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November 2004
Australian Mortgage Broker - Issue 1.19
Strength in Neighbours -
By
Sal Cinque
Emerson once coined the phrase, “Build a better mouse trap and the world will beat a path to your door.” But regardless of how effective his new trap was, it failed to sell. This landmark event gave birth to the term “Marketing Myopia”. Marketing Myopia is a terminal disease suffered by businesses that get too caught-up in the technical aspects of their product (or service) so much so they loose sight of what the customer actually wants.
Companies with a solid marketing focus pinpoint what their target audience wants before selecting the most effective channels of communication to attract new and repeat business. So how does a humble mortgage broker achieve this? It is nothing more than people buying stuff from other people. It does not take a marketing genius to realise that people are more likely to buy stuff from people they know, feel they know, or
from a brand they trust.
So how do you build a relationship with people in your local area? The simple answer is there is no Holy Grail - it takes persistence plus a combination of activities. Let’s look at what real estate agents employ when building and maintaining a strong local presence:
* Billboard advertising;
* Local newspaper advertising;
* Media releases;
* Editorial submissions to local press;
* Direct mail to prospects and past clients;
* Business card drops;
* Sponsorship of local sporting clubs or events;
* Supply of display boards for school activities;
* Auction services for local fund raising;
* Local business meetings via Rotary and other special interest groups; &
* Brand-leverage.
These avenues can be replicated and used within your mortgage broker business; however, brand-leverage is perhaps the best way real estate agents build their local presence. It is achieved where the agency’s clients pay for the cost of promoting their brand – usually in the ‘properties for sale’ section of the classifieds and ‘sale boards’.
But how do you as a mortgage broker, have a third party promote your brand? Enter “Host-Beneficiary Marketing”. Host-Beneficiary Marketing is simultaneously a proactive method of maximising existing referral relationships and a strategy for building new ones. Here’s how it works:
A Host company (referral partner) agrees to let a Beneficiary company (mortgage broker) send a sales message to the people on their database. Although the beneficiary usually prepares the message, it is sent and endorsed by the Host. The endorsement or “advocate selling” capitalises on the Host's relationship with its customers.
Host-Beneficiary Relationships usually include a revenue sharing arrangement for business generated by the strategy. Where offering any remuneration, ensure you have the backing of your aggregator when it comes to tracking, reporting, paying and invoicing. This will eliminate time-consuming administrative tasks so you can concentrate on prospecting and selling. Here's a simple five-step process to get you started.
1) Make a list of all the local businesses in your area that may have strong, positive and trusting relationships with their customer base.
2) Examine each of these potential Hosts to ensure there is no potential conflict of interest with the service you offer.
3) Deliver your sales-pitch to potential Hosts. Send a one-page letter introducing your company and inviting them to consider your Host-Beneficiary Proposal. Clearly define the relationship, service proposition, their involvement (which should be limited and at no cost to them), benefits to them and their customers and the method for tracking, reporting and paying.
4) Follow-up each of the potential hosts and offers to further explain the proposal in a face-to-face meeting.
Get in touch with your aggregator for further assistance in preparing and executing your own host/beneficiary marketing strategy, and if they can't I know a good one that can.
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November 2004
The Mortgage Brief - Vol. 9
Getting
Tough on the Soft Dollar
New MIAA guidelines on soft dollar commissions have recently been issued. Here we outline the guidelines and listen to some industry comment.
Most members of the mortgage industry welcome the MIAA guidelines in soft dollar commission disclosure as providing greater transparency. But there is some disquiet in the industry that they may also lead to even more paperwork for a client who is already weighed down with documentation. For many industry players the view is that the additional knowledge provided will not make the client any better informed.
Nevertheless the MIAA believes the Code on Alternative Forms of Remuneration will give borrowers comfort that the products they are being recommended are most suited to their needs. The guidelines require loan writers to disclose in writing to the consumer all material alternative forms of remuneration paid by a lender or credit provider that can reasonably be expected to influence any recommendation they make. Such benefits might include sponsorship of seminars, gifts, office rental payment, accommodation and entertainment, travel, computer hardware and software costs or competitions where a loan writer or broker might be eligible to win a prize subject to their achieving certain volume-related targets. If these benefits are worth less than $300 in value then you don't need to inform your client.
MIAA Chief Executive Phil Naylor believes the new guidelines will play a significant role in assuring the public that members of the Association act in a professional manner. "The guidelines recognise the requirements of the MIAA Code of Practice and the NSW Consumer "Credit Administration (Finance Brokers) Regulations, "says Naylor. "As such they should show to borrowers that we intend to be open and transparent with them at all times. "In addition it should give the public assurance that recommendations made by
MIAA members are driven by the need to meet the needs of the borrower and not those of the loan writer."
In many ways the push for disclosure has been powered by consumer lobby groups who were concerned that material incentives offered to brokers could influence their loan recommendations. By disclosing any commissions received, the lobby groups believe clients will be better informed. So it was not surprising that there were still cries for more from the leading consumer groups, even though the MIAA guidelines go well beyond the minimum requirements. Catherine Wolthuizen of the Australian Consumers Association (choice) says that while she welcomes the guidelines as sensible, she would prefer to have seen such remuneration avoided altogether.
"Soft dollar commissions are corrosive to trust and confidence," says Wolthuizen. "They should be prohibited altogether." MIAA National President,
Gerald Foley, says prohibiting soft dollar commissions altogether is not a practicable option. "Soft dollar commissions will always take place in every industry it's all part and parcel of relationship building with your suppliers and your customers. The issue here is whether brokers are then influenced in the recommendations they make to clients. And this is where the MIAA has more than stepped up to the mark," says Foley.
"By treating any breaches of this Code as breaches of the MIAA Code of Practice and thus making them subject to the MIAA Disciplinary Rules, it shows that we are serious about eradicating any poor practice among our members." Choice Home Loans Managing Director, Michael Russell, also disagrees with Wolthuizen's view that soft dollar commissions should be prohibited altogether.
There is a minor rogue element in the industry but having disclosure on soft dollar commissions won't weed them out. Legislation, regulation and listing educational requirements is what will weed out these rogues," says Russell. "Consumer groups are dreaming if they think disclosure will be the simple answer to weeding out the rogues." For most in the industry, soft dollar commissions have no bearing on the recommendation they make to clients on loans. For most in the industry, soft dollar commissions have no bearing on the recommendations they make to clients on loans.
Julianne McKnight, Compliance Officer with Plan Australia, says professional brokers with good businesses would not be influenced by such remuneration. "I don't believe that a good financial broker would be swayed," says McKnight who was one of the many members who took part in the drafting of the guidelines over 9-month period. "I don't believe that a good financial broker would be swayed," says McKnight who was one of the many members who took part in the drafting of the guidelines over a 9 month-period. "I think the MIAA has stepped up to the mark with these guidelines and the fact that any breaches will be treated as breaches of the MIAA Code of Practice has certainly raised the bar. It's a fantastic start."
Ric Purcell, National Marketing Manager with Pepper Home Loans, agrees the guidelines will instil more professionalism into brokers and give more confidence to borrowers. "I think it is only a rare few brokers who would deliberately steer a client into a home loan with a certain lender simply because they were rewarded by soft dollar commissions. "The last thing any broker or lender would want is to have a
dissatisfied client and particularly one who believed they were steered into a mortgage product merely because the broker and lender were in collusion, "says Purcell. "That would be bad business and those who adopt that sort of practice are short-sighted because it will
lead to more problems than it is worth." Too much paperwork. While legislation and regulation is welcomed in the industry and those with nothing to hide have no issues with soft dollar commission disclosure guidelines, many roll their eyes at the prospect of even more paperwork.
According to Nicholas Gruen, Chairman of Peach Discount Mortgage Broking, it is wrong that everybody should have to be regulated in order to catch "a few rouges". "For the vast bulk of brokers, soft dollar commissions never enter their heads," says Gruen. "But now we will have another paragraph explaining any such payments we have received. It makes sense in theory but our disclaimers are now literally over a page long. In fact it is now so long our clients never read it. This phenomenon of information overload is well know, but routinely ignored by governments."
Choice's Russell also has an issue with extra documentation. "We have no problem in theory with disclosing any material benefit to customers but I hope it doesn't mean the client will have another document to sign," he says. "Much of the
information we have to run by the client doesn't result in their being any better informed. We need to disclose soft dollar commissions to them in a way that does not overly burden nor overly confuse the borrower."
Brian Jones, Director of Marketing and Distribution at Homeloans says there is a fine line between promotional and entertainment spend - which are practices across all industries - and soft dollar inducements. "If all lenders are using soft dollar inducements then its effect if diluted," says Jones. "those with very deep pockets can potentially get themselves into situations that
blatantly look like they are putting business in a back door manner from a Homeloans Ltd perspective, we certainly don't have deep pockets. I am pleased to see the MIAA providing guidelines to clarify what has traditionally been a grey area for lenders."
The soft dollar commission that appears to cause the most concern in the industry is the one where a specific product is targeted and the benefit is based on the broker reaching a sales target. This is the benefit that is believed to be more likely to sway a broker into making a recommendation that may not be in the best interests of the client. Russell says in the last 12 months his firm has been offered
out lender promotions all of which they declined to participate in because there was a financial inducement attached to writing the loans. "That's very different to sponsor-ship of a conference or attending the footy, both of which are education or relationship driven. If it's not loan specific then I believe it is OK," says Russell. Pepper's Purcell agrees, "Brokers are distributors of any lender's products, need to get an understanding of the lender, its people and products," says Purcell. "That is often done in a more receptive environment than simply receiving mail, emails, or meeting in an office. Commercial relationships may be developed through a lender sponsoring an industry event and inviting brokers as their guests."
Under the guidelines, broker groups have to maintain a
register to keep a records of any payments made to them
either as bonus commissions that are volume or product
specific or for sponsorship of group conferences,
seminars, training or other events. The register should be
maintained by the broker group and should contain details
of such payments or benefits and be kept at the group's
office for seven years. The details should include such
things as name of payee, amount and purpose of payment and
should be readily available for public perusal. Choice's
Russell welcomes the concept of the register. "I have no
problems with keeping a register in the office in the
public foyer just like the comparison rate schedule and I
am quite happy with it being subject to random audits."
The general view appears to be that soft dollar
commissions will disappear because of disclosure. "The
most important thing in this industry is that we all seek
repeat and referral business and you only get one crack at
securing that business," says Russell. "It would be short
sighted of a company to be swayed by the soft dollar."
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November 2004
Mortgage Professional Australia - Issue 4.7
Secrets of my Success
Gerald Foley has just returned to his Melbourne office, fresh from the national conference of the Mortgage Industry Association of Australia in Sydney. As the
National and Victorian President of the MIAA, it was requisite for Foley to attend the conference. As a businessman, he recognises the value of being seen. Can the success of National Mortgage Brokers be attributed to networking? "Absolutely." Foley says. "We're constantly out and about. We make sure that we have a presence at all of the events." But networking is just one of the secrets of Foley's success.
