In this episode of Elite Broker, join hosts Annie Kane and James Mitchell as they catch up with award-winning broker Josh Egan to find out why he chose to follow in his father’s footsteps to become a broker, the key to his success in the industry and his tips for other brokers considering the same path.
This finance manager and director at Astute Financial reveals how he ensures good consumer outcomes, what makes him in the running for Best Finance Broker (Vic) at the Better Business Awards, his thoughts on education standards and how he writes over $100 million of loans a year.
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Announcer: Welcome to the Elite Broker podcast. This is your host, Annie Kane.
Annie Kane: Hello and welcome back to the Adviser's Elite Broker podcast. I'm Annie Kane, Editor of The Adviser and I'm joined by James Mitchell, Managing Editor of Mortgages, how are you doing James?
James Mitchell: Very good, thanks Annie.
Annie Kane: Great, and this week we're speaking to a well established broker, an award-winning Victorian based broker, Josh Egan, who is Finance Manager and Director at Astute Financial in Melbourne South, Gippsland.
Having grown up around the industry thanks to his mortgage broker father, Josh has himself carved a formidable career in broking, with more than 12 years as experience, Josh is a regular in our Elite Business Writers ranking, having shot up 13 places in the 2017 ranking to come 12th, and he's in the running this year to win Best Finance Broker, along with several other awards at their Better Business Awards (Victoria) next month.
So in this episode of Elite Broker, we find out how this top broker ensures good consumer outcomes, what makes him in the running for Best Finance Broker of the Year, his thoughts on education standards, his beginnings, and how he writes over a hundred million dollars of loans a year.
Thanks so much for coming on to the podcast, Josh, how are you doing?
Josh Egan: Good, thanks Annie. Thanks for having me.
Annie Kane: No worries.
Now, as I mentioned in the introduction, you've sort of been on our radar for a while, you've been speeding up the Elite Business Writers rankings over the years, and you won the Best Regional Broker last year thanks to your work in Melbourne City South, in Gippsland, and you're in the running this year for the same award, as well as Best Finance Broker and Best Residential Broker at the Better Business Awards in Victoria.
So you're obviously very successful now, and some might say you're to the manner born, seeing as your father was also a broker. Did you always know that you were gonna follow in his footsteps and become a broker too, or was that something that you sort of learnt later?
Josh Egan: It probably wasn't decided.
Yeah, I'd never thought that I'd ... that's probably where I was gonna be when I was leaving school, but I kind of fell into it when dad decided to start the business in Traralgon, there back in 2001, and asked all us kids, I’ve got two brothers and a sister, and whether we wanted to be involved and at that stage, I was the only one that was interested, so I went on and started off as an admin person, and then moved my way into the broking in the first year of being at the business.
Annie Kane: So you started broking, then it must've been what, 2002 once you actually qualified?
Josh Egan: Yes, 2002. Yep, so I've been ... yeah it's coming 16 years now that I've been a broker for.
Annie Kane: Okay, so you must've been quite young when you actually first started?
Josh Egan: Yes, I was 19.
Annie Kane: Oh, wow.
So now, what was it like for you in those early days when you first started out broking? Was it something that you already felt quite comfortable with, because you'd seen your dad do it? Or was it something that took a while before you were really confident in what you were doing?
Josh Egan: It took a little bit, but it was good because I was fresh to the industry, so I was learning a lot as I was going. So if I didn't know the answer to something, I would go away and learn it, I would never talk to a client and give them the wrong answer, if that makes sense.
I basically was thrown in the deep end, so I had to learn pretty quickly, and I think that was what held me in good stead along the way. I had to learn from scratch, I had to basically get into all the bank's policies, and find out which banks were doing what. And you know, I had dad there just I guess to sound ideas off, but we were very, very busy at that point in time as well, so I kind of had to learn a lot myself as well.
