In the latest episode of Elite Broker, Annie Kane and James Mitchell are joined by the director of Elephant Financial, Shehan Wijayasinghe.
Having recently won the award for Best Customer Service at the Better Business Awards NSW, Shehan shares what he believes is the key to delivering superior service to his customers.
Find out why brotherly affection led him to start a career in mortgage broking, the hurdles he faced when setting up his own business and why he believes brokers should be held to a higher standard.
He will also share:
- The process he uses to ensure good consumer outcomes
- His thoughts on fees for service
- What he has learnt about running an independent business
And plenty more!
Articles of interest:
Victorian brokers honoured at Better Business Awards
Better Business Summit Winners 2018
VIC Finalists 2018
2017 Finalists Victoria
Announcer: Welcome to the Elite Broker Podcast. This is your host, Annie Kane.
Annie Kane: Welcome back to the Elite Broker Podcast, and welcome back to James Mitchell, managing editor of mortgages at Momentum. How are you doing, James?
James Mitchell: Very good, thanks, Annie. Great to be here.
Annie Kane: Been a long time since we had you on this podcast-
James Mitchell: Has it?
Annie Kane: Yeah, it's been about a month.
James Mitchell: Oh, wow.
Annie Kane: Been away in Hong Kong.
James Mitchell: That's right.
Annie Kane: Having fun.
James Mitchell: I'm back now so it's all fine.
Annie Kane: But we're easing you in. So we've got a lovely guest on this week on Elite Broker. It's a Melbourne-based broker and director of Elephant Financial, Shehan Wijayasinghe. Now having previously worked in financial services and also for the major banks, it wasn't actually until his sister was burned by a bad experience with a bank branch that Shehan decided to move into broking himself and ensure that his clients never experience bad customer service when getting a mortgage. And his dedication to good consumer outcomes, great customer service has been paying off. Couldn't get that out then.
James Mitchell: That's all right.
Annie Kane: And this year, Shehan took home the individual award for best customer service at the Better Business Awards in Victoria. So this week, we're catching up with Shehan to find out how he's done it. How are you doing, Shehan?
Shehan Wijayasinghe: I'm doing very well. How are you?
Annie Kane: Really, really well. We're very busy here at the moment because obviously we've got all of the Royal Commission going on at the moment and all of that-
James Mitchell: Reporting season with the banks. There's a lot going on.
Annie Kane: Yeah, the major supporting. So it's been keeping us busy. But we wanted to talk to you because we obviously know you from the Better Business Awards. This year you won the individual award for best customer service at the Better Business Awards in Victoria. So congratulations to you.
Shehan Wijayasinghe: Thank you.
Annie Kane: And I know a little bit about your background into how you got into broking, and it's really a story about delivering better consumer outcomes and better customer service. And I just thought if you would be able to tell us a little bit of background as to why you got into broking. So as far as I'm aware, it started off with an experience that your sister had. Is that right?
Shehan Wijayasinghe: Yeah. Absolutely, actually. So I was working at ANZ for about five years, and I was enjoying what I was doing but got to a tether where I was trying to find out my next steps. And I went on my honeymoon with my wife and I told her, on the honeymoon, I'm done. I'm gonna take some time off and figure out what I want to do." So I came back, resigned, took another month off, and during that same time I was trying to figure out what I wanted to do, my sister actually tried to get a loan and I sent her to the ANZ branch, because that's all I knew, and she came back and gave me a scathing review for doing that. And she wasn't happy with the outcome, she wasn't happy with any of the service.
She badgered me to do it as an older sister would and I thought, "Okay, you know what? I'll help her out. I feel terrible." And actually, so I did my diploma, got accredited as quick as possible and helped her settle her loan. And all the conversations I had with my sister, I thought, "Geez, it's a bit of a surprise why branch lenders and maybe other brokers are not having these goal-oriented discussions." And to be honest, after that, it spiralled. Her friends and family came and I didn't really know I was running a business until I was a couple of months down. I went, "Oh, geez. I got to register a name," and here we are. It's bang on two years later.
Annie Kane: Well, that's great.
