In the latest episode of Elite Broker, Annie Kane and James Mitchell are joined by Cube Central broker and BDM Scott Beattie to chat about the radical steps he takes to ensure client satisfaction, why he took an 18-month career break and what he believes are the keys to success.
The Queensland-based broker at the award-winning independent brokerage in Logan City took home our Editor’s Choice award for his exceptional dedication to his clients at the Better Business Awards Queensland last year. Find out why Scott offers clients a rewrite of their loan and a refund on the upfront commission if they aren’t happy with their loan, and how he has been growing his business.
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Royal commission updates online form
Announcer: Welcome to the Elite Broker podcast. This is your host, Annie Kane.
Annie Kane: Hello from the Advisors Elite Broker podcast, I'm Annie Kane, editor of the Advisor, and I'm joined by my regular co-host James Mitchell, managing editor of mortgages. How you doing, James?
James Mitchell: Very good, thanks, Annie.
Annie Kane: Great. And today we're speaking to Cube Central's broker and BDM Scott Beattie.
Scott Beattie: Hello.
Annie Kane: Now, Mr. Beattie is a Queensland-based broker at the award-winning independent brokerage Cube Central in Logan City; the office won Best Independent Office in last year's Better Business Awards for Queensland, with Mr. Beattie taking home our editors' choice award for his exceptional dedication to his clients. In 2016, Mr. Beattie went as far as implementing a 13-month guarantee to clients that promised to reimburse the up-front commission if they were dissatisfied with their new loan, and to rewrite that loan too.
So in this episode of Elite Broker, we find out why this broker takes radical steps to ensure client satisfaction, how he balances being a broker and BDM, and what he believes are the keys to his success. How you doing, Scott?
Scott Beattie: Very good, thank you. When you were saying "Mr. Beattie," I thought you were talking about my dad, so I actually ...
James Mitchell: We'll just call you "Scott" from now.
Annie Kane: We'll just call you Scott. I can't help it. It just, like, one of those things.
Scott Beattie: No problem
James Mitchell: So tell us a little bit about how you got into broking. I know we've caught up over the years a number of times, I remember when I first joined the Advisor, you were one of the regular commentators in the magazine, and when we flew up to Brisbane, we used to see you quite a bit. Tell us a little bit about how you got started in the industry.
Scott Beattie: Sure. I actually wasn't in high school thinking I should be a mortgage broker or a banker or anything like that, I was actually fortunate enough to work in the media. I worked for Channel 10 as a cameraman, and in very early 1990, Channel 10 went into receivership and I just, although I still had plenty of work, there was a bit of uncertainty as to where my future lay. And so I went to the newspaper, because that's what we did back then, and there was a job going to the Commonwealth Bank, and that's how I ended up where I am.
So there's no, unfortunately no glamour story to it or anything like that, it was just I felt the Commonwealth Bank could offer some security to me, and that's how I ended up in there, and I've really been quite blessed over the last 28 years.
James Mitchell: So you were a cameraman before you became a mortgage broker.
Scott Beattie: Yeah, so that's why I have a good eye for detail, well, depending on how who you talk to. Arguably, I have a good idea for detail.
James Mitchell: Do you still use any of your old media skills, in terms of marketing your business or doing any films and that sort of stuff, or have you in the past?
Scott Beattie: Not really, but I do a lot of things I learned in marketing, because I still worked for the media for probably another five or six years, just casually doing outside broadcast and that kind of thing, primarily in sporting events. And a lot of the things I learned in marketing about leveraging was what I took into my mortgage broking business, because I learned I don't have the budget of, say, Aussie Homeland or Commonwealth Bank or anything like that. Everything we do, we've got to be able to leverage off of a very limited budget.
Annie Kane: So you joined CBA, and was that as a broker, or sort of in the actual branch?
Scott Beattie: No, brokers didn't exist then. I actually remember sitting in a meeting and they were talking about how they didn't want to work with the union; back then in 1990, it was that we don't want to work weekends, we don't want to work after hours, and brokers, as far as I recall, didn't exist back then. So that was just as a teller, I'd worked in a foreign currency and, yeah, just back in the head office in Brisbane, back in 1990, a long time ago now.
