The magazine for Australia`s mortgage and finance brokers

Transcription

SPECIAL REPORT
TOP 10 ORIGINATORS
ISSUE 4.3
INSIDE:
Sales and marketing
Business intelligence
Residential wrap
Top broker profiles
Industry opinion
The magazine for Australia’s mortgage and finance brokers
Find out which originators made the cut
in 2010 and why the broking industry is
again backing non-banks
VIEWPOINT
Industry leaders share their
market insights
RAMPING UP REFERRALS
$50m per year brokers reveal
referral strategies
TRUST
Trust is the most important word in the mortgage
industry on every level.
Just as your clients are putting their trust in you,
you’re putting your trust in your aggregator having
the strength and resources to deliver quality
service and to help you grow your business.
But have you thought about whether your
aggregator trusts you?
At PLAN Australia, there are no handcuff clauses
in our membership agreement and, if you leave,
you retain your entitlement to trail commission.
We’re here to help build your business.
While others talk about it, we do it.
PLAN7092_TA
It’s all about
EDITORIAL FRONTLINE
Brokers concerned as
licensing draws closer
By Jessica Darnbrough
Editor
AS THE implementation of legislation draws
closer, many aggregators are yet to clarify their
position on licensing.
The first group to step forward and outline
its licensing stance was Advantedge, making
an announcement in March. The mortgage
management and aggregation business will give
those brokers aligned under its aggregation
arm a choice.
Advantedge’s brokers will be able to either
obtain their own Australian Credit Licence
(ACL) or apply to become a credit representative
of an Advantedge ACL holder.
While brokers have until 31 December to apply
for a credit licence, Advantedge’s ‘choice’ model
certainly provides brokers with food for thought.
Brokers still have time to consider their
options and weigh up the implications that
each licensing model will have on their
business as well as their bottom line.
The potential cost to brokers to ensure
compliance under the licensing regime has
sparked heated debate across the industry.
Brokers that become credit representatives
of an ACL holder could face ongoing annual
fees from their aggregator.
On the flipside, brokers that seek their own
credit licence under the new regime could be
faced with a significant application fee.
While ASIC has released a general costing
specification, the industry is speculating that
the one-off licensing fee could sit at anywhere
from $450-$26,250.
If the latter holds true, many brokers that
want to obtain their own ACL could find
themselves priced out of the market.
But aside from the potential cost of
regulation, brokers are also concerned that the
new licensing regime could result in industry
overregulation.
According to a recent The Adviser straw
poll, 63.3 per cent of the 442 brokers polled
believed that impending regulation could
result in overregulation.
Under the new licensing regime, brokers will
be required to disclose detailed information
about loan products to their clients. Many
feel these new disclosure requirements could
far exceed their current responsible lending
requirements – putting extra pressure on them
and their increasing workload.
ASIC is yet to confirm exactly what impact
the new licensing laws will have on brokers,
and until that information becomes readily
available the legislation will remain a daunting
prospect for many.
Guessing what the future holds in terms of
licensing is a little bit like playing pin the tail
on the donkey – no-one knows how close they
are to the mark until the blindfold comes off.
But before the blindfold does come off,
one thing is clear: we should start to see a lot
more aggregators follow Advantedge’s lead and
reveal their position on licensing.
Publisher
Jim Hall
Editor
Jessica Darnbrough
Journalist
Belinda Luc
Researcher
Victoria Lewis
Sub editor
Lauren Becall
Marketing coordinator
Melinda France
Managing editor
Alex Whitlock
Senior account manager
Russell Stephenson
Designer
Daniel Berrell
Database manager
Oliver Bouris
Property data
Advertising Enquiries
E: ads@theadviser.com.au
Editorial Enquiries
E: editor@theadviser.com.au
Subscription Enquiries
E: subscriptions@theadviser.com.au
The Adviser
Level 16, 275 Alfred St, North Sydney
T: 02 9922 3300
F: 02 9922 6311
E: info@theadviser.com.au
W: www.theadviser.com.au
10,141
CAB audit period
April 2009-September 2009
The Adviser is published by Sterling Publishing (ABN 92126853085). All rights
reserved. Reproduction in full or part is not permitted without the express
permission of the publisher. The views expressed in The Adviser are not necessarily
those of the editor or publisher. No responsibility is accepted by Sterling
Publishing for the accuracy of any statement, opinion or advice contained in text
or advertisements, and to the full extent allowed by law, the publisher excludes
liability for any loss or damage sustained by readers arising from, or in conjunction
with, the supply or use of information in this publication through any cause.
CONTENTS
FEATURES
ISSUE 4.3
If you do your job
properly, and you tell
the public what is
going on in an honest
and accurate way,
some worth will come
from it
CHRIS MASTERS
16
MASTER OF WORDS
After four decades on the frontline, there is little Chris Masters hasn’t seen. The five time
Walkley award-winning investigative journalist speaks to The Adviser about exposing corruption,
his controversial Alan Jones’ book, and genocide in Rwanda
23 TOP 10 ORIGINATORS RANKING
The Adviser unveils the nation’s leading
originators for 2010
23
44 REFERRALS
Belinda Luc discovers how Australia’s best
brokers build winning referral partnerships
48 VIEWPOINT
Improving economic conditions and impending
regulation will reshape the industry and redefine
the role of the broker, The Adviser’s quarterly
roundtable has revealed
2 www.theadviser.com.au
48
44
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CONTENTS
REGULARS
41
INSIGHT
UNDERSTANDING GEN Y
34
EFFECTIVE HABITS
PROGRESSION TO SUCCESSION
56
46
BUSINESS OUTCOMES
POINT BLANK
THE PRICE OF ADVICE
THE AUSSIE SPIRIT
FRONTLINE
SALES & MARKETING
INTELLIGENCE
06 BANK RANKING UNVEILED
34 EFFECTIVE HABITS
52 ECONOMY
The Adviser will rank the banks to reveal
broker perception towards the major lenders
Having an exit strategy will determine how
you build your business
Chinese demand drives economic
momentum
07 MAJOR TARGET
36 TRADE SECRETS
56 BUSINESS OUTCOMES
ING DIRECT plans to go head-to-head with
the big four in a bid to jag market share
Peter Ellis discusses building sticky business
More brokers are embracing fee-for-service,
but what are the benefits?
08 THE WORD
Advertising online is a cost-effective strategy
for boosting enquiries
Industry pundits have their say on broker
rationalisation
12 IMPROVING SENTIMENT
Broker perceptions towards business growth
have showed marked improvement
38 ONLINE BUSINESS
41 INSIGHT
Gen Y expert Peter Sheahan reveals his
tactics for targeting younger borrowers
58 SPOTLIGHT
The GFC has accelerated much-need
innovation in property data capabilities
60 RESIDENTIAL WRAP
Property values surge on the back of
undersupply and buyer demand
14 OPINION
61 MARKETS
The outlook for securitisation is improving,
with signs that activity will gather pace
The commercial property sector is springing
back to life
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Proud supporter of
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CAS7016_MBM
FRONTLINE
NON-BANKS COMPETE WITH MAJORS
The Adviser to rank
the banks
THE ADVISER has announced that it will rank the banks to
give the industry a clearer picture of how brokers perceive the
effectiveness of their services and products.
The Third Party Banking Report – Major Lenders will ask brokers
across Australia to share their experiences in dealing with the five
biggest banks over the last 12 months, with second-tier banks to be
rated later in the year.
Since the onset of the GFC, the lending landscape has changed
dramatically, with the majors now accounting for an increasing
share of the mortgage market.
The groundbreaking report will unveil how the shift in volumes
to the biggest banks has influenced the attitudes and preferences of
the broker channel.
Lenders will be ranked on their products, broker support and
their overall third party operations with the results to be revealed in
the April edition of The Adviser.
Publisher Jim Hall said the new initiative would reinforce The
Adviser ’s commitment to its readers to provide an unbiased account
of the state of the lending sector.
“As brokers continue to increase their market share, benchmarking
which organisations are perceived as market leaders across all areas of
their operations will give brokers insight and intelligence on how they
can better to build businesses,” Mr Hall said.
“A clear understanding of how brokers view the major banks’
third party operations is invaluable to the industry as a whole.”
news
wrap
ON AVERAGE
THERE IS
APPROXIMATELY
LIBERTY SHAVES RATES
In a bid to increase competition in the
residential lending market, Liberty Financial
will offer customers interest rates starting at
6.3 per cent. Liberty previously announced it
would increase its loan to value ratio for nonprime borrowers to address the growing
needs of consumers who require ‘out of the
box’ solutions to their finance needs. “These
enhancements reaffirm Liberty as the ‘all
rounder’ in the mortgage lending space. We
offer highly competitive prime products as
well as specialised lending solutions for
the widest customer set,”
Liberty’s group sales
manager for personal
business John
Mohnacheff
said.
A thawing securitisation market coupled with
speedy turnaround times has helped non-bank
lenders chase the majors for market share.
A recent straw poll by The Adviser has revealed
that a large portion of the broking market – 72.8 per
cent of brokers – think non-banks are becoming more competitive.
Of the 400 respondents, only 25.7 per cent said non-banks had
not improved their offering, while 1.5 per cent of respondents were unsure.
Homeloans’ general manager of third party distribution Tony Carn
said the non-banks that survived the global financial crisis were using
their “second life” to rival the majors and reintroduce themselves to the
lending market.
“Liquidity is starting to come back into the market, which means
non-banks can all of a sudden challenge the majors on a number of
levels,” Mr Carn said.
“Pricing is just one area we are competing in. We are also improving
our servicing levels by keeping everything centralised, at a time when
some of the banks are moving their functions offshore. Brokers can [also]
be assured of better service from their non-bank lender, because there is
no channel conflict.
“Moreover, we also offer brokers an incredibly competitive
commission structure. There are no hurdles brokers have to overcome to
take advantage of our services, such as minimum volume requirements.”
Intuitive Finance’s managing director Andrew Mirams said it was good
to see non-bank lenders becoming more competitive.
“As it stands, the market is very unhealthy. The majors hold the lion’s
share and this needs to be challenged,” Mr Mirams said.
“While I don’t think non-banks are quite ready to compete on price,
they are able to compete in other areas. The great thing about non-bank
lenders is [that] they offer niche services, products and solutions that the
majors tend to avoid.
“Once each non-bank lender discovers what their true niche is, I think
we will see them become even more competitive,” he said.
STRAW POLL
Number of Voters: 400
ARE NON-BANKS BECOMING MORE COMPETITIVE?
291
YES
72.8%
103
NO YES
25.7%
1.5%
6
DON’T KNOW
WESTPAC COMPLETES
ST GEORGE MERGER
Westpac has completed its transition to a
single Authorised Deposit-taking Institute
(ADI) with the company deregistration of
St George following approval from the
Australian Prudential Regulation Authority
and the Federal Court. As a result, all the
assets and liabilities of St George Bank
are now those of Westpac. According
to the bank’s ASX announcement,
deregistration will have no impact on
the St George brand and branches.
“The change will also have no
impact on customers’ ordinary dayto-day interactions with St George,”
it said. Westpac began the process
of transitioning to a single ADI on
12 February 2010.
LJ HOOKER SUPPORTS MOVE
TOWARDS ‘ADVISER’
LJ Hooker has backed the MFAA’s decision to
encourage its brokers to become fully qualified
professional credit advisers. LJ Hooker
financial services general
manager Peter Bromley says
the MFAA’s requirement for
a Certificate IV in Financial
Services is already built into the
division’s performance standards
for its brokers. “We are fully
behind the MFAA’s proposal.
It is in keeping with what
the industry wishes to
offer customers in terms
of broker education
and professionalism,”
he said.
POSITION VACANT ADS
EACH WEEK ON COMMERCIAL JOB WEBSITES,
ACCORDING TO THE ADVANTAGE JOB INDEX
ING DIRECT to tackle
majors’ domination
AUSTRALIA’S FIFTH largest retail bank, ING DIRECT, has
revealed plans to go head-to-head with the big four banks this
year in a bid to snag a larger share of the mortgage market.
The lender’s chief executive officer Don Koch said the bank
intends to draw on its billion dollar global savings pool in order
to challenge the stranglehold the majors currently have over
market share.
According to Mr Koch, ING DIRECT has the capacity to
write more than $11 billion of mortgages each year, up from the
$7.3 billion gross it issued last year.
“We are looking at a couple of alternate options to fund growth,
such as covered bonds or the ability to tap our $487 billion in
savings around the world, and bring that in without withholding
tax to fund mortgage growth,” Mr Koch said.
“We have given the leader of our mortgage business a 70 per
cent growth target this year. We are already competing with the
major banks and we want to go further.”
Mr Koch said while the bank is unable to compete with the
majors on price at the moment, it can compete on innovation.
The lender plans to launch a term deposit product later this
year, and a small business product in the longer term.
Recently, the lender launched an offset product in response
to broker demand.
Speaking to The Adviser, ING DIRECT’s executive director
of mortgages Lisa Claes said brokers had been crying out for an
effective offset product.
“We listen to our brokers. They are our most important
channel, so we are determined to provide them with the best
products available,” Ms Claes said.
“The offset market accounts for 15 per cent of the entire market,
so we have developed an offset product that can cater to this sector.”
EUROFINANCE
FAST FIGURES
IN 2009, AUSTRALIA
ACHIEVED AN
AVERAGE ANNUAL
PRICE GROWTH OF
ACCORDING TO THE
GLOBAL PROPERTY
GUIDE
THERE IS A
27
BASIS POINTS
SPREAD IN THE FOUR
MAJOR BANKS’
STANDARD
VARIABLE RATE
MORTGAGES – WHICH
REMAINS UNCHANGED
FROM DECEMBER LAST
YEAR
THE PROPORTION OF
INCOME TO MEET
LOAN REPAYMENTS
ACROSS AUSTRALIA
ROSE BY 1.7% TO
30.7%
IN THE DECEMBER
QUARTER, ACCORDING
TO REIA
WESTPAC DISMISSES
GROUP CULL CLAIM
MACQUARIE LEASING
BOOSTS BROKER OFFERING
FITCH UPGRADE FOR
BENDIGO AND ADELAIDE
Westpac quashed media reports
that it will cut the number of
broker groups it uses to sell home
loans from 87 to 60. A report in
The Australian Financial Review
claimed Westpac would cut its
network of broker groups
by 27 after tightening the
accreditation process to
weed out underperformers.
A Westpac spokesperson for
the bank told The Adviser
that while some brokers had
lost their accreditations with
Westpac, the alleged culling
of 27 broker groups was
“purely speculative”.
In a move to further engage the
third party distribution channel,
Macquarie Leasing has teamed up
with car procurement service Jivve
to provide brokers an additional
revenue stream and help make
their clients “stickier”. According to
Stephen Light, national manager
for the proprietary distribution
channel, if a broker’s customer
buys a car through Jivve, the
broker will receive a
commission for each successful
sale. “The strategy is to provide our
Introducers with an efficient tool to
control the purchasing and
finance process,” he said.
Bendigo and Adelaide Bank’s
BBB+ credit rating from Fitch
Ratings has been upgraded from
stable to positive, suggesting the
bank may soon be upgraded to
A-. If the second tier lender was
upgraded to A- it would be able to
access wholesale money at cheaper
rates and close its competitive
disadvantage against the major
banks. Fitch said the bank had
managed to withstand the pressures
of the global financial crisis well,
with profitability recovering
in the first half of
the 2010
financial year.
BANK CUSTOMER
SATISFACTION
SAT AT
IN JANUARY – THE HIGHEST LEVEL
REACHED SINCE 1996, ACCORDING TO
ROY MORGAN RESEARCH
NEW EURO
PRODUCT
REFINANCE
LOAN
This product has
been specifically
created to:
4 Assist borrowers to
Refinance so as to enable
them to rearrange their
financial affairs.
4 Enable borrowers to
overcome existing lenders
demands that the loan be
repaid immediately.
FOR MORE DETAILS
CoNtACt Colin Sherry
colin@eurofinance.com.au
02 9252 8311
FRONTLINE
word
the
As national credit licensing draws closer, broker attrition is expected to rise –
but what do our industry pundits think?
WITH REGULATION LOOMING, WILL THE OVERALL NUMBER OF
BROKERS DROP?
PETER WHITE
PHIL NAYLOR
TROY PHILLIPS
STEVE SAMPSON
GERALD FOLEY
YES – BROKER
NUMBERS TO
DECLINE
YES – 10%
REDUCTION
FORECAST
NO – REGULATION
MAY BOOST
NUMBERS
YES – 35-40%
DROP EXPECTED
YES – LICENSING
TO FORCE
CHANGE
FBAA
“I DON’T know if the
looming regulation will
have an impact on how
many brokers the market
can sustain. So long as
people are borrowing,
and are borrowing from
both the bank and nonbank sectors – thereby
encouraging competition
– there will be
opportunities for brokers
to remain competitive in
the industry. Of course,
with new legislation
we will see a reduction
of broker numbers due
to increased costs and
volume hurdles by some
lenders, but there is a
lot of room left in the
marketplace for brokers
with quality product
offerings and excellent
customer service.”
MFAA
“WHILE MANY
commentators have
suggested broker
numbers will reduce by
around 20 per cent, I can
only comment based on
what I know and historic
MFAA statistics. At its
peak in mid 2007, the
MFAA’s membership
was around 13,800.
This fell to a little over
12,000 with the impact
of the GFC, consolidation
and the MFAA’s own
actions to cancel some
memberships. However,
we’re still processing
between 150 and 200 new
membership applications
per month. Our net loss
since the 2007 peak has
been about 13 per cent.
We expect that regulation
(and other impacts) could
bring about a further 10
per cent reduction over
the next 12 months or so.”