James Mitchell: I think it's pretty amazing that because setting good customer outcomes aside, just being a good brother ... Your sister wanted a home loan so you went and got a diploma and then you sorted it out. You pretty much became a broker so you could write the loan for her because her branch wasn't doing her any favours. I think that's pretty awesome.
Shehan Wijayasinghe: I was pretty scared of her. So yeah, it all started because of my fear of my older sister.
James Mitchell: Yeah, that's brilliant.
Annie Kane: She's to blame but also to thank, really, for bringing you into the market
Shehan Wijayasinghe: Yeah, absolutely.
Annie Kane: Into the market.
Shehan Wijayasinghe: Absolutely.
James Mitchell: How long it took to do the diploma and get everything sorted and accredited so that you could do the loan for her? Did she end up losing the property over that time?
Shehan Wijayasinghe: No, we made it. She was pretty good. We got a bit of an extension back then, but because I wasn't working I had a couple of months of going a bit stir crazy. So I was able to knock off the diploma in about a week. I'm really fortunate that our ... The… that I have now was quick to turn around things and quick to put everything in motion. So I was up and running in about a month. I hadn't had all the accreditation but I had the large bulk of it to give my sister some good advice.
James Mitchell: Wow, nice job.
Annie Kane: And I just wondered, you were saying, not to like slam ANZ but just ... You were saying that your sister had a really bad experience in branch. And what was it that she felt wasn't being listened to or achieved that she wanted?
Shehan Wijayasinghe: It was such a big decision for her. She just got married. She was buying her dream-ish house, and she almost wanted a little bit of comfort around, "Could she afford this? Was this the standard in the market?" She didn't really get any of that. She was almost just getting, "Here's the rate. This is what an offset does. Here's some fees or an introductory rate. Let me know which way you want to go." And she was a little bit paralysed not only from the decision of buying a house, but then the decision of, "Okay, well, is the bank right? What's going on? What's my repayment?" And she didn't get the support she wanted, which, obviously, being a brother I would do that for her. But that flows into the ethos of what we have in the business now.
James Mitchell: That's interesting. So what is it about, like you said, the ethos of your business which you think sets it apart? I'm keen to find out some of that support you mentioned, how that flows through to what you do.
Shehan Wijayasinghe: The name Elephant was born out of the fact that this is the biggest onus or the biggest decision you will ever make, in our opinion, and we think that numbers are really important to help frame your decision. I came from analytical background and so a lot of the work we do upfront is actually agnostic of a lender, agnostic of a price, because we like to work on a scenario basis. We work on each client. If you buy a home you get five scenarios, and that's starting from the lowest property you're thinking to buy and the smallest debt to what the maximum could be, and really working within that range to understand what element ... Or what can you get out of this loan? Because you're buying a new house, Is it a person decision, Is it an investment decision ... From all those discussions and a goal-based discussion really forms the debt structure and the strategy of debt, because to us it's a big decision, and really, a good three or four conversations in you can start to talk about your bank, your rate. Well before then we've discussed fixed rates. We discuss your budget. We discuss any upcoming changes in your income, good or bad. A lot of that, even just working through someone's life gives them clarity of why they're making a decision, and that's a big part of what we like to focus on.
Annie Kane: So let's go through then, if a customer comes to Elephant Financial, what the journey is for them. How do you first off start understanding their needs and wants?
Shehan Wijayasinghe: We almost have three stages. So we have a goal-based discussion and that's really around understanding why you're buying a property or why you're looking to refinance, what is the reason. And then the next stage after that in that discussion is, "Okay, what are you actually looking for?" And in this market, that what we are looking for is really important because the way the banks have changed and the way that credit's become really important ... Sometimes things don't quite align. You could want the most debt but it's probably not gonna be the well priced. Or you could want the cheapest price but there actually could be cashflow. I think a lot of clients have had the fortune of the last 10, 20 years in the lending land where you could get all three sometimes. You could get the best price, the highest borrowing, the best policy. But now banks are skewing to their own niches. So we really want to understand what is the driving factor? Is it the interest rate that you're focused on? Is it cashflow? Is it the best house? Is it getting the speed of turnaround time? Because sometimes that doesn't align.
