paper.
The list was topped by a property owned by investment strategy director Christopher Rosch in Surfers Paradise, which was sold at a 45.5% discount when it was offloaded in a mortgagee sale in January for $2.5m. It was originally bought in 2004 for $4.6m.
A Melbourne property, in Glenferrie Road, Hawthorn, came second on the list after it was sold for 44.7% less than its asking price when it changed hands in April for $4.1m.
Gerard Hansen from Auspak Financial Services, which mainly focuses on the Northern Beaches (Balgowlah Heights & Seaforth), said he had heard of people in Mosman quietly listing homes for sale due to a reduction in work or unemployment – and that values had dropped from expectations.
Hansen said one Seaforth residence recently sold for just over $2.5m, $1m down on original expectations
Balgowlah Heights has had some sales down around $300,000 to $500,000 from expectations, he added.
Business customers rate banks as ‘satisfactory’
Business customers are happy with the banks they use and their satisfaction has climbed steadily since 2001, according to TNS Communications Australia’s Business Finance Monitor (BFM).
But it said that this progress has appeared to have slowed in the last 12 months.
In the year to June 2009, 75.8% of business customers said their main financial institution offered a satisfactory service – although that figure was off by nearly 5% against the same period a year earlier.
And there had been close to a 4% satisfaction decrease with the Big Four.
ANZ’s customers remained the most satisfied, while Westpac had seen the biggest decrease and NAB’s customer satisfaction rating was the lowest. CBA’s rating remained steady.
In response, NAB told AB that TNS’s research was focused on small businesses with turnovers of less than $5m per annum where it has established a dedicated team to review the products and services it offered.
“And our aim is to improve our customer satisfaction in this customer segment,” it said.
Meanwhile, in the TNS survey Bank of Queensland and Bendigo Bank had the overall highest satisfaction level.
The TNS BFM measures attitudes and behaviour of Australian businesses towards their finances and financial institutions, and is subscribed to by Australia’s leading banks.
Each year 2,000 agricultural businesses and 10,000 non agricultural businesses with annual turnovers of up to $300 million are approached and researched.
Data has been collected from more than 90,000 businesses since the survey’s inception, and reports are based on rolling six and 12 month samples.
broker accuses Heritage Building Society of channel conflict
Heritage confirms it is pulling two products from the third party channel
argues the move is temporary, to maintain time standards
Key points
The upper crust of the Australian property market appears to have taken a massive hit in value, according to a new list compiled by the Weekend Australian.
The newspaper used data from Australian Property Monitors to compile a list of the Top 100 prestige property owners throughout the country who had been forced to sell their homes for much less than they anticipated.
Things appear to be particularly bad in Mosman. The North Sydney suburb has had more discounted sales than any
Paul Francis
business customer satisfaction climbing steadily
but has slowed in the last 12 months
decrease in satisfaction with Big Four
BoQ and Bendigo fair the best
Key points
For all the latest mortgage industry news visit www.brokernews.com.au
21www.brokernews.com.au
The FBAA has called on the banks to focus on providing brokers with “better training, rather than unfair accreditation policies, if they are truly interested in ensuring brokers remain up-to-date with their products, processes and policies”.
Peter White, national president of the FBAA, said he “almost fell
off his chair’ at the justifications given for new volume-based accreditation policies.
He said if this was the case, then it was the banks that had “dropped the ball” when it came to providing sufficient or effective training. How could banks accuse brokers of not being up to speed on quality, he asked, when they were the ones doing the training?
White said the level and quality of training had become a lot worse over the years – even more so recently as the banks had cut training budgets in light of the GFC. He said banks needed to “do a better job training brokers”.
“Forcing brokers to submit a minimum number of loans to remain accredited is a flawed approach. If the true motivation of the banks is quality control, then they will be better served focusing on lifting the level of training for their products, processes and policies.
“The simple fact is that the level and effectiveness of training
provided by the banks has dropped off significantly, and that’s why some applications submitted by brokers may not be exactly aligned with their latest policies.
White said it was once again the case that banks had seen fit to “wield the stick on brokers instead of looking at what they can do themselves to better the situation”.
“It just so happens that in this latest instance the banks have also engineered a situation where they will be able to drive volumes, raise additional revenue through re-accreditation fees, and position it under the guise of customer service,” he said.
