In this episode of Elite Broker, The Adviser talks to brothers Tom and Ben Hawley about their new business, Azura Financial, their thoughts on financial education in broking and how this impacts clientele, and why they believe brokers should intermittently review their aggregator to ensure the needs of their business are being fulfilled.
Find out how these brokers:
James Mitchell: Hello and welcome to Elite Broker, I'm your host James Mitchell, editor of The Adviser, and we're joined once again by regular co-host and deputy editor of The Adviser Annie Kane. How're you doing Annie?
Annie Kane: Good thanks James, how are you doing?
James Mitchell: Not too bad. And we've got two brothers in the studio with us today, the Hawley brothers, Tom and Ben. They've been in the broking industry for a few years now, and they've just set up Azura Financial, is that correct?
Ben: Yep, absolutely.
Tom: Absolutely correct.
James Mitchell: So tell us a little bit about the business, I understand you guys got your start in mortgage broking with Shore Financial, based just down the road here in North Sydney. You've obviously set up your own shop now, tell us a little bit about what's been happening.
Tom: Yeah sure so, so essentially we left Shore in October. And yeah, we set up a little boutique brokerage, we're operating out of Double Bay, which is a bit closer to home for us, so we're sort of Eastern Suburbs locals, and a lot of our clientele are around that area. So it made sense for us to be on this side of the bridge, it's cut down the travel time a lot, which obviously saves us a bit time of time each month.
Ben: More time in the office!
Tom: Yeah exactly, more time in the office, could be a negative, but no all good. And we're offering the same services we were previously. I think we're a bit more tailored to a premium type of clientele. Obviously Ben and mine's background is coming from banking, or funds or a different direction to broking, so we try and align ourselves with a clientele that sort of suits the type of service that we offer, which is a bit more holistic.
James Mitchell: Yep.
Tom: So and obviously we work pretty closely with accountants and real estate agents, so it made sense for us for the location move but yeah, it's a boutique brokerage. We're not really out there trying to shoot the lights out and hire 50 brokers, but I think we've set up a good little brand. I think we've got our branding and colours and everything right, in terms of the direction that we want to, or the perception that we'd like to give to the people that we're dealing with, but business referral partners as well as clients. And we're just taking it one step at a time and it's been, the last couple of months has been really interesting and looking forward to the future ahead obviously.
James Mitchell: Yeah. And in terms of, I guess your background, your educational background as well which is quite interesting. Brokers ... People come into the industry through various back rounds, some have no experience at all with finance. Some come from banking. You've got a Bachelors in Economics and Finance, you've got a Masters in Accounting and Finance, very well educated. What was your journey, I guess into mortgage broking. And I guess a question for you Ben as well.
Ben: My transition, I actually worked at St. George Bank prior to getting into broking, so I guess the lending side of it before I was dealing with companies and lending to businesses.
James Mitchell: Hmm.
Ben: And obviously much bigger numbers that dealing in the home loan space, and then the transition into broking, in terms of the theory behind lending and all that, was quite simple, but I guess it was a different experience in terms of the business. Generation what not. I mean, after doing all the study in the undergrad and the masters and everything, I never thought I'd be...you know, all I needed was a diploma! In the end of got a $50,000 HECS bill!
James Mitchell: What are your thoughts around that? I mean, we've just, I think the bills just passed for financial planning where they're going to require a degree now. It's going to mean more qualified. Obviously broking is still Cert IV, but there's talk of a higher qualification. What are your thoughts around this sort of, I guess mindset in society today that you've got to go to uni, you've got to get educated but then, you know, for a profession like broking the barrier's still quite low.
Tom: Yeah, I mean personally, I don't necessarily agree with everyone in the country needing a uni degree. I think the focus is probably a bit more of a political discussion. The focus has sort of come off or you know, the shine has sort have come off people doing trades and things like that. But I think in broking, that both, Ben would definitely agree with me that our previous experience, even though we didn't actually need it to get into the industry was beyond helpful. I mean being able to speak to people on a deeper level about their holistic financial position about what’s going on, financial market…
Ben: Understanding complex client income structures, so you know, a lot of our bigger clients, they've got, they're self-employed, they've got multiple trusts. All that sort of stuff where your average broker that comes in and enters the industry and does his diploma ... they get all these tax returns in and have no idea where to start. And that's where we, and it's a big part of what we're trying to do as a brand. Become more of a premium service for that higher end client I think.