And then so once we do that we go through and understand the structures of the debt. What's really important is making sure the client's protected. What happens if I decide to go 70%? What happens if I go lower? What will you do? Have you thought about reducing the terms? All these questions we like to delve in, and then once we've decided, "Okay, this is the right purchase price for you. This is the right loan amount. This is the retainment you're comfortable with under any scenario." Then we go and find the bank. The product is sort of secondary to that discussion.
James Mitchell: It sounds like it's quite an educational process that you have with your clients. Annie and I were having a chat last week and it was about that there's a bit of an opportunity for brokers in terms of the education piece, the financial literacy piece, purely because there's a lot of people who don't understand how to manage debt and that sort of stuff. And even people who might come to you who have existing debts. Do you ever meet customers who have, for example, credit cards, personal loans, and an unmanageable level of debt, and they're looking to get a home loan? And you need to take a step back and say, "Hold on. You need to consolidate some of this," and you start to educate them about that?
Shehan Wijayasinghe: Absolutely.
James Mitchell: Yeah.
Shehan Wijayasinghe: Absolutely, before we get into, a lot of people can see it as a transaction but it can be a big risk doing it the wrong way and not thinking about it and not educating people how their cash flow works and I came from a business background and so in the business world you're told to really know your profit and loss on your balance sheet, it's a critical part of success. But that can be applied to an individual, you know, you profit and losses, your income, that's your expenses, and then you add them to your balance sheet which is a big loan and a big asset, it needs to be managed really well and not that we go into that sort of granular detail around how you manage your cash flow but it's an important decision to know that this next step of buying a house or getting more debt or whatever it might be will really impact your personal living standards or lifestyle and people don't know that and they don't really realise that.
They just think oh yeah, I'm paying rent and I'll supplement to a mortgage and it's so different, so much more than that. And so we do take them to a bit of a journey, I say we spend a lot more time upfront and which really helps when we find the right bank or when they find a property we find that their turnaround time for purchasing is a lot shorter cos they know exactly what they want.
Annie Kane: And when it comes to actually then putting the customer into a you know a specific loan, a lot of the talk at the moment has been around the standards that brokers are held to, so in terms of at the moment the MCCP requiring brokers to work to a not unsuitable standard and maybe, you know, different people suggesting perhaps we should change that to have more of a best interest standard or something along those sort of lines so that's not just not unsuitable. Where do you sit in terms of that potential change? Do you think that brokers should be held to a higher standard and if so what should that standard look like?
Shehan Wijayasinghe: I 100% think we should be held to a higher standard. I guess the best interest cause is something we discuss in our business as well because the risk of having that kind of view is well what is the best interest? You can take a lot of views to what that is but as long as there is an area that brokers can define and then execute on best interests cause everyone's different like the best interest might be that extreme lendings now to get the perfect house, or it might be the cheapest rate or it might be cash flow. As long as there's no definition of best interest then it is derived by a good broker and executor and I think that's the safe way.
If regulators go and try and define best interests then everyone has a different scenario so I think that's a bit of a risk but overall I think it is important for our industry to take this opportunity to really transform ourselves into that more goals-based discussion, more care-based work that we do, I think it's not just needed, it's super-critical for our industry to survive.
James Mitchell: I know just earlier when we were talking you were saying when it comes to deciding a lender that's three or four conversations away, the initial stuff is around the goals and what the customer's actually looking to achieve, and I know that recently we've seen a lot of talk around customer expenses and banks becoming more stringent around living expenses and that sort of stuff and it always struck me as an interesting thing that living expenses are a point in time but they're used to I guess underwrite a loan with a 30-year term. How does the conversations you have with your clients in terms of looking at their goals and that sort of stuff feed into, I guess, the information you provide to lenders who are looking at expenses and things like that?
Shehan Wijayasinghe: Yeah, it's a really important question. Unfortunately the world we're in right now is super credit-focused and you almost, you can't fight it, you almost have to adopt it and so part of the education process not only about their goals is actually a big piece about educating where banks are in this economic cycle. Right now when we talk to clients we're pretty honest. It is a tough environment, everything has to line up, we have to get as much documentation so it's important for them to understand how everything's looked at and we try and do that upfront. And sometimes yeah it's a bit polarising, to hear that it's a tough market, but it's what's needed for us to work with the clients, for them to drop their barriers down and talk to us about what's upcoming, especially when, you're right, expenses are a point in time and when you sort of say we're looking at expenses in a point in time. We all know that when a mortgage comes along most people can adjust their expenses at a default rate are nowhere near the fact that we are overspending the other mortgage and then we're taking a servicing rate that's higher and all this kind of stuff. It's very much a constrictive crediting world.