FirstPoint NB
“WHILE DIMINISHED
commissions, tighter
credit and steady service
levels have made many
brokers question their
current business model,
the introduction of
the new legislation
may actually grow the
industry in the longer
term. The industry will
attract younger and
better qualified credit
professionals. Attrition
is not a competitive
strategy for growth,
despite industry
guesstimates that the size
of the third party channel
will top-out at about 40
to 45 per cent as a result
of regulation. The third
party space is no longer
a cottage industry. Other
players in the financial
services world will see
real value in a welleducated and legislated
Australian market place.”
Provident Capital
“WITH THE advent of
regulation and credit
licensing, there will be
significant cost and
compliance issues for
aggregators and brokers
alike, which to me means
that there’ll be future
industry consolidation.
There are a huge amount
of brokers in Australia
who do not write
sufficient loans to cover
the cost of compliance,
so I’m tipping that there’ll
be a 35 to 40 per cent
reduction in broker
numbers over the next
two to three years. I’m
also tipping a reduction
in commissions from
major lenders that will
be blamed on ‘extra
compliance costs’.”
National Mortgage Brokers
“AT THE moment, the
number of people and
businesses that ‘dabble’
in finance [broking] is
largely unknown, and
include accountants,
financial planners, real
estate agents and other
professionals. But after
1 July, businesses will
be forced to decide
whether they become
licensed or start acting
as a ‘mere referrer’. The
first scenario is great for
aggregators; the second
is great for existing
mortgage brokers who
should start targeting
local businesses. Some
smaller brokers have
just hung in through
the GFC, and might now
concede it is all too hard
for them. Meanwhile,
the remaining licensed
brokers may find
themselves busier than
they’ve ever been.”
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FUNDING BUSINESS SUCCESS FOR OVER 20 YEARS
FRONTLINE
box
mail
DEAR EDITOR,
by
nce industry, followed now
After 25 years in the fina
stpac
We
my
had
ly
ent
rec
e
14 years as a broker, I hav
requisite
failing to give them the
accreditation revoked for
s.
one loan every six month
one
t mind truly believe that
Does anyone in their righ
an expert?
ain
rem
to
e
eon
som
ws
loan every six months allo
any bank, nor will I
I will not be dictated to by
g loans with a particular
cin
pla
by
compromise my ethics
reditation.
lender just to maintain acc
ac, for
loan I placed with Westp
last
Apart from that, the
er.
ast
dis
d
ate
itig
unm
nt, was an
an existing Westpac clie
erience,
exp
er
tom
cus
ter
bet
a
e
If they wish to provid
Most
e their own service levels.
they need to vastly improv
ck
qui
e
rely need to provid
lenders think that they me
ough
e extends all the way thr
vic
Ser
ng!
wro
–
turnarounds
I find
ere
wh
y
, and this is primaril
to settlement and beyond
ers fail.
Westpac and a lot of oth
reason why I can no
I tell my clients upfront the
has
ns, and everyone of them
longer offer Westpac loa
They hold me
en.
tak
e
hav
I
nd
sta
the
congratulated me for
in even higher esteem.
Stephen Dinte
principal credit adviser
rs
Australian Mortgage Planne
DEAR EDITOR,
DEAR EDITOR,
I write in response to the MFAA’s recent proposed framework of professio
nal
standards, in particular, the introduction of volume requirements.
To require, as a minimum standard, the settlement of six loans per quarter
is
blatantly ridiculous and has no precedent in any other industry.
In no way can a broker’s skill level, professionalism or commitment be
improved by a demand to settle a certain number of loans. It discrimin
ates
against part time brokers and also fails to acknowledge those brokers,
like
myself, that focus on larger commercial transactions and are therefore
not
driven by the volumes of the typical residential mortgage broking business
.
I also argue that in terms of the additional proposal that a minimum
conversion rate also be adopted, the broker that has low volumes would
necessarily have a very high success rate – in many instances at or approac
hing
100 per cent.
In my view, this proposal adds further weight to the widely held view
in the
industry that the MFAA is supporting the agenda of the banks at the expense
of
its broker members.
To allow such a proposal is only in the interests of the banks who are using
the ‘volume’ argument to further crush the broking industry.
I fully support the improvement of professional standards for brokers,
I feel
there is no place for the ‘vacuum cleaner salesmen’ out there that add
no value
to clients, and in fact harm the industry. However, I cannot accept that
volume
requirements have any bearing on a broker’s skill level and professionalism.
Adam Ingham
partner
Radius Finance
you must be MFAA member, have a
lenders in saying that to be a professional finance broker
It is rather amusing that the MFAA has sided with major
[the required] conversion ratio.
Certificate IV, submit six mortgages per quarter, and have
mortgage brokers who ask
in the industry, in my normal everyday dealings I come across
nce
experie
years
34
with
broker,
finance
As a commercial
to read a set of financial
able
be
to
ers
memb
its
asking
to me that the MFAA would be better off
me how to submit other types of finance. It would seem
cent [of them].
finance for all of their clients’ needs, and not just 30 per
statements for a company, and be capable of arranging
a joke, and have no idea of how to really look after a
widely
are
brokers
ge
mortga
ntial]
[reside
that
think
Commercial finance and equipment brokers
client financials, or be interested
ges per year still have no idea of how to read or understand
client. I have seen mortgage brokers who arrange 100 mortga
ssion.
commi
ge
mortga
the
and
ty
commission from the sale of the… proper
in their clients’ needs; [they are] more worried about their
ge brokers to make the finance
mortga
these
for
ion
educat
proper
a
ensure
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FRONTLINE ANALYSIS
Q1 2010 sentiment survey
Broker sentiment towards business growth has showed marked improvement
AS WE enter 2010 there’s an underlying
sense of optimism in the market. Not only are
industry commentators bullish about the year
ahead, brokers are also upbeat – with findings
from the Q1 The Adviser sentiment survey
highlighting an advancing industry.
2009 will be remembered as an important
year in the evolution of the third party
distribution channel.
It was during 2009 that the full impact of
commission cuts were realised, not to mention
the ongoing issues created by the GFC –
including slower property markets. Brokers were
rightly concerned about business prospects.
While there are still numerous challenges
facing brokers in 2010, such as impending
licensing, the results of this quarter’s The Adviser
Index highlight solid broker attitudes towards
business expansion and loan volume growth.
The Adviser Index hit 40.5 for Q1 2010 –
up 11.2 percentage points on Q4 2009.
And all indicators point to strong broker
business over the coming quarter, spurred by
investor and refinancing activity.
First home buyers – buoyed by increased
government grants and concessions – kept
broker business turning over during most of
2009. Indeed, this market segment was the
key focus for many brokers.
As we move into 2010, the bourgeoning
market segments of investors, refinancers and
upgraders/downsizers are expected to pick up
where the first home buyer market stepped
DATA WRAP: THE PROPERTY MARKET
PROPERTY SALES OVER THE COMING QUARTER WILL?
REMAIN SAME
INCREASE
DECREASE
THIS QUARTER CHANGE Q4 09 CHANGE Q1 09
49.3%
6.8%
11.8%
35.1%
3.7%
16.7%
15.6%
3.1%
4.9%
RESIDENTIAL PROPERTY PRICES OVER THE COMING
QUARTER WILL?
RISE
REMAIN STATIC
FALL
53.7%
3.5%
40.3%
43.3%
6.0%
19.8%
3.0%
2.5%
20.5%
WILL THE PROPERTY MARKET OVER THE NEXT
QUARTER REPRESENT GOOD VALUE TO BUYERS?
YES
NO
DON’T KNOW
68.1%
4.3%
19.6%
20.0%
1.9%
14.3%
11.9%
2.4%
5.3%
off following the wind back of government
incentives at the end of 2009.
Both the investor and refinancing markets
are set to generate increased volumes over
the coming quarter, according to the survey
respondents, registering 45.6 per cent and
37.2 per cent respectively.
This is up 34.3 per cent (investors) and
17.5 per cent (refinancing) on the same time
last year, and is in tune with the findings in Q4
2009 – highlighting consistency within these
market prospects.
Overall, the majority of respondents
expect loan volumes to increase over the
coming quarter – up 1.0 per cent on Q4
2009’s findings.
Respondents’ views towards the overall
economy were fairly consistent compared to
the Q4 2009 findings. The largest shift was
the 9.5 per cent drop from last quarter in the
number of respondents that expect rates to
rise over the next quarter – now accounting
for 85.3 per cent of respondents.
Summarising respondent findings on
economic issues, it would appear that the
overall sentiment towards the economy is
positive, with the majority of brokers believing
that economic conditions are better than
the quarter prior. Moreover, 63.3 per cent of
respondents believe that the RBA is doing an
effective job of controlling inflation – a figure
that has risen by 3.2 per cent from Q4 2009.
Notwithstanding these results, the majority
of brokers believe the current RBA interest rate
will have a negative impact on the demand for
home loans over the coming quarter.
READ MORE ONLINE
For the full report, including additional
commentary and all data wraps, please visit:
www.theadviser.com.au/features/surveys.
DATA WRAP KEY
CHANGE FROM:
UP BY
DOWN BY
NO CHANGE
RESPONDENT DEMOGRAPHICS
TOTAL SURVEY RESPONDENTS: 436
YEARS IN INDUSTRY (AVERAGE): 13.6
INDUSTRY SECTOR: BROKERS 81.6%, ORIGINATORS 8.5%,
LENDERS 3.7% AGGREGATORS 3.2%, OTHER 3.0%
RESIDENDIAL LOANS AS PERCENTAGE OF REVENUE:
91-100 (52.1%), 81-90 (19.0%), 71-80 (5.3%), 61-70 (6.7%), OTHER (16.9%)
DATA WRAP: THE ECONOMY
IS THE FEDERAL GOVERNMENT DOING A GOOD JOB
OF MANAGING OUR ECONOMY?
NO
YES
DON’T KNOW
47.7%
5.5%
NIL
44.7%
3.0%
7.7%
7.6%
2.5%
7.7%
IS THE RBA DOING A GOOD JOB OF CONTROLLING
INFLATION THROUGH ITS MANAGEMENT OF
MONETARY POLICY?
YES
NO
DON’T KNOW
63.3%
3.2%
4.5%
30.0%
1.3%
4.1%
6.7%
1.9%
0.4%
HOW DO CURRENT ECONOMIC CONDITIONS
COMPARE THIS QUARTER WITH THE PREVIOUS
QUARTER?
BETTER
SAME
WORSE
46.1%
3.0%
19.1%
32.8%
0.9%
4.6%
21.1%
3.9%
23.7%
WHAT IMPACT WILL THE CURRENT RBA INTEREST
RATE HAVE ON DEMAND FOR HOME LOANS OVER
THE COMING QUARTER?
NEGATIVE
NONE
POSITIVE
48.8%
2.9%
47.0%
39.7%
1.2%
24.6%
11.5%
1.7%
71.6%
WHAT WILL HAPPEN TO INTEREST RATES OVER THE
NEXT QUARTER?
INCREASE
NO CHANGE
DECREASE
85.3%
9.5%
83.5%
14.0%
9.4%
4.1%
0.7%
0.1%
79.4%
DATA WRAP: BUSINESS ISSUES
DO YOU EXPECT YOUR BUSINESS OVER THE COMING
QUARTER TO:
GROW
REMAIN SAME
DECLINE
45.7%
2.3%
11.1%
37.8%
3.3%
5.0%
16.5%
1.0%
6.1%
DO YOU EXPECT YOU WILL RECOMMEND NON-BANK
PRODUCTS TO ANY CLIENTS OVER THE COMING
QUARTER?
YES
NO
DON’T KNOW
82.7%
2.3%
N/A
9.7%
0.7%
N/A
7.6%
1.6%
N/A
ARE YOU CONSIDERING LEAVING THE MORTGAGE
INDUSTRY DURING THE NEXT QUARTER?
NO
DON’T KNOW
YES
86.2%
0.9%
3.3%
7.8%
1.2%
1.4%
6.0%
0.3%
1.9%
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FRONTLINE OPINION
Light on the horizon
The outlook for securitisation is improving, with signs that activity will gather
pace over 2010
By Patrick Tuttle
Deputy chairman of the Australian
Securitisation Forum and managing
director of Pepper Homeloans
FOR MOST of Australia’s securitised mortgage
lenders the global financial crisis (GFC) really
began in August 2007, even though the visible
impact on the Australian economy emerged
much later.
For Pepper, our last RMBS issue was
completed in November 2007, more than two
years ago. It is against this backdrop that I am now
able to reflect on where Australian securitised
lenders have been and where I believe we are
heading over the coming 12 months.
By global standards, the Australian story
is a pretty remarkable one. Our economy,
including key macro measures such as the
unemployment rate and average house price
growth, have continued to defy even the most
optimistic of expectations.
Through a combination of good luck, the
China growth story, the federal economic
stimulus package, a sound regulatory
environment, our four pillars policy, and a
highly competent central bank, Australia was
one of the few bright spots in the developed
world during 2009. Our economy actually grew
by more than 2.5 per cent in 2009, at a time
when almost everyone else went backwards.
a number of securitised lenders, including
non-banks such as RESIMAC, Firstmac and
Liberty Financial, have been able to reactivate
their respective securitisation programmes,
albeit at much reduced volumes and at a
considerably higher cost of funding.
This has meant that Australia has been one
of the few debt capital markets on the planet
where new securitisation issues are continuing
to occur, supported by real money (mainly
domestic) investors willing to dip their toe in
the water again.
With the bulk of the notorious secondary
market overhang of cheap mortgage-backed
securities now largely sold off, Australian
securitised lenders are now returning to
the debt capital markets with a degree of
confidence. Already in 2010, we have seen
three new RMBS issues from AMP Bank, Bank of
Queensland and Credit Union Australia.
These follow on from the ME Bank and
Westpac deals that were completed in late
2009. This deal activity has resulted in the
pricing of AAA-rated mortgage-insured prime
RMBS deals settling around the 130 basis point
level (as a margin over 30 day BBSW).
Investor support for these recent
transactions has largely come from domestic
investors, although there are also a small
number of European buyers that have
recognised the relative value of Australian RMBS
in comparison to other investment alternatives.
DOMESTIC STRENGTH
For the Australian securitisation market,
the emergence of the Australian Office
of Financial Management (AOFM) as a
cornerstone investor in new RMBS issues
during the second half of 2009 has been an
important feature. With the AOFM’s support
BULLISH OUTLOOK
For the remainder of 2010, I expect the recent
RMBS issuance trend to continue. I also expect
to see a small number of 100 per cent low
documentation RMBS deals brought to the
market in coming months. This will be a further
important step in the road to recovery of the
Australian securitisation market as it will set
a further reference point from which to price
other asset-backed securities, particularly nonconforming RMBS.
As more deals come to market, I also expect
to gradually see more investors return to the
fray. In time, although currently waiting on the
sidelines, this should also include a number of
Asian investors who have previously had a good
experience with Australian RMBS product.
Although there is no magic wand to
make all these expectations come true, the
current level of activity within the three major
Australian ratings agencies suggests to me that
securitised lenders are serious about bringing
new deals to market.
This increased deal activity should also
result in a gradual tightening of margins paid
to bond investors, although I don’t expect to
see too much margin contraction during the
course of 2010.
Clearly, the confidence of RMBS investors
will be heavily influenced by the ongoing
resilience of the Australian economy and, to
a lesser extent, the economic outlook for our
major trading partners.
In the absence of any further unforeseen
shocks to the global economy, I remain
optimistic for the 2010 outlook. This means
that a number of securitised lenders will be in
a position to increase their lending volumes,
most likely in the second half of 2010.
This will be welcome news to mortgage
brokers looking for alternatives to the major
banks, and a broader range of mortgage
products for many of their customers who
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bank due to ever-tightening lending criteria.
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EVERYONE HAS AN OPINION, AND SOME
PEOPLE FEEL COMPELLED TO SPEAK
OUT. HERE ARE JUST A FEW COMMENTS
PROMPTED BY DAILY NEWS BROKEN ON
WWW.THEADVISER.COM.AU OVER THE
LAST MONTH
ON THE MFAA’S NEW ‘ADVISER’ FRAMEWORK
MFAA?
‣ How does being a member of the MFAA give a broker a ‘competitive edge’ if all brokers are members of the
Trevor Jones
‣ Operating as a broker outside a major city it has always been difficult [for me] to collect the
required 25 Continuing Professional Development (CPD) points [required by the MFAA] as now
none of the banks’ BDMs visit us for training. For us to ‘visit them’ costs me $200 in fuel plus
overnight accommodation of $130. The only other alternative [is to] complete a number of MFAA
courses paying $250 each; plus there is the inconvenience to my clients of being away from the
office for two days. To achieve 30 CPD points will prove impossible. Are we now heading into an
era where only the big will survive [with no] room for independent brokers?
Brian Taylor
ON ANZ RAMPING UP MORTGAGE LENDING
‣ ANZ could... sharpen its process if it got rid of processing in India. I know from
personal experience – and from talking to the processing guys left in Perth – that
this is where all the issues are stemming from. I have been trying to settle a loan with
ANZ since early November last year; it only settled last week and still there are issues
with it. The really sad thing is that this is not an isolated issue with ANZ; every deal
that I have sent them in the last six to eight months have all had similar issues, and
processing the deals has dragged out beyond anything that I have experienced.
Andrew Aickin
‣ This is welcome news
regardless of their
processing problems;
ANZ still provides by far
the best service of any
major. Recently I had an
application fully approved
within twelve and a half
working hours [of the deal
being placed] in the ANZ
system.
David Butcher
ON SLUMPING HOUSING AFFORDABILITY
‣ One other contributing factor that adds to buyers’ hesitance is the uncertainty around their eligibility for finance.
