In this episode, find out:
- How changes to mortgage policy have affected western states
- Why Damian is encouraging clients to consider commercial property
- How the business effectively manages client expectations
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 Annie Kane. How are you doing Annie?
Annie Kane: Thanks, yeah, I'm good. I'm good, I just can't remember how to speak!
James Mitchell: We've also got Damian Collins, he's the managing director of Momentum Wealth in the studio. How are you doing Damian?
Damian Collins: I'm very good James, glad to be here.
James Mitchell: No worries. Well yeah good to have you on board. Your group actually picked up an award at the Better Business Summit in Perth back in March earlier this year, it was for best customer service for the entire group, and now I wanted to pick your brain a little bit and find out exactly what Momentum Wealth does for those listening other than mortgage broking, because it sounds like you've got quite a few strings to your bow.
Damian Collins: We do actually James. We've pretty much a holistic investment advice service, we start from right at the beginning, the investment strategy, and particularly around property so where does the client want to get to over their life journey, how much of it do they want in property, what's their risk tolerance, can they afford a lot of negative cash flow or do they really need positive cash flow? Obviously their current circumstances, future, so it's really devising the whole investment strategy upfront, and then of course our investment advisor team work very much hand-in-hand with our broking team because it's great to have all this wish list of what you want to do, but if you can't afford it well then it defeats the purpose.
We work very much hand-in-hand with our broking team, and we have advisory team and work at a sustainable long-term plan for the client, we also run a on top of the broking arm our buyers agency division as well. Some clients just come in for buyers agency, and not that they'd end in the whole strategy, but their buyers agents work very closely with their broking team as well because again it just makes it very seamless. The clients like the fact that it's seamless, that it's all I don't have to come to one office and deal with one team, I don't have to go to four or five different places around. Again the broker is crucial in that relationship because there's no point putting an offer in on a property for half a mil if you can't afford it, so it works very well.
They work collaboratively together to get the best outcome for clients and also makes it easier for us to put offers in when we say well our internal team finance team of a ... Said we can get this money, and we've got a very good reputation of deals not falling over because we are working hand-in-hand with our finance team, so we get selling agents concerned to the sell as well. It doesn't fall over, typically one in three to one in four in WA fall over to finance, so it's quite high and then we've got property management arm, commercial and residential, and also we've got funds management arm. We do commercial, got about 240-odd million in assets under management.
James Mitchell: Wow.
Damian Collins: In commercial properties again, a lot of people in the property investment journey just think about residential, but as you get to that later stage in life and you're looking for an income stream, residential doesn't really give you great income streams good for growth, but if you're in retirement, commercial property can give you 7 or 8 per cent return net.
James Mitchell: It gives better yield.
Damian Collins: It's much better yield, the growth might be lower but when you're 65, and we even find a lot of people in their 50s start building that commercial component of their portfolio just because they need that income stream, and so commercial's much better for that. It's just something investors should be thinking about and not when you're 30, and even maybe in your 40 probably not, but when you get to that 50 plus, you're looking at the end game or where you want to stop working or running a business, you need that income stream in commercial. In the pool market, syndicated market, you don't put all your eggs in one basket, you do only got investment in the number of funds, it's certainly good for diversification and risk management as well. Fantastic.
Annie Kane: Yeah. I want to talk a little bit about the investor side, obviously your main leading with investors, and I guess it sounds like you got the whole sort of shebang there for the investors, but we're seeing so much macro potential measures being put in place to slow down investor and specifically interest only loans, both actually in investor and in occupier space, how are you finding that impacting the loans that you can find for your clients?
Damian Collins: When you look ahead, certainly it's had a big impact in terms of affordability, I mean we had some examples in our office of clients who could afford previously to borrow two million all of a sudden within a couple of months there it's just dropped down to $700,000.
Annie Kane: Wow.
Damian Collins: Particularly on investors, it has only got a few properties, and we used to have even some lenders, where their clients have got three or four properties already, some of the lenders would assess the existing debt at actual rate, with some they might be paying four and a half per cent, but then pretty much all the lenders now switch to not we're going to service, everything at seven and a half or seven point two five. For existing investors with a decent portfolio, that certainly made it a lot tougher and we've seen it, I mean there's some major lenders out there we got told and I know it feels nationally, but certainly we got told in WA that investor refinances in April, "Sorry we're not doing them, you just have to sit on hold for a month."
You can tell APRA is definitely putting the pressure on the banks to manage their loan book growth, which is strange because if it ... In WA there are not a lot of investors doing anything at the moment, so I guess they're not really looking as a state-by-state, they're just looking as a global pool and find any way they can do to make changes, but the other big one recently has been the change from just the penalty effectively, the penalty to interest-only loans. It's at the stage now where a lot of even our investor clients were saying at P&I, it's just not worth paying that premium for interest only, because of your repayments.
One of our brokers did one last week and the payments were the same whether it was P&I or interest only, so because there was such difference in the interest rate, so we just said yeah. We're at the point now where I think for most investors, your best bet at the moment is to go P&I, and then write it out, things will come back into normal again and they'll be the same rates, and then you can maybe switch back to interest only, but just for the moment the penalties ... I'm struggling to say it's worthwhile paying at higher rate for interest only at the moment.