But education's the only way that we can cut through that, let clients know that this is how it's done, it's an even playing field and so we try and work through that and once we get a client comfortable then trawling through their expenses, trawling through bank statements and asking questions about what is this transaction, they're very receptive to that, but if you don't talk about it early enough they just go why are you asking me these questions, this is annoying, so we do spend a lot of time just talking to them about listen we are gonna have to pry through everything. It is just the world we live in and it's also important because sometimes we pick up things that they don't even know.
Annie Kane: Yeah, and I think that's a very interesting point is that you were talking there about spending all of this time to go through all this and making sure the client knows what they're getting into and understands their spending habits as well cause they might not be aware of it but I just wondered, you know, another conversation that's being had a lot at the moment is about fees for service or changing to a flat fee and changing broker remuneration basically but some of the arguments for it have been like well if we move to a flat fee would be sort of egalitarian across all the lenders, however the alternative is we'll, we're spending all of this time educating clients and it does require a lot of time and effort to actually get them up to speed and to go through the needs analysis and what are your thoughts on potential changes to remuneration and do you think that bringing in a fee for service would be applicable?
Shehan Wijayasinghe: It’s a tough one because you see lot of merit for fee for service right, there is a lot of merit behind it but then you have to step back and go you know, where, how cause there's so many different lenders in the market. You got the big four, you have all these intermediaries and small lenders, a lot of those small lenders need us for distribution and are in close competition then the other side of things if we employ a fee for service, who determines how much it is? Are we as brokers then just gonna chase the most complex clients who can pay which is really unfair cause the people that need it the most probably can't afford it.
Annie Kane: Yeah.
Shehan Wijayasinghe: It's a tough thing that regulators have to balance, do I think that our industry is getting less, it's hard to be productive cause it's more regulation in clients absolutely, so it's a balancing act. I don't know if fee for service can work, I see the merit behind it, I just don't know if it works in our industry because it can deter us or it can deter a client coming to us which then might put them in a worse-off position cause they're not gonna be able to get all the information from the whole market.
James Mitchell: I want to ask about your business name, how do you come up with a name for your business?
Shehan Wijayasinghe: For Elephant Financial?
James Mitchell: Yeah, Elephant Financial.
Shehan Wijayasinghe: I'll tell you what, so when I started the business I said okay, I've gotta get a name, and I'm not much a creative person, but then I started literally with FW Finance, and I went wow, that is really, really bad.
James Mitchell: Yeah.
Shehan Wijayasinghe: And I didn't want to call it that, I thought I'm just gonna have a crack at being completely different and the most memorable thing to me is an animal, so I just went and the biggest decision and so I just said ah, I'm gonna call it Elephant and I'm gonna call it Elephant Financial, and it sort of now actually works quite well, cause people remember us which is great, and we think elephants have great memories since we sort of build that into our ethos and how we do things and the next phase for us is putting out the referral piece to other advisors and that's coming out soon, and we're gonna call that a herd, so you want your herd of advisors around you.
James Mitchell: Oh yeah.
Annie Kane: That's sweet.
Shehan Wijayasinghe: But yeah, it wasn't anything special, but it was just I wanted to be as far different as possible…
James Mitchell: I like it, it works.
Annie Kane: I think it's interesting actually that you did decide to branch into your own company rather than join a group, I mean you said that you were in banking to begin with and I think before that you were in audit, I think, is that right?
Shehan Wijayasinghe: Yeah absolutely.
Annie Kane: So I think you know you already had quite a bit of grounding in sort of how businesses should run and-
James Mitchell: Yeah.
Annie Kane: ...you know.
James Mitchell: Corporate things.