White said one of the reasons that banks had supported the creation of aggregators was to create volume. “It’s partly the responsibility of aggregators to train people, or get the banks along to do the training. If that is the case then the training is inadequate.”
In response to the FBAA, the CBA’s executive general manager for third party banking, Kathy Cummings, said the bank’s broker accreditation process was by far the most comprehensive in the
industry. “It involves an online accreditation test, two workshops (two hours and three hours each), two on-site visits by our dedicated state-based training staff and a graduation process over a sic-week period,” she said.
“Brokers who have completed our accreditation program are able to submit quality applications which are processed quicker and lead to a quicker decision for the customer. This saves re-work and improves service,” she added.
Cummings said the minimum criteria – four lodgements in a six-month period – broke down into one loan every six and a half weeks.
“We believe this provides professional brokers with ample opportunity to maintain their full accreditation with us and other lenders,” she said.
FBAA demands better bank training
FBAA wants better training provided for brokers
says banks have dropped the ball on training
opposed to volume targets being imposed on brokers
Key points
Peter White
Feature22 www.brokernews.com.au
Proceed with cautionDespite the temptation to cut corners in the recruitment process, broking businesses that skip pre-employment screening and background checks do so at their own risk – particularly with the new licensing rules looming
Anyone who doubts the important role pre-employment screening and background checks play in hiring the best talent need look no further than one headline-making case in 2008. In December last year, the
Sydney District Court convicted a QANTAS engineer who used fake documentation to dupe his employers. By claiming to have qualifications he did not possess the man put people’s lives at risk.
Other horror stories abound. Take the pharmaceutical firm on the verge of appointing a head supervisor for their warehouse. A last-minute criminal check revealed the man held an eight and a half page criminal record. When asked why he allowed the record check to be done, he maintained that if he hadn’t agreed he wouldn’t have been employed – and if he agreed, he figured he wouldn’t be checked.
Or take the CEO who refused to sign the privacy release forms in order for background checks to be done. Disregarding this, the company hired him for the $450k a year role anyway. A week later they ran into trouble when they discovered their new employee could not get a passport because he did not have any proof of identity.
“We pick up around one in 10 candidates who have issues sufficient that the employer will want to take it up with the candidate. We usually come back with anomalies – a date here or a query about a qualification. But for that one in 10, the employer has the option of searching or probing further or not proceeding with the appointment,” says Greg Newton, MD of Verify.
Risk mitigationBackground verification used to be the province of banks and other corporate giants. Today it’s common to find smaller companies acknowledging that these checks are an integral part of their recruitment process.
With unemployment rising and more candidates entering the job market every day, the need for thorough checks has never been higher – yet knowing where to start can be daunting. Verification vendors now offer over 30 background checks. A year ago it was around 15.
Newton says that some employers play a dangerous game – they place candidate verification in the same basket as outplacement services. In other words, it is nice to have but not essential. “Sometimes they think ‘we should be doing that, it’s the right thing to do’. It opens them up for all sorts of trouble if they don’t follow through,” he says.
Fortunately there are other drivers, not least of which is the fear of litigation. Another is the need to comply with legislation, something which will become more of an issue for broking businesses when the new licensing rules come into force at the start of next year. This is particularly true if a business becomes the licensee and makes its loan writers authorised credit representatives (thus taking on responsibility for their conduct as intermediaries).
Read the latest issue of Australian Broker online www.brokernews.com.au
23www.brokernews.com.au
First stepsA thorough verification process now encompasses traditional qualification and employment history checks, all the way through to audiometry testing, drug and alcohol testing, medical checks, driver’s licence checks and visa or right to work checks – and everything in between.
The first step is usually telephone screening. With rising unemployment, Newton believes that many employers are struggling with the volume of applicants. Even using the best e-recruitment technology that can pull up competencies out of resumes, shortlisted candidates still need to be contacted and interviewed.
“If the key competency is leadership we’ll explore how many people they’ve supervised, their method of leadership, how they went about reviewing people, training people, and so on. The aim of the competency-based telephone screening is to make sure they meet the first line criteria. In many cases there will be ratings, so from a high to low, and candidates must score a minimum. It’s a simple process that involves competency checks throughout a five-minute phone conversation. If they pass that we’ll put them into the bundle we along send to the client,” Newton explains.