Annie Kane: And so from there, you became sort of, I mean, I'm just wondering what the next step was into deciding-
James Mitchell: Mortgages, yeah.
Scott Beattie: Yeah, I transitioned from there to Suncorp, I was there for nearly five years. After that, I moved to Sydney, I went and moved to Sydney looking for, I guess, opportunity and to add a bit of street credibility to my resume. I ended up back in insurance, with Commonwealth Bank and Alliance, and then I ended up going to ING into a recruitment role, and then I ended up going to work for a start-up non-bank, who I met through my recruitment role. That was kind of where I got back into lending, and that was about 2001.
That's kind of how I ended up back into the lending game, compared to just being in the insurance side or just being in financial services, and specifically broking, pretty well since that time.
James Mitchell: So since the early 2000s, you've been broking, you'd say.
Scott Beattie: Or actively in lending, yes. Broking on the tool, so to speak, actively since 2004.
James Mitchell: So when did you make the decision to leave banking and leave the lending side and become a broker and, I guess, do the thing with Cube Central?
Scott Beattie: Sure. That was in 2005; in 2004, I was, the title was Queensland Site Manager, I looked after franchisees for this non-bank, and they wanted me to start writing home loans, which I did. But when I did the math, I realised I would be making more as a broker, rather than doing my PAYG role plus writing loans on the side. And granted, that would give me a small commission, but I just kind of saw what was happening with the franchisees, and I thought there was a great opportunity.
My wife at the time was working for Qantas, she was about to go on maternity leave with our second child, and we thought, well, we've got a little bit of money coming in with here on maternity leave, so let's give it a go, and that was in June 2005. We started actually back then as Cube Home Loans, and we didn't change the name to Cube Central until the GFC hit, and we realised we really need to diversify, and one of the things we've always engaged with is diversity.
Annie Kane: And so what did you diversify into? What do you now offer?
Scott Beattie: Pretty much everything; going back when we first started in 2005, our logo had four squares, and it still does. The logo had four squares: one was lending, one was for insurance, one was for tax and one was for legal. It was always the plan to diversify into those other business units, and realistically, after the GFC hit, I guess that was our pain point to actively put those in place to diversify our business and not be so reliant on one source of income.
At the moment, we have a full-service model. My father was an accountant; he retired, I purchased his accounting practise, just on two years ago. We have an active real estate arm with sales and property management, we do financial planning, we even have a service called Cube Connects, so when people move houses, we arrange the phone, electricity, gas, Internet, all those kind of things. Pretty well anything to do with insurance and finance, with the exception of transactional banking, we can do. It doesn't mean I do it, but we do it.
James Mitchell: Yeah.
Annie Kane: That's really interesting.
James Mitchell: I'm keen to find out, I guess, how you integrated all those different stages of the value chain, all those different processes. I know I've spoken to brokers in the past who've diversified into different types of lending, for example, but in terms of the tax, the legal, the financial planning, which is a different licencing regime altogether, where did you start? What was the first, I guess, new area of business you launched into? Tell us a little bit about some of the challenges of doing that.
Scott Beattie: For sure. Financial planning was probably the first one we diversified into because it almost went hand-in-hand, and that was just on a referral model. It just made sense; we had to ask a question for licencing about insurance anyway, so it just made sense that if someone says "I don't have insurance," which is, I would say, as least 50% of the people we speak with, chances are, they needed the referral anyway. So it just made sense that we could refer someone to them and do a commission split with that risk writer. We initially just went with a risk writer, so they primarily focused on income protection, life insurance and trauma and that kind of thing.
James Mitchell: Mm-hmm (affirmative).
Scott Beattie: As we realised it was working, we then decided to bring that person under our brand. Luke's our financial planner who's with us today, and he actually works under the brand Cube Financial Planning. We kind of tested it on a referral, and once we were happy we were working together well, then we moved it into the brand, and he brings, anything before the changeover date is his, but anything he does now, whether it's from us or off the street, is arguably our clients.