Annie Kane: The P&L sheets that you're mentioning earlier you obviously would have quite a bit of experience already and across what businesses should be doing, but I just wondered like what were the sort of main hurdles that you had to overcome when you started up the company, was there anything that sort of surprised you when you were setting up Elephant Financial?
Shehan Wijayasinghe: Oh absolutely, I, I made about 500 mistakes in the first year and that's because you just you cannot prepare for small business in general and then the brokering world when I started was going through this rapid change and sort of fortunately that we joined at the time because someone said to sign ten checklists and I know, I didn't know any different, that made it quite easy, but there are a plethora of mistakes I made. The biggest ones is just not knowing your customer demographic and then building a business around it. At the start, not that you chase every line but you're happy to do anything you can to get clients in the door and then you fixate on a certain number or volume you want to hit a month, and we through maturity learned that's just the wrong way to look at things, so we've, we try and step well away from our oh how much loans we're gonna sell this month, we're stepping well away oh how many leads are we calling because we really want to just end up with a good customer outcome.
We'd rather talk about how many happy customers walk out the door this month.
Annie Kane: And so who's we, like who else is in the company?
Shehan Wijayasinghe: So there's three of us. There's me, there's Gav who's my loan processor, and there's Ben who's just joined about two months ago and he's another sales broker.
Annie Kane: Okay, so you've kind of expanded quite quickly already then I mean as you said earlier two years in, with a company so you've already started to experience some growth. What was the decision to bring in Ben? Like how did you actually make that, what was the turning point for you to think we needed extra hands?
Shehan Wijayasinghe: Just wanted to try and be ahead of where the business is going. It's obviously important to make sure you don't put too many in the business before you grow but we, Gav and I were having some great lead flow and great volume and as the industry got a bit tighter we saw that the time to set a loan was blown out a couple of hours, because we had to do a lot of work upfront, we were trying to build more of a customer-focused business and so I didn't want to drop that service level, and then so we met Ben actually we were in a coworking environment in Chadstone sort of middle of Melbourne and Ben sitting a couple desks down and he liked what we were doing and at the same we needed a bit of help and it was a beautiful synergy that the theory of coworking that you can find other business and bring people on and that's what happened.
We needed a little bit of help to keep our service level up and the growth is coming slow and steadily and we thought why not just be ahead of the curve and Ben was a great fit for us.
James Mitchell: I know you mentioned that you got credit with Vow, you signed up with Vow when you first started, are you still with Vow now?
Shehan Wijayasinghe: Absolutely, yeah, been with Vow from the start.
James Mitchell: What was your decision to go to Vow, obviously there's quite a few aggregators in the market, how did you find out about those guys and why did you stay with them?
Shehan Wijayasinghe: I'd like to say it was this massive analysis but to be honest it was, it wasn't, Vow was back then a very simple do-it-yourself, manage your own business model and I wanted that, I wanted full accountability, we were fortunate enough to go on a flat fee model which I think has served us well in the long run now and they really gave us the tools but then said build your own business, brand it yourself, put layers of compliance on yourself. We're still an ACR, so we fall under all the sort of regime but I like the freedom to go and try and build things and make mistakes and that was a really important part and Vow sort of fit that mould for us.
James Mitchell: I know the guys at Vow are, they've done a lot of stuff in the commercial and small business space increasingly over the last few years and I noticed some ex Macquarie guys at Vow and or who aggregate through Vow and ex-bankers who have really sort of kicked goals in the commercial space. Is that an area that you're playing in as well or looking at, business, finance?
Shehan Wijayasinghe: At the start I was, I was running around like I said taking on any client but I think over the last two years we really realised where we add a lot of value and where my skill set is and the team's skill, so we probably don't deal with much commercial as we want, we probably pushed back on commercial just a little bit. We really want to get the book humming and in a world where credit is really getting tight for the home loan space, it's almost like we made the decision to focus on it so we wouldn't let anything slip through. As it stands I'd say 98% of our volume in revenue is just from pure residential and investment home loans. So we're still a little bit away from turning the tap on to commercial.
James Mitchell: I want to ask you about that tightening of credit cause I mean there's been a few projections put out in the market, you know, we've had Phillip Low from the RBA come out say that credit's gonna-
Annie Kane: Tighten up further.