With the constant policy changes and credit tightening being made by the various lending institutions, it is daunting
to a buyer to be confident to proceed to [an] offering. A pre-approval obtained three months ago... may not be an easy
proposition as rates have risen and lender policies have tightened further [during that time]. So the unaffordability
quotient has been contributed to by not only rising interest rates but also the continuing tightening of financing
policies. The borrowers of today need to be much more financially aware of their options.
Ian Franklin
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PROFILE LEADER
Master
of words
After four decades on the frontline,
there is little Chris Masters hasn’t seen.
The five time Walkley award-winning
investigative journalist speaks to
The Adviser about exposing corruption,
his controversial Alan Jones’ book, and
genocide in Rwanda
SEVENTEEN YEARS on and journalist Chris Masters can still recall, in
AN ORGANIC CAREER
vivid detail, the looks etched on the faces of individual corpses piled up
on either side of a road in Rwanda.
During his 45 years as a journalist and reporting from some of the
world’s most dangerous warzones, Masters has witnessed first-hand
“human atrocity, corruption and savagery” of the worst order.
He has seen bloodshed in Bosnia, avoided a human stampede in
Yugoslavia, embarrassed the French Government, exposed corruption
in the Queensland Police Force and endured numerous death threats.
But it was the genocide he witnessed in Rwanda – which he
recounts in Inside a Holocaust – that had the biggest impact on him.
“I had never been witness to human genocide until I visited Rwanda.
It was like purgatory,” he says.
“I was driving out to these camps along a narrow dirt track and
there were bodies piled up on either side of the track that went above
the roof of the car. You’d look out the window of the car and you would
look into the faces of dead people. I still see those faces in fine detail.
It was like being in a holocaust and you can’t fail to be affected by that.
I think you can’t fail to see the responsibility that your public should be
affected too.”
The sense of responsibility that comes with being an observer of the
best and worst of the human condition has loomed large throughout
Masters’ long career.
Widely considered Australia’s finest investigative journalist, Masters
is Four Corners’ longest-serving reporter and has collected five Walkley
Awards and a Logie Award – a testament to a highly successful career.
But despite his ‘big city’ success, Masters still sees himself as a
country boy.
One of seven children, Masters grew up in the NSW town of Grafton.
His father was a teacher; his mother was the ‘local journo’ and
responsible for leading Masters into his future vocation.
He describes journalism as an “organic career choice”, adding that
the typewriter played a large part in his upbringing.
“I grew up in a story-telling family [so] I guess you could say that,
growing up, I had an apprenticeship as a storyteller,” he says.
After spending the first part of his career learning his craft in various
regional centres including Rockhampton and Albury, Masters was
forced to relocate to the big smoke for family reasons.
“My daughter was diagnosed with cancer in the late 1970s, so I
moved the whole family to Sydney in order to be closer to her treatment
centre,” he says.
Masters landed a job with the ABC almost immediately, which
marked the beginning of a very fruitful television career.
It was during his time working for the ABC’s Rural program that
Masters work was noticed and he was offered a job working for Four
Corners, which was in the throes of a major program overhaul.
“When I started on Four Corners, they were actively trying to rebuild
the show and the brand. They were looking for local Australian reporters
and I just happened to be in the right place at the right time,” Masters says.
TRUTH-TELLING AND STORY-BREAKING
Far from being a happy accident however, Masters was seen to breathe
new life into the show.
In fact his first story ‘The Big League’ which aired in 1983, triggered
the Street Royal Commission, reforms to judicial accountability and
resulted in the chief magistrate of NSW being sent to prison.
It was also the start of Masters’ own move into the big league. In
1985, he won the gold Walkley for his story ‘French Connections’, about
the sinking of the Greenpeace vessel ‘Rainbow Warrior’.
The story made headlines around the world and Masters describes
it as one of his greatest achievements to date. “[It was] like being
caught up in a real-life adventure spy thriller,” he says.
In 1987, he had well and truly arrived as a journalistic force to be
reckoned with, with ‘Moonlight State’. The Four Corners story exposed
corruption in the Queensland police force that led to the Fitzgerald
Inquiry and a raft of reforms that reached well beyond Queensland.
Uncovering – and reporting – corruption of the order that
Moonlight State exposed certainly cemented Masters’ place as an
investigative journalist, but was also fraught with personal risks.
But Masters believes success is bred from taking risks.
He says he wouldn’t be where he is today had he not decided to
take calculated risks.
“Risks expose you, but your work or business are generally the
better off for them,” he says, adding that risks also expose truth and
there is value in uncovering the truth.
“If you do your job properly and you tell the public what is going
on in an honest and accurate way, some worth will come from it.”
And it’s clear that Masters’ passion for investigative reporting
hasn’t waned.
www.theadviser.com.au 19
PROFILE LEADER
“Discovering things, it’s like finding diamonds sometimes; it’s
absolutely thrilling,” he says. “The highs are those terrific moments when
you’re on a good story and it’s unfolding in front of you and you are living
with that daily battle for the truth.”
“It was never about trying to demolish Jones as he has demolished
so many before him, it was about examining his power base and
confronting it. It was a story that needed to be told, and as a
journalist, I see that as my public responsibility.”
MAKING A DIFFERENCE
It was never about trying to demolish
Jones as he has demolished so many before
him, it was about examining his power
base and confronting it
CHRIS MASTERS
Of course, the truth is not something everyone agrees with – as
Masters discovered during one of his more memorable forays into
investigative journalism involving radio broadcaster Alan Jones.
Masters’ unauthorised biography of Alan Jones, Jonestown, was
controversial from the beginning. After agreeing to publish the book, a
nervous ABC Enterprises demurred and it was published by Allen & Unwin.
“The book became a product of censorship, which worried and
upset me. I knew it was something of interest to the Australian public
and I knew the story needed to be told,” says Masters.
But Masters says while many people were critical of the book and the
way it was written, it dealt with an important public issue. “Alan Jones is
not a broadcaster, he is a politician who broadcasts,” Masters says.
Reflecting on his career, Masters says he has never had a problem finding
the story. Rather, the challenge lies in telling it in a compelling way.
More challenging however is dealing with the after-effects of
reporting from a warzone or civil conflict.
“There is a shock that comes with returning to the ordinary,” says
Masters of his time as an international reporter.
“But while you struggle to come to terms with the fact that the
most important thing you now face is whether or not your football
team wins the next game.
“I always appreciated the fact that I was returning to a civilised
environment, where I could get a new perspective from my civilised
surroundings.”
According to Masters, the harder journalism and the journalism
that requires more courage is that conducted in “civilised countries”.
He says the true mark of a journalist is the ability to “tell a compelling
story about a local issue”.
“[That means] a story where you attack an unforgiving subject
where you are forced to hold your nerve in the hope that ultimately
you’ll get there,” he says.
For those who are interested in the truth, it’s fortunate that
Masters has been there many times.
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partnered by
Liquidity returns,
activity picks up
fter seeing its market share drop sharply over the last three years, originators have staged
the beginnings of a comeback in 2010.
While funding remains tight, securitised lenders’ warehouses are being replenished
as markets start to thaw. Securitisation is again beginning to stand on its own two feet
without the need for support from the Australian Office of Financial Management
(AOFM), which had been so critical over the previous couple of years.
In addition to improvements in the capital markets, the injection of fresh
balance sheet funding into the wholesale pool has further boosted the non-bank sector. With greater
liquidity at its disposal, the non-bank sector has stepped up activity.
Originators are again doing what they do best – providing competition and product innovation to the
broker channel and this is clearly valued by brokers.
The Adviser’s quarterly sentiment surveys have consistently revealed that over 70 per cent of
brokers say they plan to recommend non-bank products. Whether these intentions come into fruition is
immaterial – there is clearly strong broker sentiment towards the non-banks.
Over the coming year there will be significant opportunities for originators to engage the broker
channel. But where pricing was once at the forefront of the originator’s offering, an older, wiser sector will
now look to compete with greater effect on service, policy and innovation.
While there has been some movement in the rankings for this year’s Top 10 Originators, it is interesting
to see that most of last year’s groups have held their place, highlighting stability and a strengthening sector.
OVERALL RANKING
RANK
COMPANY
1
Homeloans
2
Firstfolio
3
Australian First Mortgage
4
Mortgage Ezy
5
Collins Securities
6
Mortgage House
7
National Mortgage Company
8
Future Financial
JIM HALL
9
Better Mortgage Management
Publisher
The Adviser
10
Australian Financial
Welcome to the new world
AS THE world emerges from the GFC, there are still a number of
challenges faced by lenders even though liquidity is gradually improving.
The securitisation market is anticipated to re-emerge next year,
providing opportunities for banks and non-banks to raise funds.
However, the pricing of funds is and will remain comparatively
higher than pre-GFC. So although liquidity in securitisation markets
will gradually improve, the imminent return of the non-bank sector,
funded via securitisation, is unlikely.
The cost of funds issue is faced by all lenders but more so by nonbank lenders as they do not have access to deposits and short term
money markets like ADIs. This will remain a significant hurdle in the
short to medium term.
While the market has experienced a disproportionate shift in lending
to the four major banks, there is an enormous opportunity for alternative
brands to challenge this and compete on product and service.
Advantedge is fully committed to the mortgage management
industry and continues to develop new products and solutions that will
reinvigorate the industry and have a positive effect on competition.
Because of our strong funding position we are able to develop a
range of compelling product offerings that are competitively priced,
but also differentiated by the superior service levels we offer.
We want our customers to be able to provide a service that is
committed to putting clients first and make borrowing as simple and
easy as possible.
We also recognise that the introduction of stricter regulations will
have a significant and lasting impact on the industry.
As the industry evolves, we believe successful originators will need
to build capabilities to provide guidance and advice across broader
financial solutions for customers. We are investing in this area and see
this as an exciting opportunity for the future. Our partnership of
The Adviser ’s Top 10 Originators 2010 holds testament to our focus on,
and ambitions for, the origination sector in the period ahead.
DREW HALL
CEO
Advantedge Financial Solutions
partnered by
Growth
despite
adversity
AUSTRALIAN FINANCIAL
RANKING LAST YEAR: 5
ACCREDITED BROKERS: 1,100
YEARS ESTABLISHED: 16
FLAGSHIP PRODUCT: DNP
Australia’s mortgage originators will
rebound from the economic slowdown
as strong as ever, with renewed
vigour and a redefined market
proposition
THERE’S LITTLE doubt that 2009 was a challenging
year for the nation’s originators.
Funding pressures, a lack of competitive pricing
combined with a flight by borrowers to the perceived
safety of the mainstream banks, impacted heavily on
the non-bank sector.
The overall number of businesses actively offering
loans dropped considerably, so too did the loan
books of many originators as customers refinanced to
mainstream lenders – reflected in part by their market
share increase over the period.
Interestingly, however, a pool of originators was
able to grow in spite of market conditions. Some
achieved this – take Better Mortgage Management
and Australian First Mortgage – through rationalising
costs and focusing on core business matched with
Australian Financial (HLCA)
experienced a drop in loan
volumes, loans written and
overall book size over 2009.
Despite the drop in these
key indicators, the originator’s
managing director Matt Carter
says the company did incredibly
well to retain its position as a Top
10 Originator through the recent
tough economic period.
Moving forward, the company
hopes to improve on 2008’s
streamlining systems and processes, others, such as
Firstfolio, through acquisition.
The recent period of rationalisation in the
originator sector, while painful for many businesses,
will be remembered in years to come as a key turning
point for the development the non-bank sector.
It is during periods of adversity – when market
conditions are tough – that businesses truly realise their
value proposition and build sustainable operations that
in the future can weather market cycles.
REINVENTING ORIGINATION
There’s no doubt that the non-bank sector will look
retrospectively at 2009 and realise that it was a
watershed year – an important period in shoring up the
future of non-bank lenders in Australia.
performance and grow its loan
book and customer database.
“We hope to grow the
business both organically and
through acquisitions,” Mr Carter
says.
While the recent economic
slowdown has impacted the
mortgage originator, Mr Carter
says the company’s greatest
success last year was its ability
to “successfully adapt to the
changing economic climate”.
“We used last year to
integrate our planning and
lending divisions, reestablish the
brand in the market place and
build a solid base on which to
grow the business,” he says.
TOTAL NUMBER OF LOANS
WRITTEN 2009
(Largest amount to smallest)
RANK
COMPANY
1
Homeloans
2
Firstfolio
3
Mortgage Ezy
4
5
Mortgage House
6
7
Collins Securities
8
9
Future Financial
10
BETTER MORTGAGE MANAGEMENT
FLAGSHIP PRODUCT:
Lo Doc Premium Power Pack
The GFC drove innovation across
the mortgage industry – including
mortgage originators as they sought to
better engage brokers and empower
their client servicing proposition.
Better Mortgage Management is
one originator focused on creating
a better interface with brokers,
launching its Place A Loan (PAL) online
search engine.
The search engine allows its
brokers to find an answer to their loan
scenario online without having to
contact a BDM.
“The implementation of PAL has
managed to save both our brokers and
our staff a lot of time,” Better Mortgage
Management managing director
Murray Cowan says.
“This online tool has ultimately
helped improve our servicing times,
which is one of the biggest challenges
we face moving into 2010.
“January 2010 was our biggest
month for loan applications since
2007, so we expect our volumes to
really rocket this year. With that in
mind, the biggest challenge for our
business will be to maintain our
service standard benchmarks.”
Overall, compared to 2008
the originator performed
steady throughout 2009, with
the growth in the number
of loans written and total
loan volumes increasing
5.3 per cent and 7.3 per
cent respectively.
partnered by
AVERAGE
LOAN VOLUME:
$493M
Increase from last year:
22.4%
AVERAGE
LOAN SIZE:
$312,446
7.6%
TOTAL LOAN VOLUME 2009
(Highest volume to lowest)
RANK
COMPANY
1
Homeloans
2
3
Firstfolio
4
Mortgage Ezy
5
Mortgage House
6
7
Collins Securities
8
9
Future Financial
10
This year’s Top 10 Originators ranking highlights
a sector in a holding pattern. While some originators
have posted impressive growth figures, others have
clearly struggled under the strains of the GFC.
What is certain is that the foundations for solid and
consistent growth are evident – and that there’s indeed
strength in the channel.
Additionally, it would appear that there’s little
broker resistance to using non-traditional lenders.
The opposite actually holds true. Brokers to the large
extent are firmly behind the nation’s originators and
champions of the role they play in servicing borrowers.
While realistic that there are constraints, in some
cases, to originators’ ability to match mainstream
bank products on rate, brokers appreciate – and will
actively promote – the benefits and alternatives offered
by originators to their customers. It’s also actively
promoted at aggregator level.
Originators’ customer service proposition is
clearly a major winner; as too is the diversity in
product – in particular for those borrowers that
struggle to meet bank criteria. But the originator
proposition runs much deeper.
A silver lining to the GFC has been the renewed
focus on product innovation – of which mortgage
originators are at the fore.
Higher LVR products, for example, are quickly
becoming good business generators for originators
in those market segments that are currently active –
investors and first home buyers, for example.
Technological innovation is also a major focus – with
some originators creating portals to better engage
FUTURE FINANCIAL
RANKING LAST YEAR: NIL
ACCREDITED BROKERS: 330
FLAGSHIP PRODUCT:
Future FightBack
It’s been a big 12 months
for Future Financial with the
restructure of the company’s
product offering and introducer
database.
Established nine years ago,
the company has managed strong
performance over 2009, with a 37.1
per cent jump in the number of
loans written from the year prior,
reflecting strong overall volume
growth. Its loan book however
was down on 2008’s results.
Future Financial director Paul
Hutchinson says the biggest
challenge over the next 12
months will be to educate the
wider community that the nonbank sector is a safe, strong, and
secure alternative to the majors.
“We need to get all the
non-bank lenders and mortgage
managers to stand together and
educate the community,” Mr
Hutchinson said.
Key to the company’s
growth in the year ahead will
be the further consolidation of
its introducer database. “Our
mission is to continue to receive
quality business from quality
introducers,” Mr Hutchinson says.
“We aim to maintain and
further enhance our position as
one of the premium privatelyowned mortgage management
businesses in Australia.”
broker partners and consequently service outcomes.
One only needs to look at this year’s ranking to realise
that Australia’s Top 10 Originators are all, to one extent
or another, focused on these key areas. While some
have been steadying the ship for future growth, others
have grabbed the bull by the horns over the period of
the GFC and realised significant gains.
So how did The Adviser establish this year’s raking
and which factors influenced the final standing?
METHODOLOGY
Unlike the 2009 ranking – which analysed originator
performance solely in 2008 – the 2010 ranking was able
to examine the current performance of an originator
taking into account recent market conditions as well as
benchmarking that against last year’s results.
Through analysing an originator’s performance
through this holistic view, The Adviser was able to
determine an originator’s ability to evolve in line
with the market as well as how closely it was able to
maintain consistency in its operations.
This collective view gave a good indicator of the
strength of an originator’s strategy, the quality of its
management plus the depth of staff and personnel. It
also highlighted its funding capabilities and access to
funding, as well as flexibility in product and policy.
To be considered for a Top 10 Originator ranking
originators had to meet certain criteria.
Importantly, an originator’s product had to be
available to be distributed via the third party channel
( i.e. by brokers) and that, in theory, any broker could
write their product – which removed those lending
businesses that distribute via a proprietary channel,
such as franchise outlets.
Originators were invited to participate in a survey
that requested information relating to loan volumes,
the number of loans written, loan book size, access to
funding, broker distribution, the aggregation panels it sat
on as well as the size of its BDM support team, geographic
presence and staff numbers, amongst others.
This information was then collated, giving
The Adviser the ability to compare and contrast
originators on key business data. As well as analysing
current performance data, comparisons were made on
the data provided by originators for our 2008 ranking –
including the percentage change in loan volumes, the
number of loans written and total loan book value.