Annie Kane: That's interesting. You said that-
Scott Beattie: I was just going to say, one thing we do, so when we meet with a client, we have what we call a welcome pack. This welcome pack introduces Cube Central and its model. It talks about our service level guarantees, it talks about our other business units. One thing with mortgage brokers is, in reality, to be honest, we aren't that different. Most of us don't charge any fees, we pretty well have access to all the same lenders, and most of us, I'd like to think, are pretty good at what we do.
So what we looked at is how can we differentiate ourselves in a non-differentiated market, and that was, for example, why we introduced the 13-month loan guarantee, because if someone did want to change because a bank put their rates up over and above the reserve bank and they weren't happy, it doesn't always mean we'll refinance and give it, it's not always in their best interest to, but at least we should get first bite of the cherry to look at that client and have the opportunity to do it.
For example, we have a customer courtesy move-in trailer. So when someone's moving house, we've got an eight-foot-by-five-foot trailer, it's all branded, and the client can utilise that; it's completely free for them to do that. I always say, we know where they live, so if they don't bring it back, we can go and get it.
Annie Kane: That's so cool, though, about the up-front thing. I think it's an unusual step to take, I think very few brokers would give up their main source of income, really, to sort of honor-guarantee that if the client isn't happy, you're going to reimburse them the up-front commission. Have you actually had anyone take you up on that? Have you ever had to repay it?
Scott Beattie: Not one, thankfully. But we've had people call and say "Look, so-and-so's put up their rates," but the important thing is, I guess, it's not always the case, but if someone goes to another lender, be it a bank or a broker, they may not always, they're obviously wanting to refinance that client, they may not explain to them that they'd have to pay mortgage insurance again and that kind of thing. So we'll go through those options to say "Hey, you can do it, but here's the cost." Yes, we'll reimburse that commission, but chances are, for example, if it's in mortgage-insurance territory, that's going to outweigh the benefit of any refund that commission will make.
But it's just more about, importantly, the client will come back to us with that reference point, and it's part of the reason we offer things like Cube Connects and even health insurance. It's not really that profitable, it's more about that we are the one-stop shop for the client in that case, and obviously we've got competitors like iSelect, and compare the mark on that kind of thing to our very aggressive in health insurance and electricity and that kind of thing. They've also got a mortgage-broking arm; I don't want my clients going to those guys, so may as well do that through us.
James Mitchell: Have you got your own brand of mortgage offering?
Scott Beattie: As in a white label-
James Mitchell: As in a white label, yeah.
Scott Beattie: No, so we aggregate through Connected, but we can access their white label product to advantage in Macquarie, but no, we did the, again, pre-GFC, we did have a limited book through GE Money, under the old ASIC model, which a lot of brokers did back then. Obviously that's a thing of the past now, that's the good old days. But at this stage, we just leverage the aggregate as white-label model when we need to, and for the right clients.
James Mitchell: In terms of mortgage products and rates, I've always been interested in, I guess, where the clients' knowledge is in terms of rate movements and things like that, because it seems, with the cash rate being on hold for so long now, it seems like it's almost become a bit obsolete, you know? There's outer-cycle rate movements, regardless of what's happening with monetary policy, and when you sit down with clients, what is their view or their knowledge of the RBA cash rate? Are they confused when their rates increase while the RBA hasn't increased?
Scott Beattie: Absolutely. That's a really common question. What I explain to clients is, and I'll just use ANZ as an example, but they get a bulk of their money from the reserve bank, but they also get a bulk of their money from, if you like, wholesale warehouses. And if that wholesale warehouse is in Indonesia, for example, they really couldn't care less what the reserve bank are doing. So the reason the banks move independently of the reserve bank is not all their money comes from there. When they wholesale lend it from, say, Indonesia, they've got a rate they've got to buy it at. So that's why the rate isn't always reflected at the reserve bank.
Most people kind of understand that when you say it depends what they're buying and where they're getting it from and how much they're buying; like any business, if you bulk-buy things, you'll it potentially cheaper than others. Most people can kind of relate to that; it makes a bit more sense then, because most people just believe that it's all related specifically to the reserve bank.
James Mitchell: Do you think there needs to be more, I guess, education around that, around how the cash rate relates to the mortgage rate? Customers end up paying it; it seems like they would, to me.