Tom: Also discussing people's positions with their other advisers, like their financial planners and their accountants, it helps immensely to get new business but also gain people's trust and give them, again that sort of holistic picture. Obviously, looking back on the time, I mean I did about six years at uni and probably a year in various positions that I didn't really enjoy – you could say that was a bit of a waste of time, but realistically it was the exact opposite. It was preparing me to be able, and Ben of course, to be able to excel so quickly like we did.
And the thing about broking is, you go and speak to someone you're obviously giving a pretty...a very thin channel of advice around what sort of product they're gonna use to borrow money, however their current position and everything they're doing, their long term goals, and their full financial picture needs to be taken into consideration. And I think having that education obviously assists in a huge way with being able to advise people properly and giving that extra value over and above what I think a lot of brokers... The trap that a lot of brokers get caught in, which is literally just discussing interest rate.
And I think, being able to get away from that conversation and get more down into okay, we'll get you a good product and a good rate, but realistically we want to set you up with the right structure and talk about your tax planning and speak to your accountant and figure out what your investments are and all the rest.
And that's where you're really going to get value. I mean, being able to set up the correct structure so that your loans are more tax effective is going to save someone a lot more money that trying to get them an extra ten points on a variable rate.
Annie Kane: Hmm.
Tom: So yeah, probably a good tip for people out there.
One interesting thing that I did note was that when we were at Shore sort of hiring people, I did tend to find that people that had come from a financial background, they actually had financial experience and financially trained, and then learnt the sales side, because I'd never done anything to do with sales when I started. There tended to be a bit more success on people having the financial knowledge, and then learning the business development.
James Mitchell: Mmm-hmm.
Tom: Other than the vice versa, which is having that sales background and trying to pick up the financial side.
Ben: It makes it easy though if you know what you're talking about to be able to go to, to build the trust of referrers and all those people, if you can, if you understand it you can you know, talk about it properly. And that's the, I think, the key with that building that sales side quickly.
James Mitchell: At St. George, did you have, sort of like a business banking background that you had when you were working at St. George?
Ben: Yeah, so I started there as a graduate and sort of built my way up. And my final role there was what they called a relationship manager, which is I was basically running a portfolio of probably about 15-20 client groups. With lending in the space of sort of anywhere from sort of two up to 30, but the bulk was around that sort of eight, nine, 10 million dollars.
James Mitchell: And focusing on small businesses.
Ben: In lending. Yes, more small business, small to mid-size businesses.
James Mitchell: Is that something which you're looking to, I guess offer, or is that something you already offer, where are you now? I know there's this big push for sort of, you know for mortgage brokers to break into asset finance, SME finance, and sort of you know, get into that market as well. Is that something you thought about.
Ben: Yeah the natural thing is the commercial property. Investment and development. When you're doing the resi stuff, that's just what comes across your desk more naturally. I think there's definitely car, car finance is something that's quite simple. And a good added service to clients, but I think if you're wanting to really target, the business side of it, you've really got to immerse yourself in
An industry and target a specific industry and make yourself known in that industry. And if you're spending too much time doing the resi stuff, and you know, a bit of the commercial property investment stuff, there's not enough time left to actually properly immerse yourself in it and to really understand that industry.
Ben: I mean I don't see it, I think you've got to, you either go down that channel or you do the resi and stick to your property. Your commercial property -
James Mitchell: Got to sort of specialise.
Annie Kane: Yeah, don't spread yourself too thin, sort of thing.
Ben: I mean you, yeah. You can't sort of be a jack of all trades.
Tom: In saying that though, and sorry to touch on the answer to your question that I skipped over before, do I think there should be more education…as in terms of what people need to do.
To be qualified for broking, I actually do. I think that there needs to be, I mean a four, five-day diploma. I just don't think it's enough when you really are giving people some pretty serious advice. Depending on, I mean if they've got one loan and its pretty straight forward, different kettle of fish, but when it can become complex, I think having more education is definitely helpful. In terms of going into different loan products or areas, I'm sort of becoming a little more attracted to try and get into the commercial side of things. Mainly because I think residential mortgages will become more and more digitised in the next couple of years, especially.
I think we're on a bit of a change in the market in the moment where someone with an individual loan and a well-capitalised property, you know their ability to get approved.
