On Friday I did a speech to about 900 mortgage and finance brokers, who are awaiting the sentence from Judge Kenneth Hayne of the Royal Commission, who is bound to recommend many changes to how banks, insurance companies, financial advisers and others like mortgage brokers interact with consumers.
Seriously, the so-called ‘sins’ of mortgage brokers are venial compared to the cardinal ones big financial institutions have been fingered for, but even when it comes to this lot, my fear is that the punishment might end up being huge compared to the extent of the crime. And those who are and will be punished aren’t just say banks and their shareholders, if hanging Judge Ken gets his implied way, a hell of a lot of customers will be joining finance industry workers on the queue to nowhere.
Those people might not just be borrowers who will be told “no loans for you” (to channel the Soup Nazi on the Seinfeld TC series) it could include employees who lose their jobs if the RC’s impositions on banks lead to less loans, less economic growth and rising unemployment.
Right now, banks have been made to be stricter and more invasive when it comes to saying “yes’’ to a home loan. It not only has a potential negative economic impact, this new tougher regime for loan approval is a dream killer.
I confess I fibbed to banks in the past and got loans and those little lies about the value of my furniture and car helped me get loans that explain my wealth today. Let’s face it, many of us were shocked at what banks and insurance companies have done to a minority of people but most of us have banks and insurance companies to thank when they have helped us buy that dream/forever home, that then grew in value by 70% in five years or when that compensation cheque came after a car accident, burglary or fire.
These guys aren’t all bad and sometimes we’ve damn well loved the bleeders!
I have argued even before the Royal Commission was established that the best way to bring into line those banks behaving badly and others such as insurance companies, is to create a tribunal system, like the kind of consumer claims tribunals we see at the State-level, where there are no lawyers and a consumer and a business slug it out.
These are run by conciliators, who are good at smelling a rat and I’ve had two builders fail the sniff test over the years, which meant I received compensation for being ripped off. I reckon a similar system would be the best way to stop financial institutions burning their customers.
Believe it or not but the Morrison Government says it has such a solution called the AFCA — the Australian Financial Complaints Authority — but their marketing of it is so bad I have my suspicions about its eventual efficiency at helping consumers wronged by their lenders, their insurers, financial planners, etc.
I hope I’m proved wrong because if the AFCA does what Scott Morrison told me after the May Budget and what Assistant Treasurer Stuart Robert told me on Friday at the conference, it would then mean the long procession of rulings against financial institutions, along with the compensation costs, would force a finance institution CEO to ask: “What in the hell is going on with that division of the business?” That’s what’s been missing from this industry for a long time. It has been too easy for too many people to make good money the easy way but the post-Royal Commission is about to deliver a reality check with its recommendations.
The Government will have to play hardball with finance businesses as there is an election coming up and PM-in-waiting, Bill Shorten, is bound to slam the banks and the Government if they go too soft.
The threat of changes and the election likely in May won’t be good for bank share prices and the overall stock market index as banks are a huge driver of the All Ords.
So what looms large for everyone in the finance industry is change and the best way to respond to threats is to see it as an opportunity to look seriously at your greatest asset — your competitive advantage.
This was the message I delivered to the mortgage and finance brokers at the Finance Brokers Association of Australia conference, that it was time for change to drive them to change. I’ve spoken to this group a number of times and have entertained them with surprisingly accurate forecasts on the economy and have shared some of the great stories and business lessons I’ve gleaned from the greats of Australian and international business. What I’ve learnt from my interviews and analysis of the likes of Richard Branson, Gerry Harvey, Gai Waterhouse, Mark Bouris and John Symond to name a few have always been at the core of my speeches to the group.
But lately I have wondered whether telling entertaining/educational stories are enough?
I know in my own world setting a goal and actually keeping it is extraordinarily hard. The day-to-day pressures of doing your work and coping with family issues can prove to be a great distraction.
The great Aussie athlete, Herb Elliott, who was never beaten in international competitions and won the gold medal for the 1500 metres at the 1960 Olympics said his competitive advantage was that he “beat his little voice.”
You know the little voice who tells you that “it’s too cold and wet to run in the morning” or “that cheese cake won’t put on too many calories” or “you can start that diet tomorrow”.
I’m going to tell the mortgage and finance brokers that they have been a huge plus to the finance industry. John Symond was the first to take on the banks with a huge cut in home loan interest rates. Mark Bouris at Wizard followed.
The Higgins brothers from Mortgage Choice, who brought laptops and many lenders on to a platform that meant brokers could give borrowers a large range of choice.
And the existence of these rivals to bank branches have delivered savings for many families across Australia, so they can be proud of their work.
It’s intriguing how so many people have been disgusted by the revelations from the Royal Commission and the stories have been bad but there are plenty of good news stories that have been left out of the history of the finance industry as told to Judge Ken.
In 2007, Bob Bloom wrote a book called The Inside Advantage and when I interviewed him he said: “In my 45 year career, I have discovered that every enterprise has at least one strategic asset – one existing strength – that can form the foundation for future growth. I call this an Inside Advantage because this strength usually lies unrecognised in an activity the business is currently performing, or a concept or idea that the business already owns and can exploit. Finding this hidden potential, nurturing and communicating it, and becoming well known for it will grow the business. This principle has been the foundation of my growth strategy.”
Bob was the former chairman in the United States and chief executive of the advertising agency Publicis Worldwide, which meant he ran the PR for global giants like Southwest Airlines.
This once loser airline discovered its mojo or inside advantage when it realised its customers were primarily male salesmen who flew in cattle class and did not have a real lot of positive experiences in their lives. Now this was before the age of political correctness so the airline improved the dress of the ‘hosties’ as they were called then and the dialogue and attention they showed to their embattled customers changed the perception of the airline.
And this was a company that invested in happiness in the workplace and the results showed that this was an enlightened strategy.
A self-employed broker’s strength is their relationship piece that an employee at a bank branch seldom can match, unless the employee has a goal to be a manager and then the CEO one day.
New post-RC regulations are bound to hurt bank profits and in turn banks are bound to reduce what they reward brokers for finding loans for them. That means a broker has to do more loans, add new services and service the customer like never before.
The focus has to be the best it has ever been so that says change has to be a high priority.
I recommended to the brokers and I suggest the same to you if you want to win like never before:
1. Do a SWOT on you — list your strengths, weaknesses, opportunities and threats.
2. Develop your YOU plan — what you want from you in life generally and in your business life and write down how you are going to do it. This is your plan for self-improvement.
3. Define your Inside Advantage and start using it.
4. Look for those who will help you exploit your inside advantage.
5. And put something on your computer screen saver so you see it every day.
My current mantra to keep me committed to change, improvement and to exploit my inside advantage — which is the trust people have for me when it comes to business and money matters — is to keep telling myself that I’m killing second-rateness in my life and my business.
I got that message from Steve Jobs and it’s a bloody good one for anyone who wants to lift their game.