Ahead of his session at The Adviser’s Better Business Summit, the Australian Lending & Investment Centre’s managing director, Jason Back, reveals how he runs one of the country’s leading independent brokerages, his thoughts on outsourcing and why training is imperative.
In this episode of In Focus, tune in to find out:
Announcer: Welcome to the Elite Broker podcast with your host, James Mitchell.
James Mitchell: Hello, and welcome to Elite Broker. I'm your host for today, James Mitchell. I'm the managing editor of mortgages here at Momentum Media. Unfortunately, we do not have Annie Kane available with us today. She's away, so I'll be flying solo. But, we've got a very exciting guest on today, Jason Back, who's the managing director of Australian Lending and Investment Centre, otherwise known as ALIC. We've had a few of their brokers on the show over the last year or so. We've had Mark Davis, obviously one of the elite business writers and top brokers in the country, writes a huge amount of loans. We've also had Natasha Choi, who's a bit of a rising star, an up and comer, one of the younger brokers in the industry and she works for ALIC as well. We've also featured both of them in New Broker Academy down in Melbourne as well. So we've got Jason on the line, and we'll patch through to him now.
Hey Jason, how are you doing?
Jason Back: Very good. Yourself? Happy new year.
James Mitchell: Happy new year to you. I hope you had a nice break.
Jason Back: I did. I got a few days away. We're still on the tools a little bit, but that's okay.
James Mitchell: Yeah, oh, nice one. I just said there in my into that ALIC have been a brokerage which we've been covering for quite a while. We've obviously had a chat with Mark Davis and Natasha Choi in recent times, and I know you and I have caught up about news and features and stuff like that with the advisor recently as well. I guess one thing, we ask this question of everyone who comes on the show. I guess I just want to find out a little bit more about your background in the finance industry, leading up to the time when you joined ALIC.
Jason Back: I'm a bit of a one-trick pony. I spent 20 years with ANZ and had a fantastic career development with them. When I left school, I was doing study and doing some degrees, and I wanted to work part-time, so I did all my degree and my studies part time while working at ANZ, come up through the ranks. Moved from WA back in about 1997 over into Melbourne. That's actually, funny enough, where I met Mark. Mark and I were working in the same department, back office at a place called Current Account Management. I met him there and then a few years later we end up working again together while I was a financial planner and he was a lender. That's when we really started our working relationship. From there, I moved into various roles in places like Margin Lending, I was a director, I was in Prague for a few years managing a large team and a large book there. I finished my career up at ANZ working as the head of distribution for one of their retail divisions. It was a newly created division, and that was an enjoyable startup role.
Left there, and the boys had asked me to come along with Kevin and Mark Davis asked me to come along across the look of the company. Spent several months just reviewing everything from processes and culture and a transformation piece. I made recommendations to them, and they asked me to basically stay and implement. That was five and a half, six years ago. It's been a really interesting journey over the last 25 years.
James Mitchell: I'm really interested in the role of, I guess, MDs or CEOs of growing brokerages. I mean, there's two things. You've got brokers who set up a business and they're the main loan writer there, they're doing the deals and they might hire a few more brokers and they're growing, and then they become the CEO principal of their own business, but they still bring in the majority of business. Are you writing any loans yourself, are you doing any broking at all?
Jason Back: That's a great question. No, I don't. I did start getting my licence a couple of years ago. I've done lending many, many years ago, but it's not my specialty anymore. I think one of the things, you'll get to a point when you're growing your business where we talk about a lot here, which is a couple things. One is you can't do it all. We have a mindset here of doing what you do and doing it really well. When the business started, Mark obviously being the relationship styles beast that he is, he's fantastic with clients, he's brilliant with growing his business, but managing people and growing our business wasn't his expertise, and that's where he and Kevin established a great relationship. Kevin was running the business, it just started off with the two of them. As they continued to grow, Kevin got a taste for the customer and writing business, and it meant that he couldn't be running the business. They really needed to bring in skill sets that's more around actually running a company and running a business than just being a broker, because being a broker is actually being a small business owner. You can't delineate between the two, but they are very, very different skill sets.