In the beginning
National Mortgage Brokers, the company that Foley now runs and co-owns, has its roots in Johnson Taylor Potter, a national stockbroking firm. Foley already had an impressive track record prior to becoming the managing director of JTP in the spring 2000. By that time he had more than 15 years in mortgage broking and banking behind him, with two particularly enviable notches on his belt. First, he set up the national mortgage broking unit at ANZ. Second, at Mortgage choice he set up the business unit in Victoria. It was ideal preparation for the opportunity that came his way the next year - to not only be MD, but to have equity in the business. Bell Securities was acquiring JTP back then, and Foley and his business partners found themselves with the chance to step in and buy out the mortgage part of the business. "The decision wasn't really made by us. We weren't really expecting it," recalls Foley. "We said to ourselves, 'What do we do here guys? Do we go for a flying start or start from scratch?" Since he was already in a satisfying, well-paid job, Foley knew he was taking a risk. "Everyone knows that the first nine months of a business is tough," he says. "Naturally, I had cold feet. But never any doubt."
In the end, his experience and industry knowledge made him confident about charging ahead. "We are going into the same industry. We would be subject to the same vagaries of the market," Foley rationalises. "I saw that the aggregator space was starting to fill at that time, but there was still room for a good business." He had done his research and had two business partners lined up. He even had investors prepared to commit. "The investors knew us and how we worked, so they had faith in us," says Foley.
There was no turning back. They acquired all of JTP's assets, including the lender agreements and the existing loan book. The new owners promptly renamed the business National Mortgage Brokers. To this day, Foley prides himself on keeping up his research. He has his finger on the pulse of the latest developments in the mortgage industry, and admits to having strong opinions on where the aggregator sector, in particular, is headed. "My personal view is that I
see three or four aggregators dominating the market," he says. "Banks prefer 10-15 aggregators. They don't want only a handful of aggregators having so much power when negotiating contracts." "There are currently five big aggregators, about 10-20 mediums and a large number of small aggregators," he continues. "Some say they're an aggregator when they only have two brokers." Foley laughs at how some brokers exaggerate their presence. "In time, the small ones will find it hard to compete."
Building the business
Foley is modest about the challenges he faced during the early stages of developing National Mortgage Brokers. Fortunately for Foley and his
partners, about four brokers from JTP decided to come across, which made the launch of the business smoother. The transition from working for someone else to self-employment is one challenge he does acknowledge. "There weren't any other huge challenges," he says.
Challenges or not, clearly the results that National Mortgage Brokers has achieved are impressive. Foley allows himself to boast a little at this point. "We now have 120 brokers nationally, We have 95 broker agreements. We write about $60m a month," firing off what certainly seem to be well-memorised statistics. Numbers show the results, but relationships get you there. "We got our client base through word of mouth, by referrals
and through brokers," Foley explains. "Also, separate form that, I'm quite well-known in the industry." You can't argue against that - it can be safely assumed that many mortgage brokers are familiar with the high profile Foley.
It's now only three years since National Mortgage Brokers started out, and Foley considers the business to be still in its growth stage. Currently the head office is in Melbourne, with business development managers in Sydney and Perth. His short-term plans for the business are driven by the goal to continue to expand. Foley prefers to deal with brokers who are similarly inclined about empire-building. "Our model is not about individual brokers operating independently," he says. "We want the brokers who build businesses. The vast majority of our brokers are out to build a business. "He points out that this is the point of difference that National Mortgage Brokers offers to its customers.
We're looking forward to brokers bringing people in to their business - we're very bullish that way," he says. "We help them recruit and train." National Mortgage Brokers is convinced that its formula works, and is sticking to it. "We haven't had to alter our style. It's remained the same over the past three years. We're very glad to see our broad strategy working and we're growing by leaps and bounds."
Words of wisdom
When asked to lend advice to those who are thinking about starting their own business in the mortgage industry, Foley keeps returning to the central theme of choosing the rights people to partner with. "The days of commencing as a single broker are gone. Anyone who is looking to get into the business needs to pick the right partners." he says. He warns that there are pitfalls out there for the undiscerning
entrepreneur. For example, under some aggregator agreements you might lose a loan book when the partnership breaks up. Has the partnership at National Mortgage Brokers remained the same? "Yes, nothing has changed," Foley answers.
Those thinking of making the move from employment to running their own business also need to take a long, hard look at themselves, advises Foley. "You need to be suited to it. You need the right personality - to be confident, to be able to build networks." He has no doubt, however, that having your own business is rewarding. "I haven't found anyone who has jumped into the world of self-employment who hasn't thought that it was the best thing they ever did."
His last piece of advice is pragmatic. "We run a very lean head office, with minimal resources. You have to be very lean. Don't spend if you don't have it," he recommends. The icing on the cake for this veteran of the mortgage industry has to be his role as national president of the MIAA. Awarding the role to Foley seems to be a logical step for the MIAA as he was already vice-president and state president for Victoria. For Foley, the significance of being awarded the role is that his colleagues recognise his contribution to the mortgage broking industry. "I've been involved in the MIAA for more than 10 years now," he explains, "so becoming president was no great surprise. But the presidency is subject to members electing you." How does he balance his MIAA duties with business demands? "Time management is challenging. There are a lot of things on, for example the ASIC and APARA compliances. It's a matter of managing your time. We agreed that
others in the office would have to pick up some of the things I'd normally do," says Foley. "I am very proud of my
role as national president. My background - the sectors I've worked in, my understanding of different models - brings something to the role."
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October 2004
Australian Broker - Issue 1.17
Think Tank: Positive Outlook for Brokers
The think tank is a forum for a selection of industry heavyweights to chew over topical issues in the broker market. Chosen by Australian Broker from the recent press, these issues are timely, relevant and strike at the heart of the broking business. This edition taps into the candid thought and depth of experience of: Gerald Foley, MD, National Mortgage Brokers: Joe Sirianni, executive director, Smartline Home Loans; and Mark Haron, CEO, FAST. Here is what they had to say:Many US brokers have adopted the single product salesperson or ‘tied agent’’ distribution for single product salespeople in the NSW Consumer Credit Administration Act 1995 impact on adoption of this model in Australia?
Mark Haron: This is not applicable to Australia. We don’t have the population base or specialisation of brokers to support single product salespeople. Depending on how the market moves, if brokers haven’t got a broader business focus they risk being left out.
Gerald Foley: Australian consumers are educated, they know their range of lenders and products so they might chose the single product salesperson if they’re shopping for a loan themselves. But the broker proposition is so much stronger. Does having 20 or 50 lenders on your panel make you unbiased? If you get a commission from the lenders on your panel and you don’t offer products from all the lenders in your market, you can’t call yourself unbiased – that’s easy.
Promote yourself with a different work. Ninety percent of brokers are good at what they do and their clients wouldn’t relate the bad press we’ve seen to their own experience. It’s disappointing when cowboys do the wrong thing but we’re getting a lot of those types of player out of the market.
Joe Sirianni: Single product salespeople will continue to grow and do well. It’s a valid and legitimate channel. They’re usually associated with a trusted or large brand that people go towards. But, with the emergence of the broker, customers want more choice and this channel will continue to grow. Some people look for brand, others for choice. One won’t die at the expense of the other and disclosure will not be the driving factor. That said, as consumers aren’t aware of what commissions a single product agent receives, they may trust brokers more with the greater transparency.
GF: Do you think the single product salesperson will have to disclose commission?
JS: No, they don’t need to. Consumers won’t be fussed about it. Disclosure will not be a catalyst for their growth. It’s not a disadvantage for brokers.
GF: I agree.
MH: Will all brokers look at going down the single product route because they don’t have to disclose?
JS: Why would it be an issue? I don’t see our guys having any concerns about disclosure, unless the consumer has a backlash and I’ve seen no backlash. They often wonder how the hell the broker gets paid. We explain to them that we’re paid by the bank and they accept that. It’s when you don’t disclose that consumers have an issue and some may be weary of a single product salesperson.
Will there be interest rate rises in the first 12 months of the new government?
JS: In the next 12 months you’ll see one or two 0.25% increases, no more. It won’t be enough to cause great problems in the market. If anything, a slight increase might take few investors out and give homeowners a chance to come in.
Financial markets seemed happy with the election result. Talk that rates wouldn’t rise was a bit of ‘politicking’ but if Labour did come in and borrow money for promises made that would put a lot more pressure on interest rates. Business confidence may have dropped had Labour got in as people sat back and waited to see what they would do. With the Liberals, people know the way we’re going.
MH: The government has not had a big impact on interest rates. Rates will rise slightly in the next 12 months anyway. More recently, the Reserve Bank has used the media to soften consumer expectations, saying it’s nervous about levels of debt and spending. People adjust their habits without a rate rise. It’s like threatening a child with a stick – you don’t have to give them a whack, you just have to brandish it.
GF: They’ve almost said, “Right, I’m gonna count to three…”
JS: Yeah. The RBA has been deliberately trying to dampen the property market.
GF: Absolutely
JS: And the rate rises have impacted that. The property market has slowed; that’s why we haven’t seen a rate rise for the last how many quarters. There’s no real necessity or pressure for a rise. The economy’s travelling well.
GF: On a global standard, our official rates are high. US rates and other similar countries are substantially below us because of Australia’s good economic management over recent years. We didn’t need to lower rates to stimulate the economy, as others did, so we shouldn’t be looking to increase off our higher base like other economies.
MH: Another thing has been the cost of oil and impact on petrol prices. I’m sure the Reserve Bank looks at that. It hits the hip pocket. If consumers have to spend more on petrol and not other consumables, that gives the RBA more comfort and should stop inflation running away.
GF: Credit growth is such a big issue for them. Any slight change in rates could be a positive for brokers. If rates move, at least it gets customers thinking.
Which Aussie having just opened its fourth Sydney shopfront and ANZ recently launching its franchise’ model, is the retail outlet the distribution channel for the future?
JS: Retail outlets are a proven sales process. They’re not the channel of the future. It’s all about having an array of channels to suit customer’s needs; whether that’s a shop, internet, phone, mobile salespeople or brokers. I can’t see one channel domination over another. Players won’t need to have a retail presence compete.
GF: I agree. It comes down to, “Am I opening a shopfront for the benefit of my brokers or customers?” Some brokers may move from home into shopfront. That’s fine but it must be part of a wider strategy. It may be more appropriate to move to an office, depending on where you can get your business from, the type of customer and market. In another area a shopfront may be better, a more average loan amount, lots of first and second homebuyers. They like the look and feel of a retail presence, it gives credibility in their local market.
JS: The emergence of the broker has been non-shopfronts versus banks, which have traditionally had shopfronts. With a large brand like Aussie there’s value in having retail presence. Whether the customer values that is a different issue. I can’t see it being the ultimate channel. GF: You need to price the cost benefit. This is an expensive strategy. You’re not getting repeat business on a regular basis, every three or four years. It requires a lot of back up and marketing and brand building. You want a similar experience whichever shopfront you walk into.
JS: John Symond wants to be the McDonald’s of lending. If you want a McDonald’s burger, you have to go McDonald’s. If you want a home loan, you don’t have to go to a store. Most consumers do a lot of research on the internet. Remember three or four years back, when eLoan walked into the market?
MH & GF: Yes
JS: They were going to conquer the industry because consumer wanted to buy home loans on the internet. But ultimately consumers don’t necessarily want to buy on the internet.