Scott Beattie: Look, it certainly wouldn't hurt, and I think a lot of people's confusion that I speak with is, they say, well, you know, the banks sort of make, selling their home loan at, say, four percent or whatever the rate is, they say "We have to put the rates up by .2%," and then they make out an eight million-dollar profit and say "We had to do it because, you know, we got a squeeze on funding" and that kind of thing. So I think people don't relate to that pressure, if you like, so they're saying, well, on one hand, they're saying they're struggling with the margins they're making; on the other hand, they're making record profits.
That's probably where I think the disconnect is to people in that regard. That's just my opinion, of course.
James Mitchell: Yep.
Annie Kane: I wonder what your thoughts are, say, I think when the productivity commission came out with this draught report a few weeks ago, they were suggesting that there's a lot of confusion around interest rates and around consumers knowing what actually their rate is, and they were sort of highlighting the fact that comparison rates can be different, and that you'd see an advertised rate, but you won't always know what the discounts are.
They were kind of highlighting the fact that there's a huge range in rates, even from one certain lender for one certain product, and that there should be a more transparent process for understanding what the average rate is for a loan. Do you think that's a warranted suggestion or recommendation from the productivity commission? Do you think that there is a lot of confusion around what real rates are?
Scott Beattie: Yeah, I definitely do, and I don't know what the correct answer is, because as a broker, that's where our expertise comes in handy. When I was reading that report, it was kind of like, oh, gee, if only there was a service that was free to consumers where they could have an expert come in their house and explain all this to them and do that comparison for them. What a great idea.
James Mitchell: Yeah.
Scott Beattie: But if you think about it, every single product in the market is like that, from health insurance, car insurance, there's confusion. Business bank accounts, saving accounts; at the end of the day, the consumer or the customer has to take some responsibility at some stage, or engage an expert to do that on their behalf. I'd like to think that, for my clients, they're utilising our services to do that comparison and use that expertise. The same as, even though we have a health insurance arm, I don't do my own health insurance. I get our health insurance team to source my health insurance and make a recommendation to me, and that's what I go on.
James Mitchell: It's actually interesting, Annie mentioning the productivity commission, because with all the various reports that have come out about the mortgage industry and brokers as well, I find that they kind of take a bit of a simplistic view; the rates is a perfect example, in saying, you know, there's all these different rates out there, how do you figure out which, what's actually the real rate? What's the clear pricing going on here? But I think that's not the nature of the beast, that the market, you get discounts, SVRs, they can be discounted, rates are negotiable. Just like you mentioned, that's where the value of a broker comes in.
So it's funny how they often scrutinise mortgage brokers, or attempt to scrutinise mortgage brokers, and then say" "What's going on with rates?" But they're really just putting forth an argument for why mortgage brokers should be in existence in the first place, because they are complexities in the market.
Scott Beattie: Yeah, and look, James, I was saying to you at the Better Business Summit, when I read that report, it was like, even though what we do, it was hard to fathom that someone had even undertaken a process as to what a mortgage broker is and what a mortgage broker does. And you’re 100% correct. And the comparison rate is a potentially useful tool, but you drive past a car yard and they've got a zero percent comparison rate on a 50-grand car, but the comparison rate's based on a $25,000 loan and that kind of thing.
It's a good model, but it's not, there's work-arounds to it, and that's, in my opinion, what the problem with comparison rate is.
Annie Kane: I just want to go back a little bit, Scott. So you mentioned earlier that you had bought your dad's accountancy book when he retired, and I just want to talk a little bit about how you sort of managed that process. A few brokers that we've been speaking to have been suggesting that they're going to start putting in place a retirement plan, and maybe they want to sort of sell their book. One of the bugbears that I think some people have is when they sort of give up their book is that they can't actually then go back and, you know, manage the clients. They want to sell the business, but they don't necessarily want to give up the clients.
How did you manage that process with your dad? Did you have a sort of transition, where you were sort of phasing him out and then taking over the business, or did you just sort of buy it and then have a clean cut?