The next step for many organisations is psych testing, which can now be done online. This offers three distinct advantages:
a) an external vendor can do it directly with the candidate so it doesn’t require involvement with the employer
b) the candidate can do it at their own leisure in their own premises – they go online, log into a secure log in and undertake the tests when it suits them
c) it speeds up the process – when a high calibre candidate applies the employer needs to move quickly
ScreeningFrom there, final applicants will be thoroughly screened. The list of screening methods is becoming both more expansive and more sophisticated. Verify, a provider of candidate background checks, recently upgraded its identity checks to include 140 points of identity verification (passport, driver’s licence, utility bill). The company also offers fingerprint verification, and iris and DNA checks are just around the corner. “We won’t go to iris checks yet because few people have been iris tested, but anyone with a criminal record has been fingerprinted. Over time, as iris testing and DNA testing become more common in Australia, we will use those technologies,” says Newton.
Driver’s licence checks are also a growth area. “It’s not uncommon to find sales reps without driver’s licences. Reps tend to be younger these days – they can get into that environment where they have alcohol or recreational drugs and it’s quite common to find a conviction in the past for DUI or similar offence,” Newton says.
In an age of internet diplomas, qualification checks are also becoming more prevalent. There are two sides to this. Firstly, if the organisation desires a certain qualification in the job then employees should have it. Secondly, in order to practice in some jobs employees are mandated to have a qualification – in the case of loan
Do candidates deliberately set out to lie on their CVs? Greg Newton, MD of Verify, provides his thoughts:
“Lie is a strong word, but people design their résumé to reflect the image they want to convey. If you’re 55 you will not put down your first job from 1970. You will be trained from recruiters to start your résumé around the 1990s.
Equally you’ll find many people who started a qualification and never completed it – that will be on the CV as a completed course.
It’s also common to leave out short-term jobs. If you were at NAB from 1999 to 2004, then you spent four months at Westpac, and then went to CBA, you may leave out the four month job. Yet that could be the critical job that proved you were incompetent or sacked.
A work history check, which is different to a reference check, chronologically pieces together where a person was on a certain date, what their job title was, and to whom they reported. If there was one area that is most commonly falsified it would be work history. These people aren’t stating the facts – and there’s good reason. If they state the facts they won’t get to the interview.”
Liar, liar
writers, a minimum requirement would be a Certificate IV in mortgage broking.
Increased licensing requirements, especially when it comes to jobs involving the provision of financial advice or loans, means there should also be thorough probing of APRA records or AFS disqualification checks.
“It’s essential the organisation protect itself against litigation by ensuring that the individual has the qualification required under the law to practice the job. It’s just like driving a vehicle. If you have a rep on the road, and you haven’t checked if they have a current driver’s licence and they kill or injure someone, you very well may have substantial liability,” Newton warns.
Further checksThere are several unique offerings on the market including workers compensation checks. “If you employ someone with an outstanding claim, you inherit that workers comp and you’re liable for it. It’s wise to ensure you are not liable for that and the previous employer or the individual themselves carries that liability,” Newton explains.
These background checks would be virtually impossible without assistance from external specialists as there are multiple agencies and authorities to deal with to get this information. Newton lists Crimtrack, ASIC and the Attorney General’s Department as just a few examples. “If internal HR teams had to arrange all these checks they’d have to build these relationships, pay fees, and be tied up for hours trying to get the work done. For $200 we can do driver’s licence and identity checks, criminal record and reference checks for a fraction of the cost of a wrong hire,” says Newton.
Be carefulBefore undertaking background checks, Australian privacy laws require consent from the person being investigated. If they do not agree, the only option is to go digging in the public domain – for instance, with a search on MSN, Google or Google Academic. Sometimes that gets results, as Newton explains. “There was a case earlier this year where the Australian Financial Review ran a story about a CEO who had been dismissed from a previous job and had been frogmarched off the premises by two policemen. That was the person we were checking.”
Whichever way checks are done, Newton believes there is peace of mind for employers when they know the candidate is who they say they are, that they are fit to do the job and have the qualifications and skills required to do it well.
“Irrespective of how good the behavioural interview is, there are things you cannot ascertain. You cannot determine whether or not they missed out on the degree, or have a botched credit rating or even a criminal record – that’s where we come in,” he says.