GF: It is not the fulfilment channel, it’s the information channel.
JS: Maybe in the future consumers will see a mortgage like any other commodity and buy online. At this stage they still want the personal interface.
MH: Brokers contemplating opening a shopfront must remember the higher rent, sot of keeping doors open all the time, having someone there to look after customers. It has to be part of a marketing strategy – so you need to think where you get customers from. If it’s all referral-based, a shopfront is just going to be an expense, a bit of an ego trip to have your name on the door. GF: In deciding to move from being home-based there are lots of options, retail is one – an office, a shared office, a hot desk in a number of offices while working closely with referral sources.
JS: ANZ Mortgage Solutions has gone for the 24/7 approach. Commonwealth has Mortgage Innovators, which is predicated on shopfronts. GF: Absolutely.
JS: Mortgage Solutions is a bank’s response to changing consumer needs. It’s only taken them eight years but they’ve finally woken up that consumers want choice.
MF: The banks and Aussie have chosen the multi-channel strategy. If you have the brand to operate in the retail space, go for it.
How should brokers be diversifying their business to generate alternative revenue?
MH: A lot of brokers are interested in selling insurance and financial planning. They’ll lose focus on their core business. They must have the time and resources to make the transition. It’s easier to create strategic alliances and bring in other business partners. Insurance is a classic. Brokers talk about their proposition as a multi-lender/broker giving people different options and choices but when it comes to insurance, they only flog one product. They’re only doing it for the money, not the customer. GF: I don’t agree. A lot of brokers sell insurance to build revenue but recognise that people carry a lot of debt today and it’s almost an obligation for them to at least ask if their customer is in a position to make monthly payments extinguish debt in the event that something goes wrong.
It’s more difficult to become licensed to do that but brokers should at least have an ability to refer on a reasonable product. The broker is not making the same promise as with the loan, “I will find you the best loan for you from my panel of 20 lenders.” They’re saying, “Now we’ve organised the finance, please consider your position in the event of
an unforeseen circumstance. I can help but you can look around.”
MF: But how good are these insurance products that brokers are offering? How competitive? Have they really looked at the market? Or are they simply saying just grab this and run with it? I’d prefer to see more brokers look at the referral model and throw it to an insurance agent who will look at a number of products. GF: The important part is that a broker mentions the need, because people carry a lot of debt now and it doesn’t go to plan, they could be left exposed.
MH: Brokers who have worked hard to build a good client base now have an option to offer more services but I’m seeing more instances of other businesses becoming brokers, more financial planners saying, “I’ve got an office infrastructure, a good client base, we operate in a regulated environment, I can bring someone to my business to play the role of mortgage broker and keep it all in-house. The finance sector went through multi-skilling years back. You become expert at nothing. It hasn’t worked.
JS: Everyone wants to sell home loans. It’s more a question of specialisation. We are seeing too much diversity. We are expert in mortgages, nothing else. We have a good range of lenders, know our products and match the right one to meet their needs. Too many people want to get their hands on this industry. There’s a danger of brokers trying to branch out and do everything. They’ll dilute the proposition.
How much of a worry for brokers is the housing affordability crisis for first homebuyers?
JS: If prices continue to rise, it’s an issue we’re all conscious o. Lenders have moved well. We’ve seen CBA and St George come out with Family Pledge products and the Establishment Loan offering 100% plus 106% funding.
GF: Emergence of the reverse mortgage will help but there needs to be more done at the government level. Why not use superannuation for home purchases with the equity preserved for retirement upon sale? MH: It’s sad that first homebuyers are reliant on the family pledge. They should be able to do it in a more independent fashion. Family pledge is just formalisation of what has been happening anyway, with most first home buyers getting a leg up from mum and dad. There needs to be more government action.
GF: Easier access to finance has meant everyone’s in the market. That’s pushing prices up. It’s a cycle we can’t come away from. There’s a lot of tax on tax which pushes building costs up and creates a market higher than it should be. We have plenty of land but the cost is crazy.
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September 2004
Australian Broker
- Issue 1.12
End of the Mobile Lender?
"Fifty per cent of home loan customer's won't deal with a mobile lender. It's time to make a move".
In John Symond's view, half the borrowing market does not like brokers visiting them in their homes. "We have found there are many existing and potential customers who don't like mobile lenders coming to their homes," Symond says. This is why he has established a retail network of Aussie Shops to service them.
Whether or not you agree with Symond's statement, more customers are looking for greater choice in how they deal with a mortgage broker. Nowadays, customers want a broker who has both an office to visit during business hours and who will also go to their home or workplace.
Gerald Foley, National Mortgage Brokers managing director says that to the customer, flexibility is key. He explains, "A service where the customer has the option of being seen in the comfort of their home or workplace will always have appeal to a sector of borrowers - people who work odd hours or have young families."
Customers are also increasingly looking for a broker that has been around a while and has a reasonable brand presence in the market. Steve Degetto, Lawfund state manager, says: "I think customers perceive someone that has gone to the expense of a shop front has more to lose than a broker that can only do home visits."
Not the end but time for change
Introducing choice does not, however, mean the end for the mobile lender. However, lenders who can only make people fit their product might lose favour with customers as the role and the flexibility of brokers gains momentum. Foley says, "A good broker with their full service offering will always beat a mobile lender." It is interesting that in recent months both ANZ and CBA have launched a mobile franchise model. Is this a response to consumer research or, as some industry figures surmise, just a method to take some fixed costs off their balance sheet? The response to these models is being monitored with interest by many.
Declining to comment specifically on ANZ's model, Don Crellin, executive manager - broke distribution at ANZ, says that so long as a distribution strategy adds value for the customer, there is always a place for it. "It's a matter of ensuring that you have the correct strategies in place to harness the demand." However, Foley questions whether franchises are "a last ditch attempt to make this model sustainable." He says that for today's mobile lenders, maybe this is just a step towards being comfortable that they can go out and do it alone.
Popularity polls for mobile lenders
Not everybody agrees with Symond that as many as 50 per cent of borrowers will no longer use a mobile lender. Between 50 and 60 per cent of loans are still written in a bank branch, which suggests that some borrowers prefer to visit bricks and mortar premises to organise their mortgage.
Degetto says: "If you've used a mortgage broker in the past and were happy with their service, most customers would be very comfortable using that broker again, irrespective of where the interview takes place. But if you're looking for a mortgage broker in the Yellow Pages, you'll probably be more comfortable to have the first meeting at the broker's office."
Paul Gollan, Australian Mortgage Brokers director and CEO, does not agree that mobile lenders are losing favour at all, despite the fact that he "would be delighted if some of our competitors phased out their mobile sales team". He says AMB has a number of shop fronts/offices, but adds that most of their workforce, and the industry, are mobile lenders who do business at the customer's home or office. Foley adds that where customers prefer to shop around themselves they may like a mobile lender to meet many lenders with minimum inconvenience.
Challenges for the mobile lender
Traditional mobile lenders face a range of challenges ahead, including greater compliance costs. They will also need to keep up with the major technological developments and increasing strength of leading market brands. Branding and professionalism will become more important as the industry matures, so whether it is a mobile visit or trip to the broker's office, more customer's will want to deal with a broker that is both professional as well as credible.
Foley says having a shop front or office will add value and provide a permanent, local way to conduct, advertise and promote your business. But he warns: "To assume that all customers will then come to the broker's office would be a dangerous strategy." The same challenges face the branch-based broker, according to Gollan, but he says, "A broker based in an office outside their home often falls into the trap of thinking that just because they are in their office they are working. A home-based broker knows if they are bludging and are more likely to get out and do something productive."
Benefits of the retail outlet model
Symond is confident that the benefits of the retail outlet for Aussie will be many, providing it with a strong marketing presence in high-traffic areas. Degetto agrees that the
potential for walk-in customers and increased brand awareness are key advantages. Having a shop front can provide additional credibility to the broker and a defined line between work and home life, according to Degetto.
Having a shop front also means less travel time to and from appointments, easier access to
information and, says Gollan, more likelihood of closing a loan. "A customer who takes time off work to visit the broker at the broker's office is not there for a haircut."
Symond
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September 2004
Australian Broker - Issue 1.15
Impacting the Broker
-
By Kon Avramidis
The move towards electronic lodgement poses clear benefits for brokers. For starters, reduced turnaround time will improve client relationships. In this formal and secure communication channel, information sent and received will be a lot faster - in some cases, brokers can submit electronic loan applications to lenders and receive conditional approval in just a couple of minutes. That said, there is some debate as to exactly what conditional approval represents, as it is generally subject to receiving hard copies of the lending proposal and full assessment thereafter. For the broker, Avramidis says one could argue that the five-minute conditional approval represents little more than a serviceability assessment.
Other positives include the reduced chance of error if filling in the form, fewer problems with missing/lost faxes or errors on lender input. Because information is sent from the broker's computer to the lender's, the parties can be sure that the information will be received immediately and none of the data will be lost. Also, if the broker's internal software allows it, they will be able to store data for later use, meaning less paperwork, and can take their laptop to the client, enter loan information into the computer and submit applications when back in the office. Other uses include lodgement of later applications or use for future marketing initiatives.
The broker lender relationship should be strengthened due to the increased speed and efficiency of electronically processed applications. And for lenders, lower processing costs will dramatically increase the value of the broker. The relationship will need to evolve to something more substantial than just introducing business to the lender, according to Avramidis. "To maximise the benefits of electronic lodgment, some of the functions lenders currently undertake may need to be delegated to the broker," he says.
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September 2004
Mortgage Brief - Vol. 2 / No. 8
From Heroes to Villains
Speaking at the recent launch of the Securities Institute of Australia/MIAA suite of mortgage courses, MIAA National President Gerald Foley slammed the media or their about-face in the treatment of the mortgage industry.
"It strikes me as ironic that when the over-regulated mortgage lending market was relaxed in the late 80s and new entrants appeared in the shape of mortgage originators and later mortgage brokers, the media were falling over themselves at the spectacle of reductions in interest margins of up to 400 basis points and a far wider array of mortgage products entering the market.
"These consumer-beneficial changes to the industry came only as a result of the competitive forces created by the new market entrants. "As well as exploiting the non-competitive and high interest rates of the day, the new entrants also exploited the lack of service and consumer focus of the existing mortgage lenders," says Foley. "There is no doubt that these new players were the catalyst for a significant fall in interest rate margins across the whole market and a realisation from traditional lenders that the consumer is central to their business success.
"The new players were the consumer heroes of the day." How times have changed. "The tabloid media of today seems intent on tarnishing the image of the very people they applauded only a few years ago," observes Foley. "Cynically I guess bad news sells current affairs shows."
Foley recognises there are some rogue players in the market but they are a minority. "We agree there are some bad apples (despite our attempts to rid the industry of them), but why are the
media so possessed with painting the whole industry - and brokers in particular - in a poor light?