And get refinanced can really just be done, or will be able to be done electronically pretty quickly. As soon as their decision making process can be eroded by computers, then it just makes it a bit of a more difficult landscape and environment to operate, whereas commercial work does really, or in a lot of cases
It can take, a large scale commercial for example, it can take, it requires more of a human element.
Or it requires a lender to take a position before they want to fund something. I think that's really where in the future that brokers will have a bit more of an edge. And also obviously advising more complex clients, when it's not just about a single security, so that's really what we -
Ben: It's where you can add value.
Tom: Yeah, exactly. I think we want to position ourselves at that lower end -
Ben: That lower end of the market is getting harder and harder to add.
Ben: Value too.
Tom: The longer you -
Ben: The long-term play. There's also a lot less regulation in the commercial space as well. You're dealing with, you know a more sophisticated people.
James Mitchell: That's right.
Ben: It's going to be easier.
Tom: So we're not there yet, but I think we need to start focusing on it more and I think everyone needs to really.
James Mitchell: It's interesting with the online -
Ben: Just developing a business plan as we go. Got to write that down!
James Mitchell: It's interesting we talk about this stuff a lot, in The Adviser and on the news and stuff, and I know Annie was having a chat with CAFBA I think it was
Annie Kane: Yeah.
James Mitchell: About asset finance, and it's funny you know, brokers they look at asset finance as car loans, but then they're sort of SME specialists, see it as a quite a broader thing, and there were some interesting things that your discussion brought up, wasn't there about the complexity of the deals.
Annie Kane: I think also just the time frame, as you were just mentioning there. It takes a lot longer to do commercial, or even asset finance loan than it would do for a resi loan, and they were saying that you know, a lot of the time they're seeing sort of, whilst they were saying you know, we embrace mortgage brokers coming over to the space and diversifying to this area, like you've got to understand it's a lot harder, it's a lot more complex and a lot more subjective the way you actually frame applications for loans has to be, you know what your lender likes, doesn't like and you have to kind of frame it in a bit of a way. Yeah, and frame it in a way they might not know this business, or how this SME works, you need to say this tools just gonna do, I don't know, coffee. It's gonna do coffee and also produce all these other...sorry!
Just whacking the computer!
All the other ramifications for the business as well.
Annie Kane: That it'd have, so I think they were saying yeah, some loans could take up to a year, maybe more.
Annie Kane: I think that's quite interesting.
Tom: Projections and all the rest -
Ben: That's some of the commercial property space as well. I've found clients I've dealt with, suddenly it's all on and I've got this place and then you know, it's work as fast as you can. You'll spend days putting the deal together and then suddenly it's off.
And hear nothing, and you know three months later, got another one, it's all back on again. It's that sort of lumpier deal flow, whereas the resi loans are more consistent. You get people pre-approved, generally they do if they're serious they do end up buying something. I think in that commercial space it's lumpier, more chance of it falling over. So I obviously think you need that little bit of RESI stuff, a bit of bread and butter.
So unless you've got in that asset space, for example, you've built up some clients where there are consistently renewing assets and consistently rolling stuff.
But it's, I think it's a hard one to break. To break into.
I think you've got to make moves, like right! I'm no longer really doing resi, I'm gonna go and do - Really dedicate yourself to that and change, it's hard 'cos you're going to lose a lot of income while you transition.
Annie Kane: And getting up to speed.
Tom: Tough to let go though, huh! Tough to let go.
James Mitchell: I suppose, you know, I guess there's some sort of brokerage where, you know they've got a couple of brokers some, that specialise in the home loan part, some that specialise in equipment and leasing for example, and I know aggregation models moving more towards that. And also SMSF's again. I was speaking to a guy at Omni Wealth and he was saying that's he got a broker that purely specialises in the SMSF side.
Just moving away from diversification for a minute, I just wanted to talk about the whole process of setting up your own business, deciding to switch aggregators for example. Which we were having a chat before, before we started and you said that you actually decided to move aggregators when you were setting up your own business. What's that process like, and how do you come to the decision that you're going to leave the aggregator that you've been with for years? Go with someone new, how does that whole thought process work, because I know for a lot of brokers it's something which a lot of them are afraid to do, and they don't have the time to shop around that sort of thing.