Here are three essential tips for successful reference checking:
Always endeavour to talk to the previous manager. 1. Never ring a mobile number. Ring the switchboard and 2. ask the receptionist to confirm the job title of the referee.Ask probing questions. Probe into reasons for leaving, 3. performance on the job, teamwork ability, supervision/management style – whatever is relevant to the job. Closed yes/no responses should be avoided.
Reference checks
In an age of
internet diplomas, qualification checks are also becoming more prevalent
News analysis24 www.brokernews.com.au
Uncertainty drives fixed rate demand
She added that some lenders had shifted rates independently of the cash rate cycle, so using it as a barometer provided little assurance.
Wyatt said she anticipated continued volatility in the cost of funds over the next 12 months – a factor which made rate predictions nearly impossible.
Still, she said that fixed rates rarely fell below the standard variable rate for an extended period and were likely to trend in the same direction.
AFG’s Hewitt said: “You need to be a fortune teller to predict how far fixed rates will go to once they begin to climb.” But he did say that he thought we had reached the bottom of this rate cycle ,and that we were in for a “relatively stable” interest rate period ahead. He said it would reasonable to expect the split between fixed and variable rates approach their 80%/20% historical levels.
Demand driven“Speculation that rates might be on the way up sets off a rush of people starting to fix or leaning towards fixed rates. We are seeing that the number of fixed rate loans is slowly increasing each month,” Hewitt said.
Sheppard, too, felt the demand for fixed rates would continue to increase – by as much as 20% in the next six months. She attributed this to first homebuyers and investors, since they were the two groups most likely to benefit from the certainty of fixed rates.
“Borrowers should consider their financial situation against their investment and other lifestyle goals when deciding between fixed, variable or split rate options. Knowing your repayment level does make it easier to plan and budget over a longer period of time,” she said.
Hewitt agreed, and made the point that first homeowners often went for less sophisticated products like the standard variable rate until they got comfortable with the idea of having a home loan.
Fixed rates, he said, tended to attract more sophisticated borrowers. Investors liked to set fix costs to the rental income they received. The same applied to people who up to their second, third or fourth loans.
RAMS’s Wyatt said fixed rate home loans were becoming more popular now because they provided the certainty that enabled borrowers to plan.
She also made the point that the modern fixed rate products allowed certain flexibilities which enhanced their popularity. Like Hewitt, she said borrowers who wanted “full transactional functionality in combination with fixed rate stability” could split their loans.
At times of market uncertainty, customers want the security and stability of fixed interest rates – but they don’t want to be paying more than they have to.
So says RAMS’s head of brand and marketing Lynne Wyatt, on the back of fresh data released by Mortgage Choice that revealed the demand for fixed rate loans was on the move – in fact, hitting levels last seen in July 2008.
Given the current market volatility, Wyatt was not at all surprised at the trend. “Fixed rates suit any borrower who wishes to secure their repayments for a set time,” she said. “But fixed rates are suitable for borrowers who want to plan their budgets carefully.”
But there are other reasons borrowers might choose a fixed rate.
AFG’s general manager for sales and operations, Mark Hewitt, said whether borrowers opted for a fixed or variable rate often depended on how quickly they intended to pay off the loan. “If you’re planning on paying off a large lump sum, or paying the whole loan off quickly, then a variable rate is probably the way to go because of the fixed rate break costs,” he said.
Extra repayments, he said, over the standard amount made on a fixed rate loan could be up for penalty fees as well. “So splitting the rate is also an option for those who want to pay off a portion of their loan early,” Hewitt said.
Predictions Mortgage Choice senior corporate affairs manager, Kristy Sheppard, said that market volatility made predicting the direction of interest rates “fraught with danger”, but that latest figures suggested the downward trend seen during much of last year was over.
She said there were two main schools of thought about the cash rate, “one that says it has already bottomed out, and will begin to rise at the end of this year or early next; and another that we have at least 25 more basis point drops to go before the end of the year.”