James Mitchell: Josh, I just wanted to find out a little bit, if you could maybe paint a picture for us, a little bit of what mortgage broking was like in the early 2000s, because obviously we have, you know many different listeners, some who've been in the industry for quite some time, but we've got many new to industry brokers who haven't ... who wouldn't, I guess have a fair idea of what it was like back in the early 2000s.
I mean, how different was it then compared to now, in terms of I guess, professionalism in terms of market share? I know the non-banks were pretty prevalent in the market, and had a decent amount of share before the GFC. I was wondering if you could tell us a little bit about the differences between then and now.
Josh Egan: Yeah, I'd say completely different to what it is now.
It's pretty much a lot more professional in the way that everything's done, education standards weren't really there, so anyone could become a broker in those early days, without a lot of education, or maybe just basically have to do a bank's accreditation and you could pretty much start writing loans. So there's a lot of changes from those early days, there was things you know like 100% loans, there was No-Doc lending, there was pretty much a lot of people working out of the back of their cars, that type of stuff.
So the industry has changed to more of a professional outfit now, I believe, and education standards and compliance, from where it used to be to now, is completely different.
James Mitchell: That would've been pre-NCCP days when you started -
Josh Egan: Yes definitely, yeah.
James Mitchell: So I mean, I'm always interested in big-regulatory milestones, which come into the industry and how people I guess anticipate them, and then how they digest them and how the industry progresses from there.
I wanted to find out from you, what was the feeling, the sentiment like as NCCP was coming in, and there was speculation about it, was there a bit of fear and uncertainty, or were people on board?
Josh Egan: I think from my point of view, the regulation and the changes were great, because it meant that it actually got rid of a lot of the people that weren't doing the right thing, or the people that didn't have their clients best interest at heart, so I think from my point of view, all the changes and things were great, and there still progressing as we're going now still, meaning that you've gotta do that research into best outcomes for your client.
So I think from my aspect it was really good, for other brokers, other people, I think any change, people do get worried that, how's that gonna affect the business, or their business and things, but for me all those changes have been good, because if you're doing the right thing and doing those checks, it's not going to have that bad of an effect on how you're doing things.
James Mitchell: Yeah, nice.
Annie Kane: And now obviously, we are still seeing quite a lot of scrutiny into sort of the standards of mortgage broking, the remuneration of mortgage broking, we have obviously spotlight being shone on the sector from the royal commission, from the productivity commission, from the asset remuneration review.
What are your thoughts in terms of what actually is happening at the moment, in terms of all of these reviews? Do you think that there's a good understanding of what brokers do from the regulators? Or, do you think there's still some gaps that need to be filled there?
Josh Egan: I still think there's a few gaps, obviously here a lot of the communication around how they're getting paid and things like that, and I do think that there's some brokers in the industry probably not doing enough in regards to what they're getting paid for, for the commission you know, things like trails and things like that. But I think the people that are doing reviews, and are there to answer phone calls, inquiries from their clients along the way, that's what they're getting paid the trail and everything for.
I think that the regulators don't understand that there is a lot of brokers out there that are doing extra work and continuous work for their clients, not just setting the loan up for them and forgetting about them. So I think there is a bit being missed there, there is a lot of other work that goes into what we get paid, and it's not just setting up the loan and just forgetting about it.
James Mitchell: Yeah.
Well what's some of the after sale service stuff that you do, or that you've built into your business over the years? In terms of I guess, sort of like you mentioned, brokers get paid a trail for that ongoing service of the customer, what are some of the strategies that you've implemented to keep serving them?
Josh Egan: Yeah, so basically once we set it up, we have we set diary tasks and things to make sure we're getting in contact with the clients to make sure they're still happy with the reviewing their loans on an annual basis, they're seeing basically what they've currently got, whether or not it's still best suited for their needs, or whether there's something else that we can do. Everyone's situation changes, people have a different life, people can get married, they'll start a family, there's lots of things that can happen that there should be reviews of their current situation, you know whether we can save them money, that type of thing.