Tom: Yep. Look it just comes down to sort of, the similar of decision making process with any business decision, which is a cost benefit analysis. So we had time, because we were going through an exit period at Shore and we though that it was obviously the right thing to do, because we had an opportunity to now review what aggregator we were using.
Obviously AFG and Shore have a very close relationship as well. I think Shore's one of their largest clients. It was just something we wanted to do to review the market. We had a chat with Connective, in the end there was a bit of a cost differential there but obviously the services aren't the same.
Ben: You see we'd never as well, because I guess working under Shore, they were with AFG. So when I came into broking AFG – this is what the cost is, this is the software, never known anything else, never known what their software was like, their compliance requirements. What the costs were, any of that, so…
James Mitchell: And you'd always used the Flex platform because that was -
Ben: Yeah exactly, and so that was in the transition and we had the time.
So right, well what else is actually out there, what are they charging and I think it's important. We went round, you know, a fair few of the different aggregators and spoke to them and went and saw their software and got an idea of the cost, and did all that and saw them -
Tom: And met the people importantly as well. I think you know, you are really getting into contractual relationship with someone, I think the people you're dealing with makes a huge difference. So, but in the end changing aggregators was a really good process for us, or a good sort of activity for us because we learnt a lot of things about the differences, and the differences in operations, and I think it helped our business, definitely, with realising how things, how we can do things better.
And then we also, going up to a different software platform was also an interesting transition, so I think everyone should review their aggregator somewhat periodically if you can. It's not easy to move but I think it's not as hard as people would suspect. At the end of the day you're lodging applications. You know, a lot of the information being captured is similar. Once you do four or five of them you pick it up pretty quickly depending on how savvy you are with technology…
Ben: I can do it and I'm not good on technology. So yeah, if I can do it, anyone can do it.
Tom: They're changing though, there's a downtime in business as well. So if you're up and running, and you're operating and you want to change, you're going to, you know that time before leaving and coming off that ACL and getting put onto a new one and getting all your accreditations under your new ACL it all takes time.
Annie Kane: Could I just a little bit, I mean I know you guys set up in October and you've been running for a few months now, but what is it like working with your brother? Do you sort of like rugby tackle each other at the door to get clients?
Tom: We live together as well!
Annie Kane: I was wondering how you actually separate the sort of professional and the family.
James Mitchell: Are you competitive when it comes to doing deals, and that sort of stuff?
Annie Kane: Yeah! Do you sabotage each others deals?
Tom: No we're not all that competitive. Luckily Ben and I are really quite different, so Ben's a bit more responsible and a bit more sort of -
James Mitchell: You're a bit more free-flowing?
Tom: Yeah so -
Ben: I get frustrated at times.
Tom: I'm a bit more blasé sometimes, but probably a bit more relationship based, but I think the relationship works really well. So yeah, as Ben said we live together so we have no issue getting along.
Annie Kane: How do you divvy up clients and things like that?
Tom: Well it's your own relationships, it's how it was with Shore. The clients really don't come to the business directly – they come to a representative of the business, whether it be one of Ben and mine's relationship. If it was Ben's relationship they could obviously go directly to him, if it was my relationship they'd come to me.
We do have some partners that we deal with who are business partners of the actual business that we've done work with together, and when they send a lead we literally just go one for one. We just make sure it's fair, like you know, there's no...
We do most things 50/50. We've got some properties together 50/50 as well, so realistically it's sort of what's mine is his and vice versa, so we have no issue with divvying things up. I think Ben sometimes probably feels like he does a bit more than me on the account side – but I feel like I'm doing a bit more on the marketing side here and there. But we butt heads!
Ben: We're changing his title to marketing manager!
Tom: We butt heads but never hard enough to get frustrated.
Ben: You'd be surprised as well where, you do essentially, you're running two sort of separate businesses within a business, and you'd be surprised how little , you sort of get up in the morning and use separate cars to work because you're in and out to different appointments all day, and at the end of the day you might have a meeting. It's amazing how sort of living together and working together how little time we actually do, You know...
Annie Kane: Spend together.
Ben: You're doing your own thing, you're on the phone all day, at meetings -
Tom: I wish we could spend more together mate, I'm dying to see you more often!
Annie Kane: Quality time!
James Mitchell: I'm glad we could bring you together for this podcast!
Tom: Can we have dinner tonight?