James Mitchell: Yeah. It's interesting in terms of the WA market, where like you said there's not actually that many investors playing, and then you've got Sydney and Melbourne where huge amount of investors, 40, 50 per cent of loans being written to foreign investors. Back in 2014 when this whole macro potential thing started, the RBA flag that they were this imbalance in the market there were too many investors, and then APRA did its thing, but now we've had APRA coming out and saying, "We've got no agreement on house prices, we've got nothing to do with house prices." But surely, there must be a few people in WA who are a little bit miffed about the amount of measures that have come in place obviously it having an impact on them when they're not having that huge price growth, there's no market that needs to be cooled there.
Damian Collins: Well I think everyone in Australia, outside of Sydney and Melbourne, should be feeling fairly great because it's quite staggering isn't it? You've got a regulatory authority, and the banks they can't seem to manage, that maybe they should say right, "Our investor growth in postcode 3000 to 3200 or say it's 2000 or 2200 or whatever those postcodes are, any property secured by lines in those postcodes we're restricting, but they're just on a blanket ban, nationally it's crazy, and has certainly affected not just Perth, pretty much everything outside of Sydney Melbourne, and it's like taking a sledgehammer to the problem and it certainly has affected investors across the country when it really was meant to ... I know it's not meant to affect house prices, but they're worried about the banks and overinflated lending to that housing sector. They really should have focused on just ... But you would think there could have been a how to do it better.
James Mitchell: Yeah. We're almost out of time, but I just want to ask one final question, that was about customer experience because obviously you took home the award for best customer service for your office, for the entire business...
Annie Kane: And office of the Year last year for ABAs is it? Yeah ABAs.
James Mitchell: Australian Broking Awards?
Annie Kane: Yeah.
James Mitchell: You're obviously doing something right in terms of your team, your structure, how it's all put together, I just want to get your thoughts on this idea of customer experience because it's something I've heard big real estate groups talk about multinational companies, they're really looking to improve their customer experience, what does customer experience mean to you?
Damian Collins: Well ultimately at the end of the day, someone who's alone is the tool which someone is buying a home or an investment property. So for most people they're doing it very rarely, they don't know much about the process, so a big part of it is also at the end of the day you want the client to be happy with the whole transaction. It's about communication and education. We find its practitioners in the industry we know the words we are – and all the acronyms, and I say to our team, "Don't use those words because the client doesn't know that." Even an investor, maybe a seasoned investor but a first-time investor, they just don't get those words.
It's really about educating the client, and we use a particular handbook that we've put together ourselves, it's 50 pages, explains ... I'm sure everyone doesn't read it, but it explains the whole loan process, how a loan works, how loan-to-value ratios work, how lenders assess things, and also then we've got a support team. We've got generally one client liaison officer, which is the support person in the background generally to brokers, and so that enables the brokers to focus on the loan component of it, getting the right loan and seeing clients and then the administration in the background really helps and the community. Every Friday we update our clients regardless if nothing's happened, it's so the client knows that to expect it on Friday, you're going to get an email from us listing exactly where your loans at or if something major happens in the week they know. Clients feel comfortable because-
James Mitchell: That's fantastic doing that every week.
Damian Collins: Yeah because I read a study many years ago where it was on real estate property management, they said one in three people expect their property manager to call them every week. Now that's just not possible in property management, because you've got 150 properties, so whatever you do, whatever service you provide, unless you educate your client upfront about this service that levels again ... You're going to have one in three, you just expect it's going to be something that you're not going to be able to deliver. Communicating to the clients we say when you come on with us, this is when you'll hear from us, and these are the milestones and just keeping them in, so they know upfront, and that's the thing. The bad customer experience isn't necessarily where you gave bad customer service, it's where you misaligned what they expected and what you were going to deliver.
James Mitchell: Of course, managing expectations.
Damian Collins: It's managing their expectations, so just be clear with your customers, this is when you hear from me – you've got to follow through. Nothing worse than saying, "I'll call you tomorrow." And you don't. But set the expectations upfront. You control them, you communicate that as well, and working seamlessly obviously in our house, in our business, it makes it a lot easier when that's all in-house, the communication. So a buyer’s agent, our brokers will know what's going at the same side. If you're a broker working with third-party people, make sure you know what's going on so you can keep that customer informed, and it's not that hard, it's just about education and communication, and making that -
Annie Kane: Consistency.
Damian Collins: - being consistent with it through that process.
Annie Kane: Great.
James Mitchell: Yeah. Being organised, having a plan.
Damian Collins: Absolutely yeah.
Annie Kane: Good advice.
James Mitchell: Awesome. Well thanks very much for taking the time Damian.
Damian Collins: Glad to be here James, it's good to speak to you.
Annie Kane: Thanks very much yeah.
Damian Collins: Nice to see you Annie.
James Mitchell: That's all we've got time for this week, but do join us next time. I've been your host James Mitchell, and of course for all the latest news, insight, and analysis, do check out theadviser.com.au, catch you next time.