Whether it’s harnessing the power of digital technology or outsourcing processes, these brokers are finding innovative ways of growing their businesses. The Adviser reveals how the game changers are driving the evolution of mortgage broking.
A WORD FROM ING DIRECT
AT ING DIRECT we see ourselves as the original digital bank, with no branches and yet 90 per cent of our home loan business flows through the broker network, which at its heart is about relationships. As a digital bank, technology is at our core, but we firmly believe that innovation is about evolution rather than revolution, and we see huge opportunities particularly for brokers. While technology plays an increasingly important role in our industry, the power of a face-to face relationship remains key, with 80 per cent of younger generations preferring personal interaction when it comes to financial matters like advice and home loans*. Imagine how powerful our industry could be if we evolve and adapt to this digital world, taking our services to our customers wherever they may be, either physically or digitally, and combine this with our focus on relationships. It’s a challenging but an exciting time, and at ING DIRECT we look forward to working with our broker partners to further strengthen our industry and help more Australians into their homes.
*ING DIRECT research Q2 2016 - the truth about Gen Y and X
THE HERO OF ASSET FINANCE
When the global financial crisis hit 10 years ago, Tom Caesar realised that diversification was key to surviving – launching an asset finance business to sit alongside his home loan offering. Fast forward to now, and the South Australian-based businessman is one of the leading providers of asset finance and the company’s cutting-edge technology platforms are making waves in the broking industry. Annie Kane finds out how The Positive Group has done it
How did The Positive Group come about?
During the GFC we were focused on home loans, but it was quite di cult to get home loans set [due to the economic conditions], so we actually shifted our focus onto asset finance, and that’s how we grew the business. At that time, it was just myself and my father, Mark. He was more focused on the resi stuff and I was more focused on the asset finance, but after six months I had to teach him how to do asset finance and that became our focus. It was an interesting exercise [training up my father]. I had to completely change the way he thought about loan processing – as it’s a completely different process to mortgages.
So, we set up as Positive Lending Solutions but we kept getting asked whether we did home loans or various other products so we decided to split the business o into Positive Lending Solutions for asset finance and Positive Home Loans for our resi business. Then, later, came Positive Wealth Management, the financial planning business that we built.
You’re well known for building an asset finance platform (which Connective recently took up, under the name of BOLT). Why was this developed?
About six years ago I went to a technology conference in San Francisco… and that really opened my eyes up to the fact that technology really is changing the way our industry works. I realised that the most challenging part of asset finance for brokers is that they needed to log into 10 different systems [to lodge loans] with the different asset finance lenders; there was no platform that connects to one platform, like NextGen does with ApplyOnline for mortgages… So, we saw a hole in the market and thought we could fill it by providing brokers with a single platform.
What has been the hardest thing about developing these platforms?
It’s definitely very expensive. We have been going through a process through the last 12 months discussing with various groups and raising some capital. So far, everything’s come from our cash flow, so myself and my business partner Mark have never taken dividends; we’ve invested everything back into the business. We’ve found that the only thing stopping us from expanding out further is that we need more people.
Over the next 12 months we’re hoping to finalise an investment to really build out our tech team and get the skillsets we want within our business, because without the money it will be just a lot harder to get that. So, we want to triple that team over the next six to 12 months. We now employ about 60 people and we’ve got about five job ads up at the moment, so I think probably by the end of August/September we’ll be up around the 70 mark.
But really, I think the only thing that holds us back here in Australia is the red tape; red tape from legacy systems that the banks have, red tape from ASIC, red tape from everywhere. So, there is only so much we can do at the moment. There are things we would have like to have tried five years ago but we hadn’t been able to… If we could cut down more of that red tape we would be able to achieve more.
What advice would you give to someone wanting to launch their own broking software or technologies?
My advice to anyone would be to learn it, understand it and try it. With tech, it’s changing every day; you could have someone who was really proficient in the tech space three years ago but what they learned then to what it is now is a whole different ball game. You have to be prepared to keep up with the different technologies available and learn from other industries, it’s just about trying new things.
There are lots of things we’ve done that we’ve stuffed up and there are a lot of people that are a bit too scared to trial those new things, but I think it’s actually the learning curve you get from the ones that don’t work that really help you grow.