Scott Beattie: Well, there's two parts to it: my dad has a local business, or had a local business, he lives quite locally and works from, he had a home-based business for as long as I can remember, doing accounting. And ever since I've been in lending, he's referred clients to me. So there was already a lot of clients already dealing with us anyway. In his last year, he started saying, we had a fridge magnet up and he stared transitioning those clients. When he finished their tax return, we physically took the file, so before June 30 the following year, we actually employed a telemarketer who still works with us now to, she actually called every single one of those clients to say "Do you want to keep working with us? This is our ... " because our price went up. "Are you happy with this new pricing?" and that kind of thing.
Some people were saying "Look, I was just using your dad because we've used him for years, but if he's retired, we'll go to someone local" and that kind of thing, and that was quite okay. So we basically integrated with a phone call, and we actually had a really smooth transition. It wasn't without its headaches, because a lot new systems, so we had to double-enter a lot of things for people that, things that people didn't have to do previously, we had to do now.
And I guess we're dealing with a business with employees, versus my mum and dad, who literally just did all the tax work. It was a very laid-back, relaxed environment, where Mum and Dad had no wages, no staff, no overheads. Some people weren't happy that we put the prices up, but we just couldn't honour their prices because of how low they were doing it out.
Annie Kane: Right.
James Mitchell: Do you get many self-employed clients from that accounting business?
Scott Beattie: Yeah, we did, we do sorry, but we already were doing a lot of those clients' lending anyway, because my dad was very, very pro-active; I always used to jokingly say if he didn't refer clients, I'd move me and my kids back in with him.
James Mitchell: Yep.
Scott Beattie: He was very keen to refer clients to me. And Annie, you mentioned before, one thing about mortgage brokers being able to retain their clients or their book, wasn't quite sure which, so one thing I didn't mention is Jo and I, Jo my wife and I, we sold this business in 2011. I sold the brands, but not the trail. I actually had, we had 18 months off, and we came back after an 18-month break.
James Mitchell: Okay.
Annie Kane: What did you do in those 18 months?
James Mitchell: Yeah.
Scott Beattie: Well, I did reading at my daughter's school once a week, I did Tuckshop, I was on the Kindy Committee, I became a lifesaver, I did my diploma in financial services, I became a Cdec. I did lots of things.
Annie Kane: Wow.
Scott Beattie: We travelled for two months.
James Mitchell: Awesome.
Scott Beattie: We did a lot. I became a dad again, if you like. I always say I introduced myself to my children, because I hadn't met them, and that was part of the reason for the break. We didn't know if we were going to come back to lending, but obviously we did, and I initially came back as a consultant and as a co-owner, and then Jo and I came back as full owners into the business in 2013.
James Mitchell: Were you working particularly long hours to, I guess, to arrive at a decision where you realised you wanted to take that long a time off?
Scott Beattie: Very. Very long hours. I don't complain about the income I was earning; I was earning very good money, but the hourly rate probably wasn't that great. We had a home-based business, so there was a real, there was no real work-life balance. It was very much working seven days a week, long, long hours. When we came back, we moved the office out of home, we bought a caravan and we're very deliberate about having a balance; we'll time-out of work, time away from work, I should say.
And we did a bucket list of things; for example, we had to take the kids to Disneyland before our youngest child turned seven, and we did that, he was six and a half when we went there. We did a road trip for a month, and that was after I'd come back to broking. But we just put a, we were very deliberate about putting some things in place that we didn't fall back into old habits, where we got to that stage in 2011, where we'd had enough, if that makes sense.
James Mitchell: Yeah, yeah. I think it's something which is very common, I think, with people who are ambitious and successful in any industry, and they reach point where, like you said, you might be earning good money, but you're really missing out on seeing your family and spending enough time with them. So I think that's really commendable, to take that time off and just dedicate it to family.
Scott Beattie: It was good, and I came back refreshed and recharged, and still with the same drive, but with more of a balanced focus,
James Mitchell: Yeah, awesome.
Scott Beattie: And the other thing, too, after 18 months of being in close proximity with my wife at home, she was very keen for me to get out and do something, she didn't really care what I did. She just wanted me out.
James Mitchell: You still work together now, yeah?