Lynne Wyatt
Borrowers chasing stability are driving up the demand for fixed rate loans. Tim Neary explores who these borrowers are and what to expect from interest rates in the future
Kristy Sheppard
Mark Hewitt
James Veigli is a mortgage broker, marketing and business strategist and founder of the Australian Mortgage Broker Alliance. He can be contacted at: [email protected]
25www.brokernews.com.au
Barry Doherty is a senior assessor for the AAMC Training GroupDiversification
26 www.brokernews.com.au
The duty of caringWhen we talk to clients, whether single or not, with or without dependant children, we fail to mention the most important part of the transaction: protection. Barry Doherty explains
be as a result of an accident, illness or even death. If that advice was given they would become clients not just “once only” customers.
Your legal obligationThe courts in Australia deem financial professionals to have legal obligations and as such, if clients are not made aware of the possibility of financial hardship through no fault of their own, the financial professional can be found negligent under the Duty of Care. If this is the case, clients may seek recompense through civil action for what monetary loss they consider could have been avoided had they been given the necessary information by their financial professional.
Let us now consider some real life experiences.
1. A young professional executive going places lost his wife during childbirth and he then had to care for himself and three children – including a new born baby. Due to these tragic circumstances he lost his job because he needed to devote all of his time to his young family. This in turn meant no income, and the lender had no alternative other than to take possession of the property. If the lender or the mortgage broker had emphasised the importance of risk protection, this individual may not have had to face such disastrous consequences.
2. Many financial professionals readily give advice to businesses and arrange financing to fund future business options and visions, but completely ignore the fact that some things can go horribly wrong. If this happens how will the company/business continue to trade?
3. I have had clients who have become ill and suffer extreme financial hardship who have completely ignored my professional advice to take out income protection in the event of illness or accident. We have also seen the loss of loans from our books because clients have refused to take out the required insurance coverage (many employees unmistakably believe they are covered by Workers’ Compensation 24 hours a day).
4. Recent events in Victoria highlighted the need for insurance not just in relation to property and assets.
As has been demonstrated, these are everyday events. There are opportunities for brokers to offer suggestions or actually arrange the cover that is vitally important.
An under insurance problemRecently released statistics revealed that only 14% of the population had life cover, and more surprisingly only 6% had income replacement cover. By getting involved in this financial services area brokers can have an additional income stream. Not only are the clients well protected financially, but the more people who avail themselves of these insurance arrangements can also ease the strain on the public purse.
In my role as an assessor of Diploma and Certificate IV applications in Financial Services, I am amazed that the case studies I assess often fail to mention insurance protection. This not only applies to new entrants into the industry but also loan writers with many years of experience. With the impending takeover of the regulatory role by ASIC, we firmly believe the time has arrived for loan writers to become active in the protection of their clients’ assets, namely their life, their income and their property.
I have endeavoured to portray the many problems that are faced on a daily basis by brokers who have the responsibility to ensure clients are offered the opportunity to take out risk cover products. If we accept this responsibility we protect ourselves against future litigation and more importantly we, as an industry, can provide some comfort to those unfortunate enough to have fallen on hard times.
NO ADVICE - After having explained the financial risks of taking on debt, have clients sign an authority that they would like more information on risk cover and refer them to a professional insurance practitioner. They may not wish to accept what you have offered, and if that is the case have them sign a document that indemnifies you against any action should a claim arise in the future.
GENERAL ADVICE - Undertake a course whereby you can become qualified to offer general advice and arrange the cover as stated by the clients that they think they may need or be able to offer certain cover up to the amount of the loan only. However, this certainly does not provide clients with the required levels of cover. They are still exposed to many other events that you are not authorised to discuss, since you only have approval from your licence holder to give general advice. Extreme caution is recommended in this area because, if after being aware of your client’s full financial position you arrange cover to the maximum allowed under your licence holder’s authority and it is found insufficient for the client’s needs, it could well be challenged in court. The onus is on you, as the expert, to explain why you did not advise them to seek further professional advice to ensure the cover suggested by you was sufficient to meet their needs should unforeseen events happen. FULL COURSE ADVICE – You undertake training to achieve the appropriate qualifications to give full advice which offers total protection for your client’s interests and financial needs. These qualifications are the minimum required by most ASIC licence holders to enable you to operate as an authorised representative under their dealer licence.
Getting involved in insurance: 3 alternatives
Too often we are just happy to arrange a loan for the purchase of their dreams because, in reality, we are well paid for our successful achievements. Our clients have a new address, a motor vehicle, or
have purchased a business – and our bank account is replenished.