Once the Top 10 Originators were shortlisted, they
were ranked comparatively based on key business data,
with a weighted score applied to each ranking position.
The data used to give a final ranking included:
Number of loans written in 2009
Value of loans written in 2009
Extent of an originator’s broker distribution
Percentage growth in the number of loans written
compared to 2008
Percentage growth in loan volume compared to 2008
Total 2009 loan book size
partnered by
AVERAGE
LOAN BOOK:
$1.971B
5.0%
AVERAGE
NUMBER OF
LOAN WRITTEN:
1,584
9.3%
Brokerages back the
non-bank offering
Aggregation and brokerage groups are increasingly
supporting originators as an alternative to the banks
WHILE THE majors managed to increase their share
of the mortgage market during the global financial
crisis, it seems the pendulum may again be swinging
back to the non-bank sector.
The sector emerged from the crisis a little worse
for wear, but ready for battle.
NATIONAL MORTGAGE COMPANY
FLAGSHIP PRODUCT:
Construction loans/professional packages
National Mortgage Company performed
well last year despite a drop in volumes and
the number of loans written.
According to the lender, an
improvement to its servicing capabilities
have been a major win for 2009, which will
hold the business in good stead over 2010
and beyond.
Head of credit and risk operations Jeff
Chapman said the lender’s paperless
application process has helped cut
red tape, thereby improving servicing
levels. On top of that, the company has
been able to maintain strong funding
lines with a set of reputable Australian
wholesale providers.
Looking forward, Mr Chapman says
the company aims to lift its profile,
provide marketing support to its
introducer base, while continuing to
develop and support its staff.
“We want to remain a market leader
within a quality field by continuing to stay
relevant and add value to the businesses
of our third party introducers,” he said.
According to the Australian Bureau of Statistics,
the non-bank sector now accounts for 11 per cent of
the market – a small but important improvement on
the 10 per cent it held in October 2009.
And this is just the tip of the iceberg.
The broking industry is ramping up its
support for the non-bank sector, with aggregators
encouraging their brokers to diversify their lender
base to include mortgage managers and mortgage
originators.
THE PROOF IS IN THE PUDDING
Non-banks give both brokers and borrowers choice
– the backbone of the broking industry’s value
proposition.
Aggregation groups have recognised that
leading originators can represent stable partners
as they often have multiple funding sources – and
many of them have direct access to wholesale bank
balance sheet funding.
Moreover, with less restrictions on their lending
policies, originators are able to tailor products to
specific market needs. This targeted approach can
be valuable for aggregation groups looking to
provide their brokers with a broad range of solutions
for prospective clients.
The GFC forced every lender to re-evaluate its
MORTGAGE HOUSE
FLAGSHIP PRODUCT: Carpe
Diem 1st Rate
The GFC and a frozen
securitisation market were not
enough to stop Mortgage
House from having a strong
year, posting a 27.3 per cent
growth in loan volumes
as well as a hike in the
number of loans written.
The originator
managed to maintain
its retail presence throughout the
downturn and is currently gearing
up to expand its retail operations
further over the course of the next
financial year.
Its managing director Ken
Sayer says Mortgage House will
be recruiting more brand partners
and home loan centres throughout
2010 in a bid to broaden its
geographical presence.
“We want to extend our reach
in the regions we currently operate
in, while also expanding into other
states and territories – strengthening
our presence in the market and
community,” Mr Sayer says.
However, expanding its retail
presence is just one of Mortgage
House’s business goals for 2010.
“We also want to make our
website an online solution for our
customers,” Mr Sayer says.
“The website will be
interactive and provide both our
customers and visitors a place
where they can easily source a
wide range of information and
answers at the click of a button,
while providing a self-service tool
and tracking system – keeping
them in control and fully
informed throughout the entire
[loan] process.”
risk profile, and for the banks, in some instances,
this meant pulling back from certain areas, such as
self employed borrowers and those looking for high
LVR products.
The non-banks jumped on this opportunity, with
many tailoring their suite of products to cater to
those niche markets that again fell outside the scope
of the majors.
But aside from a more nimble approach to
lending, the fact that originators pose little or no
channel conflict sits well with many groups.
Fewer lending channels can mean that originators
don’t face a flood of branch-based business, which
can often lead to slower turnaround times for brokers.
Choice Aggregation Services chief executive
officer Brendan O’Donnell says sharp turnaround
times are often just as important to some borrowers
as a product’s pricing.
For this reason, Mr O’Donnell says he can see the
non-bank sector making a return to form this year,
clawing back some of the market share that was lost
during the GFC.
“When you add the tightening of bank policy
over the last two years and the more draconian
approach that some lenders have taken to the broker
market, it is only to be expected that brokers will
swing towards a non-bank sector with little or no
restrictions and some very competitive products,” Mr
O’Donnell said.
“At the end of the day, brokers and the non-bank
sector have a high level of mutual dependency and no
real channel conflict, and this will always be a driver
for growth of the non-bank sector’s appeal to the
broker channel.”
COLLINS SECURITIES
ACCREDITED BROKERS : 3,200
FLAGSHIP PRODUCT:
Aurora First Home Buyer
For Collins Securities, the last
18 months have been all about
market differentiation. With
the launch of its Aurora Range
of products, including a first
home buyer 95 per cent LVR
loan, Collins has set its sights on
this market segment and going
where the banks won’t.
“Delivering the message to
the market that Collins offers a
unique product range that the
banks and other lenders don’t,
or can’t, provide is important,”
Collins general manager Allan
Willoughby says.
“We have been working
extremely hard to differentiate
ourselves in the market by
TOE-TO-TOE
As brokers and borrowers start to see the non-bank
sector as a safe and viable alternative to the majors,
mortgage managers and originators will find the
confidence to go toe-to-toe with the big four.
providing loans in niche markets
that have been abandoned by
the banks due to funding and
other constraints.”
A focus on a targeted market
sectors has been one of the key
drivers behind the company’s
solid results in this year’s ranking,
with growth in the number of
loans written and loan volumes
increasing 24.6 and 50.8 per cent
respectively on 2008’s results.
Mr Willoughby says while
the company’s focus currently
lies with first home buyers,
investment lending and low doc
loan refinancing, it also aims to
support its 3,200 broker network
in maximising sale opportunities
and improving service levels.
Building referral relationships
is an important part of this aim.
“We will continue to build a
sound distribution network with
likeminded referral partners,” Mr
Willoughby says.
COLLECTIVE
LOAN VOLUME
2009
COLLECTIVE
NUMBER OF
LOANS WRITTEN
Increase from 2008:
Increase from 2008:
$4.930B 15,841
22.4%
9.3%
MORTGAGE EZY
FLAGSHIP PRODUCT:
Full Doc Discounted Variable
with a NIVA Account
Despite the GFC and reduced nonbank market share, Mortgage Ezy
has continued to grow its loan book
over the last 12 months. However
the total number of loans written and
overall volumes was down however on
the figures supplied by the non-bank
lender in 2008.
According to the lender’s general
manager Garry Driscoll, while the
opportunities for the sector are
numerous, there are a number of
obstacles to overcome.
“The biggest challenge for
non-banks is regaining consumer
confidence in the wake of
the GFC,” Mr Driscoll says.
Key to achieving this is
the ongoing development of
a originator’s resources, including
its people – which will lead better
consumer engagement.
“While we have our normal
financial goals around business
volumes and profitability, our
overriding objective will be around
our staff,” Mr Driscoll says.
“We want to create the right
environment for them to grow
professionally and personally.”
partnered by
And, according to Mr O’Donnell, if that was to
happen, it would signal the beginning of a new era
of competition.
He says brokers should always welcome fresh
competition in the market.
“In any business there are considerable dangers
in being reliant on any one supplier, and believe
me, it’s no different for brokers,” he says.
“As a ‘rule of thumb’ I have always encouraged
brokers to avoid exceeding around 20 per cent market
share with any one lender.”
A fact Mortgage Choice’s chief executive officer
Michael Russell agrees with.
According to Mr Russell, the non-bank sector
brings one very important thing to the mortgage
industry – competition.
He says a competitive lending market is
absolutely essential for today’s homeowners and
tomorrow’s homebuyers to ensure they have a
healthy choice and product innovation.
Mortgage Choice recently added non-bank
lenders Homeloans, Liberty Financial and Credit
Union Australia to its lender panel, signalling its
support for diversification and competition in the
mortgage industry.
While non-bank lenders continue to find it
tough to compete with the pricing offered by the
big banks, Mr Russell says the response he has
AUSTRALIAN FIRST MORTGAGE
FLAGSHIP PRODUCT:
Complete Option Full Doc
Australian First Mortgage not only
managed to survive the downturn, it has, in
fact, grown during it.
The originator’s loan volumes surged
15.8 per cent on 2008’s results; the number
of loans written have also spiked by 20.5
per cent. To highlight its better than
expected performance over 2009, AFM
recently developed a new logo and slogan:
‘higher standards’.
But it would appear the company’s
success in 2009 is just the start of a
sustained period of business growth.
AFM’s managing director Tanya White
says the mortgage originator is “poised to
offer our business partners a greater level
of service, product offering and technology
heading into 2010”.
According to Ms White, the company
wants to grow organically throughout 2010,
while ensuring the quality of loans written.
“We also aim to implement new
technology, both internally and externally,
to streamline lending processes and
turnaround times,” she says.
Moreover, Ms White says
AFM aims to offer first
class service, competitive
turn-around times and
a business model that is
“transparent”.
“We want to give our
brokers and clients the
ability to deal directly
with the decision
makers,” she says.
“The passion
we share for our
business is like a
healthy ‘gene’ that
flows along to our
valuable staff and
business alliances.”
PERCENTAGE GROWTH IN
NUMBER OF LOANS WRITTEN
2008-2009
PERCENTAGE GROWTH IN LOAN
VOLUME 2008-2009
RANK
RANK
COMPANY
COMPANY
1
Firstfolio
1
Firstfolio
2
Future Financial
2
Collins Securities
3
Collins Securities
3
Homeloans
4
4
Future Financial
5
Mortgage House
5
Mortgage House
6
6
7
Homeloans
7
8
8
9
Mortgage Ezy
9
Mortgage Ezy
10
10
had to the latest non-bank panel additions,
suggests there is growing demand for their
products and services.
“All of our recent panel additions are
demonstrating signs of healthy growth and
we are receiving encouraging feedback from
our franchisees,” he says.
“As markets continue to thaw, we would
expect to see the re-emergence of other nonbank lenders.”
According to Mr Russell, the non-bank
sector has been caught in limbo over the past
36 months thanks to limited investor demand
for mortgage-backed securities.
However, with the market well and truly
starting to return from its hiatus, he expects
it won’t be long before brokers start to see a
greater amount of competition.
“The best part about the non-bank
sector is its ability to challenge the majors,”
he says.
FIRSTFOLIO
ACCREDITED BROKERS : 500
FLAGSHIP PRODUCT:
Vale Loan Advantage Rate
Firstfolio has enjoyed a bullish 12 months, helped
along by a series of business acquisitions.
The mortgage originator has achieved a
123.9 per cent year on year increase in loan
volumes as well as a 151.6 per cent spike in the
number of loans written – securing the
position as the nation’s number two
ranked originator.
Firstfolio completed the
acquisition of the $3.5 billion
mortgage management and
aggregation business, First Chartered
Capital, late last year followed by
the $2 billion mortgage-managed
loan book of Loan Services
Australia.
Chief executive officer
Mark Forsyth says while
the company is yet to
feel the full weight of its
latest acquisitions, it has
benefited from the mergers
both in terms of economic
leverage and commercial
expansion, with its
mortgage managed loan
book climbing to $4.5
billion in 2009 compared to
$2.4 billion in 2008.
“It’s enabled us to
create a geographical
footprint,” Mr Forsyth
says, adding that the company has been able
to build new distribution channels through
new franchised offices. And there are more
acquisitions in the pipeline, though Mr Forsyth
remains tight-lipped about whom those
targets are.
“We will continue to look for profitable and
strategic acquisitions over the next 12 months,
but the market will have to wait and see what
we do,” he says.
Firstfolio attributes its good results to
growing its wholesale business, as well as its
marketing techniques.
“We’ve had a strong web presence over the
last 12 months and have noticed the impact of
this on our business,” he says.
According to Mr Forsyth, the company’s
web presence will help it capitalise on any
opportunities that are starting to emerge in the
market – such as potential property investors.
“The mortgage market is good and will
continue to perform. Investors are back in the
market. People need a place to live, and so
will keep borrowing,” he says, adding that the
company aims to increase its market share.
The company is aiming to reach $100
million in settlements each month and boost
its profits to $15 million for the 2010 financial
year – up markedly from the $3.5 million the
company posted last year.
“We think business will accelerate going
forward. The outlook is indeed very positive.”
partnered by
1
HOMELOANS
FLAGSHIP PRODUCT:
Homeloans Premium Full Doc range
FAST TURNAROUND TIMES, COMPETITIVE RATES AND A MASSIVE 40 PER CENT JUMP IN LOAN VOLUME GROWTH, HAVE
HELPED HOMELOANS LTD ESTABLISH ITSELF AS A VIABLE ALTERNATIVE TO THE MAJORS AND REAFFIRM ITS POSITION
AS AUSTRALIA’S HIGHEST RANKED MORTGAGE ORIGINATOR
In the six months to 31 December 2009,
Homeloans managed to ramp up its business
performance, recording a 75 per cent jump in net
profit after tax on the previous reporting period.
Homeloans general manager of third party
distribution Tony Carn attributes the company’s
$4.6 million net profit and other recent
successes to its competitive rates and service.
The lender maintains its number one
position in this year’s Top 10 Originator ranking,
built on the solid bedrock of continued strong
loan volume growth as well as a surge in
average loan size – which jumped 46 per cent
from 2008’s results.
A strong well-priced product offering in
tune with the needs of the market has always
been a key focus of the ASX-listed originator,
which continues to drive good business.
Most recently, the company lowered the
interest rates on its flagship range of Premium
home loan products by 10 basis points for LVRs
less than 65 per cent, effective this March.
But Mr Carn says as well as competing with
the majors on price, the originator’s goal is to
meet broker and customer needs in other ways.
“As well as offering competitive pricing, we
aim to position ourselves as a market leader in
service and turnaround times,” he says.
“We are a mono-line business, so there is no
channel conflict, which means we can get loans
approved quickly and easily.”
Mr Carn says while the majors currently
account for the lion’s share of the market, there
is always room for competition.
The company’s independent research house
recently found that seven out of 10 consumers
were open to dealing with both traditional and
non-traditional lenders – suggesting that more
consumers are recognising the non-bank sector
as a viable alternative to the big four.
Brokers are also beginning to realise the
value of using non-bank lenders.
According to Mr Carn, they understand the
impact fast turnaround times can have on their
customers and bottom line, while still delivering
a product that can save the average borrowers
thousands of dollars over the life of a loan.
With a lot of positive sentiment towards
non-bank lenders floating around, Mr Carn says
now is the perfect time for lenders to educate
brokers on the other benefits of using nontraditional lenders.
“Non-bank lenders provide unrivalled
service. Moreover, we provide a greater array of
home loan products,” he says.
Because Homeloans sources its funding
through a range of partners, Mr Carn says it has
access to a broad spectrum of products and can
offer great depth of credit policy.
Queensland-based advertising campaign is just
the tip of the iceberg.
Mr Carn says Homeloans still has a lot of
tricks up its sleeve and will be using 2010 to
rattle a few cages and improve its position in the
mortgage market.
“We are always looking at new ways to
improve ourselves and our offering. We don’t
want to compete with the majors on price, but
we do want to compete and win against them
in terms of service and diversity of products,”
he says.
“I’m excited to see what the future holds
for us.”
We are always looking at new
ways to improve ourselves
and our offering
TONY CARN
Homeloans
BRAND AWARENESS
Despite their strong performance throughout
2009, Homeloans expects to have an even
better 2010.
The company is currently raising its
brand awareness through various marketing
campaigns. Last month, for example, it
launched an advertising campaign in
Queensland that drew on the star power of
football legend Shane Webcke.
“From the first time the advertisement
was shown in Toowoomba, we got an
overwhelming response,” Mr Carn says.
“We want to be the next big non-bank
lender and challenge consumers’ perceptions of
the big banks. We want them to realise there are
plenty more fish in the sea.”
And it seems the lender’s
SALES & MARKETING EFFECTIVE HABITS
Progression to succession
For many brokers
building a successful
business for today is
the key focus. But with
a clear view of your
ultimate goals you’ll
increase the chances
of ensuring a smooth
succession further down
the line, writes Alex
Whitlock
IT IS sometimes hard to focus on a business
exit strategy – particularly if you are just setting
out in broking. But the reality is that your
ultimate business and financial goals will play
a significant role in influencing how you build
your business from the outset.
It is all too easy to become embroiled in the
here and now – particularly at times of business
growth. As the volume of work increases the
time left for planning evaporates all the faster.
Before you know it, your business is driving
you rather than you driving the business – and
your succession strategy becomes clouded, or
even forgotten.
Regardless of whether you are a sole operator,
or have loan writers working with you, it is well
worth taking time to periodically focus on where
and when you plan to stop working, how you’d
like to make the transition, and consider what
financial situation you’d like to be in.
TO SELL OR NOT TO SELL
One of the fundamental issues that should
be considered is whether you plan to make a
clean break from broking, or pass the business
on, as this will help determine how you build
your business moving forward and your overall
business succession strategy.
This essentially comes down to whether
you’d like to see a successor take up the reigns
while you still derive an income from your
operation, or if you’d prefer a cash payout
without further responsibility.
With this in mind, it is essential to consider
what kind of lifestyle you are hoping for once
you’ve finished full time broking. Some brokers
will look forward to a retirement without any
business pressures while others may like to
keep a hand in the business – albeit on a part
time basis.