James Mitchell: ...tighten up further and then obviously the major banks are projecting to to slow, what do you think the impact will be for brokers for lenders generally and also for consumers in this environment as regulation keeps increasing and the gap's getting narrower in terms of what people can borrow and how much they can borrow?
Shehan Wijayasinghe: I think the industry's gone on this massive change over the last year and a half or so, so I think clients are acutely aware that maybe buying capacity's a bit down and so we're finding that clients are open to hearing us educate them a little bit more about that, do I think it's having an impact on loan size, absolutely and property prices, slowly I think it has to intrinsically but I think it's a good thing. I think what's happening is only just allowing the flow of funds to go to the right people at the right price, at the right risk profile which will only serve us well in the long run. We've been really fortunate in this country to have this great bull run but it's important to protect that and I think yes it will be tight over the next couple of years. I agree with a lot of those articles that are saying there's a risk to properties going down there's a risk to the economy with credit coming down but you almost need that.
You almost need to reclean our personal balance sheets, all this change to pushing clients towards principal interests, I think it's fantastic. You'll have this period of repayment, you'll have this period of recess and then the economy will only be ready to launch again in the next couple of years in my opinion.
James Mitchell: Yeah, no, good point, so almost like a deleveraging a little bit, people are being forced into having maybe a smaller mortgage but maybe they've, there's opportunities to pay it down quicker and just service the debt in a better fashion.
Shehan Wijayasinghe: Absolutely, and it's almost, if no-one tells you you can pay your loan back faster than 30 years some people won't, and I think it's important to show them what a new credit card does to your borrowing and how it can hurt you, what an offset account does, what about reducing your term, what about paying off faster. I think those are conversations that we've been fortunate when you have double digit property growth that you don't have to think about because they’ll build equity that will solve any issues if they ever arrive. Now that's slowing down, you want to be really careful. It's about cash flow, it's about repaying debt yourself rather than having this equity kick.
Annie Kane: And I think especially in markets like Sydney and Melbourne so you're operating in Melbourne it's almost needed because the properties are so exorbitantly expensive.
Shehan Wijayasinghe: Absolutely.
Annie Kane: In the grand scheme of things. I just wonder like in terms of actually the market that you're seeing at the moment, are you finding that people are already finding it harder to get approved for a loan or is it still easy going?
Shehan Wijayasinghe: The ratio of debt to income on average across our book has come down, and that's obviously a function of the banks wanting that to happen and then there's not a day that goes by, when I first started the business I'd see a property come through, I'd see it come up for sale and go oh gee that's a decent price for that house. Now when I see a contractor sale or a couple a month I go oh gee that's actually a good purchase which tells me that it's sort of working, right. The world is, the banks have tightened, the property's come down a little bit, but people are borrowing the right amount.
Annie Kane: Yeah.
Shehan Wijayasinghe: Where previously they were borrowing on this future income and future wage growth and future 3% interest rate forever and a day, well now they're borrowing very prudently, and I think I'm seeing like a lower loan sizes, low average debt, lower purchase prices but in a good way, it's not like clients are missing out on properties. They're still out there, they're still buying their homes, they're still getting into apartments, they're still moving out of home or upgrading, so I don't think it's impacted the world in a bad way. I actually think it's impacted in a great way
Annie Kane: Great. Well I think that's all the time we have today Shehan, so thank you so much for your time and best of luck with your new hire, with Ben and we look forward to hearing more about how Elephant Financial's coming along in future.
James Mitchell: Yeah, good to chat to you.
Shehan Wijayasinghe: Good on you.
Annie Kane: If you are a new broker and want to unlock more tips and strategies to improving your business and learn from some of the industry’s best brokers then make sure you register to attend our free new broker academy roadshow. It’s visiting Sydney on the 12th of June then going onto Melbourne on the 14Th, Brisbane on the 19th, Perth on the 21st and finishing in Adelaide on the 26th of June. New Broker academy will equip you with the necessary skills to succeed so visit the adviser.com.au/new-broker for more information. Well that's all we have time for today so as always, please make sure you tune in next week for another episode of Elite Broker Podcast and visit theadvisor.com.au for all the other news and features.