"On any measure, the benefits to consumers as the result of the emergence of new players into the mortgage market overwhelmingly outweighs the impact of a relatively few unethical operators." Consumers are patently supporting the mortgage industry given that intermediaries write about 50 per cent of all mortgage loans in Australia and the overwhelming majority of these are MIAA members. "Surely 50 per cent of Australia's now-savvy borrowing consumers cannot be wrong!" says Foley. And that is why membership of the MIAA and the high educational standards of those members delivered through the Securities Institute of Australia (SIA)/MIAA courses are so important. MIAA's involvement with SIA, and the new Certificate IV course, means that borrowers will deal with loan writers who had the opportunity to obtain a formal education qualification specific to the industry.
"Non-members will be marginalised and the sector of the media which fees on bad news will be left with little fodder for their sensationalist programs." The latest co-operation between MIAA and the SIA has witnessed the introduction of two new courses on top of the already existing Diploma of Mortgage Lending. The new courses are the Mortgage Industry Induction Course and Certificate IV in Financial Services - Finance/Mortgage Broking. Education is vital to the mortgage industry. According to Foley it runs hand in glove with regulation. And any future regulatory regime will certainly include minimum experience and education standards as a prerequisite to registration or licensing as an operator in the mortgage industry.
Already all MIAA mortgage consultants must have either appropriate experience or have completed the minimum entry requirement of the Certificate III in Mortgage Lending or equivalent as well as passing certain
MIAA examinations online before they can be accredited. More and more mortgage lenders are adopting the MIA's industry entry process as their own. Once accredited, members must then accumulate 25 continuing professional development points each year. Such points can be achieved by undertaking additional courses such as those provided by the SIA.
The MIAA's Education Centre Online, which has been recently upgraded, provided both mandatory and discretionary education programs for members. Education is one of the three core activities of the MIAA with the others being membership representation and services, and events. Education and consumer protection go hand in hand. By constantly striving to improve the educational standards of all
those in the industry, the opportunity for the media to create bad news stories will be severely curtailed.
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August 2004
Australian Broker - Issue 1.1
Sourcing Leads from Accountants -
By Sal Cinque
Sourcing a solid book of referrals is one way to build a sustainable and successful broking business and third-parties, such as accountants, are great sources of leads. Sal Cinque, National Mortgage Brokers director of sales and marketing, has some advice on how to tap into this revenue stream.
Successful mortgage brokers see 'referrals' as a key
ingredient in the lead-generating mix and work diligently
towards building a solid referral program. When seeking
referral partners try to focus of one industry group at a
time. As an example let's look at how to source leads from
accounting firms. What better way to understand the
accounting fraternity than to go directly to the source -
Neil Gardiner from Gardiner Knight, a Melbourne-based
accounting firm, helps provide insight.
Know your target
Prior to approaching an accounting firm get a handle on the types of clients they work with. Knowing if they specialise in private or business clients will help in defining your value proposition. Gardiner believes small-to-medium accounting groups that major in PAYG clients are more likely to provide a consistent flow of referrals and would be more open to the concept.
Why would an accountant refer clients to a mortgage broker?
The fit is both logical and obvious - accountants provide financial and tax advice and loans certainly form part of the mix.
But what else? Just like any other business accountants are keen on adding value in a genuine effort to assist their clients whilst enhancing their client retention strategy. Gardener sees mortgage broking as a means to satisfying his clients' lending needs via a model that offers choice and convenience.
Why refer clients to you?
The answer to this can be summed-up in one word - trust. Accountants are extremely protective of their clients and would baulk at any idea of referring clients to you unless they completely trusted your level of competency, professionalism and integrity.
So how do I prove I can be trusted?
Leverage from your existing networks for an introduction to accounting groups. A third party endorsement can provide evidence of your credibility and help secure a meeting and possible a referral relationship. Gardiner suggests a great way to introduce yourself and your business model to accountants is though your own clients.
Survey your clients
Industry figure Tim Braheem of LoanToolBox has a concept of surveying your clients. All you have to do, after you have fulfilled a client's loan, is ask how they rate the service they receive from
their accountant. Where the response is low offer to introduce your client to an accounting firm you know to be a
high performer. This strategy is perfect - it helps your clients with their accounting, it provides the accounting firm with new business and increases your
potential of receiving leads.
And finally
Your credibility with accountants will also be enhanced if you follow Tom Peter's concept of "under committing and over performing". Results speak louder than works so keep your appointments, act on your promises, qualify any facts, provide regular feedback and deliver your services in a timely fashion. This is extremely important- not only when building relationships with accountants but will all relationships.
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August 2004
Australian Broker - Issue 1.8
The Broker's Choice: Fixed-rate Loans Compared
The fixed-rate loan showcase was as tough a competition as ever. Costs were seen as the most important factor by our broker panel, and this area, along with the fixed term, saw each lender battling for points. Gathering extra marks was left to flexibility over payments and the extra facilities on offer. Take a look at how our finalists got on.
When our panel of 10 broker judges came to name their top six fixed-rate loans, some clear favourites emerged. The consensus was that the top six products were provided by:
* Homeside Lending
* ING Bank
* HSBC
* Heritage Building Society
* Bank West
* Commonwealth Ban of Australia.
Outside the top choices, other nominations went to Citibank, Bank of Melbourne, Collins Securities, ANZ Bank, St George Bank and Maxis Home Loans. The selected six products were put through their paces and grilled on the following five criteria, as decided after careful consultation with our judges:
* Pricing
* Break costs
* Term of fixed rate
* Extra Payments
* Redraw Facility
* Extra Costs.
Talking Head
Kon Avramidis, National Mortgage Brokers director of IT and lending, tells us why he thinks Heritage
fixed-rate loans deserve to win the showcase.
One of the best-kept secrets is finally out. The Heritage fixed-rate loan is certainly unique in the marketplace and in a classic David vs Goliath battle in the fixed-rate stakes.
This building society has a few tricks up its sleeve that have the major banks asking: "How do they do
it?"
Interest rate is one thing. That's not to say the the Heritage rate isn't sharp, because it is, but throw in unlimited redraw and repayments and you have the makings of a very flexible P&I or interest only loan with the certainty of a one, two, three or five-year fixed rate.
For example, you can take out a $500,000 fixed-rate loan at say 6.89 per cent for three years, a month later repay $200,000 into it and again effect another drawdown the next day, all without prepayment penalties or the
dreaded economic break costs normally associated with fixed-rate loans. The only condition is that you do not fully repay the loan within three years, or in it fixed term, whichever is greater.
Another great feature of this product is when the interest rate is actually fixed, Heritage will hold the rate from the moment unconditional approval is granted until drawdown or 60 days, whichever comes first. There is no additional cost or rate lock fee for this, and because the rate is held using a cap, the customer will enjoy any decrease which may occur during the period from approval to drawdown whilst knowing they are protected against any increases.
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July 2004
Australian Broker - Issue 1.7
Associations Look to Unify Broker Voice
The broking industry could soon have the power of a combined industry voice after the Mortgage Industry Association of Australia (MIAA) and Finance Brokers Association of Australia (FBAA) agreed to form a loose forum for discussion and lobbying. The forum will bring together key representatives from the MIAA, FBAA and other industry associations at regular intervals to discuss current industry issues and present a combined industry front to government where there is a common position.
Two weeks ago Australian Broker reported the FBAA had walked away form merger plans with the MIAA because of concerns about the proposed internal broker voting structure. However, MIAA chairman Gerald Foley says when the two associations met in May, it was a joint decision not to merge due to lack of common ground between them, and that the positive step of establishing the new forum came out of the same meetings.
"A lot of lenders and members would like to see the bodies merge, but at the moment there is not enough common ground between the associations," Foley says. Foley said in his view it "makes a whole lot of sense" to form the forum to combine industry voices, which would have more influence in lobbying state and federal governments. The other industry associations to be included in the forum are yet to be announced, though Foley says it will be up and running within the next few months. He says at some point in time it will make sense for the FBAA and MIAA to merge and combine resources for greater strength. The FBAA told Australian Broker that it abandoned a merger with the MIAA as broker groups under the proposed voting structure. Foley claims this is "an interesting spin" on the outcome of the May meeting. Foley said he thought the may meeting allowed productive advances in regards to the issue.
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June 2004
Australian Broker - Issue 1.6
Time is Money -
By Sal Cinque
Many brokers find that working from home is the best way to operate. But to get maximum efficiency you need discipline and focus. Sal Cinque, National Mortgage Brokers,
director of sales and marketing, has some advice.
Studies show on-the-job performance increases significantly when working from home. In fact Training Magazine states people working from a home-based office experience productivity gains of
around 10% - 40% over conventional office-bound workers.
Travel time now becomes active time. By eliminating a 40 minute commute to an office each day, you gain approximately 8 working weeks each year. Cost reduction, work-life balance and the reduction in stress levels all contribute to a productive work environment where the focus on core business generating activities is attained. Although working from a home-based office has its upside…..beware of the pitfalls. Distractions and the lack of social interaction are clear de-motivating factors.
How to stay focused
1. Keep your home and home-office distinct. Working in the kitchen or lounge won't cut it. Have a room reserved for business only.
2. People behave in line with the way in which they see themselves. Casual dress therefore equates to casual performance: dress for success regardless of where you work.
3. Having a well-designed work area can increase productivity by reducing fatigue and strain, eliminating wasted motion and improving comfort.
4. To minimise interruptions ensure all family members and friends understand the importance of your work and explain that when you're in the office, your concentration is on business:
it's vital that boundaries are clear and present.
5. Plan your work and work your plan - a structured schedule will maintain focus on key tasks and
processes.
Time saving tips:
1. Avoid the calling of the fridge. It's all too easy to graze when working from home. Plan a 15-minute break every two hours.
2. Don't get distracted by pending household duties.
3. Don't let yesterday's technology slow you down: an effective home-based office depends on efficient equipment.
4. Use broadband. Home-based businesses rely on the internet to connect to the outside world so it must be fast. Today's broker uses the internet to submit and follow-up applications, update software and communicate with clients and suppliers. By switching from dial-up to broadband, a broker's productivity could increase
by around 33%.
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May 2004
Australian Broker - Issue 1.3
Housing Market Slowdown.....so what?
The Australian broking industry may not feel any effects from the recent fall in new home purchases, according to a leading industry figure. Kevin Matthews, executive director of the Australian Finance Group, said the industry is already enjoying high times, pulling market share from banks thanks to changes in market perceptions.
"This month has been one of our best ever", Matthews said. "Brokers such as AFG, who do business with the likes of accountants and financiers, have felt no effect [from the housing slow-down]. "However, there has been concern that the slowing market could tempt smaller brokers into fraud, thereby damaging the reputation of the industry as a whole.
Graham Reibelt, national president of the Finance
Brokers Association of Australia, said some brokers could already be feeling the pinch from the industry slowdown. "I'm concerned that this may encourage the fringe broker to carry out practices they may not normally," he said but the over-riding mood of the industry is positive.
Gerald Foley, National Mortgage Broker managing director and president of the MIAA, said there was still plenty of growth to come from the market. "There has been a small correction but it's not a bad thing. Some economists are even predicting the slowdown could be beneficial."
Australian Bureau of statistics figures show housing investments dropped 14.2% in January. Borrowing for the construction of homes fell to its lowest level in almost two years and the value of owner-occupied and investment homes fell 8.4%. Economists have pinned the decline to the rising reserve bank interest rates in November and December.