PASS THE BATON
If you intend to pass the business on to a family
member, partner or otherwise, the foundations
for a smooth handover and the grooming of a
successor need to begin as early as possible.
It is also essential that you consider your end
goals when deciding how to structure the final
transition of responsibility to your successor – for
example, will you pay a manager a salary or will
you cut a business partner in to the business? It
is also essential to consider how hands-on you’d
like to be once the transition is made.
CLEAN BREAK
If the end goal is a clean break from the business,
consider what you’re looking for in a sale. If you
plan to stay solo for the duration, what size loan
book will you need to amass to achieve the cash
return you require for your retirement?
If the ball park calculations of what a future
loan book sale could return fall short of your
lifestyle expectations, then you may need to
consider bringing others into the business, or
diversifying your revenue streams.
LEARN FROM OTHERS
Some brokers have the foresight and the good
fortune to learn from a mentor – a veteran
broker with a proven track record that can be
shared. But outside of learning the tools of the
trade, business mentoring is priceless.
Whether through personal friendships or
business networks, take every opportunity to
tap into the experiences of successful business
people. Without delving too far into their
personal financial situations, find out how they
have planned their exit strategies, how these
goals have evolved over the years, and what
they may have done differently with the benefit
of hindsight.
TRANSPARENCY IS KEY
Remember that would-be buyers are likely
to give murky or disorganised business book
keeping a wide berth, so it’s well worth keeping
on top of your administration.
How you structure, manage and run your
business will ultimately impact on its appeal to
a suitor or successor further down the line, so
accurate book keeping, timely tax returns and
transparency are of key priority if you’re looking
to attract a quality buyer or business partner.
On this note, it is well worth engaging a
proactive accountant that can help you structure
your business administration.
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SALES & MARKETING TRADE SECRETS
s
de secret
File: Tra
r Ellis
Name: Pete
oans
en Home L
g
y
x
O
:
y
n
Compa
Broker
Identity:
Building sticky business
Oxygen Home Loans broker Peter Ellis
has experienced first-hand the rewards
of strong referral relationships and
repeat business
BECOMING A successful broker is not something that
happens overnight.
Oxygen Home Loans broker Peter Ellis says it takes
perseverance, hard work and a healthy amount of reliable
referral partners.
And Mr Ellis would know.
Last year, he wrote $81 million in loans and provided
his services to more than 100 clients.
During his nine years as a mortgage broker Mr Ellis has
serviced over 700 clients. Many of them are long-term clients.
“Repeat business is crucial to my success as a broker,”
Mr Ellis says.
“If you treat the client with respect and make sure
their customer service experience is excellent, you can be
guaranteed of securing their repeat business.”
One customer service technique Mr Ellis stands by is to
action each phone call or referral lead within two hours.
Mr Ellis says brokers should action every lead
immediately because “if you don’t, you are not doing your
job properly”.
He also likes to keep his clients regularly updated on
the status of their loan application and says brokers should
not be afraid to do this.
“Often, brokers have about three scheduled client
touch points, but between my assistant and I, we make
sure we get in touch with the client a lot more regularly
than that,” says Mr Ellis.
KEEP IN TOUCH
Staying in regular touch with clients is one of the secrets
to becoming a successful mortgage broker. But success
also depends on hard work.
Mr Ellis is no stranger to having to roll up his sleeves,
having worked 12 to 13 hour days for most of his career.
“Luckily for me, I love what I do, so I have never
begrudged working those long hours,” he says.
Mr Ellis also attributes some of his success to his
referral partners.
In fact, 50 per cent of his business is generated
through his referral partnerships.
After reading a news article about a mortgage broker
who was sued for not providing mortgage protection
insurance, Mr Ellis decided it was time to diversify his
business.
Having weighed up the options, Mr Ellis set his sights
on establishing a strong referral partnership with a
financial planner who could advise his clients on the best
insurance package for their needs.
But although he considers such a referral relationship
to be essential rather than convenient, Mr Ellis says
brokers should take care “not to team up with [any] Joe
Blow financial planner down the street just so they can
say they offer insurance”.
“Brokers need to do their homework and research
which financial planning business or referral partnership
will complement their needs and the needs of their
clients,” he says.
“Every time they pass a potential client on to us, I pay
them an upfront commission.”
In recent months, Mr Ellis has focused less on loan
writing and more on mentoring brokers coming up
through the ranks – including training nine brokers to
prepare them to go in-house at McGrath real estate
agencies across Australia.
“Our aim at Oxygen home loans is to have a broker
operating on the ground floor of every McGrath real
estate agency,” he says.
Of the brokers Oxygen Home Loans’ recruits, most
are highly experienced. But Mr Ellis says they still require
training in order to understand the “Oxygen and McGrath
real estate relationship”.
“Through my mentoring role I hope to train 20 brokers
before the end of the financial year and help them become
successful businessmen,” he says.
If you treat the client with respect and make
sure their customer service experience is
excellent, you can be guaranteed of securing
their repeat business
PETER ELLIS
Oxygen Home Loans
LOOKING AHEAD
SIDE BY SIDE
Mr Ellis found a complementary referral partner in a
financial planner. But Oxygen Home Loans also benefits
from other referral partnerships – such as that with
McGrath Real Estate.
Based in Sydney, Mr Ellis operates out of McGrath’s
Edgecliff branch.
Being in such close proximity to his referral partner
works to his advantage. More than 30 sales agents are a
source of client referrals.
Mr Ellis says being able to work alongside his referral
partner makes a difference to his bottom line.
“I honestly do not believe that my business would be
as strong if I wasn’t working in the McGrath sales office.
The agents would be less likely to refer business on to me
if I wasn’t sitting right in front of their nose,” he says.
Of course, not every broker is able to work in the same
building as their referral partner. But Mr Ellis says there
are other things brokers can do to ensure their referral
partnerships remain strong.
“We pay commissions to all of our referral partners,” says
Mr Ellis.
Between his mentoring program and own loan writing
business, it seems 2010 is going to be a busy year for Mr
Ellis – made all the busier by continued high levels of
property activity.
According to RP Data’s Hedonic Home Value Index ,
Australia’s housing market has enjoyed a strong start
to 2010, recording a solid 1.8 per cent capital gain in
January – up from the 0.3 per cent drop recorded in
December 2009.
Auction volumes are higher than the same time last
year and the national weighted clearance rate average is a
very healthy 73 per cent.
Mr Ellis says he believes investors and upgraders will
dominate the market in 2010.
“That said, I don’t think the bottom has fallen out of
the first home buyer market just yet,” he says.
Although the federal government has wound back
its boost to the first home buyer grant, Mr Ellis says
historically low interest rates will encourage first home
buyers to continue to enter the market.
“Low interest rates means demand from all property
sectors is still relatively high, which is very promising.”
SALES & MARKETING ON A SHOESTRING
Driving business online
With a targeted approach, advertising online is a cost-effective
way to market your services and drive enquiries
THE POWER of the internet in reaching a wide audience
MAKING THE INVESTMENT
cannot be ignored. And with each generation becoming more
tech-savvy than the last, businesses that are not already online
are likely to be missing out on a potential new generation of
customers.
A joint report released earlier this year by the Interactive
Advertising Bureau of Australia (IAB Australia) and
PricewaterhouseCoopers revealed that online advertising
expenditure topped $1.87 billion last calendar year, and is
expected to exceed $2 billion this financial year.
While many brokers remain wedded to print advertising,
it is clear that online advertising is gaining momentum
and popularity – positioning itself as an effective tool for
generating new leads and business.
IAB Australia chief executive officer Paul Fisher says
consumers are spending more of their time online interacting
with content and marketing initiatives.
“With the proliferation of quality content online, the
explosion of online video consumption and the development
of new search and social networking tools and technology, the
online advertising industry is fast becoming the medium of
choice for marketers to influence consumers,” says Mr Fisher.
As well as audience reach, there are other benefits
associated with advertising online.
Brokers can track their web traffic statistics cheaply and
easily through various service providers, while tools such as
Google Analytics can help monitor an ad’s effectiveness.
Online advertising also gives brokers plenty of choice. For
example, they can choose whether to target a national or local
demographic by deciding which online portal they invest their
advertising dollars in.
Costs will vary depending on where you advertise, the size
of the advertisement, and whether it contains any special
features, like search engine optimisation.
In some cases, online advertising won’t cost brokers
a cent – at least initially. Online local business directories
such as LivePages offer free advertising for a 12 month
period, with the ability to edit the ad’s content and link
back to the advertiser’s own website.
ADVERTISING ONLINE
There are many different ways to advertise online, ranging
from local directory listings and business websites to online
national newspapers and e-newsletters.
But before launching a local advertising campaign, it’s
important that brokers think about their target markets. For
example, real estate agents and accountants are not just great
referral partners, they can also be great advertising partners.
A strategic marketing investment might involve buying
advertising space in a real estate agent’s e-newsletter, giving
the broker exposure to potentially hundreds of home buyers.
Local online newspapers can also be a great advertising
avenue – not only because of the local audience that is
reached, but also the feedback data on circulation and
readership that can be obtained.
Mortgage brokers and finance professionals are
a huge category on our local business directory
website – it’s a very competitive industry
ALLAN HYDE
LivePages
But while free advertising might sound attractive,
LivePages managing director Allan Hyde says brokers
should think outside the square when promoting their
services – which might mean putting their hands in their
pockets.
Tools such as database and major search engine
optimisation (such as Google) can help put a broker’s ad
ahead of the rest while premium listing packages are also
worth considering as they allow the advertiser to have its
own special feature on the home page. Mr Hyde says a
special full-page and full-featured advertisement would
involve an investment of $1,000 for 12 months.
“Mortgage brokers and finance professionals are a
huge category on our local business directory website – it’s
a very competitive industry,” he says. And that means it
might pay to stand apart from the crowd.
TOP FIVE TIPS FOR EFFECTIVE ONLINE LOCAL ADVERTISING
1. Keep it simple – make your ad design simple and eye-catching. Aesthetics
are important but be sure to get the message across!
2. Local marketing is about saturation – try and target as many local
businesses as you can
3. Get found first – it’s worth paying for extra features like search engine
optimisation, a must-have in this day and age!
4. Use local links – by posting links on other local business websites to your
homepage, you can attract customers to your website
5. Where’s the on button? – if technology isn’t your thing, have someone else
do the leg-work for you, as it’ll save time and cost
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YOUR SAY
ON THE
MAJORS
The big banks now dominate the mortgage market but how has the
shift in volumes influenced the attitudes and preferences of the broker
channel towards the majors?
Don’t miss the Third Party Banking Report – Major Lenders in the
April issue of The Adviser to find out how you rated the biggest banks
and which lender took top honours for 2010.
INSIGHT SALES & MARKETING
Understanding Generation Y
Author and entrepreneur Peter Sheahan has
dedicated his life’s work to understanding the
machinations of the typical Generation Y’er.
Speaking to The Adviser, Mr Sheahan explains the
best ways to target Gen Y home buyers
EVEN THOUGH interest rates are beginning
to climb back to their historic average and
the federal government has wound back the
boosted first home owner grant, First Home
Buyers and indeed Generation Y borrowers still
account for a significant portion of the market.
Better yet, Generation Y borrowers are
also more likely to use a mortgage broker for
finance than Generation X and Baby Boomer
borrowers.
According to the latest Genworth Financial
Mortgage Trends Report, 59 per cent of Gen Y
borrowers said they would approach a broker
for a future loan, compared to 57 per cent of
Gen X and 50 per cent of Baby Boomers.
Moreover, 41 per cent of Gen Y said they
would ideally like to buy their first property in
the next year.
So how do mortgage brokers target this
very lucrative market?
Author of Making $#IT Happen Peter Sheahan
says mortgage brokers need to communicate
with Generation Y borrowers on their level.
He says the first thing brokers should do
is think about how and where young people
go to look for information, and the answer is
obvious – the internet.
“If you’re a mortgage broker, and you’re
not utilising online tools like Google Adwords, which is so basic it’s a joke, then you’re
not even in the game,” he says.
Unlike Gen X’s and Baby Boomers who
would probably go and see their banker at
first instance if they were looking at borrowing
money, Mr Sheahan says tech-savvy Gen Y-ers
are quick to jump online.
“If my little brother was going to buy a
house the first place he’d go would be the
internet. He would search for home loans
and rates – he’d even search for brokers,” he
says, adding that understanding where the
first point of call is, is one of the key things to
observe.
ADVERTISING TO GEN Y
But while knowing where Gen Y borrowers go
for information is easy, attracting them through
advertising can prove slightly more difficult.
Mr Sheahan says brokers should not weigh
their potential customers down in broker
jargon, but instead use simple buzz words that
younger borrowers can relate to.
This is where Google Ad-words is useful.
Ad Words offers pay-per-click advertising,
and site-targeted advertising for both text and
banner ads.
SALES & MARKETING INSIGHT
The Ad Words program includes local,
national, and international distribution. Google’s
text advertisements are short, consisting of one
title line and two content text lines.
“With Google Ad Words you can really
target your audience,” he says.
But while it is important for brokers to
communicate with their customers in a way
that is easy to understand, Mr Sheahan says it
is vital for mortgage brokers to always present
themselves as ‘professionals’.
“It is always important to ask: ‘What is
going to make me seem like I’m a real expert
in understanding this space?’,” he says.
And in doing this, Mr Sheahan says he
would use thought, leadership and education
as a driver.
“You might have on your website a 24
question tutorial that everyone must do before
they consider borrowing money, or a rate and
affordability calculator, for example,” he says.
TWITTER YOUR BUSINESS
When it comes to social media like Facebook
and Twitter, its effectiveness depends on what
you’re selling, says Mr Sheahan.
“Frankly I’ve never heard of anyone buying
a house from somebody because they’re on
Twitter,” he says.
According to Mr Sheahan, brokers can
get caught up in the various social media
applications and think they have to be abreast of
them in order to do well with a younger crowd.
If you’re a mortgage broker,
and you’re not utilising
online tools like Google
Ad Words, which are so
basic it’s a joke, then you’re
not even in the game
PETER SHEAHAN
However, this is not necessarily the case. In
fact, Mr Sheahan says if brokers don’t use the
social media applications in the right way, there
is no point using them at all.
He advises brokers who do use Twitter and
Facebook to update them on a regular basis.
“Using social media is a full time job;
you need to update and blog... For it to be
effective, you’ve got to go hard,” he says,
adding that social media can help a broker
position themselves as an expert in the eyes of
Gen Y borrowers.
And a key distinguishing feature of Gen Y is
that they like the hard work done for them. So
if you’re going to advertise your services on the
internet, Mr Sheahan says you’ve got to ensure
that you can be easily found.
And how does he know all this? He was a
young property buyer himself.
“I bought my first place at 19,” he says,
adding that he now has properties in Perth,
Darwin, Brisbane and Sydney, among other
places.
“I think leverage drove me to buy
property. There are very few investment
opportunities with the same kind of rate or
return,” he says.
Peter Sheahan is an author and the chief
executive officer of Centre for Skills Development,
which specialises in large scale social change
projects for clients such as Apple and IBM.
CUTTING EDGE SALES & MARKETING
Businesses that have experienced continued success
in today’s rapidly changing world have been able to
demonstrate a superior capability in both recognising
and responding to client needs, writes David Fox
By David Fox
Advice Centre Consulting
Principal
SUCCESSFUL TRAVEL agents recognise that
client needs have changed from having flight and
accommodation reservations made for them to
ensuring they have the best holiday experience.
Successful office supply businesses recognise
that customers needs have changed from
having an assortment of stationary products to a
presentation range that will satisfy all the office
needs of a business and home office occupant –
including furniture, technology and catering!
And the successful accountant recognises
that customers no longer value having the
demand for a service such as completing a tax
return met, and now deliver advice that will
minimise tax liability and maximise personal and
business income generating capacity.
Clients now have a greater realisation of
their needs. They are now consequently far
more demanding as they begin to appreciate
their increasing power and how many service
providers are competing for the privilege of
servicing them.
Mortgage brokers that aim to succeed in
today’s market must now recognise the changing
needs of the client and in response transition to
become a client adviser. To make this transition
successfully, there will need to be three major
changes implemented. The biggest change will
be a shift in the belief that their role is to ‘broker’
the best loan product on behalf of a customer to
one that they determine the most appropriate
financial advice to satisfy that customer’s needs.
The professional who believes they are a
mortgage broker will react to what a client wants
by providing a solution to that want. However, the
professional who believes they are a client adviser
will engage the client in conversation on what is
important to them and explore the advice needs
to help them achieve what is important.
The client adviser believes their role is no
longer managing wants but uncovering needs,
no longer completes transactions according to
the business capability but satisfying the advice
needs of the client, no longer focuses on costs but
gives value, and no longer does it all themselves
but leverages specialists and advice partners.
To support this change in belief there will be
a need for today’s typical broker to redesign and
implement the client engagement process.
The engagement process of the client adviser
focuses on uncovering what’s important to the
client and identifying the components of advice
that the client needs to achieve what’s important.
This process begins with giving the client
a damn good listening to! Providing the
opportunity for the client to tell their story and
then asking probing questions to determine if
their wants and needs are aligned.
These questions often uncover issues which
the client had previously not considered and this
may impact on the advice priorities they need
which could be different than the priority advice
they thought they wanted.
The third critical change that will be required
in the successful transition from mortgage
broker to client adviser is the engagement
of other professionals. The client adviser
understands that they do not have to advise on
all financial related matters – that is beyond the
most capable of all professionals.
They will form relationships with those who
have specialist capabilities. Because the client
will not be able to receive the most appropriate
financial advice unless there is access to these
specialist advice components. These changes will
be major contributors to a successful transition
from mortgage broker to client adviser.