We've now got 45 staff in two different countries. We're a growing entity, and if you're writing 150 or 300 million in Mark's case, you don't have time that you need to dedicate to running a big business like this. You just can't do it all, and then that becomes a bit of an issue around trust and control. Brokers in our industry a lot of times, they really struggle letting things go, and they want to do it all, because they know the love and the passion they have for the client, that can be replicated through other people to get the job done. You have to let things go, and you have to trust that you've got processes and systems in place that would deliver the services that you need, but you can't do it all. That's one of the reasons why they brought someone else in, and it's allowed me to grow the business without having to spend 95 percent of my week in front of customers. I get to spend 95 percent of my week growing the business.
James Mitchell: Yup. You mentioned a few figures there, 45 staff, you're operating in two countries. For the listeners who aren't familiar with the business, give us a little bit of a picture in terms of what ALIC is, how it works, how it operates, maybe the size of the loan book and how many brokers you've got, that sort of thing. Maybe paint a bit of a picture for us.
Jason Back: ALIC obviously started off with just Kevin and Mark, and it's growing up to about 45 staff now. We've got 13 loan writers in Australia, and they range through two different brands, one being the Australia Lending Investment Centre, so ALIC, and then the other one Professional Mortgage Managers, PMM, two very different service offerings. The ALIC guys focus very much around investor clients. Predominantly they do about a 60-70 percent split investment to unoccupied. That's very much about established properties. We don't do very much off the plan or SEFS or non-conforming lending, etc. They're very focused on one particular area, and in my PMMs, a much more diverse range of brokers. Seeing you at a time and place of my choosing, they're a mobile workforce. They'll do everything from commercial and institutional level debt to asset finance first home buyers, etc. Very diverse range of skills, whereas my ALIC guys are only in the office here. They only see clients at 520 columns. I don't have them on the road, so again, very different service offerings.
That's the broker guys and girls. I've got another 15, 16-odd support staff, including my head of operations here and client service managers, and then overseas, I've got five support staff in Manila through a company called Loan Works. Andrew and Wayne and the team are growing my business up there as well, and we'll have another five or 10 staff up there over the next 12 months.
James Mitchell: Tell me a little bit about the outsourcing in the Manila office. It's an interesting thing. I think it was not last year, the year before, when I was in Nepal with my wife, and we visited ...
Jason Back: Otto's team?
James Mitchell: Otto's team over there, which was really interesting, and I know that Smart Move, who are based here in Sydney, have a Manila office as well. It's becoming quite a popular strategy. How did you come to that decision, and how has it been working in terms of efficiency?
Jason Back: It's a very fascinating area. I was lucky up to be invited up there early last year by a couple of different companies to come and see the BPOs. I also spent a little bit of time up at Simon and Darren and David's office up in Manila as well, so they were kind enough to let me go and have at Smart Move's operation up there, and they run a fantastic shop. Andrew from Loan Works and a number of other companies, we'd been speaking for a couple of years prior, so this was never not on our radar, but again, from a trust and control perspective, it took a fair amount of time for us to be convinced that we could hand over vital, critical parts of our business to an area that we can't see, and we felt that wasn't in our control. Again, if you set it up properly, and you have got a very established process, very detailed and committed to delivering a certain outcome, those propositions can work really well, so we started back with live staff on the ground back in June 2017.
It started off with a couple just to test the process. They were experienced in the work that we do and they knew AOL quite well. We had my staff doing things like the basics at this stage, which is things like evaluations, pricing, discharges, they'll load into AOL, they'll do close off calls, etc., so a lot of administrative part of things. We're looking to grow those staff and develop them now into next year to doing a little bit more around credit assessment, taking a lot more of the functions off my staff here, so that we can focus on more of the training academy that we are here to develop more brokers like Natasha Choi, like Serge Brewer, like Jonathan Di Sensi. These guys come up, writing 40, 50, 60 million in their first year, because we're spending more time training and developing them, rather than being output people in my office, they'll convert their roles more to development training roles, then they will be just workers. We'll be able to get them through faster here while my Manila team supports the ongoing operational development of the business.