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May 2004
Mortgage Professional Australia - Issue 4.3
Seven Steps to Successful Sales -
By Sal Cinque
Never leave any money on the table.....A phrase coined by many in the sales fraternity is a simple metaphor for not walking away from a selling situation without the business. If you find you’re leaving money on the table, perhaps it’s time you practiced a systems based approach to selling.
A systems based sales systems is nothing more [and nothing less] than a well thought-out set of procedures that lead the salesperson towards a successful outcome. Interestingly enough, most mortgage brokers don’t consider themselves as salespeople. They see themselves more of a consultant and work diligently towards providing their prospects with all the information they need to give someone else the business.
Brokers feel there are negative connotations associated with ‘sales’ and avoid it at their peril. Selling is a professional function and an extremely important component of business success, especially where products being offered include a complex decision making process on the customer’s behalf – such as mortgage loans.
Gone are the days of traditional selling where the benefits were heavily skewed in the salesperson’s favour by selling what the company had rather than what the customer wanted. Today’s selling is centred on mutually beneficial outcomes where both the customer and the salesperson receive value from the exchange of products or services. The table below highlights the major differences between traditional selling and the underlying philosophy of the National Mortgage Brokers’ (nMB’s) win-win sales system.
|
Traditional Selling |
Win-win Selling |
| Sell what you have |
Sell what the clients wants |
| Selling is a contest |
Selling is a service |
| Selling is persuading |
Selling is about helping |
| Clients must be sold |
Clients like to buy |
| Clients must buy today |
Clients must not feel pressured |
| Good salespeople can sell anything |
Good sales people sell on trust |
| Selling is about I win and the client
loses |
Selling is about mutually beneficial
outcomes |
Just as the nMB win-win selling system is not about the broker winning and client loosing, equally it’s not about the client winning and the broker loosing. The nMB win-win sales system is about finding the equilibrium where it makes sense for both parties to complete the transaction.
With the importance of the underlying philosophy covered, it’s time to divulge the nuts and bolts of the nMB win-win sales system. Listed in chronological order is a step-by-step path to achieving sales results. Each point is then discussed in further detail.
The nMB Win-Win Sales System:
• Introduction
• Establishing Rapport
• Identifying Needs
• Do Your Research
• Presenting the Benefits of Your Service
• Handling Objections
• Closing the Sale
Introduction:
The first contact is a broker’s opportunity to establish an initial level of trust with a client. Too many times brokers go straight into “needs analysis mode” before having earned the right or client’s trust to do so. Make sure you open up with an explanation what you do & how well you do it. Cover your lender panel & product range and most importantly, discuss how you get paid – it will help mitigate any possible objections further into the process. Discuss your commitment to the privacy act before asking for personal information and ask how the client came to call you for marketing purposes.
Establishing Rapport:
There is no doubt customers are more willing to conduct business with someone they know, feel comfortable with or trust especially in the case where the product or service involves a complex decision making process such as home loans. It is therefore important that brokers make a conscious effort to establish rapport with their clients, be enthusiastic and take an empathetic approach to their situation before conducting a thorough needs analysis. Here are just a few ideas on how to establish rapport with your clients:
First impressions count.....
You only get one chance at making a first impression…..so you better make it a good one. Did you know a client’s initial impression of you is made within the first 4 seconds of a meeting? And their final judgement is made after only 30 seconds? With this in mind, it’s no wonder 95% of a client’s first impression is influenced by your appearance i.e. attire and grooming.
Pay attention to the way you dress – people expect mortgage brokers to look business like and professional at all times. Where appropriate dress down to suit the audience, this will help put the interview on level ground but if in doubt over dress, as more damage can be done by under dressing. Where you feel it will make your clients feel a little more comfortable, you can always make adjustments during the interview such as removing a jacket or tie.
Body language makes a difference.....
Ensure your body language supports your spoken word. Greet the client with enthusiasm, make good eye contact and be willing to shake hands. When shaking hands it’s important that your hand be open and inviting…..a friendly gesture. A closed handshake projects an overpowering and dominating stance that may offend clients and potentially damage the positive first impression you’re trying to make.
Mirroring.....
Mirroring is a communication technique that greatly assists in the human relations department and enhances the interview process. It’s about adjusting your vocabulary and speed at which you speak to the same level as your client. It’s about adjusting your persona to that of your client because “like seek like”. As we mentioned above, clients are more willing to conduct business with someone they know, feel comfortable with or trust - mirroring helps in this area.
Find common ground.....
Finding common ground may be difficult when you’re dealing with thousands of clients so it’s not always realistic that the ground found be common…..any ground will suffice. Dale Carnegie says the best way to win friends [customers] and influence people is to have them talk about themselves and their interests. If you can talk in terms of your client’s interests, be honest and sincere about their situation, you will be well placed in earning their respect and their business.
A closing note on establishing rapport.....
Establishing rapport is all about human relations…..getting along with people, gaining their trust and respect. Here’s some stuff customers like their salespeople to be…..stuff home loan clients like their mortgage brokers to be:
• Professional & courteous;
• Understanding & sincere;
• Friendly & confident;
• Patient & respectful;
• A good listener;
• Knowledge about their products; &
• True to their word.
The importance of the last point cannot be stressed enough. All your good work in establishing rapport could be lost by falling short on a simple promise. So many times salespeople over commit on what they are able to deliver, be it price, timelines, etc. This creates an expectation in the minds of customers that the salesperson just can’t meet and when it’s not, eventuates in a level of dissatisfaction that inevitably leads customers to seek alternatives…..your competitors.
Tom Peters says that salespeople should “under commit and over perform” on their promises. He has proven that it is far more effective to build a buffer in what is committed to customers so as the salesperson has the opportunity to exceed their expectations.
Identifying Needs:
Two key points in identifying client needs are: 1. Don’t assume the client knows what they want; and 2. Don’t assume you know what the client needs. Make an informed judgment based on fact by asking questions. We know the client needs a loan but we’re not quite in a position to understand what they want before asking open-end & probing questions.
He/she who asks the questions controls the interview.....
Before we look at open-end questions, let’s firstly look at closed-end questions. A closed-end question is a question that is usually answered with a "yes", "no" or simple fact. Closed-end questions may be useful in gathering details but gives us no insight into the way our clients feel.
What we need to remember here is that selling is all about human relations. If we can relate to the way our clients are feeling as well as thinking, we’re part way there to closing the sale. So what then is an open-end question? An open-end question is a question that requires the respondent to answer in their own words. Open-end questions help uncover what clients are feeling as well as thinking. Open-end questions are the: who; what; when; where & how questions such as:
• Who else is involved in making a decision on your new home loan?
• What do you feel are the most important features you are looking for in a loan?
• When are you most likely to proceed with the loan?
• Where do you feel you receive value from your current lender?
• How do you feel about a loan from a building society?
Open-end questions can also reveal the emotion behind the answers and can give you a lot more information about your client's state of mind and actual needs. At times, probing questions are required to encourage further information…..here’s an example:
• Q1. What are you looking for in a new home loan?
• A1. More flexibility.
• Q2. What type of flexibility are you looking for?
Q1 is a standard open-end question which the client responds with limited information. This is where a probing question is required and Q2 lends a hand. Q2, a probing question, is also an open-end question and helps uncover the required details to select the appropriate product and to satisfy the client’s needs and wants.
Listening skills.....
Equally important to asking questions is listening to the answers. Simple enough, although this is where most communication breakdowns occur. It’s all too common where salespeople find themselves thinking of the next thing to say or question to ask while their client is still speaking. Listening is an understated part of the sales process and a skill that must be practised.
Basically, there are two types of listeners – active or passive. Listed below are differences between the two:
|
Active Listener |
Passive Listener |
| Attentive & interested |
Easily distracted |
| Allows the client to speak |
Impatient & interrupts |
| Asks questions to clarify understanding |
Silent and jumps to conclusions |
| Responds to feelings |
Only hears facts |
| Paraphrases |
Silent |
| Mentally summarises & searches for solutions |
Disinterested & thinks of what to say next |
What sort of listener are you? What sort of listener do you feel can better establish rapport with clients, identify their needs, win their trust, confidence and ultimately their business?
Look for hot buttons:
Hot buttons are buying motives or dominate reasons behind a customer’s purchase decision and when pushed, result in a sale. In fact, customers rarely buy before their hot buttons are identified. Hot buttons are unique to every customer and are based purely on their perceptions on what meets their emotional needs.
Hot buttons may translate into areas of interest or product features a client is perhaps looking for in a loan such as:
• Price – interest rate, fees;
• Flexibility;
• Convenience;
• Portability;
• Simplicity;
• Prestige;
• Security;
• Turn-around times.
Hot button leverage provides the basis of a win-win outcome whereas the client gets the loan they want and the broker makes a sale…..so practice your questioning and listening skills - they are paramount to uncovering hot buttons and increasing sales.
Do Your Research:
“Proper preparation prevents poor performance.” After conducting a thorough needs analysis it is vital that you utilise every tool at your disposal to help uncover the best possible solutions for your client. This may be achieved by leveraging support from your aggregator and lenders.
A good software platform such as a loan qualifying system, interest rate matrix, comparison rate calculator, loan comparison tools, mortgage minimising analyser and a comprehensive research library will greatly assist in this process. Prior to meeting with your client, document your findings and prepare for your presentation - including a visual component will provide added value.
Presenting the Benefits of Your Service.....
First things first. Only after you have effectively introduced your service, established rapport, identified needs, and completed your research have you earned the right and client’s trust to present a selection of suitable options.
The delivery of your recommendations plays a significant role in the sales process and greatly increases the chance of a successful outcome. Without effective presenting skills, clients may be unsure or confused and leave the interview with more questions than answers. This may create a situation where the client seeks a second opinion and potentially rewards another broker with the business.
Back to basics.....
When presenting product recommendations ensure all decision makers are present and supporting documents have been arranged. Speak clearly & confidently and avoid the use of jargon. Throughout the presentation you should check for understanding and seek agreement on as many small points as possible. Where appropriate, use anecdotes of previously satisfied clients and leverage from hot buttons identified during the needs analysis stage.
People buy benefits not features.....
Salespeople eagerly quote product features throughout their sales presentations in an effort to impress their clients with a point of difference. But product features may well fall on deaf ears unless they are translated into benefits the client can associate with. Firstly let’s take look at the difference between features and benefits. A feature is a technical aspect or design feature built into a product. A benefit on the other hand is the value a customer receives from owning the product. Features connect with the product whereas benefits connect with the client’s emotional needs or buying motives - hot buttons.
Therefore, when presenting product features during your sales presentation ensure you communicate the corresponding benefit. Here’s an example: During a needs analysis you identify your client is price conscious and a low interest rate is their hot button. You conduct your research and find a product at 0.70% lower than the standard variable rate. From here some brokers, with all the enthusiasm in the world, call their client on the phone, quote the low interest rate [thinking they have given the client what they wanted] and then wait for the green light. The same brokers then sit in total amazement wondering what went wrong when they find the client has given their business to a competitor. What these brokers fail to see is that people buy benefits not features and in this case only the feature has been communicated. To improve the possibility of a successful outcome, quote the feature [in this case the rate] and follow the statement with the words “and that means” and then present the cost and time savings associated with the lower rate. A visual demonstration of the savings will greatly assist.