Scott Beattie: Yes, she works at least four, if not five days a week in the office, but she's our operations manager, she primarily works school hours. Again, it gives us that balance; pre-2011, we had a nanny looking after our children, or an au pair in the afternoons, and it just wasn't what we wanted. It wasn't what we wanted, someone else raising our children, so we just got that, we just came back with a better approach, I think, in balance. And interestingly enough, we're more profitable, I still work full-on hours, but there's a balance to it.
Annie Kane: So what do you do now to try and, I mean, if you're still working long hours, I just wonder if you've got, it sounds like you have more awareness of your work-life balance. What do you do to de-stress and try and, when you have the spare time, what do you actually fill it with?
Scott Beattie: We bought five acres, so we're only about 15 kilometres from where our office is, but it's like living in the middle of nowhere because there's nothing there, it's like literally, the street is one car-width wide, so if there's someone coming the other way, you've got to pull off to the side of the road. So that's one big thing, and again, we go away with our caravan, as a rule, every four to six weeks. Even if it's just for a weekend, we just go away and it just gives us that break. We'll generally go within an hour or so of Brisbane, that's not too far, preferably where there's no mobile phone reception.
James Mitchell: Yeah, nice.
Annie Kane: So you're out in Daisy Hill, is that right?
Scott Beattie: That's where the office is, so about 30K south of Brisbane.
Annie Kane: Okay. And is there a difference between the types of clients or loans that you see coming through your door than you would think would be coming to someone in a capital city?
Scott Beattie: Oh, yeah, great question. Simon, one of my colleagues, he's been with us for 12 years, or coming up to 13 years. Technically, he's been here longer than I have because we sold, but he's in Annerley, which is only about 10 or 15K, if that, out of Brisbane. Now, he does less volume than me, and transactions, but his dollar value of loans is much higher, because his proximity of where he tends to fish, if you like, in his pond, for where his loans are. It's just an interesting thing we've noted over the years; although he does less volume, he's doing less work for more dollar value, if that makes sense, compared to, say, Daisy Hill.
Having said that, in the last two to three years, particularly, we've noticed certainly the dollar value of lending increasing, either in this area particularly, and ... I'm pretty geographically restricted, I say to people, north of Hobart, south of Cape York: as long as you're in the middle there, I'm happy to help you. So I don't really mind where the business is, I'll go to where it is. But sometimes it'll be a very small loan, other times it'll be a very big loan, and that's the swings and roundabouts of what we do.
Annie Kane: I think I was just going to ask a little bit about what, you know, your future steps are. You already have quite a diversified business, with the legal and the insurance and the tax arms. Have you got any plans to further expand, or are you pretty happy with the set-up as it is?
Scott Beattie: Someone did call me Jim from Jim’s Mowing once, so we don't imagine we're going to have Cube Mowing or anything like that. The plan is to build, with myself and three other mortgage brokers, the plan is to build the team by growth. Personally, I think there will be acquisition of smaller brokers. I think there will always be one-man bands and that kind of thing, but I think it'll become less and less cost-effective for smaller, low-volume operators to stay under their own brand. It will just become too expensive.
We're kind of looking at opportunity, whether it be by trial or broker wanting to join our team and leverage up what we've already done, rather than reinvent the wheel. I think that where it'll go. I don't know if, certainly in the near future, I can't imagine I'll get off the tool, so to speak. I really enjoy what I do, and I'm quite blessed that I think I've found what I'm extremely good at and I'm quite passionate about. I love what I do, I've never begrudged it. Well, I shouldn't say "never," but I rarely begrudge it, and I really enjoy it.
So I don't even wake up in the morning and go oh, I've got to do this again today. It's very rarely, if ever, that that would be a thought process. I can't see myself getting off the tools in the near future, but who knows.
James Mitchell: Yeah, nice.
Annie Kane: Well, we will watch this space, then, Scott, to see what you get up to, but I think that's pretty much all the time we have today. So thank you so much for taking the time out of your day to talk to us.
Scott Beattie: No problem at all.
Annie Kane: Best of luck for everything going forward.
James Mitchell: Yeah, thanks. Good to chat.
Annie Kane: Thanks so much for tuning in, and as always, for more news, insights and features, please visit wwww.theadviser.com.au, and we'll hopefully see you at the Better Business Summit soon.
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