So we have basically diary tasks set up every 12 months to do a review and to see how they're tracking along, we go through that, and if we can save them money we do, if it's in their best interest, if it's not in their best interest, we leave it as it is, but it's something that should be there, because the more contact that you have with clients, the better. If you're not contacting your clients, someone else will be, and they'll be looking to move them to something else.
We actually, as part of the strategy over the next 12 months, we're gonna add someone full-time into the business that does those reviews. At the moment, I'm doing a lot of my own reviews and I've got one of the other guys helping me part-time, but we're gonna actually have someone full-time in the business that basically, that's all they do is making sure that our existing clients are up to date, their situation is still ... the line is still the best outcome for them.
James Mitchell: You mentioned their best interests, "If it's in the client's best interest," and it's funny you know, that terminology, "the best interest duty" actually, which is obviously in place in financial planning, was suggested as a potential reform on area that mortgage broking could potentially go into, that was in the Productivity Commission's draught report.
And I was having a chat with Steve Weston, whose obviously worked in this industry for quite some time, and he said that there might actually be an opportunity in that, because as brokers such as yourself go back and review client circumstances and do the annual checks, or even more frequent checks, that there's a case to win more business and grow as a result.
And I was just wondering, when you go back and speak to your clients and see if they're still happy with the loan, or if anything's changed; how often would you get new business out of that client? Or that they've got a different need, or a different requirement and therefore, it sets you up to win some more business? Does that happen often?
Josh Egan: It does, people's situations do change and we've got, there are other aspects of the business, we have financial planning, and a few other things that we have in house, so there's opportunities in there, depending on the questions you ask. So when you're reviewing clients, you're looking at their current loan facility, you're looking at the interest rate, having sometimes probably not have changed from the investment unoccupied or vice versa.
So what we generally do is, we'll go back to the existing bank that they're with, and try and see what they can do on their rate, if it's variable, and then depending on the outcome of that, and depending on what else we have on the market then, we'll look to see whether there is an opportunity to refinance, to achieve the product, as long as the savings outweigh the cost, we will look to do that, and that's the conversation we have with the client.
But there is other opportunities, depending on what the business is, whether it's diversified or not into other areas, like they've got car financing, they've got equipment, if the client's self-employed, there's other opportunities to have the conversation with them, more of a holistic conversation so that then specific to they, and maybe the facility they've got in place. There's a lot of opportunities there.
Annie Kane: I think that's a really good point, and actually today the Assistant Governor of the RBA flagged risks with people coming off interest-only repayments in the period from now to 2022. She was sort of suggesting that there'll be a proportion of borrowers who will actually struggle now to pay down the principal, given the tightening of the loans from lenders on IO repayments, and potentially if someone's circumstances has changed since they got the loan, then obviously that would make it harder, and they could be put into financial stress.
So I think that's a great point that you're making there, saying that brokers can actually avoid that, they can help borrowers avoid financial stress by identifying those pain points before they occur, and making sure they're in the appropriate loan.
Josh Egan: Well that's right.
We've already been in contact with one of our interest-only clients and looking to see whether there's an option for them to move to principal interest, because the difference in interest rate now on interest-only to principal interest, depending on when it was set up, like I had a client today who's paying 4.97% on interest-only, and he's on occupied property, we can refinance that to 3.69, there's nearly 1.3% difference in the rate -
James Mitchell: Yeah, that's huge.
Josh Egan: To move across, so his actual payments aren't gonna vary too much at all, but he's gonna be paying principal off, so there's definitely a lot of opportunities in that, the interest-only space as well, to make sure that we're being proactive in there, because actually when it was set up, obviously there's no difference in the rate, between interest-only and principal on interest, and now there is, so and the same on investment, whether clients have had investment loans four years ago, the same rate as their unoccupied are now substantially higher, so there's a lot of opportunity right now in any brokers business to be getting their clients in and have that chat around getting into something better, because there's been a lot of changes in the last 18-months.
Annie Kane: Yeah and I mean you mentioned a little bit there about sort of having some car finance and equipment loans for your clients, what other types of loans do you write, because you're sort of a regional broker as well, really with the Gippsland sort of area. What's your main sort of bread and butter and what kind of loans can you offer consumers?