James Mitchell: Yeah. I remember when we caught up, I think it was just before Christmas, end of last year, there were two points which I touched on which I think our listeners would be really interested to hear about. One was the training programme that you have there, and how you're looking to revamp that or make some tweaks to that or shorten the time down. The other one was the technology piece as well. Maybe just starting off with your training programme, tell us a little bit about how it works at the moment and what you're looking to do moving forward.
Jason Back: I think one of the challenges we've got in that industry is that training, per se, is a bit of a dog's breakfast. It's ad hoc, we've got different levels, different expertise, different requirements across the board. Our highest value is education, whether that be for our clients, but more importantly also for our staff. We're happy to take in people into our business that don't have the background in finance, but we take them through a training programme. We already know that unfortunately with our industry with the low barriers to entry that you can get into our industry really quickly. You can be training on Monday and a broker on the Friday, and that's fundamentally where we have some real issues.
When we take our staff through the training programme, if we take them in at the starting point, they'll do those basic rules through what we call a learning administration officer. They'll do that from anywhere for three to nine months, that gives them the opportunity to experience the environment, the pace that we set, the type of deals that we do, the administration that we need them to do. They'll then roll into a client service manager role, that's where obviously they're now talking and establishing relationships directly with clients. They're processing deals, they're getting used to BDMs and banks and policies, processes. They'll do that for 12 to 18 months depending on their experience, and then we take them into an analyst role, what we call an associate ILM role. They'll do that again for 12 to 18 months, and that's working directly with a group of brokers. They'll sit in joint appointments over a 12-months period. They'll write 500 files. They'll see hundreds and hundreds of different types of scenario. More importantly, they'll also get a feel and understanding of the level of activity it takes to be in first year coming about 40 million, second year, about 60, third year, about 80, and wanting to be $100 million writers, this isn't just a one or a two or a six month mentor programme checking the quality of their files. This is about them running effectively a very large business within a large business.
That historically has taken us anywhere up to three to four years to develop those people. That time frame is obviously fairly significant. A lot of people don't want to unfortunately commit to that level of time, and we understand that and we understand their reasons why. What we've done is by expanding our operations and our support staff through places like Loan Works and obviously establishing a very clear process machine here for the volume that we do, it's allowing us to bring those time frames down, so they might spend only three months as an LAO. They'll spend six to 12 months as CFM, then 12 months as an analyst, bringing that time frame down to a couple of years.
Now, if you think about the equivalent to coming into the market as a broker and being on the statistical averages, writing between 20 to 40 loans a year, writing circa $9 to $15 million a year, taking away gross revenue and looking about what they profit, if they're only earning $70 or $80,000 a year, my roles, they're salary-based anyway. They're going to earn that money over the first two years, and then in the third year when they come out, they're going to be successful brokers. They have to struggle, but we know most brokers come through in that first couple of years, and that's obviously some massive drop-off rates as 50 to 60 percent of brokers file in that first 18 months, because they haven't got that support, they haven't got that indoctrination, that real clear training programme that allows them to give their clients confidence in an industry that's very much a referral model.
James Mitchell: The brokers that come and work for ALIC and are doing this training, are they salaried?
Jason Back: We bring through all the salaried roles until they get into the broker roles, and they the broker roles, we run a commission-based model.
James Mitchell: How much are brokers getting paid, say first couple of years when they're doing the training?
Jason Back: So, brokers in that office, if they're doing the training, the roles vary from anywhere at about 65 plus super, up to 80 to 100 plus super and bonuses are in there as well, and then some other little incentives that we give them around referring clients in. They're doing okay. If you're on 80-odd to 100-odd thousand dollars a year in a training capacity for a couple of years, I look at that as a pretty good opportunity to grow my knowledge and develop myself while getting paid and delivering great output during that time to be ready and come out as a ready writer.
James Mitchell: Yeah, sure, which leads me to my next question, how competitive is it to join ALIC? Do you have a long line of brokers?