Ben: Dad'll ask what's your brother doing, and I have no idea. He says, “Do you guys not... “Can you tell your brother this?” And it doesn't get through. “Don't you guys talk?” And I'm like, well I don't know! Sometimes not much!
Annie Kane: So from the sounds of it, you're not really office based then, you're kind of going out to clients rather than them coming to you?
Tom: No, we're definitely office based, but we obviously have to go and meet clients and referral partners a lot, so we're in and out a lot. I try and do a lot of business development like meeting with people, and that saves me time prospecting on the phone so, we're in and out a lot, and also obviously we've been renovating a property recently which we've in and out of a lot because of that, so we're definitely office based
We're in there most of the time, unless we have something else on. But you understand when you're extremely busy and you get back into the office, you're not coming in there to chit chat.
You're going in there and you're going to your desk and just getting back to emails and getting back to people and getting on with it. So, Ben's obviously operating his unit, I'm operating my unit within the business and it goes from there.
James Mitchell: Good stuff. And just before we let you go, we're almost out of time, but I just wanted to ask you a little bit about building those referral relationships like you said. I know you're going to, when we first started you said, you know relationships with accountants and real estate agents in particular, I know that was a very big part of the Shore model, where getting leads from agents. How's it working at the moment, with the business you've got now. What are some of the main, I guess referral relationships that you have?
Ben: Yeah so, I guess much the same. We're still I guess sourcing our referrals from real estate agents and accountants.
They're the two sources. A lot of my relationships at Shore and business sources were relationships that I actually held before I started at Shore – so relationships I'd developed while I was working at the bank. Personal relationships with people that were a few years either side of me at school, that sort of thing. So a lot of them have just transitioned over for me. And you know, I guess as time goes on as well, you know a big part, the first couple of years, if you're giving a good service to your clients, they become one of the biggest referral sources.
So once two, three years in a big chunk of business comes out of your clients as well so, so making sure they're all well looked after, and they're happy. Make it a lot easy generation.
Tom: And one thing as well, I feel like since I left, or since sorry Ben and I have started up this business, a bit of a sort of pressure valves been released on both of our businesses. Because essentially, you know we were on our own commission structure, I mean when I left Shore I basically gave up 90 per cent of my referral partners, other than a few accountants I was working with.
But what I've found now is I obviously don't have to deal with as many clients I did previously to generate the same amount revenue for me personally. And then, therefore I don't have to have as many relationships I'm managing. What it's allowed me -
James Mitchell: So it’s a higher conversion I guess?
Tom: Well not necessarily a higher conversion, but I don't have to convert as much to make the same amount of money because obviously the splits are much more attractive.
James Mitchell: Of course.
Tom: So for me that's allowed me to A) be able to deal with less clients, have better relationships with my clients, give better service to my clients, but also have better relationships with my referral partners. Because at the end of the day, dollars settled is the means to the end. The end is the dollars made
I think previously we were forgoing a lot of service to our clients that now we can focus on a bit more without actually hurting the bottom line. And that creates a lot of intangible value within the business because your creating better relationships, so I had to give up a lot of my referral partners, but I think I've sort of taken it slow and we're building momentum now, which is really good so I'm definitely enjoying the new structure.
Ben: It's been a good move, the move as well being able to take a step back and look back and go “right, where is my, of these partners, where's the business coming from. Who do I want to work with moving forward", and reassessing it all as well. You sort of start out and you just, you're looking to build as many relationships as you can, and then in the transitioning say 'right well, I'm not actually working with these people at all really. These guys are the people that are important to me, I'm going to spend a lot more time working with them, and be a bit more targeted about it.”
James Mitchell: Sounds like you've taken a decent inventory, of your own business as a broker, prior to setting up Azura and obviously with the aggregation piece, and then with the consolidation, and like you said, seeing where the business is coming from with your referrers. That's really positive.
I think that's all we've got time for today I'm afraid, but thanks very much for taking the time to come in.
Annie Kane: Thank you!
Tom: Thank you for having us James and Annie, and a pleasure to be here, and thanks to the Elite Broker.
James Mitchell: No worries.
Ben: Thanks guys.
James Mitchell: We've been Elite Broker, and do catch us next time, and of course for all the latest insight, news and analysis, do log onto TheAdviser.com.au. I've been your host, James Mitchell. Catch you next time.
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