A presentation without a demonstration, is merely conversation.....
Could you image buying a car without a test drive? Or buying a suit without trying it on first? Then why do would expect a client to buy a home loan without a demonstration of its benefits and how it meets their objectives?
I hear - I forget. I see - I remember. I do - I understand.....
Engage as many senses as possible by including a visual component to your presentation. Where you are using a laptop to demonstrate the benefits of your service, have the client enter simple figures. Getting the client involved in the demonstration is extremely important when selling intangible & complex products. It helps provide a sense of ownership, increases the client’s understanding and recall, creates an advocate for your service and greatly enhances the possibility of a successful outcome.
Handling Objections:
Objections signal we have not yet satisfied the previous steps of the nMB win-win sales process and may be a simple cry for additional information or a smokescreen to the real problem. It’s important to note here that objections are an everyday part selling and should be viewed as an opportunity to further connect with the client’s underlying buying motives – hot buttons.
Here’s a plan on how to handle objections:
1. Hear the client out - apply active listening skills as discussed above. Listening shows genuine concern and gives you a clearer understanding of the real objection.
2. Paraphrase the objection - re-stating the client’s objection in you own words helps provide further clarity.
3. Acknowledge the objection - at no time should you discredit the client’s objection, as the customer is always right even when there’re wrong. Instead acknowledge their concerns by using words such as, “I hear exactly where you’re coming from”.
4. Be empathetic - make sure the client feels you’re both on the same side by using words such as, “I understand how you feel, others have felt the same way.....”
5. Present possible solutions - it’s best to present solutions in the third party with words such as, “What they found was.....”
6. Seek agreement - once you have provided the possible solutions, seek agreement.
7. Move to trial close - after you have uncovered and handled the objection, and only then, should you move to close the sale.
Closing the Sale:
Closing the sale is an extremely important part of the process mostly ignored by the average mortgage broker. Some brokers feel out of their comfort zone when it comes to closing and often see it as a high pressure selling tactic. Brokers are concerned it may offend their clients, are afraid of rejection or simply don’t know how to.
Closing the sale is nothing more than asking the client for their business and if you have competently satisfied the previous requirements of the nMB win-win sales system, asking the client for their business will be less than a formality. So how do you ask the client for their business?
There are a number of closing strategies you may employ and one of the most effective is the “option close”. After you have completed your research, select two loan products that best suits your client’s set of circumstances. On completion of your features and benefits presentation, simply ask the client which of the two options they would like to proceed with.
Asking the client to proceed with one of two options helps provide focus on your products, limits the choice of loans, minimises potential confusion, eliminates the competition, gives purpose to the presentation and provides a deadline for the decision. Not asking for the business or providing only one solution empowers the client with the ability to delay the decision, opt to conduct further research themselves or choose a competitor’s product.
There are superfluous strategies and words that may be used within the closing stage of the selling process and there are no right or wrong ways…..only what works for you.
Plan for Success.....
Zig Zigglar says, "One form of insanity is to do the same things and expect different results." So if you’re not satisfied with your current sales conversions…..make a change. Build you sales skills, practice the techniques, learn from your mistakes as well as your fortunes and…..“never leave any money on the table.”
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January 2004
Australian Broker - Issue 1.1
Sales Tips -
By Sal Cinque
Sales Tips
1. Know your client
Customers are more willing to conduct business with someone they know or trust, especially when the product or service involves a complex decision-making process. Brokers must make a conscious effort to establish rapport with clients, be enthusiastic and take an empathetic approach before conducting a thorough needs analysis.
2. Do your research
Use every tool at your disposal. Leverage support from your aggregator and lenders and use a good software platform such as a loan qualifying system, interest rate matrix, comparison rate calculator, loan comparison tool, and mortgage minimising analyser. Document your findings and prepare your presentation.
3. Close the sale
Closing the sale is an extremely important part of the process mostly ignored by the average mortgage broker. Some brokers feel out of their comfort zone when it comes to closing and
often see it as a high-pressure selling tactic. They are concerned it may offend clients, afraid of rejection or simply don't know how to. But closing the sale is nothing more than asking the client for their business and if you have competently satisfied their requirements, it will be less than a formality.
There are a number of closing strategies you may employ and one of the most effective is the option close. After doing you research, select two of the most suitable loan products for your client. Do your features and benefits
presentation and ask the client which product they want to prefer. This helps
the client: focus on your products; limit the choice of loans; minimise potential confusion; eliminate competition; give purpose to the presentation; and
also provides a deadline for the decision. Not asking for the business or providing only one
possible solution empowers the client with the ability to delay the decision, opt to conduct further research themselves or
to choose a competitor's product.
There are excessive strategies and words that may be used in the closing stage of the selling process and there is no right or wrong way. The important point is if you don't ask, you don't get.
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January 2004
Australian Broker - Issue 1.1
Big and Bigger
Some fat cats just keep getting fatter. John Bignell, the granddaddy of Aussie mortgage Brokering, really has licked the cream. His Mortgage Gallery has outgrown its WA boots and Big can't wait to get his claws into the rest of Oz. This time he's formed a double act with Gerald Foley, head honcho at National Mortgage Brokers, and the tag team plan a double whammy on eastern states. Next comes the Northern Territory and South Australia. Did
Insider mention Big has a "minor" share in National? OK, so good on them. We like a success story, and with the broker market set to take 50% of the home loan market, Bignell and Foley should certainly grab
their slice of the pie.
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3 December 2003
The Financial Review
MIAA Elects New Head
The Mortgage Industry Association of Australia yesterday announced the
election of Victorian-based Gerald Foley as national president. Mr Foley
had served as state MIAA president for three years.
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December 2003
Mortgage Professional Australia - Issue 3.12
Industry ‘Father’ rolls out National Brand
The man widely regarded as the father of mortgage broking in Australia is set to roll out his company's brand from Western Australia across the country.
John Bignell, managing director of The Mortgage Gallery, has launched the expansion into the eastern states in conjunction with leading mortgage wholesaler, National Mortgage Brokers - which has also expanded its operations into Western Australia. Bignell, a former national president of the MIAA, wrote what is believed to have been Australia's first pure mortgage broking loan for $46,500 in Perth on 2 March,1988.
Under the co-operative deal, The Mortgage Gallery will grant state licenses to principals in NSW, Victoria and Queensland and expand its network of brokers through Australia. Bignell said The Mortgage Gallery would combine its advanced sales systems with National Mortgage Brokers as its aggregator to recruit experienced and new industry brokers who will be able to build their own business under The Mortgage Gallery brand.
The company has already issued a NSW licence to Susan Tyers, and appointed Sharon Marshall as its first broker in Sydney. Bignell said he expected to make further appointments soon in Victoria and Queensland. The company would look at expanding into the Northern Territory and South Australia in 2004, or as opportunities arise. Meanwhile, National Mortgage Brokers has appointed, Tim McKenzie, as its WA business development manager.
nMB managing director, Gerald Foley said he expected the company's operations to be fully operational early next year .
Bignell, who is a minor shareholder in nMB, said the co-operative rollouts would allow both companies to expand their presence across the country.
He said he had been receiving numerous approaches from parties, including other brokers and financial planners, who had wanted to distribute mortgage products in WA under The mortgage Gallery band.
The nMB move into WA will allow that company to manage such distribution while
also supporting our expansion into other states. Bignell said,
"These initiatives will see us develop into a significant national retail and wholesale mortgage brokering operation".
Foley said the expansion would ensure both companies would be well placed to seize more opportunities as the broker channel grows to a predicted 50% share of the home loan market.
"The Mortgage Gallery has a fantastic retail brand and has developed strong sales systems," he said. There also appears to be opportunities to attract brokers looking for a level of support in developing their own business without having to pay the high price and low commission split being asked by some franchise systems."
National Mortgage Brokers would provide brokers with a strong lender panel, good systems, sales training and commission reporting.
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October 2002
Mortgage Professional Australia - Issue 2.10
Cut to the Chase -
By Gerald Foley
Many people say the best thing about dealing with a mortgage broker is the wide choice of lenders and products available through one source. We all understand the enormous savings in time and money that borrowers can achieve through using a mortgage broker. However, some people will say that they found the choices presented to them by a mortgage broker so confusing that they didn't know which way to go and ended up back at their bank. I have heard stories of mortgage brokers who have outlined all of their lenders' home loan products to customers.
By the time the mortgage broker got to about the fifth lender the customer was totally confused and suggested that they come back another time. The customer promised to call the mortgage broker to make a time. They never did!
Mortgage brokers should take control of each customer's need for finance. Help them to find a loan that best suits their needs, and arrange it with a high level of professional service. The result will be a satisfied customer who, is the best generator of new leads you will ever have. When you receive a lead there are four main stages you need to follow if you are to move to taking a loan application. These are: Information collection, Qualify, Needs analysis, Product selection.
Information Collection
Quickly identify and gather information from your customer. This will help determine the most appropriate loan or loans to meet each customer's needs. The information gathering process starts as soon as a lead is received. Record each enquiry - paper or soft copy - listing all the questions you need answered. This will highlight unusual circumstances that need to be addressed. The customer may have a poor credit history, needs to complete their loan inside a short time frame, or has recently changed employment. None of these factors should stop you from arranging a loan, but all are important information when determining which lenders can assist. It may also highlight that you are out of your depth and need to seek help from a colleague or business partner. Collecting the right information at an early stage can also stop you from committing too soon to a loan interview. It is pointless to meet a customer to find out inside 30 seconds that you cannot assist them. It is not good for you or the customer whose time you have also wasted!
Qualify
Once you have collected as much of the relevant information you need you can begin to qualify the customer. Mortgage brokers will be left out on a limb if they are not equipped to quickly qualify customers against their lender panel members' credit rules. The days of note books and calculators to calculate a few, generic, lending rules are mostly gone by the wayside. Factor in personal details as well as financial information. Many lenders will use differing methods to calculate cost of living expenses which can be influenced greatly by lender's different approach to lifestyle. The result of properly qualifying your customer is that they and you will be aware whether they are well placed with the mainstream lenders or whether they are more likely to obtain their loan in the non-conforming sector. It is a waste of time if you begin to discuss the types of lenders and loans you have available if your customer only has a limited selection of lenders wanting to lend to them.
Needs Analysis
This is where a mortgage broker begins to really earn their commission. Understand each customer's needs to identify the most appropriate loan. This is the key reason why you have been chosen by your customer to assist them. You have access to a wide range of product knowledge - they don't!
Ask your customer questions, and record the answers, so that you can quickly discount lenders that may not be suitable. Do not make any assumptions in regards to your company's existing knowledge of what is available. Explain that you have a range of lenders - major banks, second tier banks, overseas banks, non-banks, building societies and non-conforming lenders. make sure your customer understands the features, benefits and pitfalls of fixed rate loans, honeymoon rates, lines of credit and split rate loans.
Product Selection
When starting out as a mortgage broker it can be a very daunting task to understand all the lenders products. Most lenders don't have a "catch all" product. They have particular segments they prefer to deal in and their products reflect this. Lenders are unable to meet all your customer's needs. Through obtaining accreditation with lenders, mortgage brokers should be able to gain an understanding of which products are most suited to particular customer's needs.