Jason Back: We have, funny enough, I've got four resumes come through this morning, funny enough. We've got, our philosophy now is hire slow, fire fast. Very much it's a caution process. We'll take a significant amount of time over a two or a three-month period introducing ourselves to new people. We do what they call an profiling tool, which understands, it's through an external consultant, which helps us understand people's motivational drivers, so it's a very scientific tools that really gets in and helps us understand whether the people have the right stuff to be a 40 or 50 or 100 million dollar writer. We then go and have a look at them to see whether they actually need to start again.
I met a guy yesterday. He's already six months into being a broker. Fantastic guy, he's probably not had the best induction to the industry, so I was then saying, well if you came here, you're going to go back to the start. You're going to have to come back through the processing, you're going to have to learn the back office fundamentals, you're going to have to learn the mechanics and machinations of the output of brokers before we let you back in front of the customers again. You're going to have to go backwards for potentially another two years before we would let you go and be a broker again. He gets it, he understands that it's not as easy coming into our industry as people think. He knows that if he wants to get the output he wants, there's a significant amount of support that he's going to need. Then he's going to have to go back and put in [inaudible 00:16:46]. We love that sort of dedication, but that's not everyone's cup of tea.
James Mitchell: Yeah. What are some of the growth targets for the business over the next five years? Is there a limit, is there a ceiling to the amount of brokers you can bring on board?
Jason Back: That's a great question. We've actually just gone back through, we revisit all our goals and targets every few months. At the moment, we're looking at, from a business writing perspective, we're looking at a billion dollars in new business writing next year. That gives us our back books circa around a high $2.8, $2.9 billion currently, so that's going to give us that 25 percent growth year on year, because we don't see a lot of runoff. We're more interested at the moment in now obviously growing the broker numbers. At the moment on the ALIC side, where we're looking at growing those $50, $100 million writers, I've got seven in there at the moment, but by 2020, we want 23 in there. I've got Jonathan Di Sensi coming out next month. He's going to be an outstanding writer. You'll see Daniel Gold, a name you'll see start coming up in the ranks. He came out several months ago, I think he's done $30 million in his first six months. Mark Brixon, another new writer, he said she's struggling, but he's done $20 million in his first six months. We know the recipe works. The problem is, it's a little bit like slow cooking lamb shakes. We've got this great recipe, we know it tastes great, it's just a little slow. Now we've gotta look at the efficiencies with getting that faster without compromising the quality of the programme as well.
James Mitchell: Where are these young guys coming from, young guys and girls, where are they coming from? What's the breakdown in terms of those who've got a background in finance to those who've got no background at all in this area?
Jason Back: It's probably about 50/50. Obviously we're fairly cautious about bringing in people with no background in finance. I find it a little disturbing when a lot of people get into our industry with no background and [inaudible 00:18:48] about to be an expert in this field, considering the importance in the custodianship that we have, to the Australian public, we can't be average at this. We've gotta be at the top of our game all the time. We're cautious about bringing that in, but at the flip side of that, when you look at people from the outside of our industry, they bring in some brilliant skills. Lateral thinking, very dynamic skill sets, that aren't necessarily borne out of coming from a financial background. We're comfortable bringing in from both, but if you have no background, your journey just takes a little bit longer for you to understand what we do and how we do it.
We've been looking at the younger guys as well. I've got another girl, [inaudible 00:19:30] in here, I've got Steve Curry, these guys are late 20s, that's a fantastic age for us, that 26, 27, to about 32 is a brilliant age for them to be coming in. They've tried a couple of jobs out in the market, they may have been successful, might not have. Now they come in here, they're ready to really take a big bite out of their career. They're committed to that two or three-year training, and then in their early 30s coming up. People like Natasha Choi is a great example. Tasha wrote $80 million this year at, what's Tash now, 27? Not bad.
James Mitchell: That's awesome. Just finally before I let you go, I wanted to ask about this technology piece, because yeah, last time we caught up end of last year, I was asking you what you saw as some of the biggest challenges for broking or for your business going forward or for this year, 2018. A lot of people might look at the regulatory stuff as the biggest challenge, but you flagged technology, and one thing you said was that the technology offerings out there in the market at the moment are probably not up to scratch or as good as they could be. I was wondering if you could just comment a bit more on that.