David Fox is the principal of Advice Centre
Consulting and has been a keynote speaker at NAB
Broker national roundtable functions, completed
papers on the future of the mortgage and
finance professional for the MFAA and facilitated
workshops for a number of aggregator groups.
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AFSF7040_TA
Making the move
FEATURE REFERRALS
How do Australia’s most prolific brokers build winning referral
partnerships and just how much should they contribute to your
bottom line? The Adviser’s Belinda Luc investigates
MOST BROKERS would agree that referrals generate
the bulk of their business. But for those who are
looking to increase their volumes, where should they
focus their attentions when it comes to ramping up
their referral partners?
To reveal how Australia’s most successful brokers
approach and maintain referral partnerships, The
Adviser recently surveyed the 2009 Elite Business Writers
– 50 of the highest volume writers in the business.
With a hefty average of $55 million worth of
business written each year, these top performers
have successfully built strong partnerships with a
cross section of professionals, with referred business
accounting for around 27 per cent from this channel.
When asked what they look for in a referral partner,
the top loan writers surveyed were clear: a referral
partner is more than a mere service channel whose role
it is to provide the broker with client leads. Rather, an
effective referral partnership should not only enhance
a broker’s business prospects but also their reputation
in the industry.
PICK YOUR PARTNER WISELY
Kieran Jefferies, director of KJ & Partners, says there are
two kinds of business referral partners – ‘time critical’
and ‘opportunistic referrers’.
He says brokers need to know how to balance the
two referral types to suit their current business needs
and workload.
For example, time critical referrers, such as real
estate agents, require an immediate response – which
means brokers who deal with them need to be able to
react quickly.
“Time critical referrers account for approximately 95
per cent of my business referral base,” says Mr Jefferies,
adding that the appeal of this type of referral partner is
the constant stream of leads.
Real estate agents are a key referral partner for KJ
& Partners, and an attractive one. Mr Jefferies says they
are incredibly easy to collaborate with, which ultimately
helps him settle loans quickly and without fuss.
But while Mr Jefferies views real estate agents as
the “perfect referral partner”, the fact they work to
tight deadlines and therefore need loans to be turned
around quickly may not suit some brokers.
He advises brokers who are already struggling
under heavy workloads to instead seek out
‘opportunistic referrers’ – who, as the name suggests,
refer business when the opportunity arises.
BUILD THE RANKS
Of the top brokers surveyed, the number of referral
partnerships ranged from three to a staggering 56.
However 62 per cent of the Elite Business Writers have
built a successful business working with less than 10
referral partners.
This would strongly indicate that when it comes to
referral partnerships less is in fact more.
While there is clearly no golden rule to the number
of referral partners, Mr Jefferies says quality brokers
would have a “minimum of three”.
Referral numbers aside, the question begs: what
volume of leads should a broker’s partners be referring?
Mr Jefferies suggests that if a broker can get one lead
a month from each of their referral partners, they’re
doing pretty well.
According to Mr Jeffries eight to 10 referrals from
his 14 professional referral partnerships would be what
he considered a good return each month.
“That should generate enough leads to help sustain
your business,” he says.
We realised that we had the same target market
and could benefit from working together to expand
our respective client bases
ANITA MARSHALL
Advanced Finance Solutions
MIX IT UP
Of the business writers surveyed, their referral partners
came from a range of different professions, suggesting
it pays to diversify your referral sources.
Every single loan writer said they had a referral
partnership with a real estate agent, while 73 per cent
said they had a partnership with a financial planner and
66 per cent said they collaborated with accountants.
In fact, the least popular referral partners were
insurance advisers, superannuation advisers, specialist
brokers and lenders, and other broker colleagues.
BUILDING STRONG RELATIONSHIPS
INSIGHT HOME LOANS DIRECTOR GREG COOK REVEALS HIS TOP TIPS
FOR BUILDING A GOOD REFERRAL PARTNERSHIP
Needs – Identify the shared need between both parties
Details – Nut out with your referral partner the details and parameters of
your relationship
Communication – Agree on whether or not regular communication and
involvement is required during the course of the referred client’s transaction
Commerciality – Agree on whether the referral arrangement is mutually
beneficial, or whether it is a service-orientated referral
Values – Have an understanding of each other’s values
FEATURE REFERRALS
Finding a good referral partner isn’t easy. In fact, it’s
hard work.
Mr Jefferies, who found his key referral real estate
agency partner through a combination of researching
the property section of the local paper and by coldcalling, says brokers need to be proactive.
“Some brokers expect their referrals to be handed
to them on a silver platter,” he says.
“But what many fail to realise is that they really have
to put the effort in and work for it – nothing worth
having comes easily.”
Some brokers expect their referrals to be handed
to them on a silver platter
KIERAN JEFFERIES
KJ & Partners
Advanced Finance Solutions (AFS) director and Elite
Business Writer Anita Marshall found her key referral
partner – an investment group that builds wealth
through real estate – at a business expo.
“We both had a stand at the expo, side by side.
After getting talking, we realised that we had the same
target market and could benefit from working together
to expand our respective client bases. So we came to a
mutual referral arrangement,” Ms Marshall says.
Advanced Finance Solutions’ key referrer has been a
trusted business referral partner of the business for an
impressive four years.
Ms Marshall says collaborating with the referral
partner over the years has sustained their relationship
– and that a good, quality referral relationship is about
give and take.
She says AFS advertises the referral partner’s
business in its monthly newsletter, and keeps them
informed of the progress of the referred client’s
matter at all stages during the loan transaction. When
the loan settles, the referrer also receives a gift of
appreciation.
On the flipside, the referral partner holds seminars
throughout the year, at which AFS staff speak. “It’s a
great opportunity to meet potential clients and also
they get a chance to meet us,” she says.
TOP 50 ELITE BUSINESS WRITERS: STATS FY 08/09
TOTAL NUMBER OF
MORTGAGES
WRITTEN:
8,898
TOTAL MORTGAGE
VOLUMES:
$2,775,670,009
ELITE BPM
AVG. MORTGAGE
SIZE:
$355,848
AVG. MORTGAGE
VOLUME:
$55,513,400
HIGHEST TOTAL
INDIVIDUAL VOLUME:
$183,163,519
JUSTIN DOOBOV
MOST MORTGAGES
WRITTEN:
514
WENDY HIGGINS
A NUMBERS GAME
There’s no seven-year itch in sight for Loan Market
broker Alex Shumsky, who was introduced to his
key referral partner, a real estate agency, by his loan
aggregator back in 2003.
Alex keeps the spark in the relationship by
maintaining regular contact, including attending
dinners, football matches and other social events.
And it isn’t hard to do when the two work closely
together, thanks to their ‘in-house’ arrangement.
While everyone values their referral partners
differently, for Alex it’s all about volume.
He says a good referral partner is someone who
can bring in the most leads, although there’s really no
magic number.
The key to a successful referral relationship is to
build solid, trusting relationships with your referral
partners, and take as many opportunities as you can
to develop new ones.
EXPAND YOUR HORIZONS
When sourcing effective referral partners, brokers
should consider not only their business needs, but also
the needs of their referral peers.
Over the past number of years, The Adviser has spoken
to a number of professionals outside of the mortgage
broking industry, such as accountants, financial planners,
real estate agents, licensed conveyancers and insurance
advisers. These professionals have told The Adviser that
the key to igniting a long-lasting referral relationship lies in
what a mortgage broker can bring to the table.
There’s little point in the partnership if the business
benefits are just a one-way street. Therefore, a mutual
appreciation and understanding of each other’s business
and values – together with a written agreement detailing
each person’s rights and responsibilities – is paramount.
This means that sometimes a quick phone sales pitch
or drop-in isn’t enough. Brokers who want a long lasting
strong referral partnership should have nutted out all
the parameters previously and be prepared to enter into
a formal agreement with their referral partner.
As one business adviser said: “Anyone who is solely
there to ‘clinch the deal’ but not necessarily provide a
package that’s in the best interests of the client, is of no
interest to us.”
Brokers also need to be able to demonstrate that
they have a technical understanding of the client’s
needs and the types of products available on the market.
Brokers who are unfamiliar with their product will create
headaches, confusion and disappointment all around,
resulting in a negative referral relationship.
There’s also the issue of trust that needs to be
established for the relationship to be long-lasting. Brokers
may find that their referral partner initially gives them the
‘scraps’ so to speak. This is, difficult loan applications and
difficult clients, including those who have been perhaps
refused credit in the past or have a poor credit history.
But brokers who are serious about building trust in
their referral relationship should treat these clients as
any other, and invest the necessary time and energy to
get these important deals done.
Brokers who demonstrate a conscientious persistence
to satisfy their client’s needs are bound to gain a whole new
level of respect and trust from their new referral partner.
And while associated business is important in a
referral relationship, referral partners are hesitant to cover
the same ground as mortgage brokers. If this is the case,
referral partners may not consider using a mortgage broker
at all. The whole idea is to build each person’s business, not
cause an overlap resulting in a loss of business.
As obvious as it may sound, it’s important for brokers
to have a good rapport with their referral partners. This
not only makes the relationship easy for both parties to
manage over the long term, but the good connection,
trust and mutual respect between each referral partner
will be reflected upon the client.
WHAT ARE THE BENEFITS FOR YOUR PARTNER?
For some, it’s about the level of expertise a mortgage
broker can bring to a business, while for others it’s about
achieving a higher success rate.
Brokers also serve the benefit of helping to keep their
referral partner informed of the latest and best products
that will suit their clients’ needs. In effect, a broker referral
relationship helps other businesses create a kind of
‘one-stop -shop’, that results in a more convenient service
proposition for their clients.
ANATOMY OF AN ELITE BROKER
WHAT PROFESSIONAL REFERRAL PARTNERS DO THE ELITE BUSINESS
WRITERS WORK WITH?
Accountants: 68%
Builders and developers: 32%
A.
B.
Financial
planners: 76%
C.
D.
Insurance
advisers: 12%
E.
G.
Property
agents: 100%
F.
Specialist brokers
and lenders: 18%
I.
J.
H.
Superannuation
advisers: 12%
Other mortgage
brokers: 12%
Fig. 17.
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FEATURE OPINION
Improving economic conditions and impending regulation will reshape the
industry and redefine the role of the broker, The Adviser’s quarterly roundtable
has revealed
Steven Heavey
Jeff Zulman
John Flavell
Tony Carn
Kim Cannon
St George
Vow Financial
NAB Broker
Homeloans
FirstMac
Andrew Russell
Firstfolio One
SH
JZ
JF
TC
KC
AR
WHAT OPPORTUNITIES DO YOU BELIEVE WILL EMERGE FOR THE BROKING INDUSTRY ONCE
REGULATION COMES INTO PLAY THIS YEAR?
JZ: On the surface, increased
TC: I think the introduction of
SH: [Insights] from the UK [market]
regulation seems an impediment to
doing more business; undoubtedly
it will involve more paperwork and
higher costs. But Vow believes there
is an opportunity for brokers to use
the new regulatory regime to write
more business. Why? Brokers will have
to spend more time explaining the
product to clients, and, in the process,
should establish a better relationship
with them. It won’t simply be a straight
sales transaction; there will be an
element of ‘educating’ clients about
the different products on offer.
Brokers who adapt quickly to
the new regime – who embrace it
rather than disparage it – will gain a
marketing edge as clients appreciate
getting a fuller understanding of what
they are buying.
regulation will greatly improve the
broker proposition.
History shows us that consumers
deem those brokers governed by
regulation as being professional.
Over the past few months, we have
enlisted an independent research house
to conduct extensive research on the
broker channel. Our research shows us
that 40 per cent of consumers will use a
mortgage broker to obtain finance for a
house. If we break that down and look
at each state independently, 35 per cent
of consumers will seek out a mortgage
broker in New South Wales, while more
than 55 per cent are happy to use a
broker in Western Australia.
Coincidently, Western Australia
happens to be the only state in Australia
where regulation is already in place. This
indicates that consumers respond more
positively towards ‘professional’ brokers.
suggest that some brokers will exit
the market, [thereby] providing
opportunities for the licensed broker to
grow their business.
Similarly there are some great
opportunities for brokers to present
themselves as an ASIC licensed
professional, increasing the confidence
in the broker proposition from a
consumer perspective. St George
accredited brokers already meet a
stringent set of standards and high
levels of professionalism, so we expect
that they will have little difficulty rising
to the challenges of regulation.
AS THE INDUSTRY ADVANCES TO A HIGHER LEVEL OF PROFESSIONALISM, TO WHAT EXTENT
SHOULD BROKERS PROVIDE RELEVANT PRODUCT ADVICE TO THEIR CLIENTS?
JF: I think if you asked a consumer
what they are getting from their broker,
the core response would be ‘advice’.
There is a great opportunity for
brokers to work with their customers’
comprehensive life plans, as opposed
to just providing product.
While mortgages will always
remain a cornerstone of the broker
profession, brokers will also be able
to offer their customers protection
solutions (including insurance) as well
as other solutions. If they can deliver all
of these solutions they will be able to
provide advice properly.
Consumers have a range of needs.
And as it stands, not all of a consumer’s
needs are being met by brokers.
Instead, they have to be met by other
industries and companies. So, under
the regulatory framework, I think
we will see brokers start to expand
their solutions provision, and in turn,
capture a greater number of customers.
JZ: There are two distinct trends behind
KC: Providing relevant product advice
the industry’s growing professionalism:
regulatory and commercial. The new
regulations will force a higher standard
of professionalism on the industry,
and a tougher market environment for
traditional mortgages will ‘encourage’
brokers to expand their suite of products.
In this climate, mortgage brokers
will have no choice but to undertake
the requisite professional training to
develop the necessary skills to provide
the relevant product advice to their
clients. The regulator and the market
will both demand it. The industry is
becoming more sophisticated, more
complex, more demanding, but, at the
same time, for those brokers who have
the ability and ambition to meet these
challenges, it will be more rewarding
and more fulfilling.
is the lifeblood of a broker’s business.
If a broker ends up merely acting
as a conduit for one or two lenders
then they’re probably not going to
be meeting the expectations of their
clients. In fact, they are really nothing
more than a de facto employee in
that circumstance. Brokers play an
incredibly important role in the lending
sector and I think real opportunities
will come from them maintaining
their stance as independent and
knowledgeable advisers. This puts the
onus on the broking community to
maintain a focus on excellence in both
information and delivery.
WHICH MARKET SEGMENTS DO YOU EXPECT TO PROVIDE THE BEST OPPORTUNITIES FOR BROKERS
IN 2010?
JF: First home buyers occupied a disproportionately high
portion of the market last year, buoyed by the federal
government stimulus. As that normalises the proportion of
activity across the other sectors will grow, relatively speaking.
As I move around the country speaking to brokers,
there doesn’t seem to be any one customer segment that
is greatly outdoing another. Brokers are saying that they
are busy across a number of fronts, including investors and
upgraders. There are also a lot of brokers that are assisting
their customers with refinancing.
There is still a shortage of housing [as well as] a shortage
of new dwellings being constructed. So, as in any market, I
think we will start to see supply and pressure drive demand.
SH: Market segments that have been associated with first
home buyers could see a moderation in coming months. In
contrast, segments that are closely linked to investors and
upgraders could be well supported. Investors could continue
to enter the housing market given higher dwelling prices and
rising rents amid a tight rental market and strong population
growth. Investors and upgraders should also be encouraged
by the improving jobs market and sharp rally in domestic
equities since March.
TC: I believe all segments will continue to provide
opportunities for brokers. However, our research shows that
there are some market segments that are more inclined to
use a broker to obtain housing finance, suggesting brokers
should concentrate on these market segments.
According to our research, second home buyers are less
likely to use a mortgage broker than say first home buyers
or investors. That said, our research shows us that less than
30 per cent of home buyers will go directly to a bank branch,
which means the majority of consumers are taking full
advantage of comparison websites and other social media
tools to find the best product for their needs.
There is still, and always will be, a large market for brokers.
37 per cent of home buyers said they would use a broker for
advice on what products and [which] lenders best suit their
needs. As legislation begins to play a greater role in the mortgage
industry, brokers should see their market share improve as more
consumers equate brokers to professional advisers.
AR: Two clear segments will be the drivers of activity in 2010:
the upgrader wishing to lock in past capital gains by moving
into the next pricing tier, and investors that are becoming more
bullish as both yields and house prices start rising with greater
velocity as the next upward swing in the housing cycle begins.
FEATURE OPINION
IF FUNDING COSTS CONTINUE TO RISE SHOULD LENDERS BE EXPECTED TO SHOULDER THIS
BURDEN OR PASS IT ONTO THE BORROWER?
JZ: The federal government guarantee allowed the
AR: The question remains whether funding costs are
banks to subsidise their borrowing costs in a period of
uncertainty. But with the capital markets returning to a
degree of normalcy, and with the government flagging the
eventual removal of the guarantee, expect the cost of their
borrowings to rise.
It would be nice to think lenders would absorb this
higher cost, but commercial reality dictates it will be passed
on to consumers.
Lenders have already demonstrated a preparedness to
lift rates independent of movements in official rates, so it
would be surprising, to say the least, if consumers didn’t end
up paying for the higher cost of lenders’ borrowings.
rising or that banks are using the fallout of the GFC a way
to continue to drive margin growth across their mortgage
portfolios. This strategy only hurts the customer and
emphasises the importance of rebuilding competition –
particularly in the non-bank space.
Moreover banks’ funding pressures and monetary
policy need to be reviewed and coordinated to ensure
that the economy and the industry gains confidence and
momentum within boundaries of the inflation targets set
by the RBA.