THE GLOBAL TRAVELLERS
Not content with breaking the Australian market, the managing director of Home Loan Experts Otto Dargan and Smartmove’s general manager Darren Little have been setting their sights abroad, broadening their reach and outsourcing back-end processes to free up time. They tell James Mitchell how it’s done
MORE AND more brokers are cottoning on to the benefits of outsourcing. Broking is a process-driven profession, and a broker’s time is best spent with clients – not bogged down in paperwork. Home Loans Experts managing director Otto Dargan made a few attempts at offshoring processes to the Philippines and India back in 2011 – they didn’t work.
“The problem was we didn’t know how to offshore successfully and we didn’t want to invest in it fully until we saw some success,” he says.
But after a trekking expedition in Nepal, the award-winning broker figured Kathmandu would be great for an outpost.
HLE Nepal opened in 2012 and today has almost 50 staff. The business’ core function of processing mortgages remains, but over the past few years the office has expanded its capabilities and provides additional support to the Sydney-based brokerage.
“We also have a marketing team, HR team, accounts team and compliance team. In the past year, we’ve also started a team that assists our brokers by following up long-term enquiries and marketing to our settled customers,” Mr Dargan says.
It took almost three years for the office to become effective. But the business is clearly seeing the benefits. Home Loan Experts Nepal is now working with two other Connective brokers to assist with their loan processing.
“We’re only working with brokers we know at the moment, but maybe that will change in the future,” says Mr Dargan.
Any brokers eager to set up their own operation abroad should note that it takes plenty of time and effort. However, once it’s up and running the benefits back home can be huge. But Mr Dargan says he wouldn’t recommend outsourcing unless you are planning to have at least five staff . “Otherwise it’s more of a distraction than an advantage,” he says.
“Visiting the country and hiring your leadership team is the first priority and if it’s done well, this will solve half of your problems.”
Smartmove general manager Darren Little opened an office in Manila about five years ago, and says the Philippine and Australian businesses are part of “one team” – he hates the term ‘outsourcing’.
The Manila team are Smartmove’s “technical experts”, says Mr Little, responsible for working with lenders, packaging the loan, doing the ApplyOnline work, ordering valuations, pricing, following files up and carrying out all the checks. “Anything that we can process map is done in Manila,” Mr Little says. “The consistency we are able to achieve is fantastic.
We’ve received feedback from the banks that the quality of our submission is consistent.” What this has done is free up time for the Sydney-based brokers, the “distribution” team as Mr Little calls them, to service clients and build relationships.
“Distribution is the customer facing piece. It’s the relationship piece. It has allowed us to recruit very differently. We can recruit people who are extremely good at building client relationships and building trust. That’s what the focus is,” he says. The bottom line benefit of operating two offices is simple, says Mr Little: “It creates a better bank experience and a better client experience.”
THE KING OF DIVERSIFICATION
Ren Wong, the CEO of N1 Holdings, is making waves for offering Chinese borrowers the whole service when it comes to property – from mortgages to property management and even migration services. James Mitchell finds out how he did it
REN WONG, the founder and chief executive of N1 Holdings, has always approached broking with a business mindset. The successful entrepreneur and avid property investor stumbled into broking six years ago.
“Before that I was in a few different businesses – printing, logistics. I was even in the packaging business,” Mr Wong says. “My entry into mortgage broking was a natural progression from my interest in property investment. I’d spoken to a few brokers and I liked the industry, I liked the service proposition.”
Since launching N1 Loans in 2011, the entrepreneur has added a Chinese-language comparison website, financial planning, migration services, real estate sales and property management to his offering. While some brokers fear that remuneration changes will impact their business, Mr Wong says he has always been vigilant about change and understood the importance early on of diversifying and took an alternative approach to remuneration.
“Unlike most traditional brokers, N1 started out with a PAYG model. We are all on salaries, so we can achieve much more because we are all working towards a common goal as a team,” he says. “At the moment, mortgage broking makes up 50 per cent of the group revenue, so we are not relying solely on mortgage broking. We are enhancing our broking proposition to make our clients stickier to N1 by providing more than one service. When our clients need a home loan they come to us. When they need a car loan they come to us. When they need to rent out their property we have a team of property managers.