Josh Egan: Yeah, so I would guess hybrid batteries is your standard residential home lending, so a lot of unoccupied, a lot of investment, but we do have the other services so, car loans, any equipment for business, so if you've got trucks, trailers, depending on what field they're working in, there's things like debtor finance, so for businesses needing cashflow, if you've got money out, we need to free up some money, we can do debtor finance. There's a lot of different types of finance out there. There's trade finance, if you've got clients that are bringing things in from overseas and they need to get it across.
There's lots of different finance that we can offer, the business is very diversified in that aspect.
James Mitchell: Do you offer those different products yourself, or is there someone in the business whose sort of specialisation is in that?
Josh Egan: No, I do that myself as well. We do have two other brokers in the business, that do both residential and the commercial and equipment finance piece. So part of our strategy moving forward will be to have someone specialised that just looks after that, because it does, obviously when you're writing a lot of things in one space, it's hard, because the equipment and car stuff is very quick transactions, you need to get them through quickly, you need to pretty much drop whatever you're doing, because they need to be financed, within a couple of days generally.
James Mitchell: I'm just keen to find out a little bit about when you decided to diversify the business, I mean was that a plan from the get go, from the early 2000s when you started, you were gonna do residential and commercial, and add in this stuff? Or, was it something that happened over time?
Josh Egan: No, so we basically in the old business, I would work in my parent's business up until, I'm trying to look at the dates, but to 2014, 2013 maybe, so yeah 2013. So when I made the move and went out on my own and moved to Melbourne, I basically wanted to diversify the piece then, so I started writing the commercial and the cars and equipment, so I got my accreditations and things at that point. We already had financial planning, so we'd already diversified into the financial planning space, but not so much on the commercial.
James Mitchell: Has there been much of a bottom-line difference do you think from purely writing resi to doing the other stuff?
Josh Egan: It all helps... brokers don't realise they've got so much information from them when they're talking to a client so they're looking at their statement and their position, they're looking at ... basically what they've got in super, you know, cars, if they're self employed, you know, asking the question what items might need to be replaced. So we've got a lot of information there that makes it viable for us to ask the question and to get extra business out of this. So again the moral of this products a client has for you, it’s more likely they're not going to go anywhere because you're kind of one stop for them, if that makes sense.
Annie Kane: And just talking about sort of developing that strong business where you sort of are a one stop shop, I just wondered how much, if at all really, you've considered sort of the future of your business and the viability of it as a sort of asset. Do you spend time working on the business plan or what your exit strategy's going to be? What your retirement plans are? And developing the business from that point of view? Or are you more focused on sort of day to day running and making sure the loans are coming through?
Josh Egan: Yes, I'm pretty much up until the end of the last year, certainly, round the end of October 2017, I've just been very just, going along. Haven't really put too many plans in place. It's just kind of happened and hasn't been too much planning as such. We've actually organised and we've put in a general manager for the business so we could actually put some planning in place to make sure that we're setting targets to where we want to get to. So ideally, where we want the business to be in the next couple years is a third of residential learning, a third commercially and a third in financial planning. So our business model is to be fully diversified.
At the moment, the business is still pretty much about 70% residential type lending. The other 30%, the other side of the business. So we'll be putting a lot of focus into that. That does hold us in a bit of stead given that there could be a lot of changes in the industry. There could be changes to commission and things like that. So I think having a more diversified model is going to hold us better for the future. And more will come ... things like general insurance and business insurance and things like that in the future as well.
James Mitchell: Yeah. Well with that financial planning piece, Josh, it's interesting because obviously planners went through their own round of regulation with FOFA and that changed the industry dramatically. We've seen mortgage groups, we've got YBR which does wealth management and it's got financial planning and their mortgage choice, obviously entered that space probably right around the time of FOFA and it's taken a little time to gain traction. But in terms of running a business which is diversified and you've got the planning in it, how easy or difficult is it to convert a mortgage customer into a financial planning customer as well? I mean, in terms of the conversation, are they open to it? Are they willing? I'm just wondering what the appetite's like for advice.