I think if you asked a consumer what they are
getting from their broker, the core response
would be ‘advice’
JOHN FLAVELL
NAB Broker
SH: St George continues to carefully monitor funding
costs and we are very mindful of the impact that increased
funding pressures have on our customers, which is why we
have absorbed increased costs as best as we can to protect
customers. While we never speculate about future interest
rate movements, we will always manage interest rate
decisions in the interest of all of our stakeholders.
JF: Every lender will determine its position surrounding
funding costs and managing their margins. So while I can’t
give an overview on behalf of the whole industry, I can
speak on behalf of NAB and say [that] while we are focused
on the economics of our business and sensitive about the
cost of funds, we are determined to be recognised as a bank
that delivers fair value to customers.
We have made several movements lately that show
our commitment to our customers. While some of our
competitors raised rates in recent months we took a fair
value approach and we want to continue to do what is
absolutely best for our customers.
THE CASH RATE HAS RISEN FROM A HISTORICAL LOW OF 3% TO 4% SINCE APRIL LAST YEAR.
WHERE WOULD YOU EXPECT THE CASH RATE TO BE IN 12 MONTHS FROM NOW AND WHY?
KC: Given the RBA’s latest rate increase
TC: Judging by what the economic
to 4 per cent, there seems to be no doubt
that rates are trending up; [however] it’s
of course a guessing game to predict
where they’ll end up in 12 months time.
I think the non-bank sector
needs to be very focused on how
we can improve our position in an
environment of tightening monetary
policy. Product innovation, which is
more likely at the nimble, flexible end
of the borrowing spectrum will be the
key to not only surviving, but thriving
over the next few years.
We have to look at where the funds
will be accessed and at what cost?
Also, what regulatory changes are
on the way and how will they effect
what we can offer borrowers? There
are opportunities in every monetary
environment and that’s something I
continue to look at very closely.
forecasters are saying, I predict the
official cash rate will be sitting at
approximately 4.75 per cent within 12
months: the RBA is widely expected to
hike rates by an additional 100 basis
points within the year. However, even
if this does come to fruition, interest
rates will continue to sit at historically
low levels.
AR: The cash rate will continue to
move upwards towards the long term
averages. How fast this will happen
will depend on how the inflation rate
compares to the RBA’s targets. Given
this, I would suspect that we will see
one to two 25 basis point rises before
the end of the calendar year.
JZ: I’m not an economist so I will resist
the temptation to predict a number for
the cash rate in 12 months. But while I
believe it will be higher than 4.00 per
cent, the case for higher rates is not clearcut. From the Reserve Bank’s perspective,
the economy is in much better shape
compared with 12 months ago, the
resources boom is back in full swing, and
the housing market is bubbling along –
all convincing arguments for the Reserve
Bank to keep nudging rates up.
But the big economies of the US,
Europe and Japan continue to struggle;
they are still stuck with low growth and
falling inflation. Moreover, government
capacity in these countries to further
stimulate their economies is limited.
These are arguments for the Reserve
Bank not to tighten monetary policy.
However, I think they will err on the
side of caution and keep lifting rates to
keep the inflation genie in the bottle.
INTELLIGENCE ECONOMY
Chinese demand drives
economic momentum
THE MONTH IN
NUMBERS
The chance of further rate rises has increased as economic
conditions continue to improve, writes Jessica Darnbrough
AUSTRALIA’S NATURAL resources are
again in strong demand from a buoyant
China that is enjoying a resurgence in
economic growth. Spot iron ore prices in
China have more than doubled since the
lows of March last year, triggering sharp
revisions to contract price forecasts.
This upswing in demand should see
Australia’s total earnings from exports
soar 15 per cent this year, according to
the Australian Bureau of Agricultural &
Resource Economics.
The surge in Asia’s appetite for Australian
minerals has helped strengthen Australian
business confidence, with the latest figures
from the NAB Confidence Index showing
a 4 point gain to match the seven year high
recorded in November last year.
Business conditions have also improved,
climbing five points to eight, reflecting
better trading conditions and employment
opportunities.
In line with improving business
conditions, employers added 194,600 jobs
in the five months through January, the
biggest increase in more than three years,
driving unemployment to a low of 5.3 per
cent in February 2010.
National
vacancies
advertised
in
newspapers and on online averaged 159,778
per week in February, according to the
latest ANZ Job Advertisement Series – just
Quote
end
quote
2.3 per cent lower than the same month a
year earlier.
And forward indicators appear positive
for more employment growth through the
first half of 2010.
Gross Domestic Product (GDP) grew 0.9
per cent in the December quarter of last year
– the fastest growth in almost two years.
The brisk growth took the annual pace
to 2.7 per cent, close to the historical trend
growth of 3 per cent, supporting the RBA’s
decision to hike interest rates.
Moreover, a surging GDP increases the
scope for RBA governor Glenn Stevens to
raise the central bank’s benchmark rate next
month for the fifth time in six meetings.
That said, markets remain cautious, with
the prospect of an April rate hike priced in
at just 22 per cent.
NAB’s chief economist Alan Oster expects
the RBA to increase Australia’s overnight
cash rate target by 25 basis points in the May,
August and November meetings.
NAB’S ECONOMIC OUTLOOK
Domestic GDP 2010: 1.0%
Domestic GDP 2011: 3.75%
Global GDP 2009: 3.5%
Unemployment end 2010: 4.75%
Cash rate end 2010: 4.75%
Cash rate mid 2011: 5.5%
Issued 9 March 2010
The economy is recovering and
rate rises are an inevitable
consequence of a recovering
economy that is outperforming the
rest of the world
1.8
29.1
The seasonally
adjusted
percentage
drop in private
sector units and
semi detached
other dwelling
approvals in
January
910.1
74.5
The percentage
level of customer
satisfaction
towards the
major banks
The amount,
in billions of
dollars, of total
housing debt in
Australia
194,600
290,100
The average
loan size, in
dollars, for first
home buyers in
December 2009
Federal treasurer Wayne Swan speaking to reporters about the future of the Australian economy
3 March 2010
Mortgage Choice’s 2010 First Homebuyers Survey, March 2010, www.mortgagechoice.com.au
The Adviser’s Top 10 Originators , March
2010, www.theadviser.com.au
NAB’s Monthly Business Survey, February 2010, www.nab.com.au
The amount of
non-guaranteed
funds, in billions
of dollars,
raised by ANZ
in a recent bank
funding deal
The number
of jobs added
by Australian
employers in the
five months to
January 2010
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POINT BLANK INTELLIGENCE
Surviving the downturn
Australian First Mortgage (AFM) has emerged from the financial crisis stronger
than ever, with a new value proposition to reflect its new found strength. But, as
the mortgage manager’s founder Iain Forbes tells The Adviser, there have been
some serious challenges along the way
IN A MARKET STILL DOMINATED BY THE MAJOR BANKS HOW
CAN THE NON-BANK SECTOR COMPETE?
There are many ways the non-bank sector can compete with the majors;
providing excellent customer service is one such way. We currently offer a
conditional approval time of 24 to 48 hours, while many other lenders can
take days to approve a loan.
Similarly the big banks cannot compete with the smaller lenders on
face-to-face service – this is one area we really focus on as a result.
In recent months I believe the competitive stance of the non-bank
sector has actually been given a helping hand by the majors. When interest
rates went up in December, three of the big four moved above the RBA’s 25
basis point increase. This allowed non-banks – for the first time since the
onset of the global financial crisis – to compete with the majors on pricing.
As we now have the funding support of Advantedge we have
been able to deliver competitively-priced products as well as high LVR
products of 95 per cent through RESIMAC.
AFM HAS GROWN ORGANICALLY SINCE ITS INCEPTION IN 2003.
IN A CONSOLIDATING INDUSTRY WILL AFM CONSIDER MERGERS
OR ACQUISITIONS OVER THE COMING PERIOD?
AFM is a fairly conservative lender. While we wouldn’t rule out any mergers
or acquisitions in the future, I can safely say that we are not looking at any
at the moment. If, however, an opportunity was to present itself at the
right price we wouldn’t hesitate to latch on to that with both hands.
While we are currently trying to ramp up the business, we aim to do
so through organic measures rather than through purchases. The last
couple of months have been surprisingly positive for us. Our business has
grown in leaps and bounds and we have even been forced to recruit more
staff in order to cope with the increasing demand.
We are a fiercely independent company and have managed to build
a good brand throughout the seven years we have been in operation. As
such, we are not inclined to look at any merger opportunities where we
would not be the dominant partner.
WHAT ARE AFM’S BUSINESS GOALS FOR THE YEAR AHEAD?
Our overall business goal is to focus on what we do best: providing unparallel
service and competitive rates for both commercial and residential lending.
Our new mission statement ‘higher standards’ says it all.
The GFC had a significant impact on our business and it ultimately
forced us to set ourselves conservative growth targets for the 2009-2010
financial year. However, we have defied the odds by beating our growth
targets and continue to grow month-on-month.
After the first half of the financial year, we redefined our growth targets
because we had simply outgrown them. And, in the first two months of this
year, we have already managed to outdo our revised growth targets.
HOW HAS THE GLOBAL FINANCIAL CRISIS (GFC) HELPED
REDEFINE THE NON-BANK SECTOR?
The GFC forced mortgage managers and non-bank lenders alike to review
their business models.
During the crisis, there was simply no funding for low doc lending, which
forced smaller lenders like AFM to focus on full docs. Of course, with the
various funding constraints in place, it was obvious that as a smaller lender
we would not be able to compete with the big four on price. So, AFM choose
to compete with the majors in the one area we knew we could win – service.
By focusing on improving our general customer service and
turnaround times we were able to maintain our position in the market.
That said, surviving the GFC wasn’t just about remaining competitive
through sound service – far from it. It actually forced us to become more
business savvy: we had to review our overhead costs and make changes
where necessary. We did what we could to keep the AFM business alive
and debt free. We took a long hard look at ourselves, reviewed our
business structure and overhead costs, and reduced these in order to stay
in business. Thankfully we have managed to come out of the other side of
the GFC in a very strong position. February was a record month for AFM,
and the future is looking very bright.
FIRST HOME BUYERS WERE THE DRIVING FORCE BEHIND
MARKET ACTIVITY IN 2009. WHAT WILL BE THE KEY MARKET
SEGMENTS THIS YEAR?
First home buyers were obviously the dominant market last year, thanks
to all the various government incentives. While there are still incentives
available to first home buyers, they have – in recent months – been
significantly reduced. I believe we will see investors pick up where first home
buyers left off – they will replace them as the dominant market segment.
That said I think we will also continue to see a high level of
refinancing activity. Whether borrowers want to consolidate their credit
cards, or free up equity in order to upgrade their property, we are starting
to see a lot of activity in this market segment and I think this will continue
to increase as interest rates climb.
INTELLIGENCE BUSINESS OUTCOMES
The price of
advice
A growing number of brokers are choosing to charge for their services.
And while the fee-for-service model is a road less travelled, there are
signs that many consumers are embracing the change
CHARGING A fee for a service that’s offered free
elsewhere might seem like madness to some
brokers but for others it has become a
valuable point of difference.
The broking industry has undergone
enormous change over the last few
years. Consolidation, commission
cuts, tighter lending policies
and fewer lenders have all
played a part in reshaping the
broking industry.
With legislation drawing
closer, the role of the broker will be
redefined. The MFAA has already set
out its framework for Professional Credit
Advisers and with the new level of perceived
professionalism comes new opportunities.
The notion of charging a fee for service is not a
new one to the mortgage broking industry.
Talk to brokers who were starting out 20 years ago or
more, and you’ll find that a fee was often charged to clients
in the absence of structured commissions paid by the banks.
But most would agree that broker commissions peaked several
years ago and while the banks have said that no more cuts
are in the pipeline, any further changes are more likely to be
downward rather than up.
But fee for service is less about diminishing returns and
more about creating client value.
Advice Centre Consulting director David Fox says one of
the reasons the fee-for-service model is becoming increasingly
popular with brokers is borrowers’ changing attitudes.
In the past, borrowers tended to seek out mortgage brokers
to help them choose the best product and rate out of the
plethora of products available on the market.
Borrowers are now able to do much of this leg-work
themselves, thanks to the explosion of online loan comparison
tools. As a result, they are turning to mortgage brokers for more
than product and rate advice. Now, they want holistic financial
solutions. And they are prepared to pay for it – provided they
can see the value in the service their broker is providing. Part of
the shift towards fee-for-service also reflects borrowers’ growing
suspicion of commission-based remuneration structures.
Mr Fox says the charging of commission indicates to a client that
the broker’s advice is influenced by the lenders on its panel and is
therefore biased. He says lenders will soon give brokers the option
of offering a loan product with or without a commission involved.
FirstPoint NB Financial Solutions director Troy Phillips agrees
that many consumers are sceptical of commission-based broker
remuneration, having recently moved to a fee-for-service model.
Mr Phillips says the response from clients has been “excellent”.
“Some clients feel that a mortgage broker who offers a
commission-only fee structure is just a retailer for the banks,”
says Mr Phillips.
But the shift to fee-for-service is not just about consumers’
changing perceptions, but brokers as well. He says brokers
need to recognise that their time and effort in providing a
service is just as valuable as that of any other professional.
“Any broker who thinks his time is not worth charging for
should take a good, close look at his value proposition,” says
Mr Phillips.
“Clients are willing to pay for quality advice and premium
customer service from their mortgage broker, just as they
would from their lawyer, accountant or financial planner.”
A FITTING SOLUTION
Mr Phillips says FirstPoint’s decision to
broaden its service offering beyond
mortgage broking was part of the reason
for its transition to a fee-for-service model.
Over the last 18 months, FirstPoint has
introduced a new in-house advisory service
called FinanceFit, offering clients’ advice,
products and support in the areas of financial
planning, wills and estate planning, and personal insurance.
“We don’t charge a client a fee if they are merely arranging
a mortgage, without the addition of extra services. But where
we do provide extra services, FirstPoint’s fee starts from $350,”
Mr Phillips says.
CHANGING LANES
Although there are good business reasons for brokers to move
to a fee-for-service model, Mr Fox warns brokers not to rush in.
He suggests they start with small steps – for example,
continuing to charge a commission but also charging a fee that
reflects the value the broker has provided.
For many brokers, this type of hybrid structure is
appropriate. For others, another option is to charge a fee based
on a sliding scale or calculated as a percentage of the loan
value. Offering rebates is another way to get clients used to a
fee-for-service structure. Under a rebate structure, the client
pays the broker a fee plus an ongoing annual fee, for example
– and any trail commission the broker receives from the lender
finds its way back into the client’s pocket as a rebate.
CAUTION: SPEED BUMPS AHEAD
A fee-for-service model will not suit all brokers however.
FirstPoint’s Mr Phillips warns that it is probably more suited to
larger brokerages rather than sole operators.
“Larger brokerages have a scale of key writers and back office
support, plus an industry reputation, which enables them to ask
clients for a fee in return for service value,” Mr Phillips says.
In addition, Mr Phillips says FirstPoint’s introduction of a
non-mainstream product helped validate its decision to charge
a fee-for-service.
The fee-for-service model is also well-suited to
commercial lending. Money Advisers’ general manager Robert
Paul says although the business does not charge a fee for
arranging residential loans, it charges a ‘commitment fee’ for
commercial lending reflecting the extra work involved.
Mr Paul says 99 per cent of his clients are happy to pay
the fee because they recognise the effort in the service
that is being provided.
“Commercial loans involve a tender that is sent out to
the major banks – and this can take a lot of time,” he says.
Some clients feel that a mortgage broker
who offers a commission-only fee structure
is just a retailer for the banks
TROY PHILLIPS
FirstPoint NB
THE RIGHT SIGN
Mr Phillips says brokers looking to transition to a fee-for-service
business model should do so with their customer relationships,
rather than money, in mind.
Mr Phillips says if a customer feels they have received a
valuable service, they will be happy to pay a fee for it – and will
be more likely to give the broker repeat business in the future.
But it’s up to the broker to be able to articulate and
communicate to the customer the value in the service the
broker is providing.
“Having a fee-for-service model is about showing clients
value for their money,” says Mr Phillips.
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59
INTELLIGENCE SPOTLIGHT
The future is data
The GFC not only made lenders truly understand the importance
of property data, it also hastened much-needed innovation to
position the mortgage market for future growth
RP DATA’S $6 billion parent company, The First
American Corporation, was the pioneer of mapping and
valuing the entire American residential property market.
RP Data’s chief executive officer Graham Mirabito,
The First American Corporation’s executive vice
president Jerry Hoerauf, and chief executive officer of
The First American Corporation subsidiary Core Logic,
George Livermore, spoke frankly with The Adviser on
company partnership, data innovation and the outlook
for the property market.
HOW HAVE THE EVENTS OF THE PAST THREE YEARS
SHAPED YOUR RESPECTIVE BUSINESSES AND WHAT
INNOVATIONS HAVE COME FROM THE GFC?
GEORGE LIVERMORE: The global financial crisis forced
us to take a step back and reevaluate our business. We
had to define what was important to our brokers and
real estate agents and then go about sourcing that
information more effectively.
Our immediate focus has been on developing
products for the capital markets. In 2004, we acquired
Loan Performance – a company that collected
contributory data. Because we don’t have an invested
interest in the property market, lenders trust us with
their confidential data. Using this confidential data, we
can provide accurate rest-of-market comparisons. We
can help the banks be transparent, and detail to our
broker database which bank excels and which bank lets
down the side in terms of servicing times etc.
JERRY HOERAUF: I guess you could say it is the
beginning of loan quality assessment.
GRAHAM MIRABITO: The GFC has forced us to look at
the possibility of introducing positive reporting – we don’t
have positive reporting in Australia. When we bought the
Fraud Mark product from The First American Corporation,
the banks were forced to share loan application data – it
was the beginning of contributory data.
Similarly, we already have a product called Market
Scorecard – which is currently used by our real estate
franchise groups.