Jason Back: Technology's a really exciting space, and I think we often have fear of change, as most people generally do. It's not that the technology isn't necessarily great, I just think sometimes we're not great at understanding the technology that's available. One of the things that we're really cautious about is entering into markets that we don't understand. If we're not great at technology, and we certainly don't profess to be, then we'll go out and seek advice on the right level of technology for us over the last of the 12 months that's been working closely with our aggregator, and making sure that people like our aggregator, that they're working really hard on their piece, because for all intents and purposes, they are a tech company. We consult really closely with Michelin and Mark to make sure we understand what their goal are, and does that suit our needs. So far, with working things like active campaign, which is a tool that connect is using, which links in a whole stack of APIs to link up with your CRM, that's the sort of stuff we need, and that's the stuff they're delivering.
Now, I go and talk to other brokers, obviously with my broker's entrance programme. I've seen brokers out there who are bringing in IT people into their business. I sit there and go wow, that's courageous. Do I want to drop another $70 or $80,000 a year on having a programmer in my business to be creating the apps or tech bolt-on solutions to my existing tech when things are moving so far, I think people need to be really cautious about how much they get involved in creating the tech, versus letting the tech get created around them, and effectively using turn-key solutions. I'd be more inclined to speak to what you're very good at, and let experts in the other fields develop those tools. Yes, they might cost a little bit more, yes, you won't have them exclusive, but is that the main part of your business, because for us, advice is our business, education is our business. That's not going to go out of fashion. Tech will enable and support us. I don't see it taking over the industry.
James Mitchell: Yeah. You made a really interesting point there, and it was about, technology might be good, but we need to know how to use it and make the most out of it. I think that interface, that usability and how you actually operate this platform or this technology is something which doesn't get enough attention, yeah? People always think technology's this panacea where it'll streamline all your processes, you've just gotta focus on the human interaction, which is true to a degree, but at the same time, you need to know how that technology works and how to get the most out of it.
Jason Back: Well, if you look at some of the tech that we put in place, if you look at 75 percent of the global websites are built on Wordpress. Now, if you use Wordpress, Wordpress is actually pretty easy to use, because you don't have to write code. Now, I can't write code. I can understand a little bit of it, but if I had to write my coding out of 10, I'd probably write it about minus five. Anytime that I see an update or a programme that says ah look, you just have to go in and do this and alter your code or copies, I say instantly, you've lost 99 percent of your audience when you've told them that message, because it's not like I don't want to understand it, but I don't have time to understand it, and I don't have the inclination to understand it, so therefore all the intent might be there, but the application's going to be missing.
This becomes a little bit of a, when you're looking at the basic old principle in marketing, which is design, implementation, and review. When you're looking at design, we have this great ideology, it's going to fix all these problems, it's fantastic. Nine times out of 10, most business problems aren't the thought process, it's not the exciting, creative ideas, it's implementation. This is, and again, I talk about this in my programme, I talk about it, I'm excited about the summit coming up next month in March and February, and we'll talk about the knowing [inaudible 00:24:30]. You know what you need to do, but it's the ability to get it done. The doing piece is where a lot of people actually struggle. They get these great ideas, they'll spend a lot of money or they'll spend a lot of time, but then the implementation is actually a huge issue.
James Mitchell: Fantastic. Well, I think that's all the questions I have for you, Jason, but thanks very much for taking the time, and we'll catch up with you down in Melbourne for Better Business in March.
Jason Back: Yes, I'm obviously I'm speaking at all the ones, I'll be there in Brisbane on the 15th, and away we go to Adelaide, Sydney, Brisbane, and Perth.
James Mitchell: Yeah, of course, you'll be at all of them.
Jason Back: I certainly will be.
James Mitchell: Awesome. All right, we'll catch you up then.
Jason Back: Thanks James.
James Mitchell: Cheers, Jason. All right, that's all we've got time for this week on Elite Broker, but do join us next time. Of course, for all the latest news, insight, and analysis, do check out theadvisor.com.au. I've been your host James Mitchell, catch you next time.
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