Josh Egan: Yeah, so I guess it's ... having a question to the client at the time when you're doing the mortgage. Making sure that you're talking to them about [inaudible 00:20:20] their insurances. Obviously, as a broker, you're not giving them any advice, you're saying that it's probably something that you should be reviewed by someone, given that they're extending their lending, or if they've got a family, that type of thing. So when generally, on meeting with a client, I will get super statements from them as part of the home lend application. So just to see what they've got in insurance and income protection, life cover, and things like that. So that we can have an open conversation about what would happen if something happened to the client. And then next we can lead into talking to them about why it might be worthwhile having a chat to their financial advisor to see whether the cover they've got is adequate enough.
I guess we're setting people up with debt, we should make sure that there's cover in place to make sure that that debt is covered in case something happens to them. So it's, as a duty of care, it's conversation that probably should be had with every client, regards to what they've got and whether they've contemplated if something was to happen. Life has, you know, unfortunate events sometimes. We can make sure that there's things that they can fall back on if something was to happen.
Annie Kane: I think it's interesting, sort of talking about insuring about insurance. That consumers are sort of adequately insurance and making sure they speak to financial planners if they so need it. And just looking at your figures for the Elite Business Writer's Ranking in 2017, now as mentioned in the beginning, you went up 13 whole places in the last year to come in 12th. The vast majority of what you've been writing is sort of hundreds of millions of dollars of resi loans. But there are obviously other loans in there too. We mentioned already some equipment and some car finance. Is insurance something that you think is a good source of income? Or is it something that you think should just be purely sort of left to the financial planners?
Josh Egan: Obviously, I guess, one of the insurance aspects you know, I think if you're able to offer it to a client that it should be offered. But you need to make sure that insurance is going to be adequate for them. So that's where I do think that a financial planning referral is sometimes the best outcome, because they can go into a lot more detail in regards to the situation and there's other things to take into accounts, like wills and estates and things like that to make sure that they're set up correctly. To make sure that if something were to happen to any of the clients that it's all going to be looked after. So I think that ... the financial advice guy was going to be the best person to make sure that it's fully set up correctly, then I think there's obviously things like, you're Australian life insurance policy, that's basically there to protect the mortgage, to pay out the mortgage if something was to happen. They're definitely things that should be offered in insuring before talking to a financial advisor to make sure that there's adequate cover in place.
Annie Kane: And obviously, the focus of what you do is home loans. In terms of actually the huge volume that you're writing, I think it's really important that you focus on the main crux of what mortgage brokers are, which is providing a home loan for a consumer. But for you, how do you manage writing that much. And how do you sort of find the business to be writing over a hundred million dollars in loans a year?
Josh Egan: I still don't ... I guess, in regards to the clients, a lot of it is word of mouth. I have a lot of business referrals and people that we have relationships with in that regard. We still get about 60-70% of business still comes from Gippsland. So it's been ... being a broker for 12 years, in our community has definitely helped in that regard. And moving to Melbourne I've been able to access a new demographic is regards to that sort of thing. So if you do the right thing by a client, they're going to refer their family and friends. I guess that's pretty much how I've been able to evolve, I've looked after one person, they've told their family, friends, brother ... and then I've basically looked after those as we've gone along. So it's kind of evolved and ... spend 16 years in the industry, that's where I guess I've been able to build. And now moving to the Melbourne market where I can ... the loan sizes are substantially higher than they are in Gippsland it's definitely been able to help me get to over that hundred mil mark.
I was always ... when I was in Gippsland I was pretty much ran out, the highest they could be. So I tried the area and after making the move to Melbourne I've been able to get the volume up a lot more. Because the average home sizes are very different between Gippsland and Melbourne.
Annie Kane: So it's not necessarily that you're writing more loans, it's just that the loans you're writing are higher in value.