With 75 per cent market share [of real estate agents
using our products], we see what real estate agents
are up to. We know what properties they are searching
for, how much they are marketing properties for, we
also know the time-on-market for each suburb and
the amount of discounting that takes place. We can
accurately predict how many mortgages are going to
come on the market in a certain number of days.
HOW WILL THE LOCAL PROPERTY MARKET
PERFORM OVER THE NEXT FEW YEARS?
GRAHAM MIRABITO: [A lot of] people believe our
property markets are going to go the way America did –
where they slumped in pricing. However, there are some
fundamental differences between us and our American
counterparts.
We are in undersupply – when we had our boom
in 2003 and 2004, the developers couldn’t get enough
money out of the banks to develop the country.
Consequently we are short on property. And if you add on
the fact that we are currently enjoying record migration,
Australia’s outlook for housing development is glum.
Some of the developers go on the high side and say
Australia needs 200,000 properties to keep the market
healthy. We, on the other hand, believe [that] we are
60,000 properties short. Either way, there is a huge lack
of available properties.
Then you have got the fact that 55 per cent of our
population live in Sydney and Melbourne – which will
ultimately push more demand in these areas. The supply
and demand is what is going to dictate property prices
in the future.
The fundamentals for Australia point to the fact
that there is not enough supply, so demand will push
prices up. And it is getting to the point now where the
government needs to step up and local councils need
to stop the ridiculously high infrastructure charges. We
need to have better urban planning.
WHAT CAN WE EXPECT FROM THE US PROPERTY
MARKET OVER THE NEXT COUPLE OF YEARS IN
LIGHT OF HOW THE AUSTRALIAN MARKET IS
TRACKING?
GEORGE LIVERMORE: The US property market is still
in the emergency room right now. We still have a lot of
seriously delinquent loans that need to be dealt with
and we still have prices that are in decline.
GEORGE LIVERMORE
chief executive officer,
Core Logic
We think it is going to be a while before property
prices and demand starts to pick up once again.
[Current] historically low interest rates have helped
demand to grow, just as government programs are
helping things. But there is still $9 trillion in mortgage
debt... the numbers are boggling.
We needed the GFC to make people realise how
valuable data is. In the meantime, we came to
learn how important our data is – particularly for
the mortgage and finance community
GRAHAM MIRABITO
RP Data
We are going to take a few more years to heal
properly. The banks have tightened their credit policy
over the past few years and the balance sheets are
looking better. So, perhaps they will start to open up a
bit more, and lend to Americans that they have not been
lending to over the last 36 months.
We think by the end of 2010, we will start to see fires
coming into the market, because both interest rates
and house prices are low but, as for the securitisation
market, most of the experts are still unsure what will
happen. We think probably 2011 will look a little bit
better, but it is not going to be until 2012 that we have
wind at our backs.
HOW HAVE ATTITUDES AND PERCEPTIONS
CHANGED TOWARDS PROPERTY DATA AS A
RESULT OF THE GFC?
GEORGE LIVERMORE: When times are great, people are
only slightly interested in property data. But, when the
market melts down, data becomes incredibly important.
To give you an example, the federal government has
become a huge customer of ours. Similarly, Fanny and
Freddy banks [US government-sponsored lenders] have
also become interested in our data.
They need to know what their assets are looking like
every single day – they are buying a lot of information
to ask what the inventory looks like. In other words: how
many properties are being listed, how long are they on
the market – because that is a precursor for what those
assets are going to look like a few weeks down the track.
If time-on-market is increasing, listed properties are
increasing and delinquencies are increasing; there is no
question that prices are going to continue to collapse.
The banks can have a look and see if delinquencies
are starting to reduce – that can give them a better sense
of what is happening in the market. Before, banks weren’t
looking at data collectively; they were looking at it once
in a while. [Previously the] major banks were updating
their portfolios as to what the median house prices are
for a certain region once a quarter. Now, they do it once a
month, at least.
ARE YOU AHEAD OF YOUR COMPETITORS IN
TERMS OF DATA SUPPLY, DIAGNOSTIC TOOLS
AND ONGOING INNOVATION?
JERRY HOERAUF: We have been historically way ahead of
our competitors. It is an exciting time to be in the industry,
because you have this confluence of data coming together.
Better yet, consumers are realising they need this data – so
they are adding their own data to this pool of information.
GRAHAM MIRABITO
chief executive officer,
RP Data
JERRY HOERAUF
executive vice president business development,
The First American Corporation
GEORGE LIVERMORE: We have a lot of competitors
in America and they are looking to compete with us. In
some respects, all it will take for them to be equal to us is
to spend money and get the data. But some of the data is
not in existence anymore [since] it is historical trend data.
We’ve been flattered that a lot of our competitors are
jumping into the space in an attempt to compete with
us. But we like to think of it as ‘we have been fighting and
winning the data war before other companies even knew
there was a war going on’.
We’ve [also] been pretty aggressive about protecting
our IP and we already have over 50 patents in place.
We patented [to tool] Fraud Mark, which gives us some
leverage over our competitors.
INTELLIGENCE RESIDENTIAL PROPERTY
Markets continue upward surge
Property values continue to show strong growth on the back
of ongoing undersupply and buyer demand
DARWIN
Median house price: $538,857
A slower end to 2009 has been
Quarterly growth: 3.80%
compounded by falling January housing
Annual growth: 12.45%
Average annual growth: 14.35%
finance approvals, which dropped 7 per cent,
By Belinda Luc
Median weekly rent: $568
according to a Westpac economic report –
Journalist
Gross rental yield: 5.48%
well below the bank’s expectations of a 1 per
Median unit price: $412,484
HOUSING FINANCE volumes have been
cent gain for that month.
affected by last year’s rate hikes, among other
The bank’s senior economist, Matthew
factors, ABS figures have revealed.
Hassan, said the removal of additional
In December 2009, the total value of
incentives for first home buyers and higher
housing finance commitments (excluding
interest rates drove the significant pull-back
alterations and additions) dropped by a
in housing finance approvals.
marginal 2.8 per cent from November, in
Affordability will remain an issue in the
YSIS
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seasonally adjusted terms.
wake of the RBA’s decision to
NORTHERN
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Meanwhile, the number of first home
increase the cash rate by 0.25 per
buyer commitments also decreased across
cent in March – the fourth rise in
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five months, after a brief hiatus
2009 to 21.0 per cent in December.
in February.
ANALYSIS
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MARKETS INTELLIGENCE
PRICES AND INDICATORS
LATEST FIGURES
BRISBANE
Quarterly growth: -1.87%
SYDNEY
QUEENSLAND
NEW SOUTH
WALES
ACT
VICTORIA
CANBERRA
Commercial activity surges in
south west Sydney
The commercial mortgage market has borne the brunt of
the GFC, but thankfully it is starting to recover with the help
of positive activity in Sydney’s south west
BACK IN December 2009, the seasonally
adjusted series for the value of total
commercial finance commitments was
flat, according to the Australian Bureau of
Statistics. Revolving credit commitments
rose 3.8 per cent, while fixed lending
commitments fell by 1.3 per cent.
However, since that time, there has been
a surge in demand for commercial properties,
particularly in Sydney’s south western suburbs.
The recent $2.6 million sale of a major
residential site at Hoxton Park in Sydney’s
south west to residential developer M&D
Services Pty Ltd indicates a stabilisation in
the commercial market, according to CB
Richard Ellis (CBRE).
CBRE agent Harry Bui said the sale
campaign had attracted considerable enquiry
from residential developments seeking “land
banking” opportunities.
“The stabilisation of the residential
market and projected growth in coming years
is underpinning demand for well located sites
in population growth corridors,” Mr Bui said.
According to Mr Bui, Hoxton Park in
western Sydney is affordable, close to major
transport infrastructure and one of the
fastest growing suburbs in Sydney.
Meanwhile, a boost in leasing is presenting
opportunities for commercial brokers, with
freight and logistics companies driving a
turnaround in the south Sydney market.
A new market review from CBRE shows
that more than 35,000 square metres of space
has been absorbed in the past three months
in a series of deals involving freight and
logistics operators.
CBRE south Sydney managing director
Nathan Egan said the activity had left limited
options for major space users.
“A growing number of corporates are
outsourcing their logistics requirements to save
on property and staff costs,” Mr Egan said.
And a series of smaller logistics deals have
also been struck in recent months, including
a 5,244 square metre commitment by DSV Air
& Sea Pty Ltd to Goodman’s Portside estate at
Banksmeadow in Sydney’s south.
HOTEL OPPORTUNITIES ABOUND IN QLD
CB Richard Ellis (CBRE) has
reported strong interest in hotel
investment opportunities, with
the recent sale of four south
east Queensland pubs to Centro
Properties Group.
The property portfolio
comprises the Mansfield Hotel at
Mansfield, the Royal Mail Hotel
at Tingalpa, the Club Hotel at
Waterford West and the Burleigh
Town Tavern on Queensland’s
Gold Coast.
CBRE agent Joel Fisher said
strong buyer interest in the
portfolio was underpinned by the
strength of tenancies existing in
those premises. According to Mr
Fisher, all four properties offered
highly secure income streams and
quality lease covenants.
The Burleigh Town Tavern,
Mansfield Tavern and Club Hotel
are all leased on a long term basis
to Liquorland, while the Royal Mail
Hotel is leased to a subsidiary of
the Fox Hotel Group on a long
term agreement.
“We are continuing to field
strong private investor demand
for smaller value properties with
long term leases to high quality
tenants,” Mr Fisher said.
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unstable and that without proper preparations for saving the entire race is doomed.
2012 is considered the ultimate action-adventure disaster film ever made with an astonishing
$20 million in revenue at the Australian Box Office. A thrill-ride of human survival, exploding with
groundbreaking special effects.
Starring: John Cusack, Woody Harrelson and Danny Glover
Directed: Roland Emmerich (The Day After Tomorrow/Independence Day)
Available on DVD: 17 March
Distributor: Sony Pictures
ACTION PACKED
ULTIMATE ACTION-ADVENTURE DISASTER FILM
Tool
Box
EXCLUSIVE
OFFER
FO
LAPSAFE
R OUR READE
RS
SAFE AS STEEL
We’d all like to be able to leave our valuables in our cars and know they are safe and sound. With LapSafe, brokers
now have a better way to help protect their valuables – including laptops, mobile phones, digital cameras, GPS
and wallets – against car theft.
Made in Australia with local steel and extremely difficult to penetrate, LapSafe goes a long way to ensure that
thieves will steer clear of your vehicle.
Police reports confirm that thieves generally spend less
than 30 seconds breaking in to a vehicle; usually smashing a
window and grabbing whatever they can see, such as a briefcase
or GPS. In contrast, LapSafe has minimal visibility and can take
hours to penetrate.
The simple and quick actions required to secure your valuables
and the minimal visibility of the LapSafe in your vehicle means that it
is a very practical, convenient and inexpensive solution
toSyour car
EADER
R
R
security needs.
U
O
SAVE
$50
SIVE
EXCLFUFER
O
SAVE
$50
FOR
Normally retailing for $195 (including GST), LapSafe is available
to readers of The Adviser at a special price of only $145 plus
delivery of $20.
Visit www.lapsafe.com.au and place your order, quoting
The Adviser in the promotional code area.
For more details, call Steve Erichsen on 0412 246 099
RESOURSES INDEX
ADVERTISERS
Citibank: OBC
PLAN Australia: IFC
Cashflow Finance: 1
NAB Broker: 3
Choice Aggregation Services: 5
Eurofinance: 7
RESIMAC: 9
MKM Capital: 10
Maquarie Leasing: 11
Sintex: 13
Prime Finance: 14
PEOPLE
Adam Ingham: 10
Alan Oster: 52
Alex Shumsky: 46
Allan Hyde: 38
Allan Willoughby: 30
Andrew Aickin: 16
Andrew Mirrams: 6
Andrew Russell: 48, 49, 50
Anita Marshall: 45, 46
Brendan O’Donnell: 30
Brian Taylor: 16
Chris Masters: 2, 18, 19, 20
David Airey: 60
David Butcher: 16
David Fox: 43, 56, 57
Don Koch: 7
Drew Hall: 24
Garry Driscoll: 30
George Livermore: 58,59
Gerald Foley: 8
Glenn Stevens: 52
Graham Mirabito: 58, 59
Greg Cook: 45
Harry Bui: 61
Iain Forbes: 54, 55
Ian Franklin: 16
Jeff Chapman: 28
Jeff Zulman: 48, 49, 50
Jerry Hoerauf: 58, 59
Jessica Anderson: 56
Joel Fisher: 61
John Flavell: 48, 49, 50
John Mohnacheff: 6
Justin Doobov: 46
Ken Sayer: 28
Kieran Jefferies: 45, 46
Kim Cannon: 48, 49, 50
Lisa Claes: 7
Mark Forsyth: 32
Mark Turner: 10
Matt Carter: 25
Matthew Hassan: 60
Michael Russell: 31, 32
Murray Cowan: 25
Nathan Egan: 61
Patrick Tuttle: 14
Paul Fisher: 38
Paul Hutchinson: 26
Paula Henderson: 59
Peter Bromley: 6
Peter Ellis: 4, 36, 37
Peter Sheahan: 41, 42
Peter White: 8
Phil Naylor: 8
Robert Paul: 57
Stephen Dinte: 10
Stephen Light: 7
Steve Erichsen: 63
Steve Sampson: 8
Steven Heavey: 48, 49, 50
Tanya White: 31
Tony Carn: 6, 33, 48, 49, 50
Trevor Jones: 16
Troy Phillips: 8, 56, 57
Wayne Swan: 52
Wendy Higgins: 46
RAMS Home Loans: 15
COMPANIES
Advantedge: 17
ABARE: 52
First Chartered Capital: 32
MFAA: 6, 8, 10, 16
Future Financial: 20
ABS: 28, 60, 61
Firstfolio One: 48
Money Advisers: 57
Barnes Home Loans: 21
Advanced Finance Solutions: 45
Firstfolio: 24, 25, 26, 28, 30, 31, 32, 33
Mortgage Choice: 31, 52
Advantage: 6
Firstmac: 14
Mortgage Ezy: 24, 25, 26, 28, 30, 31, 32, 33
Mortgage Ezy: 22
Advantedge: 1, 24
FirstMac: 48
Mortgage House: 24, 25, 26, 28, 30, 31, 32, 33
Advice Centre Consulting: 43, 56
Firstpoint NB: 8, 56
NAB Broker: 48, 50
National Mortage Company: 27
AFM: 24, 25, 26, 28, 30, 31, 32, 33, 55
Fitch Ratings: 7
NAB: 52
Better Mortgage Management: 29
AFR: 7
Future Financial: 24, 25, 26, 28, 30, 31, 32, 33
National Mortgage Brokers: 8
AMP Bank: 14
Genworth Financial: 41
National Mortgage Company: 24, 25, 26, 28,
Galilee Solicitors: 31
ANZ: 16, 52
Global Property Guide: 7
30, 31, 32, 33
AOFM: 14, 24
Homeloans: 6, 24, 25, 26, 28, 30, 31, 32, 33, 48
Oxygen Home Loans:
Australian First Mortage: 35
ASIC: 1, 48
IAB Australia: 38
Pepper Home Loans: 14
Homeloans: 39
ASX: 6
ING Direct: 4, 7
PriceWaterhouseCoopers: 38
Australian Financial: 24, 25, 26, 28, 30, 31, 32, 33
Insight Home Loans: 45
Provident Capital: 8
Elliot May: 41
Australian Mortgage Planners: 10
Intuitive Finance: 6
Radius Finance: 10
Bank of Queensland: 14
Jivve: 7
RBA: 12, 50, 52, 55, 60
ASIC: 42
Bendigo and Adelaide Bank: 7
KJ & Partners: 45
REIA: 7, 60
BMM: 24, 25, 26, 28, 30, 31, 32, 33
Lapsafe: 63
RESIMAC: 14, 55
BME Finance: 10
Liberty Financial: 6, 14, 31
Roy Morgan: 7
CB Richard Ellis: 61
Livepages: 38
RP Data: 37, 58, 60, 61
Choice Aggregation Services: 30
LJ Hooker: 6
St George: 6, 48, 50
Collins Securities: 24, 25, 26, 28, 30, 31, 32, 33
Loan Market: 46
The First American Corporation: 58
Core Logic: 58
Loan Services Australia: 32
Vow Financial: 48
Credit Union Australia: 14, 31
Macquarie Leasing: 7
Westpac: 6, 7, 10, 60
FBAA: 8
ME Bank: 14
FAST Group: 43
MAS Funder: 47
ING DIRECT: 51
RP Data: 53
Intellitrain: 57
Trailer Homes: 61
Insurance Made Easy: 62
Carrington National: IBC
ADVERTISING ENQUIRIES
P: 02 9922 3300
E: ads@theadviser.com.au
36, 37
Supporting you.
Growing your business.
Citibank your banking partner, gives you access to a world
of possibilities. We are committed to helping you grow
To grow you
need support.
and building solid relationships. With over 25 years of
experience in the Australian market, we are here to enable
your success.
Our professional award-winning Business Development
Managers are dedicated to helping you succeed by
providing you with exceptional service.
Citibank offers brokers a comprehensive range of
feature-packed products with a variety of options, fewer
lending restrictions and faster turnaround times.
Our Broker Portal is your gateway to instant and
valuable information.
For any assistance call your Citibank Business Development
Manager or visit www.mortgagebroker.citibank.com.au
© 2010 Citigroup Pty Limited ABN 88 004 325 080, AFSL No. 238098. Citibank®, Citi®, Citi never sleeps and Arc Design® are service marks of Citigroup Inc. CITI0314/ADV
®

The magazine for Australia`s mortgage and finance brokers

Transcription

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