The Adviser recently asked some of Australia’s Elite Business Writers to reveal their keys to success and their predictions for the future
House & Home Loans
Rate Detective Home Loans
Where do you see your business heading over the next 12 months?
JD: [I see] growth in revenue due to us creating more efficiencies in the business and – due to these efficiencies created – more time off to spend with my lovely wife, daughter and soon-to-be-born baby. I love coming to work each day; the future is exciting.
RB: I see it going from strength to strength. There are plenty of opportunities in the market at the moment and you have to be prepared to grab them with both hands. Personally, my company is in a position now where the back-end office is running smoothly, which is ultimately freeing me up to meet with more clients and write more business.
JF: We hope to continue our successive year-on-year growth. Our larger, new office has already accommodated some new brokers and we still have a few desks available which we hope to fill in the coming months.
WD: First and foremost, I see our business offering an even better service to our clients. I believe that the quality of our services is unparalleled in the market. However, that does not mean that we cannot do even better. We continually strive to improve ourselves, which means even greater benefits for our clients. I also see the next 12 months as an opportunity to grow – I expect to see significant growth in that period. We are doing more business each month and are excited about what lies ahead.
Where are the market’s big opportunities at the moment?
WD: One of the things we are now seeing is increased buyer activity due to low interest rates. The drop in rates has brought to the market a significant number of buyers, including first home buyers. We are also seeing unprecedented rental returns on properties. The obvious consequence of substantial rental returns is that people are looking to purchase investment properties. They see the opportunity that exists in the current market.
RB: I am seeing a lot of strength in several of the capital cities. The western suburbs in Sydney is really starting to pick up, as is the Western Australia property market. In WA [as The Adviser went to press], the median property price is $480,000 [and] we are seeing property prices heading back towards historic highs, which can only spell good news for brokers. Properties are affordable for first home buyers now ... we are actually writing a lot of this type of loan at the moment. I am also hearing a lot of noise from investors, especially those buying in WA.
I [also] think there are a lot of opportunities out there for brokers happy to indulge in the self-managed super fund (SMSF) space. A lot of people don’t have cash in the bank, but they do have it in their super and these products allow them to use that in connection with a property – it’s a win-win.
JF: 1st Street has been doing high volumes of first home buyer loans, upgraders, construction loans and with the rate reductions, we are also being approached to negotiate refinances. We are also starting to see a rise in investor loans.
JD: We have been very lucky to have been busy every day for the past nine years. There has never been more business for brokers in the market than now. We add so much value to a client’s purchase or refinance that saving a client money on a low interest rate is only the start of what we can do for a client to make them better off. There are opportunities everywhere you look. Whether the market is going up, down or sideways, people still need a loan and they need our assistance to help them through the maze of options.
What are the biggest business hurdles for you at the moment?
JF: We have embraced new technology and are in the process of developing a new website with enhanced features and a more user-friendly feel. A social media plan is also being implemented. As these are new areas there is some trial and error but these are proving to be valuable avenues for business growth.
RB: For me, the biggest hurdles are in credit. The lenders are constantly changing their policy and if you want to do the best job by your client, you have to be up-to date on all the different policies. However, in the current market, that can prove very difficult.
Another hurdle for me is buyer expectations. I find a lot of home buyers and sellers have an unrealistic expectation of property values. Just because your next door neighbour listed their property for $600,000, doesn’t mean you are going to get that for your house. You simply cannot compare house against house like that.
JD: Over the past year we have invested heavily in improving our processes and making the business more efficient and more cost-effective to process each application. The biggest issue I have found in recent times is that a lot of lenders have lost their good staff, and replaced them with inexperienced staff on the front line of their credit departments and processing departments. This therefore causes us to run inefficiently as we are constantly having to fix up mistakes inexperienced lending staff make. I guess this is one of the reasons clients love using Intelligent Finance as we deal with the headaches for them.
WD: Surprisingly, the biggest hurdle is growth. The problem is not that we are not growing; it is that we are growing at a rapid rate. With growth come various resource challenges, including staffing issues. Fortunately, at Rate Detective, we have an outstanding team but the pressures of growth mean that we are routinely on the look-out for quality people to join us.
Fee for service is one of the industry’s hottest topics for debate. What are your thoughts?
JF: 1st Street has never charged a fee for any of our services and I don’t see us changing our ways in the near future. The lenders’ remuneration is enough to warrant not charging fees and as we have a high loan conversion rate, our brokers are remunerated well for their efforts.
JD: I think it is hard to charge a client for setting up a loan that they think they could have done themselves at a branch. If you are adding value to the transaction and providing advice that will save the client money or even make them money then you have the ability to charge for this extra service.
RB: I think the concept is good, but I believe it is too hard to implement. We are constantly saying, ‘we are professionals’, but I don’t believe we act like one. Before fee for service can come into play, the industry needs to become truly professional and I believe that starts with stopping all home appointments. You wouldn’t expect a solicitor or accountant to show up at your house for a meeting, so why should a broker? By meeting at someone’s house, I feel like it strips us of some of our professionalism.
WD: I am not in favour of it. I firmly believe that charging a fee to the borrower for finance broking services would drive prospective clients away. I would expect to see many borrowers go direct to the financial institutions. They would simply cut out the ‘middle man.’ The current model works well and should not be changed.
How important is it to diversify? Is it something all brokers should do?
RB: I believe brokers need to stay to their knitting. They can refer in-house, or outsource work to other professionals, but ultimately they should remain specialised. At House & Home Loans, we have a series of diversified relationships. I specialise in mortgage broking and then pass my clients on to my business partners for all of their other needs. By doing this, I am not only servicing the clients’ holistic needs, but ensuring they continue to see me as a mortgage professional, rather than a jack of all trades.
WD: I cannot overstate the importance of diversification. Diversification affords numerous benefits to both the finance broker and his or her clients. To be able to offer a ‘one stop shop’ generates more revenue for the broker and increases the value of his or her business. For the client, it means immeasurable convenience. It means that the client can obtain a range of services from the one service provider. That translates to a massive saving in time and effort on their part.
JF: As part of a duty of care to clients we offer a full-service approach including mortgages, leasing and financial planning. Some brokers choose to specialise but we feel more comfortable offering clients all the options and leaving the decision up to them as to what service offerings they choose.
JD: A lot of brokers just want to write loans and not offer anything else to clients. The problem with this is that someone else will probably sell them the other products and then you are not the centre of influence of the client and the hard work you spent on getting the clients the loan will be lost as you may lose the loan to someone else.
That said, while I believe diversification is important, I think it is equally important to not be a jack of all trades. I saw a solicitor recently who claims to be not just a solicitor, but a mortgage broker, real estate agent and auctioneer as well – I don’t think people will take this person’s advice too seriously. Arranging mortgages is pretty much a full-time profession [in itself].
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