After the deal is done do we sit back and say (a) “Gee that was a good deal, I really helped them and they seem satisfied” or (b) should we, on reflection, say “did I really help those people?’
It is very important if, in your quieter times, you ponder whether your business has really helped people. In the news or on the grapevine on a daily basis, we see and hear where people suffer financial hardship caused by a multitude of reasons.
It is those people – our customers who are not yet clients – who for whatever reason did not have financial risk protection simply because they didn’t think anything would happen to them. But more importantly they weren’t told by their financial professional of the financial ramifications of an unforeseen event whether it
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25th September 2009The Westin, Sydney
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Caught on camera28 www.brokernews.com.au
Done anything exciting lately? Email your social photos to the editor at [email protected]
PHOTO 1: (From L to R) Alison Brown, Anne-Marie Syme, Anna Vanopoulos PHOTO 2: (From L to R) Lin Miller, Lee Middleton, Karen McDowell
PHOTO 3: (From L to R) Jillian Lee, Linley Morris, Brook Wilson
PHOTO 4: (From L to R) Mandy Hooker, Beverley Richardson
PHOTO 5: Ladies receiving massage
Suncorp Bank’s WA brokers recently enjoyed an afternoon of pampering and networking with colleagues. They also had the opportunity to get some advice from an industry pioneer – Anne-Marie Syme, founder of the Loans Cafe and executive chairman FAST. Syme spoke about mortgage broking in WA and the history of women in the industry. She commended the Suncorp team for recognising their female brokers and catering to their needs
PHOTO 6: (From L to R) Kirsten Junge, Pam Sullivan
PHOTO 7: (From L to R) Anna Vanopoulos, Julie Reader
PHOTO 8: (From L to R) Anne –Marie Syme, Fayroza Esat
PHOTO 9: (From L to R) Alison Irwin, Beverley Richardson, Mandy Hooker, Nataley Norton
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Web guru Sam Benjamin answers questions from readers on how to get the most out of their online presence. If you have any questions on online marketing, please email them to [email protected]
29www.brokernews.com.au
What was the last book you read?I’ve just read The 8th Confession which is part of the James Patterson murder series. And I am reading What Got You Here Won’t Get You There by Marshall Goldsmith, and Twitter Power by Joel Comm. Social media is of interest to everybody now.
if you did not live in australia, where would you like to live?In Paris. Because I love it. It’s the lifestyle, the romance, the people and the food and the wine – it just takes my breath away.
if you could sit down to lunch with anyone you like, who would it be?Dr Chris O’Brien. He’s not with us anymore, but I found him inspirational – even before his illness. A man for all people, when he passed away Australia lost a truly valuable individual.
What was the first job you ever had?I was second in charge on Thursday nights and Saturday mornings at Coles’s delicatessen and chicken rotisserie in Newcastle. I was 15, and came home every time smelling like chicken. In addition to learning that you can actually wash cocktail frankfurts and put them out the next day, it was the first time that I actually came face-to-face with the benefits of being part of a hard working team.
What do you do to unwind?Spend time with friends. My time away from work is very precious because of the amount of hours that are spend at the office. Also, my fiancé and I like to get away regularly for weekends. A change of scenery is really important to relax and switch off. What’s the most extravagant gift you ever bought yourself?A week away at Camp Eden. They call it Boot Camp for Yuppies. Twice. Not cheap, but worth every cent.
What CD is currently playing in your car stereo?Angelique Kidjo, an African singer from Benin who is one of my favourite singers.
if you could give anyone starting out in business one piece of advice, what would it be?Talent is not enough. You must add passion and heaps of practice. In addition, to turn your talent into success you must have what I call the ‘teachability factor’. This is to be able to teach what you know – your expertise – to other people.
if i was not working in the mortgage industry, i would like to be…?There is so much that I’d like to explore; from working in PR for the environment to forensic science. I’m also a die-hard amateur thespian, so I’d definitely spend a lot of time on the big stage as well.
Where was the last place you went on holiday?France.