Ask your lenders the product they most sell and the types
of customers that take up that product. Categorise what
your lenders believe are the "best" products available in
each loan category. Doing this achieves two outcomes.
Firstly, it requires you research all the available products to determine which are your best loans. Secondly, it saves time when you identify a loan with your customer. Once the type of loan is agreed, you can let your customer know that you have narrowed the search down to the best two or three prior to meeting with them.
At National Mortgage Brokers, at the start of each month we issue "What's Hot", to direct our mortgage brokers to the best loans available from our lender panel. The categories are standard home loan, basic home loan, professional package, honeymoon rate, line of credit, self certified and no savings. Interestingly, of the seven categories, any one lender rarely appears more than twice. Don't get caught out if your customer's need become too complicated for you to handle. It is better to advise your customer that, as their circumstances are a little complicated, you need more research time and want to discuss their loan with lenders before suggesting possible solutions. This is far better than to suggest a product that your are not sure of and may prove later to not be suitable. Remember, your customer is left with their loan well after you have departed.
So why is all this important? Most seasoned mortgage brokers receive a large share of their new business from their existing client base and repeat customers. Make sure you get your service right the first time and you can also expect to receive leads and repeat business from your satisfied customers.
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July 2002
Money Magazine
Banking on a Broker
In Perth, a mortgage broker writes one in two home loans. The ratio in Queensland is two loans in five and for the rest of Australia it's about one loan in three. If you've never applied for a home loan or if it's been some time since you did, things have certainly changed. About 30% of loans are now estimated to go through mortgage brokers.
It seems savvy homeowner wannabe's are bypassing the banks and heading straight for brokers. And why not! Getting in touch with one mortgage broker can put you in contact with at least 20 lenders. It's got to be a faster and better way of finding the perfect home loan. But as the industry rockets past the $29 billion mark, cracks are beginning to appear. The broking industry is yet to be regulated and critics argue that because its members are paid on commission, borrowers are exposed to only limited segments of the market or worse still, directed towards the lender who pays the most.
It's a cause of deja vu for anyone who has followed the lessons from the financial planning sector. That is, independent financial advice does not sit very well with commission-based sales. But while most of the cowboys in the financial planning arena have long been eradicated, thanks to a heavy dose of regulation, the issue was never about whether one should see financial advice but rather how one goes about choosing a reputable planner. The same approach should be taken with mortgage brokers.
Brokers have been successful because they offer borrowers substantial value add-ons. Sal Cinque, marketing director of National Mortgage Brokers, says a good broker will not only help you find the best possible home loan but also massage your finances so that you get the maximum amount possible.
"Most clients don't realise that their borrowing capacity is greatly affected by credit card limits," he says. "It doesn't matter if you owe nothing on them - lenders always take around 5% of your credit card limits as a monthly commitment. If limits total $10,000-plus, we may recommend that our clients reduce them because the change in borrowing capacity can be substantial." Mortgage brokers come in
many forms and sizes. Some boast impressive shopfronts, others like eChoice, operate only in cyberspace. Then there are brokers who like to think of themselves as a broker's broker. They're known within the industry as aggregators because they pool the loans of smaller brokers to make it more attractive for funders, and they're fast becoming the main drivers behind the growth of the broking sector.
Whatever brokers like to call themselves, they essentially all perform the same service, that is, assist borrowers with loan selection (the service is not limited to home loans), do the necessary paperwork and submit the application to the selected lender. Upon approval, they then continue to assist both borrower and lender through to loan settlement. Any ongoing relationship is really between the borrower and the lender, although the broker generally remains available if necessary.
Most brokers on average include around 24 lenders on their panel, of which banks
accountant for one third. Unlike mortgage managers, who usually charge a hefty fee as they claim to not only do the job of a mortgage broker buy also provide an ongoing role until the loan's final instalment, brokers do not charge for their services. They survive on the remunerations paid by the lenders.
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July 2002
The Age - Domain
Borrowers in a Fix
Melbourne's residential clearance rate has been regularly topping 80 per cent. This combined with the Reserve Bank's recent decision to leave interest rates temporarily unchanged - indicates the buoyancy of Melbourne's property market. However, many borrowers sitting down to work out their figures are sensibly factoring in a rate rise. Low interest rates - the average variable interest rate it currently about 6.07 per cent - may soon be a thing of the past. For those borrowers considering fixing their loan before rates officially rise, possibly as soon as this month, it is worth finding out exactly when the rate is locked in.
Director of interestrate.com Andrew Barbazza says checking whether the interest rate is locked in at the approval or settlement stage is a good idea. "Because fixed rates are influenced by the
share market, they can fluctuate daily," he says, "and refinancing a loan can take up to six weeks." This means if there is a rate rise between approval and settlement, borrowers could lose out. Mr. Barbazza says some borrowers choose to pay for certainty with a rate lock fee of $300-$500. This ensures the rate is locked in at settlement.
"If the rate really concerns the client, I'd say this is a good idea." National Mortgage Brokers managing director Gerald Foley agrees it is vital that borrowers ask the right questions. "Not all lenders actually confirm the interest rate on their fixed-rate home loans until settlement of the loan," he says. A recent survey by National Mortgage Brokers showed that of the 23 lenders surveyed, 16 did not confirm the rate on their fixed-rate home loans until settlement. The same survey, conducted early last month, found that lenders who would hold their interest rate at approval stage include, Citibank, Collins Securities, Commonwealth/Colonial Bank, Heritage Building Society, HSBC and St George.
Various conditions apply to how long the rate can be held. However, Mr Foley says that most borrowers are still opting for the flexibility of a variable loan over a fixed-rate loan.
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May 2002
Mortgage Professional Australia - Issue 2.5
Don't Switch to Fixed
The long anticipated 0.25% hike in interest rates has arrived and with it scrutiny by many of Australia's mortgage holders over whether it may be prudent to switch to a fixed-rate product. RAMS director of sales and marketing, Peter Bromley, commenting on the Reserve Bank rate-hike decision, said while it
might not be the last increase for 2002, interest rates would remain at near record-low levels for the remainder of the year.
The Mortgage Industry Association of Australia (MIAA) reported that, before this month's rate increase, the number of new mortgages written continued to be steady. It added that there was no rush from customers to fix their existing mortgages, despite the probability of further increases. But the MIAA also indicated that a trend has developed where people taking out new mortgages over the first part of the year have fixed at least part of it. Borrowers need to be aware of associated costs versus the merits of fixing all or part of their loan, said MIAA national president Derek Robertson. His remarks concur with
those of Wizard Financial Services executive chairman Mark Bouris, who last month advised borrowers to stay calm and not panic into fixing their loan interest rates.
"Continuing speculation about spiralling rates has prompted a rush in requests to
switch from variable to fixed rates, which is not necessarily the best decision," he said. "The wholesale money markets have already factored in a a rate increase, so fixing rates is betting against the market."
Managing director of National Mortgage Brokers, Gerald Foley, said there are a number of aspects borrowers need to consider when looking at a fixed rate product. First, not all lenders conform the interest rates on their fixed rate home loans until the settlement of the loan.
"A recent survey we conducted showed that of the 23 lenders surveyed, 16 did not confirm the rate on their fixed rate home loans until settlement of the loan, " he said. "The downside here is that a borrower may feel that rates are on the rise and want to fix, buy by the time they settle their home purchase or refinance an existing loan, the interest rate may have moved upwards."
Foley said there are benefits in taking out a fixed rate loan nonetheless. "Protection against rising interest rates and the knowledge that your monthly repayment will be held for a set period are the main benefits," he said. "On the other hand, a lack of flexibility in the loan product and missing out on falling interest rates are seen by many as a disadvantage."
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3 April 2002
The Age Melbourne Property Guide
Fully Financed -
By Sal Cinque
Although
some mortgage providers advertise investment loans up to 110%
of the property’s valuation, the fact is they usually require
additional collateral above and beyond that of the rental
property.
Where you
have an existing property with sufficient equity, most lenders
are likely to accept this as additional security. In this
case, interest rates are not loaded, and depending on the
equity held in your home - mortgage insurance may not be
required.
Here’s an
example of how you may be able to purchase an investment
property by borrowing the total amount including costs:
Situation Analysis:
Your home is currently valued at $250,000 with an outstanding
mortgage of $100,000. Your equity position therefore stands
at $150,000. You have found an investment property valued at
$180,000 plus you require an additional $9,000 for associated
costs including stamp duty etc. The total loan required is
$189,000.
Possible
Solutions:
a) The
investment loan is taken out with the same lender as your
family home and your current equity is used as security for
the new purchase. The lender prepares new mortgage documents
for the residential property tying it to the investment loan.
One thing to be aware of here is that if in the event of a
default involving the investment loan, the lender would be
able to recover any losses from your family home as well.
b) If you
would like to keep the loans separate, the simplest solution
is to setup a line of credit over your existing home for
$45,000 that may be used to finance the deposit and costs
associated with the investment property.
In both
possible solutions, mortgage insurance would not be required
as the total borrowings in each case falls under 80% of the
value of each property.
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April 2002
The Herald Sun
Look before you Lock
Locking in the interest rate on your home loan now may not be the best strategy. National Mortgage Brokers managing director Gerald Foley says he does not expect home buyers to suffer if rates rise after a Reserve bank meeting next month. If the RBA raises rates it will probably do so by only 0.25 per cent, with two further rises of 0.25% each. With the average variable rate now about 6.07 per cent, an extra 0.25 per cent would add $31 a month to payments on a $200,000 loan over 25 years.
Foley says with three likely increases each of 0.25 percent, the most people will have in extra payments on a 25-year $200,000 mortgage is $93. Some people may need to make adjustments in lifestyle, but most should be able to absorb the increase, he says. But with three-year fixed rates now about 0.8 per cent higher than the variable rate, locking in your home loan now may not be the wisest option.
Fixing today means home buyers will most likely be locking in at 6.8-6.9 per cent for three years in a market where the variable rate will still remain similar to that, even with predicted rises. It also means people would lose flexibility of making early or extra loan repayments. National Mortgage Brokers has developed a fixed-loan checklist
- click here for a copy.
It asks questions such as whether the interest rate on a loan will be fixed at approval or settlement. A survey by National Mortgage Brokers shows that of 23 lenders, 16 do not confirm the rate on fixed rate home loans until settlement. The downside is that a borrower may feel rates are on the rise and want to fix, but by the time they settle their home purchase or refinance an existing loan, the interest rate may have moved up.
Andrew Willink, managing director of independent financial services group Cannex, agrees fixing a home loan now may not be the best move. "When you are fixing in today's market you are fixing a rate that is already a higher premium than the current variable rate," Willink says. "You are purchasing insurance when you don't know when interest rates will rise and by how much." He says rates are expected to rise 0.25 percent to 0.5 per cent in the next three months, still well below the current fixed-loan rate. He says the better strategy is to pretend to fix by increasing monthly repayments by 1 per cent, thereby cushioning a home buyer if rates rise.