We are winning from the perspective of being excellent in customer service, rather than just products.” In 2016, the group listed on the ASX. Today, the business is valued at just over $12 million. In a February trading update, N1 Holdings showed group revenue growth of 32 per cent for the first half of FY17 and loan book growth of 38 per cent to $774 million.
“Being listed on the ASX is more than just a recognition for me as a business owner. It is more about providing more opportunity for the people who have worked with me since 2011,” Mr Wong says. In February, the group announced an employee incentive plan following strong growth in its diversification strategy. N1 Holdings proposed that 4,841,250 options at 20 cents would be issued to employees, worth $968,250 at the time.
“The employee incentive plan is a token of appreciation and reward to all those at N1 who’ve worked hard and contributed to the successful execution of N1’s growth strategy,” says Mr Wong. “From a pure mortgage broking business, N1 continues to execute its diversification strategy and deliver growth across a range of services including mortgage broking, financial services, property management, property sales and project development. Each staff member is committed to growing the value of the company, which ultimately improves shareholder value.”
THE FINANCE PARTNER FOR LIFE
ANZ’s former head of third party Don Crellin returned to Western Australia more than 10 years ago to take on leadership of Resolve Finance with a mandate to meet the construction finance needs of Western Australia-based residential building firm ABN Group. Resolve Finance has since expanded to employ around 100 people (40 of which are brokers) throughout Australia, offering a range of finance products – including its own white-label home loan offering, credit cards, personal finance, car loans, insurance, financial planning and conveyancing. Annie Kane learns more
Resolve Finance is best known for construction finance, but you have expanded into other areas. How did this come about?
Construction isn’t everything that we do but it is still a reasonably large portion [around 80 per cent]. We partnered up with major building group, ABN Group, and focused on construction finance because of that referral source that we had. Construction will always be a part of our DNA, but we are looking more as a ‘customer for life’ approach. So, it’s more than just that one-o transaction.
We wanted to be able to ‘influence’ the service delivery and also create the opportunity to innovate with products where possible. So, we actually built an end-to-end mortgage manager that sits within our business. That gives us the ability to be able to influence, to a degree, the service proposition. And it also gives us the ability to develop products that are unique to the needs of our customers, so that gets us a little bit deeper than purely white labelling.
We [also] have the ability for somebody to be able to take out a Resolve credit card. So, someone can be buying their morning coffee or their regular shopping and pull out a Resolve credit card from their wallet to pay. That front of mind with the customer pays massive dividends. We have the credit card attached to our mortgage management company and Adelaide Bank is the main funder that sits behind that. It’s been a tremendous partner.
We also have our own conveyancing and settlement business. Again, that gives us the ability to influence that service delivery to our customers but also to our brokers, so we can have an instance whereby a Resolve broker is working with Resolve Home Loans and Resolve Conveyancing and you can see the three of them all sitting down together working out how they can best service that customer all the way through. And when you couple that with the ongoing customer service opportunities provided by our financial planning division, that’s a pretty cool thing to be able to have within your business and incredibly beneficial for our customers.
The trick of it though is to not present yourself as three different divisions or companies to the customer, it’s about presenting that more holistic offering.
What makes Resolve’s diversification piece different?
What we’ve found is that one of the largest challenges for first home buyers getting into the market is the deposit gap or balancing consumer debt with multiple credit cards or personal loans etc. They may be 12 months from being in the position to be able to purchase, and we weren’t aware of a place that could give that particular customer the advice, or the assistance, to be able to take them on a journey to get to the position where they were ready.
So, we pulled together My Home Plan, which has a dedicated website that sits behind it. It’s a tool that we allocate directly to that customer and they are assigned a mentor to keep them honest in terms of their finance goals (or debt reduction goals). We partner them until such time as they are ready to be able to purchase and they come back through our broking team as well.
How do you foster a culture of innovation?
Our team is very, very aware that innovation and diversification is a large part of what we do. So, we are at the stage now where they will spot [a problem or product gap] at the frontline and they will bring that information to us. That helps us go through the next iteration of what it may be. It’s all about identifying where it makes sense to diversify — we won’t do it just for the sake of doing it.
Innovation is one of the key pillars within our strategy, so I suppose in some ways it sets that framework and puts that accountability in place, as well as have goals and measuring it. It keeps us honest and gives us that pathway. It’s certainly an ongoing journey for us and I’m sure we have a lot further to go.
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