What is the one thing most people would not know about you?I won the City of Newcastle dramatic art award 10 years ago for my performance in a musical. Best Actress in a Non-Professional Production. Anyone at the Melbourne Cup with Challenger last year would know now that I do sing, but many others don’t. I always vowed that I wouldn’t, but coming home on the bus I just let it out.
oFF tHE CuFFlisa Montgomery head of marketing and consumer advocacy, resi Home loans
tECHiE CornEr
getting leads
Q We have recently finished organising our website and are now wondering how we can market it to get more leads
from it. What suggestions do you have?sAM: Once your website is uploaded live on the net, you need to actively promote it in order to see a solid return on the investment. Many people think that just by putting a site up live on the internet, it should mean a stampede of new business will come knocking on your door. Natural ranking in search engines can take time, and the mortgage industry is particularly competitive online.
A website is not a standalone tool in your marketing plan. It works most effectively when you team it up with other traditional strategies.
Two of the easiest ways to make your site work for you is to add your website link to the bottom of every e-mail you send in the signature section. This is quite easy to do if you are using Outlook: simply go to Tools/Options and add your signature. Every e-mail now becomes a marketing tool supported by your website. Also, don’t forget to include your website on your hard copy stationery, business cards etc.
Having free things to give away on your site will also help when running marketing campaigns. Just ensure the freebies are closely related to your core business activities. For instance, mortgage calculators or e-learning courses, pdf’s etc. You could send an e-mail to all on your database inviting them or anyone they know to make use of these free tools on your site and so on. The trick is to be creative with your marketing, test everything and go with what works for you.
developing a new website
Q We have a website which a friend created for us a couple of years ago. it no longer suits our business and we are
looking at re-doing the site. What are the main issues in creating an effective site, and what issues should we consider?sAM: When thinking about your business website one of the preliminary things to consider would be what your website goals are. Do you want to promote your business with an online brochure; generate phone or e-mail enquiries; create a strong statement as a branding exercise; capture customer information; focus on key products or services or on every product or service you offer; or find out who your target audience is?
It is important to be realistic about the goals of the site in accordance with the budget and time frames for the project. Defining the goals for the site will help in determining the design, layout and navigation of the site, so it is an important first step.
In terms of design and navigation, the key is to create a website which does not confuse, overwhelm or repel the user of your website. This comes down to planning and consideration of both the goals and target audience. You may also want to review your competitor’s websites to see what else is out there on offer to your potential clients. This helps in getting an understanding of your market too.
Next you may want to consider your future aims or direction of your business. Are you planning to enter a different market such as insurance or financial planning? How will this fit in with the design of the site, does the site have scope to grow with you and your business plans? If you discuss these issues with your web designer they should be able to factor in these issues within the scope of the design.
Ensure you have the ability to maintain the content of your site in the future. Once the site is up, will the designer be around to assist with any changes you will not doubt want to make? Does the site come with a content management system giving you the ability to update it yourself as required? There is nothing worse than going to a site and seeing information which is outdated.
These are some of the basics to get you started. It can be daunting, but it is a very rewarding experience to redesign your website.
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Insiderwww.brokernews.com.au
Got any juicy gossip, or a funny story that you’d like to share with Insider, drop us a line at [email protected]
Still missing in action…
Great to be Greater…
I nsider vouches that there would be a lot of smiling faces at Newcastle’s Greater
Building Society after it surprised everyone (including the major banks) by getting comedy legend Jerry Seinfeld to front its new ad campaign.
Indeed such was the disbelief, that two bloggers on Brokernews seemed to think we were making the whole thing up – see http://www.brokernews.com.au/news/breaking-news/building-society-scores-seinfeld-for-advertisement/35922
And none would have been
smiling more broadly than its CEO Don Magin who said having someone of the profile of Jerry Seinfeld would help promote “in a fun and engaging way” that the mutual is a “significant player in the financial services sector and a viable alternative to the banks.”
It’s a remarkable achievement, especially when you consider that Jerry Seinfeld has only appeared in two previous commercials since his hugely successful sitcom ended 10 years ago – those being for Microsoft and American Express (not exactly small fry!).
And if that wasn’t reason enough to celebrate, Magin and co must surely have been popping the champagne when the AOFM announced just a week later that it would invest in the building society mortgage securities as part of its RMBS program.