Josh Egan: Yeah, I'm actually writing pretty much around the same amount of loans.
James Mitchell: So what would your annual volumes be if you moved to Sydney then?
Josh Egan: That's ... you can look at some brokers are lucky enough to be in the right areas for the right land sizes. Average is pushing up. I'm going to be concentrating a lot on the Melbourne market myself over the next few years and trying to be able to capitalise on the location where we are now.
James Mitchell: Yeah nice. Just quickly on that lead generation piece, I was having a chat with a mortgage manager last week and we were talking about aggregation and how competitive aggregators are now in terms of the technology platforms but also the lead generation piece. And this particular mortgage manager was saying that aggregators really need to be providing a point of difference and feeding leads to brokers. As someone who's obviously, very successful in the industry, you've been there for some time, do you think that mortgage brokers should be generating their own leads and marketing themselves? Or do you think that there's a place for aggregators to be providing leads to their brokers?
Josh Egan: Personally I believe that brokers should be providing their own leads. The things I just ... the model and who their aggregating to, obviously, some aggregators take a lot larger cut than other aggregators ... so I think that if you're, if the aggregator is taking a substantial amount than they should be providing something for that. In regards to, I don't think anybody should be waiting for it just to happen for them, I think they should be out and about trying to build relationships. Existing client base is the best place to start, so you know, it doesn't hurt to actually ask your clients to refer family and friends and build relationships. So there is a lot of things that you can do personally to get your profile out there.
Aggregation providing lead, our aggregator provides leads to us. If an inquiry comes through and it's from an area that their office is in, it'll get sent to us, but it's very minimal, the amount that we would get from the aggregator. I think that it really comes down to the actual aggregation model, who they're with, whether or not they should be providing leads.
James Mitchell: Well I think if a broker wants to build a brokerage and build a sustainable business, marketing a lead generation surely is going to be a fundamental part of that. That needs to be a self generated thing.
Annie Kane: Ensuring that you own that client.
James Mitchell: Yeah, exactly.
Josh Egan: It definitely does because you can't rely and wait for anyone else to try and make it happen for you. You need to be out there doing it for yourself. And then people that asking, they’re waiting, they're not going to be successful because they're not driving themselves to get out there.
Annie Kane: Obviously for you, you're doing something right. You're up for three awards as I mentioned, for the Better Business Awards of Victoria next month ... Best Regional Broker, Best Finance Broker and Best Residential Broker. But for you, if you were sort of to reflect back on your career what for you has been the stand out sort of milestones of your career so far, and what do you attribute to your success?
Josh Egan: I think the stand outs for me, on a personal level, was moving to Melbourne and starting my, the business I'm in now from scratch. That was probably the highlight for me. Industry awards are always great to have, but I think to build a business and to keep building it and to get from where it was myself, four years ago, to now with a team of 13, is probably the highlight for me. We're trying to build a business and still going, we've still got plans to take it further. So for me, that's probably the highlight, is being able to take myself out of my comfort zone and move to a whole new area. And being able to build a business from scratch.
Annie Kane: And what do you think has been the key to your success so far?
Josh Egan: I think just doing the right thing by your clients. I think the ... if you do the right thing and you get the best client outcome, they're going to be happy, they're going to refer clients. So I think that's really important, is that, everything, it should be about us, it should be about the client experience and the client outcome and that everything will flow on from there. So if you look after the client, they're going to tell everyone how good you are and everyone will want to use you. So I think that's the key, is to try and get the best client outcome and things will flow on from there.
James Mitchell: Yeah, nice. Well said.
Annie Kane: That's great advice. Thank you so much for your time today, Josh. I think that's pretty much all the time we have today, but we'll look forward to catching up with you at the Better Business Summit and Awards next month.
Josh Egan: No worries.
Annie Kane: Thanks so much. Well, hopefully you enjoyed that and learned something new. For all other news and features, please visit www.theadviser.com.au and listen to our sister podcast, Mortgage Business Uncut, if you're interested in hearing what else is happening in the industry.
See you next week.
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