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10 April 2002
The Age
Cash Flash: Redraw
The ability to redraw on extra money paid off a home mortgage over-and-above standard payments is becoming an increasingly common feature of home loans. Gerald Foley, Victorian branch president of the Mortgage Industry Association of Australasia and managing director of National Mortgage Brokers, says many people see loans that allow extra payments as a good way to save - provided they can access it if necessary.
"I think more people would have (the facility) in the event of a rainy day rather than plan to use it all the time," he says. Foley adds that consumers should check whether their redraw facility comes at a cost. Mark Ducas, marketing manager at Mortgage House, cautions that some mortgages have fees for using the redraw option. "You may get a product which has no ongoing monthly fees but there may be a fee attached to a redraw, (or) you may be limited to the amount of redraws that you can actually do per product, " he says.
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24 April 2002
The Age
Cash Flash: Fixed Rates
A survey of 23 lenders has rated the Commonwealth/Colonial Bank, Heritage Building Society and the
Rockhampton Building Society as the best fixed-rate lenders. The survey, conducted by National Mortgage Brokers, found that all three allowed borrowers to make substantial payments off their loans while both Heritage and Rockhampton don't cap the amount and have redraw facilities.
The survey also found that, while all 23 lenders charged fees for early repayment, most allowed extra payments to be made during the fixed-rate period. It revealed most lenders don't confirm the interest rate on fixed-rate home loans until settlement of the loan, meaning that
potential borrowers could find rates had moved before they settled.
Managing director at National Mortgage Brokers, Gerald
Foley, says borrowers should "do their homework". A
fixed-loan checklist for potential borrowers is available
online by clicking here.
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27 March 2002
The Age Melbourne Property Guide
Brokering For a Better Deal
There is a reason
behind the increasing number of mortgage brokers on the
market. It is a simple matter of supply and demand.
With the number of lenders increasing, so are the options
available to borrowers, making it a cluttered market for those
with an untrained eye. Getting someone else to do the
leg work makes a lot of sense. Enter your trusty
mortgage broker.
Mortgage brokers have access to a
cross-section of lenders and getting in touch with one broker
can put you in contact with dozens of lenders.
Director of Marketing at National Mortgage
Brokers Sal Cinque says approximately 5-6 years ago, mortgage brokers occupied around 5 per cent of the Australian home loan market.
Today, they account for about 25 per cent. He says mortgage brokers appeal to
clients who want choice and convenience. "Generally, we
have two distinct groups of clients that utilise our services.
Those that are time poor and those that are information poor," he says.
However, should you bank on your broker to find the right loan for you or
should you broker a loan yourself? Critics of mortgage
brokers argue that because they are paid on commission,
clients can be exposed to limited segments of the market or
directed towards the high commission paying lenders. Mr
Cinque questions this argument suggesting it does
not give the client any credit.
“In some ways the market is self regulated. With increasing consumer awareness, it would be
very difficult to win a client’s business if the product did not suit their requirements from
features and pricing prospective," he points out.
However Nicholas Gruen CEO of Peach
Home Loans thinks this
is still a question to keep
in mind.
Most brokers don't
charge, but as Dr Gruen
points out, this can mean that "brokers are
working for those who
pay them - the lenders".
When deciding
weather a mortgage
broker will meet your
needs, remember that
the line between adviser
and salesperson should
not be blurred.
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Feb 2002
Australian Mortgage Professional
Call-on vs. Drop-in -
By Gerald Foley
When reading through the many advertisements of mortgage lenders,
originators and brokers, one of the hooks most often used to attract
new business is “we come to you”. The question is, does the offer
of a mobile service really help to win over new customers or would
customers rather go into the loan consultant’s office.
Gerald Foley, Managing Director of National Mortgage Brokers, says
“Customers today are more aware and demanding than ever. A loan
consultant, whether representing a single lender or offering a
range of lenders’ products, needs to be flexible in when and
how they meet with their potential customers”.
So let’s look at the advantages of loan consultants offering
a mobile service versus that of an office or shop-front based outlet.
|
MOBILE |
|
For |
Against |
| * |
Customers more comfortable in their own surroundings |
* |
disruptions |
| * |
supporting documentation accessible at home |
* |
need to
carry supply of all documents, forms, brochures, etc. |
| * |
lowers
business costs |
* |
customers able to "shop" more brokers & lenders |
| |
|
* |
unusual
business hours |
|
OFFICE / SHOP-FRONT |
|
For |
Against |
| * |
access
to all necessary forms & brochures |
* |
higher business
operating costs |
| * |
saves
travel time & expense |
* |
need to
maintain experienced staff |
| * |
customer
more likely to proceed given committed time to attend
interview |
* |
operate
during normal retail hours |
|
* |
greater
control over interviewing hours |
* |
customers expect
immediate service |
|
* |
greater
customer confidence in a "bricks & mortar" presence |
* |
|
|
* |
gain walk in" traffic &
build local presence |
* |
|
Many people like to see a bricks & mortar presence, as it gives
them a feeling the business they are dealing with is of greater
substance. One of the keys attributed to the early success of
Charles Schwab’s move to telephone and on-line stockbroking
services in the USA, was their opening of retail branches.
It wasn’t that the customers went into the branches to conduct
their business, rather that it gave them more confidence to deal with the firm.
Overall, like most things in a sales environment, it will come down
to servicing a range of customer preferences.
For a loan consultant
to offer only one method of meeting the customer will always alienate
the other groups of customers.
If you don’t have your own office to operate from, see how you can
gain access to professional offices on a casual basis or maybe one
of your referral sources will assist to provide space on as as needs
basis. This will enable you to provide a fully flexible service,
without incurring all the additional costs and administration of operating your own office.
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6 Feb 2002
The Age Money
Cash Flash:
All-in-one Loans
All-in-one home loans are becoming increasingly popular because of their flexibility
according to Gerald Foley, the President of the Victorian
branch of the Mortgage Industry Association of
Australasia. The all-in-one-loan allows borrowers to
direct their income into a loan or offset account and
leave any cash surplus in the account to reduce the term
of the loan.
Money can be drawn down to what the scheduled payment
would have been if needed. Mr. Foley, who is also the
managing director of National Mortgage Brokers, says the
all-in-one loan is ideal for someone who has a cash
surplus at the end of the month. Modelling shows that an
all-in-one loan can cut almost 12 years and save more than
$95.000 in interest repayments off a standard 25-year loan
of $200,000 paid monthly at a rate of 6.07 percent.
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19 Dec 1999
The Herald Sun
Bendigo Inches Ahead
BENDIGO Bank customers will get access to third party finance
products online in an Australian banking first. The Victorian
based regional bank said the deal follows its purchase of a
30 percent stake in Inch Corp, a financial advisory firm with
an advanced financial services platform.Inch Corp's web portal
will be rebadged under Bendigo's brand. It will offer services
including insurance, funds management, superannuation, bill
paying facilities, share trading, financial planning and health
insurance. The website will be ready for Bendigo's 600,000
strong customer base from late January, according to managing
director Rob Hunt.
Bendigo believes the deal will particularly
benefit its regional and rural customers who do not have the same
access to financial services as metropolitan customers. The bank
currently has around $800 million in funds under management through
its wholly owned subsidiary, Sandhurst Trustees Common Funds, which
largely deals in mortgage-backed securities and cash investments.
Both Mr Hunt and Inch Corp managing director John O'Shea said the
initiative would be strong for both companies. "It provides Bendigo
with a quantum leap in the functionality and product offering of
its online business, while providing Inch with access to Bendigo's
600,000-strong customer base," a joint statement said.
"This agreement is a cost effective way of leveraging the
strengths of both groups to broaden customer services and
grow our income streams while maintaining our strong
customer focus."
Inch will continue to manage and
staff the site and provide financial advisers and consultants. Mr Hunt
said Bendigo had a proven and popular Internet site
already, with usage more than tripling last year. "A
growing number of customers are choosing online banking
and through the portal development we will vastly expand
the services we can offer to them," Mr Hunt said.
Many of Bendigo's existing products will also be offered through the portal,
which the bank believes will allow greater room for cross-selling. However, there are some products our group does not offer, which
we believe are essential financial services, and this is a cost-effective
way in which to provide our customers with access to those products
while maintaining their primary relationship with Bendigo," Mr Hunt said.
Bendigo, which operates 192 branches and Community Bank branches across
Australia, now has assets in excess of $7 billion and employs more than 1600
staff. Inch Corp launched its portal in June 2000, providing services from
groups including Macquarie Advisor Broking Services, H&R Block, National
Mortgage Brokers, RediPlan, Law Partners, Australia Post, ewise and Moneybags.
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19 Dec 1999
The Age
Bendigo Expands Online
Bendigo Bank announced yesterday that it would launch an online
financial portal service providing access to a range of products
from leading Australian financial service providers. The move
came after the bank acquired a 30 per cent stake in financial
portal operator Inch Corp for an undisclosed sum. Bendigo Bank
managing director Rob Hunt said the portal, to be re-branded as
Bendigo Bank and launched in January, would greatly increase the
bank's online products. It would also give Inch Corp access to
the bank's 600,000 customers, he said. Owen Davies, the group
public relations manager for Bendigo Bank, said the bank was
trying to target more rural customers who in the past would have
had access to only one supplier. "It is.....playing a major part
in our strategic thinking about how to.....be more relevant to the
communities we serve," he said.
The Inch Corp portal provides
services such as financial planning, tax advice, superannuation
and general insurance, as well as will preparation and health
insurance. Since its launch in June 2000, it has provided access
by arrangement to financial service providers such as Macquarie
Adviser Broking Services, National Mortgage Brokers, Australia
Post and Moneybags. Mr Hunt said Bendigo Bank's e-bank usage
had risen 221 per cent last year and was still accelerating.
The move left the stockmarket unfazed yesterday, with Bendigo
Bank shares up six cents to $7.30, in line with an upward move in the
rest of the banking sector. Hamish Carlisle, equity analyst for
Burdett, Buckeridge and Young, said: "I can't imagine a huge amount of
difference in the short term, although it will bring (Inch Corp)
some credibility in terms of the brand." He said both parties would be
pushing to rake in profits, as information services provided by the portal were free.
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Oct 1999
Mortgage Brief
National Mortgage Brokers
Johnson Taylor Potter Mortgage Plus has recently been acquired by its previous executive
team of Gerald Foley, Kon Avramidis and Sal Cinque, under a management buyout arrangement
with Johnson Taylor Potter Stockbroking.
The company has been renamed National Mortgage Brokers, and will operate as a wholesale
mortgage broker throughout the eastern seaboard states.
Following the recent acquisition by Bell Securities of Johnson Taylor Potter, Bell Securities
has decided to not continue with its direct involvement in the mortgage broking field however
will continue to use National Mortgage Brokers to service its clients needs.
Gerald Foley,
managing director, said: "National Mortgage Brokers is looking to establish itself as a
leading player in the wholesale (or aggregator) sector of the residential and commercial
mortgage market. With our brokers having the option of operating under either a stand
alone or co-branded arrangement, we believe we can fill a need for larger businesses to
introduce mortgage broking to their existing client base and for smaller, experienced
lenders and brokers to gain the benefits of owning and operating their own business,
with the support of the National Mortgage Brokers brand, lender panel, business systems and support."
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