For those who have not seen the Seinfeld ads, you can watch them at: www.youtube.com/user/GreaterBuildingSoc
At the movies…with the GFC
W ith the GFC now getting some serious celluloid treatment
(perhaps a sign that the worst of the crisis may be over), Insider has compiling a handy list of five ‘must-see GFC’ movies for your viewing pleasure:
1. ‘Capitalism: a Love Story’ (www.michaelmoore.com/index.php)
The new documentary from controversial filmmaker Michael Moore’s will be released in the US on 2 October, a year and a day after the US Senate voted to approve a US$700bn bailout of Wall Street. In a statement, Moore said: “It’s a forbidden love, one that dare not speak its name. Heck, let’s just say it: It’s capitalism.”
2. ‘Stock Shock’ (www.stockshockmovie.com)
We have a Brokernews blogger to thank for highlighting this
documentary which tells the story of US investors who lost virtually everything when they put their money into satellite radio business Sirius XM. The movie (available on DVD) investigates accusations of market manipulations and dirty schemes and promises to expose the truth behind the glitz of Wall Street.
3. ‘Freefall’ (www.guardian.co.uk/culture/2009/jul/15/freefall)
If you can get your hands on it, this BBC drama could be the most interesting of the lot. It tells the story of Gus, a wealthy London banker without a conscience who bundles and sells mortgage securities; Dave, a mortgage broker shamelessly flogging mortgages to those that can’t afford them; and married couple Jim and Mandy, who are lured by Dave to take on a mortgage they cannot afford as they strive to own their own home. UK reviews give it the thumbs up!
4. ‘Money Never Sleeps (Wall Street 2)’ ( http://www.imdb.com/title/tt1027718/)
Due to be released next year, Oliver Stone will bring the most famous ‘wolf of Wall Street’ back to life when Michael Douglas steps back into the role of Gordon Gekko. According to Wikipedia it sees Gekko “recently released from prison, and re-entering a much more chaotic financial world than the one he once oversaw”. On this occasion his mission is to alert the world to the coming financial doom…
And one from the ‘classics’ shelf…
5. ‘enron – The Smartest Guys in the room’
Released in 2005, this documentary attempted to unravel what, before the GFC, was the biggest corporate scandal to rock America.
It feels like a lifetime ago that the MFAA changed its name and branding, yet the mainstream papers still get it wrong.
It was bad enough that The Australian referred to Phil Naylor as CEO of the Mortgage Industry Association of Australia (MIAA), but the paper wasn’t even able to be consistent.
Further down in the same story (about the CBA’s broker accreditation policy), it referred to the industry body as the ‘MIA’…
Of course this also happens to be a well known war-time acronym, though some brokers might feel it quite applicable in the current circumstances.
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Serviceswww.brokernews.com.au
Australian Mortgage Awards 2009, 25th September, The Westin Sydney. Secure your table at www.australianmortgageawards.com.au
AggrEgAtor/WHolEsAlE BrokErPLAN Australia1300 78 78 [email protected] 5
BAnksSt. George Bank1300 137 532page 3
Citibank Mortgages1300 651 059www.mortgagebroker.citibank.com.aupage 15
dEBtor FinAnCEReal [email protected] 4
Scottish Pacific [email protected] 10
lEndErCSL Money1300 361 883page 12
Eurofinance02 9252 8311www.eurofinance.com.aupage 17
Homeloans Ltd1300 787 866www.homeloans.com.aupage 31 MKM Capital1300 762 151www.mkmcapital.com.aupage 8
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Vanilla Loans1300 710 729www.vanillaloans.com.aupage 14
MortgAgE MAnAgEMEnt/ non-BAnkBetter Mortgage Management1300 662 [email protected] 32
Mango Media02 9555 7073www.mangomedia.com.aupage 1
non ConForMingLiberty Financial13 11 80www.liberty.com.aupage 7
Pepper Homeloans1800 737 737www.pepperhomeloans.com.aupage 18
otHEr sErviCEsResidential Mortgage Fund1300 632 737www.residentialmortgagefund.com.aupage 25
Residex1300 139 775www.residex.com.aupage 30
otHEr sErviCEsRP Datawww.rpdata.compage 24
Symmetry1300 723 613page 19
Trailerhomes0417 392 132page 28
sHort tErM lEndErCrown & Gleeson1800 735 626www.crownandgleeson.com.aupage 2
Interim Finance02 9971 6650www.interimfinance.com.aupage 6
NCF Financial Services Pty Ltd1300 550 707www.ncf1.com.aupage 16 WHolEsAlEResimac1300 764 [